What changed in this filing

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Item 2. Management’s Discussion and Analysis

2025-07-24 compared with 2025-04-24 · 223 added, 143 removed, 326 unchanged (53% of the section changed)

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Our affiliates are leading providers of healthcare services, developing and operating healthcare delivery systems in 36 distinct markets across 14 states.

As of March 31, 2025, our subsidiaries own or lease 73 affiliated hospitals, with more than 10,000 beds, and operate more than 1,000 sites of care, including physician practices, urgent care centers, freestanding emergency departments, occupational medicine clinics, imaging centers, cancer centers and ambulatory surgery centers.

As of June 30, 2025, our subsidiaries own or lease 70 affiliated hospitals, with more than 10,000 beds, and operate more than 1,000 sites of care, including physician practices, urgent care centers, freestanding emergency departments, occupational medicine clinics, imaging centers, cancer centers and ambulatory surgery centers.

We generate revenues by providing a broad range of general and specialized hospital healthcare services and outpatient services to patients in the communities in which we are located.

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Acquisition and Divestiture Activity

During the three months ended March 31, 2025, we paid less than $1 million to acquire the operating assets and related businesses of certain physician practices and clinics that operate within the communities served by our hospitals.

During the six months ended June 30, 2025, we paid less than $1 million to acquire the operating assets and related businesses of certain physician practices and clinics that operate within the communities served by our hospitals.

The purchase price for these transactions was primarily allocated to working capital and property and equipment.

During the three months ended March 31, 2025, as reflected in the table below, we completed the divestiture of two hospitals in Florida and sold our 50% ownership interest in a hospital in Mississippi.

These hospitals represented annual net operating revenues in 2024 of approximately $359 million and we received total net proceeds of approximately $276 million in connection with these dispositions.

The following table provides a summary of hospitals that we divested (or, in the case of Merit Health Biloxi, in which we sold our 50% ownership interest) during the three months ended March 31, 2025 and the year ended December 31, 2024.

During the six months ended June 30, 2025, as reflected in the table below, we completed the divestiture of two hospitals in Florida, one hospital in North Carolina, sold our 80% ownership in one hospital in Texas, and sold our 50% ownership interests in two hospitals in Mississippi, as noted in the table below.

These hospitals represented annual net operating revenues in 2024 of approximately $760 million and we received total net proceeds of approximately $1.0 billion in connection with these dispositions.

The following table provides a summary of hospitals that we divested (or, in the cases of Merit Health Biloxi and Merit Health Madison, in which the Company divested its 50% ownership interest, and in the case of Cedar Park Regional Medical Center, in which the Company divested its 80% ownership interest) during the six months ended June 30, 2025 and the year ended December 31, 2024.

Effective Date

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March 1, 2025

Lake Norman Regional Medical Center

Duke University Health System, Inc.

Mooresville, North Carolina

April 1, 2025

Merit Health Madison

University of Mississippi Medical Center

Canton, Mississippi

Cedar Park Regional Medical Center

Ascension Health

Cedar Park, Texas

June 30, 2025

2024 Divestitures:

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October 1, 2024

On April 1, 2025, we completed the sale of Lake Norman Regional Medical Center (123 licensed beds) in Mooresville, North Carolina, and related businesses, to Duke University Health System, Inc.

The net proceeds from this sale of approximately $284 million were received at a preliminary closing on March 31, 2025.

For additional information regarding this disposition, see the Current Report on Form 8-K filed by us on April 1, 2025.

In addition to hospitals divested as reflected above, we have entered into definitive agreements to sell our ownership interest in one hospital in Mississippi and our ownership interest in one hospital in Texas as further described below, where the divestitures have not yet been completed.

On January 29, 2025, we entered into a definitive agreement for the sale of our 50% interest in Merit Health Madison (67 licensed beds) in Canton, Mississippi, to an affiliate of the University of Mississippi Medical Center, which currently has a 50% ownership interest in Merit Health Madison.

On April 15, 2025, we entered into a definitive agreement to sell our collective 80% ownership interest in Cedar Park Regional Medical Center (126 licensed beds) and certain ancillary businesses located in Cedar Park, Texas, to subsidiaries of Ascension Health.

Ascension Health currently holds a 20% ownership interest in Cedar Park Regional Medical Center and would purchase the remaining ownership interest through this transaction.

On July 22, 2025, we entered into a definitive agreement with Laboratory Corporation of America Holdings, or Labcorp, pursuant to which Labcorp will acquire select assets and assume certain leases of the ambulatory outreach laboratory services of our subsidiaries in 13 states, including certain patient service centers and in-office phlebotomy locations.

The total purchase price payable to us at the closing of this transaction is $195 million, subject to certain purchase price adjustments.

For additional information regarding this definitive agreement, see the Current Report on Form 8-K filed by us on April 15, 2025.

There can be no assurance that these potential dispositions will be completed, or if these potential dispositions are completed, the ultimate timing of the completion of these potential dispositions.

Moreover, we may give consideration to divesting certain additional hospitals and non-hospital businesses.

Generally, these hospitals and non-hospital businesses are not in one of our strategically beneficial services areas, are less complementary to our business strategy and/or have lower operating margins.

For additional information regarding this definitive agreement, see the Current Report on Form 8-K filed by us on July 22, 2025.

There can be no assurance that this potential disposition will be completed, or if this potential disposition is completed, the ultimate timing of the completion of this potential disposition.

We may give consideration to divesting certain additional hospitals and non-hospital businesses.

Generally, these hospitals and non-hospital businesses are not in one of our strategically beneficial service areas, are less complementary to our business strategy and/or have lower operating margins.

In addition, we continue to receive interest from potential acquirers for certain of our hospitals and non-hospital businesses.

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Overview of Operating Results

Net operating revenues increased from $3.140 billion for the three months ended March 31, 2024 to $3.159 billion for the three months ended March 31, 2025.

On a same-store basis, net operating revenues for the three months ended March 31, 2025 increased $94 million compared to the same period in 2024.

We had net income of $25 million during the three months ended March 31, 2025, compared to net loss of $(6) million for the same period in 2024.

Net income for the three months ended March 31, 2025 included the following:

• an after-tax charge of $7 million for expense related to costs associated with our multi-year initiative to modernize and consolidate technology platforms and associated processes, and

• an after-tax charge of $2 million resulting from a gain related to the sale of two hospitals, partially offset by a loss on the sale of our 50% ownership interest in one hospital and the impairment of certain long-lived assets that were idled, disposed of or held-for-sale as well as divestiture related costs.

Net loss for the three months ended March 31, 2024 included the following:

• an after-tax charge of $10 million for expense related to costs associated with our multi-year initiative to modernize and consolidate technology platforms and associated processes, and

Net operating revenues decreased from $3.140 billion for the three months ended June 30, 2024 to $3.133 billion for the three months ended June 30, 2025.

On a same-store basis, net operating revenues for the three months ended June 30, 2025 increased $190 million compared to the same period in 2024.

We had net income of $320 million during the three months ended June 30, 2025, compared to $26 million for the same period in 2024.

Net income for the three months ended June 30, 2025 included the following:

• an after tax benefit of $139 million for gain from early extinguishment of debt, and

• an after-tax benefit of $151 million resulting from a gain related to the divestiture of two hospitals, partially offset by a loss on the divestiture of our ownership interest in a hospital and the impairment of certain long-lived assets that were idled or disposed of as well as divestiture related costs.

Net income for the three months ended June 30, 2024 included the following:

• an after tax benefit of $27 million for gain from early extinguishment of debt,

• an after-tax charge of $10 million for expenses related to costs associated with our multi-year initiative to modernize and consolidate technology platforms and associated processes, and

• an after-tax charge of $8 million resulting from impairment of long-lived assets that were disposed of as well as divestiture related expenses.

Consolidated inpatient admissions for the three months ended June 30, 2025, decreased 7.4%, compared to the same period in 2024.

Consolidated adjusted admissions for the three months ended June 30, 2025, decreased 8.3%, compared to the same period in 2024.

Same-store inpatient admissions for the three months ended June 30, 2025, increased 0.3%, compared to the same period in 2024, and same-store adjusted admissions for the three months ended June 30, 2025, decreased 0.7%, compared to the same period in 2024.

Net operating revenues increased from $6.279 billion for the six months ended June 30, 2024 to $6.292 billion for the six months ended June 30, 2025.

On a same-store basis, net operating revenues for the six months ended June 30, 2025 increased $292 million compared to the same period in 2024.

We had net income of $345 million during the six months ended June 30, 2025, compared to $20 million for the same period in 2024.

Net income for the six months ended June 30, 2025 included the following:

• an after tax benefit of $139 million for gain from early extinguishment of debt,

• an after-tax charge of $7 million for expenses related to costs associated with our multi-year initiative to modernize and consolidate technology platforms and associated processes, and

• an after-tax benefit of $148 million resulting from a gain related to the divestiture of four hospitals, partially offset by losses on the divestiture of our ownership interest in two separate hospitals and the impairment of certain long-lived assets that were idled or disposed of as well as divestiture related costs.

Net income for the six months ended June 30, 2024 included the following:

• an after tax benefit of $27 million for gain from early extinguishment of debt,

• an after-tax charge of $19 million for expenses related to costs associated with our multi-year initiative to modernize and consolidate technology platforms and associated processes, and

• an after-tax charge of $21 million resulting from impairment of long-lived assets that were idled, disposed of or held-for-sale.

Consolidated inpatient admissions for the three months ended March 31, 2025, decreased 1.0%, compared to the same period in 2024.

Consolidated adjusted admissions for the three months ended March 31, 2025, decreased 2.3%, compared to the same period in 2024.

Same-store inpatient admissions for the three months ended March 31, 2025, increased 4.0%, compared to the same period in 2024, and same-store adjusted admissions for the three months ended March 31, 2025, increased 2.6%, compared to the same period in 2024.

Self-pay revenues represented approximately 0.6% and 1.4% for the three months ended March 31, 2025 and 2024, respectively.

The amount of foregone revenue related to providing charity care services as a percentage of net operating revenues was approximately 9.7% and 10.1% for the three months ended March 31, 2025 and 2024, respectively.

Direct and indirect costs incurred in providing charity care services as a percentage of net operating revenues was approximately 1.1% and 1.0% for the three months ended March 31, 2025 and 2024, respectively.

Consolidated inpatient admissions for the six months ended June 30, 2025, decreased 4.2%, compared to the same period in 2024.

Consolidated adjusted admissions for the six months ended June 30, 2025, decreased 5.3%, compared to the same period in 2024.

Same-store inpatient admissions for the six months ended June 30, 2025, increased 2.3%, compared to the same period in 2024, and same-store adjusted admissions for the six months ended June 30, 2025, increased 1.0%, compared to the same period in 2024.

Self-pay revenues represented approximately 0.6% and 1.6% for the three months ended June 30, 2025 and 2024, respectively, and 0.6% and 1.5% for the six months ended June 30, 2025 and 2024, respectively.

The amount of foregone revenue related to providing charity care services as a percentage of net operating revenues was approximately 10.7% and 9.1% for the three months ended June 30, 2025 and 2024, respectively, and 10.2% and 9.6% for the six months ended June 30, 2025 and 2024, respectively.

Direct and indirect costs incurred in providing charity care services as a percentage of net operating revenues was approximately 1.1% and 0.9% for the three months ended June 30, 2025 and 2024, respectively, and 1.1% and 0.9% for the six months ended June 30, 2025 and 2024, respectively.

Overview of Legislative and Other Governmental Developments

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Supreme Court decisions increase judicial scrutiny of agency authority, shift greater responsibility for statutory interpretation to courts and expand the timeline in which a plaintiff can sue regulators.

These decisions are expected to significantly impact government agency

regulation, particularly within the heavily regulated healthcare industry, in part through an increase in legal challenges to healthcare regulations and agency guidance and decisions.

These decisions are expected to significantly impact government agency regulation, particularly within the heavily regulated healthcare industry, in part through an increase in legal challenges to healthcare regulations and agency guidance and decisions.

Federal agencies oversee, regulate and otherwise affect many aspects of our business, including through Medicare and Medicaid policies, policies affecting the size of the uninsured population and enforcement and interpretation of fraud and abuse laws.

These recent Supreme Court decisions may also result in inconsistent judicial interpretations and delays in and other impacts to agency rulemaking and legislative processes.

The outcome of the 2024 federal elections, including Republican control of both the executive and legislative branches, also increases regulatory uncertainty and the potential for significant policy changes.

President Trump has issued executive orders that impact or may impact the healthcare industry, including an order establishing a presidential advisory commission, the Department of Government Efficiency, or DOGE, focused on restructuring and streamlining government agencies and reducing or eliminating regulations and federal government programs and other expenditures, as well as a directive for agencies to identify and immediately repeal regulations determined to be unlawful.

Recent Supreme Court decisions may also result in inconsistent judicial interpretations and delays in and other impacts to agency rulemaking and legislative processes.

The outcome of the 2024 federal elections, including Republican control of both the executive and legislative branches, also increases regulatory uncertainty and the likelihood of ongoing significant policy changes.

Recent actions by the presidential administration impact or may impact the healthcare industry, including actions resulting in holds on or cancellations of congressionally authorized spending as well as interruptions in the distribution of government funds.

In addition, President Trump has issued an executive order establishing a presidential advisory commission, the Department of Government Efficiency, or DOGE, focused on restructuring and streamlining government agencies and reducing or eliminating regulations and federal government programs and other expenditures, as well as a directive for agencies to identify and immediately repeal regulations determined to be unlawful.

In March 2025, in accordance with the President’s DOGE Workforce Optimization Initiative, the Department of Health and Human Services, or HHS, announced a significant agency restructuring that will reduce the HHS workforce and consolidate divisions of the agency.

HHS also announced a change in its policy on public participation in rulemaking that may negatively affect the ability of industry participants to receive advance notice of and offer feedback on some policy changes.

In addition, recent actions by the presidential administration have resulted in holds on or cancellations of congressionally authorized spending as well as interruptions in the distribution of government funds.

In recent years, the U.S.

Congress and certain state legislatures have introduced and passed a large number of proposals and legislation affecting the healthcare system, including laws intended to increase access to health insurance and reduce healthcare costs and government spending.

For example, the Patient Protection and Affordable Care Act, as amended by the Health Care and Education Reconciliation Act of 2010, or, collectively, the Affordable Care Act, affects how healthcare services are covered, delivered and reimbursed, and expanded health insurance coverage through a combination of public program expansion and private sector health insurance reforms.

However, changes in the law’s implementation, subsequent legislation and regulations, state initiatives and other factors have affected or may affect the number of individuals that elect or are able to obtain public or private health insurance and the scope of such coverage, if obtained.

For example, COVID-19 relief legislation temporarily enhanced subsidies available for individuals to purchase coverage through Affordable Care Act marketplaces.

Subsequent legislation extended these enhanced subsidies through 2025, but further extension is uncertain, and expiration of the enhanced subsidies may significantly increase the uninsured rate.

Other legislative and executive branch initiatives related to health insurance could also result in increased prices for consumers purchasing health insurance coverage or may permit the sale of insurance plans that do not satisfy current Affordable Care Act consumer protections, which could increase rates of uninsured and underinsured individuals and destabilize insurance markets.

Moreover, evolving interpretations or enforcement of applicable laws and regulations could require us to make changes in our facilities or operations or require us to incur other costs to comply.

For example, in May 2025, Centers for Medicare & Medicaid Services, or CMS, rescinded Emergency Medical Treatment and Active Labor Act, or EMTALA, guidance issued to hospitals by the prior presidential administration regarding the preemption of state laws restricting abortion.

Hospitals may face conflicting interpretations as to the requirements imposed by EMTALA in relation to state laws that address access to abortion or other reproductive health services.

In the last two decades, the U.S.

The Patient Protection and Affordable Care Act, as amended by the Health Care and Education Reconciliation Act of 2010, or, collectively, the Affordable Care Act, expanded health insurance coverage through a combination of public program expansion and private sector health insurance reforms, but changes in the law’s implementation, subsequent legislation and regulations, state initiatives and other factors have affected or may affect the number of individuals that elect or are able to obtain public or private health insurance and the scope of such coverage, if obtained.

For example, COVID-19 relief legislation, as modified by subsequent legislation, temporarily enhanced subsidies available for individuals to purchase coverage through Affordable Care Act marketplaces through 2025, but extension of these subsidies is uncertain, and their expiration may significantly increase the number of people who are uninsured.

Further, CMS issued a final rule in June 2025 that standardizes and shortens the open enrollment period for individual market coverage, both on and off the Affordable Care Act marketplaces, and requires stricter income-verification measures, among other changes.

Moreover, the federal budget reconciliation bill enacted on July 4, 2025, or the 2025 Reconciliation Bill, includes healthcare policy changes that are expected to decrease access to health insurance.

Among other provisions, the 2025 Reconciliation Bill makes changes to Affordable Care Act marketplace insurance, including effectively ending automatic renewals of coverage by requiring pre-enrollment verification of eligibility and restricting subsidized marketplace coverage and Medicare and Medicaid eligibility based on immigration status.

consumer protections.

Any of these developments could increase rates of uninsured and underinsured individuals and destabilize insurance markets.

Of critical importance to us is the potential impact of any changes specific to the Medicaid program, including changes resulting from legislative and administrative actions at the federal and state levels.

Federal actions may impact funding for, or the structure of, the Medicaid program and may shape provider reimbursement rates, eligibility and coverage policies and other aspects of the state Medicaid programs in a manner that could materially and adversely affect us.

Currently, the federal government pays a percentage match for state Medicaid expenditures that varies by state and other factors, with no pre-set limit on federal spending.

However, some members of Congress and the presidential administration have raised, and Congress may in the future adopt, proposals intended to reduce Medicaid expenditures such as restructuring the Medicaid program to give states a “block grant” or fixed amount of overall funding for their respective Medicaid programs or to impose spending caps such as per Medicaid beneficiary limits on federal contributions.

Reductions in federal funding or changes to the federal funding formula for Medicaid could have a particularly significant impact in states that expanded Medicaid under the Affordable Care Act, especially if federal contributions for Medicaid expansion populations decrease and states are unable to offset the reductions.

Further, some states have trigger laws that would end their Medicaid expansion or require other changes if federal funding is reduced.

Of the 15 states in which we operated hospitals as of March 31, 2025, nine states have taken action to expand their Medicaid programs.

At this time, the other six states have opted out of Medicaid expansion, including Florida, Alabama, Tennessee, Mississippi and Texas, where we operated a significant number of hospitals as of March 31, 2025.

In addition to changes related to federal funding, Centers for Medicare & Medicaid Services, or CMS, administrators may make changes to Medicaid payment models and may grant states additional flexibilities in the administration of Medicaid programs, including by allowing additional states to condition Medicaid enrollment on work or other community engagement or to impose other eligibility or coverage restrictions.

There is a trend across the healthcare industry toward value-based purchasing.

CMS adjusts Medicare reimbursement for hospitals and other providers based on quality measures and administers various accountable care organizations and alternative payment model demonstration projects.

Other recent reform initiatives and proposals at the federal and state levels include those focused on price transparency, and limiting out-of-network billing.

For example, the No Surprises Act imposes various requirements on providers and health plans intended to prevent “surprise” medical bills.

For example, the 2025 Reconciliation Bill includes policy changes that are expected to result in significant cuts to federal healthcare spending, including significant changes to the Medicaid program.

The 2025 Reconciliation Bill limits eligibility for Medicaid, reduces federal Medicaid funding and expands cost-sharing obligations for enrollees.

Among other changes, the law includes work or community engagement requirements for adults under the age of 65 in the Medicaid expansion population, subject to limited exceptions, and requires eligibility redeterminations at least every six months for Medicaid expansion adults, with state compliance required by December 31, 2026.

In addition, the 2025 Reconciliation Bill makes significant changes to Medicaid financing mechanisms, including restrictions on provider tax arrangements that are intended to reduce the federal matching funds received by state Medicaid programs.

The law prohibits states from establishing new provider taxes or increasing rates of existing provider taxes while also limiting the structure of such taxes.

The law also directs HHS to revise regulations governing state directed payment, or SDP, arrangements, which many states have implemented to direct certain Medicaid managed care expenditures, to cap total payments rates for specified services including hospital services.

Some provisions of the 2025 Reconciliation Bill could have a particularly significant impact in states that expanded Medicaid under the Affordable Care Act, especially if a significant number of individuals formerly covered under Medicaid expansion lose Medicaid eligibility but do not obtain other health insurance coverage.

Of the 14 states in which we operated hospitals as of June 30, 2025, eight states have taken action to expand their Medicaid programs.

The other six states in which we operated hospitals as of June 30, 2025, have opted out of Medicaid expansion, including Florida, Alabama, Tennessee, Mississippi and Texas, in which states we operated a significant number of hospitals as of June 30, 2025.

Although we are unable to fully assess the magnitude of the future impact of the 2025 Reconciliation Bill, we expect the 2025 Reconciliation Bill to adversely impact our revenue and financial results as well as increase the amount of our self-pay patients, including as a result of this legislation’s limitations on Medicaid eligibility and reductions in federal Medicaid funding as noted above.

Future Medicaid reform proposals may result in further reductions to Medicaid expenditures and involve additional administrative changes.

For example, some members of Congress and the presidential administration have raised, and Congress may in the future adopt, other proposals intended to reduce Medicaid expenditures such as restructuring the Medicaid program to give states a “block grant” or fixed amount of overall funding for their respective Medicaid programs or to impose spending caps such as per Medicaid beneficiary limits on federal contributions.

Any future changes that reduce federal funding for Medicaid expansion populations could trigger laws in some states that would end those states’ Medicaid expansion or require other changes to the program.

In addition to changes related to federal funding, CMS administrators may make changes to Medicaid payment models and may grant states additional flexibilities in the administration of Medicaid programs, including by allowing states to impose additional eligibility or coverage restrictions.

The federal deficit and other federal and state budgetary pressures have affected government healthcare program expenditures, and we anticipate these effects will continue.

For example, the payment reductions required by the Budget Control Act of 2011 and subsequent legislation are currently set to continue through the first ten months of federal fiscal year 2032.

For example, the 2025 Reconciliation Bill is expected to decrease federal healthcare spending, particularly with respect to Medicaid, and is generally expected to have significant impact on state budgets, which may result in state-level changes such as reductions to the scope of covered services or tax increases.

In addition, the 2025 Reconciliation Bill increases the federal budget deficit in a manner that triggers a statutorily mandated sequestration under the Pay-As-You-Go Act of 2010.

As a result, a Medicare spending reduction of up to 4% is required to take effect in early 2026, absent congressional action.

These reductions would be in addition to the payment reductions required by the Budget Control Act of 2011 and subsequent legislation, which are currently set to continue through the first ten months of federal fiscal year 2032.

It is possible that future deficit reduction legislation will impose additional spending reductions.

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Supreme Court decision and to achieve budget neutrality, CMS reduced payment rates for non-drug services under the outpatient PPS for calendar year 2023, and lump sum payments were distributed to affected 340B providers as the remedy for calendar years 2018 through 2022.

Moreover, in order to comply with budget neutrality requirements, HHS finalized a corresponding offset in future non-drug item and service payments for all outpatient PPS providers (except new providers) that will reduce the outpatient PPS conversion factor by 0.5% annually.

This adjustment will start in calendar year 2026 and continue for approximately 16 years.

This reduction to payment rates adversely affected our results for the three months ended March 31, 2025, and the reduction to the outpatient PPS conversion factor as noted above is anticipated to adversely impact our results beginning in 2026.

This reduction to payment rates adversely affected our results for the six months ended June 30, 2025.

Under current regulations, the conversion factor will be reduced by 0.5% annually, an adjustment that will continue for approximately 16 years.

In July 2025,

CMS issued a proposed rule that would, if finalized, instead reduce the conversion factor by 2% annually and continue for approximately five years.

The reduction to the outpatient PPS conversion factor, whether implemented under current regulations or accelerated under the proposed rule, is anticipated to adversely impact our results beginning in 2026.

In addition, future payment adjustments may apply to hospitals reimbursed under the inpatient PPS as a result of a 2024 court decision that vacated a low wage index policy CMS adopted in 2020.

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However, it is not yet clear whether, when, or how the agency will address the impact of the low wage policy in federal fiscal years 2020 through 2024.

The 2025 Reconciliation Bill includes federal income tax provisions related to interest deductibility and bonus depreciation, among other provisions.

Because the 2025 Reconciliation Bill was enacted after June 30, 2025, the tax effects of such bill have not been reflected in our condensed consolidated financial statements.

We are currently evaluating the potential impact of the 2025 Reconciliation Bill;

however, due to the bill’s complexity and the proximity of enactment of such bill to the balance sheet date (June 30, 2025), an estimate of the financial effects of such bill is not currently determinable.

Sources of Revenue

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Three Months Ended

Six Months Ended

Medicare Managed Care

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Included in Managed Care and other third-party payors is net operating revenues from insurance companies with which we have insurance provider contracts, insurance companies for which we do not have insurance provider contracts, workers’ compensation carriers and non-patient service revenue, such as gain (loss) on investments, rental income and cafeteria sales.

We generally expect the portion of revenues received from the Medicare, Medicare Managed Care and Medicaid programs to increase over the long-term due to the general aging of the population and other factors.

We generally expect the portion of revenues received from the Medicare and Medicare Managed Care programs to increase over the long-term due to the general aging of the population and other factors.

There has been a trend toward increased enrollment in Medicare Managed Care and Medicaid managed care programs, which may adversely affect our net operating revenues.

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There can be no assurance that we will retain our existing reimbursement arrangements or that third-party payors will not attempt to further reduce the rates they pay for our services.

The revenues we receive and our relationships with payors are also expected to be impacted by the 2025 Reconciliation Bill, which includes healthcare policy changes that are expected to decrease access to health insurance and result in significant cuts to federal healthcare spending.

Net operating revenues include amounts estimated by management to be reimbursable by Medicare and Medicaid under prospective payment systems and provisions of cost-based reimbursement and other payment methods.

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We account for adjustments to previous program reimbursement estimates as contractual allowance adjustments and report them in the periods that such adjustments become known.

allowance adjustments related to final settlements and previous program reimbursement estimates impacted net operating revenues by an insignificant amount in each of the three-month periods ended March 31, 2025 and 2024.

Contractual allowance adjustments related to final settlements and previous program reimbursement estimates impacted net operating revenues by an insignificant amount in each of the three- and six-month periods ended June 30, 2025 and 2024.

The payment rates under the Medicare program for hospital inpatient and outpatient acute care services are based on prospective payment systems, which depend upon a patient’s diagnosis or the clinical complexity of services provided to a patient, among other factors.

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The programs are generally authorized by CMS for a specified period of time and require CMS’s approval to be extended.

We are unable to predict whether or on what terms CMS will extend the supplemental programs in the states in which we operate.

In addition, as noted above, the 2025 Reconciliation Bill includes several changes to Medicaid financing mechanisms, including limitations on provider taxes and SDP arrangements.

It is difficult to predict the ultimate impact of the legislation on these supplemental programs or whether or on what terms CMS will extend the supplemental programs in the states in which we operate.

Under these supplemental programs, we recognize revenue and related expenses in the period in which amounts are estimable and payment is reasonably assured.

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Three Months Ended

Six Months Ended

Operating results, as a percentage of net operating revenues:

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Interest expense, net

Gain from early extinguishment of debt

Equity in earnings of unconsolidated affiliates

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Provision for income taxes

Net income (loss)

Net income attributable to noncontrolling interests

Net loss attributable to Community Health

Net income (loss) attributable to Community Health

Systems, Inc.

Three Months Ended March 31,

Percentage increase (decrease) from prior year:

Three Months Ended June 30,

Six Months Ended June 30,

Percentage (decrease) increase from prior year:

Net operating revenues

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Average length of stay (d)

Net loss attributable to Community Health

Net income attributable to Community Health

Systems, Inc.

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These metrics provide useful insight to investors about the volume and acuity of services we provide, which aid in evaluating our financial results.

Three Months Ended March 31, 2025 Compared to Three Months Ended March 31, 2024

Net operating revenues increased to $3.159 billion for the three months ended March 31, 2025, compared to $3.140 billion for the same period in 2024.

Net operating revenues on a same-store basis from hospitals that were operated throughout both periods increased $94 million, or 3.1%, during the three months ended March 31, 2025, compared to the same period in 2024.

On a period-over-period basis, the increase in same-store net operating revenues was primarily attributable to higher volumes, increased reimbursement rates and supplemental reimbursement program revenue, partially offset by declines in acuity and non-patient revenue and increased patient claim denials.

Non-same-store net operating revenues decreased $75 million during the three months ended March 31, 2025, compared to the same period in 2024, due to the divestiture of hospitals in 2025 and 2024.

On a consolidated basis, inpatient admissions decreased by 1.0% and adjusted admissions decreased by 2.3% during the three months ended March 31, 2025, compared to the same period in 2024.

On a same-store basis, net operating revenues per adjusted admission increased 0.5%, while inpatient admissions increased by 4.0% and adjusted admissions increased by 2.6% for the three months ended March 31, 2025, compared to the same period in 2024.

Operating expenses, as a percentage of net operating revenues, decreased from 92.6% during the three months ended March 31, 2024 to 91.0% during the three months ended March 31, 2025.

Operating expenses, excluding depreciation and amortization and impairment and (gain) loss on sale of businesses, as a percentage of net operating revenues, increased from 88.4% for the three months ended March 31, 2024 to 88.5% for the three months ended March 31, 2025.

Salaries and benefits, as a percentage of net operating revenues, decreased from 43.5% for the three months ended March 31, 2024 to 43.4% for the three months ended March 31, 2025.

Supplies, as a percentage of net operating revenues, remained consistent at 15.5% for both of the three months ended March 31, 2025 and 2024.

Other operating expenses, as a percentage of net operating revenues, increased from 26.9% for the three months ended March 31, 2024 to 27.4% for the three months ended March 31, 2025, primarily due to higher medical specialist fees and increased supplemental reimbursement program expense, partially offset by reduced expense for contract labor.

Lease cost and rent, as a percentage of net operating revenues, decreased from 2.5% for the three months ended March 31, 2024 to 2.2% for the three months ended March 31, 2025.

Depreciation and amortization, as a percentage of net operating revenues, decreased from 3.7% for three months ended March 31, 2024 to 3.3% for the three months ended March 31, 2025, primarily due to an increase in net operating revenues and the impact of hospital divestitures in 2025 and 2024.

Impairment and (gain) loss on sale of businesses, net was a gain of $24 million for the three months ended March 31, 2025, compared to expense of $17 million for the same period in 2024.

The net gain recognized during the three months ended March 31, 2025 was comprised of a gain of approximately $50 million related to the sale of two hospitals, partially offset by (i) an approximate $10 million impairment charge recorded to reduce the carrying value of a hospital that was deemed held-for-sale based on the difference between the carrying value of the hospital disposal group compared to the estimated fair value less costs to sell, (ii) an approximate $11 million impairment charge to adjust the carrying value of long-lived assets at a hospital that was sold at a sales price below carrying value, and (iii) an approximate $5 million impairment charge recorded to reduce the carrying value of several assets that were idled, disposed of or held-for-sale.

The expense recognized during the three months ended March 31, 2024 was recorded to reduce the carrying value of several assets that were idled, disposed of or held-for-sale.

Interest expense, net, increased by $8 million to $219 million for the three months ended March 31, 2025, compared to $211 million for the same period in 2024 due primarily to financing activities in 2024.

Equity in earnings of unconsolidated affiliates, as a percentage of net operating revenues, remained consistent at 0.1% for both of the three-month periods ended March 31, 2025 and 2024.

The net results of the above-mentioned changes resulted in income before income taxes increasing $45 million to $67 million for the three months ended March 31, 2025, compared to $22 million for the same period in 2024.

Our provision for income taxes for the three months ended March 31, 2025 and 2024 was $42 million and $28 million, respectively, and the effective tax rates were 62.7% and 127.3% for the three months ended March 31, 2025 and 2024, respectively.

The increase in the provision for income taxes for the three months ended March 31, 2025, compared to the same period in 2024 was due to an increase in non-deductible goodwill related to divested hospitals.

The difference in our effective tax rate for the three months ended March 31, 2025, compared to the same period in 2024 is due to an increase in income before taxes and the aforementioned increase in the provision for income taxes.

Net income, as a percentage of net operating revenues, was 0.8% for the three months ended March 31, 2025, compared to a net loss of (0.2)% for the same period in 2024.

Net income attributable to noncontrolling interests as a percentage of net operating revenues was 1.2% for the three months ended March 31, 2025, compared to 1.1% for the same period in 2024.

Net loss attributable to Community Health Systems, Inc.

stockholders was $(13) million for the three months ended March 31, 2025, compared to $(41) million for the same period in 2024.

Three Months Ended June 30, 2025 Compared to Three Months Ended June 30, 2024

Net operating revenues decreased to $3.133 billion for the three months ended June 30, 2025, compared to $3.140 billion for the same period in 2024.

Net operating revenues on a same-store basis from hospitals that were operated throughout both periods increased $190 million, or 6.5%, during the three months ended June 30, 2025, compared to the same period in 2024.

On a period-over-period basis, the increase in same-store net operating revenues was primarily attributable to increased reimbursement rates, non-patient revenue and supplemental reimbursement program revenue, partially offset by lower outpatient volumes, lower acuity and unfavorable changes in payor mix.

Non-same-store net operating revenues decreased $197 million during the three months ended June 30, 2025, compared to the same period in 2024, due to the divestiture of hospitals in 2025 and 2024.

On a consolidated basis, inpatient admissions decreased by 7.4% and adjusted admissions decreased by 8.3% during the three months ended June 30, 2025, compared to the same period in 2024.

On a same-store basis, net operating revenues per adjusted admission increased 7.3%, while inpatient admissions increased by 0.3% and adjusted admissions decreased by 0.7% for the three months ended June 30, 2025, compared to the same period in 2024.

Total operating expenses, as a percentage of net operating revenues, decreased from 92.4% during the three months ended June 30, 2024 to 83.7% during the three months ended June 30, 2025.

Operating expenses, excluding depreciation and amortization and impairment and (gain) loss on sale of businesses, as a percentage of net operating revenues, decreased from 88.1% for the three months ended June 30, 2024 to 87.9% for the three months ended June 30, 2025.

Salaries and benefits, as a percentage of net operating revenues, increased from 42.3% for the three months ended June 30, 2024 to 42.4% for the three months ended June 30, 2025.

Supplies, as a percentage of net operating revenues, decreased from 15.4% for three months ended June 30, 2024 to 15.0% for the three months ended June 30, 2025.

Other operating expenses, as a percentage of net operating revenues, remained consistent at 28.1% for both of the three-month periods ended June 30, 2025 and 2024.

Lease cost and rent, as a percentage of net operating revenues, increased from 2.3% for the three months ended June 30, 2024 to 2.4% for the three months ended June 30, 2025.

Depreciation and amortization, as a percentage of net operating revenues, decreased from 4.0% for three months ended June 30, 2024 to 3.4% for the three months ended June 30, 2025, primarily due to a reduction in the amortization of capitalized internal-use software and the impact of hospital divestitures in 2025 and 2024.

Impairment and (gain) loss on sale of businesses, net was a gain of $239 million for the three months ended June 30, 2025, compared to expense of $10 million for the same period in 2024.

The net gain recognized during the three months ended June 30, 2025 was comprised of a gain of approximately $241 million related to the divestiture of two hospitals, partially offset by an approximate $2 million impairment charge to adjust the carrying value of long-lived assets at a hospital that was divested at a price below carrying value.

The expense recognized during the three months ended June 30, 2024 was recorded to reduce the carrying value of several assets that were idled, disposed of or held-for-sale.

Interest expense, net, decreased by $2 million to $214 million for the three months ended June 30, 2025, compared to $216 million for the same period in 2024 due primarily to financing activities in 2024 and 2025.

Equity in earnings of unconsolidated affiliates, as a percentage of net operating revenues, remained consistent at 0.1% for both of the three-month periods ended June 30, 2025 and 2024.

Gain from early extinguishment of debt of $138 million was recognized during the three months ended June 30, 2025, compared to $26 million for the same period in 2024, as a result of the refinancing and extinguishment of certain of our outstanding notes as discussed further in “Liquidity and Capital Resources.”

The net results of the above-mentioned changes resulted in income before income taxes increasing $388 million to $438 million for the three months ended June 30, 2025, compared to $50 million for the same period in 2024.

Our provision for income taxes for the three months ended June 30, 2025 and 2024 was $118 million and $24 million, respectively, and the effective tax rates were 26.9% and 48.0% for the three months ended June 30, 2025 and 2024, respectively.

The increase in the provision for income taxes and the difference in our effective tax rate for the three months ended June 30, 2025, compared to the same period in 2024 was primarily due to an increase in non-deductible goodwill related to divested hospitals.

Net income, as a percentage of net operating revenues, was 10.2% for the three months ended June 30, 2025, compared to 0.8% for the same period in 2024.

Net income attributable to noncontrolling interests as a percentage of net operating revenues remained consistent at 1.2% for both of the three-month periods ended June 30, 2025 and 2024.

Net income attributable to Community Health Systems, Inc.

stockholders was $282 million for the three months ended June 30, 2025, compared to net loss of $(13) million for the same period in 2024.

Six Months Ended June 30, 2025 Compared to Six Months Ended June 30, 2024

Net operating revenues increased to $6.292 billion for the six months ended June 30, 2025, compared to $6.279 billion for the same period in 2024.

Net operating revenues on a same-store basis from hospitals that were operated throughout both periods increased $292 million, or 5.0%, during the six months ended June 30, 2025, compared to the same period in 2024.

Non-same-store net operating revenues decreased $279 million during the six months ended June 30, 2025, compared to the same period in 2024, due to the divestiture of hospitals in 2025 and 2024.

On a consolidated basis, inpatient admissions decreased by 4.2% and adjusted admissions decreased by 5.3% during the six months ended June 30, 2025, compared to the same period in 2024.

On a same-store basis, net operating revenues per adjusted admission increased 3.9%, while inpatient admissions increased by 2.3% and adjusted admissions increased by 1.0% for the six months ended June 30, 2025, compared to the same period in 2024.

Total operating expenses, as a percentage of net operating revenues, decreased from 92.5% during the six months ended June 30, 2024 to 87.4% during the six months ended June 30, 2025.

Operating expenses, excluding depreciation and amortization and impairment and (gain) loss on sale of businesses, as a percentage of net operating revenues, decreased from 88.3% for the six months ended June 30, 2024 to 88.2% for the six months ended June 30, 2025.

Salaries and benefits, as a percentage of net operating revenues, decreased from 43.0% for the six months ended June 30, 2024 to 42.9% for the six months ended June 30, 2025.

Supplies, as a percentage of net operating revenues, decreased from 15.4% for the six months ended June 30, 2024 to 15.2% for the six months ended June 30, 2025.

Other operating expenses, as a percentage of net operating revenues, increased from 27.5% for the six months ended June 30, 2024 to 27.8% for the six months ended June 30, 2025, primarily due to higher medical specialist fees and increased supplemental reimbursement program expense, partially offset by reduced expense for contract labor.

Lease cost and rent, as a percentage of net operating revenues, decreased from 2.4% for the six months ended June 30, 2024 to 2.3% for the six months ended June 30, 2025.

Depreciation and amortization, as a percentage of net operating revenues, decreased from 3.8% for the six months ended June 30, 2024 to 3.4% for the six months ended June 30, 2025, primarily due to a reduction in the amortization of capitalized internal-use software and the impact of hospital divestitures in 2025 and 2024.

Impairment and (gain) loss on sale of businesses, net was a gain of $263 million for the six months ended June 30, 2025, compared to expense of $27 million for the same period in 2024.

The net gain recognized during the six months ended June 30, 2025 was comprised of a gain of approximately $291 million related to the divestiture of four hospitals, partially offset by (i) an approximately $23 million impairment charge to adjust the carrying value of long-lived assets at two hospitals that were divested at a price below carrying value, and (ii) an approximately $5 million impairment charge recorded to reduce the carrying value of several assets that were idled, disposed of or held-for-sale.

The expense recognized during the six months ended June 30, 2024 was recorded to reduce the carrying value of several assets that were idled, disposed of or held-for-sale.

Interest expense, net, increased by $6 million to $432 million for the six months ended June 30, 2025, compared to $426 million for the same period in 2024 due primarily to financing activities in 2024 and 2025.

Gain from early extinguishment of debt of $138 million was recognized during the six months ended June 30, 2025, compared to $26 million for the same period in 2024, as a result of the refinancing and extinguishment of certain of our outstanding notes as discussed further in “Liquidity and Capital Resources.”

Equity in earnings of unconsolidated affiliates, as a percentage of net operating revenues, remained consistent at 0.1% for both of the six-month periods ended June 30, 2025 and 2024.

The net results of the above-mentioned changes resulted in income before income taxes increasing $433 million to $505 million for the six months ended June 30, 2025, compared to $72 million for the same period in 2024.

Our provision for income taxes for the six months ended June 30, 2025 and 2024 was $160 million and $52 million, respectively, and the effective tax rates were 31.7% and 72.2% for the six months ended June 30, 2025 and 2024, respectively.

The increase in the provision for income taxes and the difference in our effective tax rate for the six months ended June 30, 2025, compared to the same period in 2024 was primarily due to an increase in non-deductible goodwill related to divested hospitals.

Net income, as a percentage of net operating revenues, was 5.5% for the six months ended June 30, 2025, compared to 0.3% for the same period in 2024.

Net income attributable to noncontrolling interests as a percentage of net operating revenues remained consistent at 1.2% for both of the six-month periods ended June 30, 2025 and 2024.

Net income attributable to Community Health Systems, Inc.

stockholders was $269 million for the six months ended June 30, 2025, compared to net loss of $(55) million for the same period in 2024.

Liquidity and Capital Resources

Net cash provided by operating activities increased $24 million, from approximately $96 million for the three months ended March 31, 2024, to approximately $120 million for the three months ended March 31, 2025.

The increase in cash provided by operating activities is primarily due to an increase in accounts payable, partially offset by an increase in accounts receivable.

Cash paid for interest was $229 million during the three months ended March 31, 2025, compared to $149 million for the same period in 2024.

Cash paid for income taxes, net of refunds received, resulted in a net refund of $80 million and a payment of less than $1 million during the three months ended March 31, 2025 and 2024, respectively.

Net cash provided by investing activities was approximately $444 million for the three months ended March 31, 2025, compared to net cash used in investing activities of approximately $99 million for the same period in 2024.

Net cash used in investing activities during the three months ended March 31, 2025 was impacted by a decrease of $8 million in cash used for the purchase of property and equipment and an increase of $563 million in cash proceeds from dispositions of hospitals and other ancillary operations, partially offset by a decrease of $7 million in cash from the net impact of the purchases and sales of available-for-sale debt and equity securities and an increase of $25 million in cash used for other investments, which includes capitalized software costs and physician recruitment costs.

Our net cash used in financing activities was approximately $170 million for the three months ended March 31, 2025, compared to net cash provided by financing activities of approximately $13 million for the same period in 2024, a change of $183 million.

This was primarily due to the net impact of our debt borrowings and repayments during the three months ended March 31, 2025, compared to the same period in 2024.

Net working capital was approximately $1.0 billion at March 31, 2025 and approximately $956 million at December 31, 2024.

Net working capital increased by approximately $81 million between December 31, 2024 and March 31, 2025.

The increase is primarily due to increases in cash, patient accounts receivable and prepaid expenses and taxes and decreases in accrued interest and accrued liabilities for employee compensation during the three months ended March 31, 2025, partially offset by decreases in prepaid income taxes and other current assets and increases in current maturities of long-term debt, accounts payable and income tax payable.

In addition to cash flows from operations, available sources of capital include amounts available under the asset-based loan (ABL) credit agreement, or the ABL Credit Agreement, and anticipated access to public and private debt markets as well as proceeds from the disposition of hospitals or other investments such as our minority equity interests in various businesses, as applicable.

Pursuant to the ABL Credit Agreement, the lenders have extended to CHS/Community Health Systems, Inc., or CHS, a revolving asset-based loan facility, or ABL Facility.

Net cash provided by operating activities increased $11 million, from approximately $197 million for the six months ended June 30, 2024, to approximately $208 million for the six months ended June 30, 2025.

The increase in cash provided by operating activities is primarily due to an increase in accounts payable, partially offset by increased cash paid for interest and taxes.

Cash paid for interest was $407 million during the six months ended June 30, 2025, compared to $360 million for the same period in 2024.

Cash paid for income taxes, net of refunds received, resulted in a net payment of $101 million and $84 million during the six months ended June 30, 2025 and 2024, respectively.

Approximately $74 million of cash paid for taxes during the six months ended June 30, 2025, related to gains on divested hospitals for which proceeds were received during the three months ended March 31, 2025.

Net cash provided by investing activities was approximately $786 million for the six months ended June 30, 2025, compared to net cash used in investing activities of approximately $207 million for the same period in 2024.

Net cash provided by investing activities during the six months ended June 30, 2025 was impacted by an increase of $1.0 billion in cash proceeds from dispositions of hospitals and other ancillary operations, partially offset by a decrease of $23 million in cash from the net impact of the purchases and sales of available-for-sale debt and equity securities and an increase of $8 million in cash used for other investments, which includes capitalized software costs and physician recruitment costs.

Our net cash used in financing activities was approximately $575 million for the six months ended June 30, 2025, compared to net cash provided by financing activities of approximately $11 million for the same period in 2024, a change of $586 million.

This was primarily due to the net impact of our debt borrowings and repayments during the six months ended June 30, 2025, compared to the same period in 2024.

Net working capital was approximately $1.4 billion at June 30, 2025 and approximately $956 million at December 31, 2024.

Net working capital increased by approximately $408 million between December 31, 2024 and June 30, 2025.

The increase is primarily due to increases in cash and prepaid expenses and taxes and decreases in accrued liabilities for employee compensation during the six months ended June 30, 2025, partially offset by decreases in patient accounts receivable, prepaid income taxes and other current assets and increases in accounts payable.

In addition to cash flows from operations, available sources of capital include amounts available under the asset-based loan credit agreement, or the ABL Credit Agreement, and anticipated access to public and private debt markets as well as proceeds from the disposition of hospitals or other investments such as our minority equity interests in various businesses, as applicable.

Pursuant to the ABL Credit Agreement, the lenders have extended to CHS/Community Health Systems, Inc.

(a wholly-owned subsidiary of the Parent Company), or CHS, a revolving asset-based loan facility, or ABL Facility.

The maximum aggregate amount under the ABL Facility is $1.0 billion, subject to borrowing base capacity.

At March 31, 2025, we had outstanding borrowings of $200 million and approximately $651 million of additional borrowing capacity (after taking into consideration $67 million of outstanding letters of credit) under the ABL Facility.

At June 30, 2025, we had outstanding borrowings of $305 million and approximately $483 million of additional borrowing capacity (after taking into consideration $66 million of outstanding letters of credit) under the ABL Facility.

The issued letters of credit were primarily in support of potential insurance-related claims and certain bonds.

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2025 Financing Activity

On April 23, 2025, CHS undertook certain financing-related actions including:

(1) the commencement of a tender offer for any and all of its outstanding 6⅞% Senior Unsecured Notes due 2028 that will be funded using cash on hand, (2) entered into a privately negotiated agreement with a multi-asset investment manager to issue and sell $700 million aggregate principal amount of 10¾% Senior Secured Notes due 2033, and (3) the issuance of a notice of conditional redemption to redeem all of its outstanding 8% Senior Secured Notes due 2027 at par value plus accrued and unpaid interest.

The Company expects to use the net proceeds from issuance of the 10¾% Senior Secured Notes due 2033, together with cash on hand, to redeem the 8% Senior Secured Notes due 2027 and to pay related fees and expenses.

The completion of the tender offer and the consummation of the sale of the 10¾% Senior Secured Notes due 2033 and associated redemption of the 8% Senior Secured Notes due 2027, as described above, are expected to be completed in May 2025.

For additional information regarding the tender offer, the sale of the 10¾% Senior Secured Notes due 2033 and the conditional redemption notice with respect to the 8% Senior Secured Notes due 2027, see the Current Reports on Form 8-K filed by the Company on April 23, 2025.

On May 9, 2025, CHS completed the offering of $700 million aggregate principal amount of 10.750% Senior Secured Notes due June 15, 2033, or the 10¾% Senior Secured Notes due 2033, to a multi-asset investment manager through a privately negotiated agreement.

The 10¾% Senior Secured Notes due 2033 bear interest at a rate of 10.750% per year payable semi-annually in arrears on June 15 and December 15 of each year, commencing on December 15, 2025.

Proceeds from issuance of the 10¾% Senior Secured Notes due 2033, together with cash on hand, were used to redeem all outstanding 8% Senior Secured Notes due 2027 and to pay related fees and expenses.

In addition, approximately $584 million principal amount of the 6⅞% Senior Unsecured Notes due 2028 were redeemed in May 2025 via a tender offer using cash on-hand of approximately $438 million.

For additional information regarding the sale of the 10¾% Senior Secured Notes due 2033, the redemption of the 8% Senior Secured Notes due 2027, and the tender offer, see the Current Reports on Form 8-K filed by the Company with the SEC on April 23, 2025, May 7, 2025, and May 9, 2025.

A pre-tax gain from early extinguishment of debt of approximately $138 million was recognized associated with these financing activities during the three months ended June 30, 2025.

Additional Liquidity Information

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Upon the occurrence of an event of default under the ABL Facility or indentures that govern our outstanding notes, all amounts outstanding under the ABL Facility and the indentures that govern our outstanding notes may become immediately due and payable and all commitments under the ABL Facility to extend further credit may be terminated.

As of March 31, 2025, approximately $29 million of our outstanding debt of approximately $11.3 billion is due within the next 12 months.

As of June 30, 2025, approximately $23 million of our outstanding debt of approximately $10.9 billion is due within the next 12 months.

In connection with our divestiture of Tennova Healthcare - Cleveland to Hamilton Health Care Systems, Inc., which was completed effective August 1, 2024, we are entitled to receive additional cash consideration contingent upon approval of the then-potential modifications to applicable supplemental reimbursement programs as more specifically provided in the asset purchase agreement underlying the transaction.

Modifications to the applicable supplemental reimbursement programs have been approved as of June 30, 2025, but an estimate of the additional consideration that may be received by the Company under the terms of the asset purchase agreement, which is dependent upon the determination of a third party, is not yet available.

We expect to receive and recognize such additional consideration in 2025.

Net proceeds from divestitures, if any, are expected to be used for general corporate purposes (including potential debt repayments and/or debt repurchases) and capital expenditures.

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Any such debt repurchases will depend upon prevailing market conditions, our liquidity requirements, contractual restrictions, applicable securities law requirements and other factors.

There have been no material changes outside of the ordinary course of business to our upcoming cash obligations during the three months ended March 31, 2025, from those disclosed under “Capital Resources” in Management’s Discussion and Analysis of Financial Condition and Results of Operations in the 2024 Form 10-K.

There have been no material changes outside of the ordinary course of business to our upcoming cash obligations during the three months ended June 30, 2025, from those disclosed under “Capital Resources” in Management’s Discussion and Analysis of Financial Condition and Results of Operations in the 2024 Form 10-K.

Capital Resources

Cash expenditures for purchases of facilities and other related businesses were less than $1 million for the three months ended March 31, 2025, compared to approximately $1 million for the same period in 2024.

Our expenditures for the three months ended March 31, 2025 and 2024 were primarily related to physician practices and clinics.

Cash expenditures for purchases of facilities and other related businesses were less than $1 million for the six months ended June 30, 2025, compared to approximately $1 million for the same period in 2024.

Our expenditures for the six months ended June 30, 2025 and 2024 were primarily related to physician practices and clinics.

Capital expenditures relate primarily to expansion and renovation of existing facilities, construction of additional access points such as free-standing emergency departments and ambulatory surgery centers, investments in higher acuity service lines and information technology infrastructure, as well as routine expenditures for equipment, minor renovations and other upgrades.

Capital expenditures totaled $85 million and $93 million for the three months ended March 31, 2025 and 2024, respectively.

Capital expenditures totaled $176 million and $181 million for the six months ended June 30, 2025 and 2024, respectively.

We expect total capital expenditures of approximately $350 million to $400 million in 2025.

Pursuant to a hospital purchase agreement from our March 1, 2016 acquisition of Northwest Health - Starke, formerly known as Starke Hospital, we committed to make an investment of up to $15 million toward the construction of a replacement facility in Knox, Indiana.

Construction is required to be completed within five years of the date we enter into a new lease with Starke County, Indiana, the hospital lessor, or in the event we do not enter into a new lease with Starke County, construction is to be completed by September 30, 2026.

We have not entered into a new lease with the lessor for Northwest Health - Starke.

Construction is required to be completed by the earlier of (i) five years after we enter into a new lease (or amendment to the existing lease) with Starke County, Indiana, or (ii) September 30, 2026.

We have not entered into a new lease (or amendment to the existing lease) with Starke County, Indiana.

Reimbursement, Legislative and Regulatory Changes

Ongoing presidential actions, legislative and regulatory efforts and judicial interpretations could reduce or otherwise adversely affect the amount of payments we receive from Medicare and Medicaid and other payors, including through holds on or cancellations of congressionally authorized spending.

Within the statutory framework of the Medicare and Medicaid programs, there are substantial areas subject to administrative rulings, interpretations and discretion that may affect payments made under those programs.

As noted above, the 2025 Reconciliation Bill includes healthcare policy changes that are expected to decrease access to health insurance and result in significant cuts to federal healthcare spending.

There is uncertainty regarding the implementation and ultimate impact of the law, but it may adversely affect our revenues.

In addition, within the statutory framework of the Medicare and Medicaid programs, there are substantial areas subject to administrative rulings, interpretations and discretion that may affect payments made under those programs.

It is unclear how the restructuring efforts within HHS or broader governmental deregulatory initiatives will impact administration of or payment under the Medicare and Medicaid programs.

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Due to the complexities involved in these estimates, actual payments we receive could be different from the amounts we estimate and record.

If the actual contractual reimbursement percentage under government programs and managed care contracts differed by 1% at March 31, 2025 from our estimated reimbursement percentage, net loss for the three months ended March 31, 2025 would have changed by approximately $103 million, and net accounts receivable at March 31, 2025 would have changed by approximately $132 million.

If the actual contractual reimbursement percentage under government programs and managed care contracts differed by 1% at June 30, 2025 from our estimated reimbursement percentage, net income for the six months ended June 30, 2025 would have changed by approximately $98 million, and net accounts receivable at June 30, 2025 would have changed by approximately $126 million.

Final settlements under some of these programs are subject to adjustment based on administrative review and audit by third parties.

We account for adjustments to previous program reimbursement estimates as contractual allowance adjustments and report them in the periods that such adjustments become known.

Contractual allowance adjustments related to final settlements and previous program reimbursement estimates impacted net operating revenues by an insignificant amount for the three-month periods ended March 31, 2025 and 2024.

Patient Accounts Receivable

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We believe that we collect substantially all of our third-party insured receivables, which include receivables from governmental agencies.

Patient accounts receivable can be impacted by the effectiveness of our collection efforts and, as described in our significant accounting policies included in Note 1 - Basis of Presentation and Significant Accounting Policies of the Notes to Condensed Consolidated Financial Statements included under Part I, Item 1 of this Form 10-Q, numerous factors may affect the net realizable value of accounts receivable.

If the actual collection percentage differed by 1% at March 31, 2025 from our estimated collection percentage as a result of a change in expected recoveries, net loss for the three months ended March 31, 2025 would have changed by approximately $37 million, and net accounts receivable at March 31, 2025 would have changed by approximately $48 million.

Consolidated Financial Statements included under Part I, Item 1 of this Form 10-Q, numerous factors may affect the net realizable value of accounts receivable.

If the actual collection percentage differed by 1% at June 30, 2025 from our estimated collection percentage as a result of a change in expected recoveries, net income for the six months ended June 30, 2025 would have changed by approximately $36 million, and net accounts receivable at June 30, 2025 would have changed by approximately $47 million.

We also continually review our overall reserve adequacy by monitoring historical cash collections as a percentage of trailing net operating revenues, as well as by analyzing current period net operating revenues and admissions by payor classification, days revenue outstanding, the composition of self-pay receivables between pure self-pay patients and the patient responsibility portion of third-party insured receivables and the impact of recent acquisitions and dispositions.

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We believe this policy accurately reflects our ongoing collection efforts and is consistent with industry practices.

We had approximately $1.5 billion at March 31, 2025 and $1.6 billion at December 31, 2024, being pursued by various outside collection agencies.

We had approximately $1.4 billion at June 30, 2025 and $1.6 billion at December 31, 2024, being pursued by various outside collection agencies.

We expect to collect less than 4%, net of estimated collection fees, of the amounts being pursued by outside collection agencies.

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Patient accounts receivable from our hospitals represent approximately 98% of our total consolidated accounts receivable.

Days revenue outstanding, adjusted for the impact of receivables for state Medicaid supplemental payment programs and divested facilities, was 56 days and 55 days at March 31, 2025 and December 31, 2024, respectively.

Total gross accounts receivable (prior to allowance for contractual adjustments and implicit price concessions) was approximately $17.5 billion and $17.3 billion as of March 31, 2025 and December 31, 2024, respectively.

Days revenue outstanding, adjusted for the impact of receivables for state Medicaid supplemental payment programs and divested facilities, was 55 days at both June 30, 2025 and December 31, 2024.

Total gross accounts receivable (prior to allowance for contractual adjustments and implicit price concessions) was approximately $16.9 billion and $17.3 billion as of June 30, 2025 and December 31, 2024, respectively.

The approximate percentage of total gross accounts receivable (prior to allowance for contractual adjustments and implicit price concessions) summarized by payor and aging categories is as follows:

At March 31, 2025:

At June 30, 2025:

% of Gross Receivables

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Self-pay receivables

The combined total at our hospitals and clinics for the estimated implicit price concessions for self-pay accounts receivable and allowances for other self-pay discounts and contractuals, as a percentage of gross self-pay receivables, was approximately 90% at both March 31, 2025 and December 31, 2024.

If the receivables that have been written-off, but where collections are still being pursued by outside collection agencies, were included in both the allowances and gross self-pay receivables specified above, the percentage of combined allowances to total self-pay receivables would have been 92% at March 31, 2025 and 93% at December 31, 2024.

At March 31, 2025, we had approximately $3.8 billion of goodwill recorded, all of which resides at our hospital operations reporting unit.

At June 30, 2025, we had approximately $3.6 billion of goodwill recorded, all of which resides at our hospital operations reporting unit.

Goodwill represents the excess of the fair value of the consideration conveyed in an acquisition over the fair value of net assets acquired.

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Since we believe that the amount and timing of our future claims payments are reliably determinable, we discount the amount we accrue for losses resulting from professional liability claims.

The net present value of the projected payments was discounted using a weighted-average risk-free rate of 3.7% at both March 31, 2025 and December 31, 2024.

The net present value of the projected payments was discounted using a weighted-average risk-free rate of 3.8% and 3.7% at June 30, 2025 and December 31, 2024, respectively.

This liability is adjusted for new claims information in the period such information becomes known to us.

Professional liability expense includes the losses resulting from professional liability claims and loss adjustment expense, as well as excess insurance premiums, and is presented within other operating expenses in the accompanying condensed consolidated statements of loss.

Our processes for obtaining and analyzing claims and incident data are standardized across all of our businesses and have been consistent for many years.

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Each of these methods uses our company-specific historical claims data and other information.

Company-specific data includes information regarding our business, including historical paid losses and loss adjustment expenses, historical and current case loss reserves, actual and projected hospital statistical data, a variety of hospital census information, employed physician information, professional liability retentions for each policy year, geographic information and other data.

Company-specific data includes information regarding our business, including historical paid losses and loss adjustment expenses, historical and current

case loss reserves, actual and projected hospital statistical data, a variety of hospital census information, employed physician information, professional liability retentions for each policy year, geographic information and other data.

Significant assumptions are made on the basis of the aforementioned information in estimating reserves for incurred but not reported claims.

A 1% change in assumptions for either severity or frequency as of March 31, 2025 would have increased or decreased the reserve by approximately $5 million to $10 million.

A 1% change in assumptions for either severity or frequency as of June 30, 2025 would have increased or decreased the reserve by approximately $5 million to $10 million.

Based on these analyses, we periodically review and determine our estimate of the professional liability claims.

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Beginning June 1, 2018, this drop-down provision in the excess policies attaches over the $15 million per claim self-insured retention.

There were no significant changes in our estimate of the reserve for professional liability claims during the three months ended March 31, 2025.

There were no significant changes in our estimate of the reserve for professional liability claims during the six months ended June 30, 2025.

We must make estimates in recording provision for income taxes, including determination of deferred tax assets and deferred tax liabilities and any valuation allowances that might be required against the deferred tax assets.

We believe that future income will enable us to realize certain deferred tax assets, subject to the valuation allowance we have established.

The total amount of unrecognized benefit that would impact the effective tax rate, if recognized, was $43 million at March 31, 2025.

A total of $6 million of interest and penalties is included in the amount of liability for uncertain tax positions at March 31, 2025.

It is our policy to recognize interest and penalties related to unrecognized benefits in our condensed consolidated statements of loss as income tax expense.

The total amount of unrecognized benefit that would impact the effective tax rate, if recognized, was $44 million at June 30, 2025.

A total of $7 million of interest and penalties is included in the amount of liability for uncertain tax positions at June 30, 2025.

It is our policy to recognize interest and penalties related to unrecognized benefits in our condensed consolidated statements of income (loss) as income tax expense.

It is possible the amount of unrecognized tax benefit could change in the next 12 months as a result of a lapse of the statute of limitations and settlements with taxing authorities;

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• general economic and business conditions, both nationally and in the regions in which we operate, including the impact of challenging macroeconomic conditions and inflationary pressures, the current high interest rate environment, current geopolitical instability, and impacts from the imposition of, or changes in tariffs, as well as the potential impact on us of uncertain political, financial, credit and capital conditions;

• the impact of current and future healthcare public policy developments and possible changes to federal, state or local laws, regulations and policies affecting the healthcare industry, including changes affecting the structure of or funding for the Medicare and Medicaid programs and changes in the structure and administration of federal and state agencies and programs;

• the impact of current and future healthcare public policy developments and the implementation of new, and possible changes to existing, federal, state or local laws, regulations and policies affecting the healthcare industry, including changes affecting the structure of or funding for the Medicare and Medicaid programs and changes in the structure and administration of federal and state agencies and programs;

• changes by the federal and state governments to state Medicaid programs, including the extent and nature of structural and funding changes and manner in which any such changes are implemented, and other developments that affect the administration of health insurance exchanges or alter or reduce the provision of, or payment for, healthcare to state residents through legislation, regulation or otherwise;

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• any potential impairments in the carrying value of goodwill, other intangible assets, or other long-lived assets, or changes in the useful lives of other intangible assets;

• the effects related to the sequestration spending reductions pursuant to the Budget Control Act of 2011 and the potential for future deficit reduction legislation;

• the effects related to the sequestration spending reductions pursuant to both the Budget Control Act of 2011 and the Pay-As-You-Go Act of 2010 and the potential for future deficit reduction legislation;

• increases in the amount and risk of collectability of patient accounts receivable, including decreases in collectability which may result from, among other things, self-pay growth and difficulties in recovering payments for which patients are responsible, including co-pays and deductibles;

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Quantitative and Qualitat ive Disclosures about Market Risk

During the three months ended March 31, 2025, there have been no material changes in the quantitative and qualitative disclosures set forth in Item 7A.

During the three months ended June 30, 2025, there have been no material changes in the quantitative and qualitative disclosures set forth in Item 7A.

Quantitative and Qualitative Disclosures about Market Risk in our 2024 Form 10-K.

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What changed 10-Q

Item 2. Management’s Discussion and Analysis