Capella Health

Franklin, Tennessee – March 27, 2015 – Capella Healthcare, Inc. (“Capella”) today announced results for the three months and twelve months ended December 31, 2014. In its strongest year in history, Capella’s Pro Forma Adjusted EBITDA increased to $103.3 million, representing a 10.5% over the prior year.

Three Months Ended December 31, 2014
For the three months ended December 31, 2014, revenues from continuing operations were $183.7 million, up $19.8 million or 12.1% over the same period a year ago. Pro forma adjusted EBITDA increased 18.4% to $27.0 million compared with $22.8 million for the same period a year ago. Admissions increased 5.3% from the prior year quarter, and adjusted admissions increased 11.3% for the same prior year period. Revenue per adjusted admission declined 2.0%. For the quarter, pro forma adjusted EBITDA margin expanded a solid 80 basis points to 14.7% over the same period a year ago.

The strong quarterly performance was driven by several factors, including improving inpatient trends, significant growth in outpatient revenues which increased 18.9% over the prior year quarter. The growth in outpatient revenues reflect increases in cardiovascular services, diagnostic imaging services, outpatient surgeries and emergency department visits, up 10%, the largest quarterly increase in more than two years. Self-pay revenues declined 33% over the prior quarter, largely a result of Medicaid coverage expansion in three of the states served by Capella’s hospitals.

Twelve Months Ended December 31, 2014
For the twelve months ended December 31, 2014, revenues from continuing operations were $713.4 million, an increase of $45.3 million or 6.8% over the same prior year period. Pro forma Adjusted EBITDA was $103.3, an increase of 10.5% and $9.8 million over the prior year.

The strong performance was impacted by numerous factors, including a decrease in self-pay admissions of 33.8%. For the year, adjusted admissions were up 2.1%, admissions were down 1.4%, revenue per adjusted admission increased 4.6% and ER visits were up 4.1%.

“Our fourth quarter and 2014 year-end results demonstrate significant achievement, with which we are very pleased,” said Michael A. Wiechart, president and chief executive officer of Capella. “With a 10.5% increase in pro forma adjusted EBITDA, 2014 was our most successful year in the company’s history. More importantly, our hospitals continue to make significant and sustained progress in quality and patient safety metrics. None of this would be possible without the hard work and dedication of the thousands of employees, physicians and volunteers in the communities we are privileged to serve.”

“Additionally, we were pleased to complete the acquisition of a new hospital, Carolina Pines Regional Medical Center in Hartsville, SC, adding them to the Capella family on January 1, 2015. We also formed two new clinical partnerships with nationally known academic medical centers last year, MUSC Health in Charleston, South Carolina, and UW Medicine in Seattle, WA.”

“These results – as well as local, regional and national recognition – show that our hospital leaders are doing an outstanding job during a challenging time for our industry. Among the recent recognition earned by our hospitals is a second consecutive “Top Workplace in Oklahoma” award for Southwestern Medical Center in Lawton, OK; a fourth consecutive “Top Performer on Key Quality Measures®” by The Joint Commission for Willamette Valley Medical Center in McMinnville, OR; and “Businesses of the Year” honors for both National Park Medical Center in Hot Springs, AR, and EASTAR Health System in Muskogee, OK.”

About Capella Healthcare
Founded in 2005 in Franklin, Tennessee, Capella owns and/or operates general acute-care hospitals. With the philosophy that all health care is local, Capella collaborates with each hospital’s medical staff, board and community leadership to take care to the next level. Capella has access to significant leadership and financial resources, reinvesting in its family of hospitals to strengthen and expand services and facilities. For more information visit the website.

Conference Call
Capella will host a conference call for investors at 9:00 a.m. Central time today. All interested investors are invited to access the call by dialing: 877-806-6964, conference ID#: 2823 4647. A replay of the call will be available for a period of 30 days, beginning approximately one hour after the call has concluded. Instructions to access the audio recording can be found on the Investor Relations section of the Company’s website. A copy of the Company’s Form 10-Q for the quarterly period ended September 30, 2014 may be obtained via the Company’s website when filed with the Securities and Exchange Commission.

Cautionary Statement about Preliminary Results and other Forward-Looking Information
This press release contains forward-looking statements based on current management expectations. Numerous risks, uncertainties and other factors may cause actual results to differ materially from those expressed in any forward-looking statements. These factors include, but are not limited to, (1) the impact of healthcare reform and other changes in government programs; (2) spending cuts resulting from the Budget Control Act of 2011; (3) the impact of the economy; (4) growth of uninsured and “patient due” accounts and a deterioration in the collectability of these accounts; (5) federal or state programs that reduce our Medicare or Medicaid payments; (6) the reduction or elimination of payments from third-party payors or the inability to negotiate contracts or maintain satisfactory relationships with third-party payors; (7) controls designed to reduce inpatient services may reduce our revenue; (8) any shortage of qualified professional and staff personnel; (9) our ability to recruit and retain quality physicians; (10) the loss of the services of one or more of our executive management team; (11) our ability to comply with extensive laws and government regulations, including fraud and abuse laws; (12) competition from other hospitals or healthcare providers, including physicians; (13) concentration of revenue in a small number of states, which makes us particularly sensitive to regulatory and economic changes in those states; (14) our access to licensed information systems and the ability to integrate changes to our existing information systems or information systems of acquired hospitals; (15) liabilities for professional liability and other claims brought against our facilities; (16) potential legal and reputational risk as a result of our access to personal information of our patients; (17) state efforts to regulate the construction or expansion of healthcare facilities; (18) the industry trend toward value-based purchasing; (19) our substantial indebtedness and ability to generate cash flow to service or refinance our indebtedness; and (20) other risk factors described in our annual report on Form 10-K for the year ended December 31, 2013 filed with the Securities and Exchange Commission. Many of the factors that will determine our future results are beyond our ability to control or predict. In light of the significant uncertainties inherent in the forward-looking statements contained herein, readers should not place undue reliance on forward-looking statements, which reflect management’s views only as of the date hereof. We undertake 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.