Community Health Systems’ Q3 results signal cautious momentum for finance leaders navigating reimbursement headwinds.
For CFOs searching for indicators of resilience among health systems during industry uncertainty, Community Health Systems (CHS)’s Q3 2025 results offer a strong signal in a foggy policy environment.
The Tennessee-based health system reported a net operating revenue of approximately $3.09 billion, topping the consensus estimate of around $2.99 billion. While the year-over-year headline revenue shifted only a tiny amount (-0.1 %), on a same-store basis, CHS notably achieved a 6 % increase in net operating revenue and a 5.6 % rise in net revenue per adjusted admission.
Net income also swung back to the green: CHS posted a net income attributable to stockholders of roughly $130 million (or $0.96 per diluted share), contrasting with a $391 million net loss a year ago (-$2.95 per share). Adjusted EBITDA grew to about $376 million compared to $347 million in Q3 2024.
The CFO Take away
1. Payer mix and directed payments are helping. CHS cited a stronger commercial mix and state-directed Medicaid payments as meaningful contributors. About one-third of the increase in revenue per adjusted admission was tied to new Medicaid directed payment programs. That suggests the system is successfully shifting toward non-traditional reimbursement methods, which is an encouraging sign in a time of margin compression. Saint Peter’s University hospital also saw much improved revenue after focusing on Medicaid enrollment.
2. Volumes remain shaky but the economics are getting better. While total admissions dropped 6.6 % and adjusted admissions fell 7.7 % year-over-year, same-store admissions actually rose 1.3 % and adjusted admissions by 0.3 %, indicating a stabilization in CHS’ mature markets. Surgeries and ED volume remain low, yet the increasing acuity and per-admission revenue uptick is better, at least in this quarter.
3. Transitioning toward free-cash-flow positivity. CHS emphasized that they are crossing the threshold from negative toward positive free cash flow, helped by recent refinancing, strategic divestitures and the $28 million litigation settlement in Q3. From a CFO lens, that is key: ; improving cash flow provides operational flexibility when reimbursement headwinds loom.
Reimbursement Headwinds Remain Gusty
Even as CHS posts favorable earnings, wider reimbursement trends remain challenging. For example, the Centers for Medicare & Medicaid Services (CMS) finalized roughly a 2.6 % increase in inpatient payment rates for FY 2026 under the Inpatient Prospective Payment System (IPPS), based on a 3.3 % market-basket update less a 0.7 % productivity adjustment. Meanwhile, a recent report from the Medicare Payment Advisory Commission (MPAC) projected that under current law the Medicare margin for acute-care hospitals may remain at roughly –13 % in 2026.
For CFOs, be aware:
- Even small upward rate adjustments will still likely battle with inflationary pressures (labor, supply chain, utilities), so margin expansion isn’t for certain.
- Directed payment programs and favorable payer mix moves (as seen in CHS) can dull the impact but may not be scalable in all markets.
- Continue to pay attention to free cash flow generation, divestiture strategy, and operational efficiency. These all remain critical, even for systems posting positive results from quarter-to-quarter.
Marie DeFreitas is the CFO editor for HealthLeaders.
KEY TAKEAWAYS
CHS leveraged commercial volume gains and state-directed Medicaid payments, accounting for roughly one-third of its per-admission revenue growth.
While overall admissions dipped, same-store volumes stabilized and per-admission revenue rose 5.6%.
CHS’ move toward positive free cash flow shows how balance-sheet actions can sustain flexibility amid modest CMS rate updates and persistent inflation.