What changed in this filing

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Item 2. Management’s Discussion and Analysis

2026-04-22 compared with 2025-10-24 · 179 added, 250 removed, 322 unchanged (57% of the section changed)

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Our affiliates are leading providers of healthcare services, developing and operating healthcare delivery systems in 34 distinct markets across 13 states.

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.

As of March 31, 2026, our subsidiaries own or lease 65 affiliated hospitals, with more than 9,000 beds, and operate more than 900 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 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 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 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.

During the three months ended March 31, 2026, we paid approximately $5 million to acquire the operating assets and related businesses of certain physician practices and clinics, as well as a controlling interest in an ambulatory surgery center.

The purchase price for these transactions will primarily be allocated to working capital, goodwill and noncontrolling interests.

During the three months ended March 31, 2026, as reflected in the table below, we completed the divestiture of three hospitals in Pennsylvania, and sold our 80% ownership in one hospital in Tennessee.

These hospitals represented annual net operating revenues in 2025 of approximately $827 million and we received total net proceeds of approximately $657 million 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 we sold our 50% ownership interest, and in the cases of Tennova Healthcare - Clarksville and Cedar Park Regional Medical Center, in which we sold our 80% ownership interest) during the three months ended March 31, 2026 and the year ended December 31, 2025.

Effective Date

2026 Divestitures:

Tennova Healthcare - Clarksville

Vanderbilt University Medical Center

Clarksville, Tennessee

February 1, 2026

Wilkes-Barre General Hospital

Tenor Health Foundation

Wilkes-Barre, Pennsylvania

February 1, 2026

Regional Hospital of Scranton

Tenor Health Foundation

Scranton, Pennsylvania

February 1, 2026

Moses Taylor Hospital

Tenor Health Foundation

Scranton, Pennsylvania

February 1, 2026

2025 Divestitures:

Merit Health Biloxi

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June 30, 2025

2024 Divestitures:

Tennova Healthcare - Cleveland

Hamilton Health Care Systems, Inc.

Cleveland, TN

August 1, 2024

Davis Regional Medical Center

Iredell Memorial Hospital

Statesville, NC

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 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.

Northwest Health Physicians' Specialty Hospital

Washington Regional Medical Center

Fayetteville, Arkansas

December 1, 2025

In addition to hospitals divested in the table above, we completed the disposition of one hospital subsequent to March 31, 2026.

On January 20, 2026, we entered into a definitive agreement pursuant to which The Health Care Authority of the City of Huntsville (d/b/a Huntsville Hospital Health System) agreed to acquire substantially all of the assets, and assume certain liabilities, from us related to Crestwood Medical Center (180 licensed beds) in Huntsville, Alabama, and its associated outpatient centers and practices.

This disposition was completed effective April 1, 2026.

We received proceeds from this sale of approximately $459 million in cash, after giving effect to estimated working capital adjustments and before certain transaction expenses (subject to a post-closing working capital adjustment).

Proceeds from this disposition were received at a preliminary closing on March 31, 2026, and are recorded in other accrued liabilities in the condensed consolidated balance sheets.

For additional information about this transaction, see the Current Reports on Form 8-K filed by us with the SEC on January 20, 2026 and April 1, 2026.

In addition, on March 5, 2026, we entered into a definitive agreement pursuant to which Freeman-Oak Hill Health System (d/b/a Freeman Health System) agreed to acquire substantially all of the assets, and assume certain liabilities, from us related to Northwest Medical Center – Bentonville (128 licensed beds) in Bentonville, Arkansas, Northwest Medical Center – Springdale (222 licensed beds) in Springdale, Arkansas, Northwest Medical Center – Willow Creek Women’s Hospital (64 licensed beds) in Johnson, Arkansas, and Siloam Springs Regional Hospital (73 licensed beds) in Siloam Springs, Arkansas, and the associated outpatient centers and practices, for $112 million in cash, subject to adjustment for net working capital and any finance leases assumed.

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

For additional information about this transaction, see the Current Report on Form 8-K filed by us with the SEC on March 5, 2026.

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 $3.090 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:

Net operating revenues decreased from $3.159 billion for the three months ended March 31, 2025 to $2.965 billion for the three months ended March 31, 2026.

On a same-store basis, net operating revenues for the three months ended March 31, 2026 increased $88 million compared to the same period in 2025.

We had net loss of $25 million during the three months ended March 31, 2026, compared to net income of $25 million for the same period in 2025.

Net loss for the three months ended March 31, 2026 included the following:

• an after-tax charge of $8 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 $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 $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.

• an after-tax benefit of $15 million resulting primarily from a gain from the divestiture of our controlling interest in a hospital, partially offset by (i) an impairment charge to adjust the carrying value of long-lived assets at hospitals that were divested at a price below carrying value and (ii) an 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 the costs to sell.

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 or held-for-sale as well as divestiture related costs.

Consolidated inpatient admissions for the three months ended March 31, 2026, decreased 10.8%, compared to the same period in 2025.

Consolidated adjusted admissions for the three months ended March 31, 2026, decreased 10.5%, compared to the same period in 2025.

Same-store inpatient admissions for the three months ended March 31, 2026, decreased 1.3%, compared to the same period in 2025, and same-store adjusted admissions for the three months ended March 31, 2026, decreased 0.5%, compared to the same period in 2025.

Self-pay revenues represented approximately 1.1% and 0.6% for the three months ended March 31, 2026 and 2025, respectively.

The amount of foregone revenue related to providing charity care services as a percentage of net operating revenues was approximately 11.6% and 9.7% for the three months ended March 31, 2026 and 2025, respectively.

Direct and indirect costs incurred in providing charity care services as a percentage of net operating revenues was approximately 1.2% and 1.1% for the three months ended March 31, 2026 and 2025, respectively.

Overview of Legislative and Other Governmental Developments

The healthcare industry is subject to changing political, regulatory, economic and other influences that may affect our business.

Regulatory uncertainty has increased as a result of recent decisions issued by the U.S.

Supreme Court that affect review of federal agency actions, including Loper Bright Enterprises v.

Raimondo , and the outcome of the 2024 federal elections.

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.

The healthcare industry is subject to changing political, regulatory, economic and other influences that may affect our business and is heavily regulated.

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.

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.

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

President Trump has issued several executive orders that impact or may impact the healthcare industry, including orders focused on price transparency and tariffs, and an executive order that established a presidential advisory commission tasked with restructuring government agencies and reducing government expenditures, although this commission was disbanded in mid-2025.

Other 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 addition, the presidential administration has significant influence on healthcare policy changes through government agency regulation.

In March 2025, 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.

Regulatory uncertainty has also increased as a result of recent decisions issued by the U.S.

Supreme Court that affect review of federal agency actions, including Loper Bright Enterprises v.

These decisions may increase legal challenges to healthcare regulations and agency guidance and decisions and result in inconsistent judicial interpretations and delays in and other impacts to agency rulemaking and legislative processes.

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.

For example, in May 2025, 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.

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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.

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 these enhanced subsidies expired at the end of 2025.

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.

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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.

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.

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.

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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 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 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 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.

For example, the 2025 Reconciliation Law includes policy changes that are expected to result in Medicaid spending reductions and changes in administration of state Medicaid programs.

The law limits eligibility for Medicaid, including by imposing work or community engagement requirements for adults in Medicaid expansion states, and limits some Medicaid financing mechanisms, including through restrictions intended to reduce the federal

matching funds received by state Medicaid programs.

Reductions in federal matching funds and increased state obligations and administrative burden could have significant effects, such as resulting in state limitations on eligibility or coverage or changes to Medicaid expansion programs, particularly if states are unable to offset reductions.

The effects of the 2025 Reconciliation Law could be particularly significant 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 13 states in which we operated hospitals as of March 31, 2026, seven states have taken action to expand their Medicaid programs.

The other six states in which we operated hospitals as of March 31, 2026, 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 March 31, 2026.

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

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

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 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.

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.

It is possible that future legislation will impose or otherwise result in additional spending reductions.

The 2025 Reconciliation Law authorized the Rural Health Transformation, or RHT, Program, which is intended to strengthen and modernize healthcare in rural communities.

Through the RHT Program, $50 billion in federal grants will be distributed over five years, with $10 billion available in each of federal fiscal years 2026 through 2030, which may partially offset Medicaid spending reductions expected as a result of the 2025 Reconciliation Law as described herein, although the magnitude of such grants will be far less than the anticipated Medicaid spending reductions.

In December 2025, CMS announced that all 50 states will receive awards under the RHT Program.

Providers may be granted subcontracts or subawards, and providers could receive payments for healthcare items and services, subject to funding policies and limitations.

All funds must be spent before October 1, 2032.

We are actively monitoring funding opportunities in each state in which we operate.

No funds have been obligated to or received by us during the three months ended March 31, 2026.

Reimbursement by government programs may be affected by broad shifts in payment policy.

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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 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.

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, 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 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.

This reduction to payment rates adversely affected our results for the three months ended March 31, 2026.

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 until the past invalidated payments are offset.

This annual 0.5% reduction began in calendar year 2026 and was expected to continue for approximately 16 years, but CMS has indicated that it may accelerate this timeline by implementing a larger reduction beginning in calendar year 2027.

We anticipate that the reduction to the outpatient PPS conversion factor will adversely impact our results.

Sources of Revenue

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Three Months Ended

Nine Months Ended

September 30,

Medicare Managed Care

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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.

The general trend toward increased enrollment in Medicare Managed Care and Medicaid managed care programs, which has slowed or reversed in some cases in recent years, may adversely affect our net operating revenues.

We may also be impacted by regulatory requirements imposed on insurers, such as minimum medical-loss ratios and specific benefit requirements.

Furthermore, in the normal course of business, managed care programs, insurance companies and employers actively negotiate the amounts paid to hospitals.

Our relationships with payors may be impacted by price transparency initiatives and out-of-network billing restrictions, including those in the No Surprises Act.

Our relationships with payors may be impacted by policy developments such as price transparency initiatives and out-of-network billing restrictions, including those in the No Surprises Act.

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.

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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 nine-month periods ended September 30, 2025 and 2024.

Contractual allowance adjustments related to final settlements and previous program reimbursement estimates impacted net operating revenues by an insignificant amount in both of the three-month periods ended March 31, 2026 and 2025.

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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Three 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 (loss) from operations

Income from operations

Interest expense, net

(Loss) gain from early extinguishment of debt

Loss from early extinguishment of debt

Equity in earnings of unconsolidated affiliates

(Loss) income before income taxes

Benefit from income taxes

Net income (loss)

Income before income taxes

Provision for income taxes

Net (loss) income

Net income attributable to noncontrolling interests

Net income (loss) attributable to Community Health

Net loss attributable to Community Health

Systems, Inc.

Three Months Ended September 30,

Nine Months Ended September 30,

Three Months Ended March 31,

Percentage (decrease) increase from prior year:

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Average length of stay (d)

Net income (loss) attributable to Community Health

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

Three Months Ended March 31, 2026 Compared to Three Months Ended March 31, 2025

Net operating revenues decreased to $2.965 billion for the three months ended March 31, 2026, compared to $3.159 billion for the same period in 2025.

Net operating revenues on a same-store basis from hospitals that were operated throughout both periods increased $88 million, or 3.1%, during the three months ended March 31, 2026, compared to the same period in 2025.

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

Non-same-store net operating revenues decreased $282 million during the three months ended March 31, 2026, compared to the same period in 2025, due to the divestiture of hospitals in 2026 and 2025.

On a consolidated basis, inpatient admissions decreased by 10.8% and adjusted admissions decreased by 10.5% during the three months ended March 31, 2026, compared to the same period in 2025.

On a same-store basis, net operating revenues per adjusted admission increased 3.7%, while inpatient admissions decreased by 1.3% and adjusted admissions decreased by 0.5% for the three months ended March 31, 2026, compared to the same period in 2025.

Total operating expenses, as a percentage of net operating revenues, decreased from 91.0% during the three months ended March 31, 2025 to 90.5% during the three months ended March 31, 2026.

Operating expenses, excluding depreciation and amortization and impairment and (gain) loss on sale of businesses, as a percentage of net operating revenues, increased from 88.5% for the three months ended March 31, 2025 to 89.7% for the three months ended March 31, 2026.

Salaries and benefits, as a percentage of net operating revenues, increased from 43.4% for the three months ended March 31, 2025 to 44.6% for the three months ended March 31, 2026, primarily due to inflationary wage increases and the decrease in net operating revenues.

Supplies, as a percentage of net operating revenues, decreased from 15.5% for three months ended March 31, 2025 to 14.9% for the three months ended March 31, 2026, primarily due to the decrease in net operating revenues and changes in the mix of services.

Other operating expenses, as a percentage of net operating revenues, increased from 27.4% for the three months ended March 31, 2025 to 27.9% for the three months ended March 31, 2026, primarily due to the decrease in net operating revenues and increased supplemental reimbursement program expense.

Lease cost and rent, as a percentage of net operating revenues, increased from 2.2% for the three months ended March 31, 2025 to 2.3% for the three months ended March 31, 2026.

Depreciation and amortization, as a percentage of net operating revenues, increased from 3.3% for three months ended March 31, 2025 to 3.8% for the three months ended March 31, 2026, primarily due to the decrease in net operating revenues and the placement of additional assets into service in the current year compared to the prior year.

Impairment and (gain) loss on sale of businesses, net was income of $90 million for the three months ended March 31, 2026, compared to $24 million for the same period in 2025.

The income recognized during the three months ended March 31, 2026 was comprised of a gain of approximately $230 million related to the divestiture of our controlling interest in a hospital, partially offset by (i) an approximately $88 million net impairment charge to adjust the carrying value of long-lived assets at hospitals that were divested at a price below carrying value, and (ii) a $52 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.

The income 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 approximately $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 approximately $11 million impairment charge to adjust the carrying value of long-lived assets at a hospital that was divested at a sales price below carrying value, and (iii) an approximately $5 million impairment charge recorded to reduce the carrying value of several assets that were idled, disposed of or held-for-sale.

Interest expense, net, decreased $6 million to $213 million for the three months ended March 31, 2026 from $219 million for the three months ended March 31, 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 March 31, 2026 and 2025.

Loss from early extinguishment of debt of $8 million was recognized during the three months ended March 31, 2026, as a result of the redemption 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 March 31, 2025.

The net results of the above-mentioned changes resulted in income before income taxes decreasing $3 million to $64 million for the three months ended March 31, 2026, compared to $67 million for the same period in 2025.

Our provision for income taxes for the three months ended March 31, 2026 and 2025 was $89 million and $42 million, respectively, and the effective tax rates were 139.1% and 62.7% for the three months ended March 31, 2026 and 2025, respectively.

The increase in the provision for income taxes and the change in our effective tax rate for the three months ended March 31, 2026, compared to the same period in 2025 was primarily due to an increase in non-deductible goodwill related to divested hospitals.

Net (loss) income, as a percentage of net operating revenues, was a net loss of (0.8)% for the three months ended March 31, 2026, compared to net income of 0.8% for the same period in 2025.

Net income attributable to noncontrolling interests as a percentage of net operating revenues was 1.2% for both of the three-month periods ended three months ended March 31, 2026 and 2025.

Net loss attributable to Community Health Systems, Inc.

stockholders was $(58) million for the three months ended March 31, 2026, compared to $(13) million for the same period in 2025.

Liquidity and Capital Resources

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.

Net cash provided by operating activities changed by $417 million, from approximately $120 million of cash provided by operating activities for the three months ended March 31, 2025, to cash used in operating activities of approximately $297 million for the three months ended March 31, 2026.

The decrease in cash provided by operating activities is primarily due to a decrease in accounts payable, an increase in patient accounts receivable and the receipt of a larger tax refund during the three months ended March 31, 2025, compared to the same period in 2026.

Cash paid for interest was $261 million during the three months ended March 31, 2026, compared to $229 million for the same period in 2025.

Cash paid for income taxes, net of refunds received, resulted in a net refund of less than $1 million and $80 million during the three months ended March 31, 2026 and 2025, respectively.

Net cash provided by investing activities was approximately $1.0 billion for the three months ended March 31, 2026, compared to approximately $444 million for the same period in 2025.

Net cash provided by investing activities during the three months ended March 31, 2026 was impacted by an increase of $545 million in cash proceeds from dispositions of hospitals and other ancillary operations and a decrease in cash used for other investments of $28 million.

Our net cash used in financing activities was approximately $274 million for the three months ended March 31, 2026, compared to approximately $170 million for the same period in 2025, a change of $104 million.

This was primarily due to the net impact of our debt borrowings and repayments during the three months ended March 31, 2026, compared to the same period in 2025.

Net working capital was approximately $1.2 billion at March 31, 2026 and approximately $1.0 billion at December 31, 2025.

Net working capital increased by approximately $180 million between December 31, 2025 and March 31, 2026.

The increase is primarily due to increases in cash, patient accounts receivable, prepaid expenses and other current assets and decreases in accounts payable, accrued liabilities for employee compensation and accrued interest during the three months ended March 31, 2026, partially offset by decreases in supplies and increases in income tax payable and other current liabilities.

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 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.

At March 31, 2026, we had no outstanding borrowings and approximately $824 million of additional borrowing capacity (after taking into consideration $32 million of outstanding letters of credit) under the ABL Facility.

Letters of credit were reduced during the three months ended March 31, 2026 by $2 million, primarily due to a reduction in collateral for a construction-related bond.

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

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2026 Financing Activity

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 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.

On February 2, 2026, we exercised a special call provision to redeem 10% of the original principal amount, or approximately $223 million, of the 10.875% Senior Secured Notes due 2032, at a redemption price of 103% of the principal amount, plus accrued and unpaid interest.

A pre-tax loss from early extinguishment of debt of approximately $8 million was recognized associated with this financing activity during the three months ended March 31, 2026.

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 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.

As of March 31, 2026, approximately $29 million of our outstanding debt of approximately $10.2 billion is due within the next 12 months.

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.

We believe that our current levels of cash, internally generated cash flows and current levels of availability for additional borrowing under the ABL Facility, our anticipated continued access to the capital markets, and the use of proceeds from any potential future dispositions as noted above, will be sufficient to finance acquisitions, capital expenditures, working capital requirements, and any debt repurchases or other debt repayments we may elect to make or be required to make through the next 12 months and the foreseeable future thereafter.

However, ongoing negative economic conditions (including in relation to inflationary pressures, elevated interest rate levels and impacts from the imposition of, or changes in, tariffs) have resulted in, and may continue to result in, significant disruptions of financial and capital markets, which could reduce our ability to access capital and negatively affect our liquidity in the future.

However, ongoing negative economic conditions (including in relation to inflationary pressures, elevated interest rate levels, impacts from the imposition of, or changes in, tariffs, and geopolitical uncertainties) have resulted in, and may continue to result in, significant disruptions of financial and capital markets, which could reduce our ability to access capital and negatively affect our liquidity in the future.

We may elect from time to time to continue to purchase our outstanding debt, including through open market purchases, privately negotiated transactions or otherwise.

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 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.

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, 2026, from those disclosed under “Capital Resources” in Management’s Discussion and Analysis of Financial Condition and Results of Operations in the 2025 Form 10-K.

Capital Resources

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.

Cash expenditures for the purchases of facilities and other related businesses were $5 million for the three months ended March 31, 2026 related to cash paid for the acquisition of certain physician practices and clinics, as well as a controlling interest in an ambulatory surgery center, compared to less than $1 million for the three months ended March 31, 2025, 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 $241 million and $251 million for the nine months ended September 30, 2025 and 2024, respectively.

Capital expenditures totaled $76 million and $85 million for the three months ended March 31, 2026 and 2025, respectively.

We expect total capital expenditures of approximately $350 million to $400 million in 2026.

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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

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Additionally, there may be a continued rise in managed care programs and further restructuring of the financing and delivery of healthcare in the United States.

These events could adversely impact our future financial results.

Any of these events could adversely impact our future financial results.

We cannot estimate the impact of Medicare and Medicaid reimbursement changes that have been enacted or otherwise determined or that are currently or may in the future be under consideration.

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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 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.

If the actual contractual reimbursement percentage under government programs and managed care contracts differed by 1% at March 31, 2026 from our estimated reimbursement percentage, net loss for the three months ended March 31, 2026 would have changed by approximately $105 million, and net patient accounts receivable at March 31, 2026 would have changed by approximately $136 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 nine-month periods ended September 30, 2025 and 2024.

Contractual allowance adjustments related to final settlements and previous program reimbursement estimates impacted net operating revenues by an insignificant amount for each of the three-month periods ended March 31, 2026 and 2025.

Patient Accounts Receivable

Substantially all of our accounts receivable are related to providing healthcare services to patients at our hospitals and affiliated businesses.

Collection of these accounts receivable is our primary source of cash and is critical to our operating performance.

Collection of these patient accounts receivable is our primary source of cash and is critical to our operating performance.

Our primary collection risks relate to uninsured patients and outstanding patient balances for which the primary insurance payor has paid some but not all of the outstanding balance, with the remaining outstanding balance (generally deductibles and co-payments) owed by the patient.

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Insurance coverage is not verified in advance of procedures for walk-in and emergency room patients.

We estimate any adjustments to the transaction price for implicit price concessions by reserving a percentage of all self-pay accounts receivable without regard to aging category, based on collection history, adjusted for expected recoveries and any anticipated changes in trends.

Our ability to estimate the transaction price and any implicit price concessions is not impacted by not utilizing an aging of our net accounts receivable as we believe that substantially all of the risk exists at the point in time such accounts are identified as self-pay.

We estimate any adjustments to the transaction price for implicit price concessions by reserving a percentage of all self-pay patient accounts receivable without regard to aging category, based on collection history, adjusted for expected recoveries and any anticipated changes in trends.

Our ability to estimate the transaction price and any implicit price concessions is not impacted by not utilizing an aging of our net patient accounts receivable as we believe that substantially all of the risk exists at the point in time such accounts are identified as self-pay.

The percentage used to reserve for all self-pay accounts is based on our collection history.

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 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.

If the actual collection percentage differed by 1% at March 31, 2026 from our estimated collection percentage as a result of a change in expected recoveries, net loss for the three months ended March 31, 2026 would have changed by approximately $36 million, and net patient accounts receivable at March 31, 2026 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.

Our policy is to write-off gross accounts receivable if the balance is under $10 or when such amounts are placed with outside collection agencies.

Our policy is to write-off gross patient accounts receivable if the balance is under $10 or when such amounts are placed with outside collection agencies.

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

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 had approximately $1.3 billion at March 31, 2026 and $1.4 billion at December 31, 2025, 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.

As these amounts have been written-off, they are not included in our accounts receivable.

As these amounts have been written-off, they are not included in our patient accounts receivable.

Collections on amounts previously written-off are recognized as a recovery of net operating revenues when received.

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All of the following information is derived from our hospitals, excluding clinics, unless otherwise noted.

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 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 September 30, 2025:

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

Days revenue outstanding, adjusted for the impact of receivables for state Medicaid supplemental payment programs and divested facilities, was 59 days at March 31, 2026 and 54 days at December 31, 2025.

Total gross patient accounts receivable (prior to allowance for contractual adjustments and implicit price concessions) was approximately $17.9 billion and $16.9 billion as of March 31, 2026 and December 31, 2025, respectively.

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

At March 31, 2026:

% of Gross Receivables

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Managed Care and other third-party payors

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,

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

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 September 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 93% at both September 30, 2025 and December 31, 2024.

At September 30, 2025, we had approximately $3.5 billion of goodwill recorded, all of which resides at our hospital operations reporting unit.

The combined total at our hospitals and clinics for the estimated implicit price concessions for self-pay patient accounts receivable and allowances for other self-pay discounts and contractuals, as a percentage of gross self-pay receivables, was approximately 91% and 90% at March 31, 2026 and December 31, 2025, respectively.

At March 31, 2026, we had approximately $3.1 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 September 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 3.5% at both March 31, 2026 and December 31, 2025.

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 or, for increased losses specifically attributable to certain divestitures, within impairment and (gain) loss on sales of businesses, net 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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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 September 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 March 31, 2026 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 September 30, 2025.

There were no significant changes in our estimate of the reserve for professional liability claims during the three months ended March 31, 2026.

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 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.

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;

however, we do not anticipate the change will have a material impact on our consolidated results of operations or consolidated financial position.

The total amount of unrecognized benefit that would impact the effective tax rate, if recognized, was $46 million at March 31, 2026.

A total of $10 million of interest and penalties is included in the amount of liability for uncertain tax positions at March 31, 2026.

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

Recent Accounting Pronouncements

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.

This ASU is effective for annual periods beginning after December 15, 2024 and interim periods beginning after December 15, 2025.

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 condensed consolidated financial statements.

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

In September 2025, the Financial Accounting Standards Board issued Accounting Standards Update, or 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.

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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 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;

• 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 (including as a result of ongoing geopolitical conflicts), 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 any 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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Supreme Court regarding the actions of federal agencies;

• potential adverse impact of known and unknown legal, regulatory and governmental proceedings and other loss contingencies, including governmental investigations and audits, and federal and state false claims act litigation;

• the potential adverse impact of known and unknown legal, regulatory and governmental proceedings and other loss contingencies, including governmental investigations and audits, and federal and state false claims act litigation;

• our ability to enter into and maintain provider arrangements with payors and the terms of these arrangements, which may be further affected by the increasing consolidation of health insurers and managed care companies and vertical integration efforts involving payors and healthcare providers;

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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 both the Budget Control Act of 2011 and the Pay-As-You-Go Act of 2010 and the potential for future deficit reduction legislation;

• the effects related to the sequestration spending reductions pursuant to the Budget Control Act of 2011 and the potential for spending reductions under future legislation, including as may be required under the Pay-As-You-Go Act of 2010;

• 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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• changes in medical or other technology;

• any failure of key business functions, including our ability to realize the intended benefits of a new core enterprise resource planning system and the redesigned and consolidated processes which are supported by such system;

• changes in U.S.

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• the risk factors set forth in our 2025 Form 10-K and our other public filings with the SEC.

Although we believe that these forward-looking statements are based on reasonable assumptions, these assumptions are inherently subject to significant regulatory, economic and competitive uncertainties and contingencies, which are difficult or impossible to predict accurately and may be beyond our control.

Although we believe that these forward-looking statements are based upon reasonable assumptions, these assumptions are inherently subject to significant regulatory, economic and competitive uncertainties and contingencies, which are difficult or impossible to predict accurately and may be beyond our control.

Accordingly, we cannot give any assurance that our expectations will in fact occur, and we caution that actual results may differ materially from those in the forward-looking statements.

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Quantitative and Qualitat ive Disclosures about Market Risk

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.

During the three months ended March 31, 2026, 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 2025 Form 10-K.

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What changed 10-Q

Item 2. Management’s Discussion and Analysis