‘They’ve turned the dial up on denying preauthorizations’: CHS blames payers for volume drop

Franklin, Tenn.-based Community Health Systems is pointing to two converging forces behind a broad volume decline in the first quarter: aggressive insurer prior authorization denials and macroeconomic anxiety keeping patients out of the hospital.

Same-store inpatient admissions declined 1.3% year over year while adjusted admissions were down 0.5%. Same-store surgeries declined 2.2% and ED visits were down 2.8%, according to the health system’s first-quarter results, published April 21.

The softness in the first quarter was concentrated in patients with commercial and ACA exchange coverage, the cohorts facing the highest out-of-pocket exposure and the most friction from managed care gatekeeping, according to CEO Kevin Hammons.

“That leads us to believe a couple of things,” Mr. Hammons said April 22 during the company’s first-quarter earnings call. “One, it’s macroeconomic issues because those are the individuals with high deductibles and the more aggressive behavior by the managed care companies — as we understand, at least anecdotally — that there’s kind of been [the sense that] they’ve turned the dial up on denying preauthorizations in more cases. So oftentimes, those patients are not even getting to us because of that.”

Mr. Hammons said the volume pressures were “across the board” with no single market standing out as an outlier. He linked the demand slowdown to a series of macroeconomic shocks in the quarter: consumer confidence that was already muted coming out of December, a weak jobs report, rising geopolitical instability and higher gas prices.

Together these factors created an environment in which patients with high-deductible plans are choosing to defer care, according to Mr. Hammons.

“We believe that volume and payer mix challenges in the first quarter reflect a temporary disruption in demand for healthcare services in our markets,” he said. “Llargely driven by consumer fears related to geopolitical instability and increased cost of living as well as ongoing aggressive practices used by the managed care companies that drive inefficiency, unnecessarily delayed payment and interfere with the delivery of medical care.”

CHS Executive Vice President and CFO Jason Johnson said the company is assuming low single-digit volume growth for the full year and expects the first quarter to represent the trough.

“We’re at negative 0.5% adjusted admission for the first quarter,” Mr. Johnson said. “We do think that should recover. And I think payer mix was the other piece that came in less than our expectations for the full year. Similarly, we think that comes back as the economy continues to improve.”

Neither executive predicted a quick rebound.

Mr. Hammons said recovery is more likely weighted to the “back half” of 2026, with the second quarter offering an easier year-over-year comparison.

The volume weakness compounded margin pressure from recently divested hospitals, which swung from a combined $25 million positive EBITDA contribution in the first quarter of 2025 to a $25 million drag in the first quarter of 2026. Adjusted EBITDA for the quarter was $309 million, down 17.8% from $376 million in the same period last year.

Despite the pressure, CHS reaffirmed its full-year 2026 guidance, with adjusted EBITDA projected in the range of $1.3 billion to $1.5 billion.

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