Franklin, Tenn.-based Community Health Systems reported an operating income of $389 million (13.8% margin) in the second quarter of 2026, down from $512 million operating gain (16.3% margin) in the second quarter of 2025.
After accounting for interest and income tax expenses, CHS reported a net income of $70 million (2.5% margin) in the second quarter, a 75% drop from the $282 million net gain (9% margin) reported in the same quarter last year.
The bottom-line figure was also lifted by a $172 million net gain tied to hospital divestitures. The for-profit system also used about $600 million in divestiture proceeds during the quarter to buy back senior notes, part of a multiyear push to shrink its portfolio and pay down debt.
“Our dedicated team is making measurable progress across top priorities that include clinical quality, patient and physician experience and employee satisfaction, while also investing in initiatives designed to fuel future growth,” CEO Kevin Hammons said in a July 22 news release. “We are confident in our ability to deliver long-term value by managing the factors within our control and successfully navigating the dynamic macroeconomic environment.”
Seven things to know:
1. Revenue fell on divestitures but rose at retained hospitals. Second-quarter net operating revenues totaled $2.8 billion, down 9.8% year over year from $3.1 billion, a decline driven by the hospitals CHS has sold. On a same-store basis — which excludes divested facilities — revenues rose 2.4%. Same-store admissions increased 1.9% and adjusted admissions increased 2.9%, while consolidated admissions fell about 11% as the footprint shrank.
2. CHS repurchased about $600 million of its senior notes. Using proceeds from recent divestitures, the system bought back about $368 million of its 4.750% senior secured notes due 2031, about 35% of that series, and roughly $231 million of its 10.875% senior secured notes due 2032, about 13% of that series. The tender offer launched April 22 and closed May 6. Afterward, about $689 million of the 2031 notes and $1.549 billion of the 2032 notes remained outstanding. CHS recorded a $5 million pre-tax loss on the early extinguishment of debt.
3. Long-term debt fell to $9.55 billion. That is down from $10.38 billion at the end of 2025. Interest expense eased to $206 million in the quarter from $214 million a year earlier. Deleveraging has been the throughline of CHS’ strategy; the system ended 2025 with its lowest debt levels in more than a decade.
Entering 2026, CHS’ debt level was at its “lowest in over a decade,” Jason Johnson, executive vice president and CFO of CHS, told Becker’s in a Dec. 18 interview. “Our leverage was 6.7 times as of Sept. 30, 2025 — down from 7.4 times on Dec. 31, 2024, and 7.9 times the year before that,” Mr. Johnson said, adding that boosting investments in its growth projects should accelerate free cash flow and allow the company to continue decreasing its debt and leverage.
4. Adjusted EBITDA slipped to $330 million. That is down from $380 million a year earlier, an 11.7% margin. CHS attributed the decline to divestitures, an unfavorable shift in payer mix and higher medical specialist fees, partly offset by higher volumes and reimbursement rates, a greater net benefit from supplemental reimbursement programs, and lower contract labor and professional liability costs. Income from operations was $389 million, a 13.8% margin, but like net income that figure includes the divestiture gains; stripping them out leaves roughly $217 million.
5. The system now operates 60 hospitals. CHS ended the quarter with 60 hospitals, down from 70 a year earlier, and 8,863 licensed beds, down from 10,478. Its subsidiaries own or lease those hospitals and operate more than 800 sites of care across 32 markets in 12 states. So far in 2026, CHS has divested its interest in nine hospitals — an 80% ownership stake in one and eight others — for about $1.2 billion. The retrenchment continues a portfolio overhaul that has removed dozens of hospitals from the system since 2020 as it concentrates on core markets. It recently exited Arkansas and Pennsylvania.
6. Expenses came down with the smaller footprint. Salaries and benefits dropped to $1.24 billion from $1.33 billion, and supply costs fell to $401 million from $469 million, reflecting the divested hospitals. Net cash provided by operating activities held at $87 million, flat with the prior-year quarter.
7. CHS expects a net loss in 2026. In updated guidance, the system projected net operating revenues of $11.4 billion to $11.6 billion and adjusted EBITDA of $1.3 billion to $1.375 billion for 2026. It projects a full-year net loss of $1.10 to $1.25 per diluted share. Management also flagged the expiration of enhanced ACA subsidies and changes to state and federal Medicaid funding among the policy risks to its outlook.
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