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Item 2. Management’s Discussion and Analysis

2025-10-24 compared with 2025-07-24 · 196 added, 173 removed, 376 unchanged (50% 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 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.

As of September 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 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.

During the nine months ended September 30, 2025, we paid approximately $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 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.

During the nine months ended September 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.

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.

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 we divested our 50% ownership interest, and in the case of Cedar Park Regional Medical Center, in which we divested our 80% ownership interest) during the nine months ended September 30, 2025 and the year ended December 31, 2024.

Effective Date

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October 1, 2024

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 July 22, 2025.

On July 22, 2025, we entered into a definitive agreement with Laboratory Corporation of America Holdings, or Labcorp, pursuant to which Labcorp has agreed to acquire select assets and assume certain leases of the ambulatory outreach business 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, less certain purchase price adjustments.

Subject to certain regulatory approvals and the satisfaction or waiver of the closing conditions set forth in the definitive agreement, consummation of this transaction is expected to occur in the fourth quarter of 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.

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

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

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Overview of Operating Results

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:

Net operating revenues decreased from $3.090 billion for the three months ended September 30, 2024 to $3.087 billion for the three months ended September 30, 2025.

On a same-store basis, net operating revenues for the three months ended September 30, 2025 increased $172 million compared to the same period in 2024.

We had net income of $171 million during the three months ended September 30, 2025, compared to net loss of $(355) million for the same period in 2024.

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

• an after tax charge of $26 million for loss from early extinguishment of debt, and

• an after-tax charge of $16 million resulting from the impairment of certain long-lived assets that were idled or disposed.

In addition, net income during the three months ended September 30, 2025, was positively impacted by an income tax benefit of approximately $163 million recognized during the three months ended September 30, 2025, resulting from a decrease in valuation allowances stemming from increased interest deductibility and increased bonus depreciation in connection with the federal budget legislation which was enacted on July 4, 2025.

Net loss for the three months ended September 30, 2024 included the following:

• an after-tax charge of $13 million for expenses related to costs associated with our multi-year initiative to modernize and consolidate technology platforms and associated processes,

• an after-tax charge of $223 million resulting from the impairment of certain long-lived assets that were idled, disposed or held-for-sale as well as divestiture related costs, partially offset by the gain related to the sale of a hospital, and

• an after-tax charge of $116 million for a change in estimate for professional liability claims accrual.

Consolidated inpatient admissions for the three months ended September 30, 2025, decreased 6.6%, compared to the same period in 2024.

Consolidated adjusted admissions for the three months ended September 30, 2025, decreased 7.7%, compared to the same period in 2024.

Same-store inpatient admissions for the three months ended September 30, 2025, increased 1.3%, compared to the same period in 2024, and same-store adjusted admissions for the three months ended September 30, 2025, increased 0.3%, compared to the same period in 2024.

Net operating revenues increased from $9.369 billion for the nine months ended September 30, 2024 to $9.379 billion for the nine months ended September 30, 2025.

On a same-store basis, net operating revenues for the nine months ended September 30, 2025 increased $473 million compared to the same period in 2024.

We had net income of $516 million during the nine months ended September 30, 2025, compared to net loss of $(334) million for the same period in 2024.

Net income for the nine months ended September 30, 2025 included the following:

• an after tax benefit of $113 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 $132 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 as well as divestiture related costs.

Net loss for the nine months ended September 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 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.

• an after-tax charge of $33 million for expenses related to costs associated with our multi-year initiative to modernize and consolidate technology platforms and associated processes,

• an after-tax charge of $244 million resulting from impairment of certain long-lived assets that were idled, disposed or held-for-sale as well as divestiture related costs, partially offset by the gain related to the sale of a hospital, and

• an after-tax charge of $116 million for a change in estimate for professional liability claims accrual.

Consolidated inpatient admissions for the nine months ended September 30, 2025, decreased 5.0%, compared to the same period in 2024.

Consolidated adjusted admissions for the nine months ended September 30, 2025, decreased 6.1%, compared to the same period in 2024.

Same-store inpatient admissions for the nine months ended September 30, 2025, increased 2.1%, compared to the same period in 2024, and same-store adjusted admissions for the nine months ended September 30, 2025, increased 0.9%, compared to the same period in 2024.

Self-pay revenues represented approximately 0.8% and 1.1% for the three months ended September 30, 2025 and 2024, respectively, and 0.7% and 1.4% for the nine months ended September 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 13.6% and 9.8% for the three months ended September 30, 2025 and 2024, respectively, and 11.3% and 9.7% for the nine months ended September 30, 2025 and 2024, respectively.

Direct and indirect costs incurred in providing charity care services as a percentage of net operating revenues was approximately 1.4% and 1.0% for the three months ended September 30, 2025 and 2024, respectively, and 1.2% and 1.0% for the nine months ended September 30, 2025 and 2024, respectively.

Overview of Legislative and Other Governmental Developments

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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.

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.

This rule is currently the subject of legal challenges.

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

Among other provisions, the 2025 Reconciliation Law 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.

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

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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.

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.

For example, the 2025 Reconciliation Law 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 Law 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.

In addition, the 2025 Reconciliation Law 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.

Some provisions of the 2025 Reconciliation Law 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 September 30, 2025, eight states have taken action to expand their Medicaid programs.

The other six states in which we operated hospitals as of September 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 September 30, 2025.

Although we are unable to fully assess the magnitude of the future impact of the 2025 Reconciliation Law, we expect the 2025 Reconciliation Law as described above 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.

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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 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.

For example, the 2025 Reconciliation Law 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 Law 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.

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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.

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

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 starting in calendar year 2026.

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

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 starting in calendar year 2026.

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.

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.

In addition, 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.

Under the policy, CMS increased the wage index values for hospitals with low wage index, thereby increasing their reimbursement, and offset these increases by decreasing reimbursement for all other hospitals.

CMS addressed the impact of the court decision prospectively in its final rule updating inpatient hospital payment rates and policies for federal fiscal year 2025, removing the upward reimbursement adjustment for the low-wage hospitals and the related budget neutrality factor that decreased reimbursement for all other hospitals.

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.

CMS addressed the impact of the court decision prospectively in its final rules updating inpatient hospital payment rates and policies for federal fiscal years 2025 and 2026, removing the upward reimbursement adjustment for the low-wage hospitals and the related budget neutrality factor that decreased reimbursement for all other hospitals, and establishing a transitional payment policy for low wage index hospitals significantly impacted by removal of the policy.

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 federal government entered a partial shutdown effective October 1, 2025.

Although Medicare and Medicaid reimbursement generally remains available through a shutdown, we may experience delays in payment for services rendered and other effects related to government agencies operating at reduced capacity.

In addition, the government shutdown is preventing congressional action on significant issues.

For example, current law provides for reductions to Medicaid disproportionate share hospital, or DSH, payments to take effect October 1, 2025, and to be reduced by $8.0 billion in each of federal fiscal years 2026 through 2028.

Medicaid DSH payments are a type of supplemental payment intended to offset hospitals’ uncompensated care costs.

Congress has repeatedly delayed these DSH reductions, but it is unclear whether it will do so again when the government shutdown is over and whether any such delay would apply retroactively.

Sources of Revenue

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Three Months Ended

Six Months Ended

Nine Months Ended

September 30,

Medicare Managed Care

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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.

The revenues we receive and our relationships with payors are also expected to be impacted by the 2025 Reconciliation Law, 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.

In addition, we are reimbursed by non-governmental payors using a variety of payment methodologies.

Amounts we receive for the treatment of patients covered by Medicare, Medicaid and non-governmental payors are generally less than our standard billing rates.

Amounts we receive for the treatment of patients covered by

Medicare, Medicaid and non-governmental payors are generally less than our standard billing rates.

We account for the differences between the estimated program reimbursement rates and our standard billing rates as contractual allowance adjustments, which we deduct from gross revenues to arrive at net operating revenues.

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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.

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.

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

In addition, as noted above, the 2025 Reconciliation Law 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.

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Three Months Ended

Six Months Ended

Nine Months Ended

September 30,

Operating results, as a percentage of net operating revenues:

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Impairment and (gain) loss on sale of businesses, net

Income from operations

Income (loss) from operations

Interest expense, net

Gain from early extinguishment of debt

(Loss) gain from early extinguishment of debt

Equity in earnings of unconsolidated affiliates

Income before income taxes

Provision for income taxes

(Loss) income before income taxes

Benefit from income taxes

Net income (loss)

Net income attributable to noncontrolling interests

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Systems, Inc.

Three Months Ended June 30,

Six Months Ended June 30,

Three Months Ended September 30,

Nine Months Ended September 30,

Percentage (decrease) increase from prior year:

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Average length of stay (d)

Net income attributable to Community Health

Net income (loss) 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 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.

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

Net operating revenues decreased to $3.087 billion for the three months ended September 30, 2025, compared to $3.090 billion for the same period in 2024.

Net operating revenues on a same-store basis from hospitals that were operated throughout both periods increased $172 million, or 6.0%, during the three months ended September 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, higher supplemental reimbursement program revenue and favorable changes in payor mix, partially offset by lower acuity.

Non-same-store net operating revenues decreased $175 million during the three months ended September 30, 2025, compared to the same period in 2024, due to the divestiture of hospitals in 2025 and 2024, partially offset by an increase in non-patient revenue resulting primarily from the receipt of $28 million for the settlement of a legal matter.

On a consolidated basis, inpatient admissions decreased by 6.6% and adjusted admissions decreased by 7.7% during the three months ended September 30, 2025, compared to the same period in 2024.

On a same-store basis, net operating revenues per adjusted admission increased 5.6%, while inpatient admissions increased by 1.3% and adjusted admissions increased by 0.3% for the three months ended September 30, 2025, compared to the same period in 2024.

Total operating expenses, as a percentage of net operating revenues, decreased from 106.6% during the three months ended September 30, 2024 to 92.1% during the three months ended September 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 94.2% for the three months ended September 30, 2024 to 87.9% for the three months ended September 30, 2025.

Salaries and benefits, as a percentage of net operating revenues, decreased from 44.0% for the three months ended September 30, 2024 to 43.9% for the three months ended September 30, 2025.

Supplies, as a percentage of net operating revenues, decreased from 15.2% for three months ended September 30, 2024 to 14.9% for the three months ended September 30, 2025, primarily due to divestitures.

Other operating expenses, as a percentage of net operating revenues, decreased from 32.6% for the three months ended September 30, 2024 to 26.9% for the three months ended September 30, 2025, primarily due to divestitures, partially offset by higher medical specialist fees and increased supplemental reimbursement program expense.

Lease cost and rent, as a percentage of net operating revenues, decreased from 2.4% for the three months ended September 30, 2024 to 2.2% for the three months ended September 30, 2025.

Depreciation and amortization, as a percentage of net operating revenues, decreased from 3.8% for three months ended September 30, 2024 to 3.5% for the three months ended September 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 expense of $21 million for the three months ended September 30, 2025, compared to expense of $267 million for the same period in 2024.

The expense recognized during the three months ended September 30, 2025 resulted from impairment charges recorded to reduce the carrying value of several assets that were idled or disposed.

The expense recognized during the three months ended September 30, 2024 was comprised of (i) an approximately $259 million impairment charge recorded to reduce the carrying value of four hospitals that were deemed held-for-sale based on the difference between carrying value of the hospital disposal group compared to the estimated fair value less costs to sell, and (ii) an approximately $12 million impairment charge recorded to reduce the carrying value of several assets that were idled, disposed or held-for-sale, partially offset by a gain of approximately $4 million related to the sale of one hospital.

Interest expense, net, remained consistent at $216 million for the three-month periods ended September 30, 2025 and 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 September 30, 2025 and 2024.

Loss from early extinguishment of debt of $33 million was recognized during the three months ended September 30, 2025, as a result of the refinancing and extinguishment of certain of our outstanding notes as discussed further in “Liquidity and Capital Resources.” There was no loss from early extinguishment of debt during the three months ended September 30, 2024.

The net results of the above-mentioned changes resulted in loss before income taxes decreasing $417 million to $(2) million for the three months ended September 30, 2025, compared to $(419) million for the same period in 2024.

Our benefit from income taxes for the three months ended September 30, 2025 and 2024 was $(173) million and $(64) million, respectively, and the effective tax rates were 8,650.0% and 15.3% for the three months ended September 30, 2025 and 2024, respectively.

The increase in the benefit from income taxes and the difference in our effective tax rate for the three months ended September 30, 2025, compared to the same period in 2024 was primarily due to a decrease in valuation allowances stemming from increased interest deductibility and increased bonus depreciation as a result of the 2025 Reconciliation Law which resulted in an income tax benefit of approximately $163 million recognized by us during the three months ended September 30, 2025.

Net income, as a percentage of net operating revenues, was 5.5% for the three months ended September 30, 2025, compared to net loss of (11.5)% for the same period in 2024.

Net income attributable to noncontrolling interests as a percentage of net operating revenues increased from 1.2% for the three months ended September 30, 2024 to 1.3% for the three months ended September 30, 2025.

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.

stockholders was $130 million for the three months ended September 30, 2025, compared to net loss of $(391) million for the same period in 2024.

Nine Months Ended September 30, 2025 Compared to Nine Months Ended September 30, 2024

Net operating revenues increased to $9.379 billion for the nine months ended September 30, 2025, compared to $9.369 billion for the same period in 2024.

Net operating revenues on a same-store basis from hospitals that were operated throughout both periods increased $473 million, or 5.5%, during the nine months ended September 30, 2025, compared to the same period in 2024.

Non-same-store net operating revenues decreased $463 million during the nine months ended September 30, 2025, compared to the same period in 2024, due to the divestiture of hospitals in 2025 and 2024, partially offset by an increase in non-patient revenue resulting primarily from the receipt of $28 million for the settlement of a legal matter.

On a consolidated basis, inpatient admissions decreased by 5.0% and adjusted admissions decreased by 6.1% during the nine months ended September 30, 2025, compared to the same period in 2024.

On a same-store basis, net operating revenues per adjusted admission increased 4.5%, while inpatient admissions increased by 2.1% and adjusted admissions increased by 0.9% for the nine months ended September 30, 2025, compared to the same period in 2024.

Total operating expenses, as a percentage of net operating revenues, decreased from 97.2% during the nine months ended September 30, 2024 to 88.9% during the nine months ended September 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 90.3% for the nine months ended September 30, 2024 to 88.1% for the nine months ended September 30, 2025.

Salaries and benefits, as a percentage of net operating revenues, decreased from 43.3% for the nine months ended September 30, 2024 to 43.2% for the nine months ended September 30, 2025.

Supplies, as a percentage of net operating revenues, decreased from 15.4% for the nine months ended September 30, 2024 to 15.1% for the nine months ended September 30, 2025, primarily due to divestitures.

Other operating expenses, as a percentage of net operating revenues, decreased from 29.2% for the nine months ended September 30, 2024 to 27.6% for the nine months ended September 30, 2025, primarily due to divestitures, partially offset by higher medical specialist fees and increased supplemental reimbursement program expense.

Lease cost and rent, as a percentage of net operating revenues, decreased from 2.4% for the nine months ended September 30, 2024 to 2.2% for the nine months ended September 30, 2025.

Depreciation and amortization, as a percentage of net operating revenues, decreased from 3.8% for the nine months ended September 30, 2024 to 3.4% for the nine months ended September 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 $242 million for the nine months ended September 30, 2025, compared to expense of $294 million for the same period in 2024.

The net gain recognized during the nine months ended September 30, 2025 was comprised of a gain of approximately $288 million related to the divestiture of four hospitals, partially offset by (i) an approximately $31 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 $15 million impairment charge recorded to reduce the carrying value of several assets that were idled or disposed.

The expense recognized during the nine months ended September 30, 2024 was comprised of (i) an approximately $259 million impairment charge recorded to reduce the carrying value of four hospitals that were deemed held-for-sale based on the difference between carrying value of the hospital disposal group compared to the estimated fair value less costs to sell, and (ii) an approximately $39 million impairment charge recorded to reduce the carrying value of several assets that were idled, disposed or held-for-sale, partially offset by a gain of approximately $4 million related to the sale of one hospital.

Interest expense, net, increased by $6 million to $649 million for the nine months ended September 30, 2025, compared to $643 million for the same period in 2024 due primarily to financing activities in 2024 and 2025.

Gain from early extinguishment of debt of $105 million was recognized during the nine months ended September 30, 2025, compared to $25 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 nine-month periods ended September 30, 2025 and 2024.

The net results of the above-mentioned changes resulted in income before income taxes increasing $850 million to $503 million for the nine months ended September 30, 2025, compared to loss before income taxes of $(347) million for the same period in 2024.

Our benefit from income taxes for the nine months ended September 30, 2025 and 2024 was $(13) million and $(13) million, respectively, and the effective tax rates were (2.6)% and 3.7% for the nine months ended September 30, 2025 and 2024, respectively.

The difference in our effective tax rate for the nine months ended September 30, 2025, compared to the same period in 2024 was primarily due to higher pre-tax income in 2025 compared to 2024 and a decrease in valuation allowances stemming from increased interest deductibility and increased bonus depreciation as a result of the 2025 Reconciliation Law which resulted in an income tax benefit of approximately $163 million recognized by us during the nine months ended September 30, 2025.

Net income, as a percentage of net operating revenues, was 5.5% for the nine months ended September 30, 2025, compared to net loss of (3.6)% 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 nine-month periods ended September 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.

stockholders was $399 million for the nine months ended September 30, 2025, compared to net loss of $(446) million for the same period in 2024.

Liquidity and Capital Resources

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.

Net cash provided by operating activities increased $13 million, from approximately $264 million for the nine months ended September 30, 2024, to approximately $277 million for the nine months ended September 30, 2025.

The increase in cash provided by operating activities is primarily due to lower professional liability claim payments and increased non-patient revenues, partially offset by increased cash paid for interest and taxes.

Cash paid for interest was $622 million during the nine months ended September 30, 2025, compared to $562 million for the same period in 2024.

Cash paid for income taxes, net of refunds received, resulted in a net payment of $192 million and $132 million during the nine months ended September 30, 2025 and 2024, respectively.

Approximately $126 million of cash paid for taxes during the nine months ended September 30, 2025, related to gains on divested hospitals for which proceeds were received during the six months ended June 30, 2025.

During the nine months ended September 30, 2024, approximately $17 million of cash paid for taxes related to the gain on a hospital divested during the period.

Net cash provided by investing activities was approximately $705 million for the nine months ended September 30, 2025, compared to net cash used in investing activities of approximately $132 million for the same period in 2024.

Net cash provided by investing activities during the nine months ended September 30, 2025 was impacted by an increase of $838 million in cash proceeds from dispositions of hospitals and other ancillary operations, partially offset by a decrease of $20 million in cash from the net impact of the purchases and sales of available-for-sale debt and equity securities.

Our net cash used in financing activities was approximately $896 million for the nine months ended September 30, 2025, compared to approximately $137 million for the same period in 2024, a change of $759 million.

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

Net working capital was approximately $1.020 billion at September 30, 2025 and approximately $956 million at December 31, 2024.

Net working capital increased by approximately $64 million between December 31, 2024 and September 30, 2025.

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

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.

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

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.

At September 30, 2025, we had no outstanding borrowings and approximately $806 million of additional borrowing capacity (after taking into consideration $34 million of outstanding letters of credit) under the ABL Facility.

Letters of credit were reduced during the nine months ended September 30, 2025 by $32 million, primarily due to a reduction in collateral for an insurance-related bond.

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

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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.

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 us with the SEC on April 23, 2025, May 7, 2025, and May 9, 2025.

On August 12, 2025, CHS completed an offering of $1.790 billion principal amount of 9.750% Senior Secured Notes due 2034, or the 9¾% Senior Secured Notes due 2034.

The proceeds from the issuance of the 9¾% Senior Secured Notes due 2034 were used to redeem $1.743 billion principal amount of 5.625% Senior Secured Notes due 2027, or approximately 99% of the total outstanding principal amount, that were validly tendered and accepted for purchase pursuant to a tender offer that launched on July 28, 2025, and was completed on August 25, 2025, and to pay related fees and expenses.

Upon completion of the tender offer, approximately $14 million principal amount of the 5.625% Senior Secured Notes due 2027 remain outstanding.

The 9¾% Senior Secured Notes due 2034 bear interest at a rate of 9.750% per year payable semi-annually in arrears on March 15 and September 15 of each year, commencing on March 15, 2026.

The 9¾% Senior Secured Notes due 2034 are unconditionally guaranteed on a senior-priority secured basis by us and each of the current and future domestic subsidiaries that provide guarantees under the ABL Facility.

For additional information regarding the sale of the 9¾% Senior Secured Notes due 2034, the redemption of the 5.625% Senior Secured Notes due 2027, and the tender offer, see the Current Reports on Form 8-K filed by us with the SEC on July 29, 2025 and August 12, 2025.

A pre-tax loss from early extinguishment of debt of approximately $33 million and a pre-tax gain of $105 million was recognized associated with these financing activities during the three and nine months ended September 30, 2025, respectively.

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 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.

As of September 30, 2025, approximately $16 million of our outstanding debt of approximately $10.6 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 received additional cash consideration of approximately $91 million in October 2025 as a result of modifications to applicable supplemental reimbursement programs as more specifically provided in the asset purchase agreement underlying the transaction.

Additional cash consideration may be received in one or more future periods or a portion of the consideration received may be returned to the buyer subject to periodic reconciliations as set forth in the asset purchase agreement underlying the transaction.

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 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.

There have been no material changes outside of the ordinary course of business to our upcoming cash obligations during the three months ended September 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 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.

Cash expenditures for the purchases of facilities and other related businesses were approximately $1 million for the nine-month periods ended September 30, 2025 and 2024, which primarily related to cash expenditures for 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 $176 million and $181 million for the six months ended June 30, 2025 and 2024, respectively.

Capital expenditures totaled $241 million and $251 million for the nine months ended September 30, 2025 and 2024, respectively.

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

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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.

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.

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 lapses in appropriations and holds on or cancellations of congressionally authorized spending.

As noted above, the 2025 Reconciliation Law 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.

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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 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.

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

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.

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 September 30, 2025 from our estimated collection percentage as a result of a change in expected recoveries, net income for the nine months ended September 30, 2025 would have changed by approximately $36 million, and net accounts receivable at September 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 $1.4 billion at June 30, 2025 and $1.6 billion at December 31, 2024, being pursued by various outside collection agencies.

We had approximately $1.4 billion at September 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 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.

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

Total gross accounts receivable (prior to allowance for contractual adjustments and implicit price concessions) was approximately $16.8 billion and $17.3 billion as of September 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 June 30, 2025:

At September 30, 2025:

% of Gross Receivables

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

September 30,

Insured receivables

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 June 30, 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 June 30, 2025 and 93% at December 31, 2024.

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

At September 30, 2025, we had approximately $3.5 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 3.8% and 3.7% at June 30, 2025 and December 31, 2024, respectively.

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

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

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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 June 30, 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 September 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 six months ended June 30, 2025.

There were no significant changes in our estimate of the reserve for professional liability claims during the three months ended September 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 $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.

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

A total of $8 million of interest and penalties is included in the amount of liability for uncertain tax positions at September 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.

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Recent Accounting Pronouncements

In December 2023, the Financial Accounting Standards Board issued Accounting Standards Update, or ASU, 2023-09, “Income Taxes (Topic 740), Improvements to Income Tax Disclosures.” This ASU establishes new requirements for the categorization and disaggregation of information in the rate reconciliation as well as for disaggregation of income taxes paid.

In December 2023, the Financial Accounting Standards Board, or FASB, issued Accounting Standards Update, or ASU, 2023-09, “Income Taxes (Topic 740), Improvements to Income Tax Disclosures.” This ASU establishes new requirements for the categorization and disaggregation of information in the rate reconciliation as well as for disaggregation of income taxes paid.

Additionally, this ASU modifies and eliminates certain existing requirements for indefinitely reinvested foreign earnings and unrecognized tax benefits.

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The amendments in this ASU should be applied on a prospective basis and early adoption is permitted.

We are currently evaluating the impact that adoption of this ASU will have on our consolidated financial statements.

We are currently evaluating the impact that adoption of this ASU will have on our condensed consolidated financial statements.

In September 2025, the FASB issued ASU 2025-06, “Intangibles - Goodwill and Other - Internal-Use Software (Topic 350):

Targeted Improvements to the Accounting for Internal-Use Software.” This ASU modifies the criteria for when software costs may be capitalized by eliminating consideration of software project development stages and by enhancing guidance for the “probable-to-complete” threshold.

This ASU is effective for annual reporting periods beginning after December 15, 2027, and interim periods within those annual reporting periods.

Early adoption of this ASU is permitted.

We are currently evaluating the impact that adoption of this ASU will have on our condensed consolidated financial statements.

We have evaluated all other recently issued, but not yet effective, ASUs and do not expect the eventual adoption of such ASUs to have a material impact on our consolidated financial position or results of operations.

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These factors include, among other things:

• 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;

• 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 interest rate environment, current geopolitical instability, impacts from the imposition of, or changes in tariffs, as well as the impact on us of financial, credit, capital, political, and legislative conditions, including federal government shutdowns;

• 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;

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• our ability to obtain adequate levels of insurance, including general liability, professional liability, cyber liability and directors’ and officers’ liability insurance;

• timeliness of reimbursement payments received under government programs;

• any lapse in appropriations, and any hold on or cancellation of congressionally authorized spending or interruptions in the distribution of government funds, and the timeliness of reimbursement payments received under government programs;

• effects related to pandemics, epidemics, outbreaks of infectious diseases or other public health crises;

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Quantitative and Qualitat ive Disclosures about Market Risk

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.

During the three months ended September 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.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis