Good morning. Welcome to Oppenheimer's 36th Annual Healthcare Conference. I'm Michael Wiederhorn, the healthcare analyst. It's our pleasure to introduce Community Health Systems and CEO Kevin Hammons and Chief Financial Officer Jason Johnson. Thank you guys for joining us for today's fireside. Maybe we'll just, you know, we'll just kick right in here and just kinda start out with a high-level question. Can you provide us an update on the business as, and how you feel coming out of Q4? Sure, Michael, thank you for hosting us today, and thank everyone for joining the call today. This is Kevin Hammons. If I talk about a little bit about kind of how we feel coming out of Q4, we feel very optimistic. We made a lot of progress in 2025, lowering our leverage, getting to free cash flow positive for the first year in several years. I think that we are, you know, trending very positively as we move into 2026. We've completed a couple additional divestitures, which positions us well to further improve our free cash flow and further lower our leverage. As I think about as Jason and I have moved into our new roles in the company, and as we look ahead for CHS, we're really looking towards a new vision for the company, which is to make the healthcare experience exceptional for our patients, our communities, and each other. To make that happen, we're focusing on a number, or really five top priorities. Four of those are to improve quality, our patient experience, the physician experience, and improve our employee satisfaction. If we're successful in all those, we'll also continue to improve cash flows. As we kind of pivot towards those top priorities, I think we're making really good progress on those and we'll continue to make progress on those going forward, that leads me to believe that we can be better positioned to take more market share against our competitors in our markets and further improve our financial performance. Great. Let's just jump right into guidance. Can you discuss your new guidance and, you know, how much conservative is baked into the numbers? You know, what factors are there that could bring you to the top and bottom end of the range? Hey, Michael, this is Jason. I'll start here, and then Kevin can fill if I miss anything. Our guidance assumes a 5% increase in net revenue and about a 4% increase in EBITDA once you adjust 2025 to exclude the impact of the divestitures, both those that were completed in 2025 and those that were announced, and for 2026 completion, when we released our guidance and a couple of the one-time items. We also assumed a $20 million-$30 million impact on the HIX from the expiration of the enhanced premium tax credits in 2026. We did not include any impact of a few State Directed Payment programs that were submitted by three of our states, and had not been approved when we did the guidance, and we didn't assume any benefit from the Rural Health Transformation Program. If I think about the items that could result in us being at the higher end or the lower end of the guidance, it would be potentially better volume if consumer confidence rebounds more quickly in it as we get throughout the year here, or on the flip side of that, if it doesn't rebound. We've assumed about a low single digit volume increase for the year. I think that's where we could end up in the range. It will depend on how that plays out. Then also on the HIX impact if it ends up being better or worse than that, I think those are the two most significant variables. Perfect. What, why don't you also discuss maybe some of the factors of guidance that are making your guidance more back half weighted in 2026 as well? Yeah. You know, last year in 2025 started off strong with volumes. Consumer confidence was high coming off of the election, and then toward the very end of March, consumer confidence started to drop, which we see as a leading indicator for volumes. In the Q2 that showed up with weaker volumes. There was some improvement in the third and Q4, although still flat to slightly down year-over-year in those periods. Heading into the end of 2025 and in December, consumer confidence dipped and continued to fall in January of 2026. It is basically equivalent to where it was in March and April of 2025. I think that our full year, once again, that we'll get back to low single-digit volume growth, but that might be later in the year when that begins to come back. I guess from admissions trends, you're saying basically you're seeing some impact, you saw some impact from the economy in 2025, and you're expecting some rebound in, you know, as we get through 2026. Is that right? Is that the way to characterize it? Yeah, that's right. Our markets, you know, are about 18% lower at median income compared to the national average. We do believe that with the number of plans that have, you know, high deductible that people are making decisions about seeking healthcare, particularly elective, based on their outlook of the economy. Perfect. When we think about pricing acuity, obviously revenue per adjusted admission was a primary, one of the primary drivers of same-store growth in 2025. Can you talk about what you're seeing there heading into 2026 and how should we think about pricing versus acuity versus mix, you know, as planned interplay as a driver? Our revenue assumption increase of about 5% that I mentioned in our guidance, the majority of that is pure rate increase, about 2.5%-3.5%. Medicare inpatient increased 4%, which is the highest I think ever increase. We're seeing a 3%-5% increase in managed care and commercial contracts for 2026. The majority of our increase is based off of pure rate. I mentioned the low single-digit volume assumption, the rest of that being improvements in payer mix and acuity. All right. I think you talked, you mentioned earlier the exchanges. You know, can you refresh us again about your expected impact from the exchanges and how we should think about the breakdown between a shift to lower tier plans versus payer mix declines, you know, uninsured bad debt and the interplay of those, you know, at work? Yeah. The health care exchange business is less than 5% of our volumes and revenues. If you take our jumping off point from 2025 of about $11.2 billion of revenues, and assume 24.5% of that's HIX, that's about $100 million at the midpoint. We assume that ultimately pulls through to a potential $20 million-$30 million negative impact on EBITDA. You know, we acknowledge that some of that we don't know if the people will tier down or the people may lose the coverage or from the premiums going away, or if they'll get insurance through an employer or elsewhere if they ultimately become self-pay. We really won't know how this plays out until sometime in the Q2. For anyone who was auto-enrolled on HIX, they have until the end of the Q1 or maybe April, early April, to make their first premium payment, and if they don't do so, that's when they would lose coverage. It's gonna be a bit before we know exactly what the impact here is on the total enrollment in HIX. We do know that the Q1 is when you get the resets on the patient responsibility for the deductibles. Historically, we don't collect a significant amount of the patient responsibility for those patients who had HIX and received enhanced premium tax credits. We also know that they were high utilizers of ER, which we don't think has the same margins that one you know you would normally see. Twelve percent is our overall margin, which we acknowledge there's obviously fixed costs there. We're assuming a 20%-30% increase or impact, sorry, on EBITDA off of that $100 million estimated revenue. You mentioned earlier State Directed Payments. Can you give us an update on what you're hearing on this, on the State Directed Payments programs, and ones that still could be approved? I think there's been some recent noise in Florida as well about, you know, there's some rumors that's already been approved, but hasn't gone through CMS yet or publicly posted. Not sure, you know, any color on this would be great. Sure. When we released our guidance, there were three of our states had submitted new plans to CMS that had not been approved at that time. It was Georgia, Florida, and Indiana. In the last week or two, Georgia has been approved. We're waiting on the final data from the state to be able to estimate that impact, but I think it's gonna be consistent with what we originally were estimating, which was maybe 10-15, about 15 or so EBITDA impact annually. Florida, we understand that an agreement has been reached between the state and CMS, but we're waiting on the formal announcement. That one, again, I think there were some changes from the preliminary, the preprint that was submitted in the final approval. We're waiting to see what that looks like so that we can size that. It's an incremental change, so I don't think we expect anything much different than what we've initially sized that at, which was, I think, also similar, $10 million-$15 million there. So not sure exactly when that will be finally approved, but we would expect that soon based on the news that we're hearing. Indiana, I don't have any new information on that one. We don't know where that stands, except we know that the state did resubmit. I think that was end of early this year, maybe, but we don't know where that stands in the review process. Perfect. Moving down, you know, how should we be thinking about some of the, you know, of the Medicaid cuts under OB3 and how that impacting you, from a, you know, top-lines perspective? The initial cut will hit in 2027, but it's minimal. 2028's the first year we see anything significant if they were to remain in place, and that's about $70-$80 million. That's off of today's rates, today's dollars, doesn't assume any improvements or increases in Medicare rates. And ultimately, that will go up to $250-$300 million after 10 years. From 2028 through 2038, it could go up annually to $250-$300 million, assuming they remain in place and there's no changes to the law. The Rural Fund, another moving piece out there. How should we be thinking about that contribution for you? Yeah. Sorry to keep answering with unknowns, but That's okay. We know that our states have received $2.8 billion. Our 13 states in the aggregate have received $2.8 billion of the year one funds. Each state is developing their final plans and how they would plan to distribute these funds. We are monitoring each of our states and we recently submitted in the state of Alaska ideas. I think it was called an indication of interest there, how we believe the funds could be used. We don't know ultimately how much we'll receive. We expect in the next month or so that all the rest of the states will then begin to also send out either their application process or otherwise providing more information about how we may benefit from those funds. This will require an application process, and a lot of these will probably be grants, which means, we will need to complete certain actions, including spending certain funds to be able to then be reimbursed, so that it's unknown yet as to both what the benefit will be and when we will receive and recognize those funds. It will likely differ by state. Why don't we shift over to the cost side kinda. Can you give us kinda an update what you're seeing on the labor trends and how you view the outlook for inflation going forward? Our 2026 guidance assumes a 3%-4% increase in average hourly rate. On the contract labor side, I think we normalize on both our usage and the rates there, and I think that's about a 1.3% is where we came out for 2025, and I expect a similar as a percentage of revenue, and I expect a similar amount for 2026. Supply side, you know, it's obviously there's a lot of macro, you know, maneuvering that's going on right now. Is anything impacting your supply expense going forward, and how should we think about that? Yeah. We're not seeing anything currently. I don't think in the near term, we will. We are an equity owner in the HealthTrust GPO. Most of our contracts are multiyear. They renew every three years, about a third of them a year. We're insulated on our pricing for a while. I think some of the near-term increases that we're seeing in costs and shipping or manufacturing are gonna pull through in 2026. About 50% or more of our supplies are domestic. We don't know obviously what the inputs on some of those are, but we do also have, you know, that shields us a little bit too, I think. If I could just maybe chime in with a little bit of color here, Michael, on the supply side. With our ERP implementation, you know, we've now had that up and running for about a year, and we're continuing to mature our processes in that space. We're identifying, you know, more opportunities where we believe that we can, at a minimum, offset kind of future price increases in the supply space and maybe, you know, on the plus side, even obtain some additional savings over what we're spending today just by being able to leverage our scale now that we have more visibility into what we're purchasing with the ERP across the entire enterprise and moving all of that procurement work into a shared service environment. We think we have some upside potential there. You wanna give us some more, you know, kinda granularity on the financial benefits you're seeing from the new ERP system and, you know, what the opportunity you think it is, you know, how, you know, significant it could be going forward? Sure. You know, we have called out, we saved roughly $50 million this past year as a result of having moved on to that ERP. Our initial business case would suggest that we have, you know, another $50 million in 2026 and probably a couple years runway where that will continue to incrementally increase. I think now that we're moving with AI and Oracle, we have an Oracle ERP. Oracle is adding additional AI features to that ERP that were not there in our original business case. I think that opens the door for even potentially more savings opportunities or more efficiencies for us as we adapt and mature further in using that product. You mentioned AI. You maybe want to discuss some of the pros and cons in your business due to AI and kind of where you're at in you know in terms of the usage of AI. I think we're still pretty early. We've been using AI for several years in a number of use cases. I don't know that there are any cons necessarily for our business. But I do think there's opportunity for it to provide more efficiencies, particularly in transaction processing. I am somewhat hopeful that it will help balance the scales a little bit with the payers who've been using AI probably to our detriment at this point, just due to their, the availability of data that they have and probably a more mature dataset and access to data across all providers, where we're limited, the data for just our own hospitals. Going forward, I think in the revenue cycle, there's some opportunity in the back office with finance, procurement, you know, supply chain, HR payroll systems. Utilizing AI will certainly provide us a better decision support tool, allow us to get the information quicker, make decisions quicker. Even on the clinical side, which is, you know, we've been using some AI tools that we developed internally to identify patients at risk for sepsis, and we've been able to significantly lower our sepsis mortality as a result of that. I think there's a number of other use cases that we're seeing for AI in the clinical space that should help improve our care. Perfect. Let's shift gears here. You know, let's move to the capital structure. You know, kind of what do you see as your comfortable leverage position? How do you plan to reduce the leverage to your, I think, your midterm target of 5.5 times? Yeah. I think in the midterm, I mean, we continue to make progress towards that goal. We would be very comfortable in reaching that goal in the midterm. I think philosophically, we're continuing to wanna work towards a more balanced capital structure overall, and I think as we get closer and closer to our goal, we're really getting ourselves on a virtuous cycle where as leverage comes down, our free cash flows continue to increase, and that gives us an easier path to further reduce leverage beyond that goal. I think that's the virtuous cycle that we're, you know, getting ourselves on. We'll continue to work on that. With the divestitures that we've announced this year, already, you know, we're setting ourselves up to further reduce leverage here in 2026 and beyond and improve our free cash flow. I think things are moving in the right direction. Perfect. How should we think about your divestiture strategy, and are you seeing any attractive markets for deals going forward? We're getting closer to the end of our program, certainly. You know, we have probably another deal or two out there that we're in early-stage conversations, and I don't know whether or not those will ever get to the finish line. Beyond that, we continue to get inbound interest. There's significant interest, but oftentimes, it, you know, at least more recently, the interest is coming in on assets that we really don't wanna sell. That's a good position to be in. I think it gives us some optionality, but these are typically assets that we believe that the growth opportunity for us is greater than the value that would be created through a divestiture. I think where we're at now with our leverage and cash flows, that value proposition of divesting is changing for us. If we can look to be reinvesting in growth in these markets and growing EBITDA, we'll have a further deleveraging impact than selling. Right. I guess, you know, kind of following there. How should we think about your latest efforts on capital projects and how you weigh your investments in the business versus debt paydown? You know, we have guided for 2026 our capital spending from an absolute dollar standpoint, you know, pretty flat with 2025. Even though we're gonna have, you know, a number fewer facilities, so we're spending more capital per facility. That additional capital primarily in growth-related projects. We've completed most of our inpatient large construction projects that we've had going on over the past couple years. For 2026, most of our projects will be more access point related, so that's freestanding EDs, ambulatory surgery centers, urgent care centers, and then, you know, even some outpatient services and service lines in the hospitals that we'll be bolstering. That's kinda directionally, at least over the next year, where a lot of that capital will be going. I guess the last part on this, you know, there's obviously a lot of moving parts in cash flow, but maybe if you could frame the cash flow expectations for 2026. Yeah. Free cash flow for 2025 was $150 million, which was positive for the first time in several years and since, I think, going back to 2022. We do have a one significant headwind in 2026. Every 11 years, companies on a biweekly pay period have a 27th pay date in a calendar year as opposed to normal 26. There's no impact on accrual basis, so no expense impact here. But from a cash flow perspective, that's $140 million headwind in 2026. That then turns into a tailwind in 2027. We've identified several initiatives to try to offset that headwind in 2026 around our working capital, including increasing inventory turnover, decreasing days in AR, continue to use the ERP to manage AP. We had some cleanup in AP in 2025 from conversions from other systems where it had built up and paid down in 2025 that we won't have to step over in 2026. There are multiple initiatives, and they're all sort of even sized to help offset that headwind on the extra pay period, pay date. Perfect. As we wind down the fireside discussion here, you know, one last question. Is there anything you would like to point out to the investor community that you believe is misunderstood or underappreciated at this time? Sure. I'll kick this one off. I think, you know, what I would go back to is our leverage and the fact that, you know, we've lowered our leverage over the last couple years from about 7.9-6.5, and now we have a path to continue to, you know, lower that leverage even further. During that time, we've gotten ourselves positive free cash flow, so that gives us also a path forward. Lowering that leverage has freed up pretty significant amount of value, I think, to made available for our equity holders. I know that's not being reflected yet in our stock price. I think it shows a path forward. We've got a clear path now with first lien capacity in increasing first lien capacity to deal with our second lien bonds due in 2029 and 2030. That gives us a pathway to further simplify our capital structure to where potentially it could be an all first lien structure. We certainly have runway, you know, between now and any time we have to deal with it. All that said, I think, you know, we're on a good path as we think about the Big Beautiful Bill and some future headwinds. I think those get mitigated. There's also some real tailwinds from the Big Beautiful Bill with the Rural Health Transformation Fund that we can't yet quantify and some state-directed payment programs that we can't yet quantify. I think in the near term, over the next five years, we've got some wind at our back and looking forward to continuing to make progress on our vision as well, which I think puts us in a very competitive position within our markets. Well, we're out of time. I really appreciate this discussion. It was great, and we really appreciate your time. Wanna thank you, Kevin and Jason, for your time today, and for this great discussion. Sure. Appreciate it, Michael. Thanks everyone again for joining. Thank you.