Community Health Systems , Inc
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COMMUNITY HEALTH SYSTEMS , INC . Annual Report to Stockholders 2013 Company Profile Community Health Systems, Inc. is one of the largest publicly-traded hospital companies in the United States and a leading operator of general acute care hospitals in communities across the country. Through its subsidiaries, the Company currently owns or leases 206 affiliated hospitals in 29 states with an aggregate of approximately 30,900 licensed beds (as of March 1, 2014). The Company’s headquarters are located in Franklin, Tennessee, a suburb south of Nashville. Shares in Community Health Systems, Inc. are traded on the New York Stock Exchange under the symbol“CYH.” Hospital Locations As of March 1, 2014 4 1 1 1 3 1 4 4 6 10 10 1 3 18 Operating Revenues 206 29 (in billions) Hospitals States $13.5 $11.5 $9.5 $7.5 $5.5 $3.5 11 12 13 Hospitals 210 180 1 20 150 4 120 9 9 4 90 3 60 4 11 12 13* * Includes HMA facilities acquired on January 27, 2014 4 20 Adjusted Earnings Per Share from Continuing 8 Operations (diluted)** 12 11 5 $4.00 $3.50 25 $3.00 $2.50 $2.00 $1.50 11 12 13 For 2012, includes net benefit from industry-wide government settlement and payment update of $0.51 Hospitals are owned or leased by subsidiaries of Community Health Systems, Inc. Community Health Systems, Inc. does not have any employees. Financial Highlights (In thousands, except operating data and per share amounts) Year Ended December 31, 2013 2012 Operating Results Net operating revenues $ 12,997,693 $ 13,028,985 Adjusted net income attributable to Community Health Systems, Inc. stockholders** $ 224,720 $ 344,673 Adjusted earnings per share from continuing operations** Diluted $ 2.40 $ 3.84 Weighted average number of shares outstanding: Diluted 93,815 89,807 As of December 31, 2013 2012 Balance Sheet Data Working capital $ 1,290,480 $ 1,275,922 Total assets 17,117,295 16,606,335 Long-term debt 9,286,495 9,451,394 Stockholders’ equity 3,067,827 2,731,207 For The Year Ended December 31, Consolidated Same-Store 2013 2012 % Change 2013 2012 % Change Selected Operating Data Number of hospitals (at end of period) 135 135 135 135 Licensed beds (at end of period) 20,180 20,334 20,180 20,334 Beds in service (at end of period) 17,320 17,265 17,320 17,265 Admissions 654,945 701,837 -6.7% 651,044 701,837 -7.2% Adjusted admissions 1,362,344 1,418,472 -4.0% 1,353,195 1,418,472 -4.6% Patient days 2,897,491 3,058,931 2,882,332 3,058,931 Average length of stay (days) 4.4 4.4 4.4 4.4 Occupancy rate (average beds in service) 45.9% 48.6% 45.9% 48.6% Net operating revenues $ 12,997,693 $ 13,028,985 -0.2% $ 12,922,186 $ 12,943,565 -0.2% Net inpatient revenues as a % of operating revenues before provision for bad debts 43.2% 44.7% 43.2% 44.4% Net outpatient revenues as a % of operating revenues before provision for bad debts 55.0% 53.4% 54.9% 53.7% Adjusted income from operations** $ 1,015,322 $ 1,210,124 -16.1% $ 1,034,005 $ 1,182,538 -12.6% Adjusted income from operations as a % of net operating revenues** 7.8% 9.3% 8.0% 9.1% Depreciation and amortization $ 782,675 $ 725,558 $ 779,291 $ 725,557 Equity in earnings of unconsolidated affiliates $ 42,641 $ 42,033 $ 42,641 $ 42,105 Liquidity Data: Adjusted EBITDA** $ 1,840,638 $ 1,977,715 -6.9% Adjusted EBITDA as a % of net operating revenues** 14.2% 15.2% Net cash provided by operating activities $ 1,088,719 $ 1,280,120 Net cash provided by operating activities as a % of net operating revenues 8.4% 9.8% **Adjusted to exclude loss from early extinguishment of debt, impairment of long-lived assets, acquisition expenses related to HMA, reserves for government settlements and related legal costs, and for 2012, includes net benefit from industry-wide settlement and payment update. Letter to Stockholders: The changing landscape for healthcare providers requires recognized as Top Performers in Key Quality Measures TM initiative and innovation. In a challenging 2013, by The Joint Commission, a leading accrediting agency for Community Health Systems devoted considerable energy healthcare organizations. Only about one-third of the and resources to developing strategies that we believe will nation’s more than 3,300 eligible hospitals received this generate positive, long-term results. At the same time, we honor for exemplary performance in using clinical remained diligently focused on our current operations to processes that are demonstrated to improve patient care ensure the best possible performance. All of these efforts for certain conditions. This recognition demonstrates that support our fundamental objective to deliver quality, our hospital staffs strive to use evidence-based practices affordable healthcare in the communities we serve as we and underscores our unwavering determination to deliver continue to create and enhance shareholder value. high-quality, safe patient care. In 2013, we organized our Company for the successful Our affiliated hospitals are aggressively working to create acquisition of Health Management Associates, Inc., or and maintain inherently safe environments where patients HMA, a transaction that was completed at the end of can be assured their course of care will do no harm. Every January 2014. This compelling combination of two one of our hospitals participates in our Patient Safety companies increased our diverse portfolio to more than Organization (PSO), which is listed by the Health and 200 hospitals across 29 states. Newly acquired facilities Human Services Agency for Healthcare Research and geographically complement legacy hospitals, enhancing Quality. PSOs provide a privileged and secure our ability to form stronger networks in key states and to environment where healthcare providers can utilize data to more fully benefit from healthcare reform. On a combined identify and reduce the risks associated with patient care. basis, our hospitals provided care for one million inpatient Measurable results across our organization show visits and nearly five million emergency department visits improvement in important quality metrics, including in 2013. reductions in readmissions, hospital acquired conditions, and most notably, a decline in serious safety events. Our record of successfully assimilating more than one hundred previously acquired hospitals over the past fifteen Physicians and employees are trusted partners in our years gives us confidence in our ability to realize potential quality efforts. We are pleased that our organization operating synergies and other advantages of greater scale. maintains a high rate of satisfaction among physicians, Proven business strategies will drive improvements in nurses and other staff. This is one of the reasons our operating and financial performance at the HMA hospitals continue to successfully recruit physicians and hospitals to deliver a return on our investment. We look mid-level providers. Our ability to match healthcare forward to meaningful collaboration with physicians professionals with communities who need and support and employees of our new affiliates as we support the their services is fundamental to the quality of life in our excellent care they provide for patients. We could not be communities and makes our hospitals more vibrant and more excited about the transformative opportunity to relevant for the people who rely on them. We enjoyed create a stronger company for the benefit of all of our another year of outstanding recruitment results in 2013, healthcare providers, the communities we serve, and with 2,141 physicians joining our organization to expand ultimately, our stockholders. clinical services and capacity in our markets so that local residents can access the health services they need close to A relentless commitment to clinical excellence is the home. Today, more than 27,000 physicians serve on our strong foundation on which we build success. In 2013, medical staffs and 3,500 of them are employed. we were proud to report that 93 of our hospitals were Community Health Systems has taken bold steps toward ongoing success and we are W AYNE T. S MITH determined to remain a leader for our industry. As our Company has grown, so have the very practical Although our overall financial results for 2013 fell short of benefits accrued to the towns and cities where we operate. expectations, we achieved higher revenue per adjusted In the communities where we have long relationships, and admission. Our consolidated revenues reached nearly in new markets added through the acquisition of HMA, $13.0 billion and our Adjusted EBITDA (Earnings before we support economic development by employing local Interest, Taxes, Depreciation and Amortization) was residents, paying taxes and providing charity care. We over $1.8 billion. Excluding certain unusual adjustments, continue to invest in clinical services, healthcare facilities, our earnings per share from continuing operations the latest medical technologies and information systems were $2.40 (diluted.) We believe we have significant hardware, just as we did with over $600 million in capital opportunities to improve our financial performance in investments in 2013. 2014 as we deploy new growth strategies, develop the right partnerships, and leverage our considerable size and We are operating in interesting times. Societal and scale to drive higher revenues and operating efficiencies political changes are profoundly affecting our industry. across an expanded network. We look forward to serving newly insured Americans as healthcare reform delivers on its fundamental promise to Community Health Systems has taken bold steps toward provide access to essential health services. More people ongoing success and we are determined to remain a leader will get the care they need through coverage obtained on for our industry.