Stephen C. Baxter

Stephen C. Baxter sought a deeper understanding of the decremental margins on HIX revenue loss, questioning why the drop-through wouldn't be higher given potential continued ER utilization without associated revenue, and asked what percentage of HIX enrollment loss is assumed to transition to other coverage sources. He also asked about the same-store volume growth assumption for 2026 guidance and which payer categories are expected to drive improvement compared to 2025.

Answer

CFO Jason Johnson stated it's too early to accurately predict patient transitions (self-pay, downgrade, other coverage). CEO Kevin Hammons reiterated that the company generates a relatively low margin on HIX business, and some patients may gain better commercial or Medicaid coverage, while others become uninsured, justifying the 20%-30% EBITDA hit. CFO Jason Johnson indicated a low single-digit same-store volume growth expectation for 2026. CEO Kevin Hammons specified that commercial payer volumes are expected to improve, along with additional Medicare business, driven by capital and service line investments.

Stephen C. Baxter sought further understanding of the exchange points, specifically why the decremental margins wouldn't be significantly higher if costs are retained while revenue is lost, and what percentage of exchange enrollment loss is assumed to transition to other coverage sources. He also asked about the same-store volume growth assumption embedded in the guidance and which payer categories are expected to drive improvement from 2025 to 2026.

Answer

Jason Johnson, EVP and CFO, stated it's too early to accurately predict the ultimate fate of individuals losing exchange coverage, and given HIX is less than 5% of revenue, the estimate started with a 20% volume reduction. Kevin Hammons, CEO, reiterated that the margin on HIX business is already low due to poor copay collection, and some individuals may gain commercial or Medicaid coverage. Jason Johnson indicated a low single-digit expectation for same-store volume growth in 2026. Kevin Hammons expects commercial business and additional Medicare volume to ramp up, driven by capital and service line investments.

Mitchell, on behalf of Stephen C. Baxter, inquired about the specific factors driving the 5.6% growth in same-store net revenue per adjusted admission and what Community Health Systems considers a sustainable rate for this metric.

Answer

Jason Johnson, Interim CFO, explained that approximately one-third of the growth was due to Tennessee and New Mexico state-directed payment programs, with the remainder from payer mix improvement, partially offset by lower acuity. Kevin Hammons, President and Interim CEO, suggested a mid-single-digit net revenue per adjusted admission growth as sustainable, expecting acuity to recover and further lift the rate as higher-acuity outpatient surgeries return.