Dive Brief:
- For-profit hospital operator Community Health Systems is looking to slow down its aggressive pace of divestitures as it focuses on growth in its core markets, executives said on an earnings call Thursday.
- The Tennessee-based system has divested about 35% of its hospital portfolio since 2019 in an attempt to deleverage its portfolio and free up cash.
- CHS is in a few early-phase divestiture discussions, but executives are unsure whether those will proceed or ultimately result in a deal. Going forward, the hospital operator will be more opportunistic when looking at selling assets. “We are getting, I would say, closer to the end of our programmatic divestitures,” CEO Kevin Hammons said on the call.
Dive Insight:
CHS said it improved both its debt leverage and operating cash flow on Thursday, two metrics the operator has struggled with over the past several years.
The hospital operator has carried a debt load much higher than its for-profit peers, including Tenet and HCA Healthcare. High debt loads can create problems for hospital operators, who may neglect investment in patient care as they become bogged down by debt repayments
At the end of 2024, CHS’ debt leverage on earnings before interest, tax, depreciation and amortization was over 8.0x compared to Tenet’s 3.9x in the same timeframe.
CHS also struggled with generating positive cash flow, which can hamper growth and the ability to pay debt. The hospital operator has a weaker operating profile than its peers due to assets located in smaller markets with more limited growth prospects, according to ratings agency Fitch Ratings.
The hospital operator ended 2025 with a 6.6x leverage, down from 7.4x compared to the prior year. Cash flow also increased to $543 million in 2025 compared with $480 million the year prior.
Executives attributed improvements in both metrics to CHS’ divestiture strategy, which allowed it to pay down about $1.1 billion in long-term debt last year. The hospital operator has prioritized a rapid pace of sales to improve its balance sheet, especially before significant debt obligations are due in 2027 and 2029.
Last year alone, CHS divested seven hospitals, including facilities in Florida, North Carolina and Texas. It also divested assets to Labcorp and closed hospital divestitures in Pennsylvania this month.
Now, executives expect the pace of divestitures to slow after paying down significant debt. For future divestitures, Hammons said CHS would consider selling standalone hospitals without a nearby care network. However, “what we have interest in selling is certainly dwindling,” the CEO said.
CHS posted a profit of $509 million in 2025, compared to a loss of $516 million in the prior year. Its adjusted EBITDA was $1.5 billion for the year, at the midpoint of the 2025 guidance that executives predicted.
For this year, CHS said it expects adjusted EBITDA of between $1.3 billion to $1.5 billion. The lower projected amount is due to divestitures and the exclusion of some one-time gains.
CHS will lose about $1 billion in net revenue due to its announced divestitures this year, according to CFO Jason Johnson.
The expiration of enhanced Affordable Care Act subsidies will also cause CHS to lose between $20 million to $30 million in EBITDA this year, he said.
Health systems have attempted to quantify how dramatically the loss of the subsidies will hit their facilities. The enhanced subsidies expired at the end of 2025, causing premiums for beneficiaries to more than double on average this year. The resulting rise in the uninsured rate is expected to lead to less revenue and more uncompensated care for U.S. providers.
CHS, which operates over 60 hospitals in 13 states, said it has an undersized impact compared to its peers. ACA exchange enrollment represents less than 5% of adjusted admissions and net revenue at CHS facilities, according to Johnson.
“We think we’re generally relatively low margin on that business to begin with,” Hammons said.
Of CHS’ peers, HCA expects the loss of subsidies would cost the hospital operator between $600 million and $900 million this year, while Tenet expects to lose about $250 million.
