Community Health Systems, Inc. (NYSE:CYH) Q4 2022 Earnings Call Transcript

Operator: The next question will come from Kevin Fischbeck with Bank of America. Please go ahead.

Kevin Fischbeck: Great. Thanks. So, it sounds like you’re making a lot of progress. But I guess when you updated your medium-term outlook, you changed the margin target a little bit and the EBITDA leverage numbers higher now. So, I was wondering if you could kind of maybe breakdown for us exactly what maybe has changed in your view about where things are? I guess I think about things right now that’s in the form of volumes, pricing, labor and other costs. Is there one of those four or some of those combination of those four things may be coming in worse than you thought when you provided the original guidance? Any way to think about that?

Kevin Hammons: Sure. If I go back a year ago when we initially started putting out those medium-term targets and looked at where we are today, certainly inflation has had a much bigger impact than we had previously anticipated, particularly around labor. So, just being realistic about where we are a year later and having endured, kind of the increases in labor €“ contract labor, which no one anticipated a year ago to even be where €“ what we experienced during 2022 let alone where we’re still at today. It’s still a headwind for us, albeit improving, and we believe it will continue to improve. And in terms of, kind of on the net revenue line, I would say there’s continued pressure, particularly from government payers on net revenue and on rate.

Kevin Fischbeck: Is there any reason to think that the rate won’t eventually catch up? I guess over time, we always thought about it catching up on a lag. Is it just the lag part that you’re updating this for or do you kind of feel like it’s €“ there’s a mismatch there permanently?

Kevin Hammons: Yes. No. I think this is more of the lag that we’re just, kind of factoring in to the equation here. And beyond medium-term, we’re certainly focused and believe we’ll continue to make improvements and ultimately get back to where we had originally anticipated. It’s just a matter of timing and the insight we have today as we look out over the next 3 years to 5 years, as things €“ the closer we get to that, the more insights will give more clarity. But as we sit here today, we just thought it was reasonable to make a small adjustment to those goals.

Kevin Fischbeck: Alright, great. Thank you.

Operator: The next question will come from Jason Cassorla with Citi. Please go ahead.

Jason Cassorla: Great. Thanks. I was just hoping you could unpack the volume outlook within that 4% to 6% same-facility revenue guidance and perhaps in terms of how you’re expecting surgical volumes to develop inpatient versus outpatient, the trajectory of volume growth over the course of the year? And then if you’re considering any volume headwind from the recent cybersecurity incident at all at this point? Thanks.

Kevin Hammons: Sure. Let me start off. So, you’re right, we have kind of 4% to 6% net revenue growth. In terms of volume, I would anticipate probably 2% to 3%. So, about half of that net revenue growth is volume, half is rate. And in terms of, kind of where we’re at in our recovery, we think we still have opportunities to increase our admissions. We’ve made significant investments over the last couple of years, and we’re still experiencing some recovery from COVID. Our outpatient particularly our clinic visits, we’ve seen great growth over these last couple of quarters and ultimately, those will translate into more procedures and more surgeries and inpatient missions down the road. Tim, if there’s something you might add?