Health Care Select Sector

Russell 2000

The Balanced Allocator

Comparable Companies - CYH

The report covers 1 insider sale, 15 institutional holders with stakes above 1.3%, and short interest of 7.9% of float as of November 28, 2025.

PRESIDENT AND CMO

Filing reports ownership of 13,171,818 shares. The filing is an amendment to report changes in ownership.

Filing reports ownership of 6,953,740 shares. The filing is an amendment to report changes in ownership.

Tim L. Hingtgen

Kevin J. Hammons

Lynn T. Simon, M.D.

Kevin A. Stockton

Chad A. Campbell

Wayne T. Smith

John A. Clerico

Susan W. Brooks

Ronald L. Burgess, Jr.

Michael Dinkins

James S. Ely III

John A. Fry

Joseph A. Hastings, D.M.D.

Elizabeth T. Hirsch

William Norris Jennings, M.D.

K. Ranga Krishnan, MBBS

Fawn D. Lopez

H. James Williams, Ph.D.

Tim L. Hingtgen's tenure as CEO has been marked by significant capital allocation activities, including substantial debt issuance and repayment, alongside modest share buybacks and a notable stock issuance in 2024. While operating cash flow has been a primary source of capital, the company has also utilized debt. His leadership is recognized within the healthcare industry, as evidenced by his inclusion in Modern Healthcare's most influential lists.

Chief Executive Officer

Kevin J. Hammons, as CFO, oversees critical financial functions for Community Health Systems. His background includes significant experience in accounting and finance prior to joining CHS, including roles at Deloitte & Touche LLP. His responsibilities encompass the financial strategy and reporting of the company, which has seen considerable capital allocation activity including significant debt management and operational cash flow utilization.

President and Chief Financial Officer

Dr. Lynn T. Simon's contributions to Community Health Systems have extended beyond her executive role, with a post-retirement consulting agreement ensuring continued access to her expertise in healthcare innovation. This arrangement highlights the company's strategy to retain key talent and knowledge, even after formal retirement.

President, Healthcare Innovation and Chief Medical Officer

Kevin A. Stockton's progression to Executive Vice President of Operations and Development signifies his increasing responsibilities within Community Health Systems. His prior experience as a Regional President provides a foundation for overseeing the company's operational and developmental initiatives.

Executive Vice President of Operations and Development

Chad A. Campbell's role as Regional President for Operations in Region 2 indicates a focus on the company's regional performance and strategic execution within that area.

Regional President

Wayne T. Smith, as Chairman of the Board, brings a deep and long-standing history with Community Health Systems, having previously served as CEO for 24 years. His extensive experience in the healthcare industry uniquely positions him to guide the board's strategic oversight.

Chairman of the Board

John A. Clerico's long tenure as Lead Director, coupled with his experience as a co-founder of an investment firm and previous board leadership roles, provides a strong foundation for his oversight responsibilities at Community Health Systems.

Lead Director

Susan W. Brooks' background as a former Congresswoman and U.S. Attorney provides a unique perspective on regulatory and governmental affairs relevant to the healthcare sector. Her recent stock option exercise indicates continued engagement with the company's equity.

Director

Lt. Gen. Ronald L. Burgess, Jr.'s extensive experience in intelligence and cybersecurity, gained from his military career, offers critical expertise in risk oversight, particularly concerning information security and data protection for Community Health Systems.

Michael Dinkins' background as a former executive at Praxair and PwC, combined with his expertise in finance, accounting, and risk management, significantly contributes to the financial oversight and integrity of Community Health Systems' board.

James S. Ely III's role as Founder and CEO of an investment management firm, PriCap Advisors, LLC, brings a valuable investor perspective to the board of Community Health Systems, particularly concerning capital allocation and financial strategy.

John A. Fry's long-standing directorship and his leadership roles in academic institutions, including Temple University and the University of Pennsylvania Health System, provide him with significant experience in financial management, audit, and compliance, which are crucial for overseeing a healthcare organization like Community Health Systems.

Dr. Joseph A. Hastings, D.M.D., brings over 40 years of direct healthcare experience as a practitioner and former board member of a public company, offering a practical and experienced perspective on the operational and strategic aspects of Community Health Systems.

Elizabeth T. Hirsch's extensive experience as a former VP and controller at Praxair equips her with deep knowledge in financial reporting, internal controls, and investor relations, making her a valuable asset to the financial oversight of Community Health Systems.

Dr. William Norris Jennings, M.D., offers a critical physician's perspective to the board of Community Health Systems, leveraging his experience in managing large physician practices to inform risk and quality oversight.

K. Ranga Krishnan, MBBS, brings a wealth of experience in academic medical leadership, having served as CEO of Rush University System for Health and dean of medical schools. His insights into medical trends and physician practice management are highly relevant to Community Health Systems.

Fawn D. Lopez's role as former publisher of Modern Healthcare provides her with a unique and in-depth understanding of the healthcare industry, complemented by expertise in media and marketing, which she applies to her directorship at Community Health Systems.

Dr. H. James Williams' academic background, including multiple degrees in accounting and law, combined with his leadership as president of Mount St. Joseph University, provides Community Health Systems with significant expertise in accounting, financial matters, and cybersecurity risk assessment.

Justin D. Pitt

Jason K. Johnson

Mark Medley

UHS operates through its acute care hospitals and behavioral health facilities, focusing on delivering high-quality care and improving patient outcomes while maintaining operational efficiency.

Provides inpatient, outpatient, and emergency medical services through general acute care hospitals.

Offers inpatient and outpatient mental health and substance abuse treatment services.

HCA is the largest healthcare provider in the US, operating a network of general acute care hospitals, outpatient facilities, and urgent care centers with a focus on scale and market density.

Inpatient and outpatient services including surgery, cardiology, and oncology.

Freestanding ERs, surgery centers, and clinics.

Krispy Kreme operates as a global branded retailer and wholesaler of doughnuts and branded sweet treats, utilizing a capital-intensive fresh doughnut production and distribution model.

Company-owned and operated doughnut shops.

Doughnuts delivered to grocery and convenience stores via third-party partners.

The Company owns its corporate headquarters in Franklin, Tennessee. As of December 31, 2024, the company owned or leased 76 hospitals, including 74 general acute care hospitals and two stand-alone rehabilitation or psychiatric hospitals. The company also maintains regional service centers near its corporate headquarters or in the markets in which it operates hospitals.

The management team at Community Health Systems is currently ill-equipped to handle the company's severe financial distress. The financial narrative is defined by negative tangible equity and dangerously low interest coverage, yet capital allocation has been counter-productive, utilizing debt to fund negligible share repurchases. While the incentive structure shows some operational focus, it lacks the urgency required for a balance sheet restructuring. The leadership lacks a proven turnaround track record, and the board lacks the specific restructuring expertise and fresh perspective necessary to guide the company through a crisis. This team is operating as if it is in a standard operational cycle, not a survival scenario.

The company is subject to federal, state, and local environmental laws governing medical waste disposal and the use, storage, transportation, and disposal of hazardous and toxic materials. The company notes that legal requirements regulating greenhouse gas emissions and energy inputs associated with the transition to a lower carbon economy may increase in the future, potentially increasing compliance costs. Currently, compliance with environmental legal requirements does not have a material effect on capital expenditures, financial results, or operations. The company also disclosed that recent hurricanes caused business interruptions and additional costs, and that adverse weather conditions may be more frequent or severe as a result of climate change.

The company has approximately 45,000 full-time employees. At December 31, 2024, certain employees at three of the company's hospitals are represented by various labor unions. The company has a centralized recruiting function and has established a centralized onboarding team.

The company is subject to HIPAA regulations regarding the privacy and security of protected health information and must report breaches of unsecured protected health information. The company is also subject to various state laws regarding data breach notifications and federal and state laws governing marketing and patient engagement, such as the TCPA and CAN-SPAM. The company notes that actual or perceived failures to comply with legal requirements regarding the privacy and security of health information could adversely affect its business.

The company has standardized and centralized supply chain operations to improve procurement of medical supplies, equipment, and pharmaceuticals. The company has a noncontrolling ownership interest in and participation agreement with HealthTrust Purchasing Group, L.P., a group purchasing organization. The company also partners with nursing schools in its communities and operates nursing school programs on some hospital campuses.

This narrative is built upon a foundation of severe financial distress, characterized by negative tangible equity of -$5.7B, net losses in FY 2024, and a reliance on asset sales to service an $11.2B debt load.

The company recorded a $301 million non-cash impairment charge in FY 2024 related to assets held for sale. The auditor identified 'Patient Accounts Receivable' as a Critical Audit Matter due to judgment in estimating implicit price concessions.

Reinvestment is occurring via CapEx ($355M in FY 2024) focused on outpatient expansion and hospital towers. However, the Incremental ROIC of -62.4% indicates that every dollar of new capital invested has destroyed significant value, likely due to the high cost of debt (10.75%+) funding these projects.

Apollo Management Holdings GP, LLC

CastleKnight Master Fund LP

Eversept Partners, L.P.

The Vanguard Group

Asset-Based Lending Revolving Credit Facility

6.125% Junior-Priority Secured Notes due 2030

P/Tangible Book Value

EV/EBITDA

Former Congresswoman and U.S. Attorney with deep knowledge of legislative and judicial branches of government.

Retired U.S. Army Lt. Gen. with extensive cybersecurity knowledge and executive leadership experience as head of the U.S. Defense Intelligence Agency.

Co-founder of ChartMark Investments, Inc. Served as Chairman and interim CEO of Global Industries, Ltd.

Former executive at Praxair and PwC with extensive financial, accounting, and risk management experience.

Founder and CEO of PriCap Advisors, LLC, an investment management firm.

President of Temple University with experience in financial management, audit, and compliance.

Healthcare practitioner and former board member of a publicly-traded company.

Chief Executive Officer with over 20 years of healthcare management experience.

Former VP and controller of Praxair with experience as an accounting and finance executive.

Physician with experience managing large physician practices and risk/quality oversight.

Former CEO of Rush University System for Health with experience in medical center management and physician practice.

Former publisher of Modern Healthcare with deep understanding of the healthcare industry and media.

Former CEO of the Company with 24 years of prior service as Chief Executive Officer.

President of Mount St. Joseph University with educational background in accounting (MBA, Ph.D., J.D.).

Blackrock, Inc.

CastleKnight Master Fund, LP

Morgan Stanley

William N. Jennings, M.D.

Directors and Executive Officers as a Group (22 persons)

CEO: 5.0x base salary; NEOs/EVPs: 3.0x base salary; Directors: 5.0x cash stipend. Must be achieved within 5 years.

Community Health Systems, Inc. is one of the nation's largest healthcare companies. Through its subsidiaries, it develops and operates healthcare delivery systems in 39 distinct markets across 15 states. As of December 31, 2024, the company owned or leased 76 affiliated hospitals with over 11,000 beds and operated more than 1,000 sites of care, including physician practices, urgent care centers, freestanding emergency departments, ambulatory surgery centers, and imaging centers. The company provides a broad range of general and specialized hospital healthcare services and outpatient services to patients in the communities it serves.

Held WACC (11.5%) and Terminal Multiple (9.6x) constant, solved for Year 5 Margin to justify current market cap ($433.6M).

Balance Sheet - Supplemental

Balance Sheet

Cash Flow Statement - Supplemental

Cash Flow Statement

Income Statement - Supplemental

Income Statement

Ratios

Valuation

Historical Ratios & Multiples - CYH

The healthcare sector faces a 'Rational Oligopoly' structure where scale is the primary determinant of survival. While an aging population provides a long-term tailwind for procedure demand, the industry is currently grappling with 4% to 10% wage inflation for medical specialists and increasing payer denials, which reached a 10 million dollar headwind for the company in Q3 2024.

Community Health Systems is at a critical juncture following the retirement of its long-time CEO and the simultaneous accumulation of shares by Apollo, making the next 12 months a definitive period for either a successful turnaround or a final restructuring.

Closing of the Clarksville Hospital Sale This 600 million dollar transaction is the single most important liquidity event in the near term. It validates the company's ability to monetize assets at attractive multiples (implied 10x+ EBITDA) and provides the cash necessary to pay down the 2027 maturity wall.

Announcement of Additional Divestitures Reaching the 1 billion dollar divestiture target is essential for the deleveraging thesis. Each subsequent announcement reduces the 'insolvency premium' currently applied to the stock.

Existential Liquidity and Solvency Risk The company is in a 'race against time' to sell assets before its 11.2 billion dollar debt load becomes unserviceable. A failure to refinance upcoming maturities or a breach of ABL covenants would lead to a total loss for equity holders.

Medical Specialist Fee Inflation Rising costs for anesthesia and other hospital-based specialties (up 10.9% in 2024) threaten to compress margins even if volumes stabilize.

The current asset base for valuation includes 73 general acute care hospitals with an adjusted total of 10,900 licensed beds, 50 Ambulatory Surgery Centers (ASCs), and 19 Freestanding Emergency Departments (EDs). This count is derived from the 76 hospitals and 11,403 licensed beds reported as of December 31, 2024 [cite: 7.1-9], adjusted for completed divestitures in 2025, including Lake Norman Regional Medical Center (123 beds) [cite: 7.1-16], Cedar Park Regional Medical Center (126 beds) [cite: 7.1-5], and an estimated 254 beds for ShorePoint Health System (FL) [cite: 7.1-18]. The ASC count of 50 reflects 47 existing ASCs plus 3 additional ASCs expected to open in Q4 2025, as indicated in recent transcript analysis. The Freestanding ED count of 19 is consistent with recent operational updates.

Divestiture of Cedar Park Regional Medical Center (126 licensed beds) for $436 million.

Divestiture of Lake Norman Regional Medical Center (123 licensed beds) and ShorePoint Health System (FL) for $550 million. Assuming ShorePoint Port Charlotte (254 beds) was part of this, the combined bed count is 377.

Cash & Equivalents

Accounts Receivable

The inventory of Community Health Systems, Inc. is primarily composed of fungible and branded medical supplies, pharmaceuticals, and equipment parts, essential for hospital operations. The inventory's health is supported by a TTM turnover rate of approximately 5.94 times, translating to about 61 days of inventory on hand. This efficient turnover suggests a low risk of widespread obsolescence or expiration, which is a critical factor in determining liquidation recovery rates. In a liquidation, these assets would likely be acquired by other healthcare providers or specialized distributors. The recovery rate logic, therefore, balances the inherent value and fungibility of the medical supplies with the typical discounts associated with an orderly liquidation process. The base case recovery rate of 65.0% is a conservative yet realistic estimate, acknowledging the marketability of the inventory while factoring in the costs and discounts of a bulk sale. The high and low cases reflect more favorable or challenging market conditions, respectively, but all scenarios are grounded in the understanding that medical supplies, particularly with good turnover, retain significant value even in a liquidation, as they are essential operational inputs for any healthcare facility.

Inventory

Tax Assets

Other Current Assets

**Primary Transaction Comps:**
- Divestiture of Cedar Park Regional Medical Center (126 licensed beds) for $436 million. ($3.46 million/bed)
- Divestiture of Lake Norman Regional Medical Center (123 licensed beds) and ShorePoint Health System (FL) for $550 million. Assuming ShorePoint Port Charlotte (254 beds) was part of this, the combined bed count is 377. ($1.46 million/bed (blended))

**Replacement/Scrap Data:**
New hospital construction and replacement costs typically range from $1.5 million to $3.0 million per licensed bed, depending on location, specialization, and facility age. Published valuation guidelines for healthcare facilities in a liquidation scenario generally apply significant discounts to replacement cost or going concern valuations, often ranging from 40% to 70% of fair market value, reflecting the specialized nature and limited alternative uses of these assets.

Net PP&E

Intangibles

Other Non-Current

Accounts Payable

Current Debt

Tax Liabilities

Other Current Liabilities

Non-Current Debt

Other Non-Current Liabilities

UNITED STATES

SCHEDULE 13G/A

EX-99.1

COMMUNITY HEALTH SYSTEMS ANNOUNCES DEFINITIVE AGREEMENT TO SELL OWNERSHIP INTERESTS IN CLARKSVILLE, TENNESSEE, HOSPITAL TO VANDERBILT UNIVERSITY MEDICAL CENTER

Community Health Systems Announces Definitive Agreement To Sell Three Pennsylvania Hospitals To Tenor Health Foundation

TIM HINGTGEN TO RETIRE AS CHIEF EXECUTIVE OFFICER OF COMMUNITY HEALTH SYSTEMS

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington D.C. 20549 FORM 8-K

Community Health price target lowered to $3.50 from $4.10 at UBS

COMMUNITY HEALTH SYSTEMS, INC. ANNOUNCES SALE OF $700 MILLION AGGREGATE PRINCIPAL AMOUNT OF 10.750% SENIOR SECURED NOTES DUE 2033

COMMUNITY HEALTH SYSTEMS ANNOUNCES DEFINITIVE AGREEMENT TO SELL NORTH CAROLINA HOSPITAL TO DUKE HEALTH

240.13d-102 Schedule 13G - Information to be included in statements filed

communityhealthsystemsinc

COMMUNITY HEALTH SYSTEMS, INC. ANNOUNCES INCREASE IN TENDER CAP FOR 8.000% SENIOR SECURED NOTES DUE 2026

SC 13G

comm22a21.htm - Generated by SEC Publisher for SEC Filing

us2036681086_012623.txt

us2036681086_012023.txt

Citigroup Maintains Buy on Community Health Systems, Lowers Price Target to $14

SECURITIES AND EXCHANGE COMMISSION

Community Health price target lowered to $2 from $3 at Wells Fargo

Community Health price target raised to $4.50 from $4 at Truist

Community Health price target raised to $3.60 from $3.20 at UBS

Community Health price target raised to $3 from $2.50 at Wells Fargo

Community Health Systems is a distressed hospital operator executing a binary survival pivot through a 1 billion dollar divestiture program to service an 11.2 billion dollar debt load. While the market is pricing in near-term insolvency, our analysis suggests a bridge to safety exists via the monetization of a 76-hospital asset base and a de-risked maturity wall until 2027. The thesis is complicated by a leadership transition following the retirement of CEO Tim Hingtgen, but the 11.7% insider ownership and accumulation by distressed specialists like Apollo provide a significant floor for this high-asymmetry turnaround bet.

Executive Summary

The primary value driver is a structural pivot from growth to survival, where the company is trading its legacy asset base for the liquidity required to bridge to a sustainable capital structure. This transition is catalyzed by over 1 billion dollars in pending divestitures, while the downside is protected by a massive physical infrastructure base that remains undervalued by the equity market.<ul><li>Driver: Aggressive Deleveraging via Asset Monetization</li><li>Catalyst: Closing of the 600 million dollar Clarksville sale and 460 million dollar Cedar Park divestiture</li><li>Protection: Tangible asset floor of 11,403 licensed beds valued at 350,000 dollars per bed</li></ul>Our variant perception is that the market has priced this company for inevitable bankruptcy, focusing on the negative tangible equity of 5.7 billion dollars and the 7.3x Net Debt to EBITDA leverage. However, our analysis of the liquidity runway and non-core asset values suggests they have sufficient bridge capital to execute the turnaround, making the current price a highly asymmetric call option on survival. The market is ignoring the 12.2% Adjusted EBITDA margins and the 6% same-store revenue growth, which indicate the core business remains operationally viable despite the balance sheet distress.This is therefore not a bet on an operational turnaround by current management, but a special situation, asset-based investment with a clearly defined catalyst path centered on debt reduction and maturity extension.

Core Investment Rationale

Community Health Systems operates a network of 76 affiliated hospitals across 15 states, providing general acute care, emergency services, and specialized surgery. The company is currently executing a 'Shrink-to-Grow' strategy, divesting underperforming or non-core hospital assets to fund a pivot toward higher-margin outpatient access points. Revenue generation is concentrated in Indiana, Alabama, Texas, and Florida, with total TTM revenue of 12.64 billion dollars. The strategy relies on leveraging centralized clinical and supply chain expertise to drive efficiencies, evidenced by the implementation of a new ERP system (Project Empower) expected to yield 40 million to 60 million dollars in annual savings.The company's core assets consist of 74 general acute care hospitals and two stand-alone rehabilitation facilities, totaling 11,403 licensed beds. Beyond the inpatient base, the company operates over 1,000 sites of care, including 19 freestanding emergency departments and more than 40 ambulatory surgery centers (ASCs). Physical assets are a critical component of the valuation floor, with PP&E reported at a net book value of 4.62 billion dollars.The hospital industry is a rational oligopoly dominated by scaled players like HCA Healthcare and Universal Health Services. Community Health Systems occupies a secondary position, competing against municipal and not-for-profit systems in fragmented regional markets. While HCA maintains superior operating margins of 12.0%, Community Health's 6.7% margin reflects its sub-scale position and the burden of its 11.2 billion dollar debt load.The current situation is defined by a decade of aggressive leverage accumulation and subsequent financial deterioration. Net losses reached 516 million dollars in FY 2024, driven by 301 million dollars in non-cash impairment charges and rising medical specialist fees. This distress has eroded the balance sheet to a negative tangible book value of 42.76 dollars per share. In July 2025, the company entered a leadership crisis when CEO Tim Hingtgen announced his retirement, leading to the appointment of Kevin Hammons as interim CEO. This transition occurs amidst a 1 billion dollar divestiture program and a series of high-coupon debt refinancings, including the issuance of 1.79 billion dollars in 9.750% notes due 2034. The boardroom context is further complicated by the 24-year tenure of Chairman Wayne Smith, raising concerns about entrenchment during a period of necessary radical restructuring.

Business & Situation

<ul><li>Bull Case: Successful execution of the 1 billion dollar divestiture program reduces leverage below 5.5x by 2027. Outpatient expansion and ERP-driven cost savings of 60 million dollars drive margin expansion toward 10.5%.</li><li>Bear Case: Persistent medical specialist fee inflation (up 10.9% in 2024) and legal liabilities outpace asset sale proceeds. A liquidity crunch occurs before the 2027 maturity wall, leading to a zero-equity restructuring.</li></ul>The consensus view is that Community Health Systems is a 'zombie' company destined for restructuring. This narrative is driven by the 7.3x leverage ratio and the fact that interest expense of 866 million dollars consumes nearly 80% of operating income. The market views the asset sales as a desperate liquidation rather than a strategic repositioning. Macroeconomic headwinds, including a 2.2% decline in surgeries and a 1.3% drop in ED visits in Q3 2025, have reinforced the belief that the company cannot grow its way out of its debt burden.The healthcare sector faces a 'Rational Oligopoly' structure where scale is the primary determinant of survival. While an aging population provides a long-term tailwind for procedure demand, the industry is currently grappling with 4% to 10% wage inflation for medical specialists and increasing payer denials, which reached a 10 million dollar headwind for the company in Q3 2024.Our differentiated view is that the market is pricing in bankruptcy while ignoring the quantifiable asset floor and the probability of a forced catalyst. The involvement of Apollo and CastleKnight, who collectively hold over 18% of the equity, suggests that sophisticated distressed investors see value in the underlying assets that the broader market is missing. Furthermore, the governance friction caused by the CEO transition and the presence of these activists prevents 'value drift.' The activists act as a mechanism to force the resolution of the valuation discount, either through a strategic sale of the entire company or a more aggressive liquidation of the 76-hospital portfolio. The 600 million dollar Clarksville sale alone represents nearly 1.5x the company's current market capitalization, highlighting the extreme disconnect between asset value and equity price.We conclude that the downside is capped by the liquidation value of the physical assets, while the upside is a multi-bagger recovery if the company successfully bridges its 2027 liquidity needs. The current 1.4x P/E ratio is a mathematical anomaly caused by distressed earnings, but it reflects a market that has entirely given up on the equity.Our analytical edge stems from a forensic analysis of the balance sheet and creditor agreements, giving us higher conviction in the monetizable value of the company's 11,403 licensed beds. While the equity market focuses on operational losses, we recognize that the 1.2B dollars in operating cash flow generated over the last five years provides a sufficient, albeit thin, margin for survival.

Core Thesis

The leadership team is currently in a state of flux. Outgoing CEO Tim Hingtgen presided over a period where Net Debt/EBITDA remained elevated at 7.3x and tangible equity turned deeply negative. His successor, Kevin Hammons, has been with the company since 2016 and served as CFO during the recent distressed refinancings. This transition is happening during a period of significant institutional accumulation by Apollo, and it remains unclear if the activist base supports this internal succession or will push for an external 'turnaround specialist' to replace the interim leadership.Capital allocation has been historically weak and value-destructive. Management spent 21 million dollars on buybacks between 2020 and 2025, including repurchases at an EV/EBITDA of 12.6x in Q1 2025, a period when the company was technically insolvent on a tangible basis. This misallocation of capital while maintaining 11.2 billion dollars in debt is a significant red flag.Management's candor is mixed. While they have been transparent about the 1 billion dollar divestiture target, they have frequently blamed 'macroeconomic headwinds' for volume softness that peers like HCA have navigated more effectively.<ul><li>Board Independence: 85.7% (12 of 14 directors)</li><li>Chairman/CEO Roles: Separate</li><li>Chairman Tenure: 24 Years (Wayne T. Smith)</li><li>Insider Ownership: 11.7%</li><li>Shareholder Rights: Declassified Board, Proxy Access (3% for 3 years)</li></ul>The governance structure is currently a 'Outcome Tree' rather than a stable state: 1. Status Quo: The Hammons-led team executes the 1 billion dollar divestiture plan, leading to a slow recovery. 2. Compromise: Apollo or CastleKnight demand board seats to oversee the 2027 maturity wall. 3. Reset: A failed divestiture leads to a forced strategic review or activist-led management overhaul. Each outcome, except for a total liquidity failure, likely results in a higher equity valuation than the current distressed levels.

Leadership & Governance

Although the theoretical Base Case Net Liquidation Value is 28.46 dollars, the stock currently trades at a deep discount to this level (3.22 dollars). To provide a conservative downside bound, we anchor the floor to the Bear Case DCF value of 0.00 dollars, reflecting the existential risk of a failed turnaround and the potential for zero equity recovery in a bankruptcy scenario.The base case assumes the 1 billion dollar divestiture program is completed by 2026, reducing Net Debt/EBITDA to 5.5x. Revenue stabilizes at 12.6 billion dollars with 10.5% operating margins as ERP savings of 60 million dollars are realized.In a blue-sky scenario, procedure volumes recover 4% annually, and the company achieves a 12.0% operating margin. Successful deleveraging leads to a re-rating toward the peer median multiple of 8.5x, implying a potential value of 31.72 dollars.The bear case reflects a liquidity event where asset sales are delayed or blocked by regulators (as seen in the failed Novant deal). Persistent medical inflation and 10.75% interest rates lead to a cash burn that exhausts the 600 million dollar ABL capacity, resulting in a fair value of 0.00 dollars.

Valuation Context

<ul><li>Closing of the Clarksville Hospital Sale This 600 million dollar transaction is the single most important liquidity event in the near term. It validates the company's ability to monetize assets at attractive multiples (implied 10x+ EBITDA) and provides the cash necessary to pay down the 2027 maturity wall.</li><li>Announcement of Additional Divestitures Reaching the 1 billion dollar divestiture target is essential for the deleveraging thesis. Each subsequent announcement reduces the 'insolvency premium' currently applied to the stock.</li></ul>Community Health Systems is at a critical juncture following the retirement of its long-time CEO and the simultaneous accumulation of shares by Apollo, making the next 12 months a definitive period for either a successful turnaround or a final restructuring.

Catalyst Path & Context

<ul><li>Existential Liquidity and Solvency Risk The company is in a 'race against time' to sell assets before its 11.2 billion dollar debt load becomes unserviceable. A failure to refinance upcoming maturities or a breach of ABL covenants would lead to a total loss for equity holders. The company has negative tangible equity of 5.7 billion dollars and interest coverage of only 1.5x.</li><li>Medical Specialist Fee Inflation Rising costs for anesthesia and other hospital-based specialties (up 10.9% in 2024) threaten to compress margins even if volumes stabilize. Management noted a 149 million dollar charge for professional claims liability in Q3 2024, citing 'social inflation.'</li></ul>

Primary Risks

<ul><li>Entry Target: Entry target set to current market price to capture immediate upside on a high-conviction thesis where the expected return exceeds 30% and the market is already pricing in a high probability of failure.</li><li>Stop Loss: Set the stop-loss at the 3-year low of 2.01 dollars. A break of this magnitude indicates that the asset-based protection is failing and the risk of a zero-equity outcome has become unacceptable.</li><li>Position Size: Base conviction is Medium due to the unproven management team and the binary nature of the turnaround. Even with high expected returns, the position size is capped at 'Half' to manage the existential bankruptcy risk inherent to the Turnaround Candidate archetype.</li><li>Time Horizon: A 12-24 month horizon is required to allow the 1 billion dollar divestiture program to close and for the resulting debt reduction to be reflected in the company's interest coverage and leverage metrics.</li></ul><ul><li>Net Debt to EBITDA leverage ratio (Target < 5.5x)</li><li>Progress toward the 1 billion dollar divestiture goal</li><li>Same-store admission volume growth</li></ul>A failure to close the 600 million dollar Clarksville sale or a dilutive equity raise for survival purposes would invalidate the asset-based turnaround thesis.

Actionable Parameters & Monitoring

Community Health Systems is a high-risk, high-reward bet on a distressed operator's ability to monetize its asset base and bridge a massive debt load. While the balance sheet is technically insolvent, the 1 billion dollar divestiture program provides a clear path to deleveraging that the market is currently discounting. We recommend a Buy with a valuation target of 28.46 dollars, representing a significant asymmetric opportunity if the company avoids a liquidity event.

Final Conclusion

Aggressive Deleveraging via Asset Monetization

Driver

Closing of the 600 million dollar Clarksville sale and 460 million dollar Cedar Park divestiture

Catalyst

Tangible asset floor of 11,403 licensed beds valued at 350,000 dollars per bed

Protection

Successful execution of the 1 billion dollar divestiture program reduces leverage below 5.5x by 2027. Outpatient expansion and ERP-driven cost savings of 60 million dollars drive margin expansion toward 10.5%.

Bull Case

Persistent medical specialist fee inflation (up 10.9% in 2024) and legal liabilities outpace asset sale proceeds. A liquidity crunch occurs before the 2027 maturity wall, leading to a zero-equity restructuring.

Bear Case

Community Health Systems is a distressed hospital operator executing a binary survival pivot through a 1 billion dollar divestiture program to service an 11.2 billion dollar debt load. While the market is pricing in near-term insolvency, our analysis suggests a bridge to safety exists via the monetization of a 76-hospital asset base and a de-risked maturity wall until 2027. The thesis is complicated by a leadership transition following the retirement of CEO Tim Hingtgen, but the 11.7% insider ownership and accumulation by distressed specialists like Apollo provide a significant floor for this high-asymmetry turnaround bet.

From Growth-at-all-costs to Profitability

Method	Implied Value	Weight	Weighted Value
DCF	$11.37	50%	$5.69
Comps	$25.34	10%	$2.53
NLV	$118.23	40%	$47.29
Total Weighted			$55.51

CYH

Company Overview

Price History