Community Health Systems, Inc. Announces Fourth Quarter 2008 Results with Net Operating Revenues of $2.8 Billion.

FRANKLIN, Tenn. -- Community Health Systems, Inc. (NYSE: CYH) today announced financial and operating results for the fourth quarter and year ended December 31, 2008.

Net operating revenues for the three months ended December 31, 2008, totaled $2.762 billion, a 10.9 percent increase compared with $2.490 billion for the same period in 2007. Income from continuing operations increased to $56.3 million, or $0.61 per share (diluted), on 91.8 million weighted average shares outstanding for the three months ended December 31, 2008, compared with a loss of $71.9 million, or $0.77 per share (diluted), on 93.7 million weighted average shares outstanding for the same period in 2007. Net income increased to $59.9 million, or $0.65 per share (diluted), for the three months ended December 31, 2008, compared with a loss of $88.3 million, or $0.94 per share (diluted), for the same period in 2007.

Adjusted EBITDA for the three months ended December 31, 2008, was $391.7 million, compared with $181.1 million for the same period in 2007, representing a 116.3 percent increase. Adjusted EBITDA is EBITDA adjusted to exclude discontinued operations, gain from early extinguishment of debt and minority interest in earnings. The Company uses adjusted EBITDA as a measure of liquidity. Net cash provided by operating activities for the three months ended December 31, 2008, was $372.2 million, compared with $283.1 million for the same period in 2007.

The consolidated financial results for the three months ended December 31, 2008, reflect a 1.9 percent increase in total admissions compared with the same period in 2007. This increase is primarily attributable to the addition of two hospitals acquired during the fourth quarter of 2008. On a same-store basis, admissions decreased 0.9 percent and adjusted admissions decreased 0.2 percent, compared with the same period in 2007. On a same-store basis, net operating revenues increased 7.4 percent, compared with the same period in 2007.

Net operating revenues for the year ended December 31, 2008, totaled $10.840 billion, a 53.5 percent increase compared with $7.064 billion for 2007. Income from continuing operations was $206.7 million, or $2.19 per share (diluted), on 94.3 million weighted-average shares outstanding for the year ended December 31, 2008, compared with $57.7 million, or $0.61 per share (diluted), on 94.6 million weighted-average shares outstanding for 2007. Net income was $218.3 million, or $2.32 per share (diluted), for the year ended December 31, 2008, compared with $30.3 million, or $0.32 per share (diluted), for 2007.

Adjusted EBITDA for the year ended December 31, 2008, was $1.525 billion, compared with $815.0 million for 2007, representing an 87.1 percent increase. Net cash provided by operating activities for the year ended December 31, 2008, was $1.057 billion, compared with $687.7 million for 2007.

The consolidated financial results for the year ended December 31, 2008, reflect a 44.5 percent increase in total admissions compared with 2007. This increase is primarily attributable to the expansion of the Company's hospital portfolio in 2007 and the addition of two hospitals acquired during the fourth quarter of 2008. On a same-store basis, admissions increased 2.0 percent and adjusted admissions increased 2.2 percent, compared with 2007. On a same-store basis, net operating revenues increased 6.6 percent, compared with 2007.

On February 12, 2009, the Company announced the execution of a settlement agreement of pending litigation and the conveyance by two indirect subsidiaries of the Company of their ownership interest in the partnership that owns Presbyterian Hospital of Denton located in Denton, Texas, to the minority partner of the partnership.

On February 2, 2009, the Company announced the acquisition of Siloam Springs Memorial Hospital, a 74-bed acute care hospital in Siloam Springs, Arkansas.

Commenting on the results, Wayne T. Smith, chairman, president and chief executive officer of Community Health Systems, Inc., stated, "The fourth quarter of 2008 capped off another outstanding year for Community Health Systems, Inc., highlighted by record annual revenues of over $10.8 billion and over $1 billion of net cash provided by operating activities. We were also pleased with our overall volume trends for the year, despite a moderate decline in admissions during the fourth quarter and the general economic downturn. While the expected macro economic trends indicate that hospital volumes will continue to come under pressure, we believe our continued success in enhancing essential healthcare services and recruiting and retaining qualified physicians in our markets will help support our growth through this uncertain environment. Our geographically diverse hospital portfolio also provides us with a competitive advantage with less exposure to more economically depressed markets.

"As we look ahead to 2009, we will continue to leverage our considerable assets. Most importantly, we have shown our ability to deliver favorable operating results through our efforts to implement best practices in all of our facilities across the country. We have a very conservative operating strategy and are mindful of the critical need to manage our costs and drive margin, particularly in this economic environment. We see considerable opportunities to realize additional operating synergies at our more recently acquired hospitals, including the facilities acquired in the Triad merger. While we acknowledge the challenges of an uncertain marketplace, we are confident in our ability to execute and look forward to the opportunities ahead for Community Health Systems, Inc.," concluded Smith.

Included on pages 13, 14 and 15 of this press release are tables setting forth the Company's updated 2009 guidance. This guidance reflects the reclassification of our Denton, Texas hospital to held for sale during the fourth quarter and disclosure of the Company's projection range for income from continuing operations per share by quarter. The Company has also updated its disclosure regarding a pending government investigation.

Located in the Nashville, Tennessee suburb of Franklin, Community Health Systems, Inc. is the largest publicly-traded hospital company in the United States and a leading operator of general acute care hospitals in non-urban and mid-size markets throughout the country. Through its subsidiaries, the Company currently owns, leases or operates 121 hospitals in 29 states with an aggregate of approximately 18,000 licensed beds. Its hospitals offer a broad range of inpatient and surgical services, outpatient treatment and skilled nursing care. In addition, through its QHR subsidiary, the Company provides management and consulting services to over 160 independent non-affiliated general acute care hospitals located throughout the United States. Shares in Community Health Systems, Inc. are traded on the New York Stock Exchange under the symbol "CYH."

Community Health Systems, Inc. will hold a conference call to discuss this press release on Friday, February 20, 2009, at 10:30 a.m. Central, 11:30 a.m. Eastern. Investors will have the opportunity to listen to a live internet broadcast of the conference call by clicking on the Investor Relations link of the Company's website at www.chs.net, or at www.earnings.com. To listen to the live call, please go to the website at least fifteen minutes early to register, download, and install any necessary audio software. For those who cannot listen to the live broadcast, a replay will be available shortly after the call and will continue through March 20, 2009. A copy of the Company's Form 8-K (including this press release) and conference call slide show will also be available on the Company's website at www.chs.net.

Statements contained in this news release regarding expected operating results, acquisition transactions or divestitures and other events are forward-looking statements that involve risk and uncertainties. Actual future events or results may differ materially from these statements. Readers are referred to the documents filed by Community Health Systems, Inc. with the Securities and Exchange Commission, including the Company's annual report on Form 10-K, current reports on Form 8-K and quarterly reports on Form 10-Q. These filings identify important risk factors and other uncertainties that could cause actual results to differ from those contained in the forward-looking statements. The Company undertakes no obligation to revise or update any forward-looking statements, or to make any other forward-looking statements, whether as a result of new information, future events or otherwise.

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The following assumptions were used in developing the guidance provided above:

* Other than the two hospitals currently held for sale, including our Denton, Texas hospital, no additional operating divestitures have been assumed in this guidance.

* The Company's guidance does not take into account any resolution of the previously disclosed allegation by the Civil Division of the U.S. Department of Justice that the Company and three of our New Mexico hospitals have caused the State of New Mexico to submit improper claims for federal funds in violation of the Federal False Claims Act. The Company continues to believe that it has not violated the Federal False Claims Act, but has recently been informed by the U.S. Department of Justice that it intends to pursue litigation in this matter.

* Expressed as a percentage of net operating revenues, the provision for bad debts is projected to be approximately 11.8% to 12.5% for 2009. These percentages may vary depending on changes in payor mix.

* Expressed as a percent of net operating revenues, depreciation and amortization is projected to be approximately 4.5% to 4.8% for 2009; however, this is a fixed cost and the percentages may vary as revenue varies.

* 2009 projection assumes an estimate of $0.02 to $0.03 per share (diluted) of acquisition costs will be expensed pursuant to revised business combination accounting rules that became effective January 1, 2009.

* For the purpose of providing interest expense guidance, the Company assumes that the borrowing rate under the Company's $7.215 billion Senior Secured Credit Facility for 2009 will remain relatively stable as compared to 2008; however, additional swap agreements could increase interest expense based on current market conditions. Based on these assumptions, expressed as a percentage of net operating revenue, interest expense is projected to be approximately 5.5% to 5.8% for 2009; however, these percentages will vary as revenue and interest rates vary.

* Expressed as a percentage of net operating revenues, minority interest in earnings is projected to be approximately 0.4% to 0.6% for 2009.

* On December 13, 2006, the Company announced a new open market repurchase program for up to five million shares of the Company's common stock not to exceed $200 million in purchases. This repurchase program will conclude at the earlier of three years or when the maximum number of shares has been repurchased or the maximum dollar amount has been reached. Through December 31, 2008, 4.8 million shares have been purchased under this repurchase plan. No additional share purchases have been assumed for 2009. During 2008, the Company repurchased on the open market and cancelled $110 million of principal amount of its Senior Notes and paid off and retired $99 million of principal amount of its Term Loans under the Company's Credit Facility. No additional Senior Note repurchases or Term Loan pay-offs and retirements have been assumed for 2009, other than amortization and required payments under the Company Credit Facility and the pay-off of term loans related to the net proceeds from the Denton, Texas hospital conveyance.

* Expressed as a percentage of income before income taxes, provision for income tax is projected to be approximately 38.3% to 39.5% for 2009.

* Capital expenditures are projected as follows (in millions):

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Total  >  >                      >   $  >  >  600

to

$
650

* Net cash provided by operating activities are projected as follows (in millions):

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Total  >  >                      >   $  >  >    900

to

$
1,000

* Included in the above guidance are estimated 2.5% to 3.0% increases in Medicare inpatient reimbursement effective October 1, 2008 and Medicare outpatient reimbursement effective January 1, 2009. The guidance does not reflect any State Medicaid legislation not enacted to date or any State discount program not implemented to date. The guidance also does not include the possible unfavorable impact of an estimated 0.1% of net operating revenue reduction associated with the implementation of an outpatient prospective payment system relating to the TRICARE/CHAMPUS program which is under review by the U.S. Government.

The projections set forth in this report constitute forward-looking statements within the meaning of Section 27A of the Securities Act, Section 21E of the Exchange Act and the Private Securities Litigation Reform Act of 1995. Although the Company believes that these forward-looking statements are based on reasonable assumptions, these assumptions are inherently subject to significant economic and competitive uncertainties and contingencies, which are difficult or impossible to predict accurately and are beyond the control of the Company. Accordingly, the Company cannot give any assurance that its expectations will in fact occur and cautions that actual results may differ materially from those in the forward-looking statements. A number of factors could affect the future results of the Company or the healthcare industry generally and could cause the Company's expected results to differ materially from those expressed in this filing.

These factors include, among other things:

* general economic and business conditions, both nationally and in the regions in which we operate;

* our ability to successfully integrate any acquisitions or to recognize expected synergies from such acquisitions, including the facilities acquired from Triad;

* risks associated with our substantial indebtedness, leverage and debt service obligations;

* demographic changes;

* changes in, or the failure to comply with, governmental regulations;

* legislative proposals for healthcare reform;

* potential adverse impact of known and unknown government investigations and False Claims Act litigation;

* our ability, where appropriate, to enter into and maintain managed care provider arrangements and the terms of these arrangements;

* changes in inpatient or outpatient Medicare and Medicaid payment levels;

* increases in the amount and risk of collectability of patient accounts receivable;

* increases in wages as a result of inflation or competition for highly technical positions and rising supply costs due to market pressure from pharmaceutical companies and new product releases;

* liability and other claims asserted against us, including self-insured malpractice claims;

* competition;

* our ability to attract and retain without significant employment costs, qualified personnel, key management, physicians, nurses and other health care workers;

* trends toward treatment of patients in less acute or specialty healthcare settings, including ambulatory surgery centers or specialty hospitals;

* changes in medical or other technology;

* changes in generally accepted accounting principles;

* the availability and terms of capital to fund additional acquisitions or replacement facilities;

* our ability to successfully acquire additional hospitals and complete the sale of hospitals held for sale;

* our ability to obtain adequate levels of general and professional liability insurance;

* timeliness of reimbursement payments received under government programs; and

* the other risk factors set forth in our public filings with the Securities and Exchange Commission.

The consolidated operating results for the quarter and year ended December 31, 2008, are not necessarily indicative of the results that may be experienced for any such future period or for any future year, including 2009.

The Company cautions that the projections for calendar year 2009 set forth in this press release are given as of the date hereof based on currently available information. The Company is not undertaking any obligation to update these projections as conditions change or other information becomes available.