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Community Health Systems Inc (CYH) Q2 2020 Earnings Call Transcript

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CYH earnings call for the period ending June 30, 2020.

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Community Health Systems Inc (CYH -4.87%)
Q2 2020 Earnings Call
Jul 29, 2020, 11:00 a.m. ET


  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:


Ladies and gentlemen, thank you for standing by and welcome to Community Health Systems' Second Quarter 2020 Earnings Conference Call. [Operator Instructions]

I would now turn the conference over to your speaker today, Mr. Ross Comeaux, Vice President of Investor Relations. Thank you. Please go ahead.

Ross Comeaux -- Vice President of Investor Relations

Thank you, Mike. Good morning and welcome to Community Health Systems' second quarter conference call. Before we begin the call, I'd like to read the following disclosure statement. This conference call may contain certain forward-looking statements including all statements that do not relate solely to historical or current facts. These forward-looking statements are subject to a number of known and unknown risk, which are described in headings such as Risk Factors in our Annual Report on Form 10-K and other reports filed with or furnished to the Securities and Exchange Commission.

As a consequence, actual results may differ significantly from those expressed in any forward-looking statements in today's discussion. We do not intend to update any of these forward-looking statements. Yesterday afternoon we issued a press release with our financial statements and definitions and calculations of adjusted EBITDA and adjusted EPS. For those of you listening to the live broadcast of this conference call, a supplemental slide presentation has been posted to our website. We will refer to those slides during this earnings call. All calculations, we will discuss, also exclude gain or loss from early extinguishment of debt, impairment expense as well as gains or losses on the sale of businesses, expenses from government and other legal settlements and related costs, expenses from settlement legal expenses related to cases covered by the CVR, expenses related to employee termination benefits and other restructuring charges, change in valuation allowances recorded for promissory notes, change in estimates for professional liability claims accrual, change in tax valuation allowance.

With that said, I would like to turn the call over to Wayne Smith, the Chairman and Chief Executive Officer. Mr. Smith?

Wayne T. Smith -- Chairman of the Board and Chief Executive Officer

Thank you, Ross. Good morning and welcome everyone to our second quarter conference call. I'm joined today by Tim Hingtgen, our President and Chief Operating Officer; Dr. Lynn Simon, President of Clinical Operations and Chief Medical Officer; and Kevin Hammons, Executive Vice President and Chief Financial Officer. It goes without saying that the COVID fight is still on, but I think we're finding a very good fight as indicated by our second quarter results.

We reported our first quarter results at the end of April, and I concluded my remarks by saying that CHS is a strong and resilient organization that has always managed to solve problems. We remain ready for whatever might come next and that we would be best. It would do our best for everyone who counts on us. Three months later, we find ourselves in a position of caring for many more COVID-19 basis, now that we were back at that point in April. We're also balancing the healthcare needs of non-COVID patients, having successfully reopened substantially all of our services that were suspended in the early stages of this pandemic and ensuring that all who need healthcare in our communities will continue to have access, quality and safe healthcare.

The credit, of course goes to every physician, every nurse, every clinician, caregiver, support worker who shows up every day to serve our patients. Our medical staff and employees have been extraordinary during these extraordinary times. And while you're not being seen -- while you may not be seeing as many healthcare hero signs displayed as we saw back in March and April, the heroic work continues and we are extremely grateful.

We operate in the number of states have been hit harder by COVID-19 in recent weeks, Florida, Texas, Arizona and others. In each market where COVID-19 cases have increased significantly, our single purpose is deliver needed healthcare services safely. We're doing everything possible to protect our patients, employees, their families and others in our community. Safety always comes first for us and every hospital has implemented protocols to prevent the spread of COVID-19 inside our facilities. We want people to know that they're in safe in our care and safe working in our hospitals.

At the beginning of the quarter, volumes were very low in our markets just like they were across the country. This was due in large part to the federal recommendations stay at home orders and state restrictions on elective procedures, and also the cost consumers are fearful and adhering to social distancing recommendations. As states lifted those restrictions, we engaged directly with the patients who had deferred healthcare, reassuring them and bringing them back for needed appointments and procedures and emphasizing that they should not delay important healthcare services.

We promoted the importance of prop care and emergency -- and emergencies, and continuation of care for chronic conditions and even routine screening and health services. I can't say enough about the work that was done coordinated and collaborated with medical staff leaders and with physicians in our markets. These relationships enabled a relatively seamless restart of our elected procedures, walk-in appointments, and other services. We saw COVID volumes rebound in our markets in May and June. In some cases, getting close to pre-COVID levels. Although like many others, we saw a slower volume return in our ERs. In July, COVID-19 cases have increased across the Sunbelt, which can impact healthcare demand and likely affects consumers' willingness to access services.

But in most of our markets, we are effectively managing COVID-19 while also leveraging our real-time data to monitor, effective -- elected procedures and other volumes to ensure safe and efficient levels of operation. Our solid recovery in the second quarter was made possible by the Company's commitment to operational readiness at all times. The daily focus by Tim and the team has enabled us to ramp up and down and backup as needed, and this flexibility will likely be important as we continue to face uncertainties due to COVID-19 pandemic.

Our operations and leadership teams locally and in the corporate office have artfully managed each market's unique needs while also leveraging our organization resources in a coordinated enterprisewide response. Our response and recovery work has benefited greatly from prior investments that we made to enhance our supply chain operations, extend our transfer centers, accelerating workforce management processes and optimize our physician practice operations. It's not just our Company size, although that's part of it, but also our mindset in our ability to adapt to new conditions, to make rapid decisions, to quickly coordinate resources and deploy expertise where it's needed. These strengths, along with the advantages of scale position us well to cope with the future evolution of the pandemic. They also ensure we can protect our business and improve our competitive position in the future as we move forward with strategic market opportunities and the necessary adjustments, healthcare providers call upon make now to deliver even better care and more innovatively in the future.

Let me turn to the funds we received from the CARES Act for just a moment. And Kevin will get into detail as much -- will get into this in much greater detail in few minutes. Funds from the Care Act have been very helpful to our organization and so many other healthcare providers. Support through the pandemic, relief funds and accelerated Medicare payments provided liquidity, ensuring the industry could maintain more jobs, survive business disruptions and volume declines, and they support the continuation of central services for our communities. But the potential negative impact of COVID-19 will not likely in until we were able to control the pandemic, and healthcare providers will continue to need the support of our country, while, we care for Americans who count on community hospitals to always be available when they need us.

Looking forward, while COVID-19 is a primary focus, we're also continuing to plan for the future. Our divestitures as we wrap up the portfolio rationalization program this year, we strengthen the portfolio, improve liquidity. Our stronger portfolio is benefiting from investments and strategic growth drivers, including capital investments in revenue and net revenue initiatives that will deliver market share gains in both inpatient and outpatient lines of business.

Our strategic margins improvement program also remains on track with solid reduction across numerous expense categories producing greater efficiency across the organization. And our confidence continues to run high and while nothing is assured in a public crisis, we will manage through this pandemic to the best of our abilities controlling what we can control and adapting whenever we need to. Let me say once more how grateful I am to everyone across the Community Health Systems organization. I'm proud of our achievements in this difficult circumstances. I hope that everyone will continue to do their part to help control the spread of the virus and protect one another. We want our caregivers to be safe. We want our patients to recover and we must do all we must all do our part.

And now, I would like to turn the call over to Dr. Lynn Simon, who continues to lead many of our critical aspects in our response to pandemic. Dr. Simon?

Lynn T. Simon -- President of Clinical Operations and Chief Medical Officer

Thank you, Wayne. Managing the clinical and operational aspects of a large scale pandemic requires a solid infrastructure for crisis and issues management, high levels of coordination and communication across the team, and as Wayne noted earlier, the ability to make rapid, yet informed and prudent decisions. Our COVID response team continues to collaborate on a daily basis to share key updates in every functional area affected by this pandemic from testing capability, to infection control, to supply management, from nursing and patient care to employees' health, from facility planning to marketing and communications and so many other areas necessary for an effective response.

Our goal is proactive and timely information and support for a regional and local hospital leadership teams, especially in light of evolving clinical guidelines regulatory updates and sometimes an influx of COVID-19 volumes. We use an internally developed COVID-19 tracking dashboard for real-time visibility of COVID-19 cases across all of our hospitals. This enables us to see trends, plan and adjust accordingly and accurately report information to various agencies. Towards the middle of June and into July, we have seen an increase in COVID-19 patients primarily across the southern states.

Currently we are experiencing the highest number of COVID-19 admissions in Texas and Florida, while we continue to manage varying degrees of surge in Mississippi and Alabama. We believe we have hit our peak volumes in our Arizona markets at this time with newly diagnosed and inpatient case load showing sustained reductions. We have tested over 100,000 patients for a potential COVID-19 diagnosis. We have provided care for approximately 15,000 confirmed COVID-19 patients in our hospitals, EDs and outpatient care settings. This compares to approximately 2,000 cared for at the end of April; 3,000, at the end of May; and 7,000, at the end of June, which brings into clear perspective, the magnitude of this current surge in July.

Touching on some of the achievements we've seen since the early stages of the pandemic, as testing resources have increased, we are able to more quickly diagnose and confirm COVID-19 cases, which enables us to appropriately place positive patients in special COVID-care units, deploying adjust staffing teams and allocate PPE and other supplies where needed. On the supply chain side, we have implemented a new centralized distribution system for PPE and equipment which adds an additional depth to our sourcing and logistics capabilities.

We have organized our facilities and operations to provide safe care for both COVID-positive and non-COVID patients. We can see the benefits of our early stage planning and how those efforts are allowing the Company to effectively manage increases in COVID-19 admissions. We are focused on our employees and providing resources to increase resiliency and when necessary to provide relief. Our clinical teams have adapted well to simultaneously carrying for those affected by COVID-19 as well as those who have other non-COVID healthcare needs.

Throughout this pandemic, our primary objective is to ensure the safety of our patients, physicians and staff, while continuing to provide access to care for the communities we serve. As we continue to monitor new COVID-19 cases on a market by market basis, we remain confident in our ability to manage the current situation and we are prepared to make adjustments for future scenarios when they are needed. I'd like to join Wayne in thanking everyone who has worked tirelessly to ensure that our hospitals and their staff can very effectively care for all of their patients. And I'd like to also acknowledge the frontline caregivers who earn our respect and admiration every single day. Tim?

Tim Hingtgen -- President and Chief Operating Officer

Thank you, Lynn. I join you in expressing my appreciation to the caregivers across our organization and the nation for the sacrifices that they and their families have made, and for the high quality care being provided for all patients. I also want to express my gratitude to our hospital and physician practice leaders who are ensuring operational excellence and execution of our COVID-19 response and recovery strategies. I've been incredibly impressed by the organized approach, resourcefulness and continuous commitment to serve their communities during this public health crisis. And of course, I'm thankful for our CHS clinical and operational experts who are providing tremendous levels of support to our markets, while keeping all of our other important operational and strategic initiatives on track.

As Wayne mentioned, when we were able to restart medical and surgical procedures across our markets in May, we were well prepared to ramp up operations. We had plans in place for patient testing be further elective procedures and it already redesign spaces inside of our facilities to ensure social distancing and safe workflows. We work closely with our medical staff to ensure appropriate capacity for deferred cases and we develop processes that allow physicians and patients to return to the hospital setting safely and efficiently. And our team has worked to increase communications with patients and their families, proactively inviting to them to come in for needed care and reassuring them about what to expect.

Early planning and intentional volume rebuilding efforts led to consistent improvements in our admissions, adjusted admissions, surgeries and the ER visits during May and throughout June. Specifically in terms of our key metrics and second quarter performance, our net revenue was negatively impacted in the second quarter as a result of the pandemic. Admissions troughed with a 31% decline in April, prior to the recovery in May and June, during which higher acuity inpatient admissions and surgeries return to our hospitals. We finished June with a 5% decline versus the prior-year month.

On the surgery side, we were down almost 70% in April, but we were able to drive strong sequential growth the next two months ending June at a positive 2%. Service lines including cardiology, orthopedics and neuro services contributed to this recovery. Similar to the reports across the industry, ER visits have recovered at a slower pace than other volume metrics. Our hospital ER visits were down 45% in April that improved to a negative 20% by the end of June. We continue to see our ED volumes improve into July, now down approximately 15% versus the same period last year. Our ED visit declines are primarily due to lower acuity presentations. EMS traffic representing what is typically higher acuity patient volume return to more historical levels leading into the third quarter.

Now I'd like to highlight recovery in our physician practices. Many practices were affected by volume declines in the early part of the quarter, mostly because of stay-at-home orders and consumer reluctance toward visiting any kind of healthcare setting. We had previously invested in telehealth capabilities, so we were able to quickly ramp up these services and ensure that our patients could connect with their physicians and other providers virtually. We managed over 230,000 telehealth visits in the second quarter with high levels of patient and provider satisfaction.

One states began to lift stay-at-home orders, reconnected with our patients, leading to an increase of in-person practice visits as well. Physician practice volume is now higher than pre-pandemic levels beating prior-year visits in our clinics by 6% in June. Our physician practices and other access points are the top of the funnel for procedural and hospital volumes, so, a leading indicator of future utilization. Based on the visits we are now seeing in our practices, we believe we should see increased demand for medically necessary care across most specialties and hospital services in future months.

In late June and into July, the rate of new COVID-19 positive cases has increased, particularly across the Sunbelt states from which the Company generates approximately three-fourths of our net revenue. The increase in these states has slowed down the Company's overall volume recovery. We are currently averaging a daily census across the enterprise of more than 1,000 COVID positive patients. As a result, on a year-over-year basis, during the month of July, our same-store admissions are down approximately 5%, which is in line with June results. Surgeries are down close to 10% and ER visits have improved slightly from where we were in June. But, as Dr. Simon previously noted, we believe we have peaked or plateaued in terms of COVID cases in some hot spot market. And as we demonstrated on the back end of the second quarter, we are prepared to recapture more normal volumes as healthcare demand returns.

Much of the work we were doing prior to the onset of COVID-19 including initiatives we have accelerated during the pandemic, we'll make it stronger for the future. For example, our transfer center has provided increased visibility and to market needs and is aided in recovery efforts as markets reopened. We were well on the way to expanding transfer center operations to other markets before the pandemic hit. And we are still on track to complete this expansion before the end of the year. Key capital investment projects were completed, including new freestanding emergency departments to support our operations in Laredo, Texas and to expand Texas and to expand Northwest Health, our healthcare network in Northwest Arkansas. And we opened new ASCs in North Carolina and in Birmingham, Alabama. We have other active projects under way including a de novo micro hospital to extend the geographic reach and strength of our Tucson, Arizona market. That hospital is scheduled to open in the fourth quarter.

We have an active pipeline of new access points in service line expansions across the portfolio and we are still actively recruiting new physicians to our markets. Our strategic margin improvement program has delivered expense savings across our corporate office infrastructure, shared service centers, supply procurement, vendor fees and other non-patient care areas. These savings while significant were more than offset by our net revenue loss due to COVID-19 in the second quarter. But we do expect these savings to provide long-term benefit through ongoing expense reductions and greater efficiencies as our business returns to more of normal levels.

Before I turn the call over to Kevin, I think it is important to acknowledge that none of us are aware of what the future holds, especially as the COVID-19 pandemic continues to affect our country. What I remain confident in however is that our Company has the breadth of resources, a highly committed team and we'll remain agile and overcome challenges along the way. Because of this, I believe we will effectively manage through the second half of 2020 and can emerge from this with even sharper execution as we focus on delivering long-term growth.

And now I will turn the call over to Kevin.

Kevin Hammons -- Executive Vice President and Chief Financial Officer

Thanks, Tim and good morning, everyone. Similar to last quarter, I will not cover all of the typical financial metrics today, instead, I would point you to the 8-K and our slide deck for additional details. As a reminder, we previously withdrew our 2020 financial guidance and we are not providing guidance due to the ongoing impact of COVID-19 pandemic, the recent surge in new cases, the ongoing uncertainties around the timing of a recovery and other factors that we have discussed.

During the second quarter, on a consolidated basis, net operating revenues came in at $2,519 million, down 23.7% from the prior year, while adjusted EBITDA was $454 million, up 12.9%. On a same-store basis, net revenues decreased 18.4%. This was comprised of a 24.2% decrease in adjusted admissions and a 7.6% increase in net revenues per adjusted admission. As Wayne mentioned, COVID-19 has had a negative impact on our financial performance during the first half of 2020. Year-to-date through June 30, we estimate that COVID-19 has negatively impacted our net revenue by over $1 billion.

During the quarter, our hospital leadership teams did an outstanding job managing variable costs and expenses. And as Tim mentioned, our strategic margin improvement program helped to deliver further on expense reductions. On a same-store basis, our salaries, wages and benefits expense decreased 9%. Supplies expense was reduced by 18% and other operating expenses decreased 1%. Switching to cash flows, cash flow provided by operations were $1.65 billion for the second quarter of 2020. This compares to cash flows from operations of $132 million during the second quarter of 2019.

For the first six months of 2020, our cash flows provided by operations were $1.71 billion. This compares to cash flows from operations of $265 million during the first six months of 2019. In terms of the year-over-year comparison, there are few items worth noting versus prior-year which impacted both the quarter and the six-month periods. In April, the Company received approximately $1.2 billion of Medicare accelerated payments. The Company also received $564 million in provider relief grants under the CARES Act that will not be subject to repayments as long as the Company meets its eligibility criteria. Lower EBITDA due to the pandemic was largely offset by increased cash from accounts receivable collections. And in the first quarter, we paid the $53 million, Norfolk litigation settlement.

Turning to capex. Our capex for the first six months of 2020 was $192 million or 3.5% of net revenue, compared to $212 million or 3.2% net revenue in the prior year. We have continued to invest in -- invest capital into high-growth opportunities across our markets to remain positioned for incremental growth in the future. However, as we manage through these unusual circumstances, we do have the ability to scale down. As it relates to liquidity, at the end of the second quarter, the Company had $1.55 billion of cash on the balance sheet. As of June 30, the Company had no outstanding borrowings and approximately $434 million of capacity -- borrowing capacity under the ABL with the ability to increase it up to $1 billion.

Switching to the CARES Act as we previously discussed, we received approximately $1.2 billion in Medicare accelerated payments to support near-term liquidity. The recruitment of Medicare accelerated payments is scheduled to begin in August. In the second quarter, we received approximately $564 million of grants through the public health and social services emergency fund in both general and targeted distributions of which we recognized approximately $448 million in the quarter and income as a reduction in operating costs and expenses.

Following the second quarter in July, the Company received an additional $109 million grant through the public health and social surfaces emergency fund through additional targeted distributions. Through July, the government has now allocated $125 billion of the $175 billion in the CARES Act. We do not have visibility into how the remaining allocations will be determined. In terms of our divestiture program, on our last earnings call, we indicated the divestitures announced through late April would complete the Company's formal divestiture plan under closing -- upon closing.

Subsequent to our call, in June, we closed two hospital transactions generating approximately $150 million of proceeds. We also announced a definitive agreement to sell Bayfront Health St. Petersburg in St. Petersburg, Florida. Combined, we expect these announced divestitures that have not yet closed to generate approximately $430 million of incremental proceeds and close at various times during the third and fourth quarters. We look forward to driving growth from the strengthened portfolio as we move forward.

At the end of the second quarter, we had approximately $13.1 billion of long-term debt, down approximately $270 million from year end, and the Company has no near-term maturities with its next maturity of $231 million not due until February of 2022. In summary, we are confident that following our recent capital structure work along with our current cash on hand, proceeds from the divestitures and signed definitive agreements, availability under our ABL as well as the possibility of additional federal government stimulus and relief efforts, we have ample liquidity to manage through this current crisis, return to normal operations and be well positioned for growth moving forward.

Wayne, I'll turn the call back over to you.

Wayne T. Smith -- Chairman of the Board and Chief Executive Officer

Thank you, Kevin. At this point, operator, we're ready to open up to questions. We will limit everyone to one question, so several of you have time on the call -- to this call. And as always we're available to talk to you, and you can reach us at area code of 615-465-7000.

Questions and Answers:


[Operator Instructions] Your first question comes from Josh Raskin from Nephron Research.

Josh Raskin -- Nephron Research -- Analyst

Hi, thanks. Good morning. Question about the telehealth comments, and I'm curious in terms of just the workflow and the impact on the referral process and procedures downstream. I'm curious, how you make sure you're included in that process and what sort of investments you're making? And is there an opportunity actually for committee to take share? Can you sort of invest a little bit more than maybe some of the not-for-profits in your markets and things like that?

Lynn T. Simon -- President of Clinical Operations and Chief Medical Officer

Hey, this is Lynn. I can answer from the practice side.

Wayne T. Smith -- Chairman of the Board and Chief Executive Officer

Josh, I think your question is in terms of market share. How is it affecting? Has telehealth affect that in -- I think it's a very positive. I think we have a very positive position in terms, but I'll let Lynn give it specifically, but I think we've done really well.

Lynn T. Simon -- President of Clinical Operations and Chief Medical Officer

I can start and then Tim may have additional comments. From the practice side, as Tim said, the telehealth, we are positioned, I think to get it started and it really accelerated. And we continue to see obviously higher use of telemedicine than before the pandemic. What we're doing strategically is really looking to the hardwire that in our clinic operations along with integrating our telehealth platform with into our electronic medical record. That's it, help us with that referral process that you mentioned and making sure that we link up our primary care physicians with our specialists and then eventually downstream to provide their procedures. So, Tim, if you have more comments.

Tim Hingtgen -- President and Chief Operating Officer

Yeah, thanks for the question, Josh. Again, we're very pleased with the fact that we've had such strong growth in June for those practices, partly due to the launch of telehealth, as we said, but also the return of our walk-in visits, it's been very reassuring for us that we have the right doctors in the right place. I mean, the patients are indeed requiring and desiring to have their healthcare services met by our practices again. From a telehealth perspective, the integration that Lynn mentioned is pivotal. But in terms of the competitive edge that it provides to us, and it depends on the market, in some of our markets that we have competitors that have also launched or embellished their telehealth platforms as well through the impact of the pandemic. But in many of our markets, it is a new advent for us in terms of opportunities for patients to participate in their care with their provider.

So at this point, it's kind of too early to tell. We did see some tapering off of the telehealth visits. Some patients did prefer to come back to in-person visits, in terms of the integration with our referral systems. We do like the fact we monitored internally, we do like the fact that we do see those connections being made from our primary cares to our specialists, hence our belief that it does give us some good insights into what we can expect in procedural volumes in the months to come.

Wayne T. Smith -- Chairman of the Board and Chief Executive Officer

Net-net, it's helpful in terms of volume.

Tim Hingtgen -- President and Chief Operating Officer



Your next question comes from Frank Morgan from RBC Capital Markets.

Frank Morgan -- RBC Capital Markets -- Analyst

Good morning. Appreciate the comments about recent volume surgical trends in the month of July, down about 10%. And I'm just curious, how much variation is there in that number, if you could maybe give us a range between some of those hot spot markets that you talked about in Texas and Florida. How much more, are they impacted and then say markets that you wouldn't consider the hot spot markets?

Tim Hingtgen -- President and Chief Operating Officer

Yeah, Frank, this is Tim. It's a clear correlation that our biggest impacts are in those markets that are experiencing surge conditions. We have very few of state mandates as you know that are limiting our ability to provide elective or scheduled care to our patients. But in those hot spot markets, in Texas and Mississippi for instance, we do have certain capacity threshold that we have to maintain which does require us to throttle back. But even without those requirements, I think it's important to emphasize across our portfolio, we are doing, I think, a really good job of doing what's right for each of our communities. Dialing back some of the elective or scheduled procedures deferring them, so that we ensure we have ample capacity for an influx of COVID-19 care. And so for this particular juncture of time through July, definitely seeing a decrease in surgeries in our most impacted market, keeping close tabs on those patients, so that when we do see some of those COVID volumes as relief in those markets. We can reconnect with those physicians and patients and bring those services back into our hospitals.


Your next question comes from Ralph Giacobbe from Citi.

Ralph Giacobbe -- Citigroup -- Analyst

Thanks. Good morning. The pricing mix, up 7.6%, obviously, a strong result. Can you just give us a little bit more on sort of the acuity what CMI was up, and then payer mix, not only hung in, but look like it actually improved within commercial, which I guess was a little surprising, maybe any thoughts there and whether you expect that, potentially sort of fall off in the -- in the second half. Thanks.

Kevin Hammons -- Executive Vice President and Chief Financial Officer

Sure, Ralph, this is Kevin. I can give you a little color on that. So from a demographic standpoint, I think the -- the group of patients have probably stayed away from our hospitals, the most during the quarter were Medicare patients, those being at the highest risk and probably stayed away from the healthcare environment. So that certainly contributed to a payer mix improvement. I would say our pricing was split pretty evenly between acuity in payer mix is the best way to look at that.


Your next question comes from Brian Tanquilut from Jefferies.

Jack Slevin -- Jefferies -- Analyst

Hi, good morning, this is Jack Slevin on for Brian. Thanks for taking my questions. I just wanted to touch on margins and how you're thinking about margin profile moving forward? And then kind of how sustainable the current cost structure is and at what point you might need to ramp up staffing and comp?

Wayne T. Smith -- Chairman of the Board and Chief Executive Officer

We're actually feeling pretty good about margins. And we think there is a lot of visibility into the future in terms of our 2.0 program, in terms of expense management, all those things are positive for us. Kevin, you want to...

Kevin Hammons -- Executive Vice President and Chief Financial Officer

Sure. So we had started back in the third quarter, some margin improvement initiatives. We continue to work on those throughout this pandemic period. They continue to get traction and we think there is continued opportunity. So in addition to flexing some of our variable costs as a result of declining volumes during the pandemic, we also continue to progress on other margin improvement initiatives. So as we come out of the quarter, certainly with the decline in volume and revenue, we did not generate the EBITDA for the quarter. But as we return to normal, we believe that we'll continue to improve our margin profile from the pre-COVID levels.


Your next question comes from Andrew Mok from Barclays.

Andrew Mok -- Barclays -- Analyst

Hi, good morning, thanks for the question. The capex in the quarter came in around $93 million, which held up relatively well to the prior quarter and initial guidance. Can you give us a sense for what you have budgeted in the back half of the year and where you might be pulling back on investment spend? Thanks.

Kevin Hammons -- Executive Vice President and Chief Financial Officer

Sure. So we've, as you know, we pulled guidance for the rest of the year. So we don't -- not giving kind of a target on our capital spend, but as I've indicated, we are continuing to invest in what we believe to be our growth opportunities. So that, as we recover and things return to normal, we're going to be well positioned to continue to grow, take market share and improve our margins, where we have some opportunity and where some of the spend did just pulled back a little bit with some of our IT spending, where we did not have people, our IT employees going into the hospitals to do deployment of IT networks and so forth. Certainly wanted to protect both our employees and patients from that standpoint. And also some medical equipment where the providers of the medical equipment and us included did not want those people in our hospital facilities. So that spending as things return to normal, that will come back a little bit, but we did continue to invest in some construction projects, Tim, mentioned, we opened a freestanding ED in AFC, and we have a new facility in Tucson that will be opening later this year that are all growth projects.


And our last question comes from Kevin Fischbeck from Bank of America.

Kevin Fischbeck -- Bank of America -- Analyst

Hi, there. Yes. So I with you and the peers, it seems like the industry has gotten pretty solid, done pretty well dealing with COVID and maintaining some pretty semi-normal operations. So I'm trying to understand where, if you're managing this well during Q2, what scenarios might exist where there would be some downside in the back half of the year. Thanks.

Wayne T. Smith -- Chairman of the Board and Chief Executive Officer

I'm not sure that it gets any more complicated than this right now, Kevin. I think this is bad, most difficult, I've seen in the last number of years. And I think the great thing in terms of this organization is the ability to adapt. We have seen a remarkable change in terms of the way we provide cared. We have people that have been doing this now for last two months. And I think they've gotten increasingly better. You can see it in the results of our patients are doing well.

I think the downside is here. The upside is the last, latter part of the year, but again I can't being -- I'm extremely impressed with the ability, this organization that people within in terms of providing care for all this. And you know the government restrictions have created some of those issues, and they might create more kind of going forward. But on the other hand, the government has been very helpful in terms of the CARES Act. So anyway, we are very hopeful that we're on the right track and the countries on the right track and the latter part of the year will be very solid.


I will now turn the call back over to Mr. Smith for closing comments.

Wayne T. Smith -- Chairman of the Board and Chief Executive Officer

Thanks, again as for being with us this morning. I want to once again express how deeply grateful we are to all of our employees, physicians, medical staff, regional presidents, hospital leadership teams, hospital support teams and corporate office support teams. We continue to move ahead with our strategies. One, to provide outstanding care for our patients; two, to maintain the trust and partnership of our physicians and employees; three, to demonstrate our value, it is we serve; and fourth, to reward the Company's shareholders and debt holders for their confidence in investment in our organization. This concludes our call today. We look forward to updating you on our progress later in the year. Once again, if you have any questions, always reach us area code 615-465-7000. Thanks again for joining the call.


[Operator Closing Remarks]

Duration: 41 minutes

Call participants:

Ross Comeaux -- Vice President of Investor Relations

Wayne T. Smith -- Chairman of the Board and Chief Executive Officer

Lynn T. Simon -- President of Clinical Operations and Chief Medical Officer

Tim Hingtgen -- President and Chief Operating Officer

Kevin Hammons -- Executive Vice President and Chief Financial Officer

Josh Raskin -- Nephron Research -- Analyst

Frank Morgan -- RBC Capital Markets -- Analyst

Ralph Giacobbe -- Citigroup -- Analyst

Jack Slevin -- Jefferies -- Analyst

Andrew Mok -- Barclays -- Analyst

Kevin Fischbeck -- Bank of America -- Analyst

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This article is a transcript of this conference call produced for The Motley Fool. While we strive for our Foolish Best, there may be errors, omissions, or inaccuracies in this transcript. As with all our articles, The Motley Fool does not assume any responsibility for your use of this content, and we strongly encourage you to do your own research, including listening to the call yourself and reading the company's SEC filings. Please see our Terms and Conditions for additional details, including our Obligatory Capitalized Disclaimers of Liability.

Motley Fool Transcribers has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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Stocks Mentioned

Community Health Systems, Inc. Stock Quote
Community Health Systems, Inc.
$2.15 (-4.87%) $0.11

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