Community Health (CYH) Risk Analysis

The operations of our healthcare facilities depend on the efforts, abilities and experience of our facility management, healthcare professionals, such as nurses, pharmacists, lab technicians, and medical support personnel. We compete with other healthcare providers in recruiting and retaining qualified facility management and personnel responsible for the daily operations of our healthcare facilities, including nurses, other non-physician healthcare professionals and medical support personnel. The healthcare industry has been experiencing challenging labor market conditions. Our hospitals and other healthcare facilities, like many other healthcare providers, have experienced, and may continue to experience, increased labor costs due to labor shortages, public health conditions, inflationary conditions, workforce burnout and other factors. New limitations on federal loan eligibility and other student loan changes imposed pursuant to the 2025 Reconciliation Law may also impact healthcare personnel shortages. We may also be required to continue to enhance wages and benefits to recruit and retain nurses, other healthcare professionals and medical support personnel, and/or to hire more expensive temporary or contract personnel. In addition, in some markets in which we operate, a shortage of available nurses, other healthcare professionals and medical support personnel has been an operating issue. To the extent we are unable to maintain sufficient staffing levels at our hospitals, we may be required to limit the acute healthcare services provided at certain of our hospitals, which would have a corresponding adverse effect on our net operating revenues. We also depend on the available labor pool of semi-skilled and unskilled employees in each of the markets in which we operate and the available labor pool may not be sufficient for our demands. In some of our markets, employers across various industries have increased their wages for these roles, which has created more competition for this sector of employees. The impact of labor shortages across the healthcare industry may result in other healthcare facilities, such as nursing homes, limiting admissions, which may constrain our ability to discharge patients to such facilities and further exacerbate the demand on our resources. In addition, federal and state laws and regulations may increase our costs of maintaining qualified nurses and other medical support personnel. The federal government or the states in which we operate could adopt mandatory nurse-staffing ratios or related measures aimed at regulating staffing or could revise state-level mandatory nurse-staffing ratios or related measures already in place. Any of these measures could significantly affect labor costs and could have an adverse impact on our net operating revenues if we are required to limit admissions, hire additional personnel or incur other costs in order to comply with such requirements.

During the year ended December 31, 2025, 33.4% of our net operating revenues came from the Medicare and Medicaid programs. However, as healthcare expenditures continue to increase, federal and state governments have made, and continue to make, significant changes in the Medicare and Medicaid programs. These changes may include reductions in reimbursement levels and supplemental payments, funding restrictions, limitations on scope of coverage or patient eligibility, changes affecting utilization review and new or modified Medicaid waiver programs. These and other changes may impact the scale and scope of the Medicare and Medicaid programs, may affect the cost of providing services to patients, and may decrease the amount of money we receive for our services relating to the Medicare and Medicaid programs. For example, as a result of sequestration measures that extend through the first five months of federal fiscal year 2033, Medicare payments are automatically reduced by 2% per fiscal year. It is difficult to predict whether, when or what other deficit reduction initiatives may be proposed by Congress, but we anticipate that efforts to address the federal budget deficit will continue to place pressures on government healthcare programs. In addition, from time to time, CMS revises the reimbursement systems used to reimburse healthcare providers, including changes to the inpatient hospital MS-DRG system and other payment systems, which may result in reduced Medicare payments. Our business may also be adversely affected by delays or issues implementing reimbursement-related rules and interruptions in the distribution of governmental funds. Changes to government healthcare programs that reduce Medicare reimbursement may also negatively impact payments from commercial payors, since, in some cases, commercial payors rely on all or portions of Medicare payment systems to determine commercial payment rates. Further, legislation and administrative actions at the federal level may also impact the funding for, or structure of, the Medicaid program, and may shape administration of the Medicaid program at the state level, including in ways that reduce reimbursement. For example, the 2025 Reconciliation Law includes significant healthcare policy reforms that are expected to result in Medicaid spending reductions and changes in administration of state programs. The law makes significant changes to Medicaid financing mechanisms, including restrictions intended to reduce the federal matching funds received by state Medicaid programs, such as limitations on provider tax arrangements and a mandate that HHS revise regulations governing SDP arrangements to cap total payment rates paid by Medicaid managed care organizations for specified services. We are unable to fully assess the ultimate effects of the 2025 Reconciliation Law, as it is a complex law that mandates various changes over time and many details of implementation are not yet clear. In addition to changes at the federal level, some states have enacted or may consider enacting legislation designed to reduce their Medicaid expenditures, including through coverage reductions, changes in patient eligibility requirements and/or enrolling Medicaid beneficiaries in managed care programs. Budgetary pressures combined with increased spending demands, including as a result of recent federal actions, are creating additional uncertainty and may result in decreased spending, or decreased spending growth, for Medicaid programs in many states. Further, we may be impacted by developments at the federal and state levels related to Medicaid supplemental payments and SDP arrangements, which could result in our revenues from such arrangements being reduced or eliminated. Government and commercial payors as well as other third parties from whom we receive payment for our services attempt to control healthcare costs by, for example, requiring hospitals and other providers to discount payments for their services in exchange for exclusive or preferred participation in their benefit plans, reducing coverage of inpatient and emergency room services and shifting care to outpatient settings, implementing site-neutral payment policies to align payment for services across care settings, using utilization review tools including prior authorizations and implementing alternative payment models. We are increasingly involved in disputes with payors, as cost control efforts have resulted in an increase in reimbursement denials and delays by governmental and commercial payors, which may increase operational and administrative costs and decrease the reimbursement we receive. Efforts to impose more stringent cost controls are expected to continue and may be enhanced by the increasing consolidation of insurance and managed care companies, vertical integration of health insurers with healthcare providers and regulatory changes. These efforts may reduce our net operating revenues and adversely affect our business and financial condition. Our ability to maintain and obtain favorable contracts with commercial payors significantly affects the revenues and operating results of our facilities. During the year ended December 31, 2025, 65.8% of our net operating revenues came from commercial payors. Commercial payors typically reimburse healthcare providers at a higher rate than Medicare, Medicaid, other government healthcare programs or self-pay patients. Commercial payors continue to demand discounted fee structures, and the trend toward consolidation among private third-party payors tends to increase payor bargaining power. Payors may utilize plan structures such as narrow networks and tiered networks, which may exclude our facilities and employed physicians or favor other providers, and other healthcare providers may negotiate exclusivity provisions or otherwise impact our ability to contract with third-party payors. Price and clinical transparency initiatives and increasing vertical integration efforts involving third-party payors and healthcare providers may also impact our ability to obtain or maintain favorable contract terms. For example, hospitals are required to publish online payor-specific negotiated charges and de-identified minimum and maximum charges. In addition, alignment efforts between third-party payors and healthcare providers and the requirements of the No Surprises Act provide payors with increased access to performance and pricing data, which may increase payor bargaining power. Our net operating revenues may be reduced if we experience reductions in the volume of patients with private health insurance coverage, which may be driven by factors such as adverse economic conditions, including elevated unemployment and underemployment rates and inflationary pressures, and legislative or regulatory changes that increase barriers to and costs associated with obtaining or maintaining comprehensive coverage. We anticipate that several recent developments may contribute to potential future declines in our volume of patients with private health insurance coverage, including the expiration of the enhanced Affordable Care Act subsidies at the end of 2025, provisions of the 2025 Reconciliation Law that are expected to impact coverage obtained through Affordable Care Act marketplaces, and a final rule issued by CMS in June 2025 focused on health insurance marketplaces and individual market coverage. Limitations on balance billing may reduce the amount that hospitals and other providers are able to collect for out-of-network services. For example, the No Surprises Act prohibits providers from charging patients an amount beyond the in-network cost sharing amount for services rendered by out-of-network providers, subject to limited exceptions. For services for which balance billing is prohibited (even when no balance billing occurs), the No Surprises Act includes provisions that may limit the amounts received by out-of-network providers by health plans and also establishes an independent dispute resolution process for providers and payors to handle payment disputes that cannot be resolved through direct negotiation. The regulations and related guidance implementing the No Surprises Act, including those establishing the dispute resolution process, are the subject of legal challenges and, potentially, regulatory changes. If we are unable to negotiate increased reimbursement rates, maintain existing rates or other favorable contract terms, effectively respond to payor cost controls and reimbursement policies or comply with the terms of our payor contracts, or if we experience reductions in the number of patients with private health insurance coverage, the payments we receive for our services may be reduced, which may cause our net operating revenues to decline and could adversely affect our business.

Our revenues are particularly sensitive to regulatory and economic changes in states in which we generate a significant portion of our revenues, including Indiana, Alabama, Texas, Florida and Tennessee. Accordingly, any change in the current demographic, economic, competitive, or regulatory conditions in these states could have an adverse effect on our business, financial condition, or results of operations. In particular, changes to Medicaid and other payment programs in these states, including modifications, expiration or termination of Medicaid waiver programs or supplemental payment programs, could also have an adverse effect on our business, financial condition, results of operations, or cash flows. For example, a Medicaid waiver in Texas provides the federal authority for operations of most of the state's Medicaid managed care programs and provides funding for uncompensated care. Although CMS has approved the Texas waiver program through 2030, various payment programs operated under the waiver, such as SDP programs, have more limited approval periods. The 2025 Reconciliation Law includes limitations on SDP arrangements, directing HHS to revise SDP regulations to tie caps on total payment rates paid by Medicaid managed care organizations for specified services, including hospital services, to Medicare payment rates instead of average commercial rates. Several states in which we operate, including Texas, currently tie caps on total payment rates paid by managed care organizations to average commercial rates. If SDP programs or similar programs in which we participate are modified or not extended or CMS does not continue to approve these programs, our net operating revenues could be negatively impacted.

Our primary collection risks relate to uninsured patients and outstanding patient balances for which the primary insurance payor has paid some but not all of the outstanding balance, with the remaining outstanding balance (generally deductibles and co-payments) owed by the patient. Collections are impacted by the economic ability of patients to pay and the effectiveness of our collection efforts. Significant changes in payor mix, business office operations, economic conditions or trends in federal and state governmental healthcare coverage may affect our collection of patient accounts receivable and are considered in our estimates of patient accounts receivable collectability. In recent years, federal and state legislatures have considered or passed various proposals impacting or potentially impacting the size of the uninsured population. For example, federal legislation temporarily enhanced subsidies available for purchasing coverage through Affordable Care Act marketplaces, but these enhanced subsidies expired at the end of 2025. Their expiration is expected to adversely impact health insurance exchange enrollment and significantly increase the uninsured rate. Further, the end of the continuous enrollment requirement established by COVID-19 relief legislation, and the resumption of Medicaid eligibility redeterminations following the expiration of this continuous coverage requirement in 2023, resulted in significant Medicaid coverage disruptions and dis-enrollments of Medicaid enrollees, and overall Medicaid enrollment declined in 2025 in comparison to 2024. The 2025 Reconciliation Law is expected to further adversely affect the uninsured rate, including by requiring pre-enrollment verification of eligibility in a plan with subsidies and restricting subsidized marketplace coverage, effectively ending automatic renewals of coverage, and by limiting Medicare and Medicaid eligibility based on immigration status and other factors, among other measures. Rates of uninsured and underinsured individuals may also be influenced by other legislative and regulatory initiatives related to health insurance, such as permitting the sale of insurance plans that lack currently required consumer protections. Some states impose financial penalties on individuals who fail to maintain health insurance mandates or offer public health insurance options. These variables, among others, make it difficult to predict the number of uninsured individuals and what percentage of our total revenue will be comprised of self-pay revenues. We may be adversely affected by the growth in patient responsibility accounts as a result of the adoption of plan structures, including high-deductible health plans and health savings accounts, narrow networks and tiered networks, that shift greater responsibility for care to individuals through greater exclusions and copayment and deductible amounts. For example, to address anticipated increases in health insurance premiums for consumers, CMS announced in September 2025 that it would expand eligibility for high-deductible catastrophic health insurance plans. Our ability to collect patient responsibility accounts may be limited by statutory, regulatory and investigatory initiatives, including private lawsuits directed at hospital charges and collection practices for uninsured and underinsured patients and regulatory restrictions on charges for out-of-network services. For example, the No Surprises Act requires providers to send uninsured and self-pay patients a good faith estimate of expected charges for items and services. The estimate must be provided in advance of the scheduled date for the item or service or upon request and cover items and services that are reasonably expected to be provided together with the primary item or services, including those that may be provided by other providers. If the uninsured or self-pay patient receives a bill that is substantially greater than the expected charges in the good faith estimate, they may initiate a patient-provider dispute resolution process established by regulation. In addition, a deterioration of economic conditions in the United States could potentially lead to higher levels of uninsured patients, result in higher levels of patients covered by lower paying government programs, result in fiscal uncertainties for both government payors and private insurers and/or limit the economic ability of patients to make payments for which they are responsible. Any increase in the volume of self-pay patients or deterioration in collectability of patient responsibility accounts could adversely affect our financial condition or results of operations.