Community Health Systems executives on Wednesday blamed macroeconomic issues and payer behaviors for first quarter volume declines that dragged its earnings into the red.
The public for-profit system posted a loss for the first quarter of 2026 that fell "on the low end" of executives' expectations and lagged the company's performance back in 2025.
Net loss attributed to CHS stockholders was $58 million, or -$0.40 per diluted share, as opposed to the $13 million net loss, or -$0.10 per diluted share, of Q1 2025.
CEO Kevin Hammons said the weak performance wasn't focused on any of its individual markets, but largely concentrated among individuals with commercial and health exchange coverage—or those who may have higher deductibles or care decisions that impacted their managed care plans' "more aggressive" preauthorization denials.
"We believe volume and payer mix challenges in the first quarter reflect a temporary disruption in demand for healthcare services in our markets, largely driven by consumer fears related to geopolitical instability and increased cost of living, as well as ongoing aggressive practices used by the managed care companies that drive inefficiency, unnecessarily delay payment and interfere with the delivery of medical care," Hammons summarized Wednesday morning during the company's quarterly earnings call.
Hammons looked to assuage investors' concerns by outlining its progress on broader strategic and operational initiatives. The former is a sweeping portfolio transformation headlined by hospital selloffs and ambulatory surgery center acquisitions, while the latter include patient and employee satisfaction projects such as the deployment of an ambient listening technology to reduce administrative burden.
"Investments CHS has made to expand service lines, add new access points, recruit physicians to our markets and improve our quality and experience have us better positioned and prepared to accommodate demand as soon as it returns to normal levels," he said.
Chief Financial Officer Jason Johnson added that while CHS is currently behind its forecasted volume and revenue growth targets for 2026, the company expects it will make up ground in subsequent quarters. Still, CHS' shares were trading about 13% below open on Wednesday afternoon.
The company, which had returned its earnings to the black across 2025, saw its quarterly net operating revenues drop by 6.1% year over year to $2.97 billion. Much of the decline is a result of the divestitures, as comparing facilities owned during both periods saw net operating revenues rise by 3.1%.
Similarly, CHS reported a 10.8% fall in admissions and a 10.5% drop in adjusted admissions compared to the prior year. On a same-store basis, those leveled off to a 1.3% admissions decline and a 0.5% adjusted admissions decrease.
Same-store net revenue per adjusted admission rose 3.7% year over year, which Johnson said reflected rate growth and new state-directed payment programs as well as the negative impact of an unfavorable payer mix shift.
Johnson added that CHS had largely managed its labor costs, with a 2% rise in average hourly rates and an 11% decline in same-store contract labor spend, but physician employment had increased overall labor spending relative to revenue. Medical specialist fees were also up 11% year over year, about the 8% high end of CHS' forecasting. Supply expense decreased year over year relative to revenue due to a combination of reduced surgical volumes (down 2% on a same-store basis) and improved procurement and inventory management.
Executives said it's early in the year to estimate the full extent of anticipated coverage shifts among patients priced out of exchange plans as a result of now-expired premium subsidies, but acknowledged a 3.9% drop in adjusted admissions among exchange plan patients and an increase in self-pay volumes.
On the policy landscape more broadly, Hammons said that due to "CHS' historical and current presence in many rural and underserved markets, we remain actively engaged with policymakers across each of our states to help ensure that programs under the Rural Health Fund are directed towards hospitals and other providers delivering care in these communities, which we believe was the original intent of the fund. We've set up a formal structure with dedicated internal and external resources working to evaluate each state's various programs as details emerge and to apply for any and all funding available to us in order to ensure continued access to quality care in our rural communities."
Tuesday afternoon’s numbers were accompanied by word that the company redeemed about $223 million of its outstanding bonds (10.875% senior secured notes, due in 2032).
CHS’ current portfolio of 64 affiliated hospitals reflects a 35% reduction since 2019. Across 2025, the health system reported $12.5 billion total net operating revenues and $509 million of net income, a reversal of the prior year’s $516 million net loss.
On Monday, the company highlighted the opening of new ambulatory surgery centers (ASCs) in Alabama and the acquisition of a majority interest in another located in Alaska. That brings the company to 36 affiliated ASCs, with another in Alabama, to be soon acquired this quarter.
“By offering additional services through these outpatient settings, we are driving growth for our health systems, delivering quality care and excellent outcomes, and optimizing the surgical experience for both our physician partners and their patients,” Hammons said in a Monday release.
(Editor's note: This story has been updated since publication with additional commentary from CHS' Q1 2026 earnings call.)