After the hospital systems operator provided a preliminary look at its financials from last year and offered up guidance for this year at the annual J.P. Morgan healthcare conference, shares of Community Health Systems (NYSE:CYH) were rallying 13% at 11:30 a.m. EST on Wednesday.
The heavily indebted hospital and outpatient facilities company is in the midst of a restructuring that includes divesting noncore hospitals and refinancing its debt. Today, management updated investors on its financial performance in 2019, providing them with preliminary, unaudited results. It also offered guidance for 2020.
In October, management had also forecast 2019 full-year adjusted admissions growth of 1.5% to 2.5%, net operating revenue of $12.9 billion to $13.2 billion, and a net loss per share of $1.75 to $1.85. In a filing with the Securities and Exchange Commission today, management didn't say if it would hit those targets. However, the EBITDA guidance suggests final, audited data may contain few surprises.
In terms of guidance, management expects net operating revenue to slip to between $12.4 billion to $12.8 billion in 2020 because of divestitures. It also forecasts same-facility adjusted admissions growth of 1.5% to 2.5% and adjusted EBITDA between $1.65 billion and $1.80 billion. The adjusted EBITDA growth in 2020 is particularly encouraging because it suggests the company's strategy to jettison low-performing facilities has put it on a path toward profitability.
The healthcare company's divestiture plan includes selling facilities representing over $2 billion in revenue for gross proceeds of approximately $1.3 billion. The money from its sales is important because Community Health had $13.3 billion in long-term debt and just $157 million in cash on its balance sheet exiting the third quarter.
Overall, investors appear encouraged by the adjusted EBITDA guidance this year and what it may mean for cash flows and potential debt payments and refinancing. The forecast suggests the company's focus on freestanding facilities, including walk-in clinics, and primary care to drive admissions growth is paying off, but there's still a lot of work to do. Given the capital-intensive nature of its business, stiff competition, and a focus on cost-cutting by payers, it may be too early for shareholders to declare victory.