Community Health Systems
Annual Report 2018

Plain-text annual report

Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSIONWashington, D.C. 20549 Form 10-K(Mark One)☑ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the year ended December 31, 2018 OR☐TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission file number 001-15925 COMMUNITY HEALTH SYSTEMS, INC.(Exact name of registrant as specified in its charter) Delaware 13-3893191(State of incorporation) (IRS EmployerIdentification No.)4000 Meridian Boulevard 37067Franklin, Tennessee(Address of principal executive offices) (Zip Code)Registrant’s telephone number, including area code:(615) 465-7000Securities registered pursuant to Section 12(b) of the Act: Title of Each Class Name of Each Exchange on Which RegisteredCommon Stock, $.01 par value New York Stock Exchange Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. YES ☑ NO ☐Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Act. YES ☐ NO ☑Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. YES ☑ NO ☐Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 ofthis chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☑ No ☐Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§ 229.405 of this chapter) is not contained herein, and will not be contained, to thebest of the registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of the Form 10-K or any amendment to the Form 10-K. ☑Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company.See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act: Large accelerated filer ☐ Accelerated filer ☑ Smaller reporting company ☐Non-accelerated filer ☐ Emerging growth company ☐If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financialaccounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). YES ☐ NO ☑The aggregate market value of the voting stock held by non-affiliates of the Registrant was $371,142,770. Market value is determined by reference to the closing price on June 30,2018 of the Registrant’s Common Stock as reported by the New York Stock Exchange. The Registrant does not (and did not at June 30, 2018) have any non-voting common stockoutstanding. As of February 15, 2019, there were 116,227,225 shares of common stock, par value $.01 per share, outstanding.DOCUMENTS INCORPORATED BY REFERENCECertain information required for Part III of this annual report is incorporated by reference to portions of the Registrant’s definitive proxy statement for its 2019 annual meeting ofstockholders to be filed with the Securities and Exchange Commission within 120 days after the end of the Registrant’s fiscal year ended December 31, 2018. Table of ContentsTABLE OF CONTENTSCOMMUNITY HEALTH SYSTEMS, INC.Year ended December 31, 2018 Page PART I Item 1. Business 1Item 1A. Risk Factors 27Item 1B. Unresolved Staff Comments 42Item 2. Properties 43Item 3. Legal Proceedings 47Item 4. Mine Safety Disclosures 51 PART II Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of EquitySecurities 52Item 6. Selected Financial Data 54Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations 55Item 7A. Quantitative and Qualitative Disclosures about Market Risk 89Item 8. Financial Statements and Supplementary Data 90Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure 167Item 9A. Controls and Procedures 167Item 9B. Other Information 167 PART III Item 10. Directors, Executive Officers and Corporate Governance 171Item 11. Executive Compensation 173Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters 173Item 13. Certain Relationships and Related Transactions, and Director Independence 173Item 14. Principal Accountant Fees and Services 173 PART IV Item 15. Exhibits and Financial Statement Schedules 174Item 16. Form 10-K Summary 189Table of ContentsItem 1. Business of Community Health Systems, Inc.Overview of Our CompanyWe are one of the largest publicly-traded hospital companies in the United States and a leading operator of general acute care hospitals and outpatientfacilities in communities across the country. We were originally founded in 1986 and were reincorporated in 1996 as a Delaware corporation. We providehealthcare services through the hospitals that we own and operate and affiliated businesses in non-urban and selected urban markets throughout the UnitedStates. As of December 31, 2018, we owned or leased 113 hospitals with an aggregate of 18,227 licensed beds, comprised of 111 general acute care hospitalsand two stand-alone rehabilitation or psychiatric hospitals. These hospitals are geographically diversified across 20 states, with the majority of our hospitalslocated in regional networks or in close geographic proximity to one or more of our other hospitals. We generate revenues by providing a broad range ofgeneral and specialized hospital healthcare services and outpatient services to patients in the communities in which we are located. Services providedthrough our hospitals and affiliated businesses include general acute care, emergency room, general and specialty surgery, critical care, internal medicine,obstetrics, diagnostic, psychiatric and rehabilitation services. We also provide additional outpatient services at urgent care centers, occupational medicineclinics, imaging centers, cancer centers and ambulatory surgery centers. An integral part of providing these services is our network of affiliated physicians atour hospitals and affiliated businesses. As of December 31, 2018, we employed approximately 2,000 physicians and an additional 1,000 licensed healthcarepractitioners. Through our management and operation of these businesses, we provide standardization and centralization of operations across key businessareas; strategic assistance to expand and improve services and facilities; implementation of patient safety and quality of care improvement programs andassistance in the recruitment of additional physicians and licensed healthcare practitioners to the markets in which our hospitals are located. In a number ofour markets, we have partnered with local physicians or not-for-profit providers, or both, in the ownership of our facilities.We have been implementing a portfolio rationalization and deleveraging strategy by divesting hospitals and non-hospital businesses that are attractive tostrategic and other buyers. Generally, these businesses are not in one of our strategically beneficial service areas, are less complementary to our businessstrategy and/or have lower operating margins. In connection with our divestiture initiative, strategic buyers have made offers to buy certain of our assets.Through consideration of these offers we have divested or may divest hospitals and non-hospital businesses when we find such offers to be attractive and inline with our operating strategy. In 2018, we divested 11 hospitals for total net proceeds of approximately $405 million. In 2017, we divested 30 hospitals fortotal net proceeds of approximately $1.7 billion.Additionally, as part of our portfolio rationalization strategy, on April 29, 2016, we completed a spin-off of 38 hospitals and Quorum Health Resources,LLC, or QHR (our former subsidiary through which we provided management advisory and consulting services to non-affiliated general acute care hospitalslocated throughout the United States), into Quorum Health Corporation, or QHC, and distributed, on a pro rata basis, all of the shares of QHC common stockto our stockholders of record as of April 22, 2016. In recognition of the spin-off, we recorded a non-cash dividend of approximately $713 million during theyear ended December 31, 2016, representing the net assets of QHC distributed to our stockholders. Financial and statistical data reported in this Form 10-Kinclude QHC operating results through the spin-off date. In connection with the spin-off, we entered into a separation and distribution agreement as well ascertain ancillary agreements with QHC on April 29, 2016.Throughout this Form 10-K, we refer to Community Health Systems, Inc., or the Parent Company, and its consolidated subsidiaries in a simplified mannerand on a collective basis, using words like “we,” “our,” “us” and the “Company.” This drafting style is suggested by the Securities and ExchangeCommission, or SEC, and is not meant to indicate that the publicly-traded Parent Company or any particular subsidiary of the Parent Company owns oroperates any asset, business or property. The hospitals, operations and businesses described in this filing are owned and operated, and management servicesprovided, by distinct and indirect subsidiaries of Community Health Systems, Inc. 1Table of ContentsAvailable InformationOur website address is www.chs.net and the investor relations section of our website is located at www.chs.net/investor-relations. We make available freeof charge, through the investor relations section of our website, annual reports on Form 10-K, quarterly reports on Form 10-Q and current reports on Form 8-Kas well as amendments to those reports, as soon as reasonably practical after they are filed with, or furnished to, the SEC. The SEC maintains an Internet sitethat contains our reports, proxy and information statements, and other information that we file electronically with the SEC at www.sec.gov.We also make available free of charge, through the investor relations section of our website, our By-laws, our Governance Guidelines, our Code ofConduct and the charters of our Audit and Compliance Committee, Compensation Committee and Governance and Nominating Committee.We have included the Chief Executive Officer and the Chief Financial Officer certifications regarding the public disclosure required by Sections 302 and906 of the Sarbanes-Oxley Act of 2002 as Exhibits 31.1, 31.2, 32.1 and 32.2 to this Form 10-K.Our Business StrategyOur objective is to provide safe, high-quality healthcare for our patients and the communities we serve. We are committed to efficient, cost effective andprofitable operations that seek to ensure sustainable health systems and deliver long-term shareholder value. Our efforts are focused around the following keystrategies, which are designed to help us achieve our objectives: • Become a market leader and increase market share in the communities we serve; • Increase productivity and operating efficiencies to enhance profitability; • Continuously improve patient safety and quality of care; and • Optimize our portfolio through select divestitures of non-core assets while investing in markets with the best opportunities for growth.Become a market leader and increase market share in the communities we serveWe operate across diverse markets that range from sole community providers to large regional networks. We are able to leverage our significant scale andstandardized systems to provide cost-effective services and best practices for our affiliate operations. Each of our markets develops and executes a strategicplan with short and long-term goals, based on their unique opportunities and the needs of their respective communities. As an organization, we also haveimplemented a number of strategic initiatives designed to improve market position, expand services to our patients, and capture a greater share of healthcarespending in our markets. These include: • Strengthening regional networks and local market operations; • Expanding patient access points, health services and infrastructure; • Recruiting and/or employing additional primary care physicians and specialists; and • Developing a more consumer-centric experience and facilitating connections between episodes of care.Strengthening Regional Networks and Local Market Operations. We believe opportunities exist in select markets to create healthcare networks consistingof multiple hospitals and corresponding outpatient services. Regional networks are able to expand the breadth of services provided for our patients, developcenters of excellence for key services, deliver care in an organized and efficient way across the network, improve alignment with physicians and otherproviders, and make services more attractive to managed care and other payers. Currently, 79 of our hospitals operate in 22 regional networks. 2Table of ContentsWe also operate healthcare systems that are built around a single acute-care hospital. In these markets, we are focused on supporting the hospital withphysician practices, outpatient services, clinical collaborations and partnerships that offer our patients health services across the continuum of care. Thesehospitals and their related outpatient services may operate in competitive markets or as sole community providers.Expanding Patient Access Points, Health Services and Infrastructure. When expanding services – in both the acute and non-acute care settings – ourapproach is data-driven and strategic to ensure our investments are responsive to community and patient needs and produce sound financial results. While wecontinue to provide health services across a broad spectrum, we have focused our attention and resources on service lines we believe have the greatestpotential for growth, including primary care, emergency medicine, orthopedics, neuroscience, cardiovascular care, surgical services and behavioral health. Asthe shift to delivering health services in outpatient settings accelerates, we continue to expand our care offerings beyond hospital walls to include moreoutpatient access through primary care practices, urgent care centers, free-standing emergency departments, ambulatory surgery centers, imaging anddiagnostic centers, retail clinics and direct-to-consumer virtual health visits.We believe expanding our patient access footprint can attract new patients and increase patient retention, as well as our ability to connect patients fromone episode of care to the next appropriate care setting. We also believe our investments will enhance our long-term growth and generate increased revenue,earnings, and operating margins by providing a solid return on investment.Recruiting and/or Employing Additional Primary Care Physicians and Specialists. The physician-patient relationship is the foundation on which allhealthcare services are built. Understanding this, we continuously assess our communities to identify service gaps and practice opportunities in order torecruit an optimal mix of primary care physicians and specialists. We analyze demographic data and referral trends and employ recruiters at the corporatelevel to support local hospital administrators in their physician recruitment efforts. In some markets, we employ physicians, often acquiring their practices atthe onset of the arrangement. However, most physicians in our communities and on our medical staffs remain in private practice and are not our employees.We work hard to develop positive, collaborative relationships with physicians. We currently have fifteen Medicare Shared Savings Program AccountableCare Organizations which include approximately 4,500 employed and independent physicians in our communities. We look forward to realizing the benefitsof these Accountable Care Organizations, including opportunities to strengthen quality, deepen clinical collaboration and demonstrate performance under areimbursement system moving toward more value-based incentives and payments.Developing a More Consumer-Centric Experience and Facilitating Connections between Episodes of Care. Consumers continue to take a more activerole in healthcare decision-making, especially as they assume increasing responsibility for the cost of their healthcare. The rise in consumerism ishighlighting customer expectations that have not always been prioritized in the healthcare setting. We are working on ways to create more enduringrelationships with our patients by providing services that help people navigate their healthcare journeys and enable more seamless connections acrossepisodes in our healthcare systems, hospitals, and physician practices. Some of these initiatives include: • A centralized and proprietary transfer center offering services to connect emergency department and hospitalized patients requiring transfer tofacilities that can best meet their needs; • Centralized patient scheduling call centers and online scheduling to ease appointment scheduling; • Patient navigation and next appointment scheduling from existing points of care; • Availability of virtual health for certain services provided in the hospital and for direct-to-consumer, on-demand virtual visits with physicians; 3Table of Contents • Digital marketing and consumer engagement campaigns; and • Technology enabled initiatives that support connected healthcare experiences, such as patient portals, text message appointment reminders,gaps-in-care campaigns and post-discharge surveys.Increase productivity and operating efficiencies to enhance profitabilityOur hospital management teams are supported by experienced corporate leaders who have significant industry knowledge and a proven track record ofsuccess. Local hospitals benefit from centralized clinical, operational, financial and regulatory expertise that encompasses nearly every aspect of ourbusiness. Additionally, we are able to leverage deep and meaningful data sources to facilitate informed decision-making and drive operational improvementsacross the enterprise in areas such as drug and supply procurement, workforce optimization and staffing and emergency department and operating roomperformance.Standard policies and procedures in areas ranging from physician practice management to patient accounting to construction and facilities managementhelp to facilitate best practices, reduce variation and improve operating results. The following areas highlight some of our standardized and centralizedplatforms.Billing and Collections. We have adopted standard policies and procedures with respect to billing and collections. We have automated variouscomponents of the collection cycle, including statements and collection letters, to help facilitate timely and accurate progression of our accounts through thecollection cycle. We have consolidated local billing and collection functions into six centralized business offices and have completed the transition of ourhospital billing departments to this new infrastructure. We are now realizing the benefits of lower patient claim denials, higher underpayment recoveries andreduced operating expenses.Physician Support. We support newly recruited physicians to facilitate a smooth and effective transition into our communities. Newly recruitedphysicians participate in orientation that covers matters related to starting up a new practice or joining an established practice. For employed physicians, weutilize software solutions that monitor and help optimize their practice performance against industry standard benchmarks and best practices. We also haveimplemented programs to improve physician workflow, reduce physician turnover, optimize staffing at physician clinics and standardize onboardingprocesses.Procurement and Materials Management. We have standardized and centralized supply chain operations to improve procurement of the medical supplies,equipment and pharmaceuticals used in our hospitals. We have an ownership interest in and participation agreement with HealthTrust Purchasing Group,L.P., or HealthTrust, a group purchasing organization, or GPO, which benefits members through scaled pricing. HealthTrust contracts with certain vendorswho supply a substantial portion of our medical supplies, equipment and pharmaceuticals.Case and Resource Management. The primary goal of our case management program is to deliver safe, high-quality care in an efficient and cost effectivemanner. The program focuses on: • Appropriate management of length of stay consistent with national standards and benchmarks; • Reducing unnecessary utilization; • Developing and implementing operational best practices; • Discharge planning; and • Compliance with applicable regulatory standards.Our case management program integrates the functions of utilization review, discharge planning, assessment of medical necessity and resourcemanagement. Patients are assessed upon presentation to the hospital and throughout their course of care with ongoing reviews. Industry standard criteria areutilized in patient 4Table of Contentsassessments and discharge plans are adjusted according to patient needs. Cases are monitored to prevent delays in service or unnecessary utilization ofresources. When a patient is ready for discharge, a case manager works with the patient’s attending physician to evaluate and coordinate the patient’s needsfor continued care in the post-acute setting. Each hospital has the support of a physician advisor to act as a liaison to the medical staff and assist with all theactivities of the program.Other Initiatives. Numerous other initiatives have been standardized or centralized and leverage data to reduce costs and increase productivity. Forexample, we have improved staff scheduling and efficiency by implementing standardized time keeping systems and we have implemented initiatives toreduce unnecessary overtime and guide temporary staffing decisions that align with patient admissions and acuity. We have created a centralized team andimplemented standard processes for payroll processing and management of accounts payable. Likewise, we have leveraged data and expertise to optimize ourperformance in clinical and operating areas such as emergency room, pharmacy, laboratory, imaging and skilled nursing services and health informationmanagement. Each time we implement a new process initiative, we work to identify and communicate best practices and we monitor progress andperformance improvement throughout the organization.Continuously Improve Patient Safety and Quality of CareWe maintain quality assurance programs to monitor, support and advance quality of care standards and to meet Medicare and Medicaid accreditation andregulatory requirements. We maintain an emphasis on patient safety and clinical outcomes and we are continuously focused on ways to improve patient,physician and employee satisfaction. We believe that a focus on continuous improvement yields the best results for patients, reduces risk and liability, andcreates value for the people and communities we serve.We have developed and implemented programs to support and monitor patient safety and quality of care that include: • Standardized data and benchmarks to monitor clinical outcomes, hospital performance and quality improvement efforts; • Recommended policies and procedures based on medical and scientific evidence; • Training with evidence-based tools for improving patient safety and quality of care and patient, physician and employee satisfaction; • Leveraging technology and information sharing around evidence-based clinical best practices; • Training programs for hospital management and clinical staff regarding regulatory and reporting requirements; and • Implementation of specific leadership methods and error-prevention tools to create safer care environments for patients and staff.We have operated a Patient Safety Organization, or PSO, since 2011. Our PSO is listed by the U.S. Department of Health and Human Services, or HHS,Agency for Healthcare Research and Quality. We believe our PSO has assisted, and will continue to assist us, in improving patient safety at our hospitals. ThePSO has been recertified through 2019.Optimize our portfolio through select divestitures of non-core assets while investing in markets with the best opportunities for growthWe have been reshaping our portfolio through the divestiture of non-core hospital and non-hospital assets to strategic and other buyers. In 2019, weintend to divest additional hospitals in select markets. Generally, these divested assets are less complementary to our business strategies and/or have loweroperating margins. We have used, and expect to continue to use, proceeds from divestitures to reduce debt. 5Table of ContentsBy divesting non-core assets, we are able to more sharply channel our resources and capital investments into strategic markets where we have the bestability to increase access and patient care, enhance our service lines, form successful joint ventures, produce growth and increase market share. As anexample, we acquired 43 physician practices in 2018.Our portfolio optimization efforts have included several transactions to date. In 2017, we divested 30 hospitals in single and multi-hospital transactions.In 2018, we divested an additional 11 hospitals in single and multi-hospital transactions. We also closed three non-core hospitals in 2018 in locations wherethe operations could be absorbed by one or more hospitals in the same regional network.Industry OverviewAccording to the Centers for Medicare & Medicaid Services, or CMS, national healthcare expenditures grew 3.9% in 2017 to $3.5 trillion and areprojected to have grown 5.3% in 2018 to nearly $3.7 trillion. The CMS projections, published in February of 2018, indicate that total U.S. healthcarespending is expected to grow by 5.5% in 2019 and 2020, and at an average annual rate of 5.7% for 2021 through 2026. CMS anticipates that total U.S.healthcare annual expenditures will reach $5.7 trillion by 2026, accounting for approximately 19.7% of the total U.S. gross domestic product. Healthcarespending is expected to be largely influenced by changes in economic conditions and demographics, as well as by increasing prices for medical goods andservices. The CMS projections are constructed using a current-law framework. They are typically published once per year and are not updated to reflectinterim changes. For example, the projections do not take into account the possibility of further modifications to, or repeal of, the Patient Protection andAffordable Care Act, as amended by the Health Care and Education Reconciliation Act of 2010, collectively, the Affordable Care Act.Hospital services, the market within the healthcare industry in which we primarily operate, is the largest single category of healthcare expenditures. In2018, hospital care expenditures are projected to have grown 5.1%, amounting to nearly $1.2 trillion. CMS estimates that the hospital services category willamount to nearly $1.3 trillion in 2019 and projects growth in this category at an average of 5.7% annually from 2019 through 2026.U.S. Hospital Industry. The U.S. hospital industry is broadly defined to include acute care, rehabilitation and psychiatric facilities that are either public(government owned and operated), not-for-profit private (religious or secular), or for-profit institutions (investor owned). According to the American HospitalAssociation, there are approximately 5,300 community hospitals in the U.S., which are not-for-profit owned, investor owned, or state or local governmentowned. Of these hospitals, nearly 40% are located in non-urban communities. We believe that a majority of these hospitals are owned by not-for-profit orgovernmental entities. These facilities offer a broad range of healthcare services, including internal medicine, general surgery, cardiology, oncology,orthopedics, OB/GYN and emergency services. In addition, hospitals offer other ancillary services, including psychiatric, diagnostic, rehabilitation, homecare and outpatient surgery services.Factors Affecting Performance. Among the many factors that can influence a hospital’s financial and operating performance are: • facility size and location; • facility ownership structure (e.g., tax-exempt or investor owned); • a facility’s ability to participate in GPOs, such as HealthTrust; and • facility payor mix.Patients needing the most complex care are more often served by the larger and/or more specialized urban hospitals. We believe opportunities exist inselected urban markets to create networks between urban hospitals and non-urban hospitals in order to expand the breadth of services offered in thenon-urban hospitals while improving physician alignment in those markets and making them more attractive to managed care organizations. 6Table of ContentsHospital Industry TrendsDemographic Trends. According to the U.S. Census Bureau, in 2017, there were approximately 51 million Americans aged 65 or older in the U.S.comprising approximately 15.6% of the total U.S. population. By the year 2030, the number of Americans aged 65 or older is expected to climb to72 million, or 19.3% of the total population. Due to the anticipated increasing life expectancy of Americans, the number of people aged 85 years and older isalso expected to increase from 6 million in 2015 to 9 million by the year 2030. This anticipated increase in life expectancy will increase demand forhealthcare services and, as importantly, the demand for innovative, more sophisticated means of delivering those services. Hospitals, as the largest categoryof care in the healthcare market, will be among those impacted most directly by this increase in demand. Based on data compiled for us, the populations ofthe service areas where our hospitals are located grew 6.9% from 2011 to 2018 and are expected to grow by 4.2% from 2018 to 2023. The number of peopleaged 65 or older in these service areas grew by 26.8% from 2011 to 2018 and is expected to grow by 16.8% from 2018 to 2023. People aged 65 or oldercomprised 17.5% of the total population in our service areas in 2018, yet they could comprise 19.6% of the total population in our service areas by 2023.Consolidation. In addition to our own acquisitions and dispositions in recent years, consolidation activity in the hospital industry, primarily throughmergers and acquisitions involving both for-profit and not-for-profit hospital systems, is continuing. Reasons for this activity include: • ample supply of available capital; • valuation levels; • financial performance issues, including challenges associated with changes in reimbursement and collectability of self-pay revenue; • the desire to enhance the local availability of healthcare in the community; • the need and ability to recruit primary care physicians and specialists; • the need to achieve general economies of scale and to gain access to standardized and centralized functions, including favorable supplyagreements and access to malpractice coverage; • changes to healthcare payment models that emphasize cost-effective delivery of service and quality of outcomes for the entire episode of care; and • regulatory changes.The payor industry is also consolidating and acquiring health services providers in an effort to offer more expansive, competitive programs.Trends in Payment for Healthcare Services. As discussed in more detail in the Government Regulation section of this Form 10-K, the impact of healthcarereform legislation, combined with the growing financial and economic pressures on the healthcare industry, has resulted in challenges to traditionalreimbursement trends. For example, the Affordable Care Act has encouraged the adoption of new payment models that emphasize cost-effective delivery ofcare and quality of outcomes. Although the number of patients with health insurance coverage has expanded, patients may face higher deductibles andincreased co-payment requirements, which may result in greater write-offs of uncollectible amounts from those patients.Shift to Outpatient Services. Because of the growing availability of stand-alone outpatient healthcare facilities and the increase in the services that can beprovided at these locations, many individuals are seeking a broader range of services at outpatient facilities. This trend has contributed to an increase inoutpatient services while inhibiting the growth of inpatient admissions. However, recent changes to Medicare policy affecting the reimbursementmethodology for certain items and services provided by off-campus provider-based hospital departments have generally resulted in reduced payment rates forhospital outpatient settings. 7Table of ContentsSelected Operating DataThe following table sets forth operating statistics for each of the years presented for our hospitals that are included in our continuing operations. Statisticsfor 2018 include a full year of operations for 113 hospitals and partial periods for 11 hospitals divested during the year and three hospitals that ceasedoperations during the year reflecting the operations of these hospitals prior to divestiture or closure. Statistics for 2017 include a full year of operations for125 hospitals and partial periods for 30 hospitals divested during the year reflecting the operations of these hospitals prior to divestiture. Statistics for 2016include a full year of operations for 152 hospitals and partial periods for three hospitals acquired during the year reflecting the operations of these hospitalsfollowing the completion of the acquisition. Statistics for hospitals included in discontinued operations are excluded from all periods presented. Year Ended December 31, 2018 2017 2016 (Dollars in millions) Consolidated Data Number of hospitals (at end of period) 113 125 155 Licensed beds (at end of period) (1) 18,227 20,850 26,222 Beds in service (at end of period) (2) 16,297 18,457 23,229 Admissions (3) 627,321 738,036 857,412 Adjusted admissions (4) 1,351,857 1,596,739 1,867,348 Patient days (5) 2,815,401 3,296,469 3,832,104 Average length of stay (days) (6) 4.5 4.5 4.5 Occupancy rate (beds in service) (7) 43.5 % 43.3 % 43.1 % Net operating revenues $14,155 $15,353 $18,438 Net inpatient revenues as a % of net operating revenues (8) 47.7 % 47.7 % 44.2 % Net outpatient revenues as a % of net operating revenues (8) 52.3 % 52.3 % 55.8 % Net loss attributable to Community HealthSystems Inc. stockholders $(788) $(2,459) $(1,721) Net loss attributable to Community HealthSystems Inc. stockholders as a % of net operating revenues (5.6)% (16.0)% (9.3) % Adjusted EBITDA (9) $1,642 $1,703 $2,225 Adjusted EBITDA as a % of net operating revenues (9) 11.6 % 11.1 % 12.1 % Liquidity Data Net cash flows provided by operating activities $274 $773 $1,137 Net cash flows provided by operating activities as a % of netoperating revenues 1.9 % 5.0 % 6.2 % Net cash flows (used in) provided by investing activities $(245) $1,069 $630 Net cash flows used in financing activities $(396) $(1,517) $(1,713) 8Table of Contents Year Ended December 31, (Decrease) 2018 2017 Increase (Dollars in millions) Same-Store Data (10) Admissions (3) 580,845 588,769 (1.3)% Adjusted admissions (4) 1,251,066 1,255,931 (0.4)% Patient days (5) 2,606,059 2,619,494 Average length of stay (days) (6) 4.5 4.4 Occupancy rate (beds in service) (7) 44.1 % 43.9 % Net operating revenues $13,331 $12,969 2.8 % Income from operations $1,032 $990 4.2 % Income from operations as a % of net operating revenues 7.7 % 7.6 % Depreciation and amortization $651 $685 Equity in earnings of unconsolidated affiliates $(21) $(15) (1)Licensed beds are the number of beds for which the appropriate state agency licenses a facility regardless of whether the beds are actually available forpatient use. (2)Beds in service are the number of beds that are readily available for patient use. (3)Admissions represent the number of patients admitted for inpatient treatment. (4)Adjusted admissions is a general measure of combined inpatient and outpatient volume. We computed adjusted admissions by multiplying admissionsby gross patient revenues and then dividing that number by gross inpatient revenues. (5)Patient days represent the total number of days of care provided to inpatients. (6)Average length of stay (days) represents the average number of days inpatients stay in our hospitals. (7)We calculated occupancy rate percentages by dividing the average daily number of inpatients by the weighted-average number of beds in service. (8)This calculation excludes the change in estimate related to net patient revenue to increase contractual allowances and additional provision for baddebts recorded during the three months ended December 31, 2017. (9)EBITDA is a non-GAAP financial measure which consists of net loss attributable to Community Health Systems, Inc. before interest, income taxes, anddepreciation and amortization. Adjusted EBITDA, also a non-GAAP financial measure, is EBITDA adjusted to add back net income attributable tononcontrolling interests and to exclude the effect of discontinued operations, loss (gain) from early extinguishment of debt, impairment and (gain) losson sale of businesses, gain on sale of investments in unconsolidated affiliates, expense incurred related to the spin-off of QHC, expense incurred relatedto the sale of a majority ownership interest in the Company’s home care division, expense (income) related to government and other legal settlementsand related costs, expense related to employee termination benefits and other restructuring charges, expense (income) from settlement and fair valueadjustments on the CVR agreement liability related to the Health Management Associates, Inc., or HMA, legal proceedings and related legal expenses,and the overall impact of the change in estimate related to net patient revenue recorded in the fourth quarter of 2017 resulting from the increase incontractual allowances and the provision for bad debts. The Company has from time to time sold noncontrolling interests in certain of its subsidiariesor acquired subsidiaries with existing noncontrolling interest ownership positions. The Company believes that it is useful to present Adjusted EBITDAbecause it adds back the portion of EBITDA attributable to these third-party interests and clarifies for investors the Company’s portion of EBITDAgenerated by continuing operations. The Company reports Adjusted EBITDA as a measure of financial performance. Adjusted EBITDA is a keymeasure used 9Table of Contents by management to assess the operating performance of the Company’s hospital operations and to make decisions on the allocation of resources.Adjusted EBITDA is also used to evaluate the performance of the Company’s executive management team and is one of the primary targets used todetermine short-term cash incentive compensation. In addition, management utilizes Adjusted EBITDA in assessing the Company’s consolidatedresults of operations and operational performance and in comparing the Company’s results of operations between periods. The Company believes it isuseful to provide investors and other users of the Company’s financial statements this performance measure to align with how management assesses theCompany’s results of operations. Adjusted EBITDA also is comparable to a similar metric called Consolidated EBITDA, as defined in the Company’ssenior secured credit facility, which is a key component in the determination of the Company’s compliance with some of the covenants under theCompany’s senior secured credit facility (including the Company’s ability to service debt and incur capital expenditures), and is used to determine theinterest rate and commitment fee payable under the senior secured credit facility (although Adjusted EBITDA does not include all of the adjustmentsdescribed in the senior secured credit facility). For further discussion of Consolidated EBITDA and how that measure is utilized in the calculation ofour debt covenants, see the Capital Resources section of Part II, Item 7 of this Form 10-K.Adjusted EBITDA is not a measurement of financial performance under U.S. GAAP. It should not be considered in isolation or as a substitute for netincome, operating income, or any other performance measure calculated in accordance with U.S. GAAP. The items excluded from Adjusted EBITDA aresignificant components in understanding and evaluating financial performance. The Company believes such adjustments are appropriate as themagnitude and frequency of such items can vary significantly and are not related to the assessment of normal operating performance. Additionally, thiscalculation of Adjusted EBITDA may not be comparable to similarly titled measures reported by other companies. 10Table of ContentsThe following table reflects the reconciliation of Adjusted EBITDA, as defined, to net loss attributable to Community Health Systems, Inc.stockholders as derived directly from our Consolidated Financial Statements for the years ended December 31, 2018, 2017 and 2016 (in millions): Year Ended December 31, 2018 2017 2016 Net loss attributable to Community Health Systems, Inc. stockholders $(788) $(2,459) $(1,721) Adjustments: Benefit from income taxes (11) (449) (104) Depreciation and amortization 700 861 1,100 Net income attributable to noncontrolling interests 84 63 95 Loss from discontinued operations - 12 15 Interest expense, net 976 931 962 (Gain) loss from early extinguishment of debt (31) 40 30 Impairment and (gain) loss on sale of businesses, net 668 2,123 1,919 Change in estimate for contractual allowances and provision for bad debts - 591 - Gain on sale of investments in unconsolidated affiliates - - (94) Expense (income) from government and other legal settlements and related costs 11 (31) 16 Expense (income) from fair value adjustments and legal expenses related to casescovered by the CVR 13 6 (6) Expense related to the sale of a majority interest in home care division - 1 1 Expense related to the spin-off of QHC - - 12 Expense related to employee termination benefits and other restructuring charges 20 14 - Adjusted EBITDA $ 1,642 $ 1,703 $ 2,225 (10)Same-store operating results and statistical data exclude information for the hospitals divested or closed, including the hospitals included in thespin-off of QHC in the year ended December 31, 2016. In addition, same-store data excludes discontinued operations in the periods presented. Same-store operating results also exclude the overall impact of the change in estimate related to net patient receivables recorded in the fourth quarter of2017. For all hospitals owned throughout both periods, the same-store operating results and statistical data reflects the indicated periods.Sources of RevenueThe following table presents the approximate percentages of net operating revenues by payor source for the periods indicated. The data for the periodspresented are not strictly comparable due to the effect that hospital acquisitions and divestitures have had on these statistics. The percentages of netoperating revenues for 2017 also include the overall impact of the change in estimate recorded in the fourth quarter of 2017 to increase contractualallowances and record additional provision for bad debts. Year Ended December 31, 2018 2017 2016 Medicare 26.3 % 27.8 % 27.2 % Medicaid 13.3 13.2 11.9 Managed Care and other third-party payors 59.0 59.8 58.4 Self-pay 1.4 (0.8) 2.5 Total 100.0 % 100.0 % 100.0 % 11Table of ContentsAs shown above, we receive a substantial portion of our revenues from the Medicare and Medicaid programs. Included in Managed Care and other third-party payors is operating revenues from insurance companies with which we have insurance provider contracts, Medicare managed care, insurance companiesfor which we do not have insurance provider contracts, workers’ compensation carriers and non-patient service revenue, such as rental income and cafeteriasales. In the future, we generally expect the portion of our revenues to be received from the Medicare and Medicaid programs to increase due to the generalaging of the population. In addition, the Affordable Care Act has increased the number of insured patients in states that have expanded Medicaid, which inturn, has reduced the percentage of revenues from self-pay patients. However, it is unclear whether the trend of increased coverage will continue, due in partto the elimination of the financial penalty associated with the individual mandate, effective January 1, 2019. Further, the Affordable Care Act imposessignificant reductions in amounts the government pays Medicare managed care plans. The trend toward increased enrollment in Medicare managed care mayadversely affect our operating revenue growth. Other provisions in the Affordable Care Act impose minimum medical-loss ratios and require insurers to meetspecific benefit requirements. Furthermore, in the normal course of business, managed care programs, insurance companies and employers actively negotiatethe amounts paid to hospitals. The trend toward increased enrollment in managed care may adversely affect our operating revenue growth. There can be noassurance that we will retain our existing reimbursement arrangements or that these third-party payors will not attempt to further reduce the rates they pay forour services.Net operating revenues include amounts estimated by management to be reimbursable by Medicare and Medicaid under prospective payment systems andprovisions of cost-based reimbursement and other payment methods. In addition, we are reimbursed by non-governmental payors using a variety of paymentmethodologies. Amounts we receive for the treatment of patients covered by Medicare, Medicaid and non-governmental payors are generally less than thestandard billing rates. We account for the differences between the estimated program reimbursement rates and the standard billing rates as contractualallowance adjustments, which we deduct from gross revenues to arrive at net operating revenues. Final settlements under some of these programs are subjectto adjustment based on administrative review and audit by third parties. We account for adjustments to previous program reimbursement estimates ascontractual allowance adjustments and report them in the periods that such adjustments become known. Contractual allowance adjustments related to finalsettlements and previous program reimbursement estimates impacted net operating revenues and net loss by an insignificant amount in each of the yearsended December 31, 2018, 2017 and 2016.The payment rates under the Medicare program for hospital inpatient and outpatient acute care services are based on a prospective payment system,depending upon the diagnosis of a patient’s condition. These rates are indexed for inflation annually, although increases have historically been less thanactual inflation. On August 2, 2018, CMS issued the final rule to increase this index by 2.9% for hospital inpatient acute care services that are reimbursedunder the prospective payment system, beginning October 1, 2018. The final rule provides for a 0.8% multifactor productivity reduction, 0.75% reduction tohospital inpatient rates implemented pursuant to the Affordable Care Act, and a positive 0.5% adjustment in accordance with the Medicare Access and CHIPReauthorization Act of 2015, or MACRA, which will yield an estimated net 1.85% increase in reimbursement for hospitals. An additional reduction appliesto hospitals that do not submit required patient quality data. We are complying with this data submission requirement. Payments may also be affected byadmission and medical review criteria for inpatient services commonly known as the “two midnight rule.” Under the rule, for admissions on or afterOctober 1, 2013, services to Medicare beneficiaries are only payable as inpatient hospital services when there is a reasonable expectation that the hospitalcare is medically necessary and will be required across two midnights, absent unusual circumstances. Stays expected to need less than two midnights ofhospital care are subject to medical review on a case-by-case basis. Reductions in the rate of increase or overall reductions in Medicare reimbursement maycause a decline in the growth of our net operating revenues.Currently, several states utilize supplemental reimbursement programs for the purpose of providing reimbursement to providers to offset a portion of thecost of providing care to Medicaid and indigent patients. These programs are designed with input from CMS and are funded with a combination of state andfederal resources, including, in certain instances, fees or taxes levied on the providers. Similar programs are also being 12Table of Contentsconsidered by other states. The programs are generally authorized for a specified period of time and require CMS’s approval to be extended. CMS hasindicated that it will take into account a state’s status with respect to expanding its Medicaid program in considering whether to extend these supplementalprograms. We are unable to predict whether or on what terms CMS will extend the supplemental programs in the states in which we operate. As a result ofexisting supplemental programs, we recognize revenue and related expenses in the period in which the fixed and determinable amounts are estimable andcollection is reasonably assured. Reimbursement under these programs is reflected in net operating revenues and included as Medicaid revenue in the tableabove, and fees, taxes or other program related costs are reflected in other operating expenses.As of December 31, 2018, Florida, Texas and Indiana represented our only areas of significant geographic concentration. Net operating revenuesgenerated by our hospitals in Florida, as a percentage of consolidated operating revenues, were 14.3% in 2018, 14.0% in 2017 and 13.6% in 2016. Netoperating revenues generated by our hospitals in Texas, as a percentage of consolidated operating revenues, were 11.7% in 2018, 10.9% in 2017 and 10.4%in 2016. Net operating revenues generated by our hospitals in Indiana, as a percentage of consolidated operating revenues, were 12.5% in 2018, 11.6% in2017 and 9.4% in 2016.Hospital revenues depend upon inpatient occupancy levels, the volume of outpatient procedures and the charges or negotiated payment rates for hospitalservices provided. Charges and payment rates for routine inpatient services vary significantly depending on the type of service performed and the geographiclocation of the hospital. In recent years, we have experienced a significant increase in revenue received from outpatient services. We attribute this increase to: • advances in technology, which have permitted us to provide more services on an outpatient basis and • pressure from Medicare and Medicaid programs, insurance companies and managed care plans to reduce the length and number of inpatienthospital stays and to reduce costs by having services provided on an outpatient rather than on an inpatient basis.Healthcare facility operations are also subject to certain seasonal fluctuations, including decreases in patient utilization during holiday periods andincreases in colder weather months.Government RegulationOverview. The healthcare industry is required to comply with extensive government regulation at the federal, state and local levels. If we fail to complywith applicable laws and regulations, we may be subject to criminal penalties and civil sanctions, our hospitals could lose their licenses and we could loseour ability to participate in Medicare, Medicaid and other government programs. Hospitals must meet requirements to be certified as hospitals and qualifiedto participate in government programs, including those relating to the adequacy of medical care, equipment, personnel, operating policies and procedures;billing and coding for services; properly handling overpayments; classifications of levels of care provided; preparing and filing of cost reports; relationshipswith referral sources and referral recipients; maintenance of adequate records; hospital use; rate-setting; building codes; environmental protection; andprivacy and security.Hospitals are subject to periodic inspection by federal, state and local authorities to determine their compliance with applicable regulations andrequirements necessary for licensing and certification. All of our hospitals are licensed under appropriate state laws and are qualified to participate inMedicare and Medicaid programs. In addition, most of our hospitals are accredited by The Joint Commission. This accreditation indicates that a hospitalsatisfies the applicable health and administrative standards to participate in Medicare and Medicaid programs.Government regulations may change. If that happens, we may have to make changes to our facilities, equipment, personnel and services so that ourhospitals remain certified as hospitals and qualified to participate in these programs. We believe that our hospitals are in substantial compliance with currentfederal, state and 13Table of Contentslocal regulations and standards. We cannot be certain that governmental officials responsible for enforcing these laws or whistleblowers will not assert thatwe are in violation of them or that such statutes or regulations will be interpreted by the courts in a manner consistent with our interpretation.Healthcare Reform. Over the last decade, the U.S. Congress and certain state legislatures have introduced and passed a large number of proposals andlegislation designed to make major changes in the healthcare system, including changes intended to increase access to health insurance. The most prominentof these efforts, the Affordable Care Act, affects how healthcare services are covered, delivered, and reimbursed, but its future is uncertain. The law has beensubject to legislative and regulatory changes and court challenges, and the presidential administration and certain members of Congress have stated theirintent to repeal or make additional significant changes to, the Affordable Care Act, its implementation or its interpretation. For example, the Affordable CareAct mandates that substantially all U.S. citizens maintain health insurance coverage and increases health insurance coverage through a combination of publicprogram expansion and private sector health insurance reforms. However, as part of the tax reform legislation which was enacted in December 2017, effectiveJanuary 1, 2019, the financial penalty for individuals that fail to maintain health insurance coverage associated with the individual mandate was eliminated.Additionally, final rules issued in 2018 expand the availability of association health plans and allow the sale of short-term, limited-duration health plans,neither of which are required to cover all of the essential health benefits mandated by the Affordable Care Act. These changes may impact the number ofindividuals that elect to obtain public or private health insurance or the scope of such coverage, if purchased. In December 2018, a federal judge in Texasfound the entire Affordable Care Act to be unconstitutional, as a result of the elimination of the individual mandate penalty as noted above. Pending theappeal process, the law remains in place.We believe that the Affordable Care Act has had a positive impact on net operating revenues and income from continuing operations as the result of theexpansion of private sector and Medicaid coverage that has occurred. However, other provisions of the Affordable Care Act, such as requirements related toemployee health insurance coverage, have increased our operating costs. In addition, the Affordable Care Act has made changes to Medicare and Medicaidreimbursement that could adversely impact the reimbursement we receive under these programs. These changes include reductions to the Medicare annualmarket basket update for federal fiscal years 2010 through 2019, a productivity offset to the Medicare market basket update, and reductions to the Medicareand Medicaid disproportionate share hospital payments.Substantial uncertainty remains regarding the ongoing net effect of the Affordable Care Act due to the possibility of repeal or significant additionalchanges to the law, clarifications and modifications resulting from executive orders, the rule-making process, the ultimate outcome of court challenges andthe development of agency guidance, whether and how many states ultimately decide to expand Medicaid coverage and on what terms, the number ofindividuals who elect to purchase health insurance coverage and budgetary issues at federal and state levels. The impact on the healthcare industry andtiming of any potential repeal of or further changes to the Affordable Care Act and any alternative provisions is unknown. For example, members of Congresshave proposed measures that would expand government-sponsored coverage, including single-payor proposals, which could also significantly affecthealthcare providers. It is difficult to predict the nature and success of future financial or delivery system reforms.Fraud and Abuse Laws. Participation in the Medicare and Medicaid programs is heavily regulated by federal statute and regulation. If a hospital fails tocomply substantially with the requirements for participating in the programs, the hospital’s participation may be terminated and/or civil or criminal penaltiesmay be imposed. For example, a hospital may lose its ability to participate in the Medicare program if it engages in any of the following acts: • making claims to Medicare for services not provided or misrepresenting actual services provided in order to obtain higher payments; 14Table of Contents • paying money to induce the referral of patients where services are reimbursable under a federal health program; or • paying money to limit or reduce the services provided to Medicare beneficiaries.Any person or entity that knowingly and willfully defrauds or attempts to defraud a healthcare benefit program, including private healthcare plans, may besubject to fines, imprisonment or both. Additionally, any person or entity that knowingly and willfully falsifies or conceals a material fact or makes anymaterial false or fraudulent statements in connection with the delivery or payment of healthcare services by a healthcare benefit plan is subject to a fine,imprisonment or both.A section of the Social Security Act, known as the “Anti-Kickback Statute” prohibits some business practices and relationships under Medicare, Medicaidand other federal healthcare programs. These practices include the payment, receipt, offer, or solicitation of remuneration of any kind in exchange for items orservices that are reimbursed under most federal or state healthcare programs.The Office of Inspector General of the Department of Health and Human Services, or OIG, is responsible for identifying and investigating fraud and abuseactivities in federal healthcare programs. As part of its duties, the OIG provides guidance to healthcare providers by identifying types of activities that couldviolate the Anti-Kickback Statute. The OIG also publishes regulations outlining activities and business relationships that would be deemed not to violate theAnti-Kickback Statute. These regulations are known as “safe harbor” regulations. The failure of a particular activity to comply with the safe harborregulations does not necessarily mean that the activity violates the Anti-Kickback Statute; however, such failure may lead to increased scrutiny bygovernment enforcement authorities.The OIG has identified the following incentive arrangements as potential violations of the Anti-Kickback Statute: • payment of any incentive by the hospital when a physician refers a patient to the hospital; • use of free or significantly discounted office space or equipment for physicians in facilities usually located close to the hospital; • provision of free or significantly discounted billing, nursing, or other staff services; • free training for a physician’s office staff, including management and laboratory techniques (but excluding compliance training); • guarantees which provide that, if the physician’s income fails to reach a predetermined level, the hospital will pay any portion of the remainder; • low-interest or interest-free loans, or loans which may be forgiven if a physician refers patients to the hospital; • payment of the costs of a physician’s travel and expenses for conferences; • payment of services which require few, if any, substantive duties by the physician, or payment for services in excess of the fair market value of theservices rendered; • coverage on the hospital’s group health insurance plans at an inappropriately low cost to the physician; • purchasing goods or services from physicians at prices in excess of their fair market value; • rental of space in physician offices, at other than fair market value; or 15Table of Contents • physician-owned entities (often referred to as physician-owned distributorships, or PODS) that derive revenue from selling, or arranging for thesale of, implantable medical devices ordered by their physician-owners for use on procedures that physician-owners perform on their own patientsat hospitals or ASCs.We have a variety of financial relationships with physicians who refer patients to our hospitals. Physicians own interests in a number of our facilities.Physicians may also own our stock. We also have contracts with physicians providing for a variety of financial arrangements, including employmentcontracts, leases, management agreements and professional service agreements. We provide financial incentives to recruit physicians to relocate tocommunities served by our hospitals. These incentives include relocation, reimbursement for certain direct expenses, income guarantees and, in some cases,loans. Although we strive to comply with the Anti-Kickback Statute, taking into account available guidance including the “safe harbor” regulations, wecannot assure you that regulatory authorities will not determine otherwise. If that happens, we could be subject to criminal and civil penalties and/orexclusion from participating in Medicare, Medicaid, or other government healthcare programs. Civil monetary penalties are increased annually based onupdates to the consumer price index and were increased under the Bipartisan Budget Act of 2018.The Social Security Act also includes a provision commonly known as the “Stark Law.” This law prohibits physicians from referring Medicare andMedicaid patients to healthcare entities in which they or any of their immediate family members have ownership interests or other financial arrangements.These types of referrals are commonly known as “self referrals.” Sanctions for violating the Stark Law include denial of payment, civil monetary penaltiesthat are increased annually based on updates to the consumer price index, and exclusion from federal healthcare programs.There are ownership and compensation arrangement exceptions to the self-referral prohibition. One exception, known as the “whole hospital” exception,allows a physician to make a referral to a hospital if the physician owns an interest in the entire hospital, as opposed to an ownership interest in a departmentof the hospital. Another exception allows a physician to refer patients to a healthcare entity in which the physician has an ownership interest if the entity islocated in a rural area, as defined in the statute. There are also exceptions for many of the customary financial arrangements between physicians andproviders, including employment contracts, leases and recruitment agreements. From time to time, the federal government has issued regulations thatinterpret the provisions included in the Stark Law.The Affordable Care Act narrowed the “whole hospital” exception to the Stark Law. The Affordable Care Act permitted existing physician investments ina whole hospital to continue under a “grandfather” clause if the arrangement satisfies certain requirements and restrictions, but physicians are prohibited,from the time the Affordable Care Act became effective, from increasing the aggregate percentage of their ownership in the hospital. The Affordable Care Actalso restricts the ability of existing physician-owned hospitals to expand the capacity of their aggregate licensed beds, operating rooms and procedure rooms.The whole hospital exception also contains additional public disclosure requirements.In addition to the restrictions and disclosure requirements applicable to physician-owned hospitals under the Stark Law, CMS regulations requirephysician-owned hospitals and their physician owners to disclose certain ownership information to patients. Physician-owned hospitals must disclose theirphysician ownership in writing to patients and must make a list of their physician owners available upon request. Additionally, each physician owner who isa member of a physician-owned hospital’s medical staff must agree, as a condition of continued medical staff membership or admitting privileges, to disclosein writing to all patients whom they refer to the hospital their (or an immediate family member’s) ownership interest in the hospital. A hospital is consideredto be physician-owned if any physician, or an immediate family member of a physician, holds debt, stock or other types of investment in the hospital or inany owner of the hospital, excluding physician ownership through publicly-traded securities that meet certain conditions. If a hospital fails to comply withthese regulations, the hospital could lose its Medicare provider agreement and be unable to participate in Medicare. 16Table of ContentsEvolving interpretations of current, or the adoption of new, federal or state laws or regulations could affect many of the arrangements entered into by eachof our hospitals. In addition, law enforcement authorities, including the OIG, the courts and Congress have in recent years increased scrutiny of arrangementsbetween healthcare providers and potential referral sources to ensure that the arrangements are not designed as a mechanism to improperly pay for patientreferrals and/or other business. Investigators also have demonstrated a willingness to look behind the formalities of a business transaction to determine theunderlying purpose of payments between healthcare providers and potential referral sources.Many states in which we operate have also adopted laws that prohibit payments to physicians in exchange for referrals similar to the federal Anti-Kickback Statute or that otherwise prohibit fraud and abuse activities. Many states have also passed self-referral legislation similar to the Stark Law,prohibiting the referral of patients to entities with which the physician has a financial relationship. Often these state laws are broad in scope and may applyregardless of the source of payment for care. These statutes typically provide criminal and civil penalties, as well as loss of licensure. Little precedent existsfor the interpretation or enforcement of these state laws.Our operations could be adversely affected by the failure of our arrangements to comply with the Anti-Kickback Statute, the Stark Law, billing laws andregulations, current state laws or other legislation or regulations in these areas adopted in the future. We are unable to predict whether other legislation orregulations at the federal or state level in any of these areas will be adopted, what form such legislation or regulations may take or how they may affect ouroperations. We are continuing to enter into new financial arrangements with physicians and other providers in a manner structured to comply in all materialrespects with these laws. We strive to comply with applicable fraud and abuse laws. We cannot assure you, however, that governmental officials responsiblefor enforcing these laws or whistleblowers will not assert that we are in violation of them or that such statutes or regulations ultimately will be interpreted bythe courts in a manner consistent with our interpretation.Federal False Claims Act and Similar State Laws. Another significant enforcement mechanism used within the healthcare industry is the federal FalseClaims Act, or FCA, which can be used to prosecute Medicare and other government program fraud involving issues such as coding errors, billing for servicenot provided and submitting false cost reports. Further, the FCA covers payments involving federal funds in connection with the health insurance exchangescreated under the Affordable Care Act, if those payments involve any federal funds. Liability under the FCA often arises when an entity knowingly submits afalse claim for reimbursement to the federal government. The FCA broadly defines the term “knowingly.” Although simple negligence will not give rise toliability under the FCA, submitting a claim with reckless disregard to its truth or falsity may constitute “knowingly” submitting a false claim and result inliability. Among the many other potential bases for liability under the FCA is the knowing and improper failure to report and refund amounts owed to thegovernment within 60 days of identifying an overpayment. An overpayment is deemed to be identified when a person has, or should have through reasonablediligence, determined that an overpayment was received and quantified the overpayment. Submission of a claim for an item or service generated in violationof the Anti-Kickback Statute constitutes a false or fraudulent claim under the FCA. In some cases, whistleblowers, the federal government and courts havetaken the position that providers who allegedly have violated other statutes, such as the Stark Law, have thereby submitted false claims under the FCA.When a defendant is determined by a court of law to be liable under the FCA, the defendant must pay three times the actual damages sustained by thegovernment, plus substantial civil penalties for each separate false claim. These civil monetary penalties are adjusted annually based on updates to theconsumer price index. Settlements entered into prior to litigation usually involve a less severe calculation of damages. The FCA also contains “qui tam,” orwhistleblower provisions, which allow private individuals to bring actions on behalf of the government alleging that the defendant has defrauded the federalgovernment. If the government intervenes in the action and prevails, the party filing the initial complaint may share in any settlement or judgment. If thegovernment does not intervene in the action, the whistleblower plaintiff may pursue the action independently and may receive a larger share of anysettlement or judgment. When a private party brings a qui tam action under the 17Table of ContentsFCA, the defendant generally will not be made aware of the lawsuit until the government commences its own investigation or determines whether it willintervene. Every entity that receives at least $5 million annually in Medicaid payments must have written policies for all employees, contractors and agentsproviding detailed information about false claims, false statements and whistleblower protections under certain federal laws, including the FCA, and similarstate laws.A number of states, including states in which we operate, have adopted their own false claims provisions as well as their own whistleblower provisionswhereby a private party may file a civil lawsuit in state court. Federal law provides an incentive to states to enact false claims laws that are comparable to theFCA. From time to time, companies in the healthcare industry, including ours, may be subject to actions under the FCA or similar state laws.Corporate Practice of Medicine; Fee-Splitting. Some states have laws that prohibit unlicensed persons or business entities, including corporations, fromemploying physicians. Some states also have adopted laws that prohibit direct or indirect payments to, or entering into fee-splitting arrangements with,physicians and unlicensed persons or business entities. Possible sanctions for violations of these restrictions include loss of a physician’s license, civil andcriminal penalties and rescission of business arrangements. These laws vary from state to state, are often vague and have seldom been interpreted by thecourts or regulatory agencies. We structure our arrangements with healthcare providers to comply with the relevant state law. However, we cannot provideassurance that governmental officials responsible for enforcing these laws will not assert that we, or transactions in which we are involved, are in violation ofthese laws. These laws may also be interpreted by the courts in a manner inconsistent with our interpretations.Emergency Medical Treatment and Active Labor Act. The Emergency Medical Treatment and Active Labor Act imposes requirements as to the care thatmust be provided to anyone who comes to facilities providing emergency medical services seeking care before they may be transferred to another facility orotherwise denied care. Sanctions for failing to fulfill these requirements include exclusion from participation in Medicare and Medicaid programs and civilmoney penalties, which are increased annually based on updates to the consumer price index. In addition, the law creates private civil remedies that enablean individual who suffers personal harm as a direct result of a violation of the law to sue the offending hospital for damages and equitable relief. A medicalfacility that suffers a financial loss as a direct result of another participating hospital’s violation of the law also has a similar right. Although we believe thatour practices are in compliance with the law, we can give no assurance that governmental officials responsible for enforcing the law will not assert we are inviolation of this law.Conversion Legislation. Many states, including some where we have hospitals and others where we may in the future acquire hospitals, have adoptedlegislation regarding the sale or other disposition of hospitals operated by not-for-profit entities. In other states that do not have specific legislation, theattorneys general have demonstrated an interest in these transactions under their general obligations to protect charitable assets from waste. These legislativeand administrative efforts primarily focus on the appropriate valuation of the assets divested and the use of the proceeds of the sale by the not-for-profit seller.While these reviews and, in some instances, approval processes can add additional time to the closing of a hospital acquisition, we have not had anysignificant difficulties or delays in completing the process. There can be no assurance, however, that future actions on the state level will not seriously delayor even prevent our ability to acquire hospitals. If these activities are widespread, they could limit our ability to acquire hospitals.Certificates of Need. The construction of new facilities, the acquisition of existing facilities, significant capital expenditures and the addition of newservices at our facilities may be subject to state laws that require prior approval by state regulatory agencies. These CON laws generally require that a stateagency determine the public need and give approval prior to the construction or acquisition of facilities, significant capital expenditure or the addition ofnew services. As of December 31, 2018, we operated 79 hospitals in 15 states that have adopted CON laws for acute care facilities. If we fail to obtainnecessary state approval, we will not be able to expand our 18Table of Contentsfacilities, complete acquisitions or significant capital expenditures or add new services in these states. Violation of these state laws may result in theimposition of civil sanctions or the revocation of a hospital’s licenses.HIPAA Administrative Simplification and Privacy and Security Requirements. The Health Insurance Portability and Accountability Act of 1996, orHIPAA, requires the use of uniform electronic data transmission standards for healthcare claims and payment transactions submitted or receivedelectronically. These provisions are intended to encourage electronic commerce in the healthcare industry. HHS has established electronic data transmissionstandards and code sets that all healthcare providers must use when submitting or receiving certain healthcare transactions electronically. In addition, HIPAArequires that each provider use a National Provider Identifier. The Affordable Care Act requires the HHS to adopt standards for additional electronictransactions and to establish operating rules to promote uniformity in the implementation of each standardized electronic transaction.As required by HIPAA, HHS has issued privacy and security regulations that extensively regulate the use and disclosure of individually identifiablehealth-related information and require covered entities, including health plans and most healthcare providers, to implement administrative, physical andtechnical practices to protect the security of individually identifiable health information that is electronically maintained or transmitted. Business associates(entities that handle identifiable health-related information on behalf of covered entities) are subject to direct liability for violation of applicable provisionsof the regulations. In addition, a covered entity may be subject to penalties as a result of a business associate violating HIPAA, if the business associate isfound to be an agent of the covered entity. We have developed and utilize a HIPAA compliance plan as part of our effort to comply with HIPAA privacy andsecurity requirements. The privacy regulations and security regulations have and will continue to impose significant costs on us in order to comply withthese standards.Covered entities must report breaches of unsecured protected health information to affected individuals without unreasonable delay, but not to exceed 60days of discovery of the breach by the covered entity or its agents. Notification must also be made to HHS and, in certain situations involving large breaches,to the media. HHS is required to publish on its website a list of all covered entities that report a breach involving more than 500 individuals. Allnon-permitted uses or disclosures of unsecured protected health information are presumed to be breaches unless the covered entity or business associateestablishes that there is a low probability the information has been compromised. Various state laws and regulations may also require us to notify affectedindividuals in the event of a data breach involving individually identifiable information.Violations of the HIPAA privacy and security regulations may result in criminal penalties and in substantial civil penalties per violation. The civilpenalties are adjusted annually based on updates to the consumer price index. HHS is required to perform compliance audits. In addition to enforcement byHHS, state attorneys general are authorized to bring civil actions seeking either injunction or damages in response to violations of HIPAA privacy andsecurity regulations that threaten the privacy of state residents. HHS may resolve HIPAA violations through informal means, such as allowing a coveredentity to implement a corrective action plan, but HHS has the discretion to move directly to impose monetary penalties and is required to impose penalties forviolations resulting from willful neglect. Our facilities also are subject to any federal or state privacy-related laws that are more restrictive than the privacyregulations issued under HIPAA. These laws vary and could impose additional penalties. For example, the Federal Trade Commission uses its consumerprotection authority to initiate enforcement actions in response to data breaches.PaymentMedicare. Under the Medicare program, we are paid for inpatient and outpatient services performed by our hospitals.Payments for inpatient acute services are generally made pursuant to a prospective payment system, commonly known as “PPS.” Under PPS, our hospitalsare paid a predetermined amount for each hospital discharge based on the patient’s diagnosis. Specifically, each discharge is assigned to a diagnosis-relatedgroup, 19Table of Contentscommonly known as a “DRG,” based upon the patient’s condition and treatment during the relevant inpatient stay. Each DRG is assigned a payment rateusing 100% of the national average cost per case and 100% of the severity-adjusted DRG weights. DRG payments are based on national averages and not oncharges or costs specific to a hospital. Severity-adjusted DRGs more accurately reflect the costs a hospital incurs for caring for a patient and account morefully for the severity of each patient’s condition. However, DRG payments are adjusted by a predetermined geographic adjustment factor assigned to thegeographic area in which the hospital is located. While a hospital generally does not receive payment in addition to a DRG payment, hospitals may qualifyfor an “outlier” payment when the relevant patient’s treatment costs are extraordinarily high and exceed a specified regulatory threshold.The DRG payment rates are adjusted by an update factor on October 1 of each year, the beginning of the federal fiscal year. The index used to adjust theDRG payment rates, known as the “market basket index,” gives consideration to the inflation experienced by hospitals in purchasing goods and services.DRG payment rates were increased by the “market basket index” update of 2.7% and 2.9% for each of federal fiscal years 2018 and 2019, respectively,subject to certain reductions. For federal fiscal year 2018, the market basket update was positively adjusted by 0.46% in accordance with the 21st CenturyCures Act, and reduced by 0.6% for the multi-factor productivity adjustment, reduced 0.75% in accordance with the Affordable Care Act, and reduced by0.6% to remove the effects of prior adjustments related to the two midnight rule. For federal fiscal year 2019, the market basket update was positivelyadjusted by 0.5% in accordance with MACRA, and reduced 0.8% for the multi-factor productively adjustment, and reduced 0.75% in accordance with theAffordable Care Act. A 25% reduction to the market basket index occurs if patient quality data is not submitted, and a reduction of 75% of the market basketindex update occurs for hospitals that fail to demonstrate meaningful use of certified electronic health records, or EHR, technology without receiving ahardship exception. Future legislation may decrease the rate of increase for DRG payments or even decrease such payment rates, but we are unable to predictthe amount of any reduction or the effect that any reduction will have on us.The DRG payment rates are also adjusted to promote value-based purchasing, linking payments to quality and efficiency. First, hospitals that meet orexceed certain quality performance standards will receive greater reimbursement under CMS’s value-based purchasing program, while hospitals that do notsatisfy certain quality performance standards will receive reduced Medicare inpatient hospital payments. The amount collected from the reductions is pooledand used to fund the payments that reward hospitals based on a set of quality measures that have been linked to improved clinical processes of care andpatient satisfaction. CMS scores each hospital on its achievement relative to other hospitals and improvement relative to that hospital’s own pastperformance. Second, hospitals experiencing “excess readmissions” for conditions designated by CMS within 30 days from the patient’s date of dischargewill receive inpatient payments reduced by an amount determined by comparing that hospital’s readmission performance to a risk-adjusted national average.Third, the 25% of hospitals with the worst national risk-adjusted hospital acquired condition, or HAC, rates in the previous year will have their total inpatientoperating Medicare payments reduced by 1%. HHS has indicated that it will increase its efforts to promote, develop and use alternative payment models suchas Accountable Care Organizations, or ACOs, and bundled payment arrangements.In addition, hospitals may qualify for Medicare disproportionate share payments when their percentage of low income patients exceeds specifiedregulatory thresholds. A majority of our hospitals qualify to receive Medicare disproportionate share payments. CMS also distributes a prospectivelydetermined amount to Medicare disproportionate share hospitals based on a hospital’s relative share of uncompensated care. These uncompensated carepayments are drawn from pool that is funded by the 75% reduction in disproportionate share payments that was made pursuant to the Affordable Care Act.The uncompensated care pool is further reduced each year by a formula that reflects reductions in the U.S. uninsured population that is under 65 years of age.Thus, the greater the level of coverage for the uninsured, the more the Medicare uncompensated care pool will be reduced. Each eligible hospital is paid, outof the uncompensated care pool, an amount based upon its estimated cost of providing uncompensated care. These Medicare disproportionate share anduncompensated care payments as a percentage of net operating revenues was 1.27% and 1.16% for the years ended December 31, 2018 and 20Table of Contents2017, respectively. Hospitals may also qualify for Medicaid disproportionate share payments when they qualify under the state established guidelines. TheseMedicaid disproportionate share payments as a percentage of net operating revenues was 0.52% and 0.46% for the years ended December 31, 2018 and 2017,respectively. The Affordable Care Act also provided for reductions to the Medicaid disproportionate share payments, but Congress has delayed theimplementation of those reductions until 2020.We also receive Medicare reimbursement for hospital outpatient services through a PPS. Services paid under the hospital outpatient PPS are grouped intoambulatory payment classifications. APC payment rates are generally determined by applying a conversion factor, which CMS updates annually using amarket basket. For calendar year 2018, CMS estimated an increase in hospital outpatient PPS payments of 1.4%. This reflects a market basket increase of2.7%, with a 0.75% downward adjustment in accordance with the Affordable Care Act, a 0.6% downward productivity adjustment, and other policy changes.For calendar year 2019, CMS estimated an increase in hospital outpatient PPS payments of 0.6%. This reflects a market basket increase of 2.9%, with a 0.75%downward adjustment in accordance with the Affordable Care Act, and a 0.8% downward productivity adjustment. An additional 2.0% reduction to themarket basket update applies to hospitals that do not submit required patient quality data. We are complying with this data submission requirement.Over the next two years, CMS is imposing a site-neutral payment policy for off-campus provider-based departments paid under the outpatient PPS.Off-campus provider-based departments will be paid the Medicare Physician Fee Schedule-equivalent rate for clinic visits. CMS estimates this will result in a0.6% reduction to hospital payments, depending on the volume of clinic visits provided at the hospitals’ off-campus provider-based departments.The Medicare reimbursement discussed above was reduced beginning in 2013 due to the Budget Control Act of 2011 that required across-the-boardspending cuts to the federal budget, also known as sequestration. These sequestration cuts included reductions in payments for Medicare and other federallyfunded healthcare programs, including TRICARE. These reductions have been extended through 2027.Payment under the Medicare program for physician services is based upon the Medicare Physician Fee Schedule, or MPFS, under which CMS has assigneda national relative value unit, or RVU, to most medical procedures and services that reflects the resources required to provide the services relative to all otherservices. Each RVU is calculated based on a combination of the time and intensity of work required, overhead expense attributable to the service, andmalpractice insurance expense. These elements are each modified by a geographic adjustment factor to account for local practice costs and are thenaggregated. The Bipartisan Budget Act of 2018 provides for a 0.25% update to the MPFS, which is then reduced by a 0.14% budget neutrality adjustment foran overall estimated increase of 0.11% for calendar year 2019. MACRA requires the establishment of the Quality Payment Program, or QPP, a paymentmethodology intended to reward high-quality patient care. Beginning in 2017, physicians and certain other healthcare clinicians are required to participatein one of two QPP tracks. Under both tracks, performance data collected each performance year will affect Medicare payments two years later. CMS expects totransition increasing financial risk to providers as QPP evolves. Under the Advanced Alternative Payment Model, or Advanced APM, track, incentivepayments are available based on participation in specific innovative payment models approved by CMS. Providers may earn a Medicare incentive paymentand will be exempt from the reporting requirements and payment adjustments imposed under the Merit-Based Incentive Payment System, or MIPS, if theprovider has sufficient participation in an Advanced APM. Alternatively, providers may participate in the MIPS track, under which physicians will receiveperformance-based payment incentives or payment reductions based on their performance with respect to clinical quality, resource use, clinical improvementactivities, and meaningful use of EHR. MIPS consolidates components of certain previously established physician incentive programs.Medicaid. Most state Medicaid payments are made under a PPS or under programs which negotiate payment levels with individual hospitals. Medicaid isfunded jointly by state and federal government. The federal government and many states are considering various strategies to reduce Medicaid expenditures.Currently, several states utilize supplemental reimbursement programs intended to offset a portion of the costs to providers 21Table of Contentsassociated with providing care to Medicaid and indigent patients. These programs are designed with input from CMS and may be funded with a combinationof state and federal resources, including, in certain instances, fees or taxes levied on the healthcare providers. Many states currently operate, or have appliedto CMS to operate, Medicaid programs under waivers to standard Medicaid program requirements. CMS has indicated that it intends to increase stateflexibility in the administration of Medicaid programs, including allowing states to condition enrollment on work or other community engagement. We canprovide no assurance that changes to Medicaid programs or reductions to Medicaid funding will not have a material adverse effect on our consolidatedresults of operations.TRICARE. TRICARE is the Department of Defense’s healthcare program for members of the armed forces. For inpatient services, TRICARE generallyreimburses hospitals based on a DRG system modeled on the Medicare inpatient PPS. For outpatient services, TRICARE reimburses hospitals based on a PPSthat is similar to that utilized for services furnished to Medicare beneficiaries.Annual Cost Reports. Hospitals participating in the Medicare and some Medicaid programs, whether paid on a reasonable cost basis or under a PPS, arerequired to meet specified financial reporting requirements. Federal and, where applicable, state regulations require submission of annual cost reportsidentifying medical costs and expenses associated with the services provided by each hospital to Medicare beneficiaries and Medicaid recipients.Annual cost reports required under the Medicare and some Medicaid programs are subject to routine governmental audits. These audits may result inadjustments to the amounts ultimately determined to be due to us under these reimbursement programs. Finalization of these audits often takes several years.Providers can appeal any final determination made in connection with an audit. DRG outlier payments have been and continue to be the subject of CMSaudit and adjustment. The OIG is also actively engaged in audits and investigations into alleged abuses of the DRG outlier payment system.Commercial Insurance and Managed Care Companies. Our hospitals provide services to individuals covered by private healthcare insurance or by healthplans administered by managed care companies. These payors pay our hospitals or in some cases reimburse their policyholders based upon the hospital’sestablished charges and the coverage provided in the insurance policy. They try to limit the costs of hospital services by negotiating discounts, includingPPS, which would reduce payments by commercial insurers or health plans to our hospitals. Commercial insurers and managed care companies also seek toreduce payments to hospitals by establishing payment rules that in effect re-characterize the services ordered by physicians. For example, some payorsvigorously review each patient’s length of stay in the hospital and recharacterize as outpatient all inpatient stays of less than a particular duration (e.g., 24hours). Reductions in payments for services provided by our hospitals to individuals covered by these payors could adversely affect us.Under the Managed Medicare program, also known as Medicare Part C, or Medicare Advantage, the federal government contracts with private healthplans to provide members with Medicare benefits. The plans may choose to offer supplemental benefits and impose higher premiums and cost-sharingobligations. Similarly, managed Medicaid programs enable states to contract with private entities to handle program responsibilities like care managementand claims adjudication. Enrollment in Managed Medicare and managed Medicaid programs has increased in recent years as the federal and stategovernments seek to control healthcare costs.Medicare Administrative Contractors. CMS competitively bids the Medicare fiscal intermediary and Medicare carrier functions to MedicareAdministrative Contractors, or MACs, in 12 jurisdictions. Each MAC is geographically assigned and serves both Part A and Part B providers within a givenjurisdiction. Chain providers had the option of having all hospitals use one home office MAC, and we chose to do so. However, CMS has not converted all ofour hospitals to one MAC and currently does not have an established date to accomplish the conversion. CMS periodically re-solicits bids, and the MACservicing a geographic area can change as a result of the bid competition. MAC transition periods can impact claims processing functions and the resultingcash flow. 22Table of ContentsMedicare Integrity. CMS contracts with third parties to promote the integrity of the Medicare program through review of quality concerns and detectionof improper payments. Quality Improvement Organizations, or QIOs, for example, are groups of physicians and other healthcare quality experts that work onbehalf of CMS to ensure that Medicare pays only for goods and services that are reasonable and necessary and that are provided in the most appropriatesetting. Under the Recovery Audit Contractor, or RAC, program, CMS contracts with RACs nationwide to conduct post-payment reviews to detect andcorrect improper payments in the Medicare program, as required by statute. RACs review claims submitted to Medicare for billing compliance, includingcorrect coding and medical necessity. Compensation for RACs is on a contingency basis and based upon the amount of overpayments and underpaymentsidentified, if any. CMS limits the number of claims that RACs may audit by limiting the number of records that RACs may request from hospitals based oneach provider’s claim denial rate for the previous year.The RAC program’s scope also includes Medicaid claims. States may coordinate with Medicaid RACs regarding recoupment of overpayments and refersuspected fraud and abuse to appropriate law enforcement agencies. Under the Medicaid Integrity Program, CMS employs private contractors, referred to asMedicaid Integrity Contractors, or MICs, to perform reviews and post-payment audits of Medicaid claims and identify overpayments. MICs are assigned tofive geographic jurisdictions. Besides MICs, several other contractors and state Medicaid agencies have increased their review activities. CMS istransitioning some of its other integrity programs to a consolidated model by engaging Unified Program Integrity Contractors, or UPICs, to perform audits,investigations and other integrity activities.We maintain policies and procedures to respond to the RAC requests and payment denials. Payment recoveries resulting from RAC reviews and denialsare appealable, and we pursue reversal of adverse determinations at appropriate appeal levels. Currently, there are significant delays in the assignment of newMedicare appeals to Administrative Law Judges. According to the Office of Medicare Hearings and Appeals, the average processing time in fiscal year 2017was approximately three years. HHS has finalized rules intended to streamline the process and improve efficiency but has also stressed the need for additionalfunding. Thus, we may experience significant delays in appealing any RAC payment denials. To ease the backlog of appeals, CMS has announced two newsettlement initiatives. Depending upon the growth of RAC programs and our success in appealing claims in future periods, our cash flows and results ofoperations could be negatively impacted.Accountable Care Organizations. With the aim of reducing healthcare costs by improving quality and operational efficiency, ACOs are gaining tractionin both the public and private sectors. An ACO is a network of providers and suppliers (including hospitals, physicians and other designated professionals)which work together to invest in infrastructure and redesign delivery processes to achieve high quality and efficient delivery of services. ACOs are intendedto produce savings as a result of improved quality and operational efficiency. Pursuant to the Affordable Care Act, HHS established a Medicare SharedSavings Program that seeks to promote accountability and coordination of care through the creation of ACOs. Medicare-approved ACOs that achieve qualityperformance standards established by HHS are eligible to share in a portion of the amounts saved by the Medicare program. HHS has significant discretion todetermine key elements of ACO programs. Certain waivers are available from fraud and abuse laws for ACOs.Bundled Payment Initiatives. The CMS Innovation Center is responsible for establishing demonstration projects and other initiatives in order to identify,develop, test and encourage the adoption of new methods of delivering and paying for healthcare that create savings under the Medicare and Medicaidprograms, while maintaining or improving quality of care. For example, providers participating in bundled payment initiatives accept accountability forcosts and quality of care by agreeing to receive one payment for services provided to Medicare patients for certain medical conditions or episodes of care. Byrewarding providers for increasing quality and reducing costs and penalizing providers if costs exceed a certain amount, bundled payment models areintended to lead to higher quality, more coordinated care at a lower cost to the Medicare program. The CMS Innovation Center has implemented a voluntarybundled payment program known as the Bundled Payment for Care Improvement, or BPCI, initiative. We are participating in BPCI initiatives in ten of ourmarkets. 23Table of ContentsParticipation in bundled payment programs is generally voluntary, but CMS requires hospitals located in certain geographic areas to participate in bundlingprograms for specified orthopedic procedures. CMS has indicated that it is developing more bundled payment models. We expect value-based purchasingprograms, including models that condition reimbursement on patient outcome measures, to become more common with both governmental andnon-governmental payors.Supply ContractsWe purchase items, primarily medical supplies, medical equipment and pharmaceuticals, under an agreement with HealthTrust, a GPO in which we are anoncontrolling partner. As of December 31, 2018, we had a 17.7% ownership interest in HealthTrust. By participating in this organization, we are able toprocure items at competitively priced rates for our hospitals. There can be no assurance that our arrangement with HealthTrust will continue to provide thediscounts that we have historically received.CompetitionThe hospital industry is highly competitive. The competition among hospitals and other healthcare providers for patients has intensified as patients havebecome more conscious of rising costs and quality of care in the healthcare decision-making process. Certain of our hospitals are located in non-urban serviceareas in which we are the sole provider of general acute care health services. Those hospitals in non-urban service areas face no direct competition becausethere are no other hospitals in their primary service areas. However, these hospitals face competition from hospitals outside of their primary service area,including hospitals in urban areas that provide more complex services. Patients in those service areas may travel to these other hospitals for a variety ofreasons, including the need for services we do not offer, payor networks that exclude our providers, or physician referrals. Patients who are required to seekservices from these other hospitals may subsequently shift their preferences to those hospitals for services we do provide. Our other hospitals in selectedurban service areas may face competition from hospitals that are more established than our hospitals. Certain of these competing facilities offer services,including extensive medical research and medical education programs, which are not offered by our facilities. In addition, in certain markets where weoperate, there are large teaching hospitals that provide highly specialized facilities, equipment and services that may not be available at our hospitals. Wealso face competition from other specialized care providers, including outpatient surgery, orthopedic, oncology and diagnostic centers. Some competitors areimplementing physician alignment strategies, such as employing physicians, acquiring physician practice groups, and participating in ACOs, or otherclinical integration models. Cost-reduction strategies by large employer groups and their affiliates may increase this competition. We believe that we willcontinue to face increased competition in outpatient service models that become more integrated through acquisitions or partnerships between physicians,specialized care providers, and managed care payors.In most markets in which we are not the sole provider of general acute care health services, our primary competitor is a not-for-profit hospital. Thesehospitals are owned by tax-supported governmental agencies or not-for-profit entities supported by endowments and charitable contributions. Thesehospitals do not pay income or property taxes, and can make capital expenditures without paying sales tax. These financial advantages may better positionsuch hospitals to maintain more modern and technologically upgraded facilities and equipment and offer services more specialized than those available atour hospitals. Recent consolidations of not-for-profit hospitals may intensify competitive pressures.The number and quality of the physicians on a hospital’s staff is an important factor in a hospital’s competitive position. Physicians decide whether apatient is admitted to the hospital and the procedures to be performed. Admitting physicians may be on the medical staffs of other hospitals in addition tothose of our hospitals. We attempt to attract our physicians’ patients to our hospitals by offering quality services and facilities, convenient locations andstate-of-the-art equipment. In addition, CMS publicizes on its Hospital Compare website data that hospitals submit in connection with Medicarereimbursement claims, including performance data related to quality measures and patient satisfaction surveys. Federal law provides for the future expansionof the number of quality measures that must be reported. Additional quality measures and other future trends toward clinical 24Table of Contentstransparency may have a potential impact on our competitive position and patient volumes in ways that we are unable to predict. In addition, hospitals mustpublish online a list of their standard charges for items and services.Compliance ProgramWe take an operations team approach to compliance and utilize corporate experts for program design efforts and facility leaders for employee-levelimplementation. We believe compliance is another area that demonstrates our utilization of standardization and centralization techniques and initiativeswhich yield efficiencies and consistency throughout our facilities. We recognize that our compliance with applicable laws and regulations depends onindividual employee actions as well as company operations. Our approach focuses on integrating compliance responsibilities with operational functions.This approach is intended to reinforce our company-wide commitment to operate strictly in accordance with the laws and regulations that govern ourbusiness.Our company-wide compliance program has been in place since 1997. Currently, the program’s elements include leadership, management and oversight atthe highest levels, a Code of Conduct, risk area specific policies and procedures, employee education and training, an internal system for reporting concerns,auditing and monitoring programs and a means for enforcing the program’s policies.The compliance program continues to be expanded and developed to meet the industry’s expectations and our needs. Specific written policies,procedures, training and educational materials and programs, as well as auditing and monitoring activities, have been prepared and implemented to addressthe functional and operational aspects of our business. Included within these functional areas are materials and activities for business sub-units, includinglaboratory, radiology, pharmacy, emergency, surgery, observation, home care, skilled nursing and clinics. Specific areas identified through regulatoryinterpretation and enforcement activities have also been addressed in our program. Claims preparation and submission, including coding, billing and costreports, comprise the bulk of these areas. Financial arrangements with physicians and other referral sources, including compliance with the federal anti-kickback statute and the Stark Law, emergency department treatment and transfer requirements and other patient disposition issues, are also the focus ofpolicy and training, standardized documentation requirements and review and audit. Another focus of the program is the interpretation and implementationof the HIPAA standards for privacy and security.We have a Code of Conduct which applies to all directors, officers, employees and consultants, and a confidential disclosure program to enhance thestatement of ethical responsibility expected of our employees and business associates who work in the accounting, financial reporting and asset managementareas of our Company. Our Code of Conduct is posted on our website at www.chs.net/company-overview/code-of-conduct.Corporate Integrity AgreementOn August 4, 2014, we announced that we had entered into a civil settlement with the U.S. Department of Justice, other federal agencies and identifiedrelators that concluded previously announced investigations and litigation related to short stay admissions through emergency departments at certain of ouraffiliated hospitals. See the “Legal Proceedings” discussion in Part II, Item 1 of our Quarterly Report on Form 10-Q for the quarterly period endedSeptember 30, 2014 for further discussion of the background of this matter and details of the settlement. In addition to the amounts paid in the settlement, weexecuted a five-year Corporate Integrity Agreement, or CIA, with the OIG that has been incorporated into our existing and comprehensive complianceprogram.On September 25, 2018, we announced a global resolution and settlement agreements ending the U.S. Department of Justice investigation into certainconduct of HMA and its affiliated entities and settling certain qui tam lawsuits that were initiated and pending, and known to us, before our acquisition bymerger of HMA in 2014. Under this settlement, we made payments totaling $266 million, including interest, in the fourth quarter of 2018. See the “LegalProceedings” discussion in Part II, Item 1 of our Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2018 and the press release filedtherewith on September 25, 2018 for 25Table of Contentsfurther discussion of this matter and the details of the settlement. Additionally, under the terms of the global settlement, our existing CIA has been amendedand extended. The extension began immediately and effectively adds two years to the existing CIA, with the amended CIA now running through 2021.The compliance measures and reporting and auditing requirements contained in the CIA include: • continuing the duties and activities of our Corporate Compliance Officer, Corporate Compliance Work Group, and Facility Compliance Officersand committees; • maintaining our written Code of Conduct, which sets forth our commitment to full compliance with all statutes, regulations, and guidelinesapplicable to federal healthcare programs; • maintaining our written policies and procedures addressing the operation of our Compliance Program, including adherence to medical necessityand admissions standards for inpatient hospital stays; • continuing our general compliance training; • providing specific training for appropriate personnel on billing, case management and clinical documentation; • engaging an independent third party to perform an annual review of our compliance with the CIA; • continuing our Confidential Disclosure Program and hotline to enable employees or others to disclose issues or questions regarding possibleinappropriate policies or behavior; • maintaining our screening program to ensure that we do not hire or engage employees or contractors who are ineligible persons for federalhealthcare programs; • notifying the OIG of any government investigations; • reporting any material deficiency which resulted in an overpayment to us by a federal healthcare program; and • submitting annual reports to the OIG which describe in detail the operations of our corporate Compliance Program for the past year.Material, uncorrected violations of the CIA could lead to our suspension or disbarment from participation in Medicare, Medicaid and other federal andstate healthcare programs and repayment obligations. In addition, we are subject to possible civil penalties for failure to substantially comply with the termsof the CIA, including stipulated penalties ranging from $1,000 to $2,500 per day. We are also subject to a stipulated penalty of $50,000 for each falsecertification made by us or on our behalf in connection with reports required under the CIA. The CIA increases the amount of information we must provide tothe federal government regarding our healthcare practices and our compliance with federal regulations. The reports we provide in connection with the CIAcould result in greater scrutiny by regulatory authorities. We believe our existing Compliance Program addresses compliance with the operational terms ofthe CIA.Employees and Medical StaffAt December 31, 2018, we had approximately 87,000 employees, including approximately 17,000 part-time employees. References herein to “employees”refer to employees of our affiliates. We are subject to various state and federal laws that regulate wages, hours, benefits and other terms and conditionsrelating to employment. At December 31, 2018, certain employees at ten of our hospitals are represented by various labor unions. It is likely that unionorganizing efforts will take place at additional hospitals in the future. We consider our employee relations to be good and have not experienced workstoppages that have materially, adversely affected our 26Table of Contentsbusiness or results of operations. Our hospitals, like most hospitals, have experienced rising labor costs. In some markets, nurse and medical supportpersonnel availability has become a significant operating issue to healthcare providers. To address this challenge, we have implemented several initiatives toimprove retention, recruiting, compensation programs and productivity.Our hospitals are staffed by licensed physicians, including both employed physicians and physicians who are not employees of our hospitals. Somephysicians provide services in our hospitals under contracts, which generally describe a term of service, provide and establish the duties and obligations ofsuch physicians, require the maintenance of certain performance criteria and fix compensation for such services. Any licensed physician may apply to beaccepted to the medical staff of any of our hospitals, but the hospital’s medical staff and the appropriate governing board of the hospital, in accordance withestablished credentialing criteria, must approve acceptance to the staff. Members of the medical staffs of our hospitals often also serve on the medical staffs ofother hospitals and may terminate their affiliation with one of our hospitals at any time.We may be required to continue to enhance wages and benefits to recruit and retain nurses and other medical support personnel or to hire more expensivetemporary or contract personnel. As a result, our labor costs could increase. We also depend on the available labor pool of semi-skilled and unskilledemployees in each of the markets in which we operate. Certain proposed changes in federal labor laws and the National Labor Relations Board’s pendingmodification of its election procedures could increase the likelihood of employee unionization attempts. To the extent a significant portion of our employeebase unionizes, our costs could increase significantly. In addition, the states in which we operate could adopt mandatory nurse-staffing ratios or could reducemandatory nurse-staffing ratios already in place. State-mandated nurse-staffing ratios could significantly affect labor costs, and have an adverse impact onrevenues if we are required to limit patient admissions in order to meet the required ratios.Professional Liability ClaimsAs part of our business of owning and operating hospitals, we are subject to legal actions alleging liability on our part. To cover claims arising out of theoperations of hospitals, we maintain professional malpractice liability insurance and general liability insurance on a claims made basis in excess of thoseamounts for which we are self-insured, in amounts we believe to be sufficient for our operations. We also maintain umbrella liability coverage for claimswhich, due to their nature or amount, are not covered by our other insurance policies. However, our insurance coverage does not cover all claims against us ormay not continue to be available at a reasonable cost for us to maintain adequate levels of insurance. For a further discussion of our insurance coverage, seeour discussion of professional liability claims in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Part II, Item 7of this Form 10-K.Environmental MattersWe are subject to various federal, state and local laws and regulations governing the use, discharge and disposal of hazardous materials, including medicaland pharmaceutical waste products. We do not currently expect compliance with these laws and regulations to have a material adverse effect on us. It ispossible, however, that environmental issues may arise in the future which we cannot now predict.We are insured for damages of personal property or environmental injury arising out of environmental impairment for both above ground andunderground storage tank issues under one insurance policy for all of our hospitals. Our policy coverage is $5 million per occurrence with a $100,000deductible and a $20 million annual aggregate. This policy also provides pollution legal liability coverage.Item 1A. Risk FactorsOur business faces a variety of risks. If any of the events or circumstances described in any of the following risk factors occurs, our business, results ofoperations or financial condition could be materially and adversely 27Table of Contentsaffected, and our actual results may differ materially from those predicted in any forward-looking statements we make in any public disclosures. Additionalfactors that could affect our business, results of operations and financial condition are discussed elsewhere in this Report (including in “Management’sDiscussion and Analysis of Financial Condition and Results of Operations” in Part II, Item 7 of this Form 10-K). Additional risks or uncertainties notpresently known to us, or that we currently deem immaterial, also may adversely affect our business, results of operations and financial condition.Our level of indebtedness could adversely affect our ability to refinance existing indebtedness or raise additional capital to fund our operations, limit ourability to react to changes in the economy or our industry and prevent us from meeting our obligations under the agreements related to our indebtedness.We have a significant amount of indebtedness, which is more fully described in the Liquidity and Capital Resources section of “Management’sDiscussion and Analysis of Financial Condition and Results of Operations” in Part II, Item 7 of this Form 10-K and Note 7 of the Notes to ConsolidatedFinancial Statements included under Part II, Item 8 of this Form 10-K. As of December 31, 2018, we had approximately $10.7 billion aggregate principalamount of senior secured indebtedness outstanding, and approximately $2.9 billion of senior unsecured indebtedness outstanding.Our substantial leverage could have important consequences, including the following: • it may limit our ability to refinance existing indebtedness or obtain additional debt or equity financing for working capital, capital expenditures,debt service requirements, acquisitions and general corporate or other purposes; • a substantial portion of our cash flows from operations will be dedicated to the payment of principal and interest on our indebtedness and will notbe available for other purposes, including to fund our operations, capital expenditures, financial obligations and future business opportunities; • some of our borrowings, including borrowings under our credit facilities, accrue interest at variable rates, exposing us to the risk of increasedinterest rates; • it may limit our ability to make strategic acquisitions or cause us to make nonstrategic divestitures; • it may limit our ability to adjust to changing market conditions and place us at a competitive disadvantage compared to our competitors that areless highly leveraged; and • it may increase our vulnerability in connection with adverse changes in general economic, industry or competitive conditions or governmentregulations or other adverse developments.We may not be able to generate sufficient cash to service all of our indebtedness, and we may be forced to take other actions to satisfy our obligationsunder our indebtedness, which may not be successful.Our ability to make scheduled payments on or to refinance our indebtedness depends on our financial and operating performance, which is subject toprevailing economic and competitive conditions and to financial, business, regulatory and other factors beyond our control. We cannot assure you that wewill maintain a level of cash flows from operating activities sufficient to permit us to pay the principal, premium, if any, and interest on our indebtedness.In addition, we are a holding company with no direct operations. Our principal assets are the equity interests we hold in our operating subsidiaries. As aresult, we are dependent upon dividends and other payments from our subsidiaries to generate the funds necessary to meet our outstanding debt service andother obligations. Our subsidiaries may not generate sufficient cash from operations to enable us to make principal and interest payments on ourindebtedness. In addition, any payments of dividends, distributions, loans or advances to us by our subsidiaries could be subject to legal and contractualrestrictions. 28Table of ContentsIf our cash flows and capital resources are insufficient to fund our debt service obligations, we could face substantial liquidity problems and may be forcedto reduce or delay capital expenditures, sell assets or operations, seek additional capital or restructure or refinance our indebtedness. Our ability to refinanceour indebtedness on favorable terms, or at all, is directly affected by the then current general economic and financial conditions. In addition, our ability toincur secured indebtedness (which would generally enable us to achieve better pricing than the incurrence of unsecured indebtedness) depends in part on thevalue of our assets, which depends, in turn, on the strength of our cash flows and results of operations, and on economic and market conditions and otherfactors. We may find it necessary or prudent to refinance certain of our outstanding indebtedness, the terms of which may not be favorable to us.We cannot assure you that we would be able to take any of these actions, that these actions would be successful and permit us to meet our scheduled debtservice obligations or that these actions would be permitted under the terms of our existing or future debt agreements, including our credit facilities and theindentures governing our outstanding notes. For example, our debt agreements and the indentures governing our outstanding notes restrict our ability todispose of assets and use the proceeds from any dispositions. We may not be able to consummate those dispositions and any proceeds we receive may not beadequate to meet any debt service obligations then due.Restrictive covenants in the agreements governing our indebtedness may adversely affect us.Our credit facilities and the indentures governing our outstanding notes contain various covenants that limit our ability to take certain actions, includingour ability to: • incur, assume or guarantee additional indebtedness; • issue redeemable stock and preferred stock; • repurchase capital stock; • make restricted payments, including paying dividends and making certain loans, acquisitions and investments; • redeem subordinated debt; • create liens; • sell or otherwise dispose of assets, including capital stock of subsidiaries; • impair security interests; • enter into agreements that restrict dividends and certain other payments from subsidiaries; • merge, consolidate, sell or otherwise dispose of substantially all our assets; • enter into transactions with affiliates; and • guarantee certain obligations.In addition, our credit facilities contain restrictive covenants and require us to maintain specified financial ratios and satisfy other financial conditiontests. Our ability to meet these restrictive covenants and financial ratios and tests may be affected by events beyond our control, and we cannot assure youthat we will meet those tests.A breach of any of these covenants could result in a default under our credit facilities and the indentures governing our outstanding notes. Upon theoccurrence of an event of default under our credit facilities or any of 29Table of Contentsthe indentures governing our outstanding notes, all amounts outstanding under the applicable indebtedness may become immediately due and payable andall commitments under the credit facilities to extend further credit may be terminated.Our variable rate indebtedness subjects us to interest rate risk, which could cause our debt service obligations to increase significantly.Our borrowings under our credit facilities are at variable rates of interest and expose us to interest rate risk. If interest rates increase, our debt serviceobligations on the variable rate indebtedness would increase even though the amount borrowed remained the same, and our net income would decrease. Ourinterest expense, net, for the year ended December 31, 2018 was $976 million. For the year ended December 31, 2018, a fluctuation in interest rates of 1% onour variable rate debt that is not hedged by interest rate swaps would have resulted in a fluctuation in our interest expense of approximately $11 million.If we are unable to make payments on our indebtedness, we could be in default under the terms of the agreements governing our indebtedness.If we are unable to generate sufficient cash flow and are otherwise unable to obtain funds necessary to meet required payments of principal, premium, ifany, and interest on our indebtedness, or if we otherwise fail to comply with the various covenants, including financial and operating covenants, in theinstruments governing our indebtedness, including covenants in our credit facilities and the indentures governing our outstanding notes, we could be indefault under the terms of the agreements governing such indebtedness. In the event of any default, the holders of such indebtedness could elect to declare allthe funds borrowed to be immediately due and payable, together with accrued and unpaid interest; the lenders under our credit facilities could elect toterminate their commitments thereunder, cease making further loans and direct the applicable collateral agents to institute foreclosure proceedings againstour assets; and we could be forced into bankruptcy or liquidation. If our operating performance declines, we may in the future need to obtain waivers from therequired lenders under our credit facilities to avoid being in default. If we breach our covenants under our credit facilities and seek a waiver, we may not beable to obtain a waiver from the required lenders. If this occurs, we would be in default under our credit facilities, the lenders could exercise their rights, asdescribed above, and we could be forced into bankruptcy or liquidation.We have a substantial amount of indebtedness that will mature and become due in the near future.As further described in the Liquidity and Capital Resources section of “Management’s Discussion and Analysis of Financial Condition and Results ofOperations” in Part II, Item 7 of this Form 10-K and Note 7 of the Notes to Consolidated Financial Statements included under Part II, Item 8 of this Form 10-K,we have a substantial amount of indebtedness scheduled to mature in the near future, a significant portion of which will mature in close proximity to eachother. As a result, we may not have sufficient cash to repay all amounts owing under such indebtedness and there can be no assurance that we will have theability to borrow or otherwise raise the amounts necessary to repay all such amounts. Our ability to refinance our indebtedness on favorable terms, or at all, isdependent on (among other things) conditions in the credit and capital markets which are beyond our control.Despite current indebtedness levels, we may still be able to incur substantially more debt. This could further exacerbate the risks described above.We and our subsidiaries have the ability to incur substantial additional indebtedness in the future, subject to restrictions contained in our credit facilitiesand the indentures governing our outstanding notes. Our ABL facility provides for commitments and borrowings of up to $1.0 billion in the aggregate, ofwhich approximately $698 million was outstanding as of December 31, 2018. In addition, as of December 31, 2018, our revolving credit facility provided forcommitments and borrowings of up to $425.0 million in the aggregate, of which none was outstanding as of December 31, 2018. On February 15, 2019, ourCredit Facility was amended, which 30Table of Contentsreduced our revolving credit commitments to $385 million. Our credit facilities also give us the ability to provide for one or more additional tranches of termloans and increases in our revolving credit facility in the aggregate principal amount of up to the greater of (x) $500 million and (y) an amount such that oursenior secured net leverage ratio would not exceed 4.0:1.0 without the consent of the existing lenders if specified criteria are satisfied. If additionalindebtedness is added to our current debt levels, the related risks that we currently face related to indebtedness as noted above could increase.If we are unable to continue to complete divestitures as previously disclosed, our results of operations and financial condition could be adversely affected.We have been implementing a portfolio rationalization and deleveraging strategy by divesting hospitals and non-hospital businesses that are attractive tostrategic and other buyers. Generally, these businesses are not in one of our strategically beneficial service areas, are less complementary to our businessstrategy and/or have lower operating margins. In connection with our announced divestiture initiative, we have received offers from strategic buyers to buycertain of our assets. After considering these offers, we have divested or may divest hospitals and non-hospital businesses when we find such offers to beattractive and in line with our operating strategy. However, there is no assurance that contemplated divestitures will be completed, will be completed withinour contemplated timeframe, or will be completed on terms favorable to us or on terms sufficient to allow us to achieve our deleveraging strategy.Additionally, the results of operations for these hospitals we plan to divest and the potential gains or losses on the sales of those businesses may adverselyaffect our profitability. Moreover, we may incur asset impairment charges related to planned or completed divestitures that reduce our profitability.In addition, after entering into a definitive agreement, we may be subject to the satisfaction of pre-closing conditions as well as necessary regulatory andgovernmental approvals, which, if not satisfied or obtained, may prevent us from completing the sale. Divestitures may also involve continued financialexposure related to the divested business, such as through indemnities or retained obligations, that present risk to us.Our planned divestiture activities may present financial, managerial, and operational risks. Those risks include diversion of management attention fromimproving existing operations; additional restructuring charges and the related impact from separating personnel, renegotiating contracts, and restructuringfinancial and other systems; adverse effects on existing business relationships with patients and third-party payors; and the potential that the collectability ofany patient accounts receivable retained from any divested hospital may be adversely impacted. Any of these factors could adversely affect our financialcondition and results of operations.We are the subject of various legal, regulatory and governmental proceedings that, if resolved unfavorably, could have an adverse effect on us, and we maybe subject to other loss contingencies, both known and unknown.We are a party to various legal, regulatory and governmental proceedings and other related matters. Those proceedings include, among other things,government investigations. In addition, we are and may become subject to other loss contingencies, both known and unknown, which may relate to past,present and future facts, events, circumstances and occurrences. Should an unfavorable outcome occur in connection with our legal, regulatory orgovernmental proceedings or other loss contingencies, or if we become subject to any such loss contingencies in the future, there could be an adverse impacton our financial position, results of operations and liquidity.In particular, government investigations, as well as qui tam lawsuits, may lead to significant fines, penalties, damages payments or other sanctions,including exclusion from government healthcare programs. Settlements of lawsuits involving Medicare and Medicaid issues routinely require both monetarypayments and corporate integrity agreements, each of which could have an adverse effect on our business, financial condition, results of operations and/orcash flows. 31Table of ContentsThe impact of past acquisitions, as well as potential future acquisitions, could have a negative effect on our operations.Our business strategy has historically included growth by acquisitions. However, not-for-profit hospital systems and other for-profit hospital companiesgenerally attempt to acquire the same type of hospitals as we do. LifePoint Health, Inc. is a principal competitor for acquisitions. Other competitors includeHCA Holdings, Inc., or HCA, Universal Health Services, Inc., or UHS, other non-public, for profit hospitals and local market hospitals. Some of thecompetitors for our acquisitions have greater financial resources than we have. Furthermore, some hospitals are sold through an auction process, which mayresult in higher purchase prices than we believe are reasonable. Therefore, we may not be able to acquire additional hospitals on terms favorable to us.In addition, many of the hospitals we have acquired have had lower operating margins than we do and operating losses incurred prior to the time weacquired them. Hospitals acquired in the future may have similar financial performance issues. In the past, we have experienced delays in improving theoperating margins or effectively integrating the operations of certain acquired hospitals, including some hospitals acquired in connection with the HMAmerger. In the future, if we are unable to improve the operating margins of acquired hospitals, operate them profitably, or effectively integrate theiroperations, our results of operations and business may be adversely affected.Moreover, hospitals that we have acquired, or in the future could acquire, may have unknown or contingent liabilities, including liabilities associatedwith ongoing legal proceedings or for failure to comply with healthcare laws and regulations. Although we generally seek indemnification from sellerscovering these matters, we may nevertheless have material liabilities for past activities of acquired hospitals.State efforts to regulate the construction, acquisition or expansion of healthcare facilities could limit our ability to build or acquire additional healthcarefacilities, renovate our facilities or expand the breadth of services we offer.Some states in which we operate require a CON or other prior approval for the construction or acquisition of healthcare facilities, capital expendituresexceeding a prescribed amount, changes in bed capacity or services and some other matters. In evaluating a proposal, these states consider the need foradditional or expanded healthcare facilities or services. If we are not able to obtain required CONs or other prior approvals, we will not be able to acquire,operate, replace or expand our facilities or expand the breadth of services we offer. Furthermore, if a CON or other prior approval upon which we relied toinvest in construction of a replacement or expanded facility were to be revoked or lost through an appeal process, we may not be able to recover the value ofour investment.State efforts to regulate the sale of hospitals operated by municipal or not-for-profit entities could prevent us from acquiring these types of hospitals.Many states have adopted legislation regarding the sale or other disposition of hospitals operated by municipal or not-for-profit entities. In some statesthat do not have specific legislation, the attorneys general have demonstrated an interest in these transactions under their general obligation to protect theuse of charitable assets. These legislative and administrative efforts focus primarily on the appropriate valuation of the assets divested and the use of theproceeds of the sale by the non-profit seller. While these review and, in some instances, approval processes can add additional time to the closing of ahospital acquisition, we have not had any significant difficulties or delays in completing acquisitions. However, future state actions could delay or evenprevent our ability to acquire hospitals once we return to our acquisition strategy.If we are unable to effectively compete, patients could use other hospitals and healthcare providers.The healthcare industry is highly competitive among hospitals and other healthcare providers for patients, affiliations with physicians and acquisitions.However, the majority of our hospitals are located in non-urban service areas where we believe we are the sole provider of general acute care health services.As a result, the 32Table of Contentsmost significant competition our hospitals face comes from hospitals outside of our primary service areas, typically hospitals in urban areas that provide morecomplex services. Patients in our primary service areas may travel to other hospitals because of physician referrals, payor networks that exclude our providersor the need for services we do not offer, among other reasons. Patients who receive services from these other hospitals may subsequently shift their preferencesto those hospitals for the services we provide. Other healthcare providers, including outpatient surgery, orthopedic, oncology and diagnostic centers, alsocompete for patients. Our hospitals, our competitors, and other healthcare industry participants are increasingly implementing physician alignment strategies,such as acquiring physician practice groups, employing physicians and participating in ACOs or other clinical integration models, which may impact ourcompetitive position. In addition, increasing consolidation within the payor industry, vertical integration efforts involving payors and healthcare providers,and cost-reduction strategies by large employer groups and their affiliates may impact our ability to contract with payors on favorable terms and otherwiseaffect our competitive position.At December 31, 2018, 38 of our hospitals competed with more than one other non-affiliated hospital in their respective primary service areas. In mostmarkets in which we are not the sole provider of general acute care health services, our primary competitor is a municipal or not-for-profit hospital. Thesehospitals are owned by tax-supported governmental agencies or not-for-profit entities supported by endowments and charitable contributions. They do notpay income or property taxes, and can make capital expenditures without paying sales tax. These financial advantages may better position these hospitals tomaintain more modern and technologically upgraded facilities and equipment and offer services more specialized than those available at our hospitals. If ourcompetitors are better able to attract patients with these offerings, we may experience an overall decline in patient volume.Trends toward clinical transparency and value-based purchasing may have an unanticipated impact on our competitive position and patient volumes. TheCMS Hospital Compare website makes available to the public certain data that hospitals submit in connection with Medicare reimbursement claims,including performance data related to quality measures and patient satisfaction surveys. Further, every hospital must establish and update annually a public,online listing of the hospital’s standard charges for items and services. If any of our hospitals achieve poor results (or results that are lower than ourcompetitors) on these quality measures or on patient satisfaction surveys, or if our standard charges are higher than our competitors, we may attract fewerpatients.We expect these competitive trends to continue. If we are unable to compete effectively with other hospitals and other healthcare providers, patients mayseek healthcare services at providers other than our hospitals and affiliated businesses.The failure to obtain our medical supplies at favorable prices could cause our operating results to decline.We have a participation agreement with HealthTrust, a GPO. The current term of this agreement expires in January 2020, with automatic renewal terms ofone year unless either party terminates by giving notice of non-renewal. GPOs attempt to obtain favorable pricing on medical supplies with manufacturersand vendors, sometimes by negotiating exclusive supply arrangements in exchange for discounts. To the extent these exclusive supply arrangements arechallenged or deemed unenforceable, we could incur higher costs for our medical supplies obtained through HealthTrust. Further, costs of supplies and drugsmay continue to increase due to market pressure from pharmaceutical companies and new product releases. Higher costs could continue to adversely impactour operating results. Also, there can be no assurance that our arrangement with HealthTrust will provide the discounts we expect to achieve.If the fair value of our reporting units declines, a material non-cash charge to earnings from impairment of our goodwill could result.At December 31, 2018, we had approximately $4.6 billion of goodwill. We expect to recover the carrying value of this goodwill through our future cashflows. On an ongoing basis, under U.S. GAAP, we evaluate, based on the fair value of our reporting units, whether the carrying value of our goodwill isimpaired when events or 33Table of Contentschanges in circumstances indicate that such carrying value may not be recoverable. U.S. GAAP requires us to test goodwill for impairment at least annually.During the three months ended December 31, 2017, in connection with the preparation of the financial statements included in our Annual Report on Form10-K for the year ended December 31, 2017, we identified certain indicators of impairment and performed an interim goodwill impairment evaluation as ofNovember 30, 2017. Those indicators were primarily a further decline in our market capitalization and fair value of our long-term debt during November2017. We performed an estimated calculation of fair value in step one of the impairment test at November 30, 2017, which indicated that the carrying valueof our hospital operations reporting unit exceeded its fair value. As further discussed in the footnotes to the consolidated financial statements, during thethree months ended December 31, 2017 we early adopted the accounting guidance in Accounting Standards Update, or ASU, 2017-04, which eliminates thestep two calculation to determine the implied value of goodwill, and instead requires an impairment of goodwill equal to the difference between the carryingvalue and estimated fair value of the reporting unit determined in step one. As a result of this evaluation and the early adoption of ASU 2017-04, we recordeda non-cash impairment charge of $1.419 billion to goodwill during the three months ended December 31, 2017.In addition, during the three months ended June 30, 2016, we identified certain indicators of impairment requiring an interim goodwill impairmentevaluation. Those indicators were primarily the decline in our market capitalization and fair value of long-term debt during the three months ended June 30,2016, and a decline in our projected future earnings. We performed an estimated calculation of fair value in step one of the impairment test at June 30, 2016,which indicated that the carrying value of our hospital operations reporting unit exceeded its fair value, which calculation was updated during the threemonths ended September 30, 2016. A step two calculation was performed to determine the implied value of goodwill in a hypothetical purchase priceallocation. Based on these analyses, we recorded a non-cash impairment charge of $1.395 billion to goodwill during the year ended December 31, 2016based on the fair value and resulting implied goodwill at that time.The reduction in our fair value and the resulting goodwill impairment charges recorded during 2016 and 2017 reduced the carrying value of our hospitaloperations reporting unit to an amount equal to our estimated fair value. This increases the risk that future declines in fair value could result in goodwillimpairment. The determination of fair value in step one of our goodwill impairment analysis is based on an estimate of fair value for the hospital operationsreporting unit utilizing known and estimated inputs at the evaluation date. Some of those inputs include, but are not limited to, the most recent price of ourcommon stock or fair value of our long-term debt, estimates of future revenue and expense growth, estimated market multiples, expected capital expenditures,income tax rates, and costs of invested capital. Future estimates of fair value could be adversely affected if the actual outcome of one or more of theseassumptions changes materially in the future, including further decline in our stock price or fair value of our long-term debt, lower than expected hospitalvolumes, higher market interest rates or increased operating costs. Such changes impacting the calculation of our fair value could result in a materialimpairment charge in the future.A significant decline in operating results or other indicators of impairment at one or more of our facilities could result in a material, non-cash charge toearnings to impair the value of long-lived assets.Our operations are capital intensive and require significant investment in long-lived assets, such as property, equipment and other long-lived intangibleassets, including capitalized internal-use software. If one of our facilities experiences declining operating results or is adversely impacted by one or more ofthese risk factors, we may not be able to recover the carrying value of those assets through our future operating cash flows. On an ongoing basis, we evaluatewhether changes in future undiscounted cash flows reflect an impairment in the fair value of our long-lived assets. Additionally, as we continue to rationalizeour portfolio of hospitals, we evaluate whether a hospital or a group of hospitals is impaired based on an analysis of the selling price from a definitiveagreement compared to the carrying value of the net assets being sold. If the carrying value of our long-lived assets is impaired, we may incur a materialnon-cash charge to earnings. 34Table of ContentsWe are unable to predict the ultimate impact of health reform initiatives, including the Affordable Care Act, and our business may be adversely affected ifthe Affordable Care Act is repealed entirely or found to be unconstitutional or if provisions benefitting our operations are significantly modified.In recent years, the U.S. Congress and certain state legislatures have introduced and passed a large number of proposals and legislation designed to makemajor changes in the healthcare system, including changes intended to increase access to health insurance. The most prominent of these efforts, theAffordable Care Act, affects how healthcare services are covered, delivered, and reimbursed. The Affordable Care Act mandates that substantially all U.S.citizens maintain health insurance coverage, expands health insurance coverage through a combination of public program expansion and private sectorhealth insurance reforms, reduces Medicare reimbursement to hospitals, and promotes value-based purchasing. However, effective January 2019, the financialpenalty for individuals that fail to maintain insurance coverage associated with the individual mandate was eliminated. We are unable to determine theimpact of this change, but it could have an adverse effect on us.Further, efforts by the presidential administration and certain members of Congress, as well as court challenges, to repeal or make significant changes tothe Affordable Care Act, its implementation and/or its interpretation have cast considerable uncertainty on the future of the law. For example, a presidentialexecutive order has been signed that directs agencies to minimize “economic and regulatory burdens” of the Affordable Care Act. In December 2018, afederal judge in Texas found the entire Affordable Care Act to be unconstitutional as a result of the individual mandate penalty being eliminated. However,the law remains in place pending appeal. In addition, CMS administrators have indicated that they intend to grant states additional flexibility in theadministration of state Medicaid programs, including by expanding the scope of waivers under which states may impose different eligibility or enrollmentrestrictions or otherwise implement programs that vary from federal standards. In June 2018, the Department of Labor issued a final rule expandingavailability of association health plans, which are not required to adhere to specific Affordable Care Act coverage mandates. There is uncertainty regardingwhether, when, and how the Affordable Care Act will be further changed, what alternative provisions, if any, will be enacted, the timing of enactment andimplementation of alternative provisions, the impact of alternative provisions on providers as well as other healthcare industry participants, the ultimateoutcome of court challenges and how the law will be interpreted and implemented. Court challenges and changes by Congress or government agencies couldeliminate or alter provisions beneficial to us while leaving in place provisions reducing our reimbursement. Government efforts to repeal or change theAffordable Care Act or implement other reform initiatives may have an adverse effect on our business, results of operations, cash flow, capital resources andliquidity. Members of Congress have also proposed measures that would expand government-sponsored coverage, including single-payor proposals. Otherindustry participants, such as private payors and large employer groups and their affiliates, may also introduce financial or delivery system reforms. We areunable to predict the nature and success of such initiatives.If reimbursement rates paid by federal or state healthcare programs or commercial payors are reduced, if we are unable to maintain favorable contractterms with payors or comply with our payor contract obligations, if insured individuals move to insurance plans with greater coverage exclusions ornarrower networks, or if insurance coverage is otherwise restricted or reduced, our net operating revenues may decline.In 2018, 39.6% of our net operating revenues, came from the Medicare and Medicaid programs. However, as federal healthcare expenditures continue toincrease and state governments continue to face budgetary shortfalls, federal and state governments have made, and continue to make, significant changes inthe Medicare and Medicaid programs. These changes include reductions in reimbursement levels and to supplemental payment programs, likedisproportionate share hospital programs, as well as new or modified demonstration projects authorized pursuant to Medicaid waivers. Some of these changeshave decreased, or could decrease, the amount of money we receive for our services relating to these programs.In addition, government and commercial payors as well as other third parties from whom we receive payment for our services attempt to control healthcarecosts by, for example, requiring hospitals to discount payments for their services in exchange for exclusive or preferred participation in their benefit plans,restricting coverage 35Table of Contentsthrough utilization review, reducing coverage of inpatient and emergency room services and shifting care to outpatient settings, requiring priorauthorizations, and implementing alternative payment models. The ability of commercial payors to control healthcare costs using these measures may beenhanced by the increasing consolidation of insurance and managed care companies and vertical integration of health insurers with healthcare providers.In 2018, 59.0% of our net operating revenues, came from commercial payors. Our contracts with payors require us to comply with a number of termsrelated to the provision of services and billing for services. If we are unable to negotiate increased reimbursement rates, maintain existing rates or otherfavorable contract terms, effectively respond to payor cost controls and reimbursement policies or comply with the terms of our payor contracts, the paymentswe receive for our services may be reduced or we may be involved in disputes with payors and experience payment denials, both prospectively andretroactively. In addition, individuals have been increasingly enrolling in high-deductible health plans, which tend to have lower reimbursement rates forproviders along with higher co-pays and deductibles due from the patient in comparison to traditional health plans. These plans, sometimes referred to asconsumer-directed plans, may even exclude our hospitals and employed physicians from coverage.The demand for services provided by our hospitals and affiliated providers can be impacted by factors beyond our control.Our admissions and adjusted admissions as well as acuity trends may be impacted by factors beyond our control. For example, seasonal fluctuations in theseverity of influenza and other critical illnesses, unplanned shutdowns or unavailability of our facilities due to weather or other unforeseen events, decreasesin trends in high acuity service offerings, changes in competition from other service providers, turnover in physicians affiliated with our hospitals, or changesin medical technology can have an impact on the demand for services at our hospitals and affiliated providers. The impact of these or other factors beyondour control could have an adverse effect on our business, financial position and results of operations.We may be adversely affected by consolidation among health insurers and other industry participants.In recent years, a number of health insurers have merged or increased efforts to consolidate with other non-governmental payors. Insurers are alsoincreasingly pursuing alignment initiatives with healthcare providers. Consolidation within the health insurance industry may result in insurers havingincreased negotiating leverage and competitive advantages, such as greater access to performance and pricing data. Our ability to negotiate prices andfavorable terms with health insurers in certain markets could be affected negatively as a result of this consolidation. Also, the shift toward value-basedpayment models could be accelerated if larger insurers, including those engaging in consolidation activities, find these models to be financially beneficial.We cannot predict whether we will be able to negotiate favorable terms with payors and otherwise respond effectively to the impact of increasedconsolidation in the payor industry or vertical integration efforts.If we fail to comply with extensive laws and government regulations, including fraud and abuse laws, we could suffer penalties or be required to makesignificant changes to our operations.The healthcare industry is governed by laws and regulations at the federal, state and local government levels. These laws and regulations includestandards addressing, among other issues, the adequacy of medical care, equipment, personnel, operating policies and procedures; billing and coding forservices; properly handling overpayments; classification of levels of care provided; preparing and filing of cost reports; relationships with referral sourcesand referral recipients; maintenance of adequate records; compliance with building codes; environmental protection; privacy and security; debt collection;and communications with patients and consumers. Examples of these laws include, but are not limited to, HIPAA, the Stark Law, the federal anti-kickbackstatute, the FCA, the Emergency Medical Treatment and Active Labor Act and similar state laws. If we fail to comply with applicable laws and regulations wecould suffer civil sanctions and criminal penalties, including the loss of our operating licenses and our ability to participate in the Medicare, Medicaid andother federal and state healthcare programs. 36Table of ContentsIn addition, there are heightened coordinated civil and criminal enforcement efforts by both federal and state government agencies relating to thehealthcare industry, including the hospital segment. Enforcement actions have focused on financial arrangements between hospitals and physicians, billingfor services without adequately documenting medical necessity and billing for services outside the coverage guidelines for such services. Specific to ourhospitals, we have received inquiries and subpoenas from various governmental agencies regarding these and other matters, and we are also subject to variousclaims and lawsuits relating to such matters. For a further discussion of these matters, see “Legal Proceedings” in Part I, Item 3 of this Form 10-K.In the future, evolving interpretations or enforcement of these laws and regulations could subject our current practices to allegations of impropriety orillegality or could require us to make changes in our facilities, equipment, personnel, services, capital expenditure programs and operating expenses.We could be subject to substantial uninsured liabilities or increased insurance costs as a result of significant legal actions.Physicians, hospitals and other healthcare providers have become subject to an increasing number of legal actions alleging malpractice, product liability,or related legal theories. Even in states that have imposed caps on damages, litigants are seeking recoveries under new theories of liability that might not besubject to the caps on damages. Many of these actions involve large claims and significant defense costs. To protect us from the cost of these claims, wemaintain claims made professional malpractice liability insurance and general liability insurance coverage in excess of those amounts for which we are self-insured. This insurance coverage is in amounts that we believe to be sufficient for our operations; however, our insurance coverage may not continue to beavailable at a reasonable cost for us to maintain adequate levels of insurance. Additionally, our insurance coverage does not cover all claims against us, suchas fines, penalties, or other damage and legal expense payments resulting from qui tam lawsuits. We cannot predict the outcome of current or future legalactions against us or the effect that judgments or settlements in such matters may have on us or on our insurance costs. Additionally, all professional andgeneral liability insurance we purchase is subject to policy limitations. If the aggregate limit of any of our professional and general liability policies isexhausted, in whole or in part, it could deplete or reduce the limits available to pay any other material claims applicable to that policy period. Furthermore,one or more of our insurance carriers could become insolvent and unable to fulfill its or their obligations to defend, pay or reimburse us when thoseobligations become due. In that case, or if payments of claims exceed our estimates or are not covered by our insurance, it could have an adverse effect on ourbusiness, financial condition or results of operations.We could be subject to increased monetary penalties and/or other sanctions, including exclusion from federal healthcare programs, if we fail to complywith the terms of the Corporate Integrity Agreement.On August 4, 2014, we announced that we had entered into a civil settlement with the U.S. Department of Justice, other federal agencies and identifiedrelators that concluded previously announced investigations and litigation related to short stay admissions through emergency departments at certain of ouraffiliated hospitals. In addition to the amounts paid in the settlement, we executed the CIA with the OIG that has been incorporated into our existing andcomprehensive compliance program. On September 25, 2018, the CIA was amended and extended in connection with the settlement of certain qui tamlawsuits related to certain conduct of HMA and its affiliated entities that were initiated and pending, and known to us, before HMA was acquired by merger inJanuary 2014. See our discussion of these matters under the section “Business of Community Health Systems, Inc.” in Part I, Item 1 of this Form 10-K and“Legal Proceedings” in Part II, Item 1 of our Quarterly Reports on Form 10-Q for the quarterly periods ended September 30, 2014 and September 30, 2018 forfurther discussion of the background of these matters and details of the settlements.Material, uncorrected violations of the CIA could lead to our suspension or disbarment from participation in Medicare, Medicaid and other federal andstate healthcare programs and repayment obligations. In addition, we are subject to possible civil penalties for failure to substantially comply with the termsof the CIA, including stipulated penalties ranging between $1,000 to $2,500 per day. We are also subject to a stipulated penalty of 37Table of Contents$50,000 for each false certification made by us or on our behalf, pursuant to the reporting provisions of the CIA. The CIA increases the amount of informationwe must provide to the federal government regarding our healthcare practices and our compliance with federal regulations. The reports we provide inconnection with the CIA could result in greater scrutiny by regulatory authorities.If we experience growth in self-pay volume and revenues or if we experience deterioration in the collectability of patient responsibility accounts, ourfinancial condition or results of operations could be adversely affected.Our primary collection risks relate to uninsured patients and outstanding patient balances for which the primary insurance payor has paid some but not allof the outstanding balance, with the remaining outstanding balance (generally deductibles and co-payments) owed by the patient. Collections are impactedby 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 accounts receivable and are considered inour estimates of accounts receivable collectability.Efforts to repeal or revise the Affordable Care Act have cast considerable uncertainty on the future of the law and its effects on the size of the uninsuredpopulation. For example, Congress eliminated, effective January 1, 2019, the financial penalty associated with the Affordable Care Act’s mandate thatindividuals enroll in an insurance plan. As a result of this change, a federal judge in Texas recently found the entire Affordable Care Act to beunconstitutional; however, the law remains in place pending appeal. The number and identity of states that choose to expand or otherwise modify Medicaidprograms, and the terms of expansion and other program changes, continues to evolve. Some of these program changes, such requirements that Medicaidrecipients meet certain work requirements, may reduce the number of program participants. These variables, among others, make it difficult to predict thenumber 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 increases in the adoption of plan structures, including healthsavings accounts, narrow networks and tiered networks, that shift greater responsibility for care to individuals through greater exclusions and copayment anddeductible amounts. Further, 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 chargesfor out of network services. In addition, a deterioration of economic conditions in the United States could potentially lead to higher levels of uninsuredpatients, result in higher levels of patients covered by lower paying government programs, result in fiscal uncertainties at both government payors andprivate insurers and/or limit the economic ability of patients to make payments for which they are responsible. If we experience growth in self-pay volume ordeterioration in collectability of patient responsibility accounts, our financial condition or results of operations could be adversely affected.Many of the non-urban communities in which we operate continue to face challenging economic conditions, and the failure of certain employers, or theclosure of certain manufacturing and other facilities in our markets, could have a disproportionate impact on our hospitals.Many of the non-urban communities in which we operate continue to face challenging economic conditions, including higher levels of unemploymentthan other regions of the United States. In addition, the economies in the non-urban communities in which our hospitals primarily operate are oftendependent on a small number of large employers, especially manufacturing or similar facilities. These employers often provide income and health insurancefor a disproportionately large number of community residents who may depend on our hospitals for care. The failure of one or more large employers, or theclosure or substantial reduction in the number of individuals employed at manufacturing or other facilities located in or near many of the non-urbancommunities in which our hospitals primarily operate, could cause affected employees to move elsewhere for employment or 38Table of Contentslose insurance coverage that was otherwise available to them. When patients are experiencing personal financial difficulties or have concerns about generaleconomic conditions, they may: • delay or forgo elective procedures; • purchase a high-deductible insurance plan or no insurance at all, which increases a hospital’s dependence on self-pay revenue; or • choose to seek care in emergency rooms.The occurrence of these events may cause a reduction in our revenues and adversely impact our results of operations.If there are delays in regulatory updates by governmental entities to federal and state healthcare programs, we may experience increased volatility in ouroperating results as such delays may result in a timing difference between when such program revenues are earned and when they become known orestimable for purposes of accounting recognition.We derive a significant amount of our net operating revenues from governmental healthcare programs, primarily Medicare and Medicaid. Thereimbursements due to us from those programs are subject to legislative and regulatory changes that can have a significant impact on our operating results.When delays occur in the implementation of regulations or passage of legislation, there is the potential for material increases or decreases in operatingrevenues to be recognized in periods subsequent to when such related services were performed, resulting in the potential for an adverse effect on ourconsolidated financial position and consolidated results of operations.If our adoption and utilization of electronic health record systems fails to satisfy HHS standards, our consolidated results of operations could be adverselyaffected.Under the Health Information Technology for Economic and Clinical Health Act, or HITECH, and other laws, eligible hospitals that fail to demonstratemeaningful use of certified EHR technology and have not applied and qualified for a hardship exception are subject to reduced reimbursement fromMedicare. Eligible healthcare professionals are also subject to positive or negative payment adjustments based, in part, on their use of EHR technology.Thus, if our hospitals and employed professionals are unable to properly adopt, maintain, and utilize certified EHR systems, we could be subject to penaltiesand lawsuits that may have an adverse effect on our consolidated financial position and consolidated results of operations.Our operations could be significantly impacted by interruptions or restrictions in access to our information systems.Our operations depend heavily on effective information systems to process clinical, operational and financial information. Information systems require anongoing commitment of significant resources to maintain and enhance existing systems and to develop new systems in order to keep pace with continualchanges in information technology. We also sometimes rely on third-party providers of financial, clinical, patient accounting and network informationservices and, as a result, we face operational challenges in maintaining multiple provider platforms and facilitating the interface of such systems with oneanother. We rely on these third-party providers to have appropriate controls to protect confidential information. We do not control the information systems ofthird-party providers, and in some cases we may have difficulty accessing information archived on third-party systems.Our networks and information systems are also subject to disruption due to events such as a major earthquake, fire, telecommunications failure,ransomware or terrorist attacks or other catastrophic events. If the information systems on which we rely fail or are interrupted or if our access to these systemsis limited in the future, it could have an adverse effect on our business, financial condition or results of operations. 39Table of ContentsA cyber-attack or security breach could result in the compromise of our facilities, confidential data or critical data systems and give rise to potential harmto patients, remediation and other expenses, expose us to liability under HIPAA, consumer protection laws, common law or other theories, subject us tolitigation and federal and state governmental inquiries, damage our reputation, and otherwise be disruptive to our business.We rely extensively on our computer systems to manage clinical and financial data, communicate with our patients, payors, vendors and other thirdparties and summarize and analyze operating results. We have made significant investments in technology to protect our systems, equipment and medicaldevices and information from cybersecurity risks. During the second quarter of 2014, our computer network was the target of an external, criminal cyber-attack in which the attacker successfully copied and transferred certain data outside the Company. This data included certain non-medical patientidentification data (such as patient names, addresses, birthdates, telephone numbers and social security numbers) considered protected under HIPAA, but didnot include patient credit card, medical or clinical information. The remediation efforts in response to the attack have been substantial, including continueddevelopment and enhancement of our controls, processes and practices designed to protect our systems, computers, software, data and networks from attack,damage or unauthorized access. Also in connection with the cyber-attack, we have been subject to multiple purported class action lawsuits and governmentinvestigations by various State Attorneys General and the U.S. Department of Health and Human Services Office for Civil Rights, and may be subject toadditional litigation, potential governmental inquiries and potential reputation damages.In spite of our security measures, there can be no assurance that we will not be subject to additional cyber-attacks or security breaches in the future.Additionally, in the definitive agreements we enter into in connection with the divestiture of hospitals, we routinely agree to provide transition services tothe buyer, including access to our legacy information systems, for a defined transition period. By providing access to our information systems tonon-employees, we are exposed to cyber-attacks or security breaches that originate outside of our processes and practices designed to prevent such threatsfrom occurring. Any such cyber-attacks or security breaches could impact the integrity, availability or privacy of protected health information or other datasubject to privacy laws or disrupt our information technology systems, devices or business, including our ability to provide various healthcare services.Additionally, growing cyber-security threats related to the use of ransomware and other malicious software threaten the access and utilization of criticalinformation technology and data. As a result, cybersecurity and the continued development and enhancement of our controls, process and practices designedto protect our information systems from attack, damage or unauthorized access remain a priority for us. Our ability to recover from a ransomware or othercyber-attack is dependent on these practices, including successful backup systems and other recovery procedures. As cyber-threats continue to evolve, wemay be required to expend significant additional resources to continue to modify or enhance our protective measures or to investigate and remediate anyinformation security vulnerabilities. If we are subject to cyber-attacks or security breaches in the future, this could result in harm to patients; businessinterruptions and delays; the loss, misappropriation, corruption or unauthorized access of data; litigation and potential liability under privacy, security,breach notification and consumer protection laws or other applicable laws; reputational damage and federal and state governmental inquiries, any of whichcould have an adverse effect on our business, financial condition or results of operations.A pandemic, epidemic or outbreak of an infectious disease in the markets in which we operate or that otherwise impacts our facilities could adverselyimpact our business.If a pandemic, epidemic, outbreak of an infectious disease or other public health crisis were to affect our markets, our business could be adversely affected.Such a crisis could diminish the public trust in healthcare facilities, especially hospitals that fail to accurately or timely diagnose, or that are treating (or havetreated) patients affected by contagious diseases. If any of our facilities were involved in treating patients for such a contagious disease, other patients mightcancel elective procedures or fail to seek needed care at our facilities. Further, a pandemic might adversely impact our business by causing a temporaryshutdown or diversion of patients, by disrupting or delaying production and delivery of materials and products in the supply chain or by 40Table of Contentscausing staffing shortages in our facilities. Although we have disaster plans in place and operate pursuant to infectious disease protocols, the potential impactof a pandemic, epidemic or outbreak of an infectious disease with respect to our markets or our facilities is difficult to predict and could adversely impact ourbusiness.Our performance depends on our ability to recruit and retain quality physicians.The success of our healthcare facilities depends in part on the number and quality of the physicians on the medical staffs of our healthcare facilities, ourability to employ quality physicians, the admitting and utilization practices of employed and independent physicians, maintaining good relations with thosephysicians and controlling costs related to the employment of physicians. Although we employ some physicians, physicians are often not employees at ourhealthcare facilities at which they practice. In many of the markets we serve, many physicians have admitting privileges at other healthcare facilities inaddition to our healthcare facilities. Such physicians may terminate their affiliation with or employment by our healthcare facilities at any time. In addition,we may face increased challenges in this area as the physician population reaches retirement age, especially if there is a shortage of physicians willing andable to provide comparable services. Moreover, if we are unable to provide adequate support personnel or technologically advanced equipment and facilitiesthat meet the needs of those physicians and their patients, they may be discouraged from referring patients to our facilities, admissions may decrease and ouroperating performance may decline.Our labor costs could be adversely affected by competition for staffing, the shortage of experienced nurses and labor union activity.In addition to our physicians, the operations of our healthcare facilities are dependent on the efforts, abilities and experience of our management andmedical support personnel, such as nurses, pharmacists and lab technicians. We compete with other healthcare providers in recruiting and retaining qualifiedmanagement and support personnel responsible for the daily operations of our healthcare facilities, including nurses and other non-physician healthcareprofessionals. In some markets, the availability of nurses and other medical support personnel has been a significant operating issue to healthcare providers.We may be required to continue to enhance wages and benefits to recruit and retain nurses and other medical support personnel or to hire more expensivetemporary or contract personnel. In addition, the states in which we operate could adopt mandatory nurse-staffing ratios or could reduce mandatory nurse-staffing ratios already in place. State-mandated nurse-staffing ratios could significantly affect labor costs and have an adverse impact on revenues if we arerequired to limit admissions in order to meet the required ratios.Increased or ongoing labor union activity could also adversely affect our labor costs or otherwise adversely impact us. To the extent a significant portionof our employee base unionizes, our labor costs could increase significantly. In addition, when negotiating collective bargaining agreements with unions,whether such agreements are renewals or first contracts, there is the possibility that strikes could occur during the negotiation process, and our continuedoperation during any strikes could increase our labor costs and otherwise adversely impact us.If our labor costs increase, we may not be able to raise rates to offset these increased costs. Because a significant percentage of our revenues consists offixed, prospective payments, our ability to pass along increased labor costs is constrained. In the event we are not entirely effective at recruiting and retainingqualified management, nurses and other medical support personnel, or in controlling labor costs, this could have an adverse effect on our results ofoperations.The industry trend towards value-based purchasing may negatively impact our revenues.The trend toward value-based purchasing of healthcare services is gaining momentum across the healthcare industry among both government andcommercial payors. Generally, value-based purchasing initiatives tie payment to the quality and efficiency of care. For example, hospital payments may benegatively impacted by the occurrence of HACs. The 25% of hospitals with the worst national risk-adjusted HAC rates for all hospitals in 41Table of Contentsthe previous year receive a 1% reduction in their total Medicare payments. Medicare does not reimburse for care related to HACs. In addition, federal fundsmay not be used under the Medicaid program to reimburse providers for services provided to treat HACs. Hospitals that experience excess readmissions fordesignated conditions receive reduced payments for all inpatient discharges. HHS also reduces Medicare inpatient hospital payments for all discharges by arequired percentage and pools the amount collected from these reductions to fund payments to reward hospitals that meet or exceed certain qualityperformance standards. Further, Medicare and Medicaid require hospitals to report certain quality data to receive full reimbursement updates.HHS has focused on tying Medicare payments to quality or value through alternative payment models, which generally aim to make providers attentive tothe quality and cost of care they deliver to patients. Examples of alternative payment models include ACOs and bundled payment arrangements. An ACO is acare coordination model intended to produce savings as a result of improved quality and operational efficiency. In bundled payment models, providersreceive one payment for services provided to patients for certain medical conditions or episodes of care, accepting accountability for costs and quality ofcare. Providers may receive supplemental Medicare payments or owe repayments to CMS depending on whether spending exceeds or falls below a specifiedspending target and whether certain quality standards are met. Currently, participation in Medicare bundled payment programs is voluntary, except forhospitals located in certain geographic areas with respect to specified orthopedic procedures. CMS has indicated that it is developing more voluntary andmandatory bundled payment models.Several of the nation’s largest commercial payors have also expressed an intent to increase reliance on value-based reimbursement arrangements. Further,many large commercial payors require hospitals to report quality data, and several commercial payors do not reimburse hospitals for certain preventableadverse events.We expect value-based purchasing programs, including programs that condition reimbursement on patient outcome measures, to become more commonand to involve a higher percentage of reimbursement amounts. It is unclear whether these and other alternative payment models will successfully coordinatecare and reduce costs or whether they will decrease aggregate reimbursement. While we believe we are adapting our business strategies to compete in a value-based reimbursement environment, we are unable at this time to predict how this trend will affect our results of operations. If we perform at a level below theoutcomes demonstrated by our competitors, are unable to meet or exceed the quality performance standards under any applicable value-based purchasingprogram, or otherwise fail to effectively provide or coordinate the efficient delivery of quality healthcare services, our reputation in the industry may benegatively impacted, we may receive reduced reimbursement amounts and we may owe repayments to payors, causing our revenues to decline.Our revenues are somewhat concentrated in a small number of states which will make us particularly sensitive to regulatory and economic changes inthose states.Our revenues are particularly sensitive to regulatory and economic changes in states in which we generate a significant portion of our revenues, includingTexas, Mississippi, Indiana, Alabama, and New Mexico. Accordingly, any change in the current demographic, economic, competitive, or regulatoryconditions in these states could have an adverse effect on our business, financial condition, or results of operations. Changes to the Medicaid programs inthese states could also have an adverse effect on our business, financial condition, results of operations, or cash flows. The Texas Healthcare Transformationand Quality Improvement Program, or the Texas Waiver Program, which provides funding for uncompensated care and delivery system reform initiatives, isoperated under a waiver granted pursuant to Section 1115 of the Social Security Act. In December 2017, CMS approved an extension of this waiver throughSeptember 30, 2022, and in accordance with this extension, Texas must revise the disbursement methodology for the uncompensated care program to alignwith federal policies effective October 1, 2019. We cannot guarantee that revenues recognized from the program will not decrease or predict whether theTexas Waiver Program will be further extended or changed.Item 1B. Unresolved Staff CommentsNone 42Table of ContentsItem 2. PropertiesCorporate HeadquartersWe own our corporate headquarters building located in Franklin, Tennessee.HospitalsOur hospitals are general care hospitals offering a wide range of inpatient and outpatient medical services. These services generally include general acutecare, emergency room, general and specialty surgery, critical care, internal medicine, obstetrics, diagnostic, psychiatric and rehabilitation services. Inaddition, some of our hospitals provide skilled nursing and home care services based on individual community needs.For each of our hospitals owned or leased as of December 31, 2018, the following table shows its location, the date of its acquisition or lease inception andthe number of licensed beds: Hospital City Licensed Beds(1) Date of Acquisition/Lease Inception Ownership Type Alabama South Baldwin Regional Medical Center Foley 112 June, 2000 Leased Grandview Medical Center Birmingham 372 July, 2007 Owned Flowers Hospital Dothan 235 July, 2007 Owned Medical Center Enterprise Enterprise 131 July, 2007 Owned Gadsden Regional Medical Center Gadsden 346 July, 2007 Owned Crestwood Medical Center Huntsville 180 July, 2007 Owned Alaska Mat-Su Regional Medical Center Palmer 74 July, 2007 Owned Arizona Western Arizona Regional Medical Center Bullhead City 139 July, 2000 Owned Northwest Medical Center Tucson 300 July, 2007 Owned Oro Valley Hospital Oro Valley 146 July, 2007 Owned Arkansas Northwest Health System Northwest Medical Center - Bentonville Bentonville 128 July, 2007 Owned Northwest Medical Center - Springdale Springdale 222 July, 2007 Owned Willow Creek Women’s Hospital Johnson 64 July, 2007 Owned Northwest Health Physician’s Specialty Hospital Fayetteville 20 April, 2016 Leased Siloam Springs Regional Hospital Siloam Springs 73 February, 2009 Owned Medical Center of South Arkansas El Dorado 166 April, 2009 Leased Florida Lake Wales Medical Center Lake Wales 160 December, 2002 Owned North Okaloosa Medical Center Crestview 110 March, 1996 Owned Bayfront Health Brooksville Brooksville 120 January, 2014 Leased Bayfront Health Port Charlotte Port Charlotte 254 January, 2014 Owned Bayfront Health Punta Gorda Punta Gorda 208 January, 2014 Owned Bayfront Health St. Petersburg St. Petersburg 480 January, 2014 Leased Bayfront Health Spring Hill Spring Hill 124 January, 2014 Leased Heart of Florida Regional Medical Center Davenport 193 January, 2014 Owned Lower Keys Medical Center Key West 167 January, 2014 Leased 43Table of ContentsHospital City Licensed Beds(1) Date of Acquisition/Lease Inception Ownership Type Physicians Regional Healthcare System - Collier Naples 100 January, 2014 Owned Physicians Regional Healthcare System - Pine Ridge Naples 101 January, 2014 Owned Santa Rosa Medical Center Milton 129 January, 2014 Leased Seven Rivers Regional Medical Center CrystalRiver 128 January, 2014 Owned Shands Lake Shore Regional Medical Center Lake City 99 January, 2014 Leased Shands Live Oak Regional Medical Center Live Oak 25 January, 2014 Owned Shands Starke Regional Medical Center Starke 49 January, 2014 Owned St. Cloud Regional Medical Center St. Cloud 84 January, 2014 Owned Venice Regional Bayfront Health Venice 312 January, 2014 Owned Georgia East Georgia Regional Medical Center Statesboro 149 January, 2014 Owned Indiana Porter Hospital Valparaiso 301 May, 2007 Owned Lutheran Health Network Bluffton Regional Medical Center Bluffton 79 July, 2007 Owned Dupont Hospital Fort Wayne 131 July, 2007 Owned Lutheran Hospital Fort Wayne 396 July, 2007 Owned Lutheran Musculoskeletal Center Fort Wayne 39 July, 2007 Owned Lutheran Rehabilitation Hospital (rehabilitation) Fort Wayne 36 July, 2007 Owned St. Joseph’s Hospital Fort Wayne 191 July, 2007 Owned Dukes Memorial Hospital Peru 25 July, 2007 Owned Kosciusko Community Hospital Warsaw 72 July, 2007 Owned La Porte Hospital La Porte 227 March, 2016 Owned Starke Hospital Knox 53 March, 2016 Leased Louisiana Northern Louisiana Medical Center Ruston 165 April, 2007 Owned Mississippi Merit Health Wesley Hattiesburg 211 July, 2007 Owned Merit Health River Region Vicksburg 361 July, 2007 Owned Merit Health Biloxi Biloxi 198 January, 2014 Leased Merit Health Central Jackson 319 January, 2014 Leased Merit Health Rankin Brandon 134 January, 2014 LeasedMerit Health Madison Canton 67 January, 2014 Owned Merit Health River Oaks Flowood 160 January, 2014 Owned Merit Health Woman’s Hospital Flowood 109 January, 2014 Owned Merit Health Natchez Natchez 179 October, 2014 Owned Missouri Moberly Regional Medical Center Moberly 99 November, 1993 Owned Northeast Regional Medical Center Kirksville 93 December, 2000 Leased Poplar Bluff Regional Medical Center Poplar Bluff 412 January, 2014 Owned 44Table of ContentsHospital City Licensed Beds(1) Date of Acquisition/Lease Inception Ownership Type New Jersey Memorial Hospital of Salem County (3) Salem 126 September, 2002 Owned New Mexico Eastern New Mexico Medical Center Roswell 162 April, 1998 Owned Carlsbad Medical Center Carlsbad 115 July, 2007 Owned Lea Regional Medical Center Hobbs 115 July, 2007 Owned Mountain View Regional Medical Center Las Cruces 168 July, 2007 Owned North Carolina Lake Norman Regional Medical Center Mooresville 123 January, 2014 Owned Davis Regional Medical Center Statesville 144 January, 2014 Owned Oklahoma AllianceHealth Ponca City Ponca City 140 May, 2006 Owned AllianceHealth Woodward Woodward 87 July, 2007 Leased AllianceHealth Clinton Clinton 56 January, 2014 Leased AllianceHealth Madill Madill 25 January, 2014 LeasedAllianceHealth Durant Durant 148 January, 2014 Owned AllianceHealth Midwest Midwest City 255 January, 2014 Leased AllianceHealth Seminole Seminole 32 January, 2014 Leased Pennsylvania Commonwealth Health Network Berwick Hospital Berwick 90 March, 1999 Owned Wilkes-Barre General Hospital Wilkes-Barre 412 April, 2009 Owned First Hospital Wyoming Valley (psychiatric) Wilkes-Barre 193 April, 2009 Owned Regional Hospital of Scranton Scranton 186 May, 2011 Owned Tyler Memorial Hospital Tunkhannock 44 May, 2011 Owned Moses Taylor Hospital Scranton 213 January, 2012 Owned South Carolina Springs Memorial Hospital Lancaster 225 November, 1994 Owned Mary Black Memorial Hospital (2) Spartanburg 207 July, 2007 Owned Carolinas Hospital System Florence 396 July, 2007 Owned Carolinas Hospital System - Marion Mullins 124 July, 2010 Owned Chester Regional Medical Center Chester 82 January, 2014 Leased Mary Black Health System - Gaffney (2) Gaffney 125 November, 2014 Owned Tennessee Tennova Healthcare - Shelbyville Shelbyville 60 July, 2005 Owned Tennova Healthcare - Cleveland Cleveland 351 October, 2005 Owned Tennova Healthcare - Clarksville Clarksville 270 July, 2007 Owned Tennova Healthcare - Harton Tullahoma 135 January, 2014 Owned Tennova - Jefferson Memorial Hospital Jefferson City 58 January, 2014 LeasedTennova - LaFollette Medical Center LaFollette 66 January, 2014 Leased Tennova - Newport Medical Center Newport 130 January, 2014 Owned 45Table of ContentsHospital City Licensed Beds(1) Date of Acquisition/Lease Inception Ownership Type Tennova - North Knoxville Medical Center Powell 108 January, 2014 Owned Tennova - Turkey Creek Medical Center Knoxville 111 January, 2014 Owned Tennova Healthcare - Lebanon Lebanon 245 January, 2014 Owned Texas Hill Regional Hospital Hillsboro 116 October, 1994 Leased Lake Granbury Medical Center Granbury 73 January, 1997 Leased Laredo Medical Center Laredo 326 October, 2003 Owned Abilene Regional Medical Center Abilene 231 July, 2007 Owned Brownwood Regional Medical Center Brownwood 188 July, 2007 Owned College Station Medical Center College Station 167 July, 2007 Owned Navarro Regional Hospital Corsicana 162 July, 2007 Owned Longview Regional Medical Center Longview 224 July, 2007 Owned Woodland Heights Medical Center Lufkin 149 July, 2007 Owned San Angelo Community Medical Center San Angelo 171 July, 2007 Owned DeTar Healthcare System Victoria 304 July, 2007 Owned Cedar Park Regional Medical Center Cedar Park 108 December, 2007 Owned Virginia Southern Virginia Regional Medical Center Emporia 80 March, 1999 Owned Southampton Memorial Hospital Franklin 105 March, 2000 Owned Southside Regional Medical Center Petersburg 300 August, 2003 Owned West Virginia Plateau Medical Center Oak Hill 25 July, 2002 Owned Greenbrier Valley Medical Center Ronceverte 122 July, 2007 Owned Bluefield Regional Medical Center Bluefield 92 October, 2010 Owned Total Licensed Beds at December 31, 2018 18,227 Total Hospitals at December 31, 2018 113 (1)Licensed beds are the number of beds for which the appropriate state agency licenses a facility regardless of whether the beds are actually available forpatient use. (2)Hospital sold January 1, 2019. (3)Hospital sold January 31, 2019.The real property of substantially all of our wholly-owned hospitals is also encumbered by mortgages to support obligations under our credit facility andoutstanding senior secured notes.The following table lists the hospitals owned by joint venture entities in which we do not have a consolidating ownership interest, along with ourpercentage ownership interest in the joint venture entity as of December 31, 2018. Information on licensed beds was provided by the majority owner andmanager of each joint venture. A subsidiary of HCA is the majority owner of Macon Healthcare LLC. Joint Venture Facility Name City State Licensed BedsMacon Healthcare LLC Coliseum Medical Center (38%) Macon GA 310Macon Healthcare LLC Coliseum Northside Hospital (38%) Macon GA 103 46Table of ContentsItem 3. Legal ProceedingsFrom time to time, we receive inquiries or subpoenas from state regulators, state Medicaid Fraud Control units, fiscal intermediaries, the Centers forMedicare and Medicaid Services, the Department of Justice and other government entities regarding various Medicare and Medicaid issues. In addition to thematters discussed below, we are currently responding to subpoenas and administrative demands concerning (a) an inquiry regarding sleep labs at twoLouisiana hospitals (one formerly owned), (b) a civil investigative demand concerning short-term Medicaid eligibility determinations processed by thirdparty vendors at one of our Pennsylvania hospitals, (c) certain cardiology procedures, medical records and quality assurance committee meeting minutes at aformerly owned Tennessee hospital, (d) a civil investigative demand relating to the Company’s adoption of electronic health records technology and themeaningful use program, and (e) certain services provided to Medicaid beneficiaries at one of our New Mexico hospitals. In addition, we are subject to otherclaims and lawsuits arising in the ordinary course of our business including lawsuits and claims related to billing practices and the administration of charitycare policies at our hospitals. Based on current knowledge, management does not believe that loss contingencies arising from pending legal, regulatory andgovernmental matters, including the matters described herein, will have a material adverse effect on the consolidated financial position or liquidity of theCompany. However, in light of the inherent uncertainties involved in pending legal, regulatory and governmental matters, some of which are beyond ourcontrol, and the very large or indeterminate damages sought in some of these matters, an adverse outcome in one or more of these matters could be material toour results of operations or cash flows for any particular reporting period. Settlements of suits involving Medicare and Medicaid issues routinely require bothmonetary payments as well as corporate integrity agreements. Additionally, qui tam or “whistleblower” actions initiated under the civil False Claims Act maybe pending but placed under seal by the court to comply with the False Claims Act’s requirements for filing such suits. In September 2014, the CriminalDivision of the United States Department of Justice, or DOJ, announced that all qui tam cases will be shared with their Division to determine if a parallelcriminal investigation should be opened. The Criminal Division has also frequently stated an intention to pursue corporations in criminal prosecutions. Fromtime to time, we detect issues of non-compliance with Federal healthcare laws pertaining to claims submission and reimbursement practices and/or financialrelationships with physicians. We avail ourselves of various mechanisms to address potential overpayments arising out of these issues, including repaymentof claims, rebilling of claims, and participation in voluntary disclosure protocols offered by the Centers for Medicare and Medicaid Services and the Office ofthe Inspector General. Participating in voluntary repayments and voluntary disclosure protocols can have the potential for significant settlement obligationsor even enforcement action.The following legal proceedings are described in detail because, although they may not be required to be disclosed in this Part I, Item 3 under SEC rules,due to the nature of the business of the Company, we believe that the following discussion of these matters may provide useful information to securityholders. This discussion does not include claims and lawsuits covered by medical malpractice, general liability or employment practices insurance and riskretention programs, none of which claims or lawsuits would in any event be required to be disclosed in this Part I, Item 3 under SEC rules. Certain of thematters referenced below are also discussed in Note 16 of the Notes to Consolidated Financial Statements included under Part II, Item 8 of this Form 10-K.Shareholder LitigationClass Action Shareholder Federal Securities Cases. Three purported class action cases have been filed in the United States District Court for the MiddleDistrict of Tennessee; namely, Norfolk County Retirement System v. Community Health Systems, Inc., et al., filed May 9, 2011; De Zheng v. CommunityHealth Systems, Inc., et al., filed May 12, 2011; and Minneapolis Firefighters Relief Association v. Community Health Systems, Inc., et al., filed June 21,2011. All three seek class certification on behalf of purchasers of our common stock between July 27, 2006 and April 11, 2011 and allege that misleadingstatements resulted in artificially inflated prices for our common stock. In December 2011, the cases were consolidated for pretrial purposes and NYC Fundsand its counsel were selected as lead plaintiffs/lead plaintiffs’ counsel. In lieu of ruling on our motion to dismiss, the 47Table of Contentscourt permitted the plaintiffs to file a first amended consolidated class action complaint which was filed on October 5, 2015. Our motion to dismiss was filedon November 4, 2015 and oral argument took place on April 11, 2016. Our motion to dismiss was granted on June 16, 2016 and on June 27, 2016, theplaintiffs filed a notice of appeal to the Sixth Circuit Court of Appeals. The matter was heard on May 3, 2017. On December 13, 2017, the Sixth Circuitreversed the trial court’s dismissal of the case and remanded it to the District Court. We filed a renewed partial motion to dismiss on February 9, 2018, whichwas denied by the District Court on September 24, 2018. We also filed a petition for writ of certiorari with the United States Supreme Court on April 18, 2018seeking review of the Sixth Circuit’s decision. The United States Supreme Court denied the petition for a writ of certiorari on October 1, 2018. Plaintiff’smotion for class certification is pending. We believe this consolidated matter is without merit and will vigorously defend this case.Other Government InvestigationsSt. Petersburg, Florida – On September 14, 2017, our hospital in St. Petersburg, Florida received a CID from the United States Department of Justice forinformation concerning its participation in the Florida Low Income Pool Program. The Low Income Pool Program, or LIP, is a funding pool to supporthealthcare providers that provide uncompensated care to Florida residents who are uninsured or underinsured. The CID seeks documentation related toagreements between the hospital and Pinellas County. We are cooperating fully with this investigation.Commercial Litigation and Other LawsuitsBecker v. Community Health Systems, Inc. d/b/a Community Health Systems Professional Services Corporation d/b/a Community Health Systems d/b/aCommunity Health Systems PSC, Inc. d/b/a Rockwood Clinic P.S. and Rockwood Clinic, P.S. (Superior Court, Spokane, Washington). This suit was filed onFebruary 29, 2012, by a former chief financial officer at Rockwood Clinic in Spokane, Washington. Becker claims he was wrongfully terminated for allegedlyrefusing to certify a budget for Rockwood Clinic in 2012. On February 29, 2012, he also filed an administrative complaint with the Department of Labor,Occupational Safety and Health Administration alleging that he is a whistleblower under Sarbanes-Oxley, which was dismissed by the agency and wasappealed to an administrative law judge for a hearing that occurred on January 19-26, 2016. In a decision dated November 9, 2016, the law judge awardedBecker approximately $1.9 million for front pay, back pay and emotional damages with attorney fees to be later determined. We have appealed the award tothe Administrative Review Board and are awaiting its decision. At a hearing on July 27, 2012, the trial court dismissed Community Health Systems, Inc. fromthe state case and subsequently certified the state case for an interlocutory appeal of the denial to dismiss his employer and the management company. Theappellate court accepted the interlocutory appeal, and it was argued on April 30, 2014. On August 14, 2014, the court denied our appeal. On October 20,2014, we filed a petition to review the denial with the Washington Supreme Court. Our appeal was accepted and oral argument was heard on June 9, 2015. OnSeptember 15, 2015, the court denied our appeal and remanded to the trial court; a previous trial setting of September 12, 2016 has been vacated and notreset. We continue to vigorously defend these actions.Cyber Attack. As previously disclosed on a Current Report on Form 8-K filed by us on August 18, 2014, our computer network was the target of anexternal, criminal cyber-attack that we believe occurred between April and June, 2014. We and Mandiant (a FireEye Company), the forensic expert engagedby us in connection with this matter, believe the attacker was a foreign “Advanced Persistent Threat” group who used highly sophisticated malware andtechnology to attack our systems. The attacker was able to bypass our security measures and successfully copy and transfer outside the Company certainnon-medical patient identification data (such as patient names, addresses, birthdates, telephone numbers and social security numbers), but not includingpatient credit card, medical or clinical information. We worked closely with federal law enforcement authorities in connection with their investigation andpossible prosecution of those determined to be responsible for this attack. Mandiant has conducted a thorough investigation of this incident and continues toadvise us regarding security and monitoring efforts. We have provided appropriate notification to affected patients and regulatory agencies as 48Table of Contentsrequired by federal and state law. We have offered identity theft protection services to individuals affected by this attack.We have incurred certain expenses to remediate and investigate this matter. In addition, multiple purported class action lawsuits have been filed against usand certain subsidiaries. These lawsuits allege that sensitive information was unprotected and inadequately encrypted by us. The plaintiffs claim breach ofcontract and other theories of recovery, and are seeking damages, as well as restitution for any identity theft. On February 4, 2015, the United States JudicialPanel on Multidistrict Litigation ordered the transfer of the purported class actions pending outside of the District Court for the Northern District of Alabamato the District Court for the Northern District of Alabama for coordinated or consolidated pretrial proceedings. A consolidated complaint was filed and wefiled a motion to dismiss on September 21, 2015, which was partially argued on February 10, 2016. In an oral ruling from the bench, the court greatly limitedthe potential class by ruling only plaintiffs with specific injury resulting from the breach had standing to sue. Further, on jurisdictional grounds, the courtdismissed Community Health Systems, Inc. from all non-Tennessee based cases. Finally, the court set April 15, 2016 for further argument on whether theremaining plaintiffs have sufficiently stated a cause of action to continue their cases. On April 15, 2016 in an oral ruling from the bench, the court dismissedadditional claims and following this oral ruling only eight of the forty plaintiffs remained, with significant limitations imposed on their ability to assertclaims for damages. These oral rulings were confirmed in a written order filed on September 12, 2016. On October 20, 2016, the plaintiffs filed a renewedmotion for interlocutory appeal from the motion to dismiss ruling and on February 15, 2017 this motion was denied. Plaintiffs refiled their motion forpermission to seek interlocutory appeal on March 15, 2017, and that motion was also denied. We have settled these class action lawsuits, and the settlementhas been approved by the District Court. Notices of the settlement and claim forms have been mailed to purported class members. The deadline for purportedclass members to opt out of or object to the settlement is May 18, 2019.We are also currently responding to two government investigations related to the 2014 cyber-attack. The first is being conducted by various StateAttorneys General, and the second is being conducted by the U.S. Department of Health and Human Services Office for Civil Rights. We are cooperating fullywith both investigations.Empire Health Foundation v. CHS/Community Health Systems, Inc., CHS Washington Holdings, LLC, Spokane Washington Hospital Company, LLC,Spokane Valley Washington Hospital Company, LLC. This suit was filed on June 12, 2017 by Empire Health Foundation claiming Deaconess and ValleyHospitals failed to abide by charity care obligations allegedly existing in the 2008 Asset Purchase Agreement between Empire Health System and Companyaffiliates. The court granted in part and denied in part the hospitals’ motion to dismiss on October 11, 2017. All parties have filed motions for summaryjudgment, and those motions are pending. The trial for this matter is set for August 12, 2019. We believe these claims are without merit and will vigorouslydefend the case.Gibson, individually and on behalf of all others similarly situated v. National Healthcare of Leesville, Inc. d/b/a Byrd Regional Medical Center. Thiscase is a purported class action lawsuit filed in the 30th Judicial District Court for the State of Louisiana and served on August 3, 2016, claiming our formerlyaffiliated Leesville, Louisiana hospital violated payor contracts by allegedly improperly asserting hospital liens against third-party tortfeasors and seekingclass certifications for any similarly situated plaintiffs. The court has certified a class and denied our motion for summary judgment. We have appealed bothrulings to the Louisiana Third Circuit Court of Appeals. That appeal is pending. We believe these claims are without merit and will vigorously defend thecase.Bowden, individually and on behalf of all others similarly situated v. Ruston Louisiana Hospital Company, LLC d/b/a Northern Louisiana MedicalCenter. This case is a purported class action lawsuit filed in the 3rd Judicial District Court for the State of Louisiana and served on September 7, 2016,claiming our affiliated Ruston, Louisiana hospital violated payor contracts by allegedly improperly asserting hospital liens against third-party tortfeasors andseeking class certifications for any similarly situated plaintiffs. Our motion for summary 49Table of Contentsjudgment is pending, as is plaintiff’s motion for class certification. Neither motion is currently set for hearing. We believe these claims are without merit andwill vigorously defend the case.Zwick Partners, LP and Aparna Rao, individually and on behalf of all others similarly situated v. Quorum Health Corporation, Community HealthSystems, Inc., Wayne T. Smith, W. Larry Cash, Thomas D. Miller, and Michael J. Culotta. This purported class action lawsuit previously filed in the UnitedStates District Court, Middle District of Tennessee was amended on April 17, 2017 to include Community Health Systems, Inc., Wayne T. Smith and W. LarryCash as additional defendants. The plaintiffs seek to represent a class of QHC shareholders and allege that the failure to record a goodwill and long-livedasset impairment charge against QHC at the time of the spin-off of QHC violated federal securities laws. The District Court denied all defendants’ motions todismiss on April 20, 2018. The plaintiffs amended their complaint on September 14, 2018, and our motion to dismiss the new claims in the amendedcomplaint is pending. Plaintiffs’ motion for class certification is also pending. We believe the claims are without merit and will vigorously defend the case.R2 Investments v Quorum Health Corporation; Community Health Systems, Inc.; Wayne T. Smith; W. Larry Cash; Thomas D. Miller; Michael J. Culotta;John A. Clerico; James S. Ely, III; John A. Fry; William Norris Jennings; Julia B. North; H. Mitchell Watson, Jr.; H. James Williams. This case is pending inthe Circuit Court for Williamson County, Tennessee and was served on October 26, 2017. The plaintiff alleges common law fraud and violation of Tennesseesecurities fraud statutes in connection with its purchase of QHC stock and QHC senior secured notes. The court granted in part and denied in part the directordefendants’ motion to dismiss and denied the remaining defendants’ motions to dismiss on May 11, 2018. We believe the claims are without merit and willvigorously defend the case.Microsoft Corporation v Community Health Systems, Inc. This case was pending in the District Court for the Middle District of Tennessee and was servedon March 16, 2018. The plaintiff alleged willful copyright infringement, contributing copyright infringement, breach of contract, and breach of the impliedcovenant of good faith and fair dealing in connection with the alleged use of certain Microsoft products by the Company related to certain of ourdivestitures. We answered the complaint. Pursuant to an agreement between the parties, this case was dismissed on November 27, 2018.Revenue Cycle Service Center and CHSPSC, LLC v QHCCS, LLC, Quorum Health Corporation and QHCCS, LLC v Community Health Systems, Inc. Thiscase was pending in arbitration and was initiated by the Company on August 4, 2017. The Company sought unpaid amounts due from QHC related to aComputer Data Processing Transition Services Agreement and a Shared Services Transition Services Agreement (the “TSAs”) entered into between QHC andthe Company in connection with the spin-off of QHC. QHC filed a counterclaim, claiming breach of contract and tortious interference, among others. Thearbitration began on June 18, 2018 and continued through June 27, 2018. It reconvened on October 1, 2018 and concluded on October 8, 2018. On June 25,2018, the arbitration panel issued a partial order that the TSAs were enforceable contracts and would continue by their terms until their expiration in April2021. QHC had attempted to challenge the legal enforceability of both of those agreements. The arbitration panel issued a final order on January 3, 2019,finding in favor of the Company with respect to its claims against QHC related to the Computer Data Processing Transition Services Agreement and one of itsclaims against QHC related to the Shared Services Transition Services Agreement. Furthermore, the arbitration panel ruled in favor of the Company withrespect to all of QHC’s counterclaims.Steadfast Insurance Company, et al v. Community Health Systems, Inc., CHS/Community Health Systems, Inc., CHSPSC, LLC and Pecos Valley of NewMexico, LLC. These cases are filed in the Superior Court for the State of Delaware and involve suits by three excess liability insurers seeking a declarationthat a $73 million judgment rendered against Pecos Valley of New Mexico, LLC in Anne Sperling, et al v. Pecos Valley of New Mexico, LLC is not a coveredloss as defined by the policies at issue. The Steadfast complaint was served on November 30, 2018. On December 13, 2018, Admiral Insurance Company andEndurance Specialty Insurance Ltd moved to intervene in the suit as petitioners. CHS/Community Health Systems, Inc. and CHSPSC, LLC have moved todismiss the petition filed by Steadfast Insurance Company. The judgment against Pecos Valley of New Mexico, LLC, which was rendered on September 5,2018, in First Judicial Court of the State of New Mexico, is currently 50Table of Contentson appeal to the Court of Appeals of New Mexico. We believe the claims in the Steadfast litigation are without merit and will vigorously defend the case.Qui Tam Matters Where the Government Declined InterventionU.S. and the State of Mississippi ex rel. W. Blake Vanderlan, M.D. v. Jackson HMA, LLC d/b/a Central Mississippi Medical Center and Merit HealthCentral (SD Mississippi). By order filed on August 31, 2017, the court ordered the unsealing of this matter. The unsealing revealed that on August 31, 2017the United States had declined to intervene in the allegations that certain alleged EMTALA violations at the hospital resulted in a violation of the FalseClaims Act. Both the hospital and the United States have filed motions to dismiss the litigation, and those motions are pending. This litigation was stayed onJanuary 10, 2019. We believe this matter is without merit and will vigorously defend this case.Management of Significant Legal ProceedingsIn accordance with our governance documents, including our Governance Guidelines and the charter of the Audit and Compliance Committee, ourmanagement of significant legal proceedings is overseen by the independent members of the Board of Directors and, in particular, the Audit and ComplianceCommittee. The Audit and Compliance Committee is charged with oversight of compliance, regulatory and litigation matters, and enterprise riskmanagement. Management has been instructed to refer all significant legal proceedings and allegations of financial statement fraud, error, or misstatement tothe Audit and Compliance Committee for its oversight and evaluation. Consistent with New York Stock Exchange, Nasdaq and Sarbanes-Oxleyindependence requirements, the Audit and Compliance Committee is comprised entirely of individuals who are independent of our management, and all fourmembers of the Audit and Compliance Committee are “audit committee financial experts” as defined in the Securities Exchange Act of 1934, as amended.In addition, the Audit and Compliance Committee and the other independent members of the Board of Directors oversee the functions of the voluntarycompliance program, including its auditing and monitoring functions and confidential disclosure program. In recent years, the voluntary complianceprogram has addressed the potential for a variety of billing errors that might be the subject of audits and payment denials by the CMS Recovery AuditContractors’ permanent project, including MS-DRG coding, outpatient hospital and physician coding and billing, and medical necessity for services(including a focus on hospital stays of very short duration). Efforts by management, through the voluntary compliance program, to identify and limit riskfrom these government audits have included significant policy and guidance revisions, training and education, and auditing. The Board of Directors nowoversees and reviews periodic reports of our compliance with the Corporate Integrity Agreement, or CIA, that we entered into with the United StatesDepartment of Health and Human Services Office of the Inspector General during 2014 and which was amended and extended in September 2018.Item 4. Mine Safety DisclosuresNot applicable. 51Table of ContentsPART IIItem 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity SecuritiesWe completed an initial public offering of our common stock on June 14, 2000. Our common stock began trading on June 9, 2000 and is listed on theNew York Stock Exchange under the symbol CYH. As of February 15, 2019, there were approximately 200 holders of record of our common stock.Stock Performance GraphThe following graph sets forth the cumulative return of our common stock during the five year period ended December 31, 2018, as compared to thecumulative return of the Standard & Poor’s 500 Stock Index (S&P 500) and the cumulative return of the Dow Jones Healthcare Index. The graph assumes aninitial investment of $100 in our common stock and in each of the foregoing indices and the reinvestment of dividends where applicable. The comparisons inthe graph below are based on historical data and are not indicative of, or intended to forecast, future performance of our common stock. The market price ofour common stock used to calculate the cumulative return has been adjusted in prior periods for the impact of the April 2016 QHC spin-off and relateddistribution of QHC common stock to our stockholders.COMPARISON OF 5 YEAR CUMULATIVE TOTAL RETURNAmong Community Health Systems, Inc., the S&P 500 Index, and the Dow Jones US Health Care Index We are a holding company which operates through our subsidiaries. Our Credit Facility and the indentures governing the senior and senior secured notescontain various covenants under which the assets of our subsidiaries are subject to certain restrictions relating to, among other matters, dividends anddistributions, as referenced in the paragraph below.With the exception of a special cash dividend of $0.25 per share paid by us in December 2012, historically, we have not paid any cash dividends. Subjectto certain exceptions, our Credit Facility limits the ability of our 52Table of Contentssubsidiaries to pay dividends and make distributions to us, and limits our ability to pay dividends and/or repurchase stock, to an amount not to exceed$200 million in the aggregate plus an additional $25 million in any particular year plus the aggregate amount of proceeds from the exercise of stock options.The indentures governing our senior and senior secured notes also restrict our subsidiaries from, among other matters, paying dividends and makingdistributions to us, which thereby limits our ability to pay dividends and/or repurchase stock. The non-cash dividend of approximately $713 millionrecorded during the year ended December 31, 2016 to reflect the distribution of the net assets of QHC was a permitted transaction under our Credit Facility.As of December 31, 2018, under the most restrictive test in these agreements (and subject to certain exceptions), we have approximately $100 millionremaining available with which to pay permitted dividends and/or repurchase shares of our stock or our senior and senior secured notes. However, we do notintend to pay cash dividends in the foreseeable future.On November 6, 2015, we adopted an open market repurchase program for up to 10,000,000 shares of our common stock, not to exceed $300 million inrepurchases. This repurchase program expired on November 6, 2018. During the year ended December 31, 2015, we repurchased and retired 532,188 shares,which is the cumulative number of shares repurchased and retired under this program, at a weighted-average price of $27.31 per share. No shares wererepurchased under this program during the years ended December 31, 2018, 2017 and 2016.The following table contains information about our purchases of common stock during the three months ended December 31, 2018. Period Total Number of SharesPurchased (a) Average Price Paid per Share Total Number of SharesPurchased as Part of PubliclyAnnounced Plans orPrograms (b) Maximum Number of SharesThat May Yet Be PurchasedUnder the Plans orPrograms (b) October 1, 2018 -October 31, 2018 16,675 $ 3.21 - 9,467,812 November 1, 2018 -November 30, 2018 - - - - December 1, 2018 -December 31, 2018 40,645 4.62 - - Total 57,320 $4.21 - - (a)Includes 57,320 shares were withheld by us to satisfy the payment of tax obligations related to the vesting of restricted stock awards. (b)On November 9, 2015, we announced the adoption of an open market repurchase program for up to 10,000,000 shares of our common stock, not toexceed $300 million in repurchases. This repurchase program expired on November 6, 2018. 53Table of ContentsItem 6. Selected Financial DataThe following table summarizes specified selected financial data and should be read in conjunction with our related Consolidated Financial Statementsand accompanying Notes to Consolidated Financial Statements.Community Health Systems, Inc.Five Year Summary of Selected Financial Data Year Ended December 31, 2018 2017 2016 2015 2014 (in millions, except share and per share data) Consolidated Statement of (Loss) Income Data Net operating revenues $14,155 $15,353 $18,438 $19,437 $18,639Income (loss) from operations 208 (1,878) (860) 1,337 1,339(Loss) income from continuing operations (704) (2,384) (1,611) 295 260Net (loss) income (704) (2,396) (1,626) 259 203Net income attributable to noncontrolling interests 84 63 95 101 111Net (loss) income attributable to Community HealthSystems, Inc. stockholders (788) (2,459) (1,721) 158 92Basic (loss) earnings per share attributable to CommunityHealth Systems, Inc. common stockholders (1): Continuing operations $(6.99) $(21.89) $(15.41) $1.69 $1.33Discontinued operations – (0.11) (0.13) (0.31) (0.51) Net (loss) income $(6.99) $(22.00) $(15.54) $1.38 $0.82Diluted (loss) earnings per share attributable to CommunityHealth Systems, Inc. common stockholders (1): Continuing operations $(6.99) $(21.89) $(15.41) $1.68 $1.32Discontinued operations – (0.11) (0.13) (0.31) (0.51) Net (loss) income $(6.99) $(22.00) $(15.54) $1.37 $0.82Weighted-average number of shares outstanding: Basic 112,728,274 111,769,821 110,730,971 114,454,674 111,579,088Diluted (2) 112,728,274 111,769,821 110,730,971 115,272,404 112,549,320Consolidated Balance Sheet Data Cash and cash equivalents $196 $563 $238 $184 $509Total assets 15,859 17,450 21,944 26,595 27,118Long-term obligations 14,426 15,259 16,775 18,847 18,915Redeemable noncontrolling interests in equity ofconsolidated subsidiaries 504 527 554 571 531Community Health Systems, Inc. stockholders’ (deficit)equity (1,535) (767) 1,615 4,019 4,003Noncontrolling interests in equity of consolidatedsubsidiaries 72 75 113 86 80 (1)Total per share amounts may not add due to rounding. (2)See Note 13 of the Notes to Consolidated Financial Statements included under Part II, Item 8 of this Form 10-K. 54Table of ContentsItem 7. Management’s Discussion and Analysis of Financial Condition and Results of OperationsYou should read this discussion together with our Consolidated Financial Statements and the accompanying Notes to Consolidated Financial Statementsand “Selected Financial Data” included elsewhere in this Form 10-K.Executive OverviewWe are one of the largest publicly traded hospital companies in the United States and a leading operator of general acute care hospitals and outpatientfacilities in communities across the country. We provide healthcare services through the hospitals that we own and operate and affiliated businesses innon-urban and selected urban markets throughout the United States. We generate revenues by providing a broad range of general and specialized hospitalhealthcare services and outpatient services to patients in the communities in which we are located. As of December 31, 2018, we owned or leased 113hospitals, comprised of 111 general acute care hospitals and two stand-alone rehabilitation or psychiatric hospitals. For the hospitals that we own andoperate, we are paid for our services by governmental agencies, private insurers and directly by the patients we serve.We have been implementing a portfolio rationalization and deleveraging strategy by divesting hospitals and non-hospital businesses that are attractive tostrategic and other buyers. Generally, these businesses are not in one of our strategically beneficial service areas, are less complementary to our businessstrategy and/or have lower operating margins. In connection with our announced divestiture initiative, we have received offers from strategic buyers to buycertain of our assets. After considering these offers, we have divested or may divest hospitals and non-hospital businesses when we find such offers to beattractive and in line with our operating strategy.Completed Divestiture and Acquisition ActivityDuring 2018, we completed the divestiture of 11 hospitals. These 11 hospitals represented annual net operating revenues in 2017 of approximately$950 million, and we received total net proceeds of approximately $405 million in connection with the disposition of these hospitals. In addition, in 2018,we entered into definitive agreements to sell seven additional hospitals, of which four divestitures have not yet been completed, two closed effectiveJanuary 1, 2019 and one closed effective January 31, 2019.In addition, during 2017, we completed the divestiture of 30 hospitals included in continuing operations. These 30 hospitals represented annual netoperating revenues in 2016 of approximately $3.4 billion, and we received total net proceeds of approximately $1.7 billion in connection with thedisposition of these hospitals.The following table provides a summary of hospitals included in continuing operations that we divested during the years ended December 31, 2018 and2017: Hospital Buyer City, State LicensedBeds Effective Date 2018 Divestitures Bayfront Health Dade City Adventist Health System Dade City, FL 120 April 1, 2018 Tennova Healthcare – Dyersburg Regional West Tennessee Healthcare Dyersburg, TN 225 June 1, 2018 Tennova Healthcare – Regional Jackson West Tennessee Healthcare Jackson, TN 150 June 1, 2018 Tennova Healthcare – Volunteer Martin West Tennessee Healthcare Martin, TN 100 June 1, 2018 Williamson Memorial Hospital Mingo Health Partners, LLC Williamson, WV 76 June 1, 2018 Byrd Regional Hospital Allegiance Health Management Leesville, LA 60 June 1, 2018 Tennova Healthcare – Jamestown Rennova Health, Inc. Jamestown, TN 85 June 1, 2018 55Table of ContentsHospital Buyer City, State LicensedBeds Effective DateMunroe Regional Medical Center Adventist Health System Ocala, FL 425 August 1, 2018AllianceHealth Deaconess INTEGRIS Health Oklahoma City, OK 238 October 1, 2018Sparks Regional Medical Center Baptist Health Fort Smith, AR 492 November 1, 2018Sparks Medical Center – Van Buren Baptist Health Van Buren, AR 103 November 1, 20182017 Divestitures Easton Hospital Steward Health, Inc. Easton, PA 196 May 1, 2017Sharon Regional Health System Steward Health, Inc. of theCity of Anniston Sharon, PA 258 May 1, 2017Northside Medical Center Steward Health, Inc. Youngstown, OH 355 May 1, 2017Trumbull Memorial Hospital Steward Health, Inc. Warren, OH 311 May 1, 2017Hillside Rehabilitation Hospital Steward Health, Inc. Warren, OH 69 May 1, 2017Wuesthoff Health System – Rockledge Steward Health, Inc. Rockledge, FL 298 May 1, 2017Wuesthoff Health System – Melbourne Steward Health, Inc. Melbourne, FL 119 May 1, 2017Sebastian River Medical Center Steward Health, Inc. Sebastian, FL 154 May 1, 2017Stringfellow Memorial Hospital The Health Care Authority Anniston, AL 125 May 1, 2017Merit Health Gilmore Memorial Curae Health, Inc. Amory, MS 95 May 1, 2017Merit Health Batesville Curae Health, Inc. Batesville, MS 112 May 1, 2017Lake Area Medical Center CHRISTUS Health Lake Charles, LA 88 June 30, 2017Memorial Hospital of York PinnacleHealth System York, PA 100 July 1, 2017Lancaster Regional Medical Center PinnacleHealth System Lancaster, PA 214 July 1, 2017Heart of Lancaster Regional Medical Center PinnacleHealth System Lititz, PA 148 July 1, 2017Carlisle Regional Medical Center PinnacleHealth System Carlisle, PA 165 July 1, 2017Tomball Regional Medical Center HCA Tomball, TX 350 July 1, 2017South Texas Regional Medical Center HCA Jourdanton, TX 67 July 1, 2017Deaconess Hospital MultiCare Health System Spokane, WA 388 July 1, 2017Valley Hospital MultiCare Health System Spokane Valley, WA 123 July 1, 2017Yakima Regional Medical and Cardiac Center Regional Health Yakima, WA 214 September 1, 2017Toppenish Community Hospital Regional Health Toppenish, WA 63 September 1, 2017Weatherford Regional Medical Center HCA Weatherford, TX 103 October 1, 2017Brandywine Hospital Reading Health System Coatesville, PA 169 October 1, 2017Chestnut Hill Hospital Reading Health System Philadelphia, PA 148 October 1, 2017Jennersville Hospital Reading Health System West Grove, PA 63 October 1, 2017 56Table of ContentsHospital Buyer City, State LicensedBeds Effective DatePhoenixville Hospital Reading Health System Phoenixville, PA 151 October 1, 2017Pottstown Memorial Medical Center Reading Health System Pottstown, PA 232 October 1, 2017Highlands Regional Medical Center HCA Sebring, FL 126 November 1, 2017Merit Health Northwest Mississippi Curae Health, Inc. Clarksdale, MS 181 November 1, 2017On March 15, 2018, we signed a definitive agreement for the sale of Memorial Hospital of Salem County (126 licensed beds) in Salem, New Jersey, and itsassociated assets to Community Healthcare Associates, LLC. We closed on the sale of this hospital on January 31, 2019.On October 11, 2018, we signed a definitive agreement for the sale of Mary Black Health System – Spartanburg (207 licensed beds) in Spartanburg, SouthCarolina, and Mary Black Health System – Gaffney (125 licensed beds) in Gaffney, South Carolina and their associated assets to Spartanburg RegionalHealthcare System in Spartanburg, South Carolina. We closed on the sale of these hospitals effective January 1, 2019.On November 19, 2018, we signed a definitive agreement for the sale of Chester Regional Medical Center (82 licensed beds) in Chester, South Carolina,Springs Memorial Hospital (225 licensed beds) in Lancaster, South Carolina, Carolinas Hospital System (396 licensed beds) in Florence, South Carolina, andCarolinas Hospital System – Marion (124 licensed beds) in Mullins, South Carolina and their associated assets to Medical University Hospital Authority inCharleston, South Carolina.In addition to the divestiture of these hospitals in 2017 and 2018, as noted above we continue to receive interest from potential buyers for certain of ourhospitals. We intend to continue our portfolio rationalization strategy in 2019 and are pursuing additional interests for sale transactions, which are currentlyin various stages of negotiation with potential buyers. There can be no assurance that these potential divestitures (or the potential divestitures currentlysubject to definitive agreements) will be completed, or if they are completed, the ultimate timing of the completion of these divestitures.Operating results and statistical data for the year ended December 31, 2017, exclude hospitals still owned and hospitals divested during the year endedDecember 31, 2017, that were previously classified as discontinued operations for accounting purposes.During the year ended December 31, 2018, we paid approximately $26 million to acquire the operating assets and related businesses of certain physicianpractices, clinics and other ancillary businesses that operate within the communities served by our hospitals.Overview of Operating ResultsOur net operating revenues for the year ended December 31, 2018 decreased $1.2 billion to approximately $14.2 billion compared to approximately$15.4 billion for the year ended December 31, 2017, primarily as a result of hospitals divested during 2017 and 2018. On a same-store basis, net operatingrevenues for the year ended December 31, 2018 increased $362 million.We had a loss from continuing operations of $704 million during the year ended December 31, 2018, compared to loss from continuing operations of$2.4 billion for the year ended December 31, 2017. Loss from continuing operations for the year ended December 31, 2018 included the following: • an after-tax charge of $8 million for government and other legal settlements, net of related legal expenses, • an after-tax charge of $526 million for the impairment of goodwill and long-lived assets of hospitals sold or held for sale based on their estimated fairvalues, 57Table of Contents• an after-tax charge of $15 million for employee termination benefits and other restructuring costs, • after-tax income of $23 million for gain from early extinguishment of debt, • an after-tax charge of $10 million from settlement adjustments to the CVR agreement liability related to HMA legal proceedings, and related legalexpenses, and • a deferred tax provision of $34 million related to the write-off of deferred tax assets due to the nondeductible components of the settlement liability forthe HMA legal proceedings noted above.Loss from continuing operations before noncontrolling interests for the year ended December 31, 2017 included the following: • after-tax income of $20 million for government and other legal settlements and related legal expenses, • an after-tax charge of $26 million for loss from early extinguishment of debt, • an after-tax charge of $32 million for the estimated impact of the Tax Act, • an after-tax charge of $1 million related to the costs incurred for the 30 hospital divestitures, • an after-tax charge of $1.9 billion related to the impairment of goodwill and long-lived assets based on their estimated fair values, • an after-tax charge of $378 million related to the change in estimate for contractual allowances and provision for bad debts, • an after-tax charge of $5 million from fair value adjustments on the CVR agreement liability accounted for at fair value related to the HMA legalproceedings, and related legal expenses and • an after-tax charge of $9 million related to employee termination benefits and other restructuring charges.During the fourth quarter of 2017, we completed an extensive analysis of our patient revenues and patient accounts receivable and developed newaccounting processes and methodologies in preparation to adopt the new revenue recognition accounting standards in ASU 2014-09 on January 1, 2018.This analysis also included an evaluation of patient accounts receivable retained after the divestiture of 30 hospitals throughout 2017, and certain otherrevenues. Based on the information obtained, the financial results discussed below include a change in estimate recorded by us during the three months andyear ended December 31, 2017 related to an increase in contractual allowances and the provision for bad debts of approximately $591 million.Consolidated inpatient admissions for the year ended December 31, 2018, decreased 15.0%, compared to the year ended December 31, 2017, andconsolidated adjusted admissions for the year ended December 31, 2018, decreased 15.3%, compared to the year ended December 31, 2017. Same-storeinpatient admissions for the year ended December 31, 2018, decreased 1.3%, compared to the year ended December 31, 2017, and same-store adjustedadmissions for the year ended December 31, 2018, decreased 0.4%, compared to the year ended December 31, 2017.Self-pay revenues represented approximately 1.4% and (0.8)% of net operating revenues for the years ended December 31, 2018 and 2017, respectively.The amount of foregone revenue related to providing charity care services as a percentage of net operating revenues was approximately 3.5% and 3.1% forthe years ended December 31, 2018 and 2017, respectively. Direct and indirect costs incurred in providing charity care services as a percentage of netoperating revenues was approximately 0.4% for both of the years ended December 31, 2018 and 2017. 58Table of ContentsLegislative OverviewThe U.S. Congress and certain state legislatures have introduced and passed a large number of proposals and legislation designed to make major changesin the healthcare system, including changes that have increased access to health insurance. The most prominent of these recent efforts, the Affordable CareAct, affects how healthcare services are covered, delivered and reimbursed. It mandates that substantially all U.S. citizens maintain health insurance andincreases health insurance coverage through a combination of public program expansion and private sector health insurance reforms.However, the future of the Affordable Care Act is uncertain. Since the 2016 presidential election, significant changes have been made to the AffordableCare Act, its implementation, and its interpretation. The current presidential administration and certain members of Congress have stated their intent to repealor make additional significant changes to the law. For example, as part of the tax reform legislation which was enacted in December 2017, the financialpenalty associated with the individual mandate was eliminated, effective January 1, 2019, which may result in fewer individuals electing to purchase healthinsurance. In addition, final rules issued in 2018 expand availability of association health plans and allow the sale of short-term, limited-duration healthplans, neither of which are required to cover all of the essential health benefits mandated by the Affordable Care Act. These changes may impact the numberof individuals who elect to purchase health insurance or the scope of such coverage, if purchased. Of critical importance to us will be the potential impact ofany changes specific to the Medicaid funding and expansion provisions of the Affordable Care Act. We operate hospitals in five of the ten states thatexperienced the largest reductions in uninsured rates among adult residents between 2013 and 2015. In general, the states with the greatest reductions in thenumber of uninsured adult residents have expanded Medicaid. A number of states have opted out of the Medicaid coverage expansion provisions, but couldultimately decide to expand their programs at a later date. Of the 20 states in which we operated hospitals that were included in continuing operations as ofDecember 31, 2018, 10 states have taken action to expand their Medicaid programs. At this time, the other 10 states have not, including Florida, Alabama,Tennessee and Texas, where we operated a significant number of hospitals as of December 31, 2018. Some states use, or have applied to use, waivers grantedby CMS to implement expansion, impose different eligibility or enrollment restrictions, or otherwise implement programs that vary from federal standards.CMS administrators have indicated that they are increasing state flexibility in the administration of Medicaid programs. For example, CMS has granted alimited number of state applications for waivers that allow a state to condition Medicaid enrollment on work or other community engagement. Several stateshave similar applications pending.The Affordable Care Act makes a number of changes to Medicare and Medicaid, such as reductions to the Medicare annual market basket update forfederal fiscal years 2010 through 2019, a productivity offset to the Medicare market basket update, and a reduction to the Medicare and Medicaiddisproportionate share hospital payments, each of which could adversely impact the reimbursement received under these programs. The Affordable Care Actalso includes provisions aimed at reducing fraud, waste and abuse in the healthcare industry.We believe that the Affordable Care Act has had a positive impact on net operating revenues and income from continuing operations as the result of theexpansion of private sector and Medicaid coverage that has occurred. However, legislative and executive branch efforts related to healthcare reform couldresult in increased prices for consumers purchasing health insurance coverage or the sale of insurance plans that contain gaps in coverage, which coulddestabilize insurance markets and impact the rates of uninsured or underinsured adults. Other provisions of the Affordable Care Act, such as requirementsrelated to employee health insurance coverage and changes to Medicare and Medicaid reimbursement, have increased our operating costs or adverselyimpacted the reimbursement we receive.It is difficult to predict the ongoing effect of the Affordable Care Act due to executive orders, changes to the law’s implementation, clarifications andmodifications resulting from the rule-making process, judicial interpretations resulting from court challenges to its constitutionality and interpretation,whether and how many states ultimately decide to expand Medicaid coverage, the number of uninsured who elect to purchase health insurance coverage,budgetary issues at federal and state levels, and efforts to change or repeal the statute. We 59Table of Contentsmay not be able to fully realize the positive impact the Affordable Care Act may otherwise have on our business, results of operations, cash flow, capitalresources and liquidity. We cannot predict whether we will be able to modify certain aspects of our operations to offset any potential adverse consequencesfrom the Affordable Care Act or the impact of any alternative provisions that may be adopted.In recent years, a number of laws, including the Affordable Care Act and MACRA, have promoted shifting from traditional fee-for-service reimbursementmodels to alternative payment models that tie reimbursement to quality and cost of care. CMS currently administers various ACOs and bundled paymentdemonstration projects and has indicated that it will continue to pursue similar initiatives.The federal government has implemented a number of regulations and programs designed to promote the use of EHR technology and pursuant to theHITECH, established requirements for a Medicare and Medicaid incentive payments program for eligible hospitals and professionals that adopt andmeaningfully use certified EHR technology. These payments are available for a maximum period of five or six years, depending on the program. Our hospitalfacilities have been implementing EHR technology on a facility-by-facility basis since 2011. We recognize incentive reimbursement related to the Medicareor Medicaid incentives as we are able to implement the certified EHR technology and meet the defined “meaningful use criteria,” and information fromcompleted cost report periods is available from which to calculate the incentive reimbursement. The timing of recognizing incentive reimbursement does notcorrelate with the timing of recognizing operating expenses and incurring capital costs in connection with the implementation of EHR technology whichmay result in material period-to-period changes in our future results of operations.Eligible hospitals and professionals that have not demonstrated meaningful use of certified EHR technology and have not applied and qualified for ahardship exception are subject to payment adjustments. Eligible hospitals are subject to a reduced market basket update to the inpatient prospective paymentsystem standardized amount as of 2015 and for each subsequent fiscal year. Eligible professionals are subject to a 1% per year cumulative reduction appliedto the MPFS amount for covered professional services, subject to a cap of 5%. Payment adjustments for eligible professionals failing to demonstratemeaningful use will no longer be applicable beginning in 2019, when the program is scheduled to be replaced by MIPS.As a result of our current levels of cash, available borrowing capacity, long-term outlook on our debt repayments, the refinancing of our term loans and ourcontinued projection of our ability to generate cash flows, we anticipate that we will be able to invest the necessary capital in our business over the nexttwelve months. We believe there continues to be ample opportunity for growth in substantially all of our markets by decreasing the need for patients to traveloutside their communities for healthcare services. Furthermore, we will continue to strive to improve operating efficiencies and procedures in order toimprove our profitability at our hospitals.Sources of RevenueThe following table presents the approximate percentages of net operating revenues by payor source for the periods indicated. The data for the periodspresented are not strictly comparable due to the effect that hospital acquisitions and divestitures have had on these statistics. The percentages of netoperating revenues for 2017 also include the overall impact of the change in estimate recorded in the fourth quarter of 2017 to increase contractualallowances and record additional provision for bad debts. Year Ended December 31, 2018 2017 2016 Medicare 26.3 % 27.8 % 27.2 % Medicaid 13.3 13.2 11.9 Managed Care and other third-party payors 59.0 59.8 58.4 Self-pay 1.4 (0.8) 2.5 Total 100.0 % 100.0 % 100.0 % 60Table of ContentsAs shown above, we receive a substantial portion of our revenues from the Medicare and Medicaid programs. Included in Managed Care and other third-party payors is operating revenues from insurance companies with which we have insurance provider contracts, Medicare managed care, insurance companiesfor which we do not have insurance provider contracts, workers’ compensation carriers and non-patient service revenue, such as rental income and cafeteriasales. In the future, we generally expect the portion of revenues received from the Medicare and Medicaid programs to increase due to the general aging ofthe population. In addition, the Affordable Care Act has increased the number of insured patients in states that have expanded Medicaid, which in turn, hasreduced the percentage of revenues from self-pay patients. However, it is unclear whether the trend of increased coverage will continue, due in part to theelimination of the financial penalty associated with the individual mandate, effective January 1, 2019. Further, the Affordable Care Act imposes significantreductions in amounts the government pays Medicare managed care plans. The trend toward increased enrollment in Medicare managed care may adverselyaffect our operating revenue growth. Other provisions in the Affordable Care Act impose minimum medical-loss ratios and require insurers to meet specificbenefit requirements. Furthermore, in the normal course of business, managed care programs, insurance companies and employers actively negotiate theamounts paid to hospitals. The trend toward increased enrollment in managed care may adversely affect our operating revenue. There can be no assurancethat we will retain our existing reimbursement arrangements or that these third-party payors will not attempt to further reduce the rates they pay for ourservices.Net operating revenues include amounts estimated by management to be reimbursable by Medicare and Medicaid under prospective payment systems andprovisions of cost-based reimbursement and other payment methods. In addition, we are reimbursed by non-governmental payors using a variety of paymentmethodologies. Amounts we receive for the treatment of patients covered by Medicare, Medicaid and non-governmental payors are generally less than thestandard billing rates. We account for the differences between the estimated program reimbursement rates and the standard billing rates as contractualallowance adjustments, which we deduct from gross revenues to arrive at net operating revenues. Final settlements under some of these programs are subjectto adjustment based on administrative review and audit by third parties. We account for adjustments to previous program reimbursement estimates ascontractual allowance adjustments and report them in the periods that such adjustments become known. Contractual allowance adjustments related to finalsettlements and previous program reimbursement estimates impacted net operating revenues and net loss by an insignificant amount in each of the yearsended December 31, 2018, 2017, and 2016.The payment rates under the Medicare program for hospital inpatient and outpatient acute care services are based on a prospective payment system,depending upon the diagnosis of a patient’s condition. These rates are indexed for inflation annually, although increases have historically been less thanactual inflation. On August 2, 2018, CMS issued the final rule to increase this index by 2.9% for hospital inpatient acute care services that are reimbursedunder the prospective payment system, beginning October 1, 2018. The final rule provides for a 0.8% multifactor productivity reduction, a 0.75% reductionto hospital inpatient rates implemented pursuant to the Affordable Care Act, and a positive 0.5% adjustment in accordance with the MACRA, which, togetherwill yield an estimated net 1.85% increase in reimbursement for hospitals. An additional reduction applies to hospitals that do not submit required patientquality data. We are complying with this data submission requirement. Payments may also be affected by admission and medical review criteria for inpatientservices commonly known as the “two midnight rule.” Under the rule, for admissions on or after October 1, 2013, services to Medicare beneficiaries are onlypayable as inpatient hospital services when there is a reasonable expectation that the hospital care is medically necessary and will be required across twomidnights, absent unusual circumstances. Stays expected to need less than two midnights of hospital care are subject to medical review on a case-by-casebasis. Reductions in the rate of increase or overall reductions in Medicare reimbursement may cause a decline in the growth of our net operating revenues.Currently, several states utilize supplemental reimbursement programs for the purpose of providing reimbursement to providers to offset a portion of thecost of providing care to Medicaid and indigent patients. These programs are designed with input from CMS and are funded with a combination of state andfederal resources, including, in certain instances, fees or taxes levied on the providers. Similar programs are also being 61Table of Contentsconsidered by other states. The programs are generally authorized for a specified period of time and require CMS’s approval to be extended. CMS hasindicated that it will take into account a state’s status with respect to expanding its Medicaid program in considering whether to extend these supplementalprograms. We are unable to predict whether or on what terms CMS will extend the supplemental programs in the states in which we operate. Under thesesupplemental programs, we recognize revenue and related expenses in the period in which amounts are estimable and collection is reasonably assured.Reimbursement under these programs is reflected in net operating revenues and included as Medicaid revenue in the table above, and fees, taxes or otherprogram related costs are reflected in other operating expenses.Results of OperationsOur hospitals offer a variety of services involving a broad range of inpatient and outpatient medical and surgical services. These include general acutecare, emergency room, general and specialty surgery, critical care, internal medicine, obstetrics, diagnostic services, psychiatric and rehabilitation services.The strongest demand for hospital services generally occurs during January through April and the weakest demand for these services generally occurs duringthe summer months. Accordingly, eliminating the effects of new acquisitions and/or divestitures, our net operating revenues and earnings are historicallyhighest during the first quarter and lowest during the third quarter.The following tables summarize, for the periods indicated, selected operating data. Year Ended December 31, 2018 2017 2016 Operating results, as a percentage of net operating revenues: Net operating revenues 100.0 % 100.0 % 100.0 % Operating expenses (a) (88.9) (92.8) (88.3) Depreciation and amortization (4.9) (5.6) (6.0) Impairment and gain (loss) on sale of businesses, net (4.7) (13.8) (10.4) Income (loss) from operations 1.5 (12.2) (4.7) Interest expense, net (6.9) (6.1) (5.2) Gain (loss) from early extinguishment of debt 0.2 (0.3) (0.2) Gain on sale of investments in unconsolidated affiliates - - 0.5 Equity in earnings of unconsolidated affiliates 0.2 0.1 0.3 Loss from continuing operations before income taxes (5.0) (18.5) (9.3) Benefit from income taxes - 3.0 0.6 Loss from continuing operations (5.0) (15.5) (8.7) Loss from discontinued operations, net of taxes - (0.1) (0.1) Net loss (5.0) (15.6) (8.8) Less: Net income attributable to noncontrolling interests (0.6) (0.4) (0.5) Net loss attributable to Community Health Systems, Inc. stockholders (5.6)% (16.0)% (9.3)% 62Table of Contents Year Ended December 31, 2018 2017 Percentage (decrease) increase from prior year: Net operating revenues (7.8)% (16.7)% Admissions (15.0) (13.9) Adjusted admissions (b) (15.3) (14.5) Average length of stay - - Net loss attributable to Community Health Systems, Inc. (c) 68.0 (42.9) Same-store percentage increase (decrease) from prior year (d): Net operating revenues 2.8% 0.2% Admissions (1.3) (1.9) Adjusted admissions (b) (0.4) (1.7) (a)Operating expenses include salaries and benefits, supplies, other operating expenses, government and other legal settlements and related costs,electronic health records incentive reimbursement and rent.(b)Adjusted admissions is a general measure of combined inpatient and outpatient volume. We computed adjusted admissions by multiplyingadmissions by gross patient revenues and then dividing that number by gross inpatient revenues.(c)Includes loss from discontinued operations.(d)Includes acquired hospitals to the extent we operated them in both periods and excludes our hospitals that have previously been classified asdiscontinued operations for accounting purposes. In addition, also excludes information for the hospitals sold or closed during 2017 and 2018. Same-store operating results also exclude the overall impact of the change in estimate related to net patient receivables recorded in the fourth quarter of2017.Year Ended December 31, 2018 Compared to Year Ended December 31, 2017Net operating revenues decreased by 7.8% to approximately $14.2 billion for the year ended December 31, 2018, from approximately $15.4 billion for theyear ended December 31, 2017. Net operating revenues on a same-store basis from hospitals that were operated throughout both periods increased$362 million or 2.8% during the year ended December 31, 2018, as compared to the year ended December 31, 2017. The increase in same-store net operatingrevenues was attributable to improved pricing due to higher acuity, partially offset by a decline in inpatient admissions and adjusted admissions.Non-same-store net operating revenues decreased $1.6 billion during the year ended December 31, 2018, in comparison to the prior year period, with thedecrease attributable primarily to the divestiture of hospitals during 2017 and 2018. On a consolidated basis, inpatient admissions decreased by 15.0%during the year ended December 31, 2018 as compared to the year ended December 31, 2017. Also on a consolidated basis, adjusted admissions decreased by15.3% during the year ended December 31, 2018 as compared to the year ended December 31, 2017. On a same-store basis, net operating revenues peradjusted admissions increased 3.2%, while inpatient admissions decreased by 1.3% and adjusted admissions decreased by 0.4% for the year endedDecember 31, 2018, compared to the year ended December 31, 2017.All operating expenses calculations, as a percentage of net operating revenues, were impacted during the year ended December 31, 2017 due to the overallimpact of the change in estimate related to net patient receivables recorded in the fourth quarter of 2017. Total operating costs and expenses, as a percentageof net operating revenues, decreased from 112.2% during the year ended December 31, 2017 to 98.5% during the year ended December 31, 2018. Operatingexpenses, excluding depreciation and amortization and impairment and (gain) loss on sale of businesses, as a percentage of net operating revenues, decreasedfrom 92.8% for the year ended December 31, 2017 to 88.9% for the year ended December 31, 2018. Salaries and benefits, as a percentage of net operatingrevenues, decreased from 48.0% for the year ended December 31, 2017 to 45.1% for the year ended December 31, 2018. This decrease in salaries and benefits,as a percentage of net operating revenues, was 63Table of Contentsprimarily due to improved staffing and benefit expense management. Supplies, as a percentage of net operating revenues, decreased from 17.4% for the yearended December 31, 2017 to 16.6% for the year ended December 31, 2018. Other operating expenses, as a percentage of net operating revenues, decreasedfrom 25.2% for the year ended December 31, 2017 to 24.7% for the year ended December 31, 2018. Government and other legal settlements and related costs,as a percentage of net operating revenues, decreased from income of 0.2% for the year ended December 31, 2017 to expense of 0.1% for the year endedDecember 31, 2018 primarily as a result of the gain recorded from the previously announced settlement of the shareholder derivative action in January 2017.Rent, as a percentage of net operating revenues, decreased from 2.6% for the year ended December 31, 2017 to 2.4% for the year ended December 31, 2018.Depreciation and amortization, as a percentage of net operating revenues, decreased from 5.6% for the year ended December 31, 2017 to 4.9% for the yearended December 31, 2018, primarily due to a decrease in depreciable basis of property and equipment that has been impaired and from ceasing depreciationon property and equipment at hospitals sold or held for sale.Impairment and (gain) loss on sale of businesses was $668 million for the year ended December 31, 2018, compared to $2.1 billion for the year endedDecember 31, 2017. Impairment of goodwill and long-lived assets for the year ended December 31, 2018 included (i) impairment of approximately$423 million related to impairment of the long-lived assets and reporting unit goodwill allocated to hospitals that have been sold or deemed held for saleduring the year ended December 31, 2018, (ii) approximately $29 million recorded to write-off the value of a promissory note received as consideration forthe sale of three hospitals in 2017 where the buyer entered into bankruptcy proceedings, and (iii) approximately $216 million recorded primarily to adjustthe carrying value of other long-lived assets at several underperforming hospitals that have ceased operations or where we are in discussions with potentialbuyers for divestiture at a sales price that indicates a fair value below carrying value. Impairment of goodwill and long-lived assets for the year endedDecember 31, 2017 included impairment of approximately $388 million related to impairment of the long-lived assets and reporting unit goodwill allocatedto hospitals classified as held for sale during the year ended December 31, 2017, impairment of approximately $316 million for several underperforminghospitals as well as for the hospitals where we have received offers or executed non-binding letters of intent to sell the hospital, and impairment of$1.419 billion related to goodwill for our hospital reporting unit.Interest expense, net, increased by $45 million to $976 million for the year ended December 31, 2018 compared to $931 million for the year endedDecember 31, 2017, primarily due to an increase in interest rates during the year ended December 31, 2018 of $114 million. This increase was partially offsetby a decrease in our average outstanding debt during the year ended December 31, 2018, which resulted in a decrease in interest expense of $65 million.Additionally, an increase in major construction projects during the year ended December 31, 2018 resulted in more interest being capitalized, and a decreasein interest expense of $4 million, compared to the same period in 2017.Gain from early extinguishment of debt of $31 million was recognized during the year ended December 31, 2018 which resulted primarily from therefinancing and exchange of certain of our outstanding notes and repayment of a portion of our term loans under the Credit Facility as discussed further inCapital Resources. Loss from early extinguishment of debt of $40 million was recognized during the year ended December 31, 2017, which resulted from therepayment of certain outstanding notes and term loans under the Credit Facility.Equity in earnings of unconsolidated affiliates, as a percentage of net operating revenues, increased from 0.1% for the year ended December 31, 2017 to0.2% for the year ended December 31, 2018.The net results of the above-mentioned changes resulted in loss from continuing operations before income taxes decreasing $2.1 billion from loss of$2.8 billion for the year ended December 31, 2017 to loss of $715 million for the year ended December 31, 2018.Our benefit from income taxes on loss from continuing operations decreased from $449 million for the year ended December 31, 2017 to $11 million forthe year ended December 31, 2018. Our effective tax rates were 64Table of Contents1.5% and 15.8% for the year ended December 31, 2018 and 2017, respectively. The decrease in our effective tax rate for the year ended December 31, 2018,when compared to the year ended December 31, 2017, was primarily due to the increase in valuation allowance recognized on IRC Section 163(j) interestcarryforwards partially offset by the release of certain state valuation allowances on net operating loss carryforwards in certain jurisdictions.Loss from continuing operations, as a percentage of net operating revenues, decreased from 15.5% for the year ended December 31, 2017 to 5.0% for theyear ended December 31, 2018.No discontinued operations were separately reported for the year ended December 31, 2018. Discontinued operations for the year ended December 31,2017, include the results of operations of certain hospitals owned or leased by us as of December 31, 2017, which were classified as being held for sale orsold. The operation of these hospitals resulted in a loss, net of taxes, of $6 million for the year ended December 31, 2017. An after-tax impairment charge of$6 million was recorded during the year ended December 31, 2017, based on the difference between the estimated fair value and the carrying value of theassets held for sale. Overall, discontinued operations consisted of a loss, net of taxes, of $12 million for the year ended December 31, 2017.Net loss, as a percentage of net operating revenues, decreased from 15.6% for the year ended December 31, 2017 to 5.0% for the year ended December 31,2018.Net income attributable to noncontrolling interests, as a percentage of net operating revenues increased from 0.4% for the year ended December 31, 2017to 0.6% for the year ended December 31, 2018.Net loss attributable to Community Health Systems, Inc. was $788 million for the year ended December 31, 2018, compared to $2.5 billion for the yearended December 31, 2017. The decrease in net loss attributable to Community Health Systems, Inc. was primarily due to the change in estimate recorded as areduction of the net operating revenues and the impairment of goodwill and certain long-lived assets based on their estimated fair values for hospitals sold orheld for sale in 2017.Year Ended December 31, 2017 Compared to Year Ended December 31, 2016Net operating revenues decreased by 16.7% to approximately $15.4 billion for the year ended December 31, 2017, from approximately $18.4 billion forthe year ended December 31, 2016. Our provision for bad debts increased by $208 million to $3.0 billion, or 16.6% of operating revenues (before theprovision for bad debts) for the year ended December 31, 2017, from $2.8 billion, or 13.3% of operating revenues (before the provision for bad debts) for theyear ended December 31, 2016. Net operating revenues from same-store hospitals increased $33 million or 0.2% during the year ended December 31, 2017, ascompared to the year ended December 31, 2016. Non-same-store net operating revenues decreased $3 billion during the year ended December 31, 2017, incomparison to the prior year period, with the decrease attributable primarily to the spin-off of QHC, the 30 hospitals sold during 2017 and the impact of thechange in estimate recorded in 2017 to increase contractual allowances and the allowance for doubtful accounts. The decrease in same-store net operatingrevenues was attributable to the decline in inpatient admissions and adjusted admissions. On a consolidated basis, inpatient admissions decreased by 13.9%and adjusted admissions decreased by 14.5% during the year ended December 31, 2017 as compared to the year ended December 31, 2016. On a same-storebasis, net operating revenues per adjusted admissions increased 2.0%, while inpatient admissions decreased by 1.9% and adjusted admissions decreased by1.7% for the year ended December 31, 2017, compared to the year ended December 31, 2016.All operating expenses calculations, as a percentage of net operating revenues, were impacted during the year ended December 31, 2017 due to the overallimpact of the change in estimate related to net patient receivables recorded in the fourth quarter of 2017. Total operating costs and expenses, as a percentageof net operating revenues, increased from 104.7% during the year ended December 31, 2016 to 112.2% during the year ended December 31, 2017. Operatingexpenses, excluding depreciation and amortization and impairment and (gain) 65Table of Contentsloss on sale of businesses, as a percentage of net operating revenues, increased from 88.3% for the year ended December 31, 2016 to 92.8% for the year endedDecember 31, 2017. Salaries and benefits, as a percentage of net operating revenues, increased from 46.8% for the year ended December 31, 2016 to 48.0%for the year ended December 31, 2017. This increase in salaries and benefits, as a percentage of net operating revenues, was primarily due to the payment ofseverance to certain employees. Supplies, as a percentage of net operating revenues, increased from 16.3% for the year ended December 31, 2016 to 17.4% forthe year ended December 31, 2017, primarily as a result of an increase in implant costs due to an increase in surgical case mix over the prior year. Otheroperating expenses, as a percentage of net operating revenues, increased from 23.1% for the year ended December 31, 2016 to 25.2% for the year endedDecember 31, 2017, primarily as a result of higher medical specialist fees, an increase in purchased services and higher information systems expense.Government and other legal settlements and related costs, as a percentage of net operating revenues, decreased from expense of 0.1% for the year endedDecember 31, 2016 to income of 0.2% for the year ended December 31, 2017 primarily as a result of the gain recorded from the previously announcedsettlement of the shareholder derivative action in January 2017. Rent, as a percentage of net operating revenues, increased from 2.4% for the year endedDecember 31, 2016 to 2.6% for the year ended December 31, 2017.EHR incentive reimbursements represent those incentives under HITECH for which the recognition criterion has been met. We recognized approximately$28 million and $70 million of incentive reimbursements, or 0.2% and 0.4% of net operating revenues, for the years ended December 31, 2017 and 2016,respectively. The decrease in EHR incentive reimbursements is due to the majority of our hospitals completing the various stages of meaningful usecompliance, resulting in the expected decline in reimbursement as those programs wind down. We received cash payments of $41 million and $123 millionfor these incentives during the years ended December 31, 2017 and 2016, respectively. There was no deferred revenue recorded at either December 31, 2017or 2016.Depreciation and amortization, as a percentage of net operating revenues, decreased from 6.0% for the year ended December 31, 2016 to 5.6% for the yearended December 31, 2017, primarily due to ceasing depreciation on property and equipment at hospitals sold or held for sale.Impairment and (gain) loss on sale of businesses was $2.1 billion for the year ended December 31, 2017, compared to $1.9 billion for the year endedDecember 31, 2016. Impairment of goodwill and long-lived assets for the year ended December 31, 2017 included impairment of approximately $388 millionrelated to impairment of the long-lived assets and reporting unit goodwill allocated to hospitals classified as held for sale during the year endedDecember 31, 2017, impairment of approximately $316 million for several underperforming hospitals as well as for the hospitals where we had received offersor executed non-binding letters of intent to sell the hospitals, and impairment of $1.419 billion related to goodwill for our hospital reporting unit.Impairment of goodwill and long-lived assets for the year ended December 31, 2016 includes impairment of approximately $12 million related to thereporting unit goodwill and fixed assets allocated to two hospitals sold during the three months ended March 31, 2016, impairment of approximately$326 million related to the reporting unit goodwill allocated to the 18 hospitals designated as held for sale during the year ended December 31, 2016,impairment of approximately $7 million related to certain long-lived assets at one of our smaller hospitals permanently closed, impairment of approximately$1.395 billion related to goodwill for our hospital reporting unit and $270 million related to the adjustment of the fair value of certain long-lived assets atcertain hospitals we had sold or identified for sale and for certain underperforming hospitals.Interest expense, net, decreased by $31 million to $931 million for the year ended December 31, 2017 compared to $962 million for the year endedDecember 31, 2016, primarily due to a decrease in our average outstanding debt during the year ended December 31, 2017, which resulted in a decrease ininterest expense of $88 million. Additionally, a decrease in interest expense of $3 million was due to one less day of interest expense during the year endedDecember 31, 2017 since 2016 was a leap year, and a decrease in interest expense of $2 million for the year ended December 31, 2017 is a result of moreinterest being capitalized as compared to the same period in 2016 because of an increase in major construction projects during the year ended December 31, 66Table of Contents2017. These decreases were partially offset by an increase in interest rates during the year ended December 31, 2017, compared to the same period in 2016,which resulted in an increase in interest expense of $62 million.Loss from early extinguishment of debt of $40 million was recognized during the year ended December 31, 2017. The loss from early extinguishment ofdebt resulted from the repayment of certain outstanding notes and term loans under the Credit Facility as discussed further in the section “Capital Resources”in Part II, Item 7 of this Form 10-K. Loss from early extinguishment of debt of $30 million was recognized during the year ended December 31, 2016 resultingfrom the repayment of certain outstanding notes and term loans under the Credit Facility.No gain on sale of investments in unconsolidated affiliates was recognized during the year ended December 31, 2017. A gain on sale of investments inunconsolidated affiliates of $94 million was recognized during the year ended December 31, 2016 resulting from the sale of our unconsolidated minorityequity interests in Valley Health System LLC, a joint venture with UHS representing four hospitals in Las Vegas, Nevada, in which we owned a 27.5%interest, and in Summerlin Hospital Medical Center LLC, a joint venture with UHS representing one hospital in Las Vegas, Nevada, in which we owned a26.1% interest.Equity in earnings of unconsolidated affiliates, as a percentage of net operating revenues, decreased from 0.3% for the year ended December 31, 2016 to0.1% for the year ended December 31, 2017, primarily resulting from the aforementioned sale of our investments in the joint ventures in Las Vegas, Nevada.The net results of the above-mentioned changes resulted in loss from continuing operations before income taxes increasing $1.1 billion from loss of$1.7 billion for the year ended December 31, 2016 to loss of $2.8 billion for the year ended December 31, 2017.The benefit from income taxes on loss from continuing operations increased from $104 million for the year ended December 31, 2016 to $449 million forthe year ended December 31, 2017, primarily due to the increase in loss from continuing operations before income taxes. Our effective tax rates were 15.8%and 6.1% for the years ended December 31, 2017 and 2016, respectively. The increase in our effective tax rate for the year ended December 31, 2017, whencompared to the year ended December 31, 2016, was primarily due to the differences in the non-deductible nature of certain goodwill written off in the$2.1 billion impairment and (gain) loss on sale of businesses for the year ended December 31, 2017, compared to 2016.The benefit from income taxes includes the estimated impact of the Tax Act, which resulted in an additional provision for income taxes of $32 millionduring the year ended December 31, 2017, primarily related to provisional amounts recorded under SAB 118 for the remeasurement of deferred tax assets andliabilities due to the net effect of changes to the corporate tax rate in December 2017. We have accounted for the effects of the Tax Act using reasonableestimates based on currently available information and our interpretations thereof, and this estimated impact may be revised as a result of, among otherthings, changes in interpretations we have made and the issuance of new tax or accounting guidance.Loss from continuing operations, as a percentage of net operating revenues, increased from 8.7% for the year ended December 31, 2016 to 15.5% for theyear ended December 31, 2017.Discontinued operations for these periods include the results of operations of certain hospitals owned or leased by us as of December 31, 2017 and 2016,which were classified as being held for sale or sold. The operation of these hospitals resulted in a loss, net of taxes, of $6 million and $7 million for the yearsended December 31, 2017 and 2016, respectively. An after-tax impairment charge of $6 million and $8 million was recorded during the years endedDecember 31, 2017 and 2016, respectively, based on the difference between the estimated fair value and the carrying value of the assets held for sale. Overall,discontinued operations consisted of a loss, net of taxes, of $12 million and $15 million during the years ended December 31, 2017 and 2016, respectively.Net loss, as a percentage of net operating revenues, increased from 8.8% for the year ended December 31, 2016 to 15.6% for the year ended December 31,2017. 67Table of ContentsNet income attributable to noncontrolling interests, as a percentage of net operating revenues decreased from 0.5% for the year ended December 31, 2016to 0.4% for the year ended December 31, 2017.Net loss attributable to Community Health Systems, Inc. was $2.5 billion for the year ended December 31, 2017, compared to $1.7 billion for the yearended December 31, 2016. The increase in net loss attributable to Community Health Systems, Inc. was primarily due to the change in estimate recorded as areduction of net operating revenues and the impairment of goodwill and certain long-lived assets based on their estimated fair values for hospitals sold orheld for sale in 2017.Liquidity and Capital Resources2018 Compared to 2017Net cash provided by operating activities decreased $499 million, from approximately $773 million for the year ended December 31, 2017, toapproximately $274 million for the year ended December 31, 2018. The decrease in cash provided by operating activities was primarily impacted by the$266 million paid during the fourth quarter related to the global resolution and settlement of litigation and government investigation of HMA and higherinterest payments due to the timing of payments and higher interest rates resulting from the refinancing activity during the year ended December 31, 2018, aswell as from a decline in cash flow from patient accounts receivable collections that was impacted as the magnitude of collections on receivables at divestedhospitals decreased. Other contributors to the lower cash provided by operating activities include the loss of operating cash flow contributed from previouslydivested hospitals and a decrease in cash received from HITECH incentive reimbursement. Such decreases were offset by improvements in cash flow fromsupplies, prepaid expenses and other current assets and lower malpractice claim payments compared to the same period in 2017. Total cash paid for interestduring the year ended December 31, 2018, increased to approximately $936 million compared to $852 million for the year ended December 31, 2017. Cashpaid for income taxes, net of refunds received, resulted in a net refund of $19 million for the year ended December 31, 2018, compared to $4 million paid forincome taxes for the year ended December 31, 2017.Our net cash used in investing activities was approximately $245 million for the year ended December 31, 2018, compared to net cash provided byinvesting activities of approximately $1.1 billion for the year ended December 31, 2017, a decrease of approximately $1.3 billion. The cash used in investingactivities was primarily impacted by a decrease in proceeds from the disposition of hospitals and other ancillary operations of $1.3 billion as a result of fewerhospital dispositions during the year ended December 31, 2018 compared to the same period in 2017, a decrease in cash provided by the net impact of thepurchases and sales of available-for-sale securities and equity securities of $47 million and an increase of $20 million in the cash used in the acquisition offacilities and other related equipment (for physician practices, clinics and other ancillary businesses as there were no hospital acquisitions during either theyear ended December 31, 2018 or 2017). These increases in cash outflows were offset by a decrease in the cash used in the purchase of property andequipment of $37 million, an increase in the proceeds from the sale of property and equipment of $1 million, and a decrease in cash used for otherinvestments (primarily from internal-use software expenditures and physician recruiting costs) of $2 million for the year ended December 31, 2018 comparedto the same period in 2017.Our net cash used in financing activities was $396 million for the year ended December 31, 2018, compared to approximately $1.5 billion for the yearended December 31, 2017, a decrease of approximately $1.1 billion. The decrease in cash used in financing activities, in comparison to the prior year period,was primarily due to the net effect of our debt repayment, refinancing activity, and cash paid for deferred financing costs and other debt-related costs. 68Table of ContentsAs described in Notes 7, 10 and 16 of the Notes to Consolidated Financial Statements, at December 31, 2018, we had certain cash obligations, which aredue as follows (in millions): Total 2019 2020-2022 2023-2024 2025and thereafter Credit Facility $1,622 $- $1,622 $- $- 8% Senior Notes due 2019 155 155 - - - 71⁄8% Senior Notes due 2020 121 - 121 - - 51⁄8% Senior Secured Notes due 2021 1,000 - 1,000 - - 67⁄8% Senior Notes due 2022 2,632 - 2,632 - - 61⁄4% Senior Secured Notes due 2023 3,100 - - 3,100 - 85⁄8% Secured Notes due 2024 1,033 - - 1,033 - Junior-Priority Secured Notes due 2023 1,770 - - 1,770 - Junior-Priority Secured Notes due 2024 1,355 - - 1,355 - ABL Facility 698 - - 698 - Other debt 43 37 4 1 1 Total long-term debt (1) 13,529 192 5,379 7,957 1 Interest on credit facility, notes and ABL facility (2) 3,903 960 2,371 572 - Capital lease and financing obligations, including interest 329 24 54 40 211 Operating leases 877 188 376 140 173 Replacement facilities and other capital commitments (3) 151 53 61 15 22 Open purchase orders (4) 502 467 35 - - Liability for uncertain tax positions, including interest andpenalties 9 9 - - - Total $19,300 $1,893 $8,276 $8,724 $407 (1)Total long-term debt is exclusive of unamortized deferred debt issuance costs and note premium of approximately $164 million. (2)Estimate of interest payments assumes the interest rates at December 31, 2018 remain constant during the period presented for our Credit Facility andour ABL Facility, which are variable rate debt. The interest rate used to calculate interest payments for our credit facility was the London InterbankOffered Rate, or LIBOR, as of December 31, 2018 plus the applicable spread. The 8% Senior Notes due 2019, 71⁄8% Senior Notes due 2020, 51⁄8%Senior Secured Notes due 2021, 67⁄8% Senior Notes due 2022, 61⁄4% Senior Secured Notes due 2023, 85⁄8% Secured Notes due 2024, Junior-PrioritySecured Notes due 2023 and Junior-Priority Secured Notes due 2024 have fixed rates of interest. (3)Pursuant to hospital purchase agreements in effect as of December 31, 2018, we have commitments to build two replacement facilities and thefollowing capital commitments. As part of an acquisition in 2016, we agreed to build replacement facilities in La Porte and Knox, Indiana. Theestimated construction costs, including equipment costs, are currently estimated to be approximately $128 million and $15 million, respectively, ofwhich approximately $6 million has been incurred to date for the construction of the replacement facility in La Porte. In addition, under other purchaseagreements, we have committed to spend approximately $64 million for costs such as capital improvements, equipment, selected leases and physicianrecruiting. These commitments are required to be fulfilled generally over a five to seven-year period after 69Table of Contents acquisition. Through December 31, 2018, we have incurred approximately $50 million related to these commitments. (4)Open purchase orders represent our commitment for items or services ordered but not yet received.At December 31, 2018, we had issued letters of credit primarily in support of potential insurance related claims and specified outstanding bonds ofapproximately $90 million.Our debt as a percentage of total capitalization increased from 105% for the year ended December 31, 2017 to 112% for the year ended December 31,2018, due to an increase in accumulated deficit, offset by an overall decrease in long-term debt.2017 Compared to 2016Net cash provided by operating activities decreased $364 million, from approximately $1.1 billion for the year ended December 31, 2016, toapproximately $773 million for the year ended December 31, 2017. The decrease in cash provided by operating activities was primarily the result of the lossof cash flow contributed from previously divested hospitals, a decrease in cash flow due to the timing of payroll funding compared to the prior year, anincrease in disbursements from non-qualified employee retirement plans for retired and terminated employees, a decrease in cash received from HITECHincentive reimbursement, and other changes in working capital. Such decreases were offset by improvements in cash flow from patient accounts receivablecollections, as well as the net cash received from the settlement proceeds, net of legal fees, of the shareholder derivative action in January 2017. Total cashpaid for interest during the year ended December 31, 2017 decreased to approximately $852 million compared to $930 million for the year endedDecember 31, 2016, which is primarily related to the decrease in the average outstanding debt balance. Approximately $4 million was paid, net of refunds, forincome taxes for the year ended December 31, 2017, compared to approximately $16 million net cash refund for income taxes for the year endedDecember 31, 2016. Included in net cash provided by operating activities for the year ended December 31, 2017 was $41 million of cash received forHITECH incentive reimbursements, compared to $123 million received for the year ended December 31, 2016.Net cash provided by investing activities increased $439 million, from approximately $630 million for the year ended December 31, 2016 toapproximately $1.1 billion for the year ended December 31, 2017. The increase in cash provided by investing activities was primarily due to an increase inproceeds from the disposition of hospitals and other ancillary operations of $1.5 billion; a decrease in the cash used in the purchase of property andequipment of $180 million, a decrease of $117 million in the cash used in the acquisition of facilities and other related equipment as there were no hospitalacquisitions during the year ended December 31, 2017, compared to three hospitals acquired during the year ended December 31, 2016; an increase in cashprovided by the net impact of the purchases and sales of available-for-sale securities of $124 million, and a decrease in cash used for other investments(primarily from internal-use software expenditures and physician recruiting costs) of $99 million for the year ended December 31, 2017. Included in cashoutflows for other investments for the year ended December 31, 2017 is approximately $44 million of capital expenditures related to the purchase andimplementation of certified EHR technology, including implementation of Cerner software at several hospital locations. The remaining cash outflows forother investments for the year ended December 31, 2017 primarily consists of purchases and development of other internal-use software and payments madeunder non-employee physician recruiting agreements of $99 million. The increase in cash provided by investing activities was partially offset by a decreasein cash provided by the distribution from QHC of $1.2 billion received as part of the spin-off transaction during the year ended December 31, 2016, adecrease in cash provided by the April 29, 2016 sale of our investments in unconsolidated affiliates of $403 million, related to our unconsolidated interest intwo joint ventures with UHS representing five hospitals in Las Vegas, Nevada, and a decrease in the proceeds from the sale of property and equipment of$8 million. We anticipate being able to fund future routine capital expenditures with cash flows generated from operations.Our net cash used in financing activities was $1.5 billion for the year ended December 31, 2017, compared to $1.7 billion for the year ended December 31,2016, a decrease of approximately $196 million. The decrease in 70Table of Contentscash used in financing activities, in comparison to the prior year period, is primarily due to the decrease in cash paid for the repayment of long-term debt of$1.3 billion, and the net effect of our debt repayment and refinancing activity during the year, including a decrease in our long-term borrowings and issuanceof long-term debt of $938 million, and a decrease in the cash paid to repurchase vested restricted stock for payroll tax withholding requirements of$1 million. Additionally, an increase in proceeds from noncontrolling investors in joint ventures of $5 million and reduction in cash paid for the redemptionof noncontrolling investments in joint ventures of $13 million, were offset by an increase of $8 million in cash paid for distributions to noncontrollinginvestors in joint ventures. These decreases in cash used in financing activities were partially offset by an increase in cash paid for deferred financing costsand other debt-related costs of $40 million, a decrease in the proceeds from our receivables facility of $2 million, and a decrease in proceeds of $159 millionfrom the sale-lease back of our medical office buildings.Capital ExpendituresCash expenditures for purchases of facilities and other related businesses were $26 million in 2018, $6 million in 2017 and $123 million in 2016. Ourexpenditures for the years ended December 31, 2018, 2017 and 2016 were related to the purchase of physician practices and other ancillary services.Excluding the cost to construct replacement hospitals, our cash expenditures for routine capital for the year ended December 31, 2018 totaled$521 million, compared to $558 million in 2017 and $732 million in 2016. These capital expenditures related primarily to the purchase of additionalequipment, minor renovations and information systems infrastructure. Costs to construct replacement hospitals totaled $6 million in both 2018 and 2017 and$12 million in 2016. The costs to construct replacement hospitals for the year ended December 31, 2018 represent both planning and construction costs forthe replacement facility at La Porte, Indiana. The costs to construct replacement hospitals for both of the years ended December 31, 2017 and 2016 representboth planning and construction costs for the replacement hospital we previously committed to build in York, Pennsylvania. In conjunction with the sale ofMemorial Hospital of York on July 1, 2017, we no longer intend to construct this replacement hospital or have planned costs in connection therewith.Pursuant to a hospital purchase agreement from our March 1, 2016 acquisition of La Porte Hospital and Starke Hospital, we committed to buildreplacement facilities in both La Porte, Indiana and Knox, Indiana. Under the terms of such agreement, construction of the replacement hospital for LaPorteHospital is required to be completed within five years of the date of acquisition, or March 2021. In addition, construction of the replacement facility forStarke Hospital is required to be completed within five years of the date we enter into a new lease with Starke County, Indiana, the hospital lessor, or in theevent we do not enter into a new lease with Starke County, construction shall be completed by September 30, 2026. We have not entered into a new leasewith the lessor for Starke Hospital and currently anticipate completing construction of the Starke Hospital replacement facility in 2026. Construction costs,including equipment costs, for the La Porte and Starke replacement facilities are currently estimated to be approximately $128 million and $15 million,respectively. We expect total capital expenditures of approximately $475 million to $575 million in 2019 (which includes amounts that are required to beexpended pursuant to the terms of the hospital purchase agreements), including approximately $425 million to $525 million for renovation and equipmentcost and approximately $50 million for construction costs of the replacement hospital in La Porte, Indiana.Capital ResourcesNet working capital was approximately $1.2 billion at December 31, 2018, compared to $1.7 billion at December 31, 2017. Net working capital decreasedby approximately $555 million between December 31, 2017 and December 31, 2018. This decrease is primarily due to the decrease in cash and increase inother current liabilities, partially offset by a decrease in accounts payable during the year ended December 31, 2018. 71Table of ContentsWe have senior secured financing under a credit facility with a syndicate of financial institutions led by Credit Suisse, as administrative agent andcollateral agent, which at December 31, 2017 included (i) a revolving credit facility with commitments through January 27, 2019 of approximately$929 million, of which a $739 million portion represented extended commitments maturing January 27, 2021, or the Revolving Facility, (ii) a Term Gfacility due 2019, or the Term G Facility, and (iii) a Term H facility due 2021, or the Term H Facility. The Revolving Facility includes a subfacility for lettersof credit.As of December 31, 2018, the availability for additional borrowings under the Credit Facility, subject to certain limitations as set forth in the CreditFacility, was approximately $425 million pursuant to the Revolving Facility, of which $90 million is in the form of outstanding letters of credit. CHS has theability to amend the Credit Facility to provide for one or more tranches of term loans or increases in the Revolving Facility in an aggregate principal amountof up to $500 million. As of December 31, 2018, the weighted-average interest rate under the Credit Facility, excluding swaps, was 6.8%.The loans under the Credit Facility bear interest on the outstanding unpaid principal amount at a rate equal to an applicable percentage plus, at ouroption, either (a) an Alternate Base Rate (as defined) determined by reference to the greater of (1) the Prime Rate (as defined) announced by Credit Suisse or(2) the NYFRB Rate (as defined) plus 0.50% or (3) the adjusted LIBOR rate on such day for a three-month interest period commencing on the second businessday after such day plus 1% or (b) LIBOR. In addition, the margin in respect of the Revolving Facility will be subject to adjustment determined by reference toa leverage-based pricing grid. Based on our current leverage, loans in respect of the Revolving Facility currently accrue interest at a rate per annum equal toLIBOR plus 2.75%, in the case of LIBOR borrowings, and Alternate Base Rate plus 1.75%, in the case of Alternate Base Rate borrowings. Prior to the CreditFacility amendment discussed below, the Term G Loan and Term H Loan accrued interest at a rate per annum equal to LIBOR plus 2.75% and 3.00%,respectively, in the case of LIBOR borrowings, and Alternate Base Rate plus 1.75% and 2.00%, respectively, in the case of Alternate Base Rate borrowings.The Term G Loan and the Term H Loan are subject to a 1.00% LIBOR floor and a 2.00% Alternate Base Rate floor.The term loan facility must be prepaid in an amount equal to (1) 100% of the net cash proceeds of certain asset sales and dispositions by us and oursubsidiaries, subject to certain exceptions and reinvestment rights (as further described below), (2) 100% of the net cash proceeds of issuances of certain debtobligations or receivables-based financing by us and our subsidiaries, subject to certain exceptions, and (3) 75%, subject to reduction to a lower percentagebased on our first lien net leverage ratio (as defined in the Credit Facility generally as the ratio of first lien net debt on the date of determination to ourconsolidated EBITDA, as defined, for the four quarters most recently ended prior to such date), of excess cash flow (as defined) for any year, subject to certainexceptions. Voluntary prepayments and commitment reductions are permitted in whole or in part, without any premium or penalty, subject to minimumprepayment or reduction requirements.The borrower under the Credit Facility is our wholly-owned subsidiary CHS/Community Health Systems, Inc., or CHS. All of our obligations under theCredit Facility are unconditionally guaranteed by Community Health Systems, Inc. and certain of its existing and subsequently acquired or organizeddomestic subsidiaries. All obligations under the Credit Facility and the related guarantees are secured by a perfected first priority lien or security interest insubstantially all of the assets of Community Health Systems, Inc., CHS and each subsidiary guarantor, including equity interests held by us or any subsidiaryguarantor, but excluding, among others, the equity interests of non-significant subsidiaries, syndication subsidiaries, securitization subsidiaries and jointventure subsidiaries. Such assets constitute substantially the same assets, subject to certain exceptions, that secure CHS’ obligations under its outstandingsenior secured notes.We have agreed to pay letter of credit fees equal to the applicable percentage then in effect with respect to LIBOR borrowings under the RevolvingFacility times the maximum aggregate amount available to be drawn under all letters of credit outstanding under the subfacility for letters of credit. Theissuer of any letter of credit issued under the subfacility for letters of credit will also receive a customary fronting fee and other customary 72Table of Contentsprocessing charges. We are obligated to pay commitment fees of 0.50% per annum (subject to adjustment based upon our leverage ratio), on the unusedportion of the Revolving Facility.The Credit Facility contains customary representations and warranties, subject to limitations and exceptions, and customary covenants restricting our andour subsidiaries’ ability, subject to certain exceptions, to, among other things, (1) declare dividends, make distributions or redeem or repurchase capital stock,(2) prepay, redeem or repurchase other debt, (3) incur liens or grant negative pledges, (4) make loans and investments and enter into acquisitions and jointventures, (5) incur additional indebtedness or provide certain guarantees, (6) make capital expenditures, (7) engage in mergers, acquisitions and asset sales,(8) conduct transactions with affiliates, (9) alter the nature of our businesses, (10) grant certain guarantees with respect to physician practices, (11) engage insale and leaseback transactions or (12) change our fiscal year. We and our subsidiaries are also required to comply with specified financial covenants(consisting of a maximum first lien net debt to consolidated EBITDA leverage ratio) and various affirmative covenants. Under the Credit Facility, the firstlien net debt to consolidated EBITDA leverage ratio is calculated as the ratio of total first lien debt, less unrestricted cash and cash equivalents, toconsolidated EBITDA, as defined in the Credit Facility. The calculation of consolidated EBITDA as defined in the Credit Facility is a trailing 12-monthcalculation that begins with net income attributable to us, with certain pro forma adjustments to consider the impact of material acquisitions or divestitures,and adjustments for interest, taxes, depreciation and amortization, net income attributable to noncontrolling interests, stock compensation expense,restructuring costs, and the financial impact of other non-cash or non-recurring items recorded during any such 12-month period. For the 12-month periodended December 31, 2018, the first lien net debt to consolidated EBITDA leverage ratio financial covenant under the Credit Facility limited the ratio of firstlien net debt to consolidated EBITDA, as defined, to less than or equal to 5.0 to 1.0. We were in compliance with all such covenants at December 31, 2018,with a first lien net debt to consolidated EBITDA leverage ratio of approximately 4.84 to 1.0.Events of default under the Credit Facility include, but are not limited to, (1) our failure to pay principal, interest, fees or other amounts under the creditagreement when due (taking into account any applicable grace period), (2) any representation or warranty proving to have been materially incorrect whenmade, (3) covenant defaults subject, with respect to certain covenants, to an available cure, (4) bankruptcy and insolvency events, (5) a cross default tocertain other debt, (6) certain undischarged judgments (not paid within an applicable grace period), (7) a change of control (as defined), (8) certain ERISA-related defaults and (9) the invalidity or impairment of specified security interests, guarantees or subordination provisions in favor of the administrative agentor lenders under the Credit Facility.On March 16, 2017, CHS completed a public offering of $2.2 billion aggregate principal amount of 61⁄4% Senior Secured Notes due 2023, or the 61⁄4%Senior Secured Notes. The net proceeds from this issuance were used to finance the purchase or redemption of $700 million aggregate principal amount of the2018 Senior Secured Notes and related fees and expenses, and the repayment of $1.445 billion of the Term F Facility. On May 12, 2017, CHS completed atack-on offering of $900 million aggregate principal amount of 61⁄4% Senior Secured Notes, increasing the total aggregate principal amount of 61⁄4% SeniorSecured Notes to $3.1 billion. A portion of the net proceeds from this issuance were used to finance the repayment of approximately $713 million aggregateprincipal amount of CHS’ then outstanding Term A Facility and related fees and expenses. The tack-on notes have identical terms, other than issue date andissue price as the 61⁄4% Senior Secured Notes issued on March 16, 2017. The 61⁄4% Senior Secured Notes bear interest at 6.250% per annum, payablesemiannually in arrears on June 30 and September 30, commencing September 30, 2017. Interest on the 61⁄4% Senior Secured Notes accrues from the date oforiginal issuance. Interest is calculated on the basis of a 360-day year comprised of twelve 30-day months. The 2021 Senior Secured Notes, the 61⁄4% SeniorSecured Notes and the 85⁄8% Senior Secured Notes are secured by a first-priority lien subject to a shared lien of equal priority with certain other obligations,including obligations under the Credit Facility, and subject to prior ranking liens permitted by the indentures governing the 2021 Senior Secured Notes, the61⁄4% Senior Secured Notes and the 85⁄8% Senior Secured Notes on substantially the same assets, subject to certain exceptions, that secure CHS’ obligationsunder the Credit Facility. 73Table of ContentsOn February 26, 2018, the Credit Facility was amended, with requisite revolving lender approval, to remove the consolidated EBITDA to interest expenseratio financial covenant, to replace the senior secured net debt to consolidated EBITDA ratio financial covenant with a first lien net debt to consolidatedEBITDA ratio financial covenant, and to reduce the extended revolving credit commitments to $650 million (for a total of $840 million in revolving creditcommitments when combined with the non-extended portion of the revolving credit facility). The new financial covenant provides for a maximum first liennet debt to consolidated EBITDA ratio of 5.25 to 1.0, reducing to 5.0 to 1.0 on July 1, 2018, 4.75 to 1.0 on January 1, 2019, 4.5 to 1.0 on January 1, 2020 and4.25 to 1.0 on July 1, 2020. In addition, we agreed pursuant to the amendment to modify its ability to retain asset sale proceeds, and instead to apply them toprepayments of term loans based on pro forma first lien leverage. To the extent the pro forma ratio of first lien net debt to consolidated EBITDA is greaterthan or equal to 4.5 to 1.0, 100% of net cash proceeds of asset sales will be applied to prepay term loans; to the extent the first lien leverage ratio is less than4.5 to 1.0 but greater than or equal to 4.0 to 1.0, 50% of such proceeds will be applied to prepay term loans; and to the extent the pro forma first lien leverageratio is less than 4.0 to 1.0, there will be no requirement to prepay term loans with such proceeds. These ratios will be determined on a pro forma basis givingappropriate effect to the relevant asset sales and corresponding prepayments of term loans.On February 15, 2019, the Credit Facility was amended, with requisite covenant lender approval, to amend the first lien net debt to EBITDA ratio financialcovenant and to reduce the extended revolving credit commitments to $385 million. The amended financial covenant provides for a maximum first lien netdebt to EBITDA ratio of 5.00 to 1.0 from July 1, 2018 through December 31, 2018, 5.25 to 1.0 from January 1, 2019 through December 31, 2019, 5.00 to 1.00from January 1, 2020 through June 30, 2020, 4.50 to 1.00 from July 1, 2020 through September 30, 2020, and 4.25 to 1.0 thereafter. In addition, CHS agreedto further restrict its ability to make restricted payments. The revolving credit commitments will terminate on January 27, 2021. The amended Credit Facilityincludes a 91-day springing maturity date applicable if more than $250 million in the aggregate principal amount of our 8% Senior Notes due 2019, 71⁄8%Senior Notes due 2020, Term H Facility or refinancings thereof are scheduled to mature or similarly become due within 91 days of such date.On March 23, 2018, we and CHS, entered into the Fourth Amendment and Restatement Agreement to the Credit Facility, or the Agreement. In addition toincluding the changes described in the paragraph above, we further modified our ability to retain asset sale proceeds, and instead to apply them toprepayments of term loans based on pro forma first lien leverage. To the extent the pro forma ratio of first lien net debt to consolidated EBITDA is greaterthan or equal to 4.25 to 1.0, 100% of net cash proceeds of asset sales will be applied to prepay term loans; to the extent the pro forma first lien leverage ratiois less than 4.25 to 1.0 but greater than or equal to 3.75 to 1.0, 50% of such proceeds will be applied to prepay term loans; and to the extent the first lienleverage ratio is less than 3.75 to 1.0, there will be no requirement to prepay term loans with such proceeds. The Agreement also amended the Credit Facilityto permit CHS to incur debt under either an asset-based loan facility, or ABL, in an amount up to $1.0 billion or maintain its Asset-Backed Securitizationprogram. The Revolving Facility would be reduced to $425 million upon the effectiveness of the contemplated ABL facility. The Agreement also reducedthe availability for incremental tranches of term loans or increases in the Revolving Facility to $500 million and removed the secured net leverage incurrencetest with respect to junior secured debt. Term G Loans will accrue interest at a rate per annum initially equal to LIBOR plus 3.00%, in the case of LIBORborrowings, and Alternate Base Rate plus 2.00%, in the case of Alternate Base Rate borrowing. Term H Loans will accrue interest at a rate per annum initiallyequal to LIBOR plus 3.25%, in the case of LIBOR borrowings, and Alternate Base Rate plus 2.25%, in the case of Alternate Base Rate borrowing.Prior to the effectiveness of the ABL Facility described below, CHS, through certain of its subsidiaries, participated in an accounts receivable loanagreement, or the Receivables Facility, with a group of lenders and banks, Credit Agricolé Corporate and Investment Bank, as a managing agent and as theadministrative agent. Patient-related accounts receivable, or the Receivables, for certain affiliated hospitals served as collateral for the outstandingborrowings under the Receivables Facility. The interest rate on the borrowings was based on the commercial paper rate plus an applicable interest rate spread.The Receivables Facility was repaid in full and terminated upon the effectiveness of the ABL Facility on April 3, 2018. 74Table of ContentsOn April 3, 2018, we and CHS entered into an asset-based loan (ABL) credit agreement, or the ABL Credit Agreement, with JPMorgan Chase Bank, N.A.,as administrative agent, and the lenders and other agents party thereto. Pursuant to the ABL Credit Agreement, the lenders have extended to CHS a revolvingasset-based loan facility, or the ABL Facility, in the maximum aggregate principal amount of $1.0 billion, subject to borrowing base capacity. The ABLFacility includes borrowing capacity available for letters of credit of $50 million. CHS and all domestic subsidiaries of CHS that guarantee CHS’ otheroutstanding senior and senior secured indebtedness guarantee the obligations of CHS under the ABL Facility. Subject to certain exceptions, all obligationsunder the ABL Facility and the related guarantees are secured by a perfected first-priority security interest in substantially all of the Receivables, deposit,collection and other accounts and contract rights, books, records and other instruments related to the foregoing of the Company, CHS and the guarantors aswell as a perfected junior-priority security interest in substantially all of the other assets of the Company, CHS and the guarantors, subject to customaryexceptions and intercreditor arrangements. The revolving credit commitments under the Credit Facility were reduced to $425 million upon the effectivenessof the ABL facility. In connection with entering into the ABL Credit Agreement and the ABL Facility, we repaid in full and terminated our ReceivablesFacility. The outstanding borrowings pursuant to the ABL Facility at December 31, 2018 totaled $698 million on the consolidated balance sheet.Borrowings under the ABL Facility bear interest at a rate per annum equal to an applicable percentage, plus, at the Borrower’s option, either (a) anAlternative base rate or (b) a LIBOR rate. From and after December 31, 2018, the applicable percentage under the ABL Facility will be determined based onexcess availability as a percentage of the maximum commitment amount under the ABL facility at a rate per annum of 1.25%, 1.50% and 1.75% for loansbased on the Alternative base rate and 2.25%, 2.50% and 2.75% for loans based on the LIBOR rate. From and after September 30, 2018, the applicablecommitment fee rate under the ABL Facility is determined based on average utilization as a percentage of the maximum commitment amount under the ABLFacility at a rate per annum of either 0.50% or 0.625% times the unused portion of the ABL facility.Principal amounts outstanding under the ABL Facility will be due and payable in full on April 3, 2023. The ABL Facility includes a 91-day springingmaturity applicable if more than $250 million in the aggregate principal amount of the Borrower’s 8% Senior Notes due 2019, Term G loans due 2019,7.125% Senior Notes due 2020, Term H loans due 2021, 5.125% Senior Secured Notes due 2021, 6.875% Senior Notes due 2022 or 6.25% Senior SecuredNotes due 2023 or refinancings thereof are scheduled to mature or similarly become due on a date prior to April 3, 2023.The ABL Facility contains customary representations and warranties, subject to limitations and exceptions, and customary covenants restricting ourability, subject to certain exceptions, to, among other things (1) declare dividends, make distributions or redeem or repurchase capital stock, (2) prepay,redeem or repurchase other debt, (3) incur liens or grant negative pledges, (4) make loans and investments and enter into acquisitions and joint ventures,(5) incur additional indebtedness or provide certain guarantees, (6) engage in mergers, acquisitions and asset sales, (7) conduct transactions with affiliates,(8) alter the nature of the Company’s, CHS’ or the guarantors’ businesses, (9) grant certain guarantees with respect to physician practices, (10) engage in saleand leaseback transactions or (11) change our fiscal year. We are also required to comply with a consolidated fixed coverage ratio, upon certain triggeringevents described below, and various affirmative covenants. The consolidated fixed coverage ratio is calculated as the ratio of (x) consolidated EBITDA (asdefined in the ABL Facility) less capital expenditures to (y) the sum of consolidated interest expense (as defined in the ABL Facility), scheduled principalpayments, income taxes and restricted payments made in cash or in permitted investments. For purposes of calculating the consolidated fixed chargecoverage ratio, the calculation of consolidated EBITDA as defined in the ABL Facility is a trailing 12-month calculation that begins with consolidated netincome attributable to Holdings, with certain adjustments for interest, taxes, depreciation and amortization, net income attributable to noncontrollinginterests, stock compensation expense, restructuring costs, and the financial impact of other non-cash or non-recurring items recorded during any such12-month period. The consolidated fixed charge coverage ratio is a required covenant only in periods where the total borrowings outstanding under the ABLFacility reduce the amount available in the facility to less than the greater of (i) $95 million and (ii) 10% of the 75Table of Contentscalculated borrowing base. At December 31, 2018, we were not subject to the consolidated fixed charge coverage ratio as such triggering event had notoccurred during 2018.Events of default under the ABL Facility include, but are not limited to, (1) CHS’ failure to pay principal, interest, fees or other amounts under the ABLCredit Agreement when due (taking into account any applicable grace period), (2) any representation or warranty proving to have been materially incorrectwhen made, (3) covenant defaults subject, with respect to certain covenants, to an available cure and applicable grace periods, (4) bankruptcy and insolvencyevents, (5) a cross default to certain other debt, (6) certain undischarged judgments (not paid within an applicable grace period), (7) a change of control (asdefined), (8) certain ERISA-related defaults and (9) the invalidity or impairment of specified security interests, guarantees or subordination provisions infavor of the ABL Agent or lenders under the ABL Facility.On June 22, 2018, CHS completed offers to exchange (i) up to $1.925 billion aggregate principal amount of its new Junior-Priority Secured Notes due2023, or the 2023 Junior-Priority Notes, in exchange for any and all of its $1.925 billion aggregate principal amount of outstanding 8% Senior Notes, (ii) upto $1.200 billion aggregate principal amount of its new Junior-Priority Secured Notes due 2024, or the 2024 Junior-Priority Notes, in exchange for any andall of its $1.200 billion aggregate principal amount of outstanding 71⁄8% Senior Notes, and (iii) to the extent that less than all of the outstanding 8% SeniorNotes and 71⁄8% Senior Notes were tendered in the exchange offers, up to an aggregate principal amount of 2024 Junior-Priority Notes equal to, when takentogether with the total notes issued in exchange for the validly tendered and accepted 8% Senior Notes and 71⁄8% Senior Notes, $3.125 billion, in exchangefor its outstanding 67⁄8% Senior Notes. Upon completion of the exchange offers, CHS issued (i) approximately $1.770 billion aggregate principal amount ofthe 2023 Junior-Priority Notes in exchange for the same amount of 8% Senior Notes, (ii) approximately $1.079 billion aggregate principal amount of the2024 Junior-Priority Notes in exchange for the same amount of 71⁄8% Senior Notes and (iii) approximately $276 million aggregate principal amount of the2024 Junior-Priority Notes in exchange for approximately $368 million of 67⁄8% Senior Notes.On July 6, 2018, CHS completed an offering of $1.033 billion aggregate principal amount of 85⁄8% Senior Secured Notes due 2024, or the 85⁄8% SeniorSecured Notes. We used the proceeds from this offering to repay the outstanding balance owed under the Term G Loan and pay fees and expenses related tothe offering. The terms of the 85⁄8% Senior Secured Notes are governed by an indenture, dated as of July 6, 2018, among CHS, the Company, the subsidiaryguarantors party thereto, Regions Bank, as trustee and Credit Suisse AG, as collateral agent. The 85⁄8% Senior Secured Notes bear interest at a rate of 85⁄8%per year payable semi-annually in arrears on January 15 and July 15 of each year, commencing on January 15, 2019. The 85⁄8% Senior Secured Notes areunconditionally guaranteed on a senior-priority secured basis by us and each of the CHS current and future domestic subsidiaries that provide guaranteesunder CHS’ senior secured credit facilities, CHS’ ABL facility, any capital market debt securities of CHS (including CHS’ outstanding senior notes) andcertain other long-term debt of CHS.As of December 31, 2018, we are currently a party to interest rate swap agreements to limit the effect of changes in interest rates on approximately 64.6%of our variable rate debt. On each of these swaps, we receive a variable rate of interest based on the three-month LIBOR, in exchange for the payment by us ofa fixed rate of interest. See Note 8 of the Notes to Consolidated Financial Statements included under Part II, Item 8 of this Form 10-K for further informationon our interest rate swap agreements.The Credit Facility and the indentures that govern our outstanding notes contain various covenants that limit our ability to take certain actions, includingour ability to: • incur, assume or guarantee additional indebtedness; • issue redeemable stock and preferred stock; • repurchase capital stock; 76Table of Contents • make restricted payments, including paying dividends and making certain loans, acquisitions and investments; • redeem debt that is subordinated in right of payment to our outstanding notes; • create liens; • sell or otherwise dispose of assets, including capital stock of subsidiaries; • impair the security interests; • enter into agreements that restrict dividends and certain other payments from subsidiaries; • merge, consolidate, sell or otherwise dispose of substantially all of our assets; • enter into transactions with affiliates; and • guarantee certain obligations.The indentures governing each of the 2023 Junior-Priority Notes and 2024 Junior-Priority Notes also prohibit CHS from purchasing, repurchasing,redeeming, defeasing or otherwise acquiring or retiring any outstanding 8% Senior Notes and 71⁄8% Senior Notes after the consummation of the exchangeoffers described above with: (a) cash or cash equivalents on hand as of the consummation of such exchange offers; (b) cash generated from operations;(c) proceeds from assets sales; or (d) proceeds from the issuance of, or in exchange for, secured debt, in each case, prior to the date that is 60 days prior to therelevant maturity dates of such 8% Senior Notes and 71⁄8% Senior Notes, as applicable.In addition, our Credit Facility contains restrictive covenants and requires us to maintain specified financial ratios and satisfy other financial conditiontests. Our ability to meet these restricted covenants and financial ratios and tests can be affected by events beyond our control, and we cannot assure you thatwe will meet those tests. A breach of any of these covenants could result in a default under our Credit Facility and/or the indentures that govern ouroutstanding notes. Upon the occurrence of an event of default under our Credit Facility or indentures that govern our outstanding notes, all amountsoutstanding under our Credit Facility and the indentures that govern our outstanding notes may become immediately due and payable and all commitmentsunder the Credit Facility to extend further credit may be terminated.We believe that internally generated cash flows, availability for additional borrowings under our Credit Facility, of approximately $425 million, of whichapproximately $90 million is in the form of outstanding letters of credit, the availability under our new ABL Facility and our ability to amend the CreditFacility to provide for one or more incremental tranches of term loans and revolving credit commitments in an aggregate principal amount of up to$500 million, in each case subject to certain limitations as set forth in the Credit Facility, as well as our continued access to the capital markets, will besufficient to finance acquisitions, capital expenditures, working capital requirements, and any equity or debt repurchases or other debt repayments we mayelect to make through the next 12 months. In addition, we are currently required to utilize proceeds received from dispositions of assets, subject to certainexceptions, to repay outstanding debt.We may elect from time to time to purchase our outstanding debt in open market purchases, privately negotiated transactions or otherwise. Any such debtrepurchases will depend upon prevailing market conditions, our liquidity requirements, contractual restrictions, applicable securities laws requirements, andother factors.Off-balance Sheet ArrangementsIn the past, we have utilized operating leases as a financing tool for obtaining the operations of specified hospitals without acquiring, through ownership,the related assets of the hospital and without a significant outlay 77Table of Contentsof cash at the front end of the lease. We utilize the same operating strategies to improve operations at those hospitals held under operating leases as we do atthose hospitals that we own. We have not entered into any operating leases for hospital operations since December 2000. At December 31, 2018, we operatedone hospital under an operating lease that had an immaterial impact on our consolidated operating results. The terms of the one operating lease we currentlyhave in place expires in December 2020, not including lease extension options. If we allow this lease to expire, we would no longer generate revenues norincur expenses from this hospital.As described more fully in Note 16 of the Notes to Consolidated Financial Statements included under Part II, Item 8 of this Form 10-K, at December 31,2018, we have certain cash obligations for replacement facilities and other construction commitments of $151 million.Noncontrolling InterestsWe have sold noncontrolling interests in certain of our subsidiaries or acquired subsidiaries with existing noncontrolling interest ownership positions. Asof December 31, 2018, we have hospitals in 18 of the markets we serve, with noncontrolling physician ownership interests ranging from less than 1% to 40%.In addition, as of December 31, 2018 we have eight other hospitals with noncontrolling interests owned by non-profit entities. On August 15, 2018, wecompleted the acquisition of the 20% ownership interest held by the non-profit entity that was the noncontrolling interest owner of two of our hospitals inIndiana for approximately $20 million. Redeemable noncontrolling interests in equity of consolidated subsidiaries was $504 million and $527 million as ofDecember 31, 2018 and 2017, respectively, and noncontrolling interests in equity of consolidated subsidiaries was $72 million and $75 million as ofDecember 31, 2018 and 2017, respectively. The amount of net income attributable to noncontrolling interests was $84 million, $63 million and $95 millionfor the years ended December 31, 2018, 2017 and 2016, respectively. As a result of the change in the Stark Law “whole hospital” exception included in theAffordable Care Act, we are not permitted to introduce physician ownership at any of our hospital facilities that did not have physician ownership at the timeof the adoption of the Affordable Care Act, or increase the aggregate percentage of physician ownership in any of our former or existing hospital jointventures in excess of the aggregate physician ownership level held at the time of the adoption of the Affordable Care Act.Reimbursement, Legislative and Regulatory ChangesOngoing legislative and regulatory efforts could reduce or otherwise adversely affect the payments we receive from Medicare and Medicaid and otherpayors. Within the statutory framework of the Medicare and Medicaid programs, there are substantial areas subject to administrative rulings, interpretationsand discretion which may further affect payments made under those programs, and the federal and state governments might, in the future, reduce the fundsavailable under those programs or require more stringent utilization and quality reviews of hospital facilities. Additionally, there may be a continued rise inmanaged care programs and additional restructuring of the financing and delivery of healthcare in the United States. These events could cause our futurefinancial results to decline. We cannot estimate the impact of Medicare and Medicaid reimbursement changes that have been enacted or are underconsideration. We cannot predict whether additional reimbursement reductions will be made or whether any such changes or other restructuring of thefinancing and delivery of healthcare would have a material adverse effect on our business, financial conditions, results of operations, cash flow, capitalresources and liquidity.InflationThe healthcare industry is labor intensive. Wages and other expenses increase during periods of inflation and when labor shortages occur in themarketplace. In addition, our suppliers pass along rising costs to us in the form of higher prices. We have implemented cost control measures, including ourcase and resource management program, to curb increases in operating costs and expenses. We have generally offset increases in operating costs byincreasing reimbursement for services, expanding services and reducing costs in other areas. However, we cannot predict our ability to cover or offset futurecost increases, particularly any increases in our cost of providing health insurance benefits to our employees. 78Table of ContentsCritical Accounting PoliciesThe discussion and analysis of our financial condition and results of operations are based upon our consolidated financial statements, which have beenprepared in accordance with U.S. GAAP. The preparation of these financial statements requires us to make estimates and judgments that affect the reportedamount of assets and liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities at the date of our consolidated financialstatements. Actual results may differ from these estimates under different assumptions or conditions.Critical accounting policies are defined as those that are reflective of significant judgments and uncertainties, and potentially result in materially differentresults under different assumptions and conditions. We believe that our critical accounting policies are limited to those described below.Revenue RecognitionUpon our adoption of the new revenue recognition standard in the Financial Accounting Standards Board, or FASB, Accounting Standards CodificationTopic 606, or ASC 606, we record net operating revenues at the transaction price estimated to reflect the total consideration due from patients and third-partypayors in exchange for providing goods and services in patient care. These services are considered to be a single performance obligation and have a durationof less than one year. Revenues are recorded as these goods and services are provided. The transaction price, which involves significant estimates, isdetermined based on our standard charges for the goods and services provided, with a reduction recorded for price concessions related to third partycontractual arrangements as well as patient discounts and patient price concessions. During the year ended December 31, 2018, the impact of changes to theinputs used to determine the transaction price was considered immaterial to the current period.Currently, several states utilize supplemental reimbursement programs for the purpose of providing reimbursement to providers to offset a portion of thecost of providing care to Medicaid and indigent patients. These programs are designed with input from the Centers for Medicare & Medicaid Services and arefunded with a combination of state and federal resources, including, in certain instances, fees or taxes levied on the providers. Under these supplementalprograms, we recognize revenue and related expenses in the period in which amounts are estimable and collection is reasonably assured. Reimbursementunder these programs is reflected in net operating revenues and fees, taxes or other program-related costs are reflected in other operating expenses.Net operating revenues include amounts estimated by management to be reimbursable by Medicare and Medicaid under prospective payment systems andprovisions of cost-reimbursement and other payment methods. In addition, we are reimbursed by non-governmental payors using a variety of paymentmethodologies. Amounts we receive for treatment of patients covered by these programs are generally less than the standard billing rates. Explicit priceconcessions are recorded for contractual allowances that are calculated and recorded through internally-developed data collection and analysis tools toautomate the monthly estimation of required contractual allowances. Within this automated system, payors’ historical paid claims data are utilized tocalculate the contractual allowances. This data is automatically updated on a monthly basis. All hospital contractual allowance calculations are subjected tomonthly review by management to ensure reasonableness and accuracy. We account for the differences between the estimated program reimbursement ratesand the standard billing rates as contractual allowance adjustments, which is one component of the deductions from gross revenues to arrive at net operatingrevenues (net of contractual allowances and discounts). The process of estimating contractual allowances requires us to estimate the amount expected to bereceived based on payor contract provisions. The key assumption in this process is the estimated contractual reimbursement percentage, which is based onpayor classification, historical paid claims data and, when applicable, application of the expected managed care plan reimbursement based on contract terms.Due to the complexities involved in these estimates, actual payments we receive could be different from the amounts we estimate and record. If the actualcontractual reimbursement percentage under government programs 79Table of Contentsand managed care contracts differed by 1% at December 31, 2018 from our estimated reimbursement percentage, net loss for the year ended December 31,2018 would have changed by approximately $96 million, and net accounts receivable at December 31, 2018 would have changed by $106 million. Finalsettlements under some of these programs are subject to adjustment based on administrative review and audit by third parties. We account for adjustments toprevious program reimbursement estimates as contractual allowance adjustments and report them in the periods that such adjustments become known.Contractual allowance adjustments related to final settlements and previous program reimbursement estimates impacted net operating revenues and net lossby an insignificant amount for each of the years ended December 31, 2018, 2017 and 2016.Patient Accounts ReceivableSubstantially all of our accounts receivable are related to providing healthcare services to patients at our hospitals and affiliated businesses. Collection ofthese accounts receivable is our primary source of cash and is critical to our operating performance. Our primary collection risks relate to uninsured patientsand outstanding patient balances for which the primary insurance payor has paid some but not all of the outstanding balance, with the remaining outstandingbalance (generally deductibles and co-payments) owed by the patient. For all procedures scheduled in advance, our policy is to verify insurance coverageprior to the date of the procedure. Insurance coverage is not verified in advance of procedures for walk-in and emergency room patients.We estimate any adjustments to the transaction price for implicit price concessions by reserving a percentage of all self-pay accounts receivable withoutregard to aging category, based on collection history, adjusted for expected recoveries and any anticipated changes in trends. Our ability to estimate thetransaction price and any implicit price concessions is not impacted by not utilizing an aging of our net accounts receivable as we believe that substantiallyall of the risk exists at the point in time such accounts are identified as self-pay. The percentage used to reserve for all self-pay accounts is based on ourcollection history. We believe that we collect substantially all of our third-party insured receivables, which include receivables from governmental agencies.Patient accounts receivable are recorded at net realizable value based on certain assumptions determined by each payor. For third-party payors includingMedicare, Medicaid, and Managed Care, the net realizable value is based on the estimated contractual reimbursement percentage, which is based on currentcontract prices or historical paid claims data by payor. For self-pay accounts receivable, which includes patients who are uninsured and the patientresponsibility portion for patients with insurance, the net realizable value is determined using estimates of historical collection experience without regard toaging category. These estimates are adjusted for estimated conversions of patient responsibility portions, expected recoveries and any anticipated changes intrends.Patient accounts receivable can be impacted by the effectiveness of our collection efforts. Additionally, significant changes in payor mix, business officeoperations, economic conditions or trends in federal and state governmental healthcare coverage could affect the net realizable value of accounts receivable.We also continually review the net realizable value of accounts receivable by monitoring historical cash collections as a percentage of trailing net operatingrevenues, as well as by analyzing current period net revenue and admissions by payor classification, aged accounts receivable by payor, days revenueoutstanding, the composition of self-pay receivables between pure self-pay patients and the patient responsibility portion of third-party insured receivablesand the impact of recent acquisitions and dispositions. If the actual collection percentage differed by 1% at December 31, 2018 from our estimated collectionpercentage as a result of a change in expected recoveries, net loss for the year ended December 31, 2018 would have changed by $63 million, and netaccounts receivable at December 31, 2018 would have changed by $69 million. We also continually review our overall reserve adequacy by monitoringhistorical cash collections as a percentage of trailing net operating revenues, as well as by analyzing current period net revenue and admissions by payorclassification, days revenue outstanding, the composition of self-pay receivables between pure self-pay patients and the patient responsibility portion ofthird-party insured receivables and the impact of recent acquisitions and dispositions.Our policy is to write-off gross accounts receivable if the balance is under $10.00 or when such amounts are placed with outside collection agencies. Webelieve this policy accurately reflects our ongoing collection efforts 80Table of Contentsand is consistent with industry practices. We had approximately $4.7 billion at December 31, 2018 and $4.2 billion December 31, 2017, being pursued byvarious outside collection agencies. We expect to collect less than 3%, net of estimated collection fees, of the amounts being pursued by outside collectionagencies. As these amounts have been written-off, they are not included in our accounts receivable. Collections on amounts previously written-off arerecognized as a recovery of net operating revenues when received. However, we take into consideration estimated collections of these future amountswritten-off in determining the implicit price concessions used to measure the transaction price for the applicable portfolio of patient accounts receivable.All of the following information is derived from our hospitals, excluding clinics, unless otherwise noted.Patient accounts receivable from our hospitals represent approximately 98% of our total consolidated accounts receivable.Days revenue outstanding, adjusted for the impact of receivables for state Medicaid supplemental payment programs, was 58 days at December 31, 2018and 56 days at December 31, 2017.Total gross accounts receivable (prior to allowance for contractual adjustments and implicit price concessions) was approximately $17.2 billion as ofDecember 31, 2018 and approximately $18.6 billion as of December 31, 2017. The approximate percentage of total gross accounts receivable (prior toallowance for contractual adjustments and implicit price concessions) summarized by aging categories is as follows:As of December 31, 2018 % of Gross Receivables Payor 0 - 90 Days 90 - 180 Days 180 - 365 Days Over 365 Days Medicare 14 % - % - % - % Medicaid 7 % 1 % 1 % 1 % Managed Care and Other 26 % 4 % 3 % 3 % Self-Pay 9 % 8 % 10 % 13 % As of December 31, 2017 % of Gross Receivables Payor 0 - 90 Days 90 - 180 Days 180 - 365 Days Over 365 Days Medicare 13 % 1 % - % - % Medicaid 7 % 1 % 1 % 1 % Managed Care and Other 24 % 4 % 3 % 3 % Self-Pay 8 % 7 % 15 % 12 % The approximate percentage of total gross accounts receivable (prior to allowances for contractual adjustments and implicit price concessions)summarized by payor is as follows: December 31, 2018 2017 Insured receivables 60.0 % 57.9 % Self-pay receivables 40.0 42.1 Total 100.0 % 100.0 % The combined total at our hospitals and clinics for the estimated implicit price concessions for self-pay accounts receivable and allowances for otherself-pay discounts and contractuals, as a percentage of gross self-pay receivables, was approximately 90% and 92% at December 31, 2018 and December 31,2017, respectively. During the three months ended June 30, 2018, we directed the placement with outside collection 81Table of Contentsagencies of approximately $1.3 billion of gross self-pay accounts receivable. Since these receivables were fully reserved at the time of write-off, the overallpercentage of reserves for the remaining self-pay accounts receivable decreased. If the receivables that have been written-off, but where collections are stillbeing pursued by outside collection agencies, were included in both the allowances and gross self-pay receivables specified above, the percentage ofcombined allowances to total self-pay receivables would have been 94% at both December 31, 2018 and December 31, 2017.Goodwill and Other IntangiblesGoodwill represents the excess of the fair value of the consideration conveyed in the acquisition over the fair value of net assets acquired. Goodwill isevaluated for impairment annually and when an event occurs or circumstances change that, more likely than not, reduce the fair value of the reporting unitbelow its carrying value. During 2017, we adopted ASU 2017-04, which allows a company to record a goodwill impairment when the reporting units carryingvalue exceeds the fair value determined in step one. In 2017, consistent with prior years, we performed our annual goodwill evaluation during the fourthquarter as of September 30, 2017, and then an updated evaluation as of November 30, 2017 due to the identification of certain impairment indicators. Withthe elimination of the time-intensive step two calculation to determine the implied value of goodwill, we considered the additional benefits of performing theannual goodwill evaluation later in the fourth quarter to coincide with the timing of the next fiscal year’s budgeting and financial projection process. Basedon these considerations, we elected to change the annual goodwill impairment measurement date to October 31 beginning in 2018. Our most recent goodwillevaluation was performed during the fourth quarter of 2018 with an October 31, 2018 measurement date, which indicated no impairment.At December 31, 2018, we had approximately $4.6 billion of goodwill recorded, all of which resides at our hospital operations reporting unit.During the three months ended December 31, 2017, in connection with the preparation of the financial statements included in our 2017 Form 10-K, weidentified certain indicators of impairment and performed an interim goodwill impairment evaluation as of November 30, 2017. Those indicators wereprimarily a further decline in our market capitalization and fair value of our long-term debt during November 2017. We performed an estimated calculation offair value in step one of the impairment test at November 30, 2017, which indicated that the carrying value of our hospital operations reporting unit exceededits fair value. As a result of this evaluation and the early adoption of ASU 2017-04, we recorded a non-cash impairment charge of $1.419 billion to goodwillduring the three months ended December 31, 2017.The reduction in our fair value and the resulting goodwill impairment charge recorded during 2017 reduced the carrying value of our hospital operationsreporting unit to an amount equal to our estimated fair value. This increases the risk that future declines in fair value could result in goodwill impairment.The determination of fair value in step one of our goodwill impairment analysis is based on an estimate of fair value for the hospital operations reporting unitutilizing known and estimated inputs at the evaluation date. Some of those inputs include, but are not limited to, the most recent price of our common stockor fair value of our long-term debt, estimates of future revenue and expense growth, estimated market multiples, expected capital expenditures, income taxrates, and costs of invested capital. Future estimates of fair value could be adversely affected if the actual outcome of one or more of these assumptionschanges materially in the future, including further decline in our stock price or fair value of our long-term debt, lower than expected hospital volumes, highermarket interest rates or increased operating costs. Such changes impacting the calculation of our fair value could result in a material impairment charge in thefuture.Impairment or Disposal of Long-Lived AssetsWhenever events or changes in circumstances indicate that the carrying values of certain long-lived assets may be impaired, we project the undiscountedcash flows expected to be generated by these assets. If the projections indicate that the reported amounts are not expected to be recovered, such amounts arereduced to their estimated 82Table of Contentsfair value based on a quoted market price, if available, or an estimate based on valuation techniques available in the circumstances.Professional Liability ClaimsAs part of our business of owning and operating hospitals, we are subject to legal actions alleging liability on our part. We accrue for losses resulting fromsuch liability claims, as well as loss adjustment expenses that are out-of-pocket and directly related to such liability claims. These direct out-of-pocketexpenses include fees of outside counsel and experts. We do not accrue for costs that are part of our corporate overhead, such as the costs of our in-houselegal and risk management departments. The losses resulting from professional liability claims primarily consist of estimates for known claims, as well asestimates for incurred but not reported claims. The estimates are based on specific claim facts, our historical claim reporting and payment patterns, the natureand level of our hospital operations, and actuarially determined projections. The actuarially determined projections are based on our actual claim data,including historic reporting and payment patterns which have been gathered over an approximately 20-year period. As discussed below, since we purchaseexcess insurance on a claims-made basis that transfers risk to third-party insurers, the liability we accrue does include an amount for the losses covered by ourexcess insurance. We also record a receivable for the expected reimbursement of losses covered by our excess insurance. Since we believe that the amountand timing of our future claims payments are reliably determinable, we discount the amount we accrue for losses resulting from professional liability claimsusing the risk-free interest rate corresponding to the timing of our expected payments.The net present value of the projected payments was discounted using a weighted-average risk-free rate of 3.1%, 2.2% and 1.8% in 2018, 2017 and 2016,respectively. This liability is adjusted for new claims information in the period such information becomes known to us. Professional malpractice expenseincludes the losses resulting from professional liability claims and loss adjustment expense, as well as paid excess insurance premiums, and is presentedwithin other operating expenses in the accompanying consolidated statements of loss.Our processes for obtaining and analyzing claims and incident data are standardized across all of our hospitals and have been consistent for many years.We monitor the outcomes of the medical care services that we provide and for each reported claim, we obtain various information concerning the facts andcircumstances related to that claim. In addition, we routinely monitor current key statistics and volume indicators in our assessment of utilizing historicaltrends. The average lag period between claim occurrence and payment of a final settlement is between three and four years, although the facts andcircumstances of individual claims could result in the timing of such payments being different from this average. Since claims are paid promptly aftersettlement with the claimant is reached, settled claims represent approximately 1.0% of the total liability at the end of any period.For purposes of estimating our individual claim accruals, we utilize specific claim information, including the nature of the claim, the expected claimamount, the year in which the claim occurred and the laws of the jurisdiction in which the claim occurred. Once the case accruals for known claims aredetermined, information is stratified by loss layers and retentions, accident years, reported years, geography, and claims relating to the acquired HMAhospitals versus claims relating to our other hospitals. Several actuarial methods are used against this data to produce estimates of ultimate paid losses andreserves for incurred but not reported claims. Each of these methods uses our company-specific historical claims data and other information. This company-specific data includes information regarding our business, including historical paid losses and loss adjustment expenses, historical and current case lossreserves, actual and projected hospital statistical data, a variety of hospital census information, employed physician information, professional liabilityretentions for each policy year, geographic information and other data.Based on these analyses, we determine our estimate of the professional liability claims. The determination of management’s estimate, including thepreparation of the reserve analysis that supports such estimate, involves subjective judgment of management. Changes in reserving data or the trends andfactors that influence reserving data may signal fundamental shifts in our future claim development patterns or may simply reflect single-period anomalies.Even if a change reflects a fundamental shift, the full extent of the change may not become evident 83Table of Contentsuntil years later. Moreover, since our methods and models use different types of data and we select our liability from the results of all of these methods, wetypically cannot quantify the precise impact of such factors on our estimates of the liability. Due to our standardized and consistent processes for handlingclaims and the long history and depth of our company-specific data, our methodologies have produced reliably determinable estimates of ultimate paidlosses. Year Ended December 31, 2018 2017 2016 Accrual for professional liability claims, beginning of year $ 711 $ 788 $ 901 Liability for insured claims (1) (21) 4 (15) Liability transferred to QHC - - (5) Expense (income) related to: Current accident year 161 149 199 Prior accident years 14 (4) (87) (Income) expense from discounting (12) (4) 3 Total incurred loss and loss expense (2) 163 141 115 Paid claims and expenses related to: Current accident year - - - Prior accident years (203) (222) (208) Total paid claims and expenses (203) (222) (208) Accrual for professional liability claims, end of year $650 $711 $788 (1)The liability for insured claims is recorded on the consolidated balance sheet with a corresponding insurance recovery receivable. (2)Total expense, including premiums for insured coverage, was $199 million in 2018, $184 million in 2017 and $162 million in 2016.Current accident year expense increased for the year ended December 31, 2018, when compared to the prior year, due to the trend of higher severity andalso the increase in self-insured retention limit per claim from $10 million to $15 million. Expense related to prior accident years reflects changes in estimatesresulting from the filing of claims for prior year incidents, claim settlements, updates from litigation and our ongoing investigation of open claims.Expense/income from discounting reflects the changes in the weighted-average risk-free interest rate used and timing of estimated payments for discountingin each year.We are primarily self-insured for these claims; however, we obtain excess insurance that transfers the risk of loss to a third-party insurer for claims in excessof our self-insured retentions. Our excess insurance is underwritten on a claims-made basis. For claims reported prior to June 1, 2002, substantially all of ourprofessional and general liability risks were subject to a less than $1 million per occurrence self-insured retention and for claims reported from June 1, 2002through June 1, 2003, these self-insured retentions were $2 million per occurrence. Substantially all claims reported after June 1, 2003 and before June 1,2005 are self-insured up to $4 million per claim. Substantially all claims reported on or after June 1, 2005 and before June 1, 2014 are self-insured up to$5 million per claim. Substantially all claims reported on or after June 1, 2014 and before June 1, 2018 are self-insured up to $10 million per claim.Substantially all claims reported on or after June 1, 2018 are self-insured up to $15 million per claim. Management, on occasion, has selectively increased theinsured risk at certain hospitals based upon insurance pricing and other factors and may continue that practice in the future. Excess insurance for all hospitalshas been purchased through commercial insurance companies and generally covers us for liabilities in excess of the self-insured retentions. The excesscoverage consists of multiple layers of insurance, the sum of which totals up to $95 million per occurrence and in the aggregate for claims reported on or afterJune 1, 2003, up to $145 million per occurrence and in the aggregate for claims reported on or after January 1, 2008, up to $195 million per occurrence and inthe aggregate for claims reported on or after June 1, 84Table of Contents2010, and up to $220 million per occurrence and in the aggregate for claims reported on or after June 1, 2015. In addition, for integrated occurrencemalpractice claims, there is an additional $50 million of excess coverage for claims reported on or after June 1, 2014 and an additional $75 million of excesscoverage for claims reported on or after June 1, 2015. For certain policy years prior to June 1, 2014, if the first aggregate layer of excess coverage becomesfully utilized, then the self-insured retention will increase to $10 million per claim for any subsequent claims in that policy year until our total aggregatecoverage is met. Beginning June 1, 2018, this drop-down provision in the excess policies attaches over the $15 million per claim self-insured retention.Effective June 1, 2014, the hospitals acquired from HMA were insured on a claims-made basis as described above and through commercial insurancecompanies as described above for substantially all claims reported on or after June 1, 2014 except for physician-related claims with an occurrence date priorto June 1, 2014. Prior to June 1, 2014, the former HMA hospitals obtained insurance coverage through a wholly-owned captive insurance subsidiary and arisk retention group subsidiary which are domiciled in the Cayman Islands and South Carolina, respectively. Those insurance subsidiaries, which arecollectively referred to as the “Insurance Subsidiaries,” provided (i) claims-made coverage to all of the former HMA hospitals and (ii) occurrence-basiscoverage to most of the physicians employed by the former HMA hospitals. The employed physicians not covered by the Insurance Subsidiaries generallymaintained claims-made policies with unrelated third party insurance companies. To mitigate the exposure of the program covering the former HMAhospitals and other healthcare facilities, the Insurance Subsidiaries bought claims-made reinsurance policies from unrelated third parties for claims aboveself-retention levels of $10 million or $15 million per claim, depending on the policy year.Effective January 1, 2008, the former Triad hospitals were insured on a claims-made basis as described above and through commercial insurancecompanies as described above for substantially all claims occurring on or after January 1, 2002 and reported on or after January 1, 2008. Substantially alllosses for the former Triad hospitals in periods prior to May 1, 1999 were insured through a wholly-owned insurance subsidiary of HCA, Triad’s owner priorto that time, and excess loss policies maintained by HCA. HCA has agreed to indemnify the former Triad hospitals in respect of claims covered by suchinsurance policies arising prior to May 1, 1999. From May 1, 1999 through December 31, 2006, the former Triad hospitals obtained insurance coverage on aclaims incurred basis from HCA’s wholly-owned insurance subsidiary with excess coverage obtained from other carriers that is subject to certain deductibles.Effective for claims incurred after December 31, 2006, Triad began insuring its claims from $1 million to $5 million through its wholly-owned captiveinsurance company, replacing the coverage provided by HCA. Substantially all claims occurring during 2007 were self-insured up to $10 million per claim.Income TaxesWe must make estimates in recording provision for income taxes, including determination of deferred tax assets and deferred tax liabilities and anyvaluation allowances that might be required against the deferred tax assets. We believe that future income will enable us to realize certain deferred tax assets,subject to the valuation allowance we have established.The total amount of unrecognized benefit that would impact the effective tax rate, if recognized, was approximately $7 million as of December 31, 2018.A total of approximately $4 million of interest and penalties is included in the amount of liability for uncertain tax positions at December 31, 2018. It is ourpolicy to recognize interest and penalties related to unrecognized benefits in our consolidated statements of loss as income tax expense.It is possible the amount of unrecognized tax benefit could change in the next 12 months as a result of a lapse of the statute of limitations and settlementswith taxing authorities; however, we do not anticipate the change will have a material impact on our consolidated results of operations or consolidatedfinancial position.Our federal income tax returns for the 2009 and 2010 tax years have been settled with the Internal Revenue Service. The results of these examinationswere not material to our consolidated results of operations or 85Table of Contentsconsolidated financial position. Our federal income tax returns for the 2014 and 2015 tax years remain under examination by the Internal Revenue Service.We believe the results of these examinations will not be material to our consolidated results of operations or consolidated financial position. We haveextended the federal statute of limitations through June 30, 2019 for Community Health Systems, Inc. for the tax periods ended December 31, 2007, 2008,2009 and 2010, and through December 31, 2019 for the tax periods ended December 31, 2014 and 2015.We have accounted for the effects of the Tax Act using reasonable estimates based on currently available information and our interpretations thereof, andthe estimated impact of the Tax Act during the years ended December 31, 2018 and 2017. We finalized our accounting for the Tax Act in the fourth quarter of2018 in accordance with the prescribed measurement period under SAB 118. See Note 6 of the Notes to Consolidated Financial Statements included underPart II, Item 8 of this Form 10-K for additional information.Recent Accounting PronouncementsIn January 2016, the FASB issued ASU, 2016-01, which amends the measurement, presentation and disclosure requirements for equity investments, otherthan those accounted for under the equity method or that require consolidation of the investee. The ASU eliminates the classification of equity investmentsas available-for-sale with any changes in fair value of such investments recognized in other comprehensive income, and requires entities to measure equityinvestments at fair value, with any changes in fair value recognized in net income. This ASU is effective for fiscal years beginning after December 15, 2017,with early adoption permitted. To adopt this ASU, companies must record a cumulative-effect adjustment to beginning retained earnings at the beginning ofthe period of adoption. We adopted this ASU on January 1, 2018, and the adoption of this ASU did not have a material impact on our consolidated results ofoperations.In February 2016, the FASB issued ASU 2016-02, which amends the accounting for leases, requiring lessees to recognize most leases on their balancesheet with a right-of-use asset and a corresponding lease liability. Leases will be classified as either finance or operating leases, which will impact the expensemanner and timing of recognition of such leases over the lease term. The ASU also modifies the lease classification criteria for lessors and eliminates some ofthe real estate leasing guidance previously applied for certain leasing transactions. This ASU is effective for fiscal years beginning after December 15, 2018,with early adoption permitted. We adopted this ASU on January 1, 2019. In July 2018, the FASB issued ASU 2018-11, which provides entities relief from thetransition requirements in ASU 2016-02 by allowing them to elect not to recast prior comparative periods. We elected this method of transition uponadoption of this ASU. Because of the number of operating leases we utilize to support our operations, the adoption of this ASU will have a significant impacton our consolidated financial position, but is not expected to have a significant impact on our results of operations. We are substantially complete with ourimplementation efforts, pending final evaluation of the impact the adoption of this ASU will have on our consolidated financial statements. We estimate thattotal right-of-use assets and related operating lease liabilities between approximately $665 million and $715 million will be recorded on the consolidatedbalance sheet upon adoption. The adoption of this ASU is also not expected to have an impact on our compliance with debt covenants.In March 2017, the FASB issued ASU 2017-07, which changes the presentation of the components of net periodic benefit cost for sponsors of definedbenefit plans for pensions. Under the changes in this ASU, the service cost component of net periodic benefit cost is reported in the same income statementline as other employee compensation costs arising from services during the reporting period. The other components of net periodic benefit cost are presentedseparately in a line item outside of operating income. This ASU is effective for fiscal years beginning after December 15, 2017, with early adoption permitted.We adopted this ASU on January 1, 2018, and the adoption of this ASU did not have a material impact on our consolidated financial position or results ofoperations.In August 2017, the FASB issued ASU 2017-12, which amends hedge accounting recognition and disclosure requirements to improve transparency andsimplify the application of hedge accounting for certain hedging 86Table of Contentsinstruments. The amendments in this ASU that will have an impact on us include simplification of the periodic hedge effectiveness assessment, elimination ofthe benchmark interest rate concept for interest rate swaps, and enhancement of the ability to use the critical-terms match method for its cash flow hedges offorecasted interest payments. This ASU is effective for fiscal years beginning after December 15, 2018, with early adoption permitted. We early adopted thisASU on January 1, 2018, and the adoption of this ASU did not have a material impact on our consolidated financial position or results of operations.In February 2018, the FASB issued ASU 2018-02, which allows for a reclassification from accumulated other comprehensive income to retained earningsfor the stranded tax effects in accumulated other comprehensive income resulting from the enactment of the Tax Act and corresponding accounting treatmentrecorded in the fourth quarter of 2017. The ASU is effective for all entities for fiscal years beginning after December 15, 2018, and interim periods withinthose fiscal years. Early adoption of the amendments in this ASU is permitted, including adoption in any interim period for reporting periods for whichfinancial statements have not yet been issued. We early adopted this ASU on January 1, 2018, resulting in a reclassification of $6 million from accumulatedother comprehensive loss as a decrease to accumulated deficit.In August 2018, the FASB issued ASU 2018-15 to provide guidance on the accounting for implementation costs incurred in a cloud computingarrangement (CCA) that is a service contract. This ASU requires entities to account for such costs consistent with the guidance on capitalizing costsassociated with developing or obtaining internal-use software. The ASU is effective for all entities for fiscal years beginning after December 15, 2019, andinterim periods within those fiscal years, with early adoption permitted. We are currently evaluating the impact that adoption of this ASU will have on ourconsolidated financial position and results of operations.FORWARD-LOOKING STATEMENTSSome of the matters discussed in this Report include forward-looking statements. Statements that are predictive in nature, that depend upon or refer tofuture events or conditions or that include words such as “expects,” “anticipates,” “intends,” “plans,” “believes,” “estimates,” “thinks,” and similarexpressions are forward-looking statements. These statements involve known and unknown risks, uncertainties, and other factors that may cause our actualresults and performance to be materially different from any future results or performance expressed or implied by these forward-looking statements. Thesefactors include, among other things: • general economic and business conditions, both nationally and in the regions in which we operate; • the impact of health reform initiatives, including the Affordable Care Act, and the potential for the Affordable Care Act to be repealed or foundunconstitutional or for additional changes to the law, its implementation or its interpretation (including through executive orders and courtchallenges); • the extent to which states support increases, decreases or changes in Medicaid programs, implement health insurance exchanges or alter theprovision of healthcare to state residents through regulation or otherwise; • the future and long-term viability of health insurance exchanges and potential changes to the beneficiary enrollment process; • risks associated with our substantial indebtedness, leverage and debt service obligations, and the fact that a substantial portion of ourindebtedness will mature and become due in the near future, including our ability to refinance such indebtedness on acceptable terms or to incuradditional indebtedness; • demographic changes; • changes in, or the failure to comply with, federal, state or local laws or governmental regulations affecting our business; 87Table of Contents • potential adverse impact of known and unknown government investigations, audits, and federal and state false claims act litigation and other legalproceedings; • our ability, where appropriate, to enter into and maintain provider arrangements with payors and the terms of these arrangements, which may befurther affected by the increasing consolidation of health insurers and managed care companies and vertical integration efforts involving payorsand healthcare providers; • changes in, or the failure to comply with, contract terms with payors and changes in reimbursement rates paid by federal or state healthcareprograms or commercial payors; • any potential additional impairments in the carrying value of goodwill, other intangible assets, or other long-lived assets, or changes in the usefullives of other intangible assets; • changes in inpatient or outpatient Medicare and Medicaid payment levels and methodologies; • the effects related to the continued implementation of the sequestration spending reductions and the potential for future deficit reductionlegislation; • increases in the amount and risk of collectability of patient accounts receivable, including decreases in collectability which may result from,among other things, self-pay growth and difficulties in recovering payments for which patients are responsible, including co-pays and deductibles; • the efforts of insurers, healthcare providers, large employer groups and others to contain healthcare costs, including the trend toward value-basedpurchasing; • increases in wages as a result of inflation or competition for highly technical positions and rising supply and drug costs due to market pressurefrom pharmaceutical companies and new product releases; • liabilities and other claims asserted against us, including self-insured malpractice claims; • competition; • our ability to attract and retain, at reasonable employment costs, qualified personnel, key management, physicians, nurses and other healthcareworkers; • 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 U.S. GAAP; • the availability and terms of capital to fund any additional acquisitions or replacement facilities or other capital expenditures; • our ability to successfully make acquisitions or complete divestitures, including the disposition of hospitals and non-hospital businesses pursuantto our portfolio rationalization and deleveraging strategy, our ability to complete any such acquisitions or divestitures on desired terms or at all,the timing of the completion of any such acquisitions or divestitures, and our ability to realize the intended benefits from any such acquisitions ordivestitures; • the impact that changes in our relationships with joint venture or syndication partners could have on effectively operating our hospitals orancillary services or in advancing strategic opportunities; 88Table of Contents • our ability to successfully integrate any acquired hospitals, or to recognize expected synergies from acquisitions; • the impact of seasonal severe weather conditions, including the timing and amount of insurance recoveries in relation to severe weather events; • our ability to obtain adequate levels of general and professional liability insurance; • timeliness of reimbursement payments received under government programs; • effects related to outbreaks of infectious diseases; • the impact of prior or potential future cyber-attacks or security breaches; • any failure to comply with the terms of the Corporate Integrity Agreement; • the concentration of our revenue in a small number of states; • our ability to realize anticipated cost savings and other benefits from our current strategic and operational cost savings initiatives; • changes in interpretations, assumptions and expectations regarding the Tax Act; and • the other risk factors set forth in this Form 10-K for the year ended December 31, 2018 and our other public filings with the SEC.Although we believe that these forward-looking statements are based upon reasonable assumptions, these assumptions are inherently subject to significantregulatory, economic and competitive uncertainties and contingencies, which are difficult or impossible to predict accurately and may be beyond ourcontrol. Accordingly, we cannot give any assurance that our expectations will in fact occur, and we caution that actual results may differ materially fromthose in the forward-looking statements. Given these uncertainties, prospective investors are cautioned not to place undue reliance on these forward-lookingstatements. These forward-looking statements are made as of the date of this filing. We undertake no obligation to revise or update any forward-lookingstatements, or to make any other forward-looking statements, whether as a result of new information, future events or otherwise.Item 7A. Quantitative and Qualitative Disclosures about Market RiskWe are exposed to interest rate changes, primarily as a result of our Credit Facility which bears interest based on floating rates. In order to manage thevolatility relating to the market risk, we entered into interest rate swap agreements to manage our exposure to these fluctuations, as described under theheading “Liquidity and Capital Resources” in Part II, Item 7 of this Form 10-K. We utilize risk management procedures and controls in executing derivativefinancial instrument transactions. We do not execute transactions or hold derivative financial instruments for trading purposes. Derivative financialinstruments related to interest rate sensitivity of debt obligations are used with the goal of mitigating a portion of the exposure when it is cost effective to doso. As of December 31, 2018, our approximately $1.5 billion notional amount of interest rate swap agreements outstanding represented approximately 64.6%of our variable rate debt.A 1% change in interest rates on variable rate debt in excess of that amount covered by interest rate swaps would have resulted in interest expensefluctuating approximately $11 million in 2018, $27 million in 2017 and $50 million in 2016. On a prospective basis, a 1% change in interest rates on theremaining unhedged variable rate debt existing as of December 31, 2018, would result in interest expense fluctuating approximately $8 million per year. 89Table of ContentsItem 8.Financial Statements and Supplementary DataIndex to Financial Statements Page Community Health Systems, Inc. Consolidated Financial Statements: Report of Independent Registered Public Accounting Firm 91 Consolidated Statements of Loss for the Years Ended December 31, 2018, 2017 and 2016 92 Consolidated Statements of Comprehensive Loss for the Years Ended December 31, 2018, 2017 and 2016 93 Consolidated Balance Sheets as of December 31, 2018 and 2017 94 Consolidated Statements of Stockholders’ (Deficit) Equity for the Years Ended December 31, 2018, 2017 and 2016 95 Consolidated Statements of Cash Flows for the Years Ended December 31, 2018, 2017 and 2016 96 Notes to Consolidated Financial Statements 97 90Table of ContentsREPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRMTo the Stockholders and the Board of Directors ofCommunity Health Systems, Inc.Franklin, TennesseeOpinion on the Financial StatementsWe have audited the accompanying consolidated balance sheets of Community Health Systems, Inc. and subsidiaries (the “Company”) as of December 31,2018 and 2017, the related consolidated statements of loss, comprehensive loss, stockholders’ (deficit) equity, and cash flows, for each of the three years inthe period ended December 31, 2018, and the related notes and the schedule listed in the Index at Item 15 (collectively referred to as the “financialstatements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2018and 2017, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2018, in conformity withaccounting principles generally accepted in the United States of America.We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company’sinternal control over financial reporting as of December 31, 2018, based on criteria established in Internal Control – Integrated Framework (2013) issued bythe Committee of Sponsoring Organizations of the Treadway Commission and our report dated February 21, 2019, expressed an unqualified opinion on theCompany’s internal control over financial reporting.Basis for OpinionThese financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financialstatements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Companyin accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonableassurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing proceduresto assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks.Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also includedevaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financialstatements. We believe that our audits provide a reasonable basis for our opinion./s/ Deloitte & Touche LLPNashville, TennesseeFebruary 21, 2019We have served as the Company’s auditor since 1996. 91Table of ContentsCOMMUNITY HEALTH SYSTEMS, INC. AND SUBSIDIARIESCONSOLIDATED STATEMENTS OF LOSS Year Ended December 31, 2018 2017 2016 (In millions, except share and per share data) Operating revenues (net of contractual allowances and discounts) $18,398 $21,275Provision for bad debts 3,045 2,837Net operating revenues (see Note 1) $14,155 15,353 18,438Operating costs and expenses: Salaries and benefits 6,384 7,376 8,624Supplies 2,355 2,672 3,011Other operating expenses 3,496 3,864 4,248Government and other legal settlements and related costs 11 (31) 16Electronic health records incentive reimbursement (4) (28) (70) Rent 337 394 450Depreciation and amortization 700 861 1,100Impairment and (gain) loss on sale of businesses, net 668 2,123 1,919Total operating costs and expenses 13,947 17,231 19,298Income (loss) from operations 208 (1,878) (860) Interest expense, net of interest income of $7, $11, and $14 in 2018, 2017 and 2016, respectively 976 931 962(Gain) loss from early extinguishment of debt (31) 40 30Gain on sale of investments in unconsolidated affiliates - - (94) Equity in earnings of unconsolidated affiliates (22) (16) (43) Loss from continuing operations before income taxes (715) (2,833) (1,715) Benefit from income taxes (11) (449) (104) Loss from continuing operations (704) (2,384) (1,611) Discontinued operations, net of taxes: Loss from operations of entities sold or held for sale - (6) (7) Impairment of hospitals sold or held for sale - (6) (8) Loss from discontinued operations, net of taxes - (12) (15) Net loss (704) (2,396) (1,626) Less: Net income attributable to noncontrolling interests 84 63 95Net loss attributable to Community Health Systems, Inc. stockholders $(788) $(2,459) $(1,721) Basic loss per share attributable to CommunityHealth Systems, Inc. common stockholders: Continuing operations $(6.99) $(21.89) $(15.41) Discontinued operations - (0.11) (0.13) Net loss $(6.99) $(22.00) $(15.54) Diluted loss per share attributable to CommunityHealth Systems, Inc. common stockholders: Continuing operations $(6.99) $(21.89) $(15.41) Discontinued operations - (0.11) (0.13) Net loss $(6.99) $(22.00) $(15.54) Weighted-average number of shares outstanding: Basic 112,728,274 111,769,821 110,730,971Diluted 112,728,274 111,769,821 110,730,971See accompanying notes to the consolidated financial statements. 92Table of ContentsCOMMUNITY HEALTH SYSTEMS, INC. AND SUBSIDIARIESCONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS Year Ended December 31, 2018 2017 2016 (In millions) Net loss $(704) $(2,396) $(1,626) Other comprehensive income (loss), net of income taxes: Net change in fair value of interest rate swaps, net of tax of $6, $10 and $10 forthe years ended December 31, 2018, 2017 and 2016, respectively 20 19 17Net change in fair value of available-for-sale securities, net of tax (2) 8 (11) Amortization and recognition of unrecognized pension cost components, net oftax of $1, $9, and $2 for the years ended December 31, 2018, 2017, and 2016,respectively (1) 14 3Other comprehensive income 17 41 9Comprehensive loss (687) (2,355) (1,617) Less: Comprehensive income attributable to noncontrolling interests 84 63 95Comprehensive loss attributable to Community Health Systems, Inc. stockholders $(771) $(2,418) $(1,712) See accompanying notes to the consolidated financial statements. 93Table of ContentsCOMMUNITY HEALTH SYSTEMS, INC. AND SUBSIDIARIESCONSOLIDATED BALANCE SHEETS December 31, 2018 December 31, 2017 (In millions, except share data) ASSETS Current assets: Cash and cash equivalents $196 $563 Patient accounts receivable (see Note 1) 2,352 2,384 Supplies 402 444 Prepaid income taxes 3 17 Prepaid expenses and taxes 196 198 Other current assets 400 462 Total current assets 3,549 4,068 Property and equipment Land and improvements 597 671 Buildings and improvements 6,228 6,971 Equipment and fixtures 3,476 3,855 Property and equipment 10,301 11,497 Less accumulated depreciation and amortization (4,162) (4,445) Property and equipment, net 6,139 7,052 Goodwill 4,559 4,723 Deferred income taxes 69 62 Other assets, net of accumulated amortization of $939 and $883 at December 31, 2018 and 2017, respectively 1,543 1,545 Total assets $ 15,859 $ 17,450 LIABILITIES AND STOCKHOLDERS’ DEFICIT Current liabilities: Current maturities of long-term debt $204 $33 Accounts payable 887 967 Accrued liabilities: Employee compensation 627 685 Accrued interest 206 229 Other 468 442 Total current liabilities 2,392 2,356 Long-term debt 13,392 13,880 Deferred income taxes 26 19 Other long-term liabilities 1,008 1,360 Total liabilities 16,818 17,615 Redeemable noncontrolling interests in equity of consolidated subsidiaries 504 527 Commitments and contingencies (Note 16) STOCKHOLDERS’ DEFICIT Community Health Systems, Inc. stockholders’ deficit: Preferred stock, $.01 par value per share, 100,000,000 shares authorized; none issued - - Common stock, $.01 par value per share, 300,000,000 shares authorized; 116,248,376 shares issued and outstanding at December 31, 2018, and114,651,004 shares issued and outstanding at December 31, 2017 1 1 Additional paid-in capital 2,017 2,014 Accumulated other comprehensive loss (10) (21) Accumulated deficit (3,543) (2,761) Total Community Health Systems, Inc. stockholders’ deficit (1,535) (767) Noncontrolling interests in equity of consolidated subsidiaries 72 75 Total stockholders’ deficit (1,463) (692) Total liabilities and stockholders’ deficit $15,859 $17,450 See accompanying notes to the consolidated financial statements. 94Table of ContentsCOMMUNITY HEALTH SYSTEMS, INC. AND SUBSIDIARIESCONSOLIDATED STATEMENTS OF STOCKHOLDERS’ (DEFICIT) EQUITY Community Health Systems, Inc. Stockholders RedeemableNoncontrollingInterests Common Stock AdditionalPaid-inCapital Treasury Stock AccumulatedOtherComprehensiveIncome (Loss) RetainedEarnings(AccumulatedDeficit) NoncontrollingInterests TotalStockholders’(Deficit)Equity Shares Amount Shares Amount (In millions, except share data) Balance, December 31, 2015 $571 113,732,933 $1 $1,963 (975,549) $(7) $(73) $2,135 $86 $4,105 Comprehensive income (loss) 71 - - - - - 9 (1,721) 24 (1,688) Contributions from noncontrolling interests - - - - - - - - - - Distributions to noncontrolling interests, net ofcontributions (69) - - - - - - - (23) (23) Purchase of subsidiary shares from noncontrollinginterests (14) - - (9) - - - - 4 (5) Disposition of less-than-wholly owned hospital (3) - - - - - - - - - Noncontrolling interests in acquired entity - - - - - - - - 33 33 Adjustment to redemption value of redeemablenoncontrolling interests 6 - - (6) - - - - - (6) Distribution of Quorum Health Corporation (8) - - - - - 2 (713) (11) (722) Cancellation of treasury stock - (975,549) - (7) 975,549 7 - - - - Cancellation of restricted stock for taxwithholdings on vested shares - (368,945) - (6) - - - - - (6) Income tax payable increase from vesting ofrestricted shares - - - (6) - - - - - (6) Stock-based compensation - 1,488,141 - 46 - - - - - 46 Balance, December 31, 2016 554 113,876,580 1 1,975 - - (62) (299) 113 1,728 Comprehensive income (loss) 38 - - - - - 41 (2,459) 25 (2,393) Contributions from noncontrolling interests - - - - - - - - 5 5 Distributions to noncontrolling interests (71) - - - - - - - (29) (29) Purchase of subsidiary shares from noncontrollinginterests (4) - - (2) - - - - - (2) Disposition of less-than-wholly owned hospital 2 - - - - - - - (10) (10) Other reclassifications of noncontrolling interests 29 (29) (29) Noncontrolling interests in acquired entity 1 - - - - - - - - - Adjustment to redemption value of redeemablenoncontrolling interests (22) - - 22 - - - - - 22 Distribution of Quorum Health Corporation - - - - - - - (3) - (3) Cancellation of restricted stock for taxwithholdings on vested shares - (560,098) - (5) - - - - - (5) Stock-based compensation - 1,334,522 - 24 - - - - - 24 Balance, December 31, 2017 527 114,651,004 1 2,014 - - (21) (2,761) 75 (692) Comprehensive income (loss) 54 - - - - - 17 (788) 30 (741) Adoption of new accounting standards - - - - - - (6) 6 - - Contributions from noncontrolling interests 3 - - - - - - - - - Distributions to noncontrolling interests (68) - - - - - - - (28) (28) Purchase of subsidiary shares from noncontrollinginterests (24) - - (4) - - - - (3) (7) Other reclassifications of noncontrolling interests 1 - - - - - - - (2) (2) Noncontrolling interests in acquired entity 6 - - - - - - - - - Adjustment to redemption value of redeemablenoncontrolling interests 5 - - (5) - - - - - (5) Cancellation of restricted stock for taxwithholdings on vested shares - (293,735) - (1) - - - - - (1) Income tax payable increase from vesting ofrestricted shares - 333 - - - - - - - - Stock-based compensation - 1,890,774 - 13 - - - - - 13 Balance, December 31, 2018 $504 116,248,376 $1 $2,017 - $- $(10) $(3,543) $72 $(1,463) See accompanying notes to the consolidated financial statements. 95Table of ContentsCOMMUNITY HEALTH SYSTEMS, INC. AND SUBSIDIARIESCONSOLIDATED STATEMENTS OF CASH FLOWS Year Ended December 31, 2018 2017 2016 (In millions) Cash flows from operating activities: Net loss $(704) $(2,396) $(1,626) Adjustments to reconcile net loss to net cash provided by operating activities: Depreciation and amortization 700 861 1,100 Deferred income taxes (3) (454) (116) Government and other legal settlements and related costs 11 9 16 Stock-based compensation expense 13 24 46 Impairment of hospitals sold or held for sale - 6 8 Impairment and (gain) loss on sale of businesses, net 668 2,123 1,919 (Gain) loss from early extinguishment of debt (31) 40 30 Gain on sale of investments in unconsolidated affiliates - - (94) Other non-cash expenses, net 38 35 31 Changes in operating assets and liabilities, net of effects of acquisitions and divestitures: Patient accounts receivable 31 732 (96) Supplies, prepaid expenses and other current assets 16 (33) 25 Accounts payable, accrued liabilities and income taxes (163) (69) (137) Payment of HMA legal settlement (266) - - Other (36) (105) 31 Net cash provided by operating activities 274 773 1,137 Cash flows from investing activities: Acquisitions of facilities and other related businesses (26) (6) (123) Purchases of property and equipment (527) (564) (744) Proceeds from disposition of hospitals and other ancillary operations 405 1,692 143 Proceeds from sale of property and equipment 8 7 15 Purchases of available-for-sale securities and equity securities (78) (125) (505) Proceeds from sales of available-for-sale securities and equity securities 114 208 464 Proceeds from sale of investments in unconsolidated affiliates - - 403 Distribution from Quorum Health Corporation - - 1,219 Increase in other investments (141) (143) (242) Net cash (used in) provided by investing activities (245) 1,069 630 Cash flows from financing activities: Repurchase of restricted stock shares for payroll tax withholding requirements (1) (5) (6) Deferred financing costs and other debt-related costs (96) (66) (26) Proceeds from noncontrolling investors in joint ventures 3 5 - Redemption of noncontrolling investments in joint ventures (31) (6) (19) Distributions to noncontrolling investors in joint ventures (96) (100) (92) Proceeds from sale-lease back - - 159 Borrowings under credit agreements 28 841 4,879 Issuance of long-term debt 1,033 3,100 - Proceeds from ABL and receivables facility 797 105 107 Repayments of long-term indebtedness (2,033) (5,391) (6,715) Net cash used in financing activities (396) (1,517) (1,713) Net change in cash and cash equivalents (367) 325 54 Cash and cash equivalents at beginning of period 563 238 184 Cash and cash equivalents at end of period $196 $563 $238 Supplemental disclosure of cash flow information: Interest payments $(936) $(852) $(930) Income tax refunds (payments), net $19 $(4) $16 See accompanying notes to the consolidated financial statements. 96Table of ContentsCOMMUNITY HEALTH SYSTEMS, INC. AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS1. BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIESBusiness. Community Health Systems, Inc. is a holding company and operates no business in its own name. On a consolidated basis, Community HealthSystems, Inc. and its subsidiaries (collectively the “Company”) own, lease and operate general acute care hospitals in communities across the country. As ofDecember 31, 2018, the Company owned or leased 113 hospitals, included in continuing operations, including two stand-alone rehabilitation or psychiatrichospitals, licensed for 18,227 beds in 20 states. Throughout these notes to the consolidated financial statements, Community Health Systems, Inc. (the“Parent”) and its consolidated subsidiaries are referred to on a collective basis as the “Company.” This drafting style is not meant to indicate that thepublicly-traded Parent or any particular subsidiary of the Parent owns or operates any asset, business, or property. The hospitals, operations and businessesdescribed in this filing are owned and operated, and management services provided, by distinct and indirect subsidiaries of Community Health Systems, Inc.As of December 31, 2018, Florida, Texas and Indiana represent the only areas of significant geographic concentration. Net operating revenues generatedby the Company’s hospitals in Florida, as a percentage of consolidated operating revenues, were 14.3% in 2018, 14.0% in 2017 and 13.6% in 2016. Netoperating revenues generated by the Company’s hospitals in Texas, as a percentage of consolidated operating revenues, were 11.7% in 2018, 10.9% in 2017and 10.4% in 2016. Net operating revenues generated by the Company’s hospitals in Indiana, as a percentage of consolidated operating revenues, were12.5% in 2018, 11.6% in 2017 and 9.4% in 2016.Use of Estimates. The preparation of financial statements in conformity with U.S. generally accepted accounting principles (“GAAP”) requiresmanagement to make estimates and assumptions that affect the amounts reported in the consolidated financial statements. Actual results could differ fromthese estimates under different assumptions or conditions.Principles of Consolidation. The consolidated financial statements include the accounts of the Parent, its subsidiaries, all of which are controlled by theParent through majority voting control, and variable interest entities for which the Company is the primary beneficiary. All intercompany accounts, profitsand transactions have been eliminated. Noncontrolling interests in less-than-wholly-owned consolidated subsidiaries of the Parent are presented as acomponent of total equity to distinguish between the interests of the Parent and the interests of the noncontrolling owners. Revenues, expenses and incomefrom continuing operations from these subsidiaries are included in the consolidated amounts as presented on the consolidated statements of loss, along with anet income measure that separately presents the amounts attributable to the controlling interests and the amounts attributable to the noncontrolling interestsfor each of the periods presented. Noncontrolling interests that are redeemable or may become redeemable at a fixed or determinable price at the option of theholder or upon the occurrence of an event outside of the control of the Company are presented in mezzanine equity on the consolidated balance sheets.Cost of Revenue. Substantially all of the Company’s operating costs and expenses are “cost of revenue” items. Operating costs that could be classified asgeneral and administrative by the Company would include the Company’s corporate office costs at its Franklin, Tennessee office which were collectively$181 million, $189 million and $197 million for the years ended December 31, 2018, 2017 and 2016, respectively. Included in these corporate office costs isstock-based compensation of $13 million, $24 million and $46 million for the years ended December 31, 2018, 2017 and 2016, respectively.Cash Equivalents. The Company considers highly liquid investments with original maturities of three months or less to be cash equivalents.Supplies. Supplies, principally medical supplies, are stated at the lower of cost (first-in, first-out basis) or market. 97Table of ContentsCOMMUNITY HEALTH SYSTEMS, INC. AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued) Marketable Securities. Prior to adoption of Accounting Standards Update (“ASU”) 2016-01 on January 1, 2018, the Company’s marketable securitieswere classified as trading or available-for-sale. Trading securities were reported at fair value with unrealized gains and losses included in earnings.Available-for-sale securities were carried at fair value as determined by quoted market prices, with unrealized gains and losses reported as a separatecomponent of stockholders’ (deficit) equity. After adoption of ASU 2016-01 on January 1, 2018, the Company’s marketable securities consist of debtsecurities that are classified as trading or available-for-sale and equity securities. Equity securities are reported at fair value with changes in fair valueincluded in earnings. Available-for-sale securities are carried at fair value as determined by quoted market prices, with unrealized gains and losses reported asa separate component of stockholders’ (deficit) equity. Trading securities are reported at fair value with unrealized gains and losses included in earnings.Other comprehensive loss, net of tax, included an unrealized loss of $2 million and $11 million during the years ended December 31, 2018 and 2016,respectively, and an unrealized gain of $8 million during the year ended December 31, 2017, related to these available-for-sale securities.Property and Equipment. Property and equipment are recorded at cost. Depreciation is recognized using the straight-line method over the estimateduseful lives of the land and improvements (3 to 20 years), buildings and improvements (5 to 40 years) and equipment and fixtures (3 to 18 years). Costscapitalized as construction in progress were $219 million and $222 million at December 31, 2018 and 2017, respectively. Expenditures for renovations andother significant improvements are capitalized; however, maintenance and repairs which do not improve or extend the useful lives of the respective assets arecharged to operations as incurred. Interest capitalized related to construction in progress was $15 million, $11 million and $9 million for the years endedDecember 31, 2018, 2017 and 2016, respectively. Purchases of property and equipment and internal-use software accrued in accounts payable and not yetpaid were $115 million and $166 million at December 31, 2018 and 2017, respectively.The Company also leases certain facilities and equipment under capital leases (see Note 10). Such assets are amortized on a straight-line basis over thelesser of the term of the lease or the remaining useful lives of the applicable assets. During the year ended December 31, 2018, the Company had non-cashinvesting activity of $6 million related to certain facility and equipment additions that were financed through capital leases and other debt.Goodwill. Goodwill represents the excess of the fair value of the consideration conveyed in the acquisition over the fair value of net assets acquired.Goodwill arising from business combinations is not amortized. Goodwill is required to be evaluated for impairment at the same time every year and when anevent occurs or circumstances change such that it is more likely than not that impairment may exist. The Company performs its annual testing of impairmentfor goodwill in the fourth quarter of each year. As further discussed in Note 5, the Company recorded impairment charge of $1.419 billion during the yearended December 31, 2017 and an impairment charge of $1.395 billion during the year ended December 31, 2016. There was no goodwill impairment chargeduring the year ended December 31, 2018 as a result of the Company’s annual impairment evaluation.Other Assets. Other assets consist of the insurance recovery receivable from excess insurance carriers related to the Company’s self-insured malpracticegeneral liability and workers’ compensation insurance liability; costs to recruit physicians to the Company’s markets, which are deferred and expensed overthe term of the respective physician recruitment contract, generally three years, and included in amortization expense; and capitalized internal-use softwarecosts, which are expensed over the expected useful life, which is generally three years for routine software and eight to ten years for major software projects,and included in amortization expense.Revenue Recognition. On January 1, 2018, the Company adopted the new revenue recognition accounting standard issued by the Financial AccountingStandards Board (“FASB”) and codified in the FASB Accounting 98Table of ContentsCOMMUNITY HEALTH SYSTEMS, INC. AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued) Standards Codification (“ASC”) as topic 606 (“ASC 606”). The revenue recognition standard in ASC 606 outlines a single comprehensive model forrecognizing revenue as performance obligations, defined in a contract with a customer as goods or services transferred to the customer in exchange forconsideration, are satisfied. The standard also requires expanded disclosures regarding the Company’s revenue recognition policies and significantjudgments employed in the determination of revenue.The Company applied the modified retrospective approach to all contracts when adopting ASC 606. As a result, upon the Company’s adoption of ASC606 the majority of what was previously classified as the provision for bad debts in the statement of operations is now reflected as implicit price concessions(as defined in ASC 606) and therefore is included as a reduction to net operating revenues in 2018. For changes in credit issues not assessed at the date ofservice, the Company prospectively recognizes those amounts in other operating expenses on the statement of operations. For periods prior to the adoption ofASC 606, the provision for bad debts has been presented consistent with the previous revenue recognition standards that required such provision to bepresented separately as a component of net operating revenues. Additionally, upon adoption of ASC 606 the allowance for doubtful accounts ofapproximately $3.9 billion as of January 1, 2018 was reclassified as a component of net patient accounts receivable. Other than these changes in presentationon the consolidated statement of operations and consolidated balance sheet, the adoption of ASC 606 did not have a material impact on the consolidatedresults of operations for the year ended December 31, 2018, and the Company does not expect it to have a material impact on its consolidated results ofoperations on a prospective basis.As part of the adoption of ASC 606, the Company elected two of the available practical expedients provided for in the standard. First, the Company doesnot adjust the transaction price for any financing components as those were deemed to be insignificant. Additionally, the Company expenses all incrementalcustomer contract acquisition costs as incurred because such costs are not material and would be amortized over a period less than one year.Net Operating RevenuesUpon the adoption of ASC 606, net operating revenues are recorded at the transaction price estimated by the Company to reflect the total considerationdue from patients and third-party payors in exchange for providing goods and services in patient care. These services are considered to be a singleperformance obligation and have a duration of less than one year. Revenues are recorded as these goods and services are provided. The transaction price,which involves significant estimates, is determined based on the Company’s standard charges for the goods and services provided, with a reduction recordedfor price concessions related to third party contractual arrangements as well as patient discounts and other patient price concessions. During the year endedDecember 31, 2018, the impact of changes to the inputs used to determine the transaction price was considered immaterial to the current period.Currently, several states utilize supplemental reimbursement programs for the purpose of providing reimbursement to providers to offset a portion of thecost of providing care to Medicaid and indigent patients. These programs are designed with input from the Centers for Medicare & Medicaid Services and arefunded with a combination of state and federal resources, including, in certain instances, fees or taxes levied on the providers. Under these supplementalprograms, the Company recognizes revenue and related expenses in the period in which amounts are estimable and collection is reasonably assured.Reimbursement under these programs is reflected in net operating revenues and fees, taxes or other program-related costs are reflected in other operatingexpenses. 99Table of ContentsCOMMUNITY HEALTH SYSTEMS, INC. AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued) The Company’s net operating revenues during the year ended December 31, 2018 have been presented in the following table based on an allocation of theestimated transaction price with the patient between the primary patient classification of insurance coverage (in millions): Year EndedDecember 31, 2018 Medicare $ 3,730 Medicaid 1,876 Managed Care and other third-party payors 8,349 Self-pay 200 Total $ 14,155 Operating revenues, net of contractual allowances and discounts (but before the provision for bad debts) by payor have been presented in the followingtable for the years ended December 31, 2017 and 2016, as follows, consistent with the presentation prior to the adoption of ASC 606 on January 1, 2018 (inmillions): Year Ended December 31, 2017 2016 Medicare $4,188 $5,089 Medicaid 1,900 2,234 Managed Care and other third-party payors 9,991 11,354 Self-pay 2,319 2,598 Total $ 18,398 $ 21,275 Patient Accounts ReceivablePatient accounts receivable are recorded at net realizable value based on certain assumptions determined by each payor. For third-party payors includingMedicare, Medicaid, and Managed Care, the net realizable value is based on the estimated contractual reimbursement percentage, which is based on currentcontract prices or historical paid claims data by payor. For self-pay accounts receivable, which includes patients who are uninsured and the patientresponsibility portion for patients with insurance, the net realizable value is determined using estimates of historical collection experience without regard toaging category. These estimates are adjusted for estimated conversions of patient responsibility portions, expected recoveries and any anticipated changes intrends.Patient accounts receivable can be impacted by the effectiveness of the Company’s collection efforts. Additionally, significant changes in payor mix,business office operations, economic conditions or trends in federal and state governmental healthcare coverage could affect the net realizable value ofaccounts receivable. The Company also continually reviews the net realizable value of accounts receivable by monitoring historical cash collections as apercentage of trailing net operating revenues, as well as by analyzing current period net revenue and admissions by payor classification, aged accountsreceivable by payor, days revenue outstanding, the composition of self-pay receivables between pure self-pay patients and the patient responsibility portionof third-party insured receivables and the impact of recent acquisitions and dispositions.Final settlements for some payors and programs are subject to adjustment based on administrative review and audit by third parties. As a result of thesefinal settlements, the Company has recorded amounts due to third-party 100Table of ContentsCOMMUNITY HEALTH SYSTEMS, INC. AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued) payors of $144 million and $156 million as of December 31, 2018 and December 31, 2017, respectively, and these amounts are included in accruedliabilities-other in the accompanying consolidated balance sheets. Amounts due from third-party payors were $155 million and $153 million as ofDecember 31, 2018 and December 31, 2017, respectively, and are included in other current assets in the accompanying consolidated balance sheets.Substantially all Medicare and Medicaid cost reports are final settled through 2015.Charity CareIn the ordinary course of business, the Company renders services to patients who are financially unable to pay for hospital care. The Company’s policy isto not pursue collections for such amounts; therefore, the related charges for those patients who are financially unable to pay and that otherwise do notqualify for reimbursement from a governmental program are not reported in net operating revenues, and are thus classified as charity care. The Companydetermines amounts that qualify for charity care primarily based on the patient’s household income relative to the federal poverty level guidelines, asestablished by the federal government.These charity care services are estimated to be $491 million, $482 million and $487 million for the years ended December 31, 2018, 2017 and 2016,respectively, representing the value (at the Company’s standard charges) of these charity care services that are excluded from net operating revenues. Theestimated cost incurred by the Company to provide these charity care services to patients who are unable to pay was approximately $62 million, $62 millionand $64 million for the years ended December 31, 2018, 2017 and 2016, respectively. The estimated cost of these charity care services was determined usinga ratio of cost to gross charges and applying that ratio to the gross charges associated with providing care to charity patients for the period.During 2017 and culminating with the financial close process at December 31, 2017, the Company developed new accounting methodologies andprocesses to implement ASU 2014-09, the accounting standard for revenue recognition that was adopted by the Company effective January 1, 2018. Byimplementing new data extraction techniques and updated hindsight information on historical collection data, the Company was able to better estimate thenet amount after contractual allowances owed by the third-party payor and what will be owed by the patient based on historical experience. Such updatedinformation included portfolio-level data related to historical collection amounts on an individual hospital and patient level that previously had not beenreadily available. Using this information the Company created a new accounting process by which it can estimate contractual allowances on a per patientbasis. In addition to this new accounting methodology, the Company also revised its methods of estimating contractual allowances to (1) expand thehindsight period over which the Company analyzes payors’ historical paid claims data to estimate contractual allowances, (2) expand the basis for payordenied claims to refine the hindsight reserve for such denials, and (3) adjust the contractual allowances for certain categories of commercial payors usingmore precise historical experience based on recent patterns of account reimbursement. Additionally, the Company evaluated the estimated collection of thoseamounts due from the patient as part of the Company’s estimate of the allowance for doubtful accounts. This analysis also included an evaluation of patientaccounts receivable retained after the divestiture of 30 hospitals throughout 2017, and certain other revenues. Based on these new accounting processes andmethodologies, the Company recorded a change in estimate during the three months ended December 31, 2017 to increase contractual allowances byapproximately $197 million, and to record additional provision for bad debts and increase the allowance for doubtful accounts by $394 million. The totalimpact of the change in estimate recorded during the three months ended December 31, 2017 was a decrease to net operating revenues of $591 million.Electronic Health Records Incentive Reimbursement. The federal government has implemented a number of regulations and programs designed topromote the use of electronic health records (“EHR”) technology and, pursuant to the Health Information Technology for Economic and Clinical Health Act(“HITECH”), established 101Table of ContentsCOMMUNITY HEALTH SYSTEMS, INC. AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued) requirements for a Medicare and Medicaid incentive payments program for eligible hospitals and professionals that adopt and meaningfully use certifiedEHR technology. The Company utilizes a gain contingency model to recognize EHR incentive payments. Recognition occurs when the eligible hospitalsadopt or demonstrate meaningful use of certified EHR technology for the applicable payment period and have available the Medicare cost report informationfor the relevant full cost report year used to determine the final incentive payment.Medicaid EHR incentive payments are calculated based on prior period Medicare cost report information available at the time when eligible hospitalsadopt, implement, upgrade or demonstrate meaningful use of certified EHR technology. Since the information for the relevant full Medicare cost report yearis available at the time of attestation, the incentive income from resolving the gain contingency is recognized when eligible hospitals adopt, implement,upgrade or demonstrate meaningful use of certified EHR technology.Medicare EHR incentive payments are calculated based on the Medicare cost report information for the full cost report year that began during the federalfiscal year in which meaningful use is demonstrated. Since the necessary information is only available at the end of the relevant full Medicare cost report yearand after the cost report is settled, the incentive income from resolving the gain contingency is recognized when eligible hospitals demonstrate meaningfuluse of certified EHR technology and the information for the applicable full Medicare cost report year to determine the final incentive payment is available.In some instances, the Company may receive estimated Medicare EHR incentive payments prior to when the Medicare cost report information used todetermine the final incentive payment is available. In these instances, recognition of the gain for EHR incentive payments is deferred until all recognitioncriteria described above are met.Eligibility for annual Medicare incentive payments is dependent on providers successfully attesting to the meaningful use of EHR technology. Medicaidincentive payments are available to providers in the first payment year that they adopt, implement or upgrade certified EHR technology; however, providersmust demonstrate meaningful use of such technology in any subsequent payment years to qualify for additional incentive payments. Medicaid EHRincentive payments are fully funded by the federal government and administered by the states; however, the states are not required to offer EHR incentivepayments to providers.The Company recognized approximately $4 million, $28 million and $70 million for the years ended December 31, 2018, 2017 and 2016, respectively, ofincentive reimbursement for HITECH incentives from Medicare and Medicaid related to certain of the Company’s hospitals and for certain of the Company’semployed physicians that have demonstrated meaningful use of certified EHR technology or have completed attestations to their adoption orimplementation of certified EHR technology. These incentive reimbursements are presented as a reduction of operating costs and expenses on theconsolidated statements of loss. The Company received cash related to the incentive reimbursement for HITECH incentives of approximately $4 million,$41 million and $123 million for the years ended December 31, 2018, 2017 and 2016, respectively. The Company recorded no deferred revenue inconnection with the receipt of these cash payments at either December 31, 2018 or 2017.Physician Income Guarantees. The Company enters into physician recruiting agreements under which it supplements physician income to a minimumamount over a period of time, typically one year, while the physicians establish themselves in the community. As part of the agreements, the physicians arecommitted to practice in the community for a period of time, typically three years, which extends beyond their income guarantee period. The Companyrecords an asset and liability for the estimated fair value of minimum revenue guarantees on new agreements. Adjustments to the ultimate value of theguarantee paid to physicians are recognized in the period that the change in estimate is identified. The Company amortizes an asset over the life of theagreement. As of December 31, 2018 and 2017, the unamortized portion of these physician income guarantees was $24 million and $29 million, respectively. 102Table of ContentsCOMMUNITY HEALTH SYSTEMS, INC. AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued) Concentrations of Credit Risk. The Company grants unsecured credit to its patients, most of whom reside in the service area of the Company’s facilitiesand are insured under third-party payor agreements. Because of the economic diversity of the Company’s facilities and non-governmental third-party payors,Medicare represents the only significant concentration of credit risk from payors. Accounts receivable, net of contractual allowances, from Medicare was$283 million and $220 million at December 31, 2018 and 2017, respectively, representing 5% and 4% of consolidated net accounts receivable, as ofDecember 31, 2018 and 2017, respectively.Accounting for the Impairment or Disposal of Long-Lived Assets. During the year ended December 31, 2018, the Company recorded a total combinedimpairment charge and loss on disposal of approximately $668 million, of which (i) approximately $423 million was recorded to reduce the carrying value ofcertain hospitals that have been sold or deemed held for sale based on the difference between the carrying value of the hospital disposal groups compared toestimated fair value less costs to sell, (ii) approximately $29 million was recorded to write-off the value of a promissory note received as consideration for thesale of three hospitals in 2017 where the buyer entered into bankruptcy proceedings, and (iii) approximately $216 million was recorded primarily to adjustthe carrying value of other long-lived assets at several underperforming hospitals that have ceased operations or where the Company is in discussions withpotential buyers for divestiture at a sales price that indicates a fair value below carrying value. Included in the carrying value of the hospital disposal groupsat December 31, 2018 is a net allocation of approximately $186 million of goodwill allocated from the hospital operations reporting unit goodwill based ona calculation of the disposal groups’ relative fair value compared to the total reporting unit. The Company will continue to evaluate the potential for furtherimpairment of the long-lived assets of underperforming hospitals as well as at hospitals where the Company is evaluating offers for potential sales. Based onsuch analysis, additional impairment charges may be recorded in the future.During the year ended December 31, 2017, the Company recorded a total combined impairment charge and loss on disposal of approximately$388 million to reduce the carrying value of certain hospitals that have been deemed held for sale based on the difference between the carrying value of thehospital disposal groups compared to estimated fair value less costs to sell. Included in the carrying value of the hospital disposal groups at December 31,2017 is a net allocation of approximately $7 million of goodwill allocated from the hospital operations reporting unit goodwill based on a calculation of thedisposal groups’ relative fair value compared to the total reporting unit. Additionally, the Company recorded an impairment charge of approximately$341 million during the three months ended December 31, 2017 for several underperforming hospitals as well as for certain hospitals deemed held for sale orwhere the Company has received offers or executed non-binding letters of intent to sell the hospital.Income Taxes. The Company accounts for income taxes under the asset and liability method, in which deferred income tax assets and liabilities arerecognized for the tax consequences of “temporary differences” by applying enacted statutory tax rates applicable to future years to differences between thefinancial statement carrying amounts and the tax bases of existing assets and liabilities. The effect on deferred taxes of a change in tax rates is recognized inthe consolidated statement of loss during the period in which the tax rate change becomes law.Comprehensive Loss. Comprehensive loss is the change in equity of a business enterprise during a period from transactions and other events andcircumstances from non-owner sources.Segment Reporting. A public company is required to report annual and interim financial and descriptive information about its reportable operatingsegments. Operating segments, as defined, are components of an enterprise about which separate financial information is available that is evaluated regularlyby the chief operating decision maker in deciding how to allocate resources and in assessing performance. Aggregation of similar operating segments into asingle reportable operating segment is permitted if the businesses have similar economic characteristics and meet the criteria established by U.S. GAAP. 103Table of ContentsCOMMUNITY HEALTH SYSTEMS, INC. AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued) The Company operated in two distinct operating segments during 2016, represented by the hospital operations (which includes the Company’s acute carehospitals and related healthcare entities that provide inpatient and outpatient healthcare services) and the home care agencies operations (which providein-home outpatient care). U.S. GAAP requires (1) that financial information be disclosed for operating segments that meet a 10% quantitative threshold of theconsolidated totals of net revenue, profit or loss, or total assets; and (2) that the individual reportable segments disclosed contribute at least 75% of totalconsolidated net revenue. Based on these measures, only the hospital operations segment meets the criteria as a separate reportable segment. Financialinformation for the home care agencies segment does not meet the quantitative thresholds and is therefore combined with corporate into the all otherreportable segment. Additionally, as discussed in Note 3, on December 31, 2016, the Company sold 80% of its ownership interest in the home care segment.Since January 1, 2017, the Company has operated in only one operating segment.Derivative Instruments and Hedging Activities. The Company records derivative instruments on the consolidated balance sheet as either an asset orliability measured at its fair value. Changes in a derivative’s fair value are recorded each period in earnings or other comprehensive income (“OCI”),depending on whether the derivative is designated and is effective as a hedged transaction, and on the type of hedge transaction. Changes in the fair value ofderivative instruments recorded to OCI are reclassified to earnings in the period affected by the underlying hedged item. Any portion of the fair value of aderivative instrument determined to be ineffective under the standard is recognized in current earnings.The Company has entered into several interest rate swap agreements. See Note 8 for further discussion about the swap transactions.New Accounting Pronouncements. In January 2016, the FASB issued Accounting Standards Update (“ASU”) 2016-01, which amends the measurement,presentation and disclosure requirements for equity investments, other than those accounted for under the equity method or that require consolidation of theinvestee. The ASU eliminates the classification of equity investments as available-for-sale with any changes in fair value of such investments recognized inother comprehensive income, and requires entities to measure equity investments at fair value, with any changes in fair value recognized in net income. ThisASU is effective for fiscal years beginning after December 15, 2017, with early adoption permitted. To adopt this ASU, companies must record a cumulative-effect adjustment to beginning retained earnings at the beginning of the period of adoption. The Company adopted this ASU on January 1, 2018, and theadoption of this ASU did not have a material impact on its consolidated results of operations or financial position.In February 2016, the FASB issued ASU 2016-02, which amends the accounting for leases, requiring lessees to recognize most leases on their balancesheet with a right-of-use asset and a corresponding lease liability. Leases will be classified as either finance or operating leases, which will impact the mannerand timing of expense recognition of such leases over the lease term. The ASU also modifies the lease classification criteria for lessors and eliminates some ofthe real estate leasing guidance previously applied for certain leasing transactions. This ASU is effective for fiscal years beginning after December 15, 2018,with early adoption permitted. The Company adopted this ASU on January 1, 2019. In July 2018, the FASB issued ASU 2018-11, which provides entitiesrelief from the transition requirements in ASU 2016-02 by allowing them to elect not to recast prior comparative periods. The Company elected this methodof transition upon adoption of this ASU. Because of the number of leases the Company utilizes to support its operations, the adoption of this ASU will have asignificant impact on the Company’s consolidated financial position, but is not expected to have a significant impact on the Company’s results ofoperations. The Company is substantially complete with its implementation efforts, pending final evaluation of the impact the adoption of this ASU willhave on its consolidated financial statements. The Company estimates that total right-of-use assets and related operating lease liabilities betweenapproximately $665 million and $715 million will be recorded on the consolidated balance sheet upon adoption. 104Table of ContentsCOMMUNITY HEALTH SYSTEMS, INC. AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued) The adoption of this ASU is also not expected to have an impact on the Company’s compliance with debt covenants.In March 2017, the FASB issued ASU 2017-07, which changes the presentation of the components of net periodic benefit cost for sponsors of definedbenefit plans for pensions. Under the changes in this ASU, the service cost component of net periodic benefit cost is reported in the same income statementline as other employee compensation costs arising from services during the reporting period. The other components of net periodic benefit cost are presentedseparately in a line item outside of operating income. This ASU is effective for fiscal years beginning after December 15, 2017, with early adoption permitted.The Company adopted this ASU on January 1, 2018, and the adoption of this ASU did not have a material impact on the Company’s consolidated financialposition or results of operations.In August 2017, the FASB issued ASU 2017-12, which amends hedge accounting recognition and disclosure requirements to improve transparency andsimplify the application of hedge accounting for certain hedging instruments. The amendments in this ASU that will have an impact on the Company includesimplification of the periodic hedge effectiveness assessment, elimination of the benchmark interest rate concept for interest rate swaps, and enhancement ofthe ability to use the critical-terms match method for its cash flow hedges of forecasted interest payments. This ASU is effective for fiscal years beginningafter December 15, 2018, with early adoption permitted. The Company early adopted this ASU on January 1, 2018, and the adoption of this ASU did not havea material impact on the Company’s consolidated financial position or results of operations.In February 2018, the FASB issued ASU 2018-02, which allows a reclassification from accumulated other comprehensive income to retained earnings forthe stranded tax effects in accumulated other comprehensive income resulting from the enactment of the comprehensive tax legislation commonly referred toas the Tax Cuts and Jobs Act (the “Tax Act”) and corresponding accounting treatment recorded in the fourth quarter of 2017. The ASU is effective for allentities for fiscal years beginning after December 15, 2018, and interim periods within those fiscal years. Early adoption of the amendments in this ASU ispermitted, including adoption in any interim period for reporting periods for which financial statements have not yet been issued. The Company earlyadopted this ASU on January 1, 2018, and the Company has elected to reclassify $6 million from accumulated other comprehensive loss to a decrease toaccumulated deficit for these stranded tax effects. The stranded tax effects included in this adjustment relate solely to the reduction of the federal corporatetax rate as a result of the Tax Act. The Company’s accounting policy on releasing the income tax effects of amounts from Accumulated other comprehensiveloss has been to apply such amounts on a portfolio basis.In August 2018, the FASB issued ASU 2018-15 to provide guidance on the accounting for implementation costs incurred in a cloud computingarrangement that is accounted for as a service contract. This ASU requires entities to account for such costs consistent with the guidance on capitalizing costsassociated with developing or obtaining internal-use software. The ASU is effective for all entities for fiscal years beginning after December 15, 2019, andinterim periods within those fiscal years, with early adoption permitted. The Company is currently evaluating the impact that adoption of this ASU will haveon its consolidated financial position and results of operations.2. ACCOUNTING FOR STOCK-BASED COMPENSATIONStock-based compensation awards have been granted under the Community Health Systems, Inc. Amended and Restated 2000 Stock Option and AwardPlan, amended and restated as of March 20, 2013 (the “2000 Plan”), and the Community Health Systems, Inc. Amended and Restated 2009 Stock Option andAward Plan, which was amended and restated as of March 14, 2018 and approved by the Company’s stockholders at the annual meeting of stockholders heldon May 15, 2018 (the “2009 Plan”). 105Table of ContentsCOMMUNITY HEALTH SYSTEMS, INC. AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued) The 2000 Plan allowed for the grant of incentive stock options intended to qualify under Section 422 of the Internal Revenue Code (the “IRC”), as well asstock options which do not so qualify, stock appreciation rights, restricted stock, restricted stock units, performance-based shares or units and other shareawards. Prior to being amended in 2009, the 2000 Plan also allowed for the grant of phantom stock. Persons eligible to receive grants under the 2000 Planinclude the Company’s directors, officers, employees and consultants. All options granted under the 2000 Plan have been “nonqualified” stock options fortax purposes. Generally, vesting of these granted options occurs in one-third increments on each of the first three anniversaries of the award date. Optionsgranted prior to 2005 have a 10-year contractual term, options granted in 2005 through 2007 have an eight-year contractual term and options granted in2008 through 2011 have a 10-year contractual term. The Company has not granted stock option awards under the 2000 Plan since 2011. Pursuant to theamendment and restatement of the 2000 Plan dated March 20, 2013, no further grants will be awarded under the 2000 Plan.The 2009 Plan provides for the grant of incentive stock options intended to qualify under Section 422 of the IRC and for the grant of stock options whichdo not so qualify, stock appreciation rights, restricted stock, restricted stock units, performance-based shares or units and other share awards. Persons eligibleto receive grants under the 2009 Plan include the Company’s directors, officers, employees and consultants. To date, all options granted under the 2009 Planhave been “nonqualified” stock options for tax purposes. Generally, vesting of these granted options occurs in one-third increments on each of the first threeanniversaries of the award date. Options granted in 2011 or later have a 10-year contractual term. As of December 31, 2018, 8,639,000 shares of unissuedcommon stock were reserved for future grants under the 2009 Plan.The exercise price of all options granted under the 2000 Plan and the 2009 Plan has been equal to the fair value of the Company’s common stock on theoption grant date.The following table reflects the impact of total compensation expense related to stock-based equity plans on the reported operating results for therespective periods (in millions): Year Ended December 31, 2018 2017 2016 Effect on loss from continuing operations beforeincome taxes $ (13) $ (24) $ (46) Effect on net loss $(10) $(16) $(27) At December 31, 2018, $12 million of unrecognized stock-based compensation expense related to outstanding unvested restricted stock and restrictedstock units (the terms of which are summarized below) was expected to be recognized over a weighted-average period of 21 months. There is no expense to berecognized related to stock options. There were no modifications to awards during the years ended December 31, 2018 and 2017. There were nomodifications to awards during the years ended December 31, 2018 and 2017, other than those required by the Employee Matters Agreement (“EMA”)entered into as part of the spinoff of Quorum Health Corporation (“QHC”), as further discussed below. 106Table of ContentsCOMMUNITY HEALTH SYSTEMS, INC. AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued) Options outstanding and exercisable under the 2000 Plan and the 2009 Plan as of December 31, 2018, and changes during each of the years in the three-year period prior to December 31, 2018, were as follows (in millions, except share and per share data): Shares Weighted-AverageExercise Price Weighted-AverageRemainingContractual Term AggregateIntrinsicValueas ofDecember 31,2018 Outstanding at December 31, 2015 1,232,158 $ 31.65 Granted - - Exercised - - Forfeited and cancelled (46,838) 27.44 Outstanding at December 31, 2016 1,185,320 28.12 Granted - - Exercised - - Forfeited and cancelled (69,653) 33.52 Outstanding at December 31, 2017 1,115,667 31.56 Granted - - Exercised - - Forfeited and cancelled (490,729) 32.01 Outstanding at December 31, 2018 624,938 $ 31.21 1.9 years $- Exercisable at December 31, 2018 624,938 $ 31.21 1.9 years $- The weighted-average exercise prices in the table above for periods prior to the April 29, 2016 spin-off of QHC reflect the historical prices at those dates.No stock options were granted during the years ended December 31, 2018, 2017 and 2016. The aggregate intrinsic value (calculated as the number ofin-the-money stock options multiplied by the difference between the Company’s closing stock price on the last trading day of the reporting period ($2.82)and the exercise price of the respective stock options) in the table above represents the amount that would have been received by the option holders had alloption holders exercised their options on December 31, 2018. This amount changes based on the market value of the Company’s common stock. There wereno options exercised during the years ended December 31, 2018, 2017 and 2016. The aggregate intrinsic value of options vested and expected to vestapproximates that of the outstanding options.In accordance with the terms of the EMA, on April 29, 2016, the exercise prices of all stock options outstanding as of that date were modified to reflect thereduction in the Company’s stock price that occurred as a result of the distribution of QHC to the Company’s stockholders in order to maintain a consistentintrinsic value before and following the QHC distribution. There were no other modifications to the term or number of the outstanding options. The Companyevaluated the fair value of the stock options immediately before and after the exercise price modification, and concluded that no incremental stockcompensation expense should be recorded.The Company has also awarded restricted stock under the 2000 Plan and the 2009 Plan to employees of certain subsidiaries. The restrictions on theseshares generally lapse in one-third increments on each of the first three anniversaries of the award date. Certain of the restricted stock awards granted to theCompany’s senior executives contain a performance objective that must be met in addition to any time-based vesting requirements. If the applicableperformance objective is not attained, the awards will be forfeited in their entirety. For such performance-based awards granted prior to 2017, once the targetperformance objective was attained, restrictions lapse in one-third increments on each of the first three anniversaries of the award date. For performance-based 107Table of ContentsCOMMUNITY HEALTH SYSTEMS, INC. AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued) awards granted since 2017, the performance objectives are measured cumulatively over a three-year period. With respect to these performance-based awardsgranted since 2017, if the applicable target performance objective is met at the end of three years, then the portion of the restricted stock award subject tosuch performance objective will vest in full. Additionally, for these awards, based on the level of achievement for the applicable performance objectivewithin the parameters specified in the award, the number of shares to be issued in connection with the vesting of the award will be adjusted to decrease orincrease the number of shares specified in the original award. Notwithstanding the above-mentioned performance objectives and vesting requirements, therestrictions with respect to restricted stock granted under the 2000 Plan and the 2009 Plan will lapse earlier in the event of death, disability or termination ofemployment by the Company for any reason other than for cause of the holder of the restricted stock, or change in control of the Company. Restricted stockawards subject to performance standards that have not yet been satisfied are not considered outstanding for purposes of determining earnings per share untilthe performance objectives have been satisfied.On April 29, 2016, the Company cancelled 106,005 restricted stock awards from the March 1, 2016 grant that were held by former employees whoseemployment with the Company terminated as the result of commencing employment with QHC in connection with the spin-off. This cancellation did notinclude the issuance of replacement awards by the Company. As a result, the Company recorded approximately $2 million of compensation expense relatedto the unrecognized stock compensation expense for those awards at the cancellation date. This expense is recorded as part of the costs related to the spin-offof QHC presented in other operating expenses on the accompanying consolidated statement of loss for the year ended December 31, 2016.Restricted stock outstanding under the 2000 Plan and the 2009 Plan as of December 31, 2018, and changes during each of the years in the three-yearperiod prior to December 31, 2018, were as follows: Shares Weighted-AverageGrantDate FairValue Unvested at December 31, 2015 2,845,579 $ 44.18 Granted 1,611,049 14.11 Vested (1,343,003) 43.39 Forfeited (144,340) 19.99 Unvested at December 31, 2016 2,969,285 29.39 Granted 1,502,000 9.10 Vested (1,586,855) 33.91 Forfeited (240,511) 18.20 Unvested at December 31, 2017 2,643,919 16.17 Granted 1,987,000 4.54 Vested (1,154,670) 23.22 Forfeited (167,342) 10.29 Unvested at December 31, 2018 3,308,907 7.00 Restricted stock units (“RSUs”) have been granted to the Company’s outside directors under the 2000 Plan and the 2009 Plan. On March 1, 2017, each ofthe Company’s then-serving outside directors who were expected to stand for re-election at the 2017 Annual Meeting of Stockholders received a grant underthe 2009 Plan of 18,498 RSUs. On March 1, 2018, each of the Company’s outside directors received a grant under the 2009 Plan of 37,118 RSUs. OnMarch 1, 2016, each of the Company’s outside directors received a grant under the 2009 Plan of 11,017 RSUs. On March 1, 2017, each of the Company’soutside directors received a grant under the 2009 Plan of 18,498 RSUs. Each of the 2016, 2017 and 2018 grants had a grant date fair value of approximately 108Table of ContentsCOMMUNITY HEALTH SYSTEMS, INC. AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued) $170,000. Vesting of these RSUs occurs in one-third increments on each of the first three anniversaries of the award date or upon the director’s earliercessation of service on the board, other than for cause.In connection with the spin-off of QHC, holders of outstanding RSUs were credited with a total of 22,021 incremental RSUs at a ratio calculated tomaintain a consistent intrinsic value before and following the QHC distribution. There were no other changes to the awards and the incremental RSUs willvest in accordance with the initial vesting period of the corresponding original award.RSUs outstanding under the 2000 Plan and the 2009 Plan as of December 31, 2018, and changes during each of the years in the three-year period prior toDecember 31, 2018, were as follows: Shares Weighted-Average GrantDate Fair Value Unvested at December 31, 2015 42,678 $44.59 Granted 99,140 16.90 Vested (21,432) 43.87 Forfeited - - Unvested at December 31, 2016 120,386 22.06 Granted 110,988 9.19 Vested (59,296) 24.90 Forfeited - - Unvested at December 31, 2017 172,078 12.78 Granted 296,944 4.58 Vested (71,116) 15.51 Forfeited - - Unvested at December 31, 2018 397,906 6.17 3. ACQUISITIONS AND DIVESTITURESAcquisitionsThe Company accounts for all transactions that represent business combinations using the acquisition method of accounting, where the identifiable assetsacquired, the liabilities assumed and any noncontrolling interest in the acquired entity are recognized and measured at their fair values on the date theCompany obtains control in the acquiree. Such fair values that are not finalized for reporting periods following the acquisition date are estimated andrecorded as provisional amounts. Adjustments to these provisional amounts during the measurement period (defined as the date through which allinformation required to identify and measure the consideration transferred, the assets acquired, the liabilities assumed and any noncontrolling interests hasbeen obtained, limited to one year from the acquisition date) are recorded when identified. Goodwill is determined as the excess of the fair value of theconsideration conveyed in the acquisition over the fair value of the net assets acquired.Acquisition and integration expenses related to prospective and closed acquisitions included in other operating expenses on the consolidated statementsof loss were $3 million, $2 million and $5 million during the years ended December 31, 2018, 2017 and 2016, respectively.On April 1, 2016, one or more subsidiaries of the Company completed the acquisition of an 80% interest in Physicians’ Specialty Hospital (20 licensedbeds), a Medicare-certified specialty surgical hospital in Fayetteville, 109Table of ContentsCOMMUNITY HEALTH SYSTEMS, INC. AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued) Arkansas. The total cash consideration paid for the 80% ownership interest in this joint venture was approximately $12 million, with additionalconsideration of $2 million assumed in liabilities, for a total consideration of $14 million. The value of the noncontrolling interest at acquisition was$2 million. Based upon the Company’s final purchase price allocation relating to this acquisition as of December 31, 2016, approximately $12 million ofgoodwill has been recorded.On March 1, 2016, one or more subsidiaries of the Company completed the acquisition of an 80% ownership interest in a joint venture entity with IndianaUniversity Health that includes substantially all of the assets of IU Health La Porte Hospital (“La Porte”) in La Porte, Indiana (227 licensed beds) and IUHealth Starke Hospital (“Starke”) in Knox, Indiana (50 licensed beds), and affiliated outpatient centers and physician practices. The total cash considerationpaid for the 80% ownership interest in this joint venture was approximately $96 million with additional consideration of $8 million assumed in liabilities, fora total consideration of $104 million. The value of the noncontrolling interest at acquisition was $25 million. Based upon the Company’s final purchaseprice allocation relating to this acquisition as of December 31, 2016, approximately $45 million of goodwill has been recorded. On August 15, 2018, one ormore subsidiaries of the Company completed the acquisition of the 20% ownership interest held by the noncontrolling interest owner for approximately$20 million. The Company owns 100% of the La Porte and Starke hospitals as a result of this transaction.There were no hospital acquisitions in either the year ended December 31, 2018 or December 31, 2017. The table below summarizes the allocations of thepurchase price (including assumed liabilities) for the above hospital acquisition transactions in 2016 (in millions): 2016 Current assets $7 Property and equipment 69 Goodwill 57 Intangible assets 10 Other long-term assets 3 Liabilities (10) Noncontrolling interests (28) Total identifiable net assets $ 108 The operating results of the foregoing transactions have been included in the accompanying consolidated statements of loss from their respective dates ofacquisition, including net operating revenues of $214 million for the year ended December 31, 2016, from hospital acquisitions that closed during that year.Other AcquisitionsDuring the years ended December 31, 2018, 2017 and 2016, one or more subsidiaries of the Company paid approximately $26 million, $6 million and$16 million, respectively, to acquire the operating assets and related businesses of certain physician practices, clinics and other ancillary businesses thatoperate within the communities served by the Company’s affiliated hospitals. In connection with these acquisitions, during the year ended December 31,2018, the Company allocated approximately $10 million of the consideration paid to property and equipment and net working capital and the remainder,approximately $22 million consisting of intangible assets that do not qualify for separate recognition, to goodwill. The value of noncontrolling interestsacquired in these acquisitions was $6 million. During the year ended December 31, 2017, the Company allocated approximately $2 million of theconsideration paid to property and equipment and net working capital and the remainder, approximately $4 million consisting of intangible assets that donot qualify for separate recognition, to goodwill. No value was allocated to noncontrolling interests recorded in these acquisitions. During 2016, the 110Table of ContentsCOMMUNITY HEALTH SYSTEMS, INC. AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued) Company allocated approximately $8 million of the consideration paid to property and equipment and net working capital and the remainder, approximately$14 million consisting of intangible assets that do not qualify for separate recognition, to goodwill. The value of noncontrolling interests acquired in theseacquisitions was $6 million.DivestituresIn April 2014, FASB issued ASU 2014-08, which changed the requirements for reporting discontinued operations. Under this accounting standard, adiscontinued operation is a disposal that represents a strategic shift that has (or will have) a major effect on an entity’s operations and financial results.Additional disclosures are required for significant components of the entity that are disposed of or are held for sale but do not qualify as discontinuedoperations. This ASU was adopted on January 1, 2015 and is required to be applied on a prospective basis for disposals or components initially classified asheld for sale after adoption. As a result, the following divestitures occurring subsequent to the date of adoption are included in continuing operations for theyears ended December 31, 2018, 2017 and 2016. Additionally, the impact of the hospitals and other assets spun off to QHC are discussed in Note 4 below.The following table provides a summary of hospitals included in continuing operations that the Company divested during the years ended December 31,2018, 2017, and 2016: Hospital Buyer City, State LicensedBeds Effective Date2018 Divestitures: Sparks Regional Medical Center Baptist Health Fort Smith, AR 492 November 1, 2018Sparks Medical Center – Van Buren Baptist Health Van Buren, AR 103 November 1, 2018AllianceHealth Deaconess INTEGRIS Health Oklahoma City, OK 238 October 1, 2018Munroe Regional Medical Center Adventist Health System Ocala, FL 425 August 1, 2018Tennova Healthcare – Dyersburg Regional West Tennessee Healthcare Dyersburg, TN 225 June 1, 2018Tennova Healthcare – Regional Jackson West Tennessee Healthcare Jackson, TN 150 June 1, 2018Tennova Healthcare – Volunteer Martin West Tennessee Healthcare Martin, TN 100 June 1, 2018Williamson Memorial Hospital Mingo Health Partners, LLC Williamson, WV 76 June 1, 2018Byrd Regional Hospital Allegiance Health Management Leesville, LA 60 June 1, 2018Tennova Healthcare – Jamestown Rennova Health, Inc. Jamestown, TN 85 June 1, 2018Bayfront Health Dade City Adventist Health System Dade City, FL 120 April 1, 20182017 Divestitures: Highlands Regional Medical Center HCA Holdings, Inc. (“HCA”) Sebring, FL 126 November 1, 2017Merit Health Northwest Mississippi Curae Health, Inc. Clarksdale, MS 181 November 1, 2017 111Table of ContentsCOMMUNITY HEALTH SYSTEMS, INC. AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued) Hospital Buyer City, State LicensedBeds Effective DateWeatherford Regional Medical Center HCA Weatherford, TX 103 October 1, 2017Brandywine Hospital Reading Health System Coatesville, PA 169 October 1, 2017Chestnut Hill Hospital Reading Health System Philadelphia, PA 148 October 1, 2017Jennersville Hospital Reading Health System West Grove, PA 63 October 1, 2017Phoenixville Hospital Reading Health System Phoenixville, PA 151 October 1, 2017Pottstown Memorial Medical Center Reading Health System Pottstown, PA 232 October 1, 2017Yakima Regional Medical and Cardiac Center Regional Health Yakima, WA 214 September 1, 2017Toppenish Community Hospital Regional Health Toppenish, WA 63 September 1, 2017Memorial Hospital of York PinnacleHealth System York, PA 100 July 1, 2017Lancaster Regional Medical Center PinnacleHealth System Lancaster, PA 214 July 1, 2017Heart of Lancaster Regional Medical Center PinnacleHealth System Lititz, PA 148 July 1, 2017Carlisle Regional Medical Center PinnacleHealth System Carlisle, PA 165 July 1, 2017Tomball Regional Medical Center HCA Tomball, TX 350 July 1, 2017South Texas Regional Medical Center HCA Jourdanton, TX 67 July 1, 2017Deaconess Hospital MultiCare Health System Spokane, WA 388 July 1, 2017Valley Hospital MultiCare Health System Spokane Valley, WA 123 July 1, 2017Lake Area Medical Center CHRISTUS Health Lake Charles, LA 88 June 30, 2017Easton Hospital Steward Health, Inc. Easton, PA 196 May 1, 2017Sharon Regional Health System Steward Health, Inc. Sharon, PA 258 May 1, 2017Northside Medical Center Steward Health, Inc. Youngstown, OH 355 May 1, 2017Trumbull Memorial Hospital Steward Health, Inc. Warren, OH 311 May 1, 2017Hillside Rehabilitation Hospital Steward Health, Inc. Warren, OH 69 May 1, 2017Wuesthoff Health System – Rockledge Steward Health, Inc. Rockledge, FL 298 May 1, 2017Wuesthoff Health System – Melbourne Steward Health, Inc. Melbourne, FL 119 May 1, 2017Sebastian River Medical Center Steward Health, Inc. Sebastian, FL 154 May 1, 2017Stringfellow Memorial Hospital The Health Care Authority Anniston, AL 125 May 1, 2017 of the City of Anniston Merit Health Gilmore Memorial Curae Health, Inc. Amory, MS 95 May 1, 2017Merit Health Batesville Curae Health, Inc. Batesville, MS 112 May 1, 2017 112Table of ContentsCOMMUNITY HEALTH SYSTEMS, INC. AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued) Hospital Buyer City, State LicensedBeds Effective Date2016 Divestitures: Alliance Health Blackwell * The Blackwell Hospital TrustAuthority Blackwell, OK 53 September 3, 2016Lehigh Regional Medical Center Prime Healthcare Services, Inc.(“Prime”) Lehigh Acres, FL 88 February 1, 2016Bartow Regional Medical Center BayCare Health Systems, Inc. Bartow, FL 72 January 1, 2016 *Divestiture relates to termination of a prior lease for the hospital.On December 31, 2016, one or more subsidiaries of the Company sold an 80% majority ownership interest in the home care division to a subsidiary ofAlmost Family, Inc. for $128 million. In connection with the divestiture of a controlling interest in the home care division, the Company recorded a gain ofapproximately $91 million during the year ended December 31, 2016.On May 1, 2017, one or more subsidiaries of the Company sold AllianceHealth Pryor (52 licensed beds) in Pryor, Oklahoma, and its associated assets toArdent Health Services Inc. for approximately $1 million in cash. This hospital has been reported in the consolidated statements of loss in discontinuedoperations.Net operating revenues and loss from discontinued operations for the respective periods are as follows (in millions): Year Ended December 31, 2017 2016 Net operating revenues $79 $99 Loss from operations of entities sold or held for sale before income taxes (10) (11) Impairment of hospitals sold or held for sale (8) (12) Loss on sale, net (1) - Loss from discontinued operations, before taxes (19) (23) Income tax benefit (7) (8) Loss from discontinued operations, net of taxes $(12) $(15) As part of its ongoing evaluation of the fair value of the hospitals it is marketing for sale, the Company recorded an impairment charge on the carryingvalue of the long-lived assets at these hospitals in discontinued operations of $6 million and $8 million, net of tax, for the years ended December 31, 2017and 2016, respectively. There was no impairment charge recorded for the year ended December 31, 2018. Interest expense was allocated to discontinuedoperations based on sale proceeds available for debt repayment.The following table discloses amounts included in the consolidated balance sheet for the hospitals classified as held for sale as of December 31, 2018 and2017 (in millions): December 31, 2018 2017 Other current assets $21 $8 Other assets, net 154 12 Accrued liabilities 44 2 113Table of ContentsCOMMUNITY HEALTH SYSTEMS, INC. AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued) Financial and statistical data reported in this Annual Report on Form 10-K (“Form 10-K”) includes operating results for hospitals held for sale atDecember 31, 2018 and for the 41 hospitals that were divested through 2018 and 2017 through the effective date of each respective transaction. Summaryfinancial results of these hospitals included in continuing operations for the periods included in the accompanying consolidated statements of loss are asfollows: Year Ended December 31, 2018 2017 2016 Loss from operations before income taxes $(488) $(701) $(492) Less: Loss attributable to noncontrolling interests - (2) - Loss from operations before income taxes attributable to CommunityHealth Systems, Inc. stockholders $(488) $(699) $(492) The operating results for these held for sale or divested hospitals included impairment charges of approximately $415 million, $368 million and$463 million that were allocated to the divestitures during the years ended December 31, 2018, 2017 and 2016, respectively.Other Hospital ClosuresDuring the three months ended December 31, 2018, the Company completed the planned closure of Tennova – Physicians Regional Medical Center inKnoxville, Tennessee and Tennova – Lakeway Regional Medical Center in Morristown, Tennessee. The Company recorded an impairment charge ofapproximately $27 million during the three months ended December 31, 2018, to adjust the fair value of the supplies, inventory and long-lived assets ofthese hospitals, including property and equipment and capitalized software costs, based on their estimated fair value and future utilization.During the three months ended June 30, 2018, the Company completed the planned closure of Twin Rivers Regional Medical Center in Kennett,Missouri. The Company recorded an impairment charge of approximately $4 million during the three months ended June 30, 2018, to adjust the fair value ofthe supplies, inventory and long-lived assets of this hospital, including property and equipment and capitalized software costs, based on their estimated fairvalue and future utilization.During the three months ended March 31, 2016, the Company announced the planned closure of McNairy Regional Hospital in Selmer, Tennessee. TheCompany recorded an impairment charge of approximately $7 million during the three months ended March 31, 2016, to adjust the fair value of the suppliesinventory and long-lived assets of this hospital, including property and equipment and capitalized software costs, based on their estimated fair value andfuture utilization. McNairy Regional Hospital closed on May 19, 2016. No additional impairment was recorded related to the closure of this facility.4. SPIN-OFF OF QUORUM HEALTH CORPORATIONOn April 29, 2016, the Company completed the spin-off of 38 hospitals and Quorum Health Resources, LLC into Quorum Health Corporation, anindependent, publicly traded corporation. The transaction was structured to be generally tax free to the Company and its stockholders. The Companydistributed, on a pro rata basis, all of the shares of QHC common stock to the Company’s stockholders of record as of April 22, 2016. These stockholders ofrecord as of April 22, 2016 received a distribution of one share of QHC common stock for every four shares of Company common stock held as of the recorddate plus cash in lieu of any fractional shares. In recognition of the spin-off, the Company recorded a non-cash dividend of approximately $713 millionduring the 114Table of ContentsCOMMUNITY HEALTH SYSTEMS, INC. AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued) year ended December 31, 2016, representing the net assets of QHC distributed to the Company’s stockholders. Immediately following the completion of thespin-off, the Company’s stockholders owned 100% of the outstanding shares of QHC common stock. Following the spin-off, QHC became an independentpublic company with its common stock listed for trading under the symbol “QHC” on the New York Stock Exchange.In connection with the spin-off, the Company and QHC entered into a separation and distribution agreement as well as certain ancillary agreements onApril 29, 2016. These agreements allocate between the Company and QHC the various assets, employees, liabilities and obligations (including investments,property and employee benefits and tax-related assets and liabilities) that comprise the separate companies and govern certain relationships between, andactivities of, the Company and QHC for a period of time after the spin-off.The results of operations for QHC through the date of the spin-off are presented in continuing operations in the consolidated statements of loss as theCompany has determined that the spin-off of QHC does not meet the criteria as discontinued operations under ASU 2014-08.Financial and statistical data reported in this Form 10-K include QHC operating results through April 29, 2016. Summary financial results of QHC for theperiods included in the accompanying consolidated statements of loss are as follows: Year EndedDecember 31,2016 Loss from operations before income taxes $(12) Less: Income attributable to noncontrolling interests (1) Loss from operations before income taxes attributable to Community Health Systems, Inc. stockholders $(13) 5. GOODWILL AND OTHER INTANGIBLE ASSETSGoodwillThe changes in the carrying amount of goodwill for the years ended December 31, 2018 and 2017 are as follows (in millions): Balance, beginning of year 2018 2017 Goodwill $7,537 $7,916 Accumulated impairment losses (2,814) (1,395) 4,723 6,521 Goodwill acquired as part of acquisitions during current year 22 5 Consideration and purchase price allocation adjustments for prior year’s acquisitions andother adjustments - (27) Goodwill allocated to hospitals held for sale (186) (357) Impairment of goodwill - (1,419) Balance, end of year Goodwill 7,373 7,537 Accumulated impairment losses (2,814) (2,814) $4,559 $4,723 Goodwill is allocated to each identified reporting unit, which is defined as an operating segment or one level below the operating segment (referred to as acomponent of the entity). Management has determined that the 115Table of ContentsCOMMUNITY HEALTH SYSTEMS, INC. AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued) Company’s operating segments meet the criteria to be classified as reporting units. At December 31, 2018, after giving effect to 2018 divestiture activity, theCompany had approximately $4.6 billion of goodwill recorded.Goodwill is evaluated for impairment annually and when an event occurs or circumstances change that, more likely than not, reduce the fair value of thereporting unit below its carrying value. During 2017, the Company adopted ASU 2017-04, which allows a company to record a goodwill impairment whenthe reporting unit’s carrying value exceeds the fair value determined in step one. In 2017, consistent with prior years, the Company performed its annualgoodwill evaluation during the fourth quarter as of September 30, 2017, and then an updated evaluation as of November 30, 2017 due to the identification ofcertain impairment indicators. With the elimination of the time-intensive step two calculation to determine the implied value of goodwill, the Company hasconsidered the additional benefits of performing the annual goodwill evaluation later in the fourth quarter to coincide with the timing of the next fiscal year’sbudgeting and financial projection process. Based on these considerations, the Company elected to change the annual goodwill impairment measurementdate to October 31 beginning in 2018. The Company performed its annual goodwill impairment evaluation during the fourth quarter of 2018 using theOctober 31, 2018 measurement date, which evaluation indicated no impairment. The next annual goodwill evaluation will be performed during the fourthquarter of 2019 with an October 31, 2019 measurement date, or sooner if the Company identifies certain indicators of impairment.The Company estimates the fair value of the related reporting units using both a discounted cash flow model as well as a market multiple model. The cashflow forecasts are adjusted by an appropriate discount rate based on the Company’s estimate of a market participant’s weighted-average cost of capital. Thesemodels are both based on the Company’s best estimate of future revenues and operating costs and are reconciled to the Company’s consolidated marketcapitalization, with consideration of the amount a potential acquirer would be required to pay, in the form of a control premium, in order to gain sufficientownership to set policies, direct operations and control management decisions.As noted above, during the three months ended December 31, 2017, the Company identified certain indicators of impairment occurring following itsannual goodwill evaluation that required an interim goodwill impairment evaluation, which was performed as of November 30, 2017. Those indicators wereprimarily a further decline in the Company’s market capitalization and fair value of the Company’s long-term debt during November 2017. The Companyperformed an estimated calculation of fair value in step one of the impairment test at November 30, 2017, which indicated that the carrying value of thehospital operations reporting unit exceeded its fair value. As a result of this evaluation and the early adoption of ASU 2017-04, the Company recorded anon-cash impairment charge of $1.419 billion to goodwill during the three months ended December 31, 2017.The reduction in the Company’s fair value and the resulting goodwill impairment charges recorded during 2016 and 2017 reduced the carrying value ofthe Company’s hospital operations reporting unit to an amount equal to the Company’s estimated fair value. This increases the risk that future declines in fairvalue could result in goodwill impairment. The determination of fair value in step one of the Company’s goodwill impairment analysis is based on anestimate of fair value for the hospital operations reporting unit utilizing known and estimated inputs at the evaluation date. Some of those inputs include, butare not limited to, the most recent price of the Company’s common stock or fair value of the Company’s long-term debt, estimates of future revenue andexpense growth, estimated market multiples, expected capital expenditures, income tax rates, and costs of invested capital. Future estimates of fair valuecould be adversely affected if the actual outcome of one or more of these assumptions changes materially in the future, including further decline in theCompany’s stock price or fair value of long-term debt, lower than expected hospital volumes, higher market interest rates or increased operating costs. Suchchanges impacting the calculation of fair value could result in a material impairment charge in the future. 116Table of ContentsCOMMUNITY HEALTH SYSTEMS, INC. AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued) The determination of fair value of the Company’s hospital operations reporting unit as part of its goodwill impairment measurement represents a Level 3fair value measurement in the fair value hierarchy due to its use of internal projections and unobservable measurement inputs.These impairment charges do not have an impact on the calculation of the Company’s financial covenants under the Company’s Credit Facility.Intangible AssetsNo intangible assets other than goodwill were acquired during the years ended December 31, 2018 and 2017. The gross carrying amount of theCompany’s other intangible assets subject to amortization was $1 million and $18 million at December 31, 2018 and 2017, respectively, and the net carryingamount was less than $1 million and $10 million at December 31, 2018 and 2017, respectively. The carrying amount of the Company’s other intangibleassets not subject to amortization was $67 million and $79 million at December 31, 2018 and 2017, respectively. Other intangible assets are included inother assets, net on the Company’s consolidated balance sheets. Substantially all of the Company’s intangible assets are contract-based intangible assetsrelated to operating licenses, management contracts, or non-compete agreements entered into in connection with prior acquisitions.The weighted-average remaining amortization period for the intangible assets subject to amortization is approximately two years. There are no expectedresidual values related to these intangible assets. Amortization expense on these intangible assets was $3 million, $4 million and $14 million during theyears ended December 31, 2018, 2017 and 2016, respectively. Amortization expense on intangible assets is estimated to be less than $1 million in 2019,2020 and 2021.The gross carrying amount of capitalized software for internal use was approximately $1.2 billion for both of the years ended December 31, 2018 and2017, and the net carrying amount was approximately $355 million and $416 million at December 31, 2018 and 2017, respectively. The estimatedamortization period for capitalized internal-use software is generally three years, except for capitalized costs related to significant system conversions, forwhich the estimated amortization period is generally eight to ten years. There is no expected residual value for capitalized internal-use software. AtDecember 31, 2018, there were approximately $40 million of capitalized costs for internal-use software that is currently in the development stage and willbegin amortization once the software project is complete and ready for its intended use. Amortization expense on capitalized internal-use software was$140 million, $178 million and $201 million during the years ended December 31, 2018, 2017 and 2016, respectively. Amortization expense on capitalizedinternal-use software is estimated to be $138 million in 2019, $84 million in 2020, $57 million in 2021, $34 million in 2022, $26 million in 2023 and$16 million thereafter. 117Table of ContentsCOMMUNITY HEALTH SYSTEMS, INC. AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued) 6. INCOME TAXESThe benefit from income taxes for loss from continuing operations consists of the following (in millions): Year Ended December 31, 2018 2017 2016 Current: Federal $1 $- $5 State (9) 5 7 (8) 5 12 Deferred: Federal 50 (485) (88) State (53) 31 (28) (3) (454) (116) Total benefit from income taxes for loss from continuing operations $(11) $(449) $(104) The following table reconciles the differences between the statutory federal income tax rate and the effective tax rate (dollars in millions): Year Ended December 31, 2018 2017 2016 Amount % Amount % Amount % Benefit from income taxes at statutory federal rate $(150) 21.0 % $(991) 35.0 % $(600) 35.0 % State income taxes, net of federal income tax benefit (114) 16.0 (10) 0.3 (1) 0.1 Net income attributable to noncontrolling interests (18) 2.5 (22) 0.8 (33) 1.9 Change in valuation allowance 212 (29.7) 26 (0.9) (1) 0.1 Change in uncertain tax position 9 (1.3) - - - - Federal rate change - - 32 (1.1) - - Federal and state tax credits (17) 2.4 (5) 0.1 (6) 0.3 Nondeductible transaction costs - - - - 3 (0.2) Nondeductible goodwill 30 (4.2) 504 (17.8) 536 (31.2) Nondeductible settlements 22 (3.1) - - - - Other 15 (2.1) 17 (0.6) (2) 0.1 Benefit from income taxes and effective tax rate for loss fromcontinuing operations $(11) 1.5 % $(449) 15.8 % $(104) 6.1 % The Company’s effective tax rates were 1.5%, 15.8% and 6.1% for the years ended December 31, 2018, 2017 and 2016, respectively. Including the netincome attributable to noncontrolling interests, which is not tax effected in the consolidated statement of loss, the effective tax rate for the years endedDecember 31, 2018, 2017 and 2016 would have been 1.4%, 15.5% and 5.7% respectively. The decrease in the Company’s effective tax rate for the yearended December 31, 2018, when compared to the year ended December 31, 2017, was primarily due to 118Table of ContentsCOMMUNITY HEALTH SYSTEMS, INC. AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued) the increase in valuation allowance recognized on IRC Section 163(j) interest carryforwards partially offset by the release of certain state valuationallowances on net operating loss carryforwards in certain jurisdictions. The increase in the Company’s effective tax rate for the year ended December 31,2017, when compared to the year ended December 31, 2016, was primarily due to the difference between the non-deductible nature of certain goodwillwritten off in those years.Deferred income taxes are based on the estimated future tax effects of differences between the financial statement and tax bases of assets and liabilitiesunder the provisions of the enacted tax laws. Deferred income taxes as of December 31, 2018 and 2017 consist of (in millions): December 31, 2018 2017 Assets Liabilities Assets Liabilities Net operating loss and credit carryforwards $743 $- $583 $- Property and equipment - 237 - 263 Self-insurance liabilities 69 - 78 - Prepaid expenses - 27 - 30 Intangibles - 134 - 128 Investments in unconsolidated affiliates - 55 - 54 Other liabilities - 14 - 16 Long-term debt and interest 84 - 6 - Accounts receivable 58 - 144 - Section 163(j) interest limitation 144 - - - Accrued vacation 26 - 27 - Other comprehensive income 4 - 9 - Stock-based compensation 4 - 10 - Deferred compensation 64 - 77 - Other 15 - 89 - 1,211 467 1,023 491 Valuation allowance (701) - (489) - Total deferred income taxes $510 $467 $534 $491 The Company believes that the net deferred tax assets will ultimately be realized, except as noted below. Its conclusion is based on its estimate of futuretaxable income and the expected timing of temporary difference reversals. The Company has gross federal net operating loss carryforwards of approximately$825 million and state net operating loss carryforwards of approximately $7.6 billion, which expire from 2019 to 2038. The Company’s tax affected federaland state net operating loss and credit carryforwards are approximately $202 million and $541 million, respectively. A valuation allowance of approximately$504 million has been recognized for federal and state net operating loss carryforwards, state credit carryforwards and state deferred tax assets that theCompany does not expect to be able to utilize prior to the expiration of the carryforward period. The Company has federal and state deferred tax assets of$144 million relating to interest limitations under IRC Section 163(j) and $101 million related to certain deferred tax assets expected to be deductible asinterest expense and limited in future periods. The Company has recorded a valuation allowance of $196 million relative to these deferred tax assets as ofDecember 31, 2018. The Company also has unrecognized deferred tax assets that are included in other comprehensive income. If recognized, additional statenet operating losses will be created which the Company does not expect to utilize prior to the expiration of the carryforward period. A valuation allowance ofapproximately $1 million has been recognized for those items. With respect to the deferred tax liability pertaining to intangibles, as included above,goodwill purchased in connection with certain 119Table of ContentsCOMMUNITY HEALTH SYSTEMS, INC. AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued) of the Company’s business acquisitions is amortizable for income tax reporting purposes. However, for financial reporting purposes, there is nocorresponding amortization allowed with respect to such purchased goodwill.The valuation allowance for losses incurred in certain state jurisdictions where the Company concluded associated deferred tax assets would not berealized increased by $17 million and $104 million during the years ended December 31, 2018 and 2017, respectively.SAB 118 disclosureOn December 22, 2017, the Tax Act was enacted into law, which significantly changes existing U.S. tax law and included many provisions applicable tous. The Tax Act made broad and complex changes to the U.S. tax code, including a permanent reduction in the U.S. federal corporate tax rate from 35% to21% effective as of January 1, 2018 (“Rate Reduction”).The Tax Act also revised other aspects of the U.S. tax code, which included, but were not limited to (1) creating a new limitation on deductible interestexpense; (2) changing rules related to uses and limitations of net operating loss carryforwards: and (3) modifying the rules governing the deductibility ofcertain executive compensation.On December 22, 2017, the SEC staff issued Staff Accounting Bulletin No. 118 (“SAB 118”) to address the application of U.S. GAAP in situations when aregistrant does not have the necessary information available, prepared, or analyzed (including computations) in reasonable detail to complete the accountingfor certain income tax effects of the Tax Act. At December 31, 2017, the Company recorded a discrete net tax expense of $32 million primarily related toprovisional amounts under SAB 118 for the remeasurement of U.S. deferred tax assets and liabilities due to Rate Reduction. The Company finalized theaccounting analysis based on the guidance, interpretations, and data available as of November 30, 2018. As a result of certain state conformity to the newfederal limitation on deductibility of interest expense, the Company has determined such changes impact the recorded state valuation allowances in thosejurisdictions. During the three months ended December 31, 2018, the Company recorded an $18 million tax benefit from the release of certain state valuationallowances, which impacted the effective tax rate for the year ended December 31, 2018 by approximately 2.5%.The total amount of unrecognized benefit that would affect the effective tax rate, if recognized, was approximately $7 million as of December 31, 2018. Atotal of approximately $4 million of interest and penalties is included in the amount of the liability for uncertain tax positions at December 31, 2018. It is theCompany’s policy to recognize interest and penalties related to unrecognized benefits in its consolidated statements of loss as income tax expense.It is possible the amount of unrecognized tax benefit could change in the next 12 months as a result of a lapse of the statute of limitations and settlementswith taxing authorities; however, the Company does not anticipate the change will have a material impact on the Company’s consolidated results ofoperations or consolidated financial position. 120Table of ContentsCOMMUNITY HEALTH SYSTEMS, INC. AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued) The following is a tabular reconciliation of the total amount of unrecognized tax benefit for the years ended December 31, 2018, 2017 and 2016 (inmillions): Year Ended December 31, 2018 2017 2016 Unrecognized tax benefit, beginning of year $18 $18 $15 Gross increases — tax positions in current period 11 - 4 Lapse of statute of limitations - - (1) Unrecognized tax benefit, end of year $29 $18 $18 The Company’s federal income tax returns for the 2009 and 2010 tax years have been settled with the Internal Revenue Service. The results of theseexaminations were not material to the Company’s consolidated results of operations or consolidated financial position. The Company’s federal income taxreturns for the 2014 and 2015 tax years remain under examination by the Internal Revenue Service. The Company believes the results of these examinationswill not be material to its consolidated results of operations or consolidated financial position. The Company has extended the federal statute of limitationsthrough June 30, 2019 for Community Health Systems, Inc. for the tax periods ended December 31, 2007, 2008, 2009 and 2010, and through December 31,2019 for the tax periods ended December 31, 2014 and 2015.Cash paid for income taxes, net of refunds received, resulted in a net refund of $19 million and $16 million during the years ended December 31, 2018 and2016, respectively, and net cash paid of $4 million during the year ended December 31, 2017. 121Table of ContentsCOMMUNITY HEALTH SYSTEMS, INC. AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued) 7. LONG-TERM DEBTLong-term debt, net of unamortized debt issuance costs and discounts or premiums, consists of the following (in millions): December 31, 2018 2017 Credit Facility: Term G Loan $- $1,037 Term H Loan 1,622 1,903 Revolving Credit Facility - - 8% Senior Notes due 2019 155 1,925 71⁄8% Senior Notes due 2020 121 1,200 51⁄8% Senior Secured Notes due 2021 1,000 1,000 67⁄8% Senior Notes due 2022 2,632 3,000 61⁄4% Senior Secured Notes due 2023 3,100 3,100 85⁄8% Secured Notes due 2024 1,033 - Junior-Priority Secured Notes due 2023 1,770 - Junior-Priority Secured Notes due 2024 1,355 - Receivables Facility - 565 ABL Facility 698 - Capital lease obligations 231 304 Other 43 48 Less: Unamortized deferred debt issuance costs and note premium (164) (169) Total debt 13,596 13,913 Less: Current maturities (204) (33) Total long-term debt $13,392 $13,880 Credit FacilityThe Company’s wholly-owned subsidiary, CHS/Community Health Systems, Inc. (“CHS”), has senior secured financing under a credit facility with asyndicate of financial institutions led by Credit Suisse, as administrative agent and collateral agent (the “Credit Facility”), which at December 31, 2017included (i) a revolving credit facility with commitments through January 27, 2019 of approximately $929 million, of which a $739 million portionrepresented extended commitments maturing January 27, 2021 (the “Revolving Facility”), (ii) a Term G facility due 2019 (the “Term G Facility”), and (iii) aTerm H facility due 2021 (the “Term H Facility). The Revolving Facility includes a subfacility for letters of credit.The loans under the Credit Facility bear interest on the outstanding unpaid principal amount at a rate equal to an applicable percentage plus, at CHS’option, either (a) an Alternate Base Rate (as defined) determined by reference to the greater of (1) the Prime Rate (as defined) announced by Credit Suisse or(2) the NYFRB Rate (as defined) plus 0.50% or (3) the adjusted London Interbank Offered Rate (“LIBOR”) on such day for a three-month interest periodcommencing on the second business day after such day plus 1% or (b) LIBOR. In addition, the margin in respect of the Revolving Facility will be subject toadjustment determined by reference to a leverage-based pricing grid. Based on the Company’s current leverage, loans in respect of the Revolving Facilitycurrently accrue interest at a rate per annum equal to LIBOR plus 2.75%, in the case of LIBOR borrowings, and Alternate Base Rate plus 1.75%, in the case ofAlternate Base Rate borrowings. Prior to the Credit Facility amendment discussed below, the Term G Loan and Term H Loan accrued interest at a rate perannum equal to 122Table of ContentsCOMMUNITY HEALTH SYSTEMS, INC. AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued) LIBOR plus 2.75% and 3.00%, respectively, in the case of LIBOR borrowings, and Alternate Base Rate plus 1.75% and 2.00%, respectively, in the case ofAlternate Base Rate borrowings. The Term G Loan and the Term H Loan are subject to a 1.00% LIBOR floor and a 2.00% Alternate Base Rate floor.The term loan facility must be prepaid in an amount equal to (1) 100% of the net cash proceeds of certain asset sales and dispositions by the Company andits subsidiaries, subject to certain exceptions and reinvestment rights (as further described below), (2) 100% of the net cash proceeds of issuances of certaindebt obligations or receivables-based financing by the Company and its subsidiaries, subject to certain exceptions, and (3) 75%, subject to reduction to alower percentage based on the Company’s first lien net leverage ratio (as defined in the Credit Facility generally as the ratio of first lien net debt on the dateof determination to the Company’s consolidated EBITDA, as defined, for the four quarters most recently ended prior to such date), of excess cash flow (asdefined) for any year, subject to certain exceptions. Voluntary prepayments and commitment reductions are permitted in whole or in part, without anypremium or penalty, subject to minimum prepayment or reduction requirements. There are no scheduled principal amortization payments on the Term HFacility after December 31, 2018 until it matures in 2021.The borrower under the Credit Facility is CHS. All of the obligations under the Credit Facility are unconditionally guaranteed by the Company andcertain of its existing and subsequently acquired or organized domestic subsidiaries. All obligations under the Credit Facility and the related guarantees aresecured by a perfected first priority lien or security interest in substantially all of the assets of the Company, CHS and each subsidiary guarantor, includingequity interests held by the Company, CHS or any subsidiary guarantor, but excluding, among others, the equity interests of non-significant subsidiaries,syndication subsidiaries, securitization subsidiaries and joint venture subsidiaries, and subject to the ABL Facility. Such assets constitute substantially thesame assets, subject to certain exceptions, that secure (i) on a first lien basis CHS’ obligations under the 2021 Senior Secured Notes and the 61⁄4% SeniorSecured Notes and the 85⁄8% Senior Secured Notes (in each case, as defined below) and (ii) on a junior-priority basis the 2023 Junior-Priority Notes (asdefined below) and the 2024 Junior-Priority Notes (in each case, as defined below).CHS has agreed to pay letter of credit fees equal to the applicable percentage then in effect with respect to LIBOR borrowings under the RevolvingFacility times the maximum aggregate amount available to be drawn under all letters of credit outstanding under the subfacility for letters of credit. Theissuer of any letter of credit issued under the subfacility for letters of credit will also receive a customary fronting fee and other customary processing charges.CHS is obligated to pay commitment fees of 0.50% per annum (subject to adjustment based upon the Company’s leverage ratio) on the unused portion of theRevolving Facility.The Credit Facility contains customary representations and warranties, subject to limitations and exceptions, and customary covenants restricting theCompany’s and its subsidiaries’ ability, subject to certain exceptions, to, among other things (1) declare dividends, make distributions or redeem orrepurchase capital stock, (2) prepay, redeem or repurchase other debt, (3) incur liens or grant negative pledges, (4) make loans and investments and enter intoacquisitions and joint ventures, (5) incur additional indebtedness or provide certain guarantees, (6) make capital expenditures, (7) engage in mergers,acquisitions and asset sales, (8) conduct transactions with affiliates, (9) alter the nature of the Company’s businesses, (10) grant certain guarantees withrespect to physician practices, (11) engage in sale and leaseback transactions or (12) change the Company’s fiscal year. The Company is also required tocomply with specified financial covenants (consisting of a first lien net debt to consolidated EBITDA leverage ratio) and various affirmative covenants.Under the Credit Facility, the first lien net debt to consolidated EBITDA ratio is calculated as the ratio of total first lien debt, less unrestricted cash and cashequivalents, to consolidated EBITDA, as defined in the Credit Facility. The calculation of consolidated EBITDA as defined in the Credit Facility is a trailing12-month calculation that begins with net income attributable to the Company, with certain pro forma adjustments to consider the impact of materialacquisitions or divestitures, and 123Table of ContentsCOMMUNITY HEALTH SYSTEMS, INC. AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued) adjustments for interest, taxes, depreciation and amortization, net income attributable to noncontrolling interests, stock compensation expense, restructuringcosts, and the financial impact of other non-cash or non-recurring items recorded during any such 12-month period. For the 12-month period endedDecember 31, 2018, the first lien net debt to consolidated EBITDA ratio financial covenant under the Credit Facility limited the ratio of first lien net debt toconsolidated EBITDA, as defined, to less than or equal to 5.0 to 1.0. The Company was in compliance with all such covenants at December 31, 2018, with afirst lien net debt to consolidated EBITDA ratio of approximately 4.84 to 1.0. As further discussed at Note 17, on February 15, 2019, the Company and CHSentered into an amendment to the Credit Facility that, among other things, increased the maximum ratio for the first lien net debt to consolidated EBITDAeffective January 1, 2019.Events of default under the Credit Facility include, but are not limited to, (1) CHS’ failure to pay principal, interest, fees or other amounts under the creditagreement when due (taking into account any applicable grace period), (2) any representation or warranty proving to have been materially incorrect whenmade, (3) covenant defaults subject, with respect to certain covenants, to an available cure, (4) bankruptcy and insolvency events, (5) a cross default tocertain other debt, (6) certain undischarged judgments (not paid within an applicable grace period), (7) a change of control (as defined), (8) certain ERISA-related defaults and (9) the invalidity or impairment of specified security interests, guarantees or subordination provisions in favor of the administrative agentor lenders under the Credit Facility.As of December 31, 2018, the availability for additional borrowings under the Credit Facility, subject to certain limitations as set forth in the CreditFacility, was approximately $425 million pursuant to the Revolving Facility, of which $90 million is in the form of outstanding letters of credit and noborrowings were outstanding. CHS has the ability to amend the Credit Facility to provide for one or more tranches of term loans or increases in the RevolvingFacility in an aggregate principal amount of up to $500 million. As of December 31, 2018, the weighted-average interest rate under the Credit Facility,excluding swaps, was 6.8%.2018 Financing ActivityOn February 26, 2018, the Credit Facility was amended, with requisite revolving lender approval, to remove the consolidated EBITDA to interest expenseratio financial covenant, to replace the senior secured net debt to consolidated EBITDA ratio financial covenant with a first lien net debt to consolidatedEBITDA ratio financial covenant, and to reduce the extended revolving credit commitments to $650 million (for a total of $840 million in revolving creditcommitments when combined with the non-extended portion of the revolving credit facility). The new financial covenant provides for a maximum first liennet debt to consolidated EBITDA ratio of 5.25 to 1.0, reducing to 5.0 to 1.0 on July 1, 2018, 4.75 to 1.0 on January 1, 2019, 4.5 to 1.0 on January 1, 2020 and4.25 to 1.0 on July 1, 2020. In addition, the Company agreed pursuant to the amendment to modify its ability to retain asset sale proceeds, and instead toapply them to prepayments of term loans based on pro forma first lien leverage. To the extent the pro forma ratio of first lien net debt to consolidated EBITDAis greater than or equal to 4.5 to 1.0, 100% of net cash proceeds of asset sales will be applied to prepay term loans; to the extent the pro forma first lienleverage ratio is less than 4.5 to 1.0 but greater than or equal to 4.0 to 1.0, 50% of such proceeds will be applied to prepay term loans; and to the extent thefirst lien leverage ratio is less than 4.0 to 1.0, there will be no requirement to prepay term loans with such proceeds. These ratios will be determined on a proforma basis giving appropriate effect to the relevant asset sales and corresponding prepayments of term loans.On March 23, 2018, the Company and CHS entered into the Fourth Amendment and Restatement Agreement to the Credit Facility (the “Agreement”). Inaddition to including the changes described in the paragraph above, the Company further modified its ability to retain asset sale proceeds, and instead toapply them to prepayments of term loans based on pro forma first lien leverage. To the extent the pro forma ratio of first lien net debt to consolidated EBITDAis greater than or equal to 4.25 to 1.0, 100% of net cash proceeds of asset sales will be 124Table of ContentsCOMMUNITY HEALTH SYSTEMS, INC. AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued) applied to prepay term loans; to the extent the pro forma first lien leverage ratio is less than 4.25 to 1.0 but greater than or equal to 3.75 to 1.0, 50% of suchproceeds will be applied to prepay term loans; and to the extent the first lien leverage ratio is less than 3.75 to 1.0, there will be no requirement to prepay termloans with such proceeds. The Agreement also amended the Credit Facility to permit CHS to incur debt under either an asset-based loan (“ABL”) facility inan amount up to $1.0 billion or maintain its Asset-Backed Securitization program. The Revolving Facility would be reduced to $425 million upon theeffectiveness of the contemplated ABL facility. The Agreement also reduced the availability for incremental tranches of term loans or increases in theRevolving Facility to $500 million and removed the secured net leverage incurrence test with respect to junior secured debt. Term G Loans will accrueinterest at a rate per annum initially equal to LIBOR plus 3.00%, in the case of LIBOR borrowings, and Alternate Base Rate plus 2.00%, in the case ofAlternate Base Rate borrowing. Term H Loans will accrue interest at a rate per annum initially equal to LIBOR plus 3.25%, in the case of LIBOR borrowings,and Alternate Base Rate plus 2.25%, in the case of Alternate Base Rate borrowing.On April 3, 2018, the Company and CHS entered into an asset-based loan (ABL) credit agreement (the “ABL Credit Agreement”) (as further describedbelow), with JPMorgan Chase Bank, N.A., as administrative agent, and the lenders and other agents party thereto. Pursuant to the ABL Credit Agreement, thelenders have extended to CHS a revolving asset-based loan facility (the “ABL Facility”) in the maximum aggregate principal amount of $1.0 billion, subjectto borrowing base capacity. The ABL facility includes borrowing capacity available for letters of credit of $50 million. CHS and all domestic subsidiaries ofCHS that guarantee CHS’ other outstanding senior and senior secured indebtedness guarantee the obligations of CHS under the ABL Facility. In conjunctionwith the closing of the ABL Facility, the wholly-owned special-purpose entity that owned the Receivables pledged under the previous Receivables Facilitybecame a subsidiary guarantor under the Credit Facility and CHS’ outstanding notes. Subject to certain exceptions, all obligations under the ABL Facilityand the related guarantees are secured by a perfected first-priority security interest in substantially all of the Receivables, deposit, collection and otheraccounts and contract rights, books, records and other instruments related to the foregoing of the Company, CHS and the guarantors as well as a perfectedjunior-priority security interest in substantially all of the other assets of the Company, CHS and the guarantors, subject to customary exceptions andintercreditor arrangements. The revolving credit commitments under the Credit Facility were reduced to $425 million upon the effectiveness of the ABLFacility. In connection with entering into the ABL Credit Agreement and the ABL Facility, the Company repaid in full and terminated its ReceivablesFacility. The outstanding borrowings pursuant to the ABL Facility at December 31, 2018 totaled $698 million on the consolidated balance sheet.Borrowings under the ABL Facility bear interest at a rate per annum equal to an applicable percentage, plus, at the Borrower’s option, either (a) anAlternative base rate or (b) a LIBOR rate. From and after December 31, 2018, the applicable percentage under the ABL Facility will be determined based onexcess availability as a percentage of the maximum commitment amount under the ABL facility at a rate per annum of 1.25%, 1.50% and 1.75% for loansbased on the Alternative base rate and 2.25%, 2.50% and 2.75% for loans based on the LIBOR rate. From and after September 30, 2018, the applicablecommitment fee rate under the ABL Facility is determined based on average utilization as a percentage of the maximum commitment amount under the ABLFacility at a rate per annum of either 0.50% or 0.625% times the unused portion of the ABL facility.Principal amounts outstanding under the ABL Facility will be due and payable in full on April 3, 2023. The ABL Facility includes a 91-day springingmaturity applicable if more than $250 million in the aggregate principal amount of the Borrower’s 8% Senior Notes due 2019, Term G loans due 2019,7.125% Senior Notes due 2020, Term H loans due 2021, 5.125% Senior Secured Notes due 2021, 6.875% Senior Notes due 2022 or 6.25% Senior SecuredNotes due 2023 or refinancings thereof are scheduled to mature or similarly become due on a date prior to April 3, 2023. 125Table of ContentsCOMMUNITY HEALTH SYSTEMS, INC. AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued) The ABL Facility contains customary representations and warranties, subject to limitations and exceptions, and customary covenants restricting ourability, subject to certain exceptions, to, among other things (1) declare dividends, make distributions or redeem or repurchase capital stock, (2) prepay,redeem or repurchase other debt, (3) incur liens or grant negative pledges, (4) make loans and investments and enter into acquisitions and joint ventures,(5) incur additional indebtedness or provide certain guarantees, (6) engage in mergers, acquisitions and asset sales, (7) conduct transactions with affiliates,(8) alter the nature of the Company’s, CHS’ or the guarantors’ businesses, (9) grant certain guarantees with respect to physician practices, (10) engage in saleand leaseback transactions or (11) change our fiscal year. We are also required to comply with a consolidated fixed coverage ratio, upon certain triggeringevents described below, and various affirmative covenants. The consolidated fixed coverage ratio is calculated as the ratio of (x) consolidated EBITDA (asdefined in the ABL Facility) less capital expenditures to (y) the sum of consolidated interest expense (as defined in the ABL Facility), scheduled principalpayments, income taxes and restricted payments made in cash or in permitted investments. For purposes of calculating the consolidated fixed chargecoverage ratio, the calculation of consolidated EBITDA as defined in the ABL Facility is a trailing 12-month calculation that begins with consolidated netincome attributable to Holdings, with certain adjustments for interest, taxes, depreciation and amortization, net income attributable to noncontrollinginterests, stock compensation expense, restructuring costs, and the financial impact of other non-cash or non-recurring items recorded during any such12-month period. The consolidated fixed charge coverage ratio is a required covenant only in periods where the total borrowings outstanding under the ABLFacility reduce the amount available in the facility to less than the greater of (i) $95 million and (ii) 10% of the calculated borrowing base. At December 31,2018, the Company is not subject to the consolidated fixed charge coverage ratio as such triggering event had not occurred during 2018.Events of default under the ABL Facility include, but are not limited to, (1) CHS’ failure to pay principal, interest, fees or other amounts under the ABLCredit Agreement when due (taking into account any applicable grace period), (2) any representation or warranty proving to have been materially incorrectwhen made, (3) covenant defaults subject, with respect to certain covenants, to an available cure and applicable grace periods, (4) bankruptcy and insolvencyevents, (5) a cross default to certain other debt, (6) certain undischarged judgments (not paid within an applicable grace period), (7) a change of control (asdefined), (8) certain ERISA-related defaults and (9) the invalidity or impairment of specified security interests, guarantees or subordination provisions infavor of the ABL Agent or lenders under the ABL Facility.On June 22, 2018, CHS completed its previously announced offers to exchange certain of its outstanding senior unsecured notes due 2019, 2020 and2022 for new junior-priority secured notes due 2023 and 2024, the terms and amounts of which are further discussed below.On July 6, 2018, CHS completed a private offering of $1.033 billion aggregate principal amount of 85⁄8% Senior Secured Notes due 2024 (the “85⁄8%Senior Secured Notes”). The terms of the 85⁄8% Senior Secured Notes are discussed below. Using the proceeds from the offering, the Company repaid theoutstanding balance owed under the Term G Loan and paid fees and expenses related to the offering. 126Table of ContentsCOMMUNITY HEALTH SYSTEMS, INC. AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued) As of December 31, 2018, the term loans and outstanding revolving credit loans are scheduled to be paid with principal payments for future years asfollows (in millions): Year Ending December 31, Amount 2019 $- 2020 - 2021 1,622 2022 - 2023 - Thereafter - Total maturities 1,622 Less: Deferred debt issuance costs (21) Total term loans and outstanding revolving credit loans $1,601 As of December 31, 2018, the Company had letters of credit issued, primarily in support of potential insurance-related claims and certain bonds, ofapproximately $90 million.8% Senior Notes due 2019On November 22, 2011, CHS completed a private offering of $1.0 billion aggregate principal amount of 8% Senior Notes due 2019 (the “8% SeniorNotes”). The net proceeds from this issuance, together with available cash on hand, were used to finance the purchase of up to $1.0 billion aggregateprincipal amount of CHS’ then outstanding 87⁄8% Senior Notes due 2015 and related fees and expenses. On March 21, 2012, CHS completed an offering ofan additional $1.0 billion aggregate principal amount of 8% Senior Notes, which were issued in a private placement (at a premium of 102.5%). The netproceeds from this issuance were used to finance the purchase of approximately $850 million aggregate principal amount of CHS’ then outstanding 87⁄8%Senior Notes due 2015, to pay related fees and expenses and for general corporate purposes. The 8% Senior Notes bear interest at 8% per annum, payablesemiannually in arrears on May 15 and November 15. Interest on the 8% Senior Notes accrues from the date of original issuance. Interest is calculated on thebasis of a 360-day year comprised of twelve 30-day months.CHS is entitled, at its option, to redeem all or a portion of the 8% Senior Notes upon not less than 30 nor more than 60 days’ notice, at the followingredemption prices (expressed as a percentage of principal amount on the redemption date), plus accrued and unpaid interest, if any, to the redemption date(subject to the right of holders of record on the relevant record date to receive interest due on the relevant interest payment date), if redeemed during theperiod set forth below: Period Redemption Price November 15, 2017 to November 14, 2019 100.000% Pursuant to a registration rights agreement entered into at the time of the issuance of the 8% Senior Notes, as a result of an exchange offer made by CHS,substantially all of the 8% Senior Notes issued in November 2011 and March 2012 were exchanged in May 2012 for new notes (the “8% Exchange Notes”)having terms substantially identical in all material respects to the 8% Senior Notes (except that the 8% Exchange Notes were issued under a registrationstatement pursuant to the Securities Act of 1933, as amended (the “1933 Act”)). References to the 8% Senior Notes shall also be deemed to include the 8%Exchange Notes unless the context provides otherwise.On June 22, 2018, CHS issued approximately $1.770 billion aggregate principal amount of new Junior-Priority Secured Notes due 2023 (the “2023Junior-Priority Notes”) in exchange for the same amount of 8% Senior 127Table of ContentsCOMMUNITY HEALTH SYSTEMS, INC. AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued) Notes. The terms of the 2023 Junior-Priority Notes are described below. Following this exchange, CHS had $155 million aggregate principal amount of 8%Senior Notes outstanding.71⁄8% Senior Notes due 2020On July 18, 2012, CHS completed a public offering of 71⁄8% Senior Notes due 2020 (the “71⁄8% Senior Notes”). The net proceeds from this issuance wereused to finance the purchase or redemption of $934 million aggregate principal amount of CHS’ then outstanding 87⁄8% Senior Notes due 2015, to pay forconsents delivered in connection with a related tender offer, to pay related fees and expenses, and for general corporate purposes. The 71⁄8% Senior Notesbear interest at 7.125% per annum, payable semiannually in arrears on July 15 and January 15. Interest on the 71⁄8% Senior Notes accrues from the date oforiginal issuance. Interest is calculated on the basis of a 360-day year comprised of twelve 30-day months.CHS is entitled, at its option, to redeem all or a portion of the 71⁄8% Senior Notes upon not less than 30 nor more than 60 days’ notice, at the followingredemption prices (expressed as a percentage of principal amount on the redemption date), plus accrued and unpaid interest, if any, to the redemption date(subject to the right of holders of record on the relevant record date to receive interest due on the relevant interest payment date), if redeemed during theperiod set forth below: Period Redemption Price July 15, 2018 to July 14, 2020 100.000% On June 22, 2018, CHS issued approximately $1.079 billion aggregate principal amount of new Junior-Priority Secured Notes due 2024 (the “2024Junior-Priority Notes”) in exchange for the same amount of 71⁄8% Senior Notes. The terms of the 2024 Junior-Priority Notes are described below. Followingthis exchange, CHS had $121 million aggregate principal amount of 71⁄8% Senior Notes outstanding.51⁄8% Senior Secured Notes due 2021On January 27, 2014, CHS completed a private offering of $1.0 billion aggregate principal amount of 51⁄8% Senior Secured Notes due 2021 (the “2021Senior Secured Notes”). The net proceeds from this issuance were used to finance the Company’s acquisition by merger of Health Management Associates(“HMA”). The 2021 Senior Secured Notes bear interest at 5.125% per annum, payable semiannually in arrears on February 1 and August 1. Interest on the2021 Senior Secured Notes accrues from the date of original issuance. Interest is calculated on the basis of a 360-day year comprised of twelve 30-daymonths.The 2021 Senior Secured Notes and the related guarantees are secured by (i) first-priority liens on the collateral (the “Non-ABL Priority Collateral”) thatalso secures on a first-priority basis the Credit Facilities (subject to certain exceptions), the 61⁄4% Senior Secured Notes and the 85⁄8% Senior Secured Notesand (ii) second-priority liens on the collateral (the “ABL-Priority Collateral”) that secures on a first-priority basis the ABL Facility (and also secures on asecond-priority basis the Credit Facilities and the 61⁄4% Senior Secured Notes and the 85⁄8% Senior Secured Notes), in each case subject to permitted liensdescribed in the indenture governing the 2021 Senior Secured Notes. 128Table of ContentsCOMMUNITY HEALTH SYSTEMS, INC. AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued) CHS is entitled, at its option, to redeem all or a portion of the 2021 Senior Secured Notes upon not less than 30 nor more than 60 days’ notice, at thefollowing redemption prices (expressed as a percentage of principal amount on the redemption date), plus accrued and unpaid interest, if any, to theredemption date (subject to the right of holders of record on the relevant record date to receive interest due on the relevant interest payment date), if redeemedduring the periods set forth below: Period RedemptionPrice February 1, 2018 to January 31, 2019 102.563 % February 1, 2019 to January 31, 2020 101.281 % February 1, 2020 to January 31, 2021 100.000 % Pursuant to a registration rights agreement entered into at the time of the issuance of the 2021 Senior Secured Notes, as a result of an exchange offer madeby CHS, all of the 2021 Senior Secured Notes issued in January 2014 were exchanged in October 2014 for new notes (the “2021 Exchange Notes”) havingterms substantially identical in all material respects to the 2021 Senior Secured Notes (except that the exchange notes were issued under a registrationstatement pursuant to the 1933 Act). References to the 2021 Senior Secured Notes shall be deemed to be the 2021 Exchange Notes unless the contextprovides otherwise.67⁄8% Senior Notes due 2022On January 27, 2014, CHS completed a private offering of $3.0 billion aggregate principal amount of 67⁄8% Senior Notes due 2022 (the “67⁄8% SeniorNotes”). The net proceeds from this issuance were used to finance the HMA merger. The 67⁄8% Senior Notes bear interest at 6.875% per annum, payablesemiannually in arrears on February 1 and August 1. Interest on the 67⁄8% Senior Notes accrues from the date of original issuance. Interest is calculated on thebasis of a 360-day year comprised of twelve 30-day months.CHS is entitled, at its option, to redeem all or a portion of the 67⁄8% Senior Notes upon not less than 30 nor more than 60 days’ notice, at the followingredemption prices (expressed as a percentage of principal amount on the redemption date), plus accrued and unpaid interest, if any, to the redemption date(subject to the right of holders of record on the relevant record date to receive interest due on the relevant interest payment date), if redeemed during theperiods set forth below: Period RedemptionPrice February 1, 2018 to January 31, 2019 103.438 % February 1, 2019 to January 31, 2020 101.719 % February 1, 2020 to January 31, 2022 100.000 % Pursuant to a registration rights agreement entered into at the time of the issuance of the 67⁄8% Senior Notes, as a result of an exchange offer made by CHS,all of the 67⁄8% Senior Notes issued in January 2014 were exchanged in October 2014 for new notes (the “67⁄8% Exchange Notes”) having terms substantiallyidentical in all material respects to the 67⁄8% Senior Notes (except that the exchange notes were issued under a registration statement pursuant to the 1933Act). References to the 67⁄8% Senior Notes shall be deemed to be the 67⁄8% Exchange Notes unless the context provides otherwise.On June 22, 2018, CHS issued approximately $276 million aggregate principal amount of the 2024 Junior-Priority Notes in exchange for approximately$368 million of 67⁄8% Senior Notes. Following this exchange, CHS had $2.632 billion aggregate principal amount of 67⁄8% Senior Notes outstanding.61⁄4% Senior Secured Notes due 2023On March 16, 2017, CHS completed a public offering of $2.2 billion aggregate principal amount of 61⁄4% Senior Secured Notes due 2023 (the “61⁄4%Senior Secured Notes”). The net proceeds from this issuance were 129Table of ContentsCOMMUNITY HEALTH SYSTEMS, INC. AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued) used to finance the purchase or redemption of $700 million aggregate principal amount of CHS’ then outstanding 2018 Senior Secured Notes and related feesand expenses, and the repayment of $1.445 billion of the Term F Facility. On May 12, 2017, CHS completed a tack-on offering of $900 million aggregateprincipal amount of 61⁄4% Senior Secured Notes, increasing the total aggregate principal amount of 61⁄4% Senior Secured Notes to $3.1 billion. A portion ofthe net proceeds from this issuance were used to finance the repayment of approximately $713 million aggregate principal amount of CHS’ then outstandingTerm A Facility and related fees and expenses. The tack-on notes have identical terms, other than issue date and issue price as the 61⁄4% Senior Secured Notesissued on March 16, 2017. The 61⁄4% Senior Secured Notes bear interest at 6.250% per annum, payable semiannually in arrears on March 31 andSeptember 30, commencing September 30, 2017. Interest on the 61⁄4% Senior Secured Notes accrues from the date of original issuance. Interest is calculatedon the basis of a 360-day year comprised of twelve 30-day months.The 61⁄4% Senior Secured Notes and the related guarantees are secured by (i) first-priority liens on the Non-ABL Priority Collateral that also secures on afirst-priority basis the Credit Facilities (subject to certain exceptions), the 2021 Senior Secured Notes and the 85⁄8% Senior Secured Notes and (ii) second-priority liens on the ABL-Priority Collateral that secures on a first-priority basis the ABL Facility (and also secures on a second-priority basis the CreditFacilities and the 2021 Senior Secured Notes and the 85⁄8% Senior Secured Notes), in each case subject to permitted liens described in the indenturegoverning the 61⁄4% Senior Secured Notes.CHS is entitled, at its option, to redeem all or a portion of the 61⁄4% Senior Secured Notes at any time prior to March 31, 2020, upon not less than 30 normore than 60 days’ notice, at a price equal to 100% of the principal amount of the 61⁄4% Senior Secured Notes redeemed plus accrued and unpaid interest, ifany, plus a “make-whole” premium, as described in the indenture governing the 61⁄4% Senior Secured Notes. In addition, CHS may redeem up to 40% of theaggregate principal amount of the 61⁄4% Senior Secured Notes at any time prior to March 31, 2020 using the net proceeds from certain equity offerings at theredemption price of 106.250% of the principal amount of the 61⁄4% Senior Secured Notes redeemed, plus accrued and unpaid interest, if any.CHS may redeem some or all of the 61⁄4% Senior Secured Notes at any time on or after March 31, 2020 upon not less than 30 nor more than 60 days’notice, at the following redemption prices (expressed as a percentage of principal amount on the redemption date), plus accrued and unpaid interest, if any, tothe redemption date (subject to the right of holders of record on the relevant record date to receive interest due on the relevant interest payment date), ifredeemed during the periods set forth below: Period RedemptionPrice March 31, 2020 to March 30, 2021 103.125 % March 31, 2021 to March 30, 2022 101.563 % March 31, 2022 to March 30, 2023 100.000 % Junior-Priority Secured Notes due 2023On June 22, 2018, CHS completed a private offering of $1.770 billion aggregate principal amount of the 2023 Junior-Priority Notes in exchange for thesame amount of 8% Senior Notes. The 2023 Junior-Priority Notes bear interest at (i) 11% per annum from June 22, 2018 to, but excluding, June 22, 2019 and(ii) 97⁄8% per annum from June 22, 2019 until maturity, payable semiannually in arrears on June 30 and December 31. Interest on the 2023 Junior-PriorityNotes accrues from the date of original issuance with the first interest payment date on December 31, 2018. Interest is calculated on the basis of a 360-dayyear comprised of twelve 30-day months.The 2023 Junior-Priority Notes and the related guarantees are secured by (i) second-priority liens on the Non-ABL Priority Collateral that secures on afirst-priority basis the Credit Facilities (subject to certain exceptions), the 2021 Senior Secured Notes, the 61⁄4% Senior Secured Notes and the 85⁄8% SeniorSecured 130Table of ContentsCOMMUNITY HEALTH SYSTEMS, INC. AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued) Notes and (ii) third-priority liens on the ABL-Priority Collateral that secures on a first-priority basis the ABL Facility (and also secures on a second-prioritybasis the Credit Facilities, the 2021 Senior Secured Notes, the 61⁄4% Senior Secured Notes and the 85⁄8% Senior Secured Notes), in each case subject topermitted liens described in the indenture governing the 2023 Junior-Priority Notes.Prior to June 30, 2020, CHS may redeem some or all of the 2023 Junior-Priority Notes at a redemption price equal to 100% of the principal amount of thenotes redeemed plus accrued and unpaid interest, if any, plus a “make-whole” premium, as described in the indenture governing the 2023 Junior-PriorityNotes. After June 30, 2020, CHS is entitled, at its option, to redeem all or a portion of the 2023 Junior-Priority Notes upon not less than 15 nor more than 60days’ notice, at the following redemption prices (expressed as a percentage of principal amount on the redemption date), plus accrued and unpaid interest, ifany, to the redemption date (subject to the right of holders of record on the relevant record date to receive interest due on the relevant interest payment date),if redeemed during the periods set forth below: Period RedemptionPrice June 30, 2020 to June 29, 2021 107.406 % June 30, 2021 to June 29, 2022 103.703 % June 30, 2022 to June 29, 2023 100.000 % In addition, at any time prior to June 30, 2020, CHS may redeem up to 40% of the aggregate principal amount of the 2023 Junior-Priority Notes with theproceeds of certain equity offerings at 109.875%, plus accrued and unpaid interest, if any, to, but excluding, the applicable redemption date.Junior-Priority Secured Notes due 2024On June 22, 2018, CHS completed a private offering of $1.355 billion aggregate principal amount of the 2024 Junior-Priority Notes in exchange forapproximately $1.079 billion of 71⁄8% Senior Notes and approximately $368 million of 67⁄8% Senior Notes. The 2024 Junior-Priority Notes bear interest at arate of 81⁄8% per annum, payable semiannually in arrears on June 30 and December 31. Interest on the 2024 Junior-Priority Notes accrues from the date oforiginal issuance with the first interest payment date on December 31, 2018. Interest is calculated on the basis of a 360-day year comprised of twelve 30-daymonths.The 2024 Junior-Priority Notes and the related guarantees are secured by (i) second-priority liens on the Non-ABL Priority Collateral that secures on afirst-priority basis the Credit Facilities (subject to certain exceptions), the 2021 Senior Secured Notes, the 61⁄4% Senior Secured Notes and the 85⁄8% SeniorSecured Notes and (ii) third-priority liens on the ABL-Priority Collateral that secures on a first-priority basis the ABL Facility (and also secures on a second-priority basis the Credit Facilities, the 2021 Senior Secured Notes, the 61⁄4% Senior Secured Notes and the 85⁄8% Senior Secured Notes), in each case subjectto permitted liens described in the indenture governing the 2024 Junior-Priority Notes. 131Table of ContentsCOMMUNITY HEALTH SYSTEMS, INC. AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued) Prior to June 30, 2021, CHS may redeem some or all of the 2024 Junior-Priority Notes at a redemption price equal to 100% of the principal amount of thenotes redeemed plus accrued and unpaid interest, if any, plus a “make-whole” premium, as described in the indenture governing the 2024 Junior-PriorityNotes. After June 30, 2021, CHS is entitled, at its option, to redeem all or a portion of the 2024 Junior-Priority Notes upon not less than 15 nor more than 60days’ notice, at the following redemption prices (expressed as a percentage of principal amount on the redemption date), plus accrued and unpaid interest, ifany, to the redemption date (subject to the right of holders of record on the relevant record date to receive interest due on the relevant interest payment date),if redeemed during the periods set forth below: Period Redemption Price June 30, 2021 to June 29, 2022 104.063 % June 30, 2022 to June 29, 2023 102.031 % June 30, 2023 to June 29, 2024 100.000 % In addition, at any time prior to June 30, 2021, CHS may redeem up to 40% of the aggregate principal amount of the 2024 Junior-Priority Notes with theproceeds of certain equity offerings at 108.125%, plus accrued and unpaid interest, if any, to, but excluding, the applicable redemption date.The indentures governing each of the 2023 Junior-Priority Notes and 2024 Junior-Priority Notes also prohibit CHS from purchasing, repurchasing,redeeming, defeasing or otherwise acquiring or retiring any outstanding 8% Senior Notes and 71⁄8% Senior Notes after the consummation of the exchangeoffers described above with: (a) cash or cash equivalents on hand as of the consummation of such exchange offers; (b) cash generated from operations;(c) proceeds from assets sales; or (d) proceeds from the issuance of, or in exchange for, secured debt, in each case, prior to the date that is 60 days prior to therelevant maturity dates of such 8% Senior Notes and 71⁄8% Senior Notes, as applicable.85⁄8% Senior Secured Notes due 2024On July 6, 2018, CHS completed a private offering of $1.033 billion aggregate principal amount of the 85⁄8% Senior Secured Notes”. The terms of the85⁄8% Senior Secured Notes are governed by an indenture, dated as of July 6, 2018, among CHS, the Company, the subsidiary guarantors party thereto,Regions Bank, as trustee and Credit Suisse AG, as collateral agent. The 85⁄8% Senior Secured Notes bear interest at a rate of 85⁄8% per year payable semi-annually in arrears on January 15 and July 15 of each year, commencing on January 15, 2019. The Notes are unconditionally guaranteed on a senior-prioritysecured basis by the Company and each of the CHS current and future domestic subsidiaries that provide guarantees under CHS’ senior secured creditfacilities, CHS’ ABL facility, any capital market debt securities of CHS (including CHS’ outstanding senior notes) and certain other long-term debt of CHS.The 85⁄8% Senior Secured Notes and the related guarantees are secured by (i) first-priority liens on the Non-ABL Priority Collateral that also secures on afirst-priority basis the Credit Facilities (subject to certain exceptions), the 2021 Senior Secured Notes and the 61⁄4% Senior Secured Notes and (ii) second-priority liens on the ABL-Priority Collateral that secures on a first-priority basis the ABL Facility (and also secures on a second-priority basis the CreditFacilities and the 2021 Senior Secured Notes and the 61⁄4% Senior Secured Notes), in each case subject to permitted liens described in the indenturegoverning the 85⁄8% Senior Secured Notes.Prior to January 15, 2021, CHS may redeem some or all of the 85⁄8% Senior Secured Notes at a redemption price equal to 100% of the principal amount ofthe notes redeemed plus accrued and unpaid interest, if any, plus a “make-whole” premium, as described in the indenture governing the 85⁄8% Senior SecuredNotes. After January 15, 2021, CHS is entitled, at its option, to redeem all or a portion of the 85⁄8% Senior Secured Notes upon not less than 15 nor more than60 days’ notice, at the following redemption prices (expressed as a 132Table of ContentsCOMMUNITY HEALTH SYSTEMS, INC. AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued) percentage of principal amount on the redemption date), plus accrued and unpaid interest, if any, to the redemption date (subject to the right of holders ofrecord on the relevant record date to receive interest due on the relevant interest payment date), if redeemed during the periods set forth below: Period Redemption Price January 15, 2021 to January 14, 2022 104.313 % January 15, 2022 to January 14, 2023 102.156 % January 15, 2023 to January 14, 2024 100.000 % In addition, at any time prior to January 15, 2021, CHS may redeem up to 40% of the aggregate principal amount of the 85⁄8% Senior Secured Notes withthe proceeds of certain equity offerings at 108.625%, plus accrued and unpaid interest, if any, to, but excluding, the applicable redemption date.Receivables FacilityPrior to the effectiveness of the ABL Facility described above, CHS, through certain of its subsidiaries, participated in an accounts receivable loanagreement (the “Receivables Facility”) with a group of lenders and banks, Credit Agricolé Corporate and Investment Bank, as a managing agent and as theadministrative agent. Patient-related accounts receivable (the “Receivables”) for certain affiliated hospitals served as collateral for the outstandingborrowings under the Receivables Facility. The interest rate on the borrowings was based on the commercial paper rate plus an applicable interest rate spread.The Receivables Facility was repaid in full and terminated upon the effectiveness of the ABL Facility on April 3, 2018.Loss (Gain) from Early Extinguishment of DebtThe financing and repayment transactions discussed above resulted in a gain from the early extinguishment of debt of $31 million and a loss from earlyextinguishment of debt of $40 million and $30 million for the years ended December 31, 2018, 2017 and 2016, respectively, and an after-tax gain of$23 million and an after-tax loss of $26 million and $19 million for the years ended December 31, 2018, 2017 and 2016, respectively.Other DebtAs of December 31, 2018, other debt consisted primarily of other obligations maturing in various installments through 2028.To limit the effect of changes in interest rates on a portion of the Company’s long-term borrowings, the Company is a party to six separate interest swapagreements in effect at December 31, 2018, with an aggregate notional amount for currently effective swaps of $1.5 billion. On each of these swaps, theCompany receives a variable rate of interest based on the three-month LIBOR in exchange for the payment of a fixed rate of interest. See Note 8 for additionalinformation regarding these swaps. 133Table of ContentsCOMMUNITY HEALTH SYSTEMS, INC. AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued) As of December 31, 2018, the scheduled maturities of long-term debt outstanding, including capital lease obligations for each of the next five years andthereafter are as follows (in millions): Year Ending December 31, Amount 2019 $204 2020 133 2021 2,630 2022 2,639 2023 5,580 Thereafter 2,574 Total maturities 13,760 Less: Deferred debt issuance costs (171) Plus: unamortized note premium 7 Total long-term debt $13,596 The Company paid interest of $936 million, $852 million and $930 million on borrowings during the years ended December 31, 2018, 2017 and 2016,respectively.8. FAIR VALUE OF FINANCIAL INSTRUMENTSThe fair value of financial instruments has been estimated by the Company using available market information as of December 31, 2018 and 2017, andvaluation methodologies considered appropriate. The estimates presented in the table below are not necessarily indicative of amounts the Company couldrealize in a current market exchange (in millions): December 31, 2018 December 31, 2017 CarryingAmount Estimated FairValue CarryingAmount Estimated FairValue Assets: Cash and cash equivalents $196 $196 $563 $563 Investments in equity securities 137 137 - - Available-for-sale securities 93 93 252 252 Trading securities 11 11 37 37 Liabilities: Contingent Value Right - - 2 2 Credit Facility 1,602 1,564 2,902 2,826 8% Senior Notes due 2019 155 146 1,922 1,637 71⁄8% Senior Notes due 2020 121 100 1,192 897 51⁄8% Senior Secured Notes due 2021 984 934 978 902 67⁄8% Senior Notes due 2022 2,593 1,175 2,943 1,729 61⁄4% Senior Secured Notes due 2023 3,067 2,819 3,061 2,800 Junior-Priority Secured Notes due 2023 1,750 1,380 - - Junior-Priority Secured Notes due 2024 1,338 976 - - 85⁄8% Secured Notes due 2024 1,021 1,025 - - ABL Facility and other debt 734 734 611 611 134Table of ContentsCOMMUNITY HEALTH SYSTEMS, INC. AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued) The carrying value of the Company’s long-term debt in the above table is presented net of unamortized deferred debt issuance costs. The estimated fairvalue is determined using the methodologies discussed below in accordance with accounting standards related to the determination of fair value based on theU.S. GAAP fair value hierarchy as discussed in Note 9. The estimated fair value for financial instruments with a fair value that does not equal its carryingvalue is considered a Level 1 valuation. The Company utilizes the market approach and obtains indicative pricing from the administrative agent to the CreditFacility to determine fair values or through publicly available subscription services such as Bloomberg where relevant.Cash and cash equivalents. The carrying amount approximates fair value due to the short-term maturity of these instruments (less than three months).Investments in equity securities. Estimated fair value is based on closing price as quoted in public markets. Prior to the adoption of ASU 2016-01 onJanuary 1, 2018, such investments were classified as either available-for-sale or trading securities.Available-for-sale securities. Estimated fair value is based on closing price as quoted in public markets or other various valuation techniques.Trading securities. Estimated fair value is based on closing price as quoted in public markets.Contingent Value Right. Estimated fair value is based on the closing price as quoted on the public market where the CVR is traded.Credit Facility. Estimated fair value is based on publicly available trading activity and supported with information from the Company’s bankersregarding relevant pricing for trading activity among the Company’s lending institutions.8% Senior Notes due 2019. Estimated fair value is based on the closing market price for these notes.71⁄8% Senior Notes due 2020. Estimated fair value is based on the closing market price for these notes.51⁄8% Senior Secured Notes due 2021. Estimated fair value is based on the closing market price for these notes.67⁄8% Senior Notes due 2022. Estimated fair value is based on the closing market price for these notes.61⁄4% Senior Secured Notes due 2023. Estimated fair value is based on the closing market price for these notes.Junior-Priority Secured Notes due 2023. Estimated fair value is based on the closing market price for these notes.Junior-Priority Secured Notes due 2024. Estimated fair value is based on the closing market price for these notes.85⁄8% Secured Notes due 2024. Estimated fair value is based on the closing market price for these notes.ABL Facility and other debt. The carrying amount of the ABL Facility and all other debt (which, at December 31, 2017 includes the Receivables Facility)approximates fair value due to the nature of these obligations. 135Table of ContentsCOMMUNITY HEALTH SYSTEMS, INC. AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued) Interest rate swaps. The fair value of interest rate swap agreements is the amount at which they could be settled, based on estimates calculated by theCompany using a discounted cash flow analysis based on observable market inputs and validated by comparison to estimates obtained from the counterparty.The Company incorporates credit valuation adjustments (“CVAs”) to appropriately reflect both its own nonperformance or credit risk and the respectivecounterparty’s nonperformance or credit risk in the fair value measurements. In adjusting the fair value of its interest rate swap agreements for the effect ofnonperformance or credit risk, the Company has considered the impact of any netting features included in the agreements.The Company assesses the effectiveness of its hedge instruments on a quarterly basis. For the years ended December 31, 2018 and 2017, the Companycompleted an assessment of the cash flow hedge instruments and determined the hedges to be highly effective. The Company has also determined that theineffective portion of the hedges do not have a material effect on the Company’s consolidated financial position, operations or cash flows. The counterpartiesto the interest rate swap agreements expose the Company to credit risk in the event of nonperformance by such counterparties. However, at December 31,2018, the Company does not anticipate nonperformance by these counterparties. The Company does not hold or issue derivative financial instruments fortrading purposes.Interest rate swaps consisted of the following at December 31, 2018: Swap # Notional Amount(in millions) Fixed Interest Rate Termination Date Asset (Liability)Fair Value(in millions) 1 $200 2.515 % August 30, 2019 $- 2 200 2.613 % August 30, 2019 - 3 300 2.738 % August 30, 2020 (1) 4 300 2.892 % August 30, 2020 (1) 5 300 2.363 % January 27, 2021 2 6 200 2.368 % January 27, 2021 1 The Company is exposed to certain risks relating to its ongoing business operations. The risk managed by using derivative instruments is interest rate risk.Interest rate swaps are entered into to manage interest rate fluctuation risk associated with the term loans in the Credit Facility. Companies are required torecognize all derivative instruments as either assets or liabilities at fair value in the consolidated statement of financial position. The Company designates itsinterest rate swaps as cash flow hedges. For derivative instruments that are designated and qualify as cash flow hedges, the effective portion of the gain or losson the derivative is reported as a component of OCI and reclassified into earnings in the same period or periods during which the hedged transactions affectearnings. Gains and losses on the derivative representing either hedge ineffectiveness or hedge components excluded from the assessment of effectiveness arerecognized in current earnings.Assuming no change in interest rates in effect as of December 31, 2018, approximately $5 million of interest income resulting from the spread between thefixed and floating rates defined in each interest rate swap agreement will be recognized during the next 12 months. If interest rate swaps do not remain highlyeffective as a cash flow hedge, the derivatives’ gains or losses resulting from the change in fair value reported through OCI will be reclassified into earnings. 136Table of ContentsCOMMUNITY HEALTH SYSTEMS, INC. AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued) The following tabular disclosure provides the amount of pre-tax gain (loss) recognized as a component of OCI during the years ended December 31, 2018,2017 and 2016 (in millions): Amount of Pre-Tax Gain (Loss)Recognized in OCI (Effective Portion) Derivatives in Cash Flow Hedging Relationships Year Ended December 31, 2018 2017 2016 Interest rate swaps $17 $2 $(27) The following tabular disclosure provides the location of the effective portion of the pre-tax loss reclassified from accumulated other comprehensive loss(“AOCL”) into interest expense on the consolidated statements of loss income during the years ended December 31, 2018, 2017 and 2016 (in millions): Location of Loss Reclassified fromAOCL into Income (Effective Portion) Amount of Pre-Tax Loss Reclassified fromAOCL into Income (Effective Portion) Year Ended December 31, 2018 2017 2016 Interest expense, net $2 $30 $54 The fair values of derivative instruments in the consolidated balance sheets as of December 31, 2018 and 2017 were as follows (in millions): Asset Derivatives Liability Derivatives December 31, 2018 December 31, 2017 December 31, 2018 December 31, 2017 BalanceSheet Location Fair Value BalanceSheet Location Fair Value BalanceSheet Location Fair Value BalanceSheet Location Fair Value Derivatives designated ashedging instruments Otherassets,net $3 Otherassets,net $1 Otherlong-termliabilities $2 Otherlong-termliabilities $18 9. FAIR VALUEFair Value HierarchyFair value is a market-based measurement, not an entity-specific measurement. Therefore, a fair value measurement should be determined based on theassumptions that market participants would use in pricing the asset or liability. As a basis for considering market participant assumptions in fair valuemeasurements, the Company utilizes the U.S. GAAP fair value hierarchy that distinguishes between market participant assumptions based on market dataobtained from sources independent of the reporting entity (observable inputs that are classified within Levels 1 and 2 of the hierarchy) and the reportingentity’s own assumption about market participant assumptions (unobservable inputs classified within Level 3 of the hierarchy).The inputs used to measure fair value are classified into the following fair value hierarchy:Level 1: Quoted market prices in active markets for identical assets or liabilities. 137Table of ContentsCOMMUNITY HEALTH SYSTEMS, INC. AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued) Level 2: Observable market-based inputs or unobservable inputs that are corroborated by market data.Level 3: Unobservable inputs that are supported by little or no market activity and are significant to the fair value of the assets orliabilities. Level 3 includes values determined using pricing models, discounted cash flow methodologies, or similar techniquesreflecting the Company’s own assumptions.In instances where the determination of the fair value hierarchy measurement is based on inputs from different levels of the fair value hierarchy, the levelin the fair value hierarchy within which the entire fair value measurement falls is based on the lowest level input that is significant to the fair valuemeasurement in its entirety. The Company’s assessment of the significance of a particular input to the fair value measurement in its entirety requiresjudgment of factors specific to the asset or liability. Transfers between levels within the fair value hierarchy are recognized by the Company on the date of thechange in circumstances that requires such transfer. There were no transfers between levels during the years ending December 31, 2018 or December 31, 2017.The following table sets forth, by level within the fair value hierarchy, the financial assets and liabilities recorded at fair value on a recurring basis as ofDecember 31, 2018 and 2017 (in millions): December 31, 2018 Level 1 Level 2 Level 3 Investments in equity securities $137 $137 $- $- Available-for-sale securities 93 - 93 - Trading securities 11 - 11 - Fair value of interest rate swap agreements 3 - 3 - Total assets $ 244 $ 137 $ 107 $ - Contingent Value Right (CVR) $- $- $- $- Fair value of interest rate swap agreements 2 - 2 - Total liabilities $2 $- $2 $- December 31, 2017 Level 1 Level 2 Level 3 Available-for-sale securities $252 $132 $120 $- Trading securities 37 37 - - Fair value of interest rate swap agreements 1 - 1 - Total assets $ 290 $ 169 $ 121 $- Contingent Value Right (CVR) $2 $2 $- $- CVR-related liability 256 - - 256 Fair value of interest rate swap agreements 18 - 18 - Total liabilities $276 $2 $18 $256 138Table of ContentsCOMMUNITY HEALTH SYSTEMS, INC. AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued) Investments in Equity Securities, Available-for-sale Securities and Trading SecuritiesInvestments in equity securities and trading securities classified as Level 1 are measured using quoted market prices. Level 2 available-for-sale securitiesand trading securities primarily consisted of bonds and notes issued by the United States government and its agencies and domestic and foreign corporations.The estimated fair values of these securities are determined using various valuation techniques, including a multi-dimensional relational model thatincorporates standard observable inputs and assumptions such as benchmark yields, reported trades, broker/dealer quotes, issuer spreads, benchmarksecurities, bids/offers and other pertinent reference data.Supplemental information regarding the Company’s available-for-sale securities (all of which had no withdrawal restrictions) is set forth in the table below(in millions): Amortized Cost Gross Unrealized Gains Gross Unrealized Losses EstimatedFairValues As of December 31, 2018: Debt securities Government $54 $- $(3) $51 Corporate 34 - (2) 32 Mortgage and asset-backed securities 10 - - 10 Totals $98 $- $(5) $93 Amortized Cost Gross Unrealized Gains Gross Unrealized Losses EstimatedFairValues As of December 31, 2017: Debt securities and debt-based mutual funds Government and corporate $189 $- $(4) $185 Equity securities and equity-based mutual funds Domestic 51 10 - 61 International 5 1 - 6 Totals $245 $11 $(4) $252 As of December 31, 2018 and 2017, investments with aggregate estimated fair values of approximately $89 million (121 investments) and $181 million(246 investments), respectively, generated the gross unrealized losses disclosed in the above table. At each reporting date, the Company performs anevaluation of impaired securities to determine if the unrealized losses are other-than-temporary. This evaluation considers a number of factors including, butnot limited to, the length of time and extent to which the fair value has been less than cost, and management’s ability and intent to hold the securities untilfair value recovers. Based on the results of this evaluation, management concluded that as of December 31, 2018, there were no other-than-temporary lossesrelated to available-for-sale securities. The recent declines in value of the securities and/or length of time they have been below cost, as well as theCompany’s ability and intent to hold the securities for a reasonable period of time sufficient for a projected recovery of fair value, have caused managementto conclude that the securities, that have generated gross unrealized losses, were not other-than-temporarily impaired. Management will continue to monitorand evaluate the recoverability of the Company’s available-for-sale securities.The contractual maturities of debt-based securities held by the Company as of December 31, 2018 and 2017, excluding mutual fund holdings, are set forthin the table below (in millions). Expected maturities will differ 139Table of ContentsCOMMUNITY HEALTH SYSTEMS, INC. AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued) from contractual maturities because the issuers of the debt securities may have the right to prepay their obligations without prepayment penalties. December 31, 2018 December 31, 2017 AmortizedCost EstimatedFair Values AmortizedCost EstimatedFair Values Within 1 year $ 14 $ 14 $ 4 $ 4 After 1 year and through year 5 20 19 46 46 After 5 years and through year 10 25 24 32 31 After 10 years 39 36 41 40 Gross realized gains and losses on sales of available-for-sale securities are summarized in the table below (in millions): Year Ended December 31, 2018 2017 2016 Realized gains $ - $ 3 $ 28 Realized losses - (2) (6) Other investment income, which includes interest and dividends, related to all investment securities were $7 million, $8 million and $7 million for theyears ended December 31, 2018, 2017 and 2016, respectively.Net gains and losses recognized during the year ended December 31, 2018 for investments in equity securities, which are broken out between investmentssold during the year and investments held at the end of the year, are summarized in the table below (in millions): Year EndedDecember 31, 2018 Net gains and (losses) recognized during the year on equity securities $(7) Less: Net gains and (losses) recognized during the year on equity securities sold during the year 1 Unrealized gains and (losses) recognized during the year on equity securities held at December 31, 2018 $(8) Contingent Value Right (CVR)The CVR represented the estimate of the fair value for the contingent consideration paid to HMA shareholders as part of the HMA merger. The CVRs werelisted on the Nasdaq and the valuation of the CVRs was based on the quoted trading price for the CVRs on the last day of the period. Changes in theestimated fair value of the CVR were recorded through the consolidated statements of loss. In January 2019, the CVRs were terminated and removed fromlisting with Nasdaq after the determination that no amount was payable under the CVR agreement.CVR-related LiabilityThe CVR-related legal liability (prior to being reclassified as a current liability on the Company’s consolidated balance sheet as noted below) representedthe Company’s estimate of fair value of the liability associated with the legal matters assumed in the HMA merger, which at December 31, 2017 was includedin other long-term liabilities in the accompanying consolidated balance sheet. This liability did not include those matters previously 140Table of ContentsCOMMUNITY HEALTH SYSTEMS, INC. AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued) accrued by HMA as a probable contingency, which were settled and paid during the year ended December 31, 2015. To develop the estimate of fair value, theCompany engaged an independent third-party valuation firm to measure the liability. The valuation was made utilizing the Company’s estimates of futureoutcomes for each legal case and simulating future outcomes based on the timing, probability and distribution of several scenarios using a Monte Carlosimulation model. Other inputs were then utilized for discounting the liability to the measurement date. The HMA legal matters underlying this fair valueestimate were evaluated by management to determine the likelihood and impact of each of the potential outcomes. Using that information, as well as thepotential correlation and variability associated with each case, a fair value was determined for the estimated future cash outflows to conclude or settle theHMA legal matters included in the analysis, excluding legal fees (which are expensed as incurred). Because of the unobservable nature of the majority of theinputs used to value the liability, the Company classified the fair value measurement as a Level 3 measurement in the fair value hierarchy. Prior toDecember 31, 2018, changes in the fair value of the CVR related legal liability were recorded in future periods through the consolidated statements of loss.At December 31, 2018, the CVR-related legal liability was zero after taking into account the Company’s payment of the amounts agreed to in the finalglobal resolution and settlement of certain HMA legal matters during the three months ended December 31, 2018, as further discussed in Note 16.Fair Value of Interest Rate Swap AgreementsThe valuation of the Company’s interest rate swap agreements is determined using market valuation techniques, including discounted cash flow analysison the expected cash flows of each agreement. This analysis reflects the contractual terms of the agreement, including the period to maturity, and usesobservable market-based inputs, including forward interest rate curves. The fair value of interest rate swap agreements are determined by netting thediscounted future fixed cash payments and the discounted expected variable cash receipts. The variable cash receipts are based on the expectation of futureinterest rates based on observable market forward interest rate curves and the notional amount being hedged.The Company incorporates CVAs to appropriately reflect both its own nonperformance or credit risk and the respective counterparty’s nonperformance orcredit risk in the fair value measurements. In adjusting the fair value of its interest rate swap agreements for the effect of nonperformance or credit risk, theCompany has considered the impact of any netting features included in the agreements. The CVA on the Company’s interest rate swap agreements had animmaterial effect on the fair value of the related asset or liability at December 31, 2018. The CVA on the Company’s interest rate swap agreements resulted ina decrease in the fair value of the related liability of $1 million and an after-tax adjustment of less than $1 million to OCI at December 31, 2017.The majority of the inputs used to value the Company’s interest rate swap agreements, including the forward interest rate curves and market perceptions ofthe Company’s credit risk used in the CVAs, are observable inputs available to a market participant. As a result, the Company has determined that the interestrate swap valuations are classified in Level 2 of the fair value hierarchy.10. LEASESThe Company leases hospitals, medical office buildings, and certain equipment under capital and operating lease agreements. During 2018, 2017 and2016, the Company entered into capital lease obligations of $6 million, $31 million and $179 million, respectively. All lease agreements generally requirethe Company to pay maintenance, repairs, property taxes and insurance costs. 141Table of ContentsCOMMUNITY HEALTH SYSTEMS, INC. AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued) Commitments relating to noncancellable operating and capital leases and financing obligations for each of the next five years and thereafter are as follows(in millions): Year Ending December 31, Operating(1) Capital FinancingObligations 2019 $188 $12 $12 2020 157 10 9 2021 121 8 10 2022 98 7 10 2023 79 14 10 Thereafter 234 121 106 Total minimum future payments $ 877 172 157 Less: Imputed interest (80) (18) Total capital lease and financing obligations 92 139 Less: Current portion (8) (5) Long-term capital lease and financing obligations $84 $134 (1)Minimum lease payments have not been reduced by minimum sublease rentals due in the future, which are considered immaterial.On December 22, 2016, the Company completed the sale and leaseback of ten medical office buildings for net proceeds of $159 million to HCP, Inc. Thebuildings, with a combined total of 756,183 square feet, are located in five states and support a wide array of diagnostic, medical and surgical services in anoutpatient setting for the respective nearby hospitals. Because of the Company’s continuing involvement in these leased buildings, the transaction does notqualify for sale treatment and the related leases have been recorded as financing obligations in the Company’s consolidated balance sheet at December 31,2018 and 2017.Assets capitalized under capital leases and financing obligations as reflected in the accompanying consolidated balance sheets were $53 million of landand improvements, $552 million of buildings and improvements and $16 million of equipment and fixtures as of December 31, 2018 and $63 million of landand improvements, $774 million of buildings and improvements and $28 million of equipment and fixtures as of December 31, 2017. The accumulateddepreciation related to assets under capital leases and financing obligations was $193 million and $218 million as of December 31, 2018 and 2017,respectively. Depreciation of assets under capital leases and financing obligations is included in depreciation and amortization expense and amortization ofdebt discounts on capital lease and financing obligations is included in interest expense in the accompanying consolidated statements of loss.11. EMPLOYEE BENEFIT PLANSThe Company maintains various benefit plans, including defined contribution plans, defined benefit plans and deferred compensation plans, for whichcertain of the Company’s subsidiaries are the plan sponsors. The CHS/Community Health Systems, Inc. Retirement Savings Plan is a defined contributionplan which covers the majority of the Company’s employees. Employees at these locations whose employment is covered by collective bargainingagreements are generally eligible to participate in the CHS/Community Health Systems, Inc. Standard 401(k) Plan. Total expense to the Company under the401(k) plans was $90 million, $94 million and $98 million for the years ended December 31, 2018, 2017 and 2016, respectively, and is recorded in salariesand benefits expense on the consolidated statements of loss. 142Table of ContentsCOMMUNITY HEALTH SYSTEMS, INC. AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued) The Company maintains unfunded deferred compensation plans that allow participants to defer receipt of a portion of their compensation. The liability forthe deferred compensation plans was $163 million and $189 million as of December 31, 2018 and 2017, respectively, and is included in other long-termliabilities on the consolidated balance sheets. The Company had assets of $146 million and $173 million as of December 31, 2018 and 2017, respectively, ina non-qualified plan trust generally designated to pay benefits of the deferred compensation plans, consisting of equity securities of $32 million and$37 million as of December 31, 2018 and 2017, respectively, and company-owned life insurance contracts of $114 million and $136 million as ofDecember 31, 2018 and 2017, respectively.The Company provides an unfunded Supplemental Executive Retirement Plan (“SERP”) for certain members of its executive management. The Companyuses a December 31 measurement date for the benefit obligations and a January 1 measurement date for its net periodic costs for the SERP. Variances fromactuarially assumed rates will result in increases or decreases in benefit obligations and net periodic cost in future periods. Benefits expense under the SERPwas $9 million, $16 million and $12 million for the years ended December 31, 2018, 2017 and 2016, respectively. The accrued benefit liability for the SERPtotaled $66 million and $83 million at December 31, 2018 and 2017, respectively, and is included in other long-term liabilities on the consolidated balancesheets. The weighted-average assumptions used in determining net periodic cost for the year ended December 31, 2018 was a discount rate of 3.4% andannual salary increase of 2.0%. The Company had equity securities in a rabbi trust generally designated to pay benefits of the SERP in the amounts of$74 million and $99 million at December 31, 2018 and 2017, respectively. These amounts are included in other assets, net on the consolidated balancesheets.During the years ended December 31, 2018 and 2017, certain members of executive management of the Company that were participants in the SERPretired and met the requirements for payout of their SERP retirement benefit. The SERP payout provisions require payment to the participant in an actuariallydetermined lump sum amount six months after the participant retires from the Company. Such amounts were paid out of the rabbi trust. As required by thepension accounting rules in U.S. GAAP, the Company recognized a non-cash settlement loss of approximately $2 million and $6 million during the yearsended December 31, 2018 and 2017, respectively.The Company maintains the CHS/Community Health Systems, Inc. Retirement Income Plan (“Pension Plan”), which is a defined benefit, non-contributorypension plan that covers certain employees at three of its formerly owned hospitals. The Pension Plan provides benefits to covered individuals satisfyingcertain age and service requirements. Employer contributions to the Pension Plan are in accordance with the minimum funding requirements of the EmployeeRetirement Income Security Act of 1974, as amended. The Company expects to make contributions of approximately $1 million to the Pension Plan in 2019.The Company uses a December 31 measurement date for the benefit obligations and a January 1 measurement date for its net periodic costs for the PensionPlan. Variances from actuarially assumed rates will result in increases or decreases in benefit obligations, net periodic cost and funding requirements in futureperiods. Benefits expense under the Pension Plan was less than $1 million for both of the years ended December 31, 2018 and 2016, and was $7 million forthe year ended December 31, 2017. The accrued benefit liability for the Pension Plan totaled $11 million and $12 million at December 31, 2018 and 2017,respectively, and is included in other long-term liabilities on the consolidated balance sheets. The weighted-average assumptions used for determining thenet periodic cost for the year ended December 31, 2018 was a discount rate of 3.6% and the expected long-term rate of return on assets of 6.5%.12. STOCKHOLDERS’ (DEFICIT) EQUITYAuthorized capital shares of the Company include 400,000,000 shares of capital stock consisting of 300,000,000 shares of common stock and100,000,000 shares of preferred stock. Each of the aforementioned classes of capital stock has a par value of $0.01 per share. Shares of preferred stock, none ofwhich were 143Table of ContentsCOMMUNITY HEALTH SYSTEMS, INC. AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued) outstanding as of December 31, 2018, may be issued in one or more series having such rights, preferences and other provisions as determined by the Board ofDirectors without approval by the holders of common stock.On November 6, 2015, the Company adopted an open market repurchase program for up to 10,000,000 shares of the Company’s common stock, not toexceed $300 million in repurchases. The repurchase program expired on November 6, 2018. During the year ended December 31, 2015, the Companyrepurchased and retired 532,188 shares at a weighted-average price of $27.31 per share, which is the cumulative number of shares repurchased and retiredunder this program. No shares were repurchased under this program during the years ended December 31, 2018, 2017 and 2016.The Company is a holding company which operates through its subsidiaries. The Company’s Credit Facility and the indentures governing each series ofour outstanding notes contain various covenants under which the assets of the subsidiaries of the Company are subject to certain restrictions relating to,among other matters, dividends and distributions, as referenced in the paragraph below.With the exception of a special cash dividend of $0.25 per share paid by the Company in December 2012, historically, the Company has not paid anycash dividends. Subject to certain exceptions, the Company’s Credit Facility limits the ability of the Company’s subsidiaries to pay dividends and makedistributions to the Company, and limits the Company’s ability to pay dividends and/or repurchase stock, to an amount not to exceed $200 million in theaggregate plus an additional $25 million in any particular year plus the aggregate amount of proceeds from the exercise of stock options. The indenturesgoverning the senior and senior secured notes also restrict the Company’s subsidiaries from, among other matters, paying dividends and making distributionsto the Company, which thereby limits the Company’s ability to pay dividends and/or repurchase stock. The non-cash dividend of approximately$713 million recorded by the Company during the year ended December 31, 2016 to reflect the distribution of the net assets of QHC was a permittedtransaction under the Company’s Credit Facility. As of December 31, 2018, under the most restrictive test in these agreements (and subject to certainexceptions), the Company has approximately $100 million available with which to pay permitted dividends and/or repurchase shares of stock or make otherrestricted payments.The following schedule discloses the effects of changes in the Company’s ownership interest in its less-than-wholly-owned subsidiaries on CommunityHealth Systems, Inc. stockholders’ deficit (in millions): Year Ended December 31, 2018 2017 2016 Net loss attributable to Community Health Systems, Inc. stockholders $(788) $(2,459) $(1,721) Transfers from the noncontrolling interests: Net decrease in Community Health Systems, Inc. paid-in-capital for purchase ofsubsidiary partnership interests (4) (2) (9) Net transfers from the noncontrolling interests (4) (2) (9) Change to Community Health Systems, Inc. stockholders’ deficit from net loss attributable toCommunity Health Systems, Inc. stockholders and transfers to noncontrolling interests $(792) $(2,461) $(1,730) 144Table of ContentsCOMMUNITY HEALTH SYSTEMS, INC. AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued) 13. EARNINGS PER SHAREThe following table sets forth the components of the numerator and denominator for the computation of basic and diluted (loss) earnings per share for lossfrom continuing operations, discontinued operations and net loss attributable to Community Health Systems, Inc. common stockholders (in millions, exceptshare data): Year Ended December 31, 2018 2017 2016 Numerator: Loss from continuing operations, net of taxes $(704) $(2,384) $(1,611) Less: Income from continuing operations attributable tononcontrolling interests, net of taxes 84 63 95 Loss from continuing operations attributable to Community HealthSystems, Inc. common stockholders — basic and diluted $(788) $(2,447) $(1,706) Loss from discontinued operations, net of taxes $- $(12) $(15) Less: Loss from discontinued operations attributable tononcontrolling interests, net of taxes - - - Loss from discontinued operations attributable to CommunityHealth Systems, Inc. common stockholders — basic and diluted $- $(12) $(15) Denominator: Weighted-average number of shares outstanding — basic 112,728,274 111,769,821 110,730,971 Effect of dilutive securities: Restricted stock awards - - - Employee stock options - - - Other equity-based awards - - - Weighted-average number of shares outstanding — diluted 112,728,274 111,769,821 110,730,971 The Company generated a loss from continuing operations attributable to Community Health Systems, Inc. common stockholders for the years endedDecember 31, 2018 and 2017, so the effect of dilutive securities is not considered because their effect would be antidilutive. If the Company had generatedincome from continuing operations during the years ended December 31, 2018, 2017 and 2016, the effect of restricted stock awards, employee stock options,and other equity-based awards on the diluted shares calculation would have been an increase in shares of 68,687, 111,464 and 331,518, respectively. Year Ended December 31, 2018 2017 2016 Dilutive securities outstanding not included in the computation of earnings per sharebecause their effect is antidilutive: Employee stock options and restricted stock awards 2,152,408 3,008,919 2,554,627 145Table of ContentsCOMMUNITY HEALTH SYSTEMS, INC. AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued) 14. EQUITY INVESTMENTSAs of December 31, 2018, the Company owned equity interests of 38.0% in three hospitals in Macon, Georgia, in which HCA owns the majority interest.On December 31, 2016, the Company sold 80% of its ownership interest in the legal entity that owned and operated its home care agency business. As part ofthe divestiture of its controlling interest in the home care agency business, the Company recorded an equity method investment representing its remaining20% ownership.In March 2005, the Company began purchasing items, primarily medical supplies, medical equipment and pharmaceuticals, under an agreement withHealthTrust Purchasing Group, L.P. (“HealthTrust”), a group purchasing organization in which the Company is a noncontrolling partner. As of December 31,2018, the Company had a 17.7% ownership interest in HealthTrust.The Company’s investment in all of its unconsolidated affiliates was $192 million and $171 million at December 31, 2018 and 2017, respectively, and isincluded in other assets, net in the accompanying consolidated balance sheets. Included in the Company’s results of operations is the Company’s equity inpre-tax earnings from all of its investments in unconsolidated affiliates, which was $22 million, $16 million and $43 million for the years endedDecember 31, 2018, 2017 and 2016, respectively.15. OTHER COMPREHENSIVE INCOMEThe following tables present information about items reclassified out of accumulated other comprehensive loss by component for the years endedDecember 31, 2018 and 2017 (in millions, net of tax): Change in FairValue of InterestRate Swaps Change in FairValue of Available-for-Sale Securities Change inUnrecognizedPension CostComponents AccumulatedComprehensiveIncome (Loss) Balance as of December 31, 2017 $(12) $(2) $(7) $(21) Other comprehensive incomebefore reclassifications 12 (2) (2) 8 Amounts reclassified fromaccumulated othercomprehensive income 8 - 1 9 Net current-period othercomprehensive income 20 (2) (1) 17 Adoption of ASU 2016-01 and2018-02 (3) (3) - (6) Balance as of December 31, 2018 $5 $(7) $(8) $(10) 146Table of ContentsCOMMUNITY HEALTH SYSTEMS, INC. AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued) Change in FairValue of InterestRate Swaps Change in FairValue of Available-for-Sale Securities Change inUnrecognizedPension CostComponents AccumulatedComprehensiveIncome (Loss) Balance as of December 31, 2016 $(31) $(10) $(21) $(62) Other comprehensive income beforereclassifications - 8 5 13 Amounts reclassified fromaccumulated other comprehensiveincome 19 - 9 28 Net current-period othercomprehensive income 19 8 14 41 Balance as of December 31, 2017 $(12) $(2) $(7) $(21) The following tables present a subtotal for each significant reclassification to net loss out of AOCL and the line item affected in the accompanyingconsolidated statements of loss for the years ended December 31, 2018 and 2017 (in millions): Amount reclassifiedfrom AOCL Affected line item in thestatement where net(loss) income is presentedDetails about accumulated othercomprehensive (loss) income components Year EndedDecember 31,2018 Gains and losses on cash flow hedges Interest rate swaps $(10) Interest expense, net 2 Tax benefit $(8) Net of taxAmortization of defined benefit pension items Prior service costs $(1) Salaries and benefitsSettlement losses recognized (2) Salaries and benefits (3) Total before tax 2 Tax benefit $(1) Net of tax 147Table of ContentsCOMMUNITY HEALTH SYSTEMS, INC. AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued) Amount reclassifiedfromAOCL Affected line item in thestatement where net(loss) income is presentedDetails about accumulated othercomprehensive (loss) income components Year EndedDecember 31,2017 Gains and losses on cash flow hedges Interest rate swaps $(30) Interest expense, net 11 Tax benefit $(19) Net of taxAmortization of defined benefit pension items Prior service costs $(2) Salaries and benefitsActuarial losses (1) Salaries and benefitsSettlement losses recognized (13) Salaries and benefits (16) Total before tax 7 Tax benefit $(9) Net of tax16. COMMITMENTS AND CONTINGENCIESConstruction and Other Capital Commitments. Pursuant to a hospital purchase agreement in effect as of December 31, 2018, the Company is required tobuild replacement facilities in La Porte, Indiana and Knox, Indiana. The estimated construction costs, including equipment costs, for the La Porte and Starkereplacement facilities are currently estimated to be approximately $128 million and $15 million, respectively, of which approximately $6 million has beenincurred to date for the construction of La Porte. In addition, under other purchase agreements outstanding at December 31, 2018, the Company hascommitted to spend approximately $64 million for costs such as capital improvements, equipment, selected leases and physician recruiting. Thesecommitments are required to be fulfilled generally over a five to seven-year period after acquisition. Through December 31, 2018, the Company has spentapproximately $50 million related to these commitments.Physician Recruiting Commitments. As part of its physician recruitment strategy, the Company provides income guarantee agreements to certainphysicians who agree to relocate to its communities and commit to remain in practice there. Under such agreements, the Company is required to makepayments to the physicians in excess of the amounts they earned in their practice up to the amount of the income guarantee. These income guarantee periodsare typically for 12 months. Such payments are recoverable by the Company from physicians who do not fulfill their commitment period, which is typicallythree years, to the respective community. At December 31, 2018, the maximum potential amount of future payments under these guarantees in excess of theliability recorded is $26 million.Professional Liability Claims. As part of the Company’s business of owning and operating hospitals, it is subject to legal actions alleging liability on itspart. The Company accrues for losses resulting from such liability claims, as well as loss adjustment expenses that are out-of-pocket and directly related tosuch liability claims. These direct out-of-pocket expenses include fees of outside counsel and experts. The Company does not accrue for costs that are part ofcorporate overhead, such as the costs of in-house legal and risk management departments. The losses resulting from professional liability claims primarilyconsist of estimates for known claims, as well as estimates for incurred but not reported claims. The estimates are based on specific claim facts, historicalclaim reporting and payment patterns, the nature and level of hospital operations and actuarially determined projections. The actuarially determinedprojections are based on the Company’s actual claim data, 148Table of ContentsCOMMUNITY HEALTH SYSTEMS, INC. AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued) including historic reporting and payment patterns which have been gathered over an approximate 20-year period. As discussed below, since the Companypurchases excess insurance on a claims-made basis that transfers risk to third-party insurers, the liability it accrues does include an amount for the lossescovered by its excess insurance. The Company also records a receivable for the expected reimbursement of losses covered by excess insurance. Since theCompany believes that the amount and timing of its future claims payments are reliably determinable, it discounts the amount accrued for losses resultingfrom professional liability claims using the risk-free interest rate corresponding to the timing of expected payments.The net present value of the projected payments was discounted using a weighted-average risk-free rate of 3.1%, 2.2% and 1.8% in 2018, 2017 and 2016,respectively. This liability is adjusted for new claims information in the period such information becomes known. The Company’s estimated liability forprofessional and general liability claims was $650 million and $711 million as of December 31, 2018 and 2017, respectively. The estimated undiscountedclaims liability was $710 million and $760 million as of December 31, 2018 and 2017, respectively. The current portion of the liability for professional andgeneral liability claims was $100 million and $115 million as of December 31, 2018 and 2017, respectively, and is included in other accrued liabilities in theaccompanying consolidated balance sheets, with the long-term portion recorded in other long-term liabilities. Professional malpractice expense includes thelosses resulting from professional liability claims and loss adjustment expense, as well as paid excess insurance premiums, and is presented within otheroperating expenses in the accompanying consolidated statements of loss.The Company’s processes for obtaining and analyzing claims and incident data are standardized across all of its hospitals and have been consistent formany years. The Company monitors the outcomes of the medical care services that it provides and for each reported claim, the Company obtains variousinformation concerning the facts and circumstances related to that claim. In addition, the Company routinely monitors current key statistics and volumeindicators in its assessment of utilizing historical trends. The average lag period between claim occurrence and payment of a final settlement is between threeand four years, although the facts and circumstances of individual claims could result in the timing of such payments being different from this average. Sinceclaims are paid promptly after settlement with the claimant is reached, settled claims represent approximately 1.0% of the total liability at the end of anyperiod.For purposes of estimating its individual claim accruals, the Company utilizes specific claim information, including the nature of the claim, the expectedclaim amount, the year in which the claim occurred and the laws of the jurisdiction in which the claim occurred. Once the case accruals for known claims aredetermined, information is stratified by loss layers and retentions, accident years, reported years, geography and claims relating to the acquired HMAhospitals versus claims relating to the Company’s other hospitals. Several actuarial methods are used against this data to produce estimates of ultimate paidlosses and reserves for incurred but not reported claims. Each of these methods uses company-specific historical claims data and other information. Thiscompany-specific data includes information regarding the Company’s business, including historical paid losses and loss adjustment expenses, historical andcurrent case loss reserves, actual and projected hospital statistical data, a variety of hospital census information, employed physician information,professional liability retentions for each policy year, geographic information and other data.Based on these analyses the Company determines its estimate of the professional liability claims. The determination of management’s estimate, includingthe preparation of the reserve analysis that supports such estimate, involves subjective judgment of the management. Changes in reserving data or the trendsand factors that influence reserving data may signal fundamental shifts in the Company’s future claim development patterns or may simply reflect single-period anomalies. Even if a change reflects a fundamental shift, the full extent of the change may not become evident until years later. Moreover, since theCompany’s methods and models use different types of data and the Company selects its liability from the results of all of these methods, it typically 149Table of ContentsCOMMUNITY HEALTH SYSTEMS, INC. AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued) cannot quantify the precise impact of such factors on its estimates of the liability. Due to the Company’s standardized and consistent processes for handlingclaims and the long history and depth of company-specific data, the Company’s methodologies have produced reliably determinable estimates of ultimatepaid losses.The Company is primarily self-insured for professional liability claims; however, the Company obtains excess insurance that transfers the risk of loss to athird-party insurer for claims in excess of self-insured retentions. The Company’s excess insurance is underwritten on a claims-made basis. For claims reportedprior to June 1, 2002, substantially all of the Company’s professional and general liability risks were subject to a less than $1 million per occurrence self-insured retention and for claims reported from June 1, 2002 through June 1, 2003, these self-insured retentions were $2 million per occurrence. Substantiallyall claims reported after June 1, 2003 and before June 1, 2005 are self-insured up to $4 million per claim. Substantially all claims reported on or after June 1,2005 and before June 1, 2014 are self-insured up to $5 million per claim. Substantially all claims reported on or after June 1, 2014 and before June 1, 2018are self-insured up to $10 million per claim. Substantially all claims reported on or after June 1, 2018 are self-insured up to $15 million per claim.Management on occasion has selectively increased the insured risk at certain hospitals based upon insurance pricing and other factors and may continue thatpractice in the future. Excess insurance for all hospitals has been purchased through commercial insurance companies and generally covers the Company forliabilities in excess of the self-insured retentions. The excess coverage consists of multiple layers of insurance, the sum of which totals up to $95 million peroccurrence and in the aggregate for claims reported on or after June 1, 2003, up to $145 million per occurrence and in the aggregate for claims reported on orafter January 1, 2008, up to $195 million per occurrence and in the aggregate for claims reported on or after June 1, 2010, and up to $220 million peroccurrence and in the aggregate for claims reported on or after June 1, 2015. In addition, for integrated occurrence malpractice claims, there is an additional$50 million of excess coverage for claims reported on or after June 1, 2014 and an additional $75 million of excess coverage for claims reported on or afterJune 1, 2015. For certain policy years prior to June 1, 2014, if the first aggregate layer of excess coverage becomes fully utilized, then the Company’s self-insured retention will increase to $10 million per claim for any subsequent claims in that policy year until the Company’s total aggregate coverage is met.Beginning June 1, 2018, this drop-down provision in the excess policies attaches over the $15 million per claim self-insured retention.Effective June 1, 2014, the hospitals acquired from HMA were insured on a claims-made basis as described above and through commercial insurancecompanies as described above for substantially all claims reported on or after June 1, 2014 except for physician-related claims with an occurrence date priorto June 1, 2014. Prior to June 1, 2014, the former HMA hospitals obtained insurance coverage through a wholly-owned captive insurance subsidiary and arisk retention group subsidiary which are domiciled in the Cayman Islands and South Carolina, respectively. Those insurance subsidiaries, which arecollectively referred to as the “Insurance Subsidiaries,” provided (i) claims-made coverage to all of the former HMA hospitals and (ii) occurrence-basiscoverage to most of the physicians employed by the former HMA hospitals. The employed physicians not covered by the Insurance Subsidiaries generallymaintained claims-made policies with unrelated third party insurance companies. To mitigate the exposure of the program covering the former HMAhospitals and other healthcare facilities, the Insurance Subsidiaries bought claims-made reinsurance policies from unrelated third parties for claims aboveself-retention levels of $10 million or $15 million per claim, depending on the policy year.Effective January 1, 2008, the hospitals acquired from Triad were insured on a claims-made basis as described above and through commercial insurancecompanies as described above for substantially all claims occurring on or after January 1, 2002 and reported on or after January 1, 2008. Substantially alllosses for the former Triad hospitals in periods prior to May 1, 1999 were insured through a wholly-owned insurance subsidiary of HCA, Triad’s owner priorto that time, and excess loss policies maintained by HCA. HCA has agreed to indemnify the former Triad hospitals in respect of claims covered by suchinsurance policies arising prior to May 1, 1999. After May 1, 1999 through December 31, 2006, the former Triad hospitals obtained insurance coverage on aclaims 150Table of ContentsCOMMUNITY HEALTH SYSTEMS, INC. AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued) incurred basis from HCA’s wholly-owned insurance subsidiary, with excess coverage obtained from other carriers that is subject to certain deductibles.Effective for claims incurred after December 31, 2006, Triad began insuring its claims from $1 million to $5 million through its wholly-owned captiveinsurance company, replacing the coverage provided by HCA. Substantially all claims occurring during 2007 were self-insured up to $10 million per claim.Legal Matters. The Company is a party to various legal, regulatory and governmental proceedings incidental to its business. Based on currentknowledge, management does not believe that loss contingencies arising from pending legal, regulatory and governmental matters, including the mattersdescribed herein, will have a material adverse effect on the consolidated financial position or liquidity of the Company. However, in light of the inherentuncertainties involved in pending legal, regulatory and governmental matters, some of which are beyond the Company’s control, and the very large orindeterminate damages sought in some of these matters, an adverse outcome in one or more of these matters could be material to the Company’s results ofoperations or cash flows for any particular reporting period.With respect to all legal, regulatory and governmental proceedings, the Company considers the likelihood of a negative outcome. If the Companydetermines the likelihood of a negative outcome with respect to any such matter is probable and the amount of the loss can be reasonably estimated, theCompany records an accrual for the estimated loss for the expected outcome of the matter. If the likelihood of a negative outcome with respect to materialmatters is reasonably possible and the Company is able to determine an estimate of the possible loss or a range of loss, whether in excess of a related accruedliability or where there is no accrued liability, the Company discloses the estimate of the possible loss or range of loss. However, the Company is unable toestimate a possible loss or range of loss in some instances based on the significant uncertainties involved in, and/or the preliminary nature of, certain legal,regulatory and governmental matters.In connection with the spin-off of Quorum Health Corporation (“QHC”), the Company agreed to indemnify QHC for certain liabilities relating tooutcomes or events occurring prior to April 29, 2016, the closing date of the spin-off, including (i) certain claims and proceedings that were known to beoutstanding at or prior to the consummation of the spin-off and involved multiple facilities and (ii) certain claims, proceedings and investigations bygovernmental authorities or private plaintiffs related to activities occurring at or related to QHC’s healthcare facilities prior to the closing date of the spin-off,but only to the extent, in the case of clause (ii), that such claims are covered by insurance policies maintained by the Company, including professionalliability and employer practices. Notwithstanding the foregoing, the Company is not required to indemnify QHC in respect of any claims or proceedingsarising out of or related to the business operations of Quorum Health Resources, LLC at any time or QHC’s compliance with the corporate integrityagreement. Subsequent to the spin-off of QHC, the Office of the Inspector General provided the Company with written assurance that it would look solely atQHC for compliance for its facilities under the Company’s Corporate Integrity Agreement; however, the Office of the Inspector General declined to enter intoa separate corporate integrity agreement with QHC.HMA Legal Matters and Related CVR AgreementOn September 25, 2018, the Company announced a global resolution and settlement agreements ending the U.S. Department of Justice investigations intocertain conduct of HMA and its affiliated entities and settling qui tam lawsuits that were initiated and pending, and known to the Company, before theCompany’s acquisition of HMA, under which resolution the Company made total payments of $266 million (including interest) during the fourth quarter of2018. Based on the total costs incurred and settlements paid (including with respect to this global settlement), no payment was due to the holders of thecontingent value rights (“CVRs”) that were issued to shareholders of HMA as part of the consideration in the Company’s acquisition by merger of HMA inJanuary 2014. 151Table of ContentsCOMMUNITY HEALTH SYSTEMS, INC. AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued) The CVR agreement entitled the holder to receive a one-time cash payment of up to $1.00 per CVR, subject to downward adjustment (but not below zero)based on the final resolution of certain litigation, investigations, or other actions or proceedings (the “HMA Legal Matters”) related to HMA or its affiliateswhich existed on or prior to July 29, 2013 (the date of the Company’s merger agreement with HMA). Based on the amount of losses incurred by the Companyin connection with the HMA Legal Matters as more specifically provided in the CVR agreement, which generally included the amount paid for damages,costs, fees and expenses (including, without limitation, attorneys’ fees and expenses), and all fines, penalties, settlement amounts, indemnificationobligations and other liabilities, no amount was payable to the holders of CVRs under the CVR agreement. In January 2019, the Company provided notice tothe trustee under the CVR agreement of this determination in accordance with the terms of the CVR agreement. As a result of the determination that noamount was payable under the CVRs, the CVR agreement has terminated, and in January 2019, the CVRs were removed from listing with Nasdaq andderegistered with the Securities and Exchange Commission.Other Probable ContingenciesBecker v. Community Health Systems, Inc. d/b/a Community Health Systems Professional Services Corporation d/b/a Community Health Systems d/b/aCommunity Health Systems PSC, Inc. d/b/a Rockwood Clinic P.S. and Rockwood Clinic, P.S. (Superior Court, Spokane, Washington). This suit was filed onFebruary 29, 2012, by a former chief financial officer at Rockwood Clinic in Spokane, Washington. Becker claims he was wrongfully terminated for allegedlyrefusing to certify a budget for Rockwood Clinic in 2012. On February 29, 2012, he also filed an administrative complaint with the Department of Labor,Occupational Safety and Health Administration alleging that he is a whistleblower under Sarbanes-Oxley, which was dismissed by the agency and wasappealed to an administrative law judge for a hearing that occurred on January 19-26, 2016. In a decision dated November 9, 2016, the law judge awardedBecker approximately $1.9 million for front pay, back pay and emotional damages with attorney fees to be later determined. The Company has appealed theaward to the Administrative Review Board and is awaiting its decision. At a hearing on July 27, 2012, the trial court dismissed Community Health Systems,Inc. from the state case and subsequently certified the state case for an interlocutory appeal of the denial to dismiss his employer and the managementcompany. The appellate court accepted the interlocutory appeal, and it was argued on April 30, 2014. On August 14, 2014, the court denied the Company’sappeal. On October 20, 2014, the Company filed a petition to review the denial with the Washington Supreme Court. The appeal was accepted and oralargument was heard on June 9, 2015. On September 15, 2015, the court denied the Company’s appeal and remanded to the trial court; a previous trial settingof September 12, 2016 has been vacated and not reset. The Company continues to vigorously defend these actions. 152Table of ContentsCOMMUNITY HEALTH SYSTEMS, INC. AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued) Summary of Recorded AmountsThe table below presents a reconciliation of the beginning and ending liability balances (in millions) during the years ended December 31, 2018 and2017, with respect to the Company’s determination of the contingencies of the Company in respect of which an accrual has been recorded. OtherProbableContingencies Balance as of December 31, 2016 $14 Expense 14 Cash payments (14) Balance as of December 31, 2017 14 Expense 7 Reserve for insured claim 4 Cash payments (6) Balance as of December 31, 2018 $19 In accordance with applicable accounting guidance, the Company establishes a liability for litigation, regulatory and governmental matters for which,based on information currently available, the Company believes that a negative outcome is known or is probable and the amount of the loss is reasonablyestimable. For all such matters (whether or not discussed in this contingencies footnote), such amounts have been recorded in other accrued liabilities on theconsolidated balance sheet and are included in the table above. Due to the uncertainties and difficulty in predicting the ultimate resolution of thesecontingencies, the actual amount could differ from the estimated amount reflected as a liability on the consolidated balance sheet.In the aggregate, attorneys’ fees and other costs incurred but not included in the table above related to probable contingencies, and CVR-relatedcontingencies accounted for at fair value, totaled $2 million for both the years ended December 31, 2018 and 2017, and are included in other operatingexpenses in the accompanying consolidated statements of loss.Matters for which an Outcome Cannot be AssessedFor the following legal matter, due to the uncertainties surrounding the ultimate outcome of the case, the Company cannot at this time assess what theoutcome may be and is further unable to determine any estimate of loss or range of loss.Class Action Shareholder Federal Securities Cases. Three purported class action cases have been filed in the United States District Court for the MiddleDistrict of Tennessee; namely, Norfolk County Retirement System v. Community Health Systems, Inc., et al., filed May 9, 2011; De Zheng v. CommunityHealth Systems, Inc., et al., filed May 12, 2011; and Minneapolis Firefighters Relief Association v. Community Health Systems, Inc., et al., filed June 21,2011. All three seek class certification on behalf of purchasers of the Company’s common stock between July 27, 2006 and April 11, 2011 and allege thatmisleading statements resulted in artificially inflated prices for the Company’s common stock. In December 2011, the cases were consolidated for pretrialpurposes and NYC Funds and its counsel were selected as lead plaintiffs/lead plaintiffs’ counsel. In lieu of ruling on the Company’s motion to dismiss, thecourt permitted the plaintiffs to file a first amended consolidated class action complaint, which was filed on October 5, 2015. The Company’s motion todismiss was filed on November 4, 2015 and oral argument was held on April 11, 2016. The Company’s motion to dismiss was granted on June 16, 153Table of ContentsCOMMUNITY HEALTH SYSTEMS, INC. AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued) 2016 and on June 27, 2016, the plaintiffs filed a notice of appeal to the Sixth Circuit Court of Appeals. The matter was heard on May 3, 2017. OnDecember 13, 2017, the Sixth Circuit reversed the trial court’s dismissal of the case and remanded it to the District Court. The Company filed a renewedpartial motion to dismiss on February 9, 2018, which was denied by the District Court on September 24, 2018. The Company also filed a petition for a writ ofcertiorari to the United States Supreme Court on April 18, 2018 seeking review of the Sixth Circuit’s decision. The United States Supreme Court denied thepetition for a writ of certiorari on October 1, 2018. Plaintiff’s motion for class certification is pending. The Company believes this consolidated matter iswithout merit and will vigorously defend this case.17. SUBSEQUENT EVENTSThe Company has evaluated all material events occurring subsequent to the balance sheet date for events requiring disclosure or recognition in theconsolidated financial statements.On January, 1 2019, one or more subsidiaries of the Company sold Mary Black Health System – Spartanburg (207 licensed beds) in Spartanburg, SouthCarolina, and Mary Black Health System – Gaffney (125 licensed beds) in Gaffney, South Carolina and their associated assets to Spartanburg RegionalHealthcare System for approximately $76 million in cash pursuant to the terms of a definitive agreement which had been entered into on October 11, 2018.On January 31, 2019, one or more subsidiaries of the Company sold Memorial Hospital of Salem County (126 licensed beds) in Salem, New Jersey and itsassociated assets to Community Healthcare Associates, LLC for approximately $2 million in cash pursuant to the terms of a definitive agreement which hadbeen entered into on March 15, 2018.On January 8, 2019, using a portion of the net proceeds from the divestitures that preliminarily closed on December 31, 2018 and that closed effectiveJanuary 1, 2019, the Company paid approximately $65 million to reduce its outstanding borrowings on the Term H Loan under the Credit Facility.On February 15, 2019, the Company and CHS entered into Amendment No. 1 (the “Agreement”), among the Company, CHS, the subsidiary guarantorsparty thereto, the lenders party thereto and Credit Suisse AG, Cayman Islands Branch, as administrative agent and collateral agent, to the Credit Facility. TheCredit Facility was amended by the Agreement, with requisite covenant lender approval, to amend the first lien net debt to EBITDA ratio financial covenantand to reduce the extended revolving credit commitments to $385 million. The amended financial covenant provides for a maximum first lien net debt toEBITDA ratio of 5.00 to 1.0 from July 1, 2018 through December 31, 2018, 5.25 to 1.0 from January 1, 2019 through December 31, 2019, 5.00 to 1.00 fromJanuary 1, 2020 through June 30, 2020, 4.50 to 1.00 from July 1, 2020 through September 30, 2020, and 4.25 to 1.0 thereafter. In addition, CHS agreedpursuant to the Agreement to further restrict its ability to make restricted payments. The revolving credit commitments will terminate on January 27, 2021.The amended Credit Facility includes a 91-day springing maturity date applicable if more than $250 million in the aggregate principal amount of our 8%Senior Notes, 71⁄8% Senior Notes, Term H Facility or refinancings thereof are scheduled to mature or similarly become due within 91 days of such date. 154Table of ContentsCOMMUNITY HEALTH SYSTEMS, INC. AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued) 18. QUARTERLY FINANCIAL DATA (UNAUDITED) Quarter 1st 2nd 3rd 4th Total (2) (in millions, except share and per share data) Year ended December 31, 2018: Net operating revenues $3,689 $3,562 $3,451 $3,453 $14,155Loss from continuing operations before income taxes (13) (129) (204) (369) (715) Loss from continuing operations (6) (91) (308) (299) (704) Loss from discontinued operations - - - - - Net loss attributable to Community Health Systems, Inc. $(25) $(110) $(325) $(328) $(788) Basic loss per share attributable to Community Health Systems,Inc. common stockholders: Continuing operations $(0.22) $(0.97) $(2.88) $(2.91) $(6.99) Discontinued operations - - - - - Net loss $(0.22) $(0.97) $(2.88) $(2.91) $(6.99) Diluted loss per share attributable to Community Health Systems,Inc. common stockholders: Continuing operations $(0.22) $(0.97) $(2.88) $(2.91) $(6.99) Discontinued operations - - - - - Net loss $(0.22) $(0.97) $(2.88) $(2.91) $(6.99) Weighted-average number of shares outstanding: Basic 112,291,496 112,837,944 112,865,482 112,909,869 112,728,274 Diluted 112,291,496 112,837,944 112,865,482 112,909,869 112,728,274 Year ended December 31, 2017: Net operating revenues $4,486 $4,144 $3,666 $3,059 $15,353Loss from continuing operations before income taxes (176) (131) (147) (2,379) (2,833) Loss from continuing operations (176) (116) (88) (2,004) (2,384) Loss from discontinued operations (1) (6) (2) (3) (12) Net loss attributable to Community Health Systems, Inc. $(199) $(137) $(110) $(2,013) $(2,459) Basic loss per share attributable to Community Health Systems,Inc. common stockholders (1): Continuing operations $(1.78) $(1.17) $(0.96) $(17.95) $(21.89) Discontinued operations (0.01) (0.06) (0.02) (0.03) (0.11) Net loss $(1.79) $(1.22) $(0.98) $(17.98) $(22.00) Diluted loss per share attributable to Community Health Systems,Inc. common stockholders (1): Continuing operations $(1.78) $(1.17) $(0.96) $(17.95) $(21.89) Discontinued operations (0.01) (0.06) (0.02) (0.03) (0.11) Net loss $(1.79) $(1.22) $(0.98) $(17.98) $(22.00) Weighted-average number of shares outstanding: Basic 111,252,331 111,909,858 111,935,738 111,971,628 111,769,821 Diluted 111,252,331 111,909,858 111,935,738 111,971,628 111,769,821 (1)Total per share amounts may not add due to rounding.(2)Total quarterly amounts may not add due to rounding. 155Table of ContentsCOMMUNITY HEALTH SYSTEMS, INC. AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued) 19. SUPPLEMENTAL CONDENSED CONSOLIDATING FINANCIAL INFORMATIONThe Senior Notes due 2019, 2020 and 2022, which are senior unsecured obligations of CHS, the 51⁄8% Senior Secured Notes due 2021, and the 61⁄4%Senior Secured Notes due 2023 (collectively, “the Notes”) are guaranteed on a senior basis by the Company and by certain of its existing and subsequentlyacquired or organized 100% owned domestic subsidiaries. In addition, equity interests held by the Company in non-guarantor subsidiaries have beenpledged as collateral under the Notes, except for equity interests held in three hospitals owned jointly with a non-profit, health organization. The Notes arefully and unconditionally guaranteed on a joint and several basis, with exceptions considered customary for such guarantees, limited to the release of theguarantee when a subsidiary guarantor’s capital stock is sold, or a sale of all of the subsidiary guarantor’s assets used in operations. The following condensedconsolidating financial statements present Community Health Systems, Inc. (as parent guarantor), CHS (as the issuer), the subsidiary guarantors, thesubsidiary non-guarantors and eliminations. These condensed consolidating financial statements have been prepared and presented in accordance with SECRegulation S-X Rule 3-10 “Financial Statements of Guarantors and Issuers of Guaranteed Securities Registered or Being Registered.”The accounting policies used in the preparation of this financial information are consistent with those elsewhere in the consolidated financial statementsof the Company, except as noted below: • Intercompany receivables and payables are presented gross in the supplemental condensed consolidating balance sheets. • Cash flows from intercompany transactions are presented in cash flows from financing activities, as changes in intercompany balances withaffiliates, net. • Income tax expense is allocated from the parent guarantor to the income producing operations (other guarantors and non-guarantors) and theissuer through stockholders’ deficit. As this approach represents an allocation, the income tax expense allocation is considered non-cash forstatement of cash flow purposes. • Interest expense, net has been presented to reflect net interest expense and interest income from outstanding long-term debt and intercompanybalances.The Company’s intercompany activity consists primarily of daily cash transfers for purposes of cash management, the allocation of certain expenses andexpenditures paid for by the Parent on behalf of its subsidiaries, and the push down of investment in its subsidiaries. This activity also includes theintercompany transactions between consolidated entities as part of the ABL Facility and Receivables Facility that are further discussed in Note 7. TheCompany’s subsidiaries generally do not purchase services from one another; thus, the intercompany transactions do not represent revenue generatingtransactions. All intercompany transactions eliminate in consolidation.From time to time, subsidiaries of the Company sell and/or repurchase noncontrolling interests in consolidated subsidiaries, which may changesubsidiaries between guarantors and non-guarantors. Amounts for prior periods have been revised to reflect the status of guarantors and non-guarantors as ofDecember 31, 2018. 156Table of ContentsCOMMUNITY HEALTH SYSTEMS, INC. AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued) Condensed Consolidating Statement of LossYear Ended December 31, 2018 ParentGuarantor Issuer OtherGuarantors Non -Guarantors Eliminations Consolidated (In millions) Net operating revenues $- $(5) $8,712 $5,448 $- $14,155Operating costs and expenses: Salaries and benefits - - 3,275 3,109 - 6,384Supplies - - 1,547 808 - 2,355Other operating expenses - - 2,378 1,118 - 3,496Government and other legal settlements and related costs - - 11 - - 11Electronic health records incentive reimbursement - - (1) (3) - (4) Rent - - 174 163 - 337Depreciation and amortization - - 452 248 - 700Impairment and (gain) loss on sale of businesses, net - 29 333 306 - 668Total operating costs and expenses - 29 8,169 5,749 - 13,947(Loss) income from operations - (34) 543 (301) - 208Interest expense, net - 425 590 (39) - 976(Gain) loss from early extinguishment of debt - (32) 1 - - (31) Equity in earnings of unconsolidated affiliates 788 414 318 - (1,542) (22) Loss from continuing operations before income taxes (788) (841) (366) (262) 1,542 (715) (Benefit from) provision for income taxes - (53) 13 29 - (11) Loss from continuing operations (788) (788) (379) (291) 1,542 (704) Loss from discontinued operations, net of taxes - - - - - - Net loss (788) (788) (379) (291) 1,542 (704) Less: Net income attributable to noncontrolling interests - - - 84 - 84Net loss attributable to Community Health Systems, Inc.stockholders $(788) $(788) $(379) $(375) $1,542 $(788) 157Table of ContentsCOMMUNITY HEALTH SYSTEMS, INC. AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued) Condensed Consolidating Statement of LossYear Ended December 31, 2017 ParentGuarantor Issuer OtherGuarantors Non -Guarantors Eliminations Consolidated (In millions) Operating revenues (net of contractual allowances and discounts) $- $(22) $10,932 $7,488 $- $18,398Provision for bad debts - - 2,081 964 - 3,045Net operating revenues - (22) 8,851 6,524 - 15,353Operating costs and expenses: Salaries and benefits - - 3,652 3,724 - 7,376Supplies - - 1,651 1,021 - 2,672Other operating expenses - - 2,447 1,417 - 3,864Government and other legal settlements and related costs - - (31) - - (31) Electronic health records incentive reimbursement - - (12) (16) - (28) Rent - - 197 197 - 394Depreciation and amortization - - 515 346 - 861Impairment and (gain) loss on sale of businesses, net - - 1,219 904 - 2,123Total operating costs and expenses - - 9,638 7,593 - 17,231Loss from operations - (22) (787) (1,069) - (1,878) Interest expense, net - 327 610 (6) - 931Loss from early extinguishment of debt - 40 - - - 40Equity in earnings of unconsolidated affiliates 2,459 1,955 868 - (5,298) (16) Loss from continuing operations before income taxes (2,459) (2,344) (2,265) (1,063) 5,298 (2,833) Provision for (benefit from) income taxes - 115 (314) (250) - (449) Loss from continuing operations (2,459) (2,459) (1,951) (813) 5,298 (2,384) Discontinued operations, net of taxes: Loss from operations of entities sold or held for sale - - (4) (2) - (6) Impairment of hospitals sold or held for sale - - (5) (1) - (6) Loss from discontinued operations, net of taxes - - (9) (3) - (12) Net loss (2,459) (2,459) (1,960) (816) 5,298 (2,396) Less: Net income attributable to noncontrolling interests - - - 63 - 63Net loss attributable to Community Health Systems, Inc.stockholders $(2,459) $(2,459) $(1,960) $(879) $5,298 $(2,459) 158Table of ContentsCOMMUNITY HEALTH SYSTEMS, INC. AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued) Condensed Consolidating Statement of LossYear Ended December 31, 2016 ParentGuarantor Issuer OtherGuarantors Non -Guarantors Eliminations Consolidated (In millions) Operating revenues (net of contractual allowances and discounts) $- $(25) $11,253 $10,047 $- $21,275Provision for bad debts - - 1,719 1,118 - 2,837Net operating revenues - (25) 9,534 8,929 - 18,438Operating costs and expenses: Salaries and benefits - - 3,784 4,840 - 8,624Supplies - - 1,681 1,330 - 3,011Other operating expenses - - 2,291 1,957 - 4,248Government and other legal settlements and related costs - - 16 - - 16Electronic health records incentive reimbursement - - (36) (34) - (70) Rent - - 199 251 - 450Depreciation and amortization - - 626 474 - 1,100Impairment and (gain) loss on sale of businesses, net - - 1,262 657 - 1,919Total operating costs and expenses - - 9,823 9,475 - 19,298(Loss) income from operations - (25) (289) (546) - (860) Interest expense, net - 241 652 69 - 962Loss from early extinguishment of debt - 30 - - - 30Gain on sale of investments in unconsolidated affiliates - - (94) - - (94) Equity in earnings of unconsolidated affiliates 1,721 1,462 601 - (3,827) (43) Loss from continuing operations before income taxes (1,721) (1,758) (1,448) (615) 3,827 (1,715) (Benefit from) provision for income taxes - (37) 19 (86) - (104) Loss from continuing operations (1,721) (1,721) (1,467) (529) 3,827 (1,611) Discontinued operations, net of taxes: Loss from operations of entities sold or held for sale - - (9) 2 - (7) Impairment of hospitals sold or held for sale - - (1) (7) - (8) Loss from discontinued operations, net of taxes - - (10) (5) - (15) Net (loss) income (1,721) (1,721) (1,477) (534) 3,827 (1,626) Less: Net income attributable to noncontrolling interests - - - 95 - 95Net (loss) income attributable to Community Health Systems, Inc.stockholders $(1,721) $(1,721) $(1,477) $(629) $3,827 $(1,721) 159Table of ContentsCOMMUNITY HEALTH SYSTEMS, INC. AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued) Condensed Consolidating Statement of Comprehensive LossYear Ended December 31, 2018 ParentGuarantor Issuer OtherGuarantors Non -Guarantors Eliminations Consolidated (In millions) Net loss $(788) $(788) $(379) $(291) $1,542 $(704) Other comprehensive income (loss), net of income taxes: Net change in fair value of interest rate swaps, net of tax 20 20 - - (20) 20Net change in fair value of available-for-sale securities, net oftax (2) (2) (2) - 4 (2) Amortization and recognition of unrecognized pension costcomponents, net of tax (1) (1) (1) - 2 (1) Other comprehensive income 17 17 (3) - (14) 17Comprehensive loss (771) (771) (382) (291) 1,528 (687) Less: Comprehensive income attributable to noncontrollinginterests - - - 84 - 84Comprehensive loss attributable to Community Health Systems, Inc. stockholders $(771) $(771) $(382) $(375) $1,528 $(771) Condensed Consolidating Statement of Comprehensive LossYear Ended December 31, 2017 ParentGuarantor Issuer OtherGuarantors Non -Guarantors Eliminations Consolidated (In millions) Net loss $(2,459) $(2,459) $(1,960) $(816) $5,298 $(2,396) Other comprehensive income (loss), net of income taxes: Net change in fair value of interest rate swaps, net of tax 19 19 - - (19) 19Net change in fair value of available-for-sale securities, net oftax 8 8 8 - (16) 8Amortization and recognition of unrecognized pension costcomponents, net of tax 14 14 14 - (28) 14Other comprehensive income 41 41 22 - (63) 41Comprehensive loss (2,418) (2,418) (1,938) (816) 5,235 (2,355) Less: Comprehensive income attributable to noncontrollinginterests - - - 63 - 63Comprehensive loss attributable to Community Health Systems,Inc. stockholders $(2,418) $(2,418) $(1,938) $(879) $5,235 $(2,418) 160Table of ContentsCOMMUNITY HEALTH SYSTEMS, INC. AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued) Condensed Consolidating Statement of Comprehensive LossYear Ended December 31, 2016 ParentGuarantor Issuer OtherGuarantors Non -Guarantors Eliminations Consolidated (In millions) Net loss $(1,721) $(1,721) $(1,477) $(534) $3,827 $(1,626) Other comprehensive income (loss), net of income taxes: Net change in fair value of interest rate swaps, net of tax 17 17 - - (17) 17Net change in fair value of available-for-sale securities, net oftax (11) (11) (11) - 22 (11) Amortization and recognition of unrecognized pension costcomponents, net of tax 3 3 3 - (6) 3Other comprehensive income (loss) 9 9 (8) - (1) 9Comprehensive loss (1,712) (1,712) (1,485) (534) 3,826 (1,617) Less: Comprehensive income attributable to noncontrollinginterests - - - 95 - 95Comprehensive loss attributable to Community Health Systems, Inc. stockholders $(1,712) $(1,712) $(1,485) $(629) $3,826 $(1,712) 161Table of ContentsCOMMUNITY HEALTH SYSTEMS, INC. AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued) Condensed Consolidating Balance SheetDecember 31, 2018 ParentGuarantor Issuer OtherGuarantors Non -Guarantors Eliminations Consolidated (In millions) ASSETS Current assets: Cash and cash equivalents $- $- $135 $61 $- $196Patient accounts receivable - - 1,972 380 - 2,352Supplies - - 261 141 - 402Prepaid income taxes 3 - - - - 3Prepaid expenses and taxes - - 132 64 - 196Other current assets - - 120 280 - 400Total current assets 3 - 2,620 926 - 3,549Intercompany receivable - 12,698 4,875 6,316 (23,889) - Property and equipment, net - - 3,992 2,147 - 6,139Goodwill - - 2,760 1,799 - 4,559Deferred income taxes 69 - - - - 69Other assets, net - 25 956 562 - 1,543Net investment in subsidiaries - 21,519 11,698 - (33,217) - Total assets $72 $34,242 $26,901 $11,750 $(57,106) $15,859LIABILITIES AND DEFICIT Current liabilities: Current maturities of long-term debt $- $155 $22 $27 $- $204Accounts payable - - 593 294 - 887Accrued interest - 206 - - - 206Accrued liabilities - - 635 460 - 1,095Total current liabilities - 361 1,250 781 - 2,392Long-term debt - 13,167 147 78 - 13,392Intercompany payable 1,572 22,178 24,646 11,819 (60,215) - Deferred income taxes 26 - - - - 26Other long-term liabilities 9 2 714 283 - 1,008Total liabilities 1,607 35,708 26,757 12,961 (60,215) 16,818Redeemable noncontrolling interests in equity of consolidatedsubsidiaries - - - 504 - 504Deficit: Community Health Systems, Inc. stockholders’ deficit: Common stock 1 - - - - 1Additional paid-in capital 2,017 (327) 162 (566) 731 2,017Accumulated other comprehensive loss (10) (10) (5) (9) 24 (10) (Accumulated deficit) retained earnings (3,543) (1,129) (13) (1,212) 2,354 (3,543) Total Community Health Systems, Inc. stockholders’ (deficit)equity (1,535) (1,466) 144 (1,787) 3,109 (1,535) Noncontrolling interests in equity of consolidated subsidiaries - - - 72 - 72Total (deficit) equity (1,535) (1,466) 144 (1,715) 3,109 (1,463) Total liabilities and deficit $72 $34,242 $26,901 $11,750 $(57,106) $15,859 162Table of ContentsCOMMUNITY HEALTH SYSTEMS, INC. AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued) Condensed Consolidating Balance SheetDecember 31, 2017 ParentGuarantor Issuer OtherGuarantors Non -Guarantors Eliminations Consolidated (In millions) ASSETS Current assets: Cash and cash equivalents $- $- $499 $64 $- $563Patient accounts receivable, net of allowance fordoubtful accounts - - 1,938 446 - 2,384Supplies - - 291 153 - 444Prepaid income taxes 17 - - - - 17Prepaid expenses and taxes - - 148 50 - 198Other current assets - - 149 313 - 462Total current assets 17 - 3,025 1,026 - 4,068Intercompany receivable - 13,369 5,794 7,102 (26,265) - Property and equipment, net - - 4,489 2,563 - 7,052Goodwill - - 2,882 1,841 - 4,723Deferred income taxes 62 - - - - 62Other assets, net 15 39 1,728 806 (1,043) 1,545Net investment in subsidiaries - 21,605 11,126 - (32,731) - Total assets $94 $35,013 $29,044 $13,338 $(60,039) $17,450LIABILITIES AND DEFICIT Current liabilities: Current maturities of long-term debt $- $- $25 $8 $- $33Accounts payable - - 670 297 - 967Accrued interest - 228 1 - - 229Accrued liabilities - - 651 476 - 1,127Total current liabilities - 228 1,347 781 - 2,356Long-term debt - 12,998 779 103 - 13,880Intercompany payable 833 21,458 24,600 12,915 (59,806) - Deferred income taxes 19 - - - - 19Other long-term liabilities 9 1,018 1,031 344 (1,042) 1,360Total liabilities 861 35,702 27,757 14,143 (60,848) 17,615Redeemable noncontrolling interests in equity ofconsolidated subsidiaries - - - 527 - 527Deficit: Community Health Systems, Inc. stockholders’ deficit: Common stock 1 - - - - 1Additional paid-in capital 2,014 (252) 963 (529) (182) 2,014Accumulated other comprehensive loss (21) (21) (5) (4) 30 (21) (Accumulated deficit) retained earnings (2,761) (416) 329 (874) 961 (2,761) Total Community Health Systems, Inc. stockholders’(deficit) equity (767) (689) 1,287 (1,407) 809 (767) Noncontrolling interests in equity of consolidatedsubsidiaries - - - 75 - 75Total (deficit) equity (767) (689) 1,287 (1,332) 809 (692) Total liabilities and deficit $94 $35,013 $29,044 $13,338 $(60,039) $17,450 163Table of ContentsCOMMUNITY HEALTH SYSTEMS, INC. AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued) Condensed Consolidating Statement of Cash FlowsYear Ended December 31, 2018 ParentGuarantor Issuer OtherGuarantors Non -Guarantors Eliminations Consolidated (In millions) Net cash provided by (used in) operatingactivities $40 $(409) $319 $324 $- $274Cash flows from investing activities: Acquisitions of facilities and other relatedbusinesses - - (3) (23) - (26) Purchases of property and equipment - - (410) (117) - (527) Proceeds from disposition of hospitals and otherancillary operations - - 185 220 - 405Proceeds from sale of property and equipment - - 2 6 - 8Purchases of available-for-sale securities andequity securities - - (54) (24) - (78) Proceeds from sales of available-for-salesecurities and equity securities - - 79 35 - 114Increase in other investments - (7) (109) (25) - (141) Net cash used in investing activities - (7) (310) 72 - (245) Cash flows from financing activities: Repurchase of restricted stock shares for payrolltax withholding requirements (1) - - - - (1) Deferred financing costs and other debt-relatedcosts - (96) - - - (96) Proceeds from noncontrolling investors in jointventures - - - 3 - 3Redemption of noncontrolling investments injoint ventures - - - (31) - (31) Distributions to noncontrolling investors in jointventures - - - (96) - (96) Changes in intercompany balances with affiliates,net (39) 99 207 (267) - - Borrowings under credit agreements - - 28 - - 28Issuance of long-term debt - 1,033 - - - 1,033Proceeds from ABL and receivables facility - 748 49 - - 797Repayments of long-term indebtedness - (1,368) (657) (8) - (2,033) Net cash (used in) provided by financingactivities (40) 416 (373) (399) - (396) Net change in cash and cash equivalents - - (364) (3) - (367) Cash and cash equivalents at beginning of period - - 499 64 - 563Cash and cash equivalents at end of period $- $- $135 $ 61 $- $196 164Table of ContentsCOMMUNITY HEALTH SYSTEMS, INC. AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued) Condensed Consolidating Statement of Cash FlowsYear Ended December 31, 2017 ParentGuarantor Issuer OtherGuarantors Non -Guarantors Eliminations Consolidated (In millions) Net cash (used in) provided by operatingactivities $(12) $(317) $ 727 $375 $- $773Cash flows from investing activities: Acquisitions of facilities and other relatedbusinesses - - (1) (5) - (6) Purchases of property and equipment - - (367) (197) - (564) Proceeds from disposition of hospitals and otherancillary operations - - 596 1,096 - 1,692Proceeds from sale of property and equipment - - 4 3 - 7Purchases of available-for-sale securities - - (91) (34) - (125) Proceeds from sales of available-for-salesecurities - - 172 36 - 208Investment in other non-operating assets - - (106) (37) - (143) Net cash used in investing activities - - 207 862 - 1,069Cash flows from financing activities: Repurchase of restricted stock shares for payrolltax withholding requirements (5) - - - - (5) Deferred financing costs and other debt-relatedcosts - (65) (1) - - (66) Proceeds from noncontrolling investors in jointventures - - - 5 - 5Redemption of noncontrolling investments injoint ventures - - - (6) - (6) Distributions to noncontrolling investors in jointventures - - - (100) - (100) Changes in intercompany balances with affiliates,net 17 1,565 (437) (1,145) - - Borrowings under credit agreements - 795 30 16 - 841Issuance of long-term debt - 3,100 - - - 3,100Proceeds from ABL and receivables facility - - 105 - - 105Repayments of long-term indebtedness - (5,078) (291) (22) - (5,391) Net cash provided by (used in) financingactivities 12 317 (594) (1,252) - (1,517) Net change in cash and cash equivalents - - 340 (15) - 325Cash and cash equivalents at beginning of period - - 159 79 - 238Cash and cash equivalents at end of period $- $- $499 $64 $- $563 165Table of ContentsCOMMUNITY HEALTH SYSTEMS, INC. AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued) Condensed Consolidating Statement of Cash FlowsYear Ended December 31, 2016 ParentGuarantor Issuer OtherGuarantors Non -Guarantors Eliminations Consolidated (In millions) Net cash provided by (used in) operatingactivities $14 $(335) $1,074 $384 $- $1,137Cash flows from investing activities: Acquisitions of facilities and other relatedbusinesses - - (99) (24) - (123) Purchases of property and equipment - - (476) (268) - (744) Proceeds from disposition of hospitals andother ancillary operations - - 14 129 - 143Proceeds from sale of property and equipment - - 6 9 - 15Purchases of available-for-sale securities - - (263) (242) - (505) Proceeds from sales of available-for-salesecurities - - 218 246 - 464Proceeds from sale of investments inunconsolidated affiliates - - 403 - - 403Distribution from Quorum Health Corporation - 1,219 - - - 1,219Increase in other investments - - (156) (86) - (242) Net cash provided by (used in) investingactivities - 1,219 (353) (236) - 630Cash flows from financing activities: Repurchase of restricted stock shares for payrolltax withholding requirements (6) - - - - (6) Deferred financing costs and other debt-relatedcosts - (26) - - - (26) Redemption of noncontrolling investments injoint ventures - - - (19) - (19) Distributions to noncontrolling investors injoint ventures - - - (92) - (92) Changes in intercompany balances withaffiliates, net (8) 801 (708) (85) - - Proceeds from sale-lease back - - 147 12 - 159Borrowings under credit agreements - 4,848 30 1 - 4,879Proceeds from receivables facility - - 107 - - 107Repayments of long-term indebtedness - (6,507) (193) (15) - (6,715) Net cash provided by (used in) financingactivities (14) (884) (617) (198) - (1,713) Net change in cash and cash equivalents - - 104 (50) - 54Cash and cash equivalents at beginning of period - - 55 129 - 184Cash and cash equivalents at end of period $- $- $159 $79 $- $238 166Table of ContentsItem 9. Changes in and Disagreements with Accountants on Accounting and Financial DisclosureNone.Item 9A. Controls and ProceduresEvaluation of Disclosure Controls and ProceduresOur Chief Executive Officer and Chief Financial Officer, with the participation of other members of management, have evaluated the effectiveness of ourdisclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e)) under the Securities and Exchange Act of 1934, as amended, as of the end ofthe period covered by this report. Based on such evaluations, our Chief Executive Officer and Chief Financial Officer concluded that, as of such date, ourdisclosure controls and procedures were effective (at the reasonable assurance level) to ensure that the information required to be included in this report hasbeen recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms and to ensure that the information requiredto be included in this report was accumulated and communicated to management, including our Chief Executive Officer and Chief Financial Officer, to allowtimely decisions regarding required disclosure.Changes in Internal Control Over Financial ReportingThere have been no changes in internal control over financial reporting that occurred during the period that have materially affected or are reasonablylikely to materially affect our internal controls over financial reporting.Management’s report on internal control over financial reporting is included herein at page 168.The attestation report from Deloitte & Touche LLP, our independent registered public accounting firm, on our internal control over financial reporting isincluded herein at page 169.Item 9B. Other InformationNone. 167Table of ContentsManagement’s Report on Internal Control over Financial ReportingWe are responsible for the preparation and integrity of the consolidated financial statements appearing in our Annual Report on Form 10-K. Theconsolidated financial statements were prepared in conformity with accounting principles generally accepted in the United States of America and includeamounts based on management’s estimates and judgments. All other financial information in this report has been presented on a basis consistent with theinformation included in the consolidated financial statements.We are also responsible for establishing and maintaining adequate internal controls over financial reporting (as defined in Rule 13a-15(f) under theSecurities and Exchange Act of 1934, as amended). We maintain a system of internal controls that is designed to provide reasonable assurance as to the fairand reliable preparation and presentation of the consolidated financial statements, as well as to safeguard assets from unauthorized use or disposition.Our control environment is the foundation for our system of internal control over financial reporting and is embodied in our Code of Conduct. It sets thetone of our organization and includes factors such as integrity and ethical values. Our internal control over financial reporting is supported by formal policiesand procedures which are reviewed, modified and improved as changes occur in business conditions and operations.The Audit and Compliance Committee of the Board of Directors, which is composed solely of outside directors, meets periodically with members ofmanagement, the internal auditors and the independent registered public accounting firm to review and discuss internal control over financial reporting andaccounting and financial reporting matters. The independent registered public accounting firm and internal auditors report to the Audit and ComplianceCommittee and have full and free access to the Audit and Compliance Committee at any time.We conducted an evaluation of the effectiveness of our internal control over financial reporting based on the framework in Internal Control – IntegratedFramework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. This evaluation included review of thedocumentation of controls, evaluation of the design effectiveness of controls, testing of the operating effectiveness of controls and a conclusion on thisevaluation. We have concluded that our internal control over financial reporting was effective as of December 31, 2018, based on these criteria.Deloitte & Touche LLP, an independent registered public accounting firm, has issued an attestation report on our internal control over financial reporting,which is included herein.We do not expect that our disclosure controls and procedures or our internal controls will prevent all errors and all fraud. A control system, no matter howwell conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of acontrol system must reflect the fact there are resource constraints and the benefits of controls must be considered relative to their costs. Because of theinherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any,within the Company have been detected. 168Table of ContentsREPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRMTo the Stockholders and the Board of Directors ofCommunity Health Systems, Inc.Franklin, TennesseeOpinion on Internal Control over Financial ReportingWe have audited the internal control over financial reporting of Community Health Systems, Inc., and subsidiaries (the “Company”) as of December 31,2018, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of theTreadway Commission (COSO). In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as ofDecember 31, 2018, based on criteria established in Internal Control – Integrated Framework (2013) issued by COSO.We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidatedfinancial statements and financial statement schedule as of and for the year ended December 31, 2018, of the Company and our reports dated February 21,2019, expressed an unqualified opinion on those financial statements and schedule.Basis for OpinionThe Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness ofinternal control over financial reporting, included in the accompanying Management’s Report on Internal Control over Financial Reporting. Ourresponsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firmregistered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and theapplicable rules and regulations of the Securities and Exchange Commission and the PCAOB.We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonableassurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining anunderstanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operatingeffectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. Webelieve that our audit provides a reasonable basis for our opinion.Definition and Limitations of Internal Control over Financial ReportingA company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reportingand the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal controlover financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairlyreflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permitpreparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are beingmade only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention ortimely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation ofeffectiveness to future periods are subject to the risk that 169Table of Contentscontrols may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. /s/ Deloitte & Touche LLPNashville, TennesseeFebruary 21, 2019 170Table of ContentsPART IIIItem 10. Directors, Executive Officers and Corporate GovernanceThe Company has adopted a Code of Conduct that is applicable to all members of the Board of Directors and our officers, as well as employees of oursubsidiaries. A copy of the current version of our Code of Conduct is available in the Company-Overview — Corporate Governance section of our internetwebsite at www.chs.net/company-overview/corporate-governance. A copy of the Code of Conduct is also available in print, free of charge, to any stockholderwho requests it by writing to Community Health Systems, Inc., Investor Relations, at 4000 Meridian Boulevard, Franklin, TN 37067. The Company intendsto post amendments to or waivers, if any, from its Code of Conduct at this location on its website, in each case to the extent such amendment or waiver wouldotherwise require the filing of a Current Report on Form 8-K pursuant to Item 5.05 thereof.The committee report of the Audit and Compliance Committee of the Board of Directors is presented below. The other information required by this Item isincorporated herein by reference to the Company’s definitive proxy statement to be filed under Regulation 14A in connection with the Annual Meeting ofthe Stockholders of the Company scheduled to be held on May 14, 2019, under “General Information,” “Members of the Board of Directors,” “InformationAbout our Executive Officers,” and “Section 16(a) Beneficial Ownership Reporting Compliance.”AUDIT AND COMPLIANCE COMMITTEE REPORTThe Audit and Compliance Committee of the Board of Directors of the Company is composed of four directors, each of whom is “independent” as definedby the applicable listing standards of the New York Stock Exchange, Nasdaq and Section 10A-3 of the Exchange Act. All of our Audit and ComplianceCommittee members meet the Securities and Exchange Commission definition of “audit committee financial expert.” The Audit and Compliance Committeeoperates under a written charter adopted by the Board of Directors, which is posted on our corporate website (www.chs.net) and which is reviewed by theCommittee annually, in conjunction with the Committee’s annual self-evaluation. The Company’s management is responsible for its internal controls and thefinancial reporting process. Our independent registered public accounting firm, Deloitte & Touche LLP, is responsible for performing an independent audit ofour consolidated financial statements in accordance with the standards of the Public Company Accounting Oversight Board (United States) and to issue itsreports thereon. The Audit and Compliance Committee is responsible for, among other things, monitoring and overseeing these processes, and recommendingto the Board of Directors: (i) that the audited consolidated financial statements be included in the Company’s Annual Report on Form 10-K; and (ii) theselection of the independent registered public accounting firm to audit the consolidated financial statements of the Company.In keeping with that responsibility, the Audit and Compliance Committee has reviewed and discussed the Company’s audited consolidated financialstatements with management and with the independent registered public accounting firm, reviewed internal controls and accounting procedures andprovided oversight review of the Company’s corporate compliance program. In addition, the Audit and Compliance Committee has discussed with theCompany’s independent registered public accounting firm the matters required to be discussed by the applicable requirements of the Public CompanyAccounting Oversight Board.The Audit and Compliance Committee discussed with the Company’s internal auditors and independent registered public accounting firm the overallscope and plans for their respective audits. The Audit and Compliance Committee met with the internal auditors and the independent registered publicaccounting firm with and without management present to discuss the results of their examinations, their evaluations of the Company’s internal controls andthe overall quality of the Company’s financial reporting.The Audit and Compliance Committee has received the written disclosures and the letter from the independent registered public accounting firm requiredby applicable requirements of the Public Company Accounting Oversight Board regarding the independent accountant’s communications with the auditcommittee concerning 171Table of Contentsindependence. The Audit and Compliance Committee has discussed with the independent registered public accounting firm its independence and also hasreviewed the amount of fees paid to the independent registered accounting firm for audit and non-audit services.Based on the Audit and Compliance Committee’s discussions with management and the independent registered public accounting firm and the Audit andCompliance Committee’s review of the representations of management and the materials it received from the independent registered public accounting firmas described above, the Audit and Compliance Committee recommended to the Board of Directors that the audited consolidated financial statements beincluded in the Company’s Annual Report on Form 10-K for the year ended December 31, 2018 for filing with the SEC.This report is respectfully submitted by the Audit and Compliance Committee of the Board of Directors.THE AUDIT AND COMPLIANCE COMMITTEEJohn A. ClericoMichael DinkinsJames S. Ely III, ChairH. James Williams, Ph.D. 172Table of ContentsItem 11. Executive CompensationThe information required by this Item is incorporated herein by reference to the Company’s definitive proxy statement to be filed under Regulation 14Ain connection with the Annual Meeting of the Stockholders of the Company scheduled to be held on May 14, 2019 under “Executive Compensation,”“Compensation Committee Interlocks and Insider Participation,” “Non-Management Director Compensation,” and “Compensation Committee Report.”Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder MattersThe information required by this Item is incorporated herein by reference to the Company’s definitive proxy statement to be filed under Regulation 14Ain connection with the Annual Meeting of the Stockholders of the Company scheduled to be held on May 14, 2019 under “Security Ownership of CertainBeneficial Owners and Management” and “Equity Compensation Plan Information.”Item 13. Certain Relationships and Related Transactions, and Director IndependenceThe information required by this Item is incorporated herein by reference to the Company’s definitive proxy statement to be filed under Regulation 14Ain connection with the Annual Meeting of the Stockholders of the Company scheduled to be held on May 14, 2019 under “General Information” and“Relationships and Certain Transactions Between the Company and Its Officers, Directors and 5% Beneficial Owners and Their Family Members.”Item 14. Principal Accounting Fees and ServicesThe information required by this Item is incorporated herein by reference to the Company’s definitive proxy statement to be filed under Regulation 14Ain connection with the Annual Meeting of the Stockholders of the Company scheduled to be held on May 14, 2019 under “Fees Paid to Auditors” and“Pre-Approval of Audit and Non-Audit Services.” 173Table of ContentsPART IV Item 15.Exhibits and Financial Statement SchedulesItem 15(a) 1. Financial StatementsReference is made to the index of financial statements and supplementary data under Item 8 in Part II.Item 15(a) 2. Financial Statement SchedulesThe following financial statement schedule is filed as part of this Form 10-K at page 192 hereof:Schedule II — Valuation and Qualifying AccountsAll other schedules are omitted since the required information is not present or is not present in amounts sufficient to require submission of the schedule, orbecause the information required is included in the consolidated financial statements and notes thereto.Item 15(a) 3. ExhibitsThe following exhibits are either filed with this Report or incorporated herein by reference. No. Description 2.1 Agreement and Plan of Merger, dated as of July 29, 2013, by and among Health Management Associates, Inc., Community HealthSystems, Inc. and FWCT-2 Acquisition Corporation (incorporated by reference to Exhibit 2.1 to Community Health Systems, Inc.’sCurrent Report on Form 8-K filed July 30, 2013 (No. 001-15925)) 2.2 Amendment and Consent to Agreement and Plan of Merger, dated as of September 24, 2013, by and among Health ManagementAssociates, Inc., Community Health Systems, Inc. and FWCT-2 Acquisition Corporation (incorporated by reference to Exhibit 2.1 toCommunity Health Systems, Inc.’s Current Report on Form 8-K filed September 25, 2013 (No. 001-15925)) 2.3 Separation and Distribution Agreement, dated April 29, 2016, by and between Community Health Systems, Inc. and Quorum HealthCorporation (incorporated by reference to Exhibit 2.1 to Community Health Systems, Inc.’s Current Report on Form 8-K filed May 2,2016 (No. 001-15925)) 2.4 Tax Matters Agreement, dated April 29, 2016, by and between Community Health Systems, Inc. and Quorum Health Corporation(incorporated by reference to Exhibit 2.2 to Community Health Systems, Inc.’s Current Report on Form 8-K filed May 2, 2016 (No.001-15925)) 2.5 Employee Matters Agreement, dated April 29, 2016, by and between Community Health Systems, Inc. and Quorum Health Corporation(incorporated by reference to Exhibit 2.3 to Community Health Systems, Inc.’s Current Report on Form 8-K filed May 2, 2016 (No.001-15925)) 2.6 Amendment to the Employee Matters Agreement, effective as of April 29, 2016, by and between Community Health Systems, Inc. andQuorum Health Corporation (incorporated by reference to Exhibit 2.1 to Community Health Systems, Inc.’s Quarterly Report on Form10-Q for the quarter ended September 30, 2016 filed November 2, 2016 (No. 001-15925)) 3.1 Form of Restated Certificate of Incorporation of Community Health Systems, Inc. (incorporated by reference to Exhibit 3.1 to AmendmentNo. 4 to Community Health Systems, Inc.’s Registration Statement on Form S-1/A filed June 8, 2000 (No. 333-31790)) 3.2 Certificate of Amendment to the Restated Certificate of Incorporation of Community Health Systems, Inc., dated May 18, 2010(incorporated by reference to Exhibit 3.2 to Community Health Systems, Inc.’s Current Report on Form 8-K filed May 20, 2010 (No.001-15925)) 174Table of ContentsNo. Description 3.3 Amended and Restated By-laws of Community Health Systems, Inc. (as of December 7, 2016) (incorporated by reference to Exhibit 3.1 toCommunity Health Systems, Inc.’s Current Report on Form 8-K filed December 12, 2016 (No. 001-15925)) 4.1 Form of Common Stock Certificate (incorporated by reference to Exhibit 4.1 to Community Health Systems, Inc.’s Quarterly Report onForm 10-Q for the quarter ended March 31, 2014 filed May 7, 2014 (No. 001-15925)) 4.2 Senior Notes Indenture relating to CHS/Community Health Systems, Inc.’s 8.000% Senior Notes due 2019, dated as of November 22,2011, by and among CHS/Community Health Systems, Inc., the Guarantors party thereto and Regions Bank, as successor Trustee(incorporated by reference to Exhibit 4.6 to Community Health Systems, Inc.’s Annual Report on Form 10-K for the year endedDecember 31, 2011 filed February 23, 2012 (No. 001-15925)) 4.3 Form of 8.000% Senior Note due 2019 (included in Exhibit 4.2) 4.4 Registration Rights Agreement relating to CHS/Community Health Systems, Inc.’s 8.000% Senior Notes due 2019, dated as of November 22, 2011, by and among CHS/Community Health Systems, Inc., the Guarantors party thereto and the Initial Purchasers (incorporated byreference to Exhibit 4.8 to Community Health Systems, Inc.’s Annual Report on Form 10-K for the year ended December 31, 2011 filedFebruary 23, 2012 (No. 001-15925)) 4.5 First Supplemental Indenture relating to CHS/Community Health Systems, Inc.’s 8.000% Senior Notes due 2019, dated as of January 31,2012, by and among CHS/Community Health Systems, Inc., the guarantors party thereto and U.S. Bank National Association, as Trustee(incorporated by reference to Exhibit 4.35 to Community Health Systems, Inc.’s Registration Statement on Form S-4/A filed April 2, 2012(No. 333-180265)) 4.6 Second Supplemental Indenture relating to CHS/Community Health Systems, Inc.’s 8.000% Senior Notes due 2019, dated as of March 31,2012, by and among CHS/Community Health Systems, Inc., the guarantors party thereto and U.S. Bank National Association, as Trustee(incorporated by reference to Exhibit 4.36 to Community Health Systems, Inc.’s Registration Statement on Form S-4/A filed April 2, 2012(No. 333-180265)) 4.7 Third Supplemental Indenture relating to CHS/Community Health Systems, Inc.’s 8.000% Senior Notes due 2019, dated as of May 15,2012, by and among CHS/Community Health Systems, Inc., the guarantors party thereto and U.S. Bank National Association, as Trustee(incorporated by reference to Exhibit 4.2 to Community Health Systems, Inc.’s Current Report on Form 8-K filed July 18, 2012(No. 001-15925)) 4.8 Fourth Supplemental Indenture relating to CHS/Community Health Systems, Inc.’s 8.000% Senior Notes due 2019, dated as ofSeptember 30, 2012, by and among CHS/Community Health Systems, Inc., the guarantors party thereto and Regions Bank, as successorTrustee (incorporated by reference to Exhibit 4.5 to Community Health Systems, Inc.’s Quarterly Report on Form 10-Q for the quarterended September 30, 2012 filed November 1, 2012 (No. 001-15925)) 4.9 Fifth Supplemental Indenture relating to CHS/Community Health Systems, Inc.’s 8.000% Senior Notes due 2019, dated as of March 31,2013, by and among CHS/Community Health Systems, Inc., the guarantors party thereto and Regions Bank, as successor Trustee(incorporated by reference to Exhibit 4.1 to Community Health Systems, Inc.’s Quarterly Report on Form 10-Q for the quarter endedMarch 31, 2013 filed April 30, 2013 (No. 001-15925)) 4.10 Sixth Supplemental Indenture relating to CHS/Community Health Systems, Inc.’s 8.000% Senior Notes due 2019, dated as of September 30, 2013, by and among CHS/Community Health Systems, Inc., the guarantors party thereto and Regions Bank, as successor Trustee(incorporated by reference to Exhibit 4.1 to Community Health Systems, Inc.’s Quarterly Report on Form 10-Q for the quarter endedSeptember 30, 2013 filed October 31, 2013 (No. 001-15925)) 175Table of ContentsNo. Description 4.11 Seventh Supplemental Indenture relating to CHS/Community Health Systems, Inc.’s 8.000% Senior Notes due 2019, dated as ofFebruary 12, 2014, by and among CHS/Community Health Systems, Inc., the guarantors party thereto and Regions Bank, as successorTrustee (incorporated by reference to Exhibit 4.12 to Community Health Systems, Inc.’s Annual Report on Form 10-K for the year endedDecember 31, 2013 filed February 26, 2014 (No. 001-15925)) 4.12 Eighth Supplemental Indenture relating to CHS/Community Health Systems, Inc.’s 8.000% Senior Notes due 2019, dated as of June 30,2014, by and among CHS/Community Health Systems, Inc., the guarantors party thereto and Regions Bank, as successor Trustee(incorporated by reference to Exhibit 4.1 to Community Health Systems, Inc.’s Quarterly Report on Form 10-Q for the quarter endedJune 30, 2014 filed August 1, 2014 (No. 001-15925)) 4.13 Ninth Supplemental Indenture relating to CHS/Community Health Systems, Inc.’s 8.000% Senior Notes due 2019, dated as of December 1, 2014, by and among CHS/Community Health Systems, Inc., the guarantors party thereto and Regions Bank, as successor Trustee(incorporated by reference to Exhibit 4.14 to Community Health Systems, Inc.’s Annual Report on Form 10-K for the year endedDecember 31, 2014 filed February 25, 2015 (No. 001-15925)) 4.14 Tenth Supplemental Indenture relating to CHS/Community Health Systems, Inc.’s 8.000% Senior Notes due 2019, dated as of March 31,2015, by and among CHS/Community Health Systems, Inc., the guarantors party thereto and Regions Bank, as successor Trustee(incorporated by reference to Exhibit 4.1 to Community Health Systems, Inc.’s Quarterly Report on Form 10-Q for the quarter endedMarch 31, 2015 filed May 6, 2015 (No. 001-15925)) 4.15 Eleventh Supplemental Indenture relating to CHS/Community Health Systems, Inc.’s 8.000% Senior Notes due 2019, dated as of June 30,2015, by and among CHS/Community Health Systems, Inc., the guarantors party thereto and Regions Bank, as successor Trustee(incorporated by reference to Exhibit 4.1 to Community Health Systems, Inc.’s Quarterly Report on Form 10-Q for the quarter endedJune 30, 2015 filed August 4, 2015 (No. 001-15925)) 4.16 Twelfth Supplemental Indenture relating to CHS/Community Health Systems, Inc.’s 8.000% Senior Notes due 2019, dated as ofSeptember 30, 2015, by and among CHS/Community Health Systems, Inc., the guarantors party thereto and Regions Bank, as successorTrustee (incorporated by reference to Exhibit 4.1 to Community Health Systems, Inc.’s Quarterly Report on Form 10-Q for the quarterended September 30, 2015 filed November 3, 2015 (No. 001-15925)) 4.17 Thirteenth Supplemental Indenture relating to CHS/Community Health Systems, Inc.’s 8.000% Senior Notes due 2019, dated as ofDecember 31, 2015, by and among CHS/Community Health Systems, Inc., the guarantors party thereto and Regions Bank, as successorTrustee (incorporated by reference to Exhibit 4.17 to Community Health Systems, Inc.’s Annual Report on Form 10-K for the year endedDecember 31, 2015 filed February 17, 2016 (No. 001-15925)) 4.18 Fourteenth Supplemental Indenture relating to CHS/Community Health Systems, Inc.’s 8.000% Senior Notes due 2019, dated as ofMarch 31, 2016, by and among CHS/Community Health Systems, Inc., the guarantors party thereto and Regions Bank, as successorTrustee (incorporated by reference to Exhibit 4.1 to Community Health Systems, Inc.’s Quarterly Report on Form 10-Q for the quarterended March 31, 2016 filed May 3, 2016 (No. 001-15925)) 4.19 Fifteenth Supplemental Indenture relating to CHS/Community Health Systems, Inc.’s 8.000% Senior Notes due 2019, dated as ofSeptember 30, 2016, by and among CHS/Community Health Systems, Inc., the guarantors party thereto and Regions Bank, as successorTrustee (incorporated by reference to Exhibit 4.1 to Community Health Systems, Inc.’s Quarterly Report on Form 10-Q for the quarterended September 30, 2016 filed November 2, 2016 (No. 001-15925)) 176Table of ContentsNo. Description 4.20 Sixteenth Supplemental Indenture relating to CHS/Community Health Systems, Inc.’s 8.000% Senior Notes due 2019, dated as of April 12, 2018, by and among CHS/Community Health Systems, Inc., the guarantors party thereto and Regions Bank, as successor Trustee(incorporated by reference to Exhibit 4.1 to Community Health Systems, Inc.’s Quarterly Report on Form 10-Q for the quarter endedMarch 31, 2018 filed May 2, 2018 (No. 001-15925)) 4.21 Seventeenth Supplemental Indenture relating to CHS/Community Health Systems, Inc.’s 8.000% Senior Notes due 2019, dated as ofOctober 3, 2018, by and among CHS/Community Health Systems, Inc., the guarantors party thereto and Regions Bank, as successorTrustee (incorporated by reference to Exhibit 4.1 to Community Health Systems, Inc.’s Quarterly Report on Form 10-Q for the quarterended September 30, 2018 filed October 30, 2018 (No. 001-15925)) 4.22 Senior Notes Indenture relating to CHS/Community Health Systems, Inc.’s 7.125% Senior Notes due 2020, dated as of July 18, 2012, byand among CHS/Community Health Systems, Inc., the Guarantors party thereto and Regions Bank, as Trustee (incorporated by reference toExhibit 4.1 to Community Health Systems, Inc.’s Current Report on Form 8-K filed July 18, 2012 (No. 001-15925)) 4.23 Form of 7.125% Senior Note due 2020 (included in Exhibit 4.22) 4.24 First Supplemental Indenture relating to CHS/Community Health Systems, Inc.’s 7.125% Senior Notes due 2020, dated as of September 30, 2012, by and among CHS/Community Health Systems, Inc., the guarantors party thereto and Regions Bank, as Trustee (incorporatedby reference to Exhibit 4.6 to Community Health Systems, Inc.’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2012filed November 1, 2012 (No. 001-15925)) 4.25 Second Supplemental Indenture relating to CHS/Community Health Systems, Inc.’s 7.125% Senior Notes due 2020, dated as of March 31,2013, by and among CHS/Community Health Systems, Inc., the guarantors party thereto and Regions Bank, as Trustee (incorporated byreference to Exhibit 4.2 to Community Health Systems, Inc.’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2013 filedApril 30, 2013 (No. 001-15925)) 4.26 Third Supplemental Indenture relating to CHS/Community Health Systems, Inc.’s 7.125% Senior Notes due 2020, dated as of September 30, 2013, by and among CHS/Community Health Systems, Inc., the guarantors party thereto and Regions Bank, as Trustee (incorporatedby reference to Exhibit 4.2 to Community Health Systems, Inc.’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2013filed October 31, 2013 (No. 001-15925)) 4.27 Fourth Supplemental Indenture relating to CHS/Community Health Systems, Inc.’s 7.125% Senior Notes due 2020, dated as ofFebruary 12, 2014, by and among CHS/Community Health Systems, Inc., the guarantors party thereto and Regions Bank, as Trustee(incorporated by reference to Exhibit 4.19 to Community Health Systems, Inc.’s Annual Report on Form 10-K for the year endedDecember 31, 2013 filed February 26, 2014 (No. 001-15925)) 4.28 Fifth Supplemental Indenture relating to CHS/Community Health Systems, Inc.’s 7.125% Senior Notes due 2020, dated as of June 30,2014, by and among CHS/Community Health Systems, Inc., the guarantors party thereto and Regions Bank, as Trustee (incorporated byreference to Exhibit 4.2 to Community Health Systems, Inc.’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2013 filedAugust 1, 2014 (No. 001-15925)) 4.29 Sixth Supplemental Indenture relating to CHS/Community Health Systems, Inc.’s 7.125% Senior Notes due 2020, dated as of December 1,2014, by and among CHS/Community Health Systems, Inc., the guarantors party thereto and Regions Bank, as Trustee (incorporated byreference to Exhibit 4.23 to Community Health Systems, Inc.’s Annual Report on Form 10-K for the year ended December 31, 2014 filedFebruary 25, 2015 (No. 001-15925)) 177Table of ContentsNo. Description 4.30 Seventh Supplemental Indenture relating to CHS/Community Health Systems, Inc.’s 7.125% Senior Notes due 2020, dated as of March 31, 2015, by and among CHS/Community Health Systems, Inc., the guarantors party thereto and Regions Bank, as Trustee (incorporatedby reference to Exhibit 4.2 to Community Health Systems, Inc.’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2015filed May 6, 2015 (No. 001-15925)) 4.31 Eighth Supplemental Indenture relating to CHS/Community Health Systems, Inc.’s 7.125% Senior Notes due 2020, dated as of June 30,2015, by and among CHS/Community Health Systems, Inc., the guarantors party thereto and Regions Bank, as Trustee (incorporated byreference to Exhibit 4.2 to Community Health Systems, Inc.’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2015 filedAugust 4, 2015 (No. 001-15925)) 4.32 Ninth Supplemental Indenture relating to CHS/Community Health Systems, Inc.’s 7.125% Senior Notes due 2020, dated as of September 30, 2015, by and among CHS/Community Health Systems, Inc., the guarantors party thereto and Regions Bank, as Trustee (incorporatedby reference to Exhibit 4.2 to Community Health Systems, Inc.’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2015filed November 3, 2015 (No. 001-15925)) 4.33 Tenth Supplemental Indenture relating to CHS/Community Health Systems, Inc.’s 7.125% Senior Notes due 2020, dated as of December 31, 2015, by and among CHS/Community Health Systems, Inc., the guarantors party thereto and Regions Bank, as Trustee (incorporatedby reference to Exhibit 4.29 to Community Health Systems, Inc.’s Annual Report on Form 10-K for the year ended December 31, 2015filed February 17, 2016 (No. 001-15925)) 4.34 Eleventh Supplemental Indenture relating to CHS/Community Health Systems, Inc.’s 7.125% Senior Notes due 2020, dated as of March 31, 2016, by and among CHS/Community Health Systems, Inc., the guarantors party thereto and Regions Bank, as Trustee (incorporatedby reference to Exhibit 4.2 to Community Health Systems, Inc.’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2016filed May 3, 2016 (No. 001-15925)) 4.35 Twelfth Supplemental Indenture relating to CHS/Community Health Systems, Inc.’s 7.125% Senior Notes due 2020, dated as ofSeptember 30, 2016, by and among CHS/Community Health Systems, Inc., the guarantors party thereto and Regions Bank, as Trustee(incorporated by reference to Exhibit 4.2 to Community Health Systems, Inc.’s Quarterly Report on Form 10-Q for the quarter endedSeptember 30 , 2016 filed November 2, 2016 (No. 001-15925)) 4.36 Thirteenth Supplemental Indenture relating to CHS/Community Health Systems, Inc.’s 7.125% Senior Notes due 2020, dated as ofApril 12, 2018, by and among CHS/Community Health Systems, Inc., the guarantors party thereto and Regions Bank, as Trustee(incorporated by reference to Exhibit 4.2 to Community Health Systems, Inc.’s Quarterly Report on Form 10-Q for the quarter endedMarch 31, 2018 filed May 2, 2018 (No. 001-15925)) 4.37 Fourteenth Supplemental Indenture relating to CHS/Community Health Systems, Inc.’s 7.125% Senior Notes due 2020, dated as ofOctober 3, 2018, by and among CHS/Community Health Systems, Inc., the guarantors party thereto and Regions Bank, as Trustee(incorporated by reference to Exhibit 4.2 to Community Health Systems, Inc.’s Quarterly Report on Form 10-Q for the quarter endedSeptember 30, 2018 filed October 30, 2018 (No. 001-15925)) 4.38 Senior Secured Notes Indenture relating to CHS/Community Health Systems, Inc.’s 5.125% Senior Secured Notes due 2021, dated as ofJanuary 27, 2014, by and among FWCT-2 Escrow Corporation, Regions Bank, as Trustee, and Credit Suisse AG, as Collateral Agent(incorporated by reference to Exhibit 4.1 to Community Health Systems, Inc.’s Current Report on Form 8-K filed January 28, 2014(No. 001-15925)) 4.39 Form of 5.125% Senior Secured Note due 2021 (included in Exhibit 4.38) 178Table of ContentsNo. Description 4.40 First Supplemental Indenture relating to CHS/Community Health Systems, Inc.’s 5.125% Senior Secured Notes due 2021, dated as ofJanuary 27, 2014, by and among CHS/Community Health Systems, Inc., the guarantors party thereto, Regions Bank, as Trustee, and CreditSuisse AG, as Collateral Agent (incorporated by reference to Exhibit 4.2 to Community Health Systems, Inc.’s Current Report on Form 8-Kfiled January 28, 2014 (No. 001-15925)) 4.41 Second Supplemental Indenture relating to CHS/Community Health Systems, Inc.’s 5.125% Senior Secured Notes due 2021, dated as ofJune 30, 2014, by and among CHS/Community Health Systems, Inc., the guarantors party thereto, Regions Bank, as Trustee and CreditSuisse AG, as Collateral Agent (incorporated by reference to Exhibit 4.4 to Community Health Systems, Inc.’s Quarterly Report onForm 10-Q for the quarter ended June 30, 2014 filed August 1, 2014 (No. 001-15925)) 4.42 Third Supplemental Indenture relating to CHS/Community Health Systems, Inc.’s 5.125% Senior Secured Notes due 2021, dated as ofDecember 1, 2014, by and among CHS/Community Health Systems, Inc., the guarantors party thereto, Regions Bank, as Trustee and CreditSuisse AG, as Collateral Agent (incorporated by reference to Exhibit 4.41 to Community Health Systems, Inc.’s Annual Report onForm 10-K for the year ended December 31, 2014 filed February 25, 2015 (No. 001-15925)) 4.43 Fourth Supplemental Indenture relating to CHS/Community Health Systems, Inc.’s 5.125% Senior Secured Notes due 2021, dated as ofMarch 31, 2015, by and among CHS/Community Health Systems, Inc., the guarantors party thereto, Regions Bank, as Trustee and CreditSuisse AG, as Collateral Agent (incorporated by reference to Exhibit 4.4 to Community Health Systems, Inc.’s Quarterly Report on Form10-Q for the quarter ended March 31, 2015 filed May 6, 2015 (No. 001-15925)) 4.44 Fifth Supplemental Indenture relating to CHS/Community Health Systems, Inc.’s 5.125% Senior Secured Notes due 2021, dated as ofJune 30, 2015, by and among CHS/Community Health Systems, Inc., the guarantors party thereto, Regions Bank, as Trustee and CreditSuisse AG, as Collateral Agent (incorporated by reference to Exhibit 4.4 to Community Health Systems, Inc.’s Quarterly Report on Form10-Q for the quarter ended June 30, 2015 filed August 4, 2015 (No. 001-15925)) 4.45 Sixth Supplemental Indenture relating to CHS/Community Health Systems, Inc.’s 5.125% Senior Secured Notes due 2021, dated as ofSeptember 30, 2015, by and among CHS/Community Health Systems, Inc., the guarantors party thereto, Regions Bank, as Trustee andCredit Suisse AG, as Collateral Agent (incorporated by reference to Exhibit 4.4 to Community Health Systems, Inc.’s Quarterly Report onForm 10-Q for the quarter ended September 30, 2015 filed November 3, 2015 (No. 001-15925)) 4.46 Seventh Supplemental Indenture relating to CHS/Community Health Systems, Inc.’s 5.125% Senior Secured Notes due 2021, dated as ofDecember 31, 2015, by and among CHS/Community Health Systems, Inc., the guarantors party thereto, Regions Bank, as Trustee andCredit Suisse AG, as Collateral Agent (incorporated by reference to Exhibit 4.54 to Community Health Systems, Inc.’s Annual Report onForm 10-K for the year ended December 31, 2015 filed February 17, 2016 (No. 001-15925)) 4.47 Eighth Supplemental Indenture relating to CHS/Community Health Systems, Inc.’s 5.125% Senior Secured Notes due 2021, dated as ofMarch 31, 2016, by and among CHS/Community Health Systems, Inc., the guarantors party thereto, Regions Bank, as Trustee and CreditSuisse AG, as Collateral Agent (incorporated by reference to Exhibit 4.4 to Community Health Systems, Inc.’s Quarterly Report on Form10-Q for the quarter ended March 31, 2016 filed May 3, 2016 (No. 001-15925)) 179Table of ContentsNo. Description 4.48 Ninth Supplemental Indenture relating to CHS/Community Health Systems, Inc.’s 5.125% Senior Secured Notes due 2021, dated as ofSeptember 30, 2016, by and among CHS/Community Health Systems, Inc., the guarantors party thereto, Regions Bank, as Trustee andCredit Suisse AG, as Collateral Agent (incorporated by reference to Exhibit 4.4 to Community Health Systems, Inc.’s Quarterly Report onForm 10-Q for the quarter ended September 30, 2016 filed November 2, 2016 (No. 001-15925)) 4.49 Tenth Supplemental Indenture relating to CHS/Community Health Systems, Inc.’s 5.125% Senior Secured Notes due 2021, dated as ofApril 12, 2018, by and among CHS/Community Health Systems, Inc., the guarantors party thereto, Regions Bank, as Trustee and CreditSuisse AG, as Collateral Agent (incorporated by reference to Exhibit 4.3 to Community Health Systems, Inc.’s Quarterly Report on Form10-Q for the quarter ended March 31, 2018 filed May 2, 2018 (No. 001-15925)) 4.50 Eleventh Supplemental Indenture relating to CHS/Community Health Systems, Inc.’s 5.125% Senior Secured Notes due 2021, dated as ofOctober 3, 2018, by and among CHS/Community Health Systems, Inc., the guarantors party thereto, Regions Bank, as Trustee and CreditSuisse AG, as Collateral Agent (incorporated by reference to Exhibit 4.3 to Community Health Systems, Inc.’s Quarterly Report on Form10-Q for the quarter ended September 30, 2018 filed October 30, 2018 (No. 001-15925)) 4.51 Senior Notes Indenture relating to CHS/Community Health Systems, Inc.’s 6.875% Senior Notes due 2022, dated as of January 27, 2014,by and among FWCT-2 Escrow Corporation and Regions Bank, as Trustee (incorporated by reference to Exhibit 4.3 to Community HealthSystems, Inc.’s Current Report on Form 8-K filed January 28, 2014 (No. 001-15925)) 4.52 Form of 6.875% Senior Note due 2022 (included in Exhibit 4.51) 4.53 First Supplemental Indenture relating to CHS/Community Health Systems, Inc.’s 6.875% Senior Notes due 2022, dated as of January 27,2014, by and among CHS/Community Health Systems, Inc., the guarantors party thereto and Regions Bank, as Trustee (incorporated byreference to Exhibit 4.4 to Community Health Systems, Inc.’s Current Report on Form 8-K filed January 28, 2014 (No. 001-15925)) 4.54 Second Supplemental Indenture relating to CHS/Community Health Systems, Inc.’s 6.875% Senior Notes due 2022, dated as of June 30,2014, by and among CHS/Community Health Systems, Inc., the guarantors party thereto and Regions Bank, as Trustee (incorporated byreference to Exhibit 4.5 to Community Health Systems, Inc.’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2014 filedAugust 1, 2014 (No. 001-15925)) 4.55 Third Supplemental Indenture relating to CHS/Community Health Systems, Inc.’s 6.875% Senior Notes due 2022, dated as of December 1,2014, by and among CHS/Community Health Systems, Inc., the guarantors party thereto and Regions Bank, as Trustee (incorporated byreference to Exhibit 4.46 to Community Health Systems, Inc.’s Annual Report on Form 10-K for the year ended December 31, 2014 filedFebruary 25, 2015 (No. 001-15925)) 4.56 Fourth Supplemental Indenture relating to CHS/Community Health Systems, Inc.’s 6.875% Senior Notes due 2022, dated as of March 31,2015, by and among CHS/Community Health Systems, Inc., the guarantors party thereto and Regions Bank, as Trustee (incorporated byreference to Exhibit 4.5 to Community Health Systems, Inc.’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2015 filedMay 6, 2015 (No. 001-15925)) 4.57 Fifth Supplemental Indenture relating to CHS/Community Health Systems, Inc.’s 6.875% Senior Notes due 2022, dated as of June 30,2015, by and among CHS/Community Health Systems, Inc., the guarantors party thereto and Regions Bank, as Trustee (incorporated byreference to Exhibit 4.5 to Community Health Systems, Inc.’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2015 filedAugust 4, 2015 (No. 001-15925)) 180Table of ContentsNo. Description 4.58 Sixth Supplemental Indenture relating to CHS/Community Health Systems, Inc.’s 6.875% Senior Notes due 2022, dated as of September 30, 2015, by and among CHS/Community Health Systems, Inc., the guarantors party thereto and Regions Bank, as Trustee (incorporatedby reference to Exhibit 4.5 to Community Health Systems, Inc.’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2015filed November 3, 2015 (No. 001-15925)) 4.59 Seventh Supplemental Indenture relating to CHS/Community Health Systems, Inc.’s 6.875% Senior Notes due 2022, dated as ofDecember 31, 2015, by and among CHS/Community Health Systems, Inc., the guarantors party thereto and Regions Bank, as Trustee(incorporated by reference to Exhibit 4.63 to Community Health Systems, Inc.’s Annual Report on Form 10-K for the year endedDecember 31, 2015 filed February 17, 2016 (No. 001-15925)) 4.60 Eighth Supplemental Indenture relating to CHS/Community Health Systems, Inc.’s 6.875% Senior Notes due 2022, dated as of March 31,2016, by and among CHS/Community Health Systems, Inc., the guarantors party thereto and Regions Bank, as Trustee (incorporated byreference to Exhibit 4.5 to Community Health Systems, Inc.’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2016 filedMay 3, 2016 (No. 001-15925)) 4.61 Ninth Supplemental Indenture relating to CHS/Community Health Systems, Inc.’s 6.875% Senior Notes due 2022, dated as of September 30, 2016, by and among CHS/Community Health Systems, Inc., the guarantors party thereto and Regions Bank, as Trustee (incorporatedby reference to Exhibit 4.5 to Community Health Systems, Inc.’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2016filed November 2, 2016 (No. 001-15925)) 4.62 Tenth Supplemental Indenture relating to CHS/Community Health Systems, Inc.’s 6.875% Senior Notes due 2022, dated as of April 12,2018, by and among CHS/Community Health Systems, Inc., the guarantors party thereto and Regions Bank, as Trustee (incorporated byreference to Exhibit 4.4 to Community Health Systems, Inc.’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2018 filedMay 2, 2018 (No. 001-15925)) 4.63 Eleventh Supplemental Indenture relating to CHS/Community Health Systems, Inc.’s 6.875% Senior Notes due 2022, dated as ofOctober 3, 2018, by and among CHS/Community Health Systems, Inc., the guarantors party thereto and Regions Bank, as Trustee(incorporated by reference to Exhibit 4.4 to Community Health Systems, Inc.’s Quarterly Report on Form 10-Q for the quarter endedSeptember 30, 2018 filed October 30, 2018 (No. 001-15925)) 4.64 Senior Secured Notes Indenture relating to CHS/Community Health Systems, Inc.’s 6.250% Senior Secured Notes due 2023, dated as ofMarch 16, 2017, by and among CHS/Community Health Systems, Inc. and Regions Bank, as Trustee (incorporated by reference toExhibit 4.1 to Community Health Systems, Inc.’s Current Report on Form 8-K filed March 16, 2017 (No. 001-15925)) 4.65 Form of 6.250% Senior Secured Note due 2023 (included in Exhibit 4.64) 4.66 First Supplemental Indenture relating to CHS/Community Health Systems, Inc.’s 6.250% Senior Secured Notes due 2023, dated March 16,2017, by and among CHS/Community Health Systems, Inc., Community Health Systems, Inc., the Guarantors party thereto, Regions Bank,as Trustee, and Credit Suisse AG, as collateral agent (incorporated by reference to Exhibit 4.1 to Community Health Systems, Inc.’sCurrent Report on Form 8-K filed March 16, 2017 (No. 001-15925)) 4.67 Second Supplemental Indenture relating to CHS/Community Health Systems, Inc.’s 6.250% Senior Secured Notes due 2023, dated May 12, 2017, by and among CHS/Community Health Systems, Inc., Community Health Systems, Inc., the Guarantors party thereto, RegionsBank, as Trustee, and Credit Suisse AG, as collateral agent (incorporated by reference to Exhibit 4.3 to Community Health Systems, Inc.’sCurrent Report on Form 8-K filed May 12, 2017 (No. 001-15925)) 181Table of ContentsNo. Description 4.68 Third Supplemental Indenture relating to CHS/Community Health Systems, Inc.’s 6.250% Senior Secured Notes due 2023, dated as ofApril 12, 2018, by and among CHS/Community Health Systems, Inc., the guarantors party thereto, Regions Bank, as Trustee and CreditSuisse AG, as Collateral Agent (incorporated by reference to Exhibit 4.5 to Community Health Systems, Inc.’s Quarterly Report on Form10-Q for the quarter ended March 31, 2018 filed May 2, 2018 (No. 001-15925)) 4.69 Fourth Supplemental Indenture relating to CHS/Community Health Systems, Inc.’s 6.250% Senior Secured Notes due 2023, dated as ofOctober 3, 2018, by and among CHS/Community Health Systems, Inc., the guarantors party thereto and Regions Bank, as Trustee andCredit Suisse AG, as Collateral Agent (incorporated by reference to Exhibit 4.5 to Community Health Systems, Inc.’s Quarterly Report onForm 10-Q for the quarter ended September 30, 2018 filed October 30, 2018 (No. 001-15925)) 4.70 Indenture, dated as of June 22, 2018, among CHS/Community Health Systems, Inc., Community Health Systems, Inc., the guarantors partythereto, Regions Bank, as Trustee and as Junior-Priority Collateral Agent, relating to the Junior-Priority Secured Notes due 2023(incorporated by reference to Exhibit 4.01 to Community Health Systems, Inc.’s Current Report on Form 8-K filed June 25, 2018 (No.001-15925)) 4.71 Form of Junior-Priority Secured Note due 2023 (included in Exhibit 4.70) 4.72 First Supplemental Indenture relating to CHS/Community Health Systems, Inc.’s Junior-Priority Secured Notes due 2023, dated as ofOctober 3, 2018, by and among CHS/Community Health Systems, Inc., the guarantors party thereto, and Regions Bank, as Trustee and asJunior-Priority Collateral Agent (incorporated by reference to Exhibit 4.6 to Community Health Systems, Inc.’s Quarterly Report on Form10-Q for the quarter ended September 30, 2018 filed October 30, 2018 (No. 001-15925)) 4.73 Indenture, dated as of June 22, 2018, among CHS/Community Health Systems, Inc., Community Health Systems, Inc., the guarantors partythereto, Regions Bank, as Trustee and as Junior-Priority Collateral Agent, relating to the 8.125% Junior-Priority Secured Notes due 2024(incorporated by reference to Exhibit 4.02 to Community Health Systems, Inc.’s Current Report on Form 8-K filed June 25, 2018 (No.001-15925)) 4.74 Form of 8.125% Junior-Priority Secured Note due 2024 (included in Exhibit 4.73) 4.75 First Supplemental Indenture relating to CHS/Community Health Systems, Inc.’s 8.125% Junior-Priority Secured Notes due 2024, dated asof October 3, 2018, by and among CHS/Community Health Systems, Inc., the guarantors party thereto, and Regions Bank, as Trustee andas Junior-Priority Collateral Agent (incorporated by reference to Exhibit 4.7 to Community Health Systems, Inc.’s Quarterly Report onForm 10-Q for the quarter ended September 30, 2018 filed October 30, 2018 (No. 001-15925)) 4.76 Indenture, dated as of July 6, 2018, among CHS/Community Health Systems, Inc., Community Health Systems, Inc., the guarantors partythereto, Regions Bank, as trustee, and Credit Suisse AG, as collateral agent, relating to the 8.625% Senior Secured Notes due 2024(incorporated by reference to Exhibit 4.1 to Community Health Systems, Inc.’s Current Report on Form 8-K filed July 6, 2018 (No.001-15925)) 4.77 Form of 8.625% Senior Secured Note due 2024 (included in Exhibit 4.76) 4.78 First Supplemental Indenture relating to CHS/Community Health Systems, Inc.’s 8.625% Senior Secured Notes due 2024, dated as ofOctober 3, 2018, by and among CHS/Community Health Systems, Inc., the guarantors party thereto and Regions Bank, as Trustee andCredit Suisse AG, as Collateral Agent (incorporated by reference to Exhibit 4.8 to Community Health Systems, Inc.’s Quarterly Report onForm 10-Q for the quarter ended September 30, 2018 filed October 30, 2018 (No. 001-15925)) 182Table of ContentsNo. Description 4.79 Amendment No. 1 and Reaffirmation Agreement, dated as of August 17, 2012, relating to the Amended and Restated Guarantee andCollateral Agreement, dated as of July 25, 2007, as amended and restated as of November 5, 2010, among CHS/Community HealthSystems, Inc., Community Health Systems, Inc., the guarantors party thereto, and Credit Suisse AG, as Collateral Trustee (incorporated byreference to Exhibit 4.1 to Community Health Systems, Inc.’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2012filed November 1, 2012 (No. 001-15925)) 4.80 First Lien Intercreditor Agreement, dated as of August 17, 2012, among Credit Suisse AG, as Collateral Agent, Credit Suisse AG, asauthorized representative, Regions Bank, as Trustee and authorized representative, and the additional authorized representatives partythereto (incorporated by reference to Exhibit 4.2 to Community Health Systems, Inc.’s Quarterly Report on Form 10-Q for the quarterended September 30, 2012 filed November 1, 2012 (No. 001-15925)) 4.81 Secured Notes Registration Rights Agreement, dated as of January 27, 2014, by and among FWCT-2 Escrow Corporation, Merrill Lynch,Pierce, Fenner & Smith Incorporated and Credit Suisse Securities (USA) LLC, each as a representative of the initial purchasers(incorporated by reference to Exhibit 4.5 to Community Health Systems, Inc.’s Current Report on Form 8-K filed January 28, 2014(No. 001-15925)) 4.82 Unsecured Notes Registration Rights Agreement, dated as of January 27, 2014, by and among FWCT-2 Escrow Corporation, MerrillLynch, Pierce, Fenner & Smith Incorporated and Credit Suisse Securities (USA) LLC, each as a representative of the initial purchasers(incorporated by reference to Exhibit 4.6 to Community Health Systems, Inc.’s Current Report on Form 8-K filed January 28, 2014(No. 001-15925)) 4.83 Secured Notes Registration Rights Agreement Joinder, dated as of January 27, 2014, by and among CHS/Community Health Systems,Inc., the subsidiaries party thereto, and Merrill Lynch, Pierce, Fenner & Smith Incorporated and Credit Suisse Securities (USA) LLC, eachas a representative of the initial purchasers thereto (incorporated by reference to Exhibit 4.7 to Community Health Systems, Inc.’s CurrentReport on Form 8-K filed January 28, 2014 (No. 001-15925)) 4.84 Unsecured Notes Registration Rights Agreement Joinder, dated as of January 27, 2014, by and among CHS/Community Health Systems,Inc., the subsidiaries party thereto, and Merrill Lynch, Pierce, Fenner & Smith Incorporated and Credit Suisse Securities (USA) LLC, eachas a representative of the initial purchasers (incorporated by reference to Exhibit 4.8 to Community Health Systems, Inc.’s Current Reporton Form 8-K filed January 28, 2014 (No. 001-15925)) 4.85 Amended and Restated ABL Intercreditor Agreement, dated as of June 22, 2018, among JPMorgan Chase Bank, N.A., as ABL Agent,Credit Suisse AG, as Senior-Priority Collateral Agent, Credit Suisse AG, as Senior-Priority Non-ABL Loan Agent, Regions Bank, as 2021Secured Notes Trustee, as 2023 Secured Notes Trustee, as Junior-Priority Collateral Agent and as Trustee under the Indentures,CHS/Community Health Systems, Inc., Community Health Systems, Inc., the subsidiary guarantors party thereto and each additional agentfrom time to time party thereto (incorporated by reference to Exhibit 4.04 to Community Health Systems, Inc.’s Current Report on Form8-K filed June 25, 2018 (No. 001-15925)) 4.86 Junior-Priority Collateral Agreement, dated as of June 22, 2018, among CHS/Community Health Systems, Inc., Community HealthSystems, Inc., the subsidiaries party thereto and Regions Bank, as junior-priority collateral agent (incorporated by reference to Exhibit4.03 to Community Health Systems, Inc.’s Current Report on Form 8-K filed June 25, 2018 (No. 001-15925)) 183Table of ContentsNo. Description 4.87 Senior-Junior Lien Intercreditor Agreement, dated as of June 22, 2018, among CHS/Community Health Systems, Inc., Community HealthSystems, Inc., the subsidiaries party thereto, Credit Suisse AG, Cayman Islands Branch, as initial Senior-Priority Collateral Agent, RegionsBank, as initial Junior-Priority Collateral Agent and each additional agent from time to time party thereto (incorporated by reference toExhibit 4.05 to Community Health Systems, Inc.’s Current Report on Form 8-K filed June 25, 2018 (No. 001-15925)) 4.88 Junior-Priority Lien Pari Passu Intercreditor Agreement, dated as of June 22, 2018, among Regions Bank, as Collateral Agent, RegionsBank, in its capacity as Trustee under the 2023 Notes Indenture, Regions Bank, in its capacity as Trustee under the 2024 Notes Indentureand each additional authorized representative from time to time party thereto (incorporated by reference to Exhibit 4.06 to CommunityHealth Systems, Inc.’s Current Report on Form 8-K filed June 25, 2018 (No. 001-15925)) 4.89 ABL Intercreditor Agreement, dated as of April 3, 2018, among JPMorgan Chase Bank, N.A. as ABL Agent, Credit Suisse AG, as SeniorPriority Non-ABL Loan Agent, Regions Bank as 2021 Secured Notes Trustee and 2023 Secured Notes Trustee, each additional agent fromtime to time party thereto, CHS/Community Health Systems, Inc. as Borrower, Community Health Systems, Inc., as Parent, and thesubsidiaries of Borrower from time to time party thereto (incorporated by reference to Exhibit 4.6 to Community Health Systems, Inc.’sQuarterly Report on Form 10-Q for the quarter ended March 31, 2018 filed May 2, 2018 (No. 001-15925)) 10.1 Amended and Restated Guarantee and Collateral Agreement, dated as of July 25, 2007, as amended and restated as of November 5, 2010,among CHS/Community Health Systems, Inc., Community Health Systems, Inc., the subsidiaries of CHS/Community Health Systems, Inc.from time to time party thereto and Credit Suisse AG, as Collateral Agent (incorporated by reference to Exhibit 10.3 to Community HealthSystems, Inc.’s Current Report on Form 8-K filed November 9, 2010 (No. 001-15925)) 10.2 Fourth Amendment and Restatement Agreement, dated as of March 23, 2018, to the Credit Agreement dated as of July 25, 2007, asamended and restated as of November 5, 2010, February 2, 2012 and January 27, 2014, among CHS/Community Health Systems, Inc.,Community Health Systems, Inc., the subsidiary guarantors party thereto, the lenders party thereto and Credit Suisse, AG, asAdministrative Agent and Collateral Agent (incorporated by reference to Exhibit 10.1 to Community Health Systems, Inc.’s CurrentReport on Form 8-K filed March 26, 2018 (No. 001-15925)) 10.3 Amendment No. 1, dated February 15, 2019, to the Credit Agreement dated as of as of July 25, 2007, as amended and restated as ofNovember 5, 2010, February 2, 2012, January 27, 2014, and March 23, 2018, among CHS/Community Health Systems, Inc., CommunityHealth Systems, Inc., the subsidiary guarantors party thereto, the lenders party thereto and Credit Suisse, AG, Cayman Islands Branch, asAdministrative Agent and Collateral Agent (incorporated by reference to Exhibit 10.1 to Community Health Systems, Inc.’s CurrentReport on Form 8-K filed February 20, 2019 (No. 001-15925)) 10.4 ABL Credit Agreement, dated as of April 3, 2018, among CHS/Community Health Systems, Inc., as the Borrower, Community HealthSystems, Inc., as the Parent, the subsidiaries of the Borrower party thereto, the lenders party thereto, and JPMorgan Chase Bank, N.A., asAdministrative Agent and Collateral Agent (incorporated by reference to Exhibit 10.1 to Community Health Systems, Inc.’s CurrentReport on Form 8-K filed April 3, 2018 (No. 001-15925)) 184Table of ContentsNo. Description 10.5 Amendment No. 1 to ABL Credit Agreement, dated as of May 3, 2018, among CHS/Community Health Systems, Inc., as the Borrower,Community Health Systems, Inc., as the Parent, the subsidiaries of the Borrower party thereto, the lenders party thereto, and JPMorganChase Bank, N.A., as Administrative Agent and Collateral Agent (incorporated by reference to Exhibit 10.4 to Community HealthSystems, Inc.’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2018 filed July 27, 2018 (No. 001-15925)) 10.6 Guarantee and Collateral Agreement to ABL Credit Agreement, dated as of April 3, 2018, among CHS/Community Health Systems, Inc.,as the Borrower, Community Health Systems, Inc., as the Parent, the subsidiaries of the Borrower party thereto, and JPMorgan Chase Bank,N.A., as Collateral Agent (incorporated by reference to Exhibit 10.4 to Community Health Systems, Inc.’s Quarterly Report on Form 10-Qfor the quarter ended March 31, 2018 filed May 2, 2018 (No. 001-15925)) 10.7† Form of Indemnification Agreement between Community Health Systems, Inc. and its directors and executive officers (incorporated byreference to Exhibit 10.8 to Amendment No. 2 to Community Health Systems, Inc.’s Registration Statement on Form S-1/A filed May 2,2000 (No. 333-31790)) 10.8† CHS/Community Health Systems, Inc. Amended and Restated Supplemental Executive Retirement Plan, as amended and restated as ofJanuary 1, 2009 (incorporated by reference to Exhibit 10.13 to Community Health Systems, Inc.’s Annual Report on Form 10-K for theyear ended December 31, 2008 filed February 27, 2009 (No. 001-15925)) 10.9† Amendment No. 1, dated as of September 13, 2011, to the CHS/Community Health Systems, Inc. Amended and Restated SupplementalExecutive Retirement Plan, as amended and restated as of January 1, 2009 (incorporated by reference to Exhibit 10.1 to CommunityHealth Systems, Inc.’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2011 filed October 28, 2011 (No. 001-15925)) 10.10† Amendment No. 2, dated as of January 1, 2014, to the CHS/Community Health Systems, Inc. Amended and Restated SupplementalExecutive Retirement Plan, as amended and restated as of January 1, 2009 (incorporated by reference to Exhibit 10.1 to CommunityHealth Systems, Inc.’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2014 filed May 7, 2014 (No. 001-15925)) 10.11† CHS/Community Health Systems, Inc. 2018 Supplemental Executive Retirement Plan, executed on May 15, 2018 and effective January 1,2018 (incorporated by reference to Exhibit 10.5 to Community Health Systems, Inc.’s Quarterly Report on Form 10-Q for the quarter endedJune 30, 2018 filed July 27, 2018 (No. 001-15925)) 10.12† Community Health Systems Supplemental Executive Benefits, amended and restated effective April 1, 2015(incorporated by reference toExhibit 10.2 to Community Health Systems, Inc.’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2015, filed August 4,2015 (No. 001-15925)) 10.13† Supplemental Executive Retirement Plan Trust, dated June 1, 2005, by and between CHS/Community Health Systems, Inc., as grantor,and Wachovia Bank, N.A., as Trustee (incorporated by reference to Exhibit 10.3 to Community Health Systems, Inc.’s Current Report onForm 8-K filed June 1, 2005 (No. 001-15925)) 10.14† CHS/Community Health Systems, Inc. Deferred Compensation Plan, amended and restated effective January 1, 2014 (incorporated byreference to Exhibit 10.25 to Community Health Systems, Inc.’s Annual Report on Form 10-K for the year ended December 31, 2013 filedFebruary 26, 2014 (No. 001-15925)) 185Table of ContentsNo. Description 10.15† Community Health Systems Deferred Compensation Plan Trust, amended and restated effective February 26, 1999 (incorporated byreference to Exhibit 10.18 to Community Health Systems, Inc.’s Annual Report on Form 10-K for the year ended December 31, 2002 filedMarch 27, 2003 (No. 001-15925)) 10.16† CHS NQDCP, effective as of September 1, 2009 (incorporated by reference to Exhibit 4.2 to Community Health Systems, Inc.’sRegistration Statement on Form S-8 filed December 11, 2009 (No. 333-163691)) 10.17† CHS NQDCP Adoption Agreement, executed as of August 11, 2009 (incorporated by reference to Exhibit 4.3 to Community HealthSystems, Inc.’s Registration Statement on Form S-8 filed December 11, 2009 (No. 333-163691)) 10.18† Guarantee, dated December 9, 2009, made by Community Health Systems, Inc. in favor of CHS/Community Health Systems, Inc. withrespect to CHS/Community Health Systems, Inc.’s payment obligations under the CHS/Community Health Systems, Inc. DeferredCompensation Plan and the NQDCP (incorporated by reference to Exhibit 4.4 to Community Health Systems, Inc.’s Registration Statementon Form S-8 filed December 11, 2009 (No. 333-163691)) 10.19† Community Health Systems, Inc. 2004 Employee Performance Incentive Plan, as amended and restated as of February 26, 2014(incorporated by reference to Exhibit 10.1 to Community Health Systems, Inc.’s Quarterly Report on Form 10-Q for the quarter endedJune 30, 2014 filed August 1, 2014 (No. 001-15925)) 10.20† Amendment No. 1, dated February 22, 2017, to Community Health Systems, Inc. 2004 Employee Performance Incentive Plan, as amendedand restated as of February 26, 2014 (incorporated by reference to Exhibit 10.1 to Community Health Systems, Inc.’s Quarterly Report onForm 10-Q for the quarter ended March 31, 2017 filed May 2, 2017 (No. 001-15925)) 10.21† Community Health Systems, Inc. Directors’ Fees Deferral Plan, as amended and restated as of December 10, 2008 (incorporated byreference to Exhibit 10.15 to Community Health Systems, Inc.’s Annual Report on Form 10-K for the year ended December 31, 2008 filedFebruary 27, 2009 (No. 001-15925)) 10.22† Community Health Systems, Inc. 2000 Stock Option and Award Plan, as amended and restated as of March 20, 2013 (incorporated byreference to Exhibit 10.1 to Community Health Systems, Inc.’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2013 filedJuly 31, 2013 (No. 001-15925)) 10.23† Form of Nonqualified Stock Option Agreement (Employee) for Community Health Systems, Inc. 2000 Stock Option and Award Plan(incorporated by reference to Exhibit 10.15 to Community Health Systems, Inc.’s Annual Report on Form 10-K for the year endedDecember 31, 2009 filed February 26, 2010 (No. 001-15925)) 10.24† Community Health Systems, Inc. 2009 Stock Option and Award Plan, as amended and restated as of March 14, 2018 (incorporated byreference to Exhibit 10.1 to Community Health Systems, Inc.’s Current Report on Form 8-K filed May 15, 2018 (No. 001-15925)) 10.25† Form of Nonqualified Stock Option Agreement (Employee) for Community Health Systems, Inc. 2009 Stock Option and Award Plan(incorporated by reference to Exhibit 10.39 to Community Health Systems, Inc.’s Annual Report on Form 10-K for the year endedDecember 31, 2013 filed February 26, 2014 (No. 001-15925)) 10.26† Form of Restricted Stock Award Agreement for Community Health Systems, Inc. 2009 Stock Option and Award Plan (incorporated byreference to Exhibit 10.3 to Community Health Systems, Inc.’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2013 filedJuly 31, 2013 (No. 001-15925)) 186Table of ContentsNo. Description 10.27† Form of Performance Based Restricted Stock Award Agreement (Most Highly Compensated Executive Officers) for Community HealthSystems, Inc. 2009 Stock Option and Award Plan (for awards granted from March 1, 2016 through February 28, 2017)(incorporated byreference to Exhibit 10.1 to Community Health Systems, Inc.’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2016 filedMay 3, 2016 (No. 001-15925)) 10.28† Form of Performance Based Restricted Stock Award Agreement (Senior Officers) for Community Health Systems, Inc. 2009 Stock Optionand Award Plan (for awards granted from March 1, 2017 through February 28, 2018)(incorporated by reference to Exhibit 10.2 toCommunity Health Systems, Inc.’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2017 filed May 2, 2017 (No.001-15925)) 10.29† Form of Performance Based Restricted Stock Award Agreement (Senior Officers) for Community Health Systems, Inc. 2009 Stock Optionand Award Plan (for awards granted beginning March 1, 2018) (incorporated by reference to Exhibit 10.46 to Community Health Systems,Inc.’s Annual Report on Form 10-K for the year ended December 31, 2017 filed February 28, 2018 (No. 001-15925)) 10.30† Form of Director Restricted Stock Unit Award Agreement for Community Health Systems, Inc. 2009 Stock Option and Award Plan(incorporated by reference to Exhibit 10.5 to Community Health Systems, Inc.’s Quarterly Report on Form 10-Q for the quarter endedJune 30, 2013 filed July 31, 2013 (No. 001-15925)) 10.31† Form of Amended and Restated Change in Control Severance Agreement effective December 31, 2008 (incorporated by reference toExhibit 10.22 to Community Health Systems, Inc.’s Annual Report on Form 10-K for the year ended December 31, 2008 filed February 27, 2009 (No. 001-15925)) 10.32† Form of Change in Control Severance Agreement (for executive officers appointed since January 1, 2009) (incorporated by reference toExhibit 10.3 to Community Health Systems, Inc.’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2014 filed May 7, 2014(No. 001-15925)) 10.33 Participation Agreement entered into as of January 1, 2005, by and between Community Health Systems Professional ServicesCorporation and HealthTrust Purchasing Group, L.P. (incorporated by reference to Exhibit 10.1 to Community Health Systems, Inc.’sCurrent Report on Form 8-K filed January 7, 2005 (No. 001-15925)) 10.34 Amendment effective as of January 1, 2015, by and between CHSPSC, LLC and HealthTrust Purchasing Group, L.P., to ParticipationAgreement entered into as of January 1, 2005, by and between Community Health Systems Professional Services Corporation andHealthTrust Purchasing Group, L.P. (incorporated by reference to Exhibit 10.36 to Community Health Systems, Inc.’s Annual Report onForm 10-K for the year ended December 31, 2014 filed February 25, 2015 (No. 001-15925)) 10.35† Consultancy Agreement, dated May 16, 2017, by and between CHSPSC, LLC and Larry Cash (incorporated by reference to Exhibit 10.1to Community Health Systems, Inc.’s Current Report on Form 8-K filed May 17, 2017 (No. 001-15925)) 10.36† Executive Deferred Compensation Award between Dr. Lynn Simon and CHSPSC, LLC, dated December 12, 2017 (incorporated byreference to Exhibit 10.54 to Community Health Systems, Inc.’s Annual Report on Form 10-K for the year ended December 31, 2017 filedFebruary 28, 2018 (No. 001-15925)) 21* List of Subsidiaries 23.1* Consent of Deloitte & Touche LLP 31.1* Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 187Table of ContentsNo. Description 31.2* Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 32.1** Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, adopted pursuant to Section 906 of the Sarbanes-Oxley Act of2002 32.2** Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, adopted pursuant to Section 906 of the Sarbanes-Oxley Act of2002 99.1 Corporate Integrity Agreement, Amended, dated September 21, 2018, between Community Health Systems, Inc. and the Office ofInspector General of the United States Department of Health and Human Services (incorporated by reference to Exhibit 99.1 to CommunityHealth Systems, Inc.’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2018 filed October 30, 2018 (No. 001-15925)) 99.2 Order Approving Derivative Settlement and Order of Dismissal with Prejudice, dated January 17, 2017 and Stipulation of Settlement,dated November 18, 2016 (incorporated by reference to Exhibit 99.2 to Community Health Systems, Inc.’s Annual Report on Form 10-Kfor the year ended December 31, 2016 filed February 21, 2017 (No. 001-15925))101.INS* XBRL Instance Document101.SCH* XBRL Taxonomy Extension Schema101.CAL* XBRL Taxonomy Extension Calculation Linkbase101.DEF* XBRL Taxonomy Extension Definition Linkbase101.LAB* XBRL Taxonomy Extension Label Linkbase101.PRE* XBRL Taxonomy Extension Presentation Linkbase *Filed herewith.**Furnished herewith.†Indicates a management contract or compensatory plan or arrangement 188Table of ContentsItem 16. Form 10-K SummaryNone. 189Table of ContentsSIGNATURESPursuant to the requirements of section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on itsbehalf by the undersigned, thereunto duly authorized. COMMUNITY HEALTH SYSTEMS, INC.By: /s/ Wayne T. Smith Wayne T. Smith Chairman of the Boardand Chief Executive OfficerDate: February 21, 2019Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of theRegistrant and in the capacities and on the dates indicated. Name Title Date/s/ WAYNE T. SMITHWayne T. Smith Chairman of the Board and Chief Executive Officer February 21, 2019/s/ THOMAS J. AARONThomas J. Aaron Executive Vice President and Chief Financial Officer February 21, 2019/s/ KEVIN J. HAMMONSKevin J. Hammons Senior Vice President, Assistant Chief FinancialOfficer, Chief Accounting Officer and Treasurer February 21, 2019/s/ TIM L. HINGTGENTim L. Hingtgen President, Chief Operating Officer and Director February 21, 2019/s/ JOHN A. CLERICOJohn A. Clerico Director February 21, 2019/s/ MICHAEL DINKINSMichael Dinkins Director February 21, 2019/s/ JAMES S. ELY IIIJames S. Ely III Director February 21, 2019/s/ JOHN A. FRYJohn A. Fry Director February 21, 2019/s/ ELIZABETH T. HIRSCHElizabeth T. Hirsch Director February 21, 2019/s/ WILLIAM NORRIS JENNINGS, M.D.William Norris Jennings, M.D. Director February 21, 2019/s/ K. RANGA KRISHNAN, MBBSK. Ranga Krishnan, MBBS Director February 21, 2019/s/ JULIA B. NORTHJulia B. North Director February 21, 2019/s/ H. JAMES WILLIAMS, PH.D.H. James Williams, Ph.D. Director February 21, 2019 190Table of ContentsREPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRMTo the Stockholders and the Board of Directors ofCommunity Health Systems, Inc.Franklin, TennesseeOpinion on the Financial Statement ScheduleWe have audited the consolidated financial statements of Community Health Systems, Inc., and subsidiaries (the “Company”) as of December 31, 2018 and2017, and for each of the three years in the period ended December 31, 2018, and the Company’s internal control over financial reporting as of December 31,2018, and have issued our reports thereon dated February 21, 2019; such reports are included elsewhere in this Form 10-K. Our audits also included theconsolidated financial statement schedule of the Company listed in the Index at Item 15. This financial statement schedule is the responsibility of theCompany’s management. Our responsibility is to express an opinion on the Company’s financial statement schedule based on our audits. In our opinion,such financial statement schedule, when considered in relation to the financial statements taken as a whole, presents fairly, in all material respects, theinformation set forth therein./s/ Deloitte & Touche LLPNashville, TennesseeFebruary 21, 2019 191Table of ContentsCommunity Health Systems, Inc. and SubsidiariesSchedule II — Valuation and Qualifying Accounts Description BalanceatBeginningofYear AcquisitionsandDispositions ChargedtoCostsandExpenses Write-offs Balanceat Endof Year (In millions) Year ended December 31, 2018allowance for doubtful accounts (1) $- $- $- $- $- Year ended December 31, 2017allowance for doubtful accounts $3,773 $(21) $3,054 $(2,936) $3,870 Year ended December 31, 2016allowance for doubtful accounts $ 4,110 $ (365) $ 2,849 $ (2,821) $ 3,773 (1)As discussed at Note 1 of the Notes of the Consolidated Financial Statements, on January 1, 2018, the Company adopted the new revenue recognitionstandard codified in ASC 606. Upon adoption of ASC 606, the allowance for doubtful accounts of approximately $3.9 billion was reclassified as acomponent of the net patient accounts receivable. 192Exhibit 21as of 12/31/18Community Health Systems, Inc.SUBSIDIARY LISTING(*) Majority position held in an entity with physicians, non-profit entities or both(#) Minority position held in a non-consolidating entity A Woman’s Place, LLC (DE) Abilene Clinic Asset Holding Company, LLC (DE) Abilene Hospital, LLC (DE) Abilene Merger, LLC (DE) Access Center Services, LLC (DE) AF-CH-HH, LLC# (DE) Affinity Cardio-Thoracic Specialists, LLC (DE) Affinity Cardiovascular Specialists, LLC (DE) Affinity Gastroenterology ASC, LLC* (DE) Affinity Health Systems, LLC (DE) Affinity Hospital, LLC (DE) d/b/a Grandview Medical CenterAffinity Neurosurgical Specialists, LLC (DE) Affinity Orthopedic Services, LLC (DE) Affinity Orthopedic Specialists, LLC (DE) Affinity Physician Services, LLC (DE) Affinity Radiation Therapy Services, LLC (DE) Affinity Skilled Nursing, LLC (DE) Alabama HMA Physician Management, LLC (AL) Alaska Physician Services, LLC (DE) Alice Regional Hospital Community Alliance, Inc. (TX) Alliance Health Partners, LLC (MS) Ambulance Services of Dyersburg, Inc. (TN) Ambulance Services of McNairy, Inc. (TN) Amory HMA Physician Management, LLC (MS) Amory HMA, LLC (MS) Anesthesiology Group of Hattiesburg, LLC (DE) Angelo Community Healthcare Services, Inc. (TX) Anniston HMA, LLC (AL) Arizona ASC Management, Inc. (AZ) Arizona DH, LLC (DE) Arizona Medco, LLC (DE) Arkansas HMA Regional Service Center, LLC (AR) Arkansas Medical Imaging JV, LLC (DE) ARMC, LP (DE) d/b/a Abilene Regional Medical CenterASC JV Holdings, LLC (DE) Augusta Home Care Services, LLC# (DE) Bartow HMA Physician Management, LLC (FL) Bartow HMA, LLC (FL) Batesville HMA Development, LLC (MS) Batesville HMA Medical Group, LLC (MS) Bayfront Ambulatory Surgical Center, LLC* (DE) Bayfront Health Imaging Center, LLC* (DE) Page 1 of 24Community Health Systems, Inc.SUBSIDIARY LISTING Bayfront Health Urgent Care, LLC (DE) Bayfront HMA Convenient Care, LLC* (FL) Bayfront HMA Healthcare Holdings, LLC* (FL) Bayfront HMA Home Health, LLC# (FL) Bayfront HMA Investments, LLC* (FL) Bayfront HMA Medical Center, LLC* (FL) d/b/a Bayfront Health St. PetersburgBayfront HMA Physician Management, LLC* (FL) Bayfront HMA Real Estate Holdings, LLC* (FL) Bayfront HMA Wellness Center, LLC* (FL) Beauco, LLC (DE) Beaumont Medical Center, L.P. (DE) Beaumont Regional, LLC (DE) Berwick Clinic Company, LLC (DE) Berwick Clinic Corp. (PA) Berwick Home Care Services, LLC# (DE) Berwick Home Health Private Care, Inc. (PA) Berwick Hospital Company, LLC (DE) d/b/a Berwick Hospital CenterBH Trans Company, LLC (DE) Biloxi H.M.A., LLC (MS) d/b/a Merit Health BiloxiBiloxi HMA Physician Management, LLC (MS) Birmingham Holdings II, LLC (DE) Birmingham Holdings, LLC (DE) Birmingham Home Care Services, LLC# (DE) Blackwell HMA, LLC (OK) Blackwell HMPN, LLC (OK) Blackwell Home Health & Hospice, LLC (OK) Blue Island Home Care Services, LLC# (DE) Bluefield Clinic Company, LLC (DE) Bluefield HBP Medical Group, LLC (DE) Bluefield Holdings, LLC (DE) Bluefield Hospital Company, LLC (DE) d/b/a Bluefield Regional Medical CenterBluffton Health System LLC (DE) d/b/a Bluffton Regional Medical CenterBluffton Physician Services, LLC (DE) Brandon HMA, LLC (MS) d/b/a Merit Health RankinBrandon Physician Management, LLC (DE) Brandywine Hospital Malpractice Assistance Fund, Inc. (PA) Brazos Valley of Texas, L.P. (DE) Brazos Valley Surgical Center, LLC (DE) Brevard HMA ALF, LLC (FL) Brevard HMA APO, LLC (FL) Brevard HMA ASC, LLC (FL) Brevard HMA Diagnostic Imaging, LLC (FL) Page 2 of 24Community Health Systems, Inc.SUBSIDIARY LISTING Brevard HMA HME, LLC (FL) Brevard HMA Holdings, LLC (FL) Brevard HMA Home Health, LLC# (FL) Brevard HMA Hospice, LLC# (FL) Brevard HMA Hospitals, LLC (FL) Brevard HMA Investment Properties, LLC (FL) Brevard HMA Nursing Home, LLC (FL) Brooklyn Medical Associates, LLC (IN) Brooksville HMA Physician Management, LLC (FL) Brownsville Clinic Corp. (TN) Brownsville Hospital Corporation (TN) Brownwood Asset Holding Company, LLC (DE) Brownwood Hospital, L.P. (DE) d/b/a Brownwood Regional Medical CenterBrownwood Medical Center, LLC (DE) Bullhead City Clinic Corp. (AZ) Bullhead City Hospital Corporation (AZ) d/b/a Western Arizona Regional Medical CenterBullhead City Hospital Investment Corporation (DE) Bullhead City Imaging Corporation (AZ) Bullhead Medical Plaza II, LLC# (AZ) Bullhead Medical Plaza, Ltd.# (NV) Cahaba Orthopedics, LLC (DE) Campbell County HMA, LLC (TN) d/b/a LaFollette Medical CenterCardiology Associates of Spokane, LLC (DE) Carlisle HMA Physician Management, LLC (PA) Carlisle HMA Surgery Center, LLC (PA) Carlisle HMA, LLC (PA) Carlisle Medical Group, LLC (PA) Carlsbad Medical Center, LLC (DE) d/b/a Carlsbad Medical CenterCarolina Surgery Center, LLC* (SC) Carolinas Holdings, LLC (DE) Carolinas JV Holdings General, LLC (DE) Carolinas JV Holdings II, LLC (DE) Carolinas JV Holdings, L.P. (DE) Carolinas Medical Alliance, Inc. (SC) Carolinas OB/GYN Medical Group, LLC (DE) CDI JV, LLC# (DE) Cedar Park Clinic Asset Holding Company, LLC (DE) Cedar Park Health System, L.P.* (DE) d/b/a Cedar Park Regional Medical CenterCedar Park Regional Medical Group (TX) Cedar Park Surgery Center, L.L.P.# (TX) Center for Adult Healthcare, LLC (DE) Center for Medical Interoperability, Inc. (DE)# Page 3 of 24Community Health Systems, Inc.SUBSIDIARY LISTING Center for Pain Management, LLC* (DE) Central Florida HMA Holdings, LLC (DE) Central Polk, LLC* (FL) Central States HMA Holdings, LLC (DE) Centre Home Care, LLC# (AL) CH BH Services, LLC (DE) Chester HMA Physician Management, LLC (SC) Chester HMA, LLC (SC) d/b/a Chester Regional Medical CenterChester Imaging, LLC (DE) Chester Medical Group, LLC (SC) Chester PPM, LLC (SC) Chesterton Surgery Center, LLC* (DE) Chestnut Hill Health System, LLC (DE) Chestnut Knoll Home Health Care, L.P.# (PA) CHHS Development Company, LLC (DE) CHHS Holdings, LLC (DE) CHHS Hospital Company, LLC (DE) CHS Kentucky Holdings, LLC (DE) CHS Mississippi State Political Action Committee (MS) CHS Pennsylvania Holdings, LLC (DE) CHS PSO, LLC (DE) CHS Realty Holdings I, Inc. (TN) CHS Realty Holdings II, Inc. (TN) CHS Realty Holdings III, LLC (DE) CHS Realty Holdings Joint Venture (TN) CHS Receivables Funding, LLC (DE) CHS Tennessee Holdings, LLC (DE) CHS Virginia Holdings, LLC (DE) CHS Washington Holdings, LLC (DE) CHS/Community Health Systems, Inc. (DE) CHS/Community Health Systems, Inc. Political Action Committee CHS-ASC, LLC (DE) CHSPSC ACO 1, LLC (DE) CHSPSC ACO 10, LLC (DE) CHSPSC ACO 11, LLC (DE) CHSPSC ACO 12, LLC (DE) CHSPSC ACO 13, LLC (DE) CHSPSC ACO 14, LLC (DE) CHSPSC ACO 15, LLC (DE) CHSPSC ACO 16, LLC (DE) CHSPSC ACO 17, LLC (DE) CHSPSC ACO 18, LLC (DE) Page 4 of 24Community Health Systems, Inc.SUBSIDIARY LISTING CHSPSC ACO 19, LLC (DE) CHSPSC ACO 2, LLC (DE) CHSPSC ACO 20, LLC (DE) CHSPSC ACO 21, LLC (DE) CHSPSC ACO 22, LLC (DE) CHSPSC ACO 23, LLC (DE) CHSPSC ACO 24, LLC (DE) CHSPSC ACO 25, LLC (DE) CHSPSC ACO 26, LLC (DE) CHSPSC ACO 27, LLC (DE) CHSPSC ACO 28, LLC (DE) CHSPSC ACO 29, LLC (DE) CHSPSC ACO 3, LLC (DE) CHSPSC ACO 30, LLC (DE) CHSPSC ACO 4, LLC (DE) CHSPSC ACO 5, LLC (DE) CHSPSC ACO 6, LLC (DE) CHSPSC ACO 7, LLC (DE) CHSPSC ACO 8, LLC (DE) CHSPSC ACO 9, LLC (DE) CHSPSC ACO Holdings, LLC (DE) CHSPSC Leasing, Inc. (DE) CHSPSC, LLC (DE) Citrus HMA, LLC (FL) d/b/a Bayfront Health Seven RiversClarksdale HMA Physician Management, LLC (MS) Clarksdale HMA, LLC (MS) Clarksville Endoscopy Center, LLC* (DE) Clarksville Health System, G.P.* (DE) d/b/a Tennova Healthcare - ClarksvilleClarksville Holdings II, LLC (DE) Clarksville Holdings, LLC (DE) Clarksville Home Care Services, LLC# (DE) Clarksville Imaging Center, LLC# (TN) Clarksville Physician Services, G.P.* (DE) Clarksville Surgicenter, LLC# (TN) Cleveland Home Care Services, LLC# (DE) Cleveland Hospital Company, LLC (TN) Cleveland Medical Clinic, Inc. (TN) Cleveland PHO, Inc. (TN) Cleveland Tennessee Hospital Company, LLC (DE) d/b/a Tennova Healthcare – ClevelandClick to Care, LLC (FL) Clinton HMA, LLC (OK) d/b/a AllianceHealth ClintonClinton HMPN, LLC (OK) Page 5 of 24Community Health Systems, Inc.SUBSIDIARY LISTING Clinton Home Health & Hospice LLC# (OK) Coast Imaging, LLC# (MS) Coatesville Hospital Corporation (PA) Cocke County HMA, LLC (TN) d/b/a Newport Medical CenterCoffee Hospital Management Associates, Inc. (TN) College Station Clinic Asset Holding Company, LLC (DE) College Station Diagnostic Clinic (TX) College Station Hospital, L.P. (DE) d/b/a College Station Medical CenterCollege Station Medical Center, LLC (DE) College Station Merger, LLC (DE) College Station RHC Company, LLC (DE) Collier Boulevard HMA Physician Management, LLC (FL) Collier HMA Facility Based Physician Management, LLC (FL) Collier HMA Neurological Vascular Medical Group, LLC (FL) Collier HMA Physician Management, LLC (FL) Commonwealth Health Cancer Network, LLC* (DE) Commonwealth Health Clinically Integrated Network, LLC (DE) Commonwealth Health Urgent Care, LLC (DE) Commonwealth Physician Network, LLC (DE) Community GP Corp. (DE) Community Health Care Partners, Inc. (MS) Community Health Investment Company, LLC (DE) Community Health Physicians Operations Holding Company, LLC (DE) Community Health Systems Foundation (TN) Community Health Systems, Inc. (DE) Community Information Network, Inc. Community Insurance Group SPC, LTD. (Cayman Islands) Community LP Corp. (DE) Community Network Solutions, LLC (DE) Compass Imaging, LLC (MS) CP Hospital GP, LLC (DE) CP Premier Urgent Care JV, LLC# (DE) CPLP, LLC (DE) Credentialing Verification Services, LLC (DE) Crestview Hospital Corporation* (FL) d/b/a North Okaloosa Medical CenterCrestview Professional Condominiums Association, Inc.* (FL) Crestview Surgery Center, L.P. (TN) Crestwood Healthcare, L.P. (DE) d/b/a Crestwood Medical CenterCrestwood Hospital LP, LLC (DE) Crestwood Hospital, LLC (DE) Crestwood Physician Services, LLC (DE) Crestwood Surgery Center, LLC* (DE) Page 6 of 24Community Health Systems, Inc.SUBSIDIARY LISTING Crossgates HMA Medical Group, LLC (MS) Crossroads Healthcare Management, LLC# (TX) Crossroads Home Care Services, LLC# (DE) Crystal River HMA Physician Management, LLC (FL) CSMC, LLC (DE) CSP ASC Holdings, LLC* (DE) Dallas Phy Service, LLC (DE) Dallas Physician Practice, L.P. (DE) Day Surgery, Inc. (KS) DCF (TX) Deaconess Health System, LLC* (OK) Deaconess Holdings, LLC (DE) Deaconess Hospital Holdings, LLC (DE) Deaconess Metropolitan Physicians, LLC (DE) Deaconess Physician Services, LLC (DE) Deming Home Care Services, LLC# (DE) Desert Hospital Holdings, LLC (DE) Detar Hospital, LLC (DE) DFW Physerv, LLC (DE) DH Cardiology, LLC (DE) DHFW Holdings, LLC (DE) Diagnostic Imaging Centers of NEPA, LLC# (PA) Diagnostic Imaging Management of Brandywine Valley, LLC (PA) Diagnostic Imaging of Brandywine Valley, LP (PA) Dukes Health System, LLC (DE) d/b/a Dukes Memorial HospitalDukes Physician Services, LLC (DE) Dupont Hospital, LLC* (DE) d/b/a Dupont HospitalDurant H.M.A., LLC* (OK) d/b/a AllianceHealth DurantDurant HMA Home Health, LLC (OK) Durant HMA Physician Management, LLC (OK) Dyersburg Clinic Corp. (TN) Dyersburg HBP Medical Group, LLC (DE) Dyersburg Hospital Company, LLC (TN) E.D. Clinics, LLC (DE) East Georgia HMA Physician Management, LLC (GA) East Georgia Regional Medical Center, LLC* (GA) d/b/a East Georgia Regional Medical CenterEast Tennessee Clinic Corp. (TN) East Tennessee Health Systems, Inc. (TN) Easton Hospital Malpractice Assistance Fund, Inc. (PA) El Dorado Home Care Services, LLC# (DE) El Dorado Surgery Center, L.P.* (DE) EL MED, LLC (DE) Page 7 of 24Community Health Systems, Inc.SUBSIDIARY LISTING Eligibility Screening Services, LLC (DE) Empire Health Services (WA) Emporia Clinic Corp. (VA) Emporia Home Care Services, LLC# (DE) Emporia Hospital Corporation (VA) d/b/a Southern Virginia Regional Medical CenterEnterprise Clinic, LLC (DE) Fallbrook Hospital Corporation (DE) Fayetteville Arkansas Hospital Company, LLC* (DE) d/b/a Northwest Health Physicians’ SpecialtyHospitalFirst Choice Health Plan of Mississippi, LLC# (MS) Firstcare, Inc.# (IN) Florence Home Care Services, LLC# (DE) Florida Endoscopy and Surgery Center, LLC* (FL) Florida HMA Holdings, LLC (DE) Florida HMA Regional Service Center, LLC (FL) Florida West Coast Health Alliance, LLC* (DE) Flowood Mississippi Imaging, LLC (DE) Flowood River Oaks HMA Medical Group, LLC (MS) FMG PrimeCare, LLC (DE) Foley Clinic Corp. (AL) Foley Hospital Corporation (AL) d/b/a South Baldwin Regional Medical CenterFort Payne Home Care, LLC# (AL) Fort Smith HMA Home Health, LLC# (AR) Fort Smith HMA PBC Management, LLC (AR) Fort Smith HMA Physician Management, LLC (AR) Fort Smith HMA, LLC (AR) Frankfort Health Partner, Inc. (IN) Franklin Clinic Corp. (VA) Franklin Home Care Services, LLC# (DE) Franklin Hospital Corporation (VA) d/b/a Southampton Memorial HospitalFresenius Vascular Care Petersburg, LLC# (DE) Fulton Home Care Services, LLC# (DE) Gadsden HMA Physician Management, LLC* (AL) Gadsden Home Care Services, LLC# (DE) Gadsden Regional Medical Center, LLC (DE) d/b/a Gadsden Regional Medical CenterGadsden Regional Physician Group Practice, LLC (DE) Gadsden Regional Primary Care, LLC (AL) Gaffney Clinic Company, LLC (DE) Gaffney H.M.A., LLC (SC) Gaffney HMA Physician Management, LLC (SC) Gaffney PPM, LLC (SC) Galesburg Home Care, LLC# (DE) Gateway Medical Services, Inc. (FL) Page 8 of 24Community Health Systems, Inc.SUBSIDIARY LISTING Granbury Clinic Asset Holding Company, LLC (DE) Granbury Hospital Corporation (TX) d/b/a Lake Granbury Medical CenterGranbury Mammography JV, LLC# (DE) Granbury Texas Hospital Investment Corporation (DE) Granite City Home Care Services, LLC# (DE) GRB Real Estate, LLC (DE) Greenbrier Valley Anesthesia, LLC (DE) Greenbrier Valley Emergency Physicians, LLC (DE) Greenbrier VMC, LLC* (DE) d/b/a Greenbrier Valley Medical CenterGRMC Holdings, LLC (DE) Gulf Coast HMA Physician Management, LLC (FL) Gulf Coast Hospital, L.P. (DE) Gulf Coast Medical Center, LLC (DE) Gulf Oaks Therapeutic Day School, LLC (MS) Gulf South Surgery Center, LLC# (MS) Gulfmed, Inc.# (MS) Harborside Surgery Center, LLC# (FL) Haines City HMA Physician Management, LLC (FL) Haines City HMA Urgent Care, LLC (FL) Haines City HMA, LLC* (FL) d/b/a Heart of Florida Regional Medical CenterHallmark Healthcare Company, LLC (DE) Hamlet PPM, LLC (NC) Harris Managed Services, Inc. (AR) Harrison HMA, LLC (MS) Harton Clinic Company, LLC (DE) Hartsville ENT, LLC (SC) Hartsville HMA Physician Management, LLC (SC) Hartsville PPM, LLC (SC) Hattiesburg Home Care Services, LLC# (DE) Health Management Associates, LLC (DE) Health Management Associates, LP (DE) Health Management General Partner I, LLC (DE) Health Management General Partner, LLC (DE) Health Management Information Technology, LLC (DE) Health Management Intellectual Properties, LLC (TX) Health Management Physician Associates, LLC (DE) HealthTrust Purchasing Group, L.P.# (DE) Healthwest Holdings, Inc. (AZ) Heart of Florida Surgery Center, LLC# (DE) Helena Home Care Services, LLC# (DE) Heritage Healthcare Innovation Fund II, LP# (DE) Heritage Healthcare Innovation Fund, LP# (DE) Page 9 of 24Community Health Systems, Inc.SUBSIDIARY LISTING Hernando HMA, LLC* (FL) d/b/a Bayfront Health Brooksville; Bayfront HealthSpring HillHighland Health Systems, Inc. (TX) Hill Country ASC Partners, L.L.C.# (TX) Hill Regional Clinic Corp. (TX) HIM Central Services, LLC (DE) HMA ASC Holdings, LLC (DE) HMA ASCOA Holdings, LLC (DE) HMA Bayflite Services, LLC (FL) HMA CAT, LLC (TX) HMA Employee Disaster Relief Fund, Inc. (FL) HMA Fentress County General Hospital, LLC (TN) HMA Hospital Holdings, LP (DE) HMA Lake Shore, Inc.* (FL) HMA MRI, LLC (TX) HMA Oklahoma Clearing Service, LLC (OK) HMA Professional Services Group, LP (DE) HMA Santa Rosa Medical Center, LLC (FL) d/b/a Santa Rosa Medical CenterHMA Services GP, LLC (DE) HMA/Solantic Joint Venture, LLC# (DE) HMA-ASCOA Investments, LLC* (DE) HMA-ASCOA Investments, LLC* (DE) HMA-TRI Holdings, LLC (DE) Hobbs Medco, LLC (DE) Hobbs Physician Practice, LLC (DE) Hood Medical Group (TX) Hood Medical Services, Inc. (TX) Hospital Laundry Services, Inc.# (IN) Hospital Management Associates, LLC (FL) Hospital Management Services of Florida, LP (FL) Hospital of Fulton, Inc. (KY) Hospital of Morristown, LLC (TN) Hot Springs Outpatient Surgery Center, G.P. (AR) HP LRHS Land, LLC# (IN) HTI Tucson Rehabilitation, Inc. (AZ) Illinois Home Care Holdings, LLC# (DE) Imaging JV Holdings, LLC (DE) INACTCO, Inc. (DE) Innovative Recoveries, LLC (DE) Intermountain Medical Group, Inc. (PA) IOM Health System, L.P.* (IN) d/b/a Lutheran Hospital of IndianaJackson HMA North Medical Office Building, LLC (MS) Jackson HMA, LLC (MS) d/b/a Merit Health Central Page 10 of 24Community Health Systems, Inc.SUBSIDIARY LISTING Jackson Home Care Services, LLC# (DE) Jackson Hospital Corporation (TN) Jackson, Tennessee Hospital Company, LLC* (TN) Jamestown HMA Physician Management, LLC (TN) Jasper Medical Group, LLC (FL) Jefferson County HMA, LLC (TN) d/b/a Jefferson Memorial HospitalJennersville Regional Hospital Malpractice Assistance Fund, Inc. (PA) Jourdanton Clinic Asset Holding Company, LLC (DE) Jourdanton Home Care Services, LLC# (DE) Jourdanton Hospital Corporation (TX) Kay County Clinic Company, LLC (OK) Kay County Hospital Corporation (OK) Kay County Oklahoma Hospital Company, LLC (OK) d/b/a AllianceHealth Ponca CityKennett HMA Physician Management, LLC (MO) Kennett HMA, LLC (MO) Key West HMA Physician Management, LLC (FL) Key West HMA, LLC (FL) d/b/a Lower Keys Medical CenterKey West Home Health, LLC# (FL) Key West Private Care, LLC# (FL) Keystone HMA Property Management, LLC (PA) Kirksville Academic Medicine, LLC (MO) Kirksville Clinic Corp. (MO) Kirksville Home Care Services, LLC# (MO) Kirksville Hospital Company, LLC (DE) Kirksville Missouri Hospital Company, LLC* (MO) d/b/a Northeast Regional Medical CenterKirksville Physical Therapy Services, LLC (DE) Knox Hospital Company, LLC (DE) d/b/a Starke HospitalKnoxville HMA Cardiology PPM, LLC (TN) Knoxville HMA Development, LLC (TN) Knoxville HMA Family Services, LLC (TN) Knoxville HMA Holdings, LLC (TN) Knoxville HMA Homecare DME & Hospice, LLC (TN) Knoxville HMA JV Holdings, LLC (TN) Knoxville HMA Mission Services, LLC (TN) Knoxville HMA Physician Management, LLC (TN) Knoxville HMA Wellness Center, LLC (TN) Knoxville Home Care Services, LLC# (DE) Knoxville, Tennessee Turkey Creek MOB, LLC (DE) Kosciusko Ambulance Services, LLC (DE) Kosciusko Medical Group, LLC (DE) La Porte and Starke EMS, LLC (DE) La Porte Clinic Company, LLC (DE) Page 11 of 24Community Health Systems, Inc.SUBSIDIARY LISTING La Porte Health System, LLC (DE) La Porte Home Care Services, LLC (DE) La Porte Hospital Company, LLC (DE) d/b/a La Porte HospitalLa Porte Occupational Health Services, LLC (DE) Lake Shore HMA Medical Group, LLC* (FL) Lake Shore HMA, LLC* (FL) d/b/a Shands Lake Shore Regional Medical CenterLake Wales Clinic Corp. (FL) Lake Wales Hospital Corporation* (FL) d/b/a Lake Wales Medical CenterLake Wales Hospital Investment Corporation* (FL) Lake Wales Imaging Center, LLC (DE) Lakeland Home Care Services, LLC# (DE) Lakeway Hospital Company, LLC (TN) Lancaster Clinic Corp. (SC) Lancaster HMA Physician Management, LLC (PA) Lancaster HMA, LLC* (PA) Lancaster Home Care Services, LLC# (DE) Lancaster Hospital Corporation (DE) d/b/a Springs Memorial HospitalLancaster Imaging Center, LLC (SC) Lancaster Medical Group HMA, LLC (PA) Lancaster Medical Group, LLC (PA) Lancaster Outpatient Imaging, LLC (PA) Langtree Endoscopy Center, LLC* (DE) LaPorte Medical Group Surgical Center, LLC# (IN) Laredo Clinic Asset Holding Company, LLC (DE) Laredo Texas Hospital Company, L.P. (TX) d/b/a Laredo Medical CenterLas Cruces ASC-GP, LLC (DE) Las Cruces Home Care Services, LLC# (DE) Las Cruces Medical Center, LLC (DE) d/b/a Mountain View Regional Medical CenterLas Cruces Physician Services, LLC (DE) Las Cruces Surgery Center – Telshor, LLC* (DE) Las Cruces Surgery Center, L.P.* (DE) Lea Regional Hospital, LLC (DE) d/b/a Lea Regional Medical CenterLebanon HMA Physician Management, LLC (TN) Lebanon HMA Surgery Center, LLC (TN) Lebanon HMA, LLC (TN) d/b/a Tennova Healthcare – Lebanon; TennovaHealthcare – McFarland Lebanon CampusLebanon Surgery Center, LLC (DE) Lehigh HMA Physician Management, LLC (FL) Lehigh HMA, LLC (FL) LHT Knoxville Properties, LLC# (DE) Little Rock HMA, Inc. (AR) Live Oak HMA Medical Group, LLC* (FL) Live Oak HMA, LLC* (FL) d/b/a Shands Live Oak Regional Medical Center Page 12 of 24Community Health Systems, Inc.SUBSIDIARY LISTING Logan Hospital Corporation (WV) Logan, West Virginia Hospital Company, LLC (WV) Lone Star HMA Physician Management, Inc. (TX) Lone Star HMA, L.P. (DE) Longview Clinic Operations Company, LLC (DE) Longview Medical Center, L.P. (DE) d/b/a Longview Regional Medical CenterLongview Merger, LLC (DE) Louisa Home Care Holdings, LLC# (DE) Louisa Home Care Services, LLC# (DE) Louisburg HMA Physician Management, LLC (NC) Lower Florida Keys Physician/Hospital Organization, Inc.# (FL) LRH, LLC (DE) LS Psychiatric, LLC (DE) Lufkin Clinic Asset Holding Company, LLC (DE) Lutheran Health Imaging, LLC (DE) Lutheran Health Network CBO, LLC (DE) Lutheran Health Network Investors, LLC* (DE) Lutheran Health Network of Indiana, LLC (DE) Lutheran Health Quality Alliance, LLC (DE) Lutheran Medical Group, LLC (DE) Lutheran Medical Office Park Phase II Property Owners Association, Inc. # (IN) Lutheran Medical Office Park Property Owners Association, Inc.# (IN) Lutheran Musculoskeletal Center, LLC* (DE) Lutheran/TRMA Network, LLC# (IN) Macon Healthcare, LLC# (DE) Madison Cardiovascular Physician Services, LLC (DE) Madison Clinic Corp. (TN) Madison HMA Physician Management, LLC (MS) Madison HMA, LLC (MS) d/b/a Merit Health MadisonMarion Physician Services, LLC (DE) Marshall County HMA, LLC (OK) d/b/a AllianceHealth MadillMarshall County HMPN, LLC (OK) Martin Clinic Corp. (TN) Martin Hospital Company, LLC (TN) Mary Black HealthNetwork, Inc.# (SC) Mary Black Health System LLC (DE) Mary Black Medical Office Building Limited Partnership (SC) Mary Black MOB II Limited Partnership (SC) Mary Black Physician Services, LLC (DE) Mary Black Physicians Group, LLC (DE) Mat-Su Regional ASC GP, LLC (DE) Mat-Su Regional Surgery Center, L.P. (DE) Page 13 of 24Community Health Systems, Inc.SUBSIDIARY LISTING Mat-Su Valley II, LLC* (AK) Mat-Su Valley III, LLC* (AK) Mat-Su Valley Medical Center, LLC* (AK) d/b/a Mat-Su Regional Medical CenterMayes County HMA, LLC (OK) Mayes County HMPN, LLC (OK) Mayes County Home Health, LLC# (OK) McKenna Court Homes, LLC (DE) McNairy Clinic Corp. (TN) McNairy Hospital Corporation (TN) MCSA, L.L.C. (AR) MDSave, Inc.# (DE) Medical Center at Terrell, LLC (DE) Medical Center of Brownwood, LLC (DE) Medical Holdings, Inc. (KS) MEDSTAT, LLC (IN) Melbourne HMA Medical Group, LLC (FL) Melbourne HMA, LLC (FL) Mercy Cardiovascular Cath Lab, LLC# (PA) Merger Legacy Holdings, LLC (DE) Merit Health Biloxi ASC Holdings, LLC (DE) Mesquite HMA General, LLC (DE) Metro Knoxville HMA, LLC (TN) d/b/a Turkey Creek Medical Center; North KnoxvilleMedical CenterMHS Ambulatory Surgery Center, Inc. (ND) Michigan City MOB, LLC# (IN) Midwest City HMA Physician Management, LLC* (OK) Midwest Regional Medical Center, LLC* (OK) d/b/a AllianceHealth MidwestMinot Health Services, Inc. (ND) Mississippi HMA Holdings I, LLC (DE) Mississippi HMA Holdings II, LLC (DE) Mississippi HMA Hospitalists, LLC (MS) Mississippi HMA Regional Service Center, LLC (MS) Moberly HBP Medical Group, LLC (DE) Moberly Hospital Company, LLC (DE) d/b/a Moberly Regional Medical CenterMoberly Medical Clinics, Inc. (MO) Moberly Physicians Corp. (MO) Mooresville HMA Investors, LLC* (NC) Mooresville HMA Physician Management, LLC (NC) Mooresville Home Care Services, LLC# (DE) Mooresville Hospital Management Associates, LLC (NC) d/b/a Lake Norman Regional Medical CenterMooresville PPM, LLC (NC) Morristown Clinic Corp. (TN) Morristown Professional Centers, Inc. (TN) Page 14 of 24Community Health Systems, Inc.SUBSIDIARY LISTING Morristown Surgery Center, LLC (TN) Munroe HMA HMPN, LLC (FL) Munroe HMA Holdings, LLC* (FL) Munroe HMA Hospital, LLC (FL) Naples HMA, LLC (FL) d/b/a Physicians Regional Medical Center – PineRidge; Physicians Regional Medical Center – CollierNatchez Clinic Company, LLC (DE) Natchez HBP Services, LLC (DE) Natchez Hospital Company, LLC (DE) d/b/a Merit Health NatchezNational Healthcare of England Arkansas, Inc. (AR) National Healthcare of Leesville, Inc. (DE) National Healthcare of Newport, Inc. (DE) Navarro Hospital, L.P. (DE) d/b/a Navarro Regional HospitalNavarro Regional, LLC (DE) NC-DSH, LLC (DE) New Cedar Lake Surgery Center, LLC# (MS) Newport Physician Clinics, Inc. (AR) NHCI of Hillsboro, Inc. (TX) d/b/a Hill Regional HospitalNorth Carolina HMA Regional Service Center, LLC (NC) North Okaloosa Clinic Corp. (FL) North Okaloosa Home Health, LLC# (FL) North Okaloosa Medical Corp.* (FL) North Okaloosa Surgery Venture Corp. (FL) Northampton Cardiology Clinic, LLC (DE) Northampton Clinic Company, LLC (DE) Northampton Home Care, LLC# (DE) Northampton Hospital Company, LLC (DE) Northampton Physician Services Corp. (PA) Northampton Urgent Care, LLC (DE) Northeast Medical Center, L.P. (DE) Northern Indiana Oncology Center of Porter Memorial Hospital, LLC* (IN) Northwest Allied Physicians, LLC (DE) Northwest Arkansas Employees, LLC (DE) Northwest Arkansas Hospitals, LLC (DE) d/b/a Northwest Medical Center – Bentonville;Northwest Medical Center – Springdale; WillowCreek Women’s HospitalNorthwest Arkansas Paramed Transfer, LLC (DE) Northwest Benton County Physician Services, LLC (DE) Northwest Cardiology, LLC (DE) Northwest HBP Medical Services, LLC (DE) Northwest Hospital Cardiac Diagnostics, L.P. (TN) Northwest Hospital, LLC (DE) d/b/a Northwest Medical CenterNorthwest Houghton Hospital, LLC (DE) Northwest Indiana Health System, LLC* (DE) Page 15 of 24Community Health Systems, Inc.SUBSIDIARY LISTING Northwest Marana Hospital, LLC (DE) Northwest Medical Center CT/MRI at Marana, LLC (DE) Northwest Physicians, LLC (AR) Northwest Rancho Vistoso Imaging Services, LLC (DE) Northwest Sahuarita Hospital, LLC (DE) Northwest-Sparks Quality Alliance, LLC (DE) NOV Holdings, LLC (DE) NRH, LLC (DE) Oak Hill Clinic Corp. (WV) Oak Hill Hospital Corporation (WV) d/b/a Plateau Medical CenterOhio Sleep Disorders Centers, LLC# (OH) Oklahoma City ASC-GP, LLC (DE) Oklahoma City Home Care Services, LLC# (DE) Olive Branch Clinic Corp. (MS) Olive Branch Hospital, Inc. (MS) One Boyertown Properties, L.P.# (PA) Open Air of MSLOU, L.L.C. (LA) Oro Valley Hospital, LLC (DE) d/b/a Oro Valley HospitalOsceolaSC, LLC* (DE) d/b/a St. Cloud Regional Medical CenterOsler HMA Medical Group, LLC (FL) Pacific Group ASC Division, Inc. (AZ) Pacific Physicians Services, LLC (DE) Palmer-Wasilla Health System, LLC (DE) Palmetto Tri-County Medical Specialists, LLC (DE) Palmetto Women’s Care, LLC (DE) Panhandle Medical Center, LLC (DE) Panhandle Surgical Hospital, L.P. (DE) Parkway Regional Medical Clinic, Inc. (KY) Pasco Hernando HMA Physician Management, LLC* (FL) Pasco Regional Medical Center, LLC (FL) Payson Healthcare Management, Inc. (AZ) Payson Hospital Corporation (AZ) PBEC HMA, Inc. (FL) Peckville Hospital Company, LLC (DE) Pecos Valley of New Mexico, LLC (DE) Pennsylvania Hospital Company, LLC (DE) Personal Home Health Care, LLC (TN) Petersburg Clinic Company, LLC (VA) Petersburg Home Care Services, LLC# (DE) Petersburg Hospital Company, LLC* (VA) d/b/a Southside Regional Medical CenterPhillips & Coker OB-GYN, LLC (DE) Phoenix Surgical, LLC (DE) Page 16 of 24Community Health Systems, Inc.SUBSIDIARY LISTING Phoenixville Hospital Company, LLC (DE) Phoenixville Hospital Malpractice Assistance Fund, Inc. (PA) Physician Practice Support, LLC (TN) Physicians Regional Marco Island, LLC (FL) Pinellas Surgery Center, LLC* (FL) Piney Woods Healthcare System, L.P.* (DE) d/b/a Woodland Heights Medical CenterPISA Surgery Center, LLC (DE) Plymouth Hospital Corporation (NC) Polk Medical Services, Inc. (TN) Ponca City Home Care Services, LLC# (OK) Poplar Bluff Physician Management, LLC (MO) Poplar Bluff Regional Medical Center, LLC (MO) d/b/a Poplar Bluff Regional Medical CenterPort Charlotte HMA Physician Management, LLC (FL) Port Charlotte HMA, LLC (FL) d/b/a Bayfront Health Port CharlottePorter Health Services, LLC (DE) Porter Hospital, LLC* (DE) d/b/a Porter Regional HospitalPorter Physician Services, LLC (DE) Pottstown Home Care Services, LLC# (DE) Pottstown Hospital Company, LLC (DE) Pottstown Hospital Corporation (PA) Pottstown Imaging Company, LLC (DE) Pottstown Memorial Malpractice Assistance Fund, Inc. (PA) Pottstown Professional Services Company, LLC (DE) Precision Surgery Center, LLC (DE) Preferential Health Network, Inc.# (SC) Premier Care Super PHO, LLC (DE) PremierCare of Northwest Arkansas, LLC (AR) Procure Solutions, LLC (DE) Professional Account Services Inc. (TN) Punta Gorda HMA Physician Management, LLC (FL) Punta Gorda HMA, LLC (FL) d/b/a Bayfront Health Punta GordaPunta Gorda Medical Arts Center Association, Inc. (FL) QHG Georgia Holdings II, LLC (DE) QHG Georgia Holdings, Inc. (DE) QHG Georgia, LP (GA) QHG of Barberton, Inc. (OH) QHG of Bluffton Company, LLC (DE) QHG of Clinton County, Inc. (IN) QHG of Enterprise, Inc. (AL) d/b/a Medical Center EnterpriseQHG of Forrest County, Inc. (MS) QHG of Fort Wayne Company, LLC (DE) QHG of Hattiesburg, Inc. (MS) Page 17 of 24Community Health Systems, Inc.SUBSIDIARY LISTING QHG of Kenmare, Inc. (ND) QHG of Lake City, Inc. (SC) QHG of Minot, Inc. (ND) QHG of Ohio, Inc. (OH) QHG of South Carolina, Inc. (SC) d/b/a Carolinas Hospital System; Carolinas HospitalSystem—MarionQHG of Spartanburg, Inc. (SC) QHG of Springdale, Inc. (AR) QHG of Texas, Inc. (TX) QHG of Warsaw Company, LLC (DE) Quorum ELF, Inc. (DE) Quorum Health Services, Inc. (DE) Rankin Cardiology Center, LLC (MS) Red Bud Home Care Services, LLC# (DE) Redimed Dekalb, LLC# (IN) Regional Cancer Treatment Center, Ltd.# (TX) Regional Cardiology Center, L.L.C.# (MS) Regional Cardiology Group, LLC (DE) Regional Clinics of Longview (TX) Regional Employee Assistance Program (TX) Regional Hospital of Longview, LLC (DE) Regional Surgical Services, LLC (VA) Rehab Hospital of Fort Wayne General Partnership* (DE) Revenue Cycle Service Center, LLC (DE) River Oaks Hospital, LLC (MS) d/b/a Merit Health River OaksRiver Oaks Management Company, LLC (MS) River Oaks Medical Office Building, LLC (MS) River Region Medical Corporation (MS) Riverpark Community Cath Lab, LLC# (DE) Riverview Regional Medical Center, LLC* (DE) Rockledge HMA Convenient Care, LLC (FL) Rockledge HMA Medical Group, LLC (FL) Rockledge HMA Urgent Care, LLC (FL) Rockledge HMA, LLC (FL) Rockwood Clinic Real Estate Holdings, LLC (DE) ROH, LLC (MS) d/b/a Merit Health Woman’s HospitalRonceverte Physician Group, LLC (DE) Rose City HMA Medical Group, LLC* (PA) Rose City HMA, LLC* (PA) Roswell Clinic Corp. (NM) Roswell Community Hospital Investment Corporation (DE) Roswell Hospital Corporation (NM) d/b/a Eastern New Mexico Medical CenterRussell County Clinic Corp. (VA) Page 18 of 24Community Health Systems, Inc.SUBSIDIARY LISTING Russell County Medical Center, Inc. (VA) Ruston Clinic Company, LLC (DE) Ruston Hospital Corporation (DE) Ruston Louisiana Hospital Company, LLC (DE) d/b/a Northern Louisiana Medical CenterSACMC, LLC (DE) Salem Clinic Corp. (NJ) Salem Home Care Holdings, LLC (DE) Salem Home Care Services, LLC (DE) Salem Hospital Corporation (NJ) d/b/a The Memorial Hospital of Salem CountySamaritan Surgicenters of Arizona II, LLC (AZ) San Angelo Ambulatory Surgery Center, Ltd.# (TX) San Angelo Community Medical Center, LLC (DE) San Angelo Hospital, L.P.# (DE) d/b/a San Angelo Community Medical CenterSan Angelo Medical, LLC (DE) Santa Rosa HMA Physician Management, LLC (FL) Santa Rosa HMA Urgent Care, LLC (FL) Scott County HMA, LLC (TN) Scranton Cardiovascular Physician Services, LLC (DE) Scranton Clinic Company, LLC (DE) Scranton Emergency Physician Services, LLC (DE) Scranton GP Holdings, LLC (DE) Scranton Holdings, LLC (DE) Scranton Hospital Company, LLC (DE) d/b/a Regional Hospital of ScrantonScranton Hospitalist Physician Services, LLC (DE) Scranton Quincy Ambulance, LLC (DE) Scranton Quincy Clinic Company, LLC (DE) Scranton Quincy Holdings, LLC (DE) Scranton Quincy Home Care Services, LLC# (DE) Scranton Quincy Hospital Company, LLC (DE) d/b/a Moses Taylor HospitalScranton Quincy QRFS, LLC (DE) Sebastian HMA Physician Management, LLC (FL) Sebastian Home Care Services, LLC# (DE) Sebastian Hospital, LLC (FL) Sebastopol, LLC (DE) Sebring HMA Physician Management, LLC (FL) Sebring Hospital Management Associates, LLC (FL) Seminole HMA, LLC (OK) d/b/a AllianceHealth SeminoleSeminole HMPN, LLC (OK) SEPA Integrated Providers Alliance, LLC (DE) Sharon Clinic Company, LLC (DE) Sharon Home Care Services, LLC# (DE) Sharon Pennsylvania Holdings, LLC (DE) Page 19 of 24Community Health Systems, Inc.SUBSIDIARY LISTING Sharon Pennsylvania Hospital Company, LLC (DE) Sharon Regional HBP Medical Group, LLC (DE) Shelby Alabama Real Estate, LLC (DE) Shelbyville Clinic Corp. (TN) Shelbyville Home Care Services, LLC# (DE) Shelbyville Hospital Company, LLC (TN) d/b/a Tennova Healthcare - ShelbyvilleSherman Hospital, L.P. (DE) Sherman Medical Center, LLC (DE) Siloam Springs Arkansas Hospital Company, LLC (DE) d/b/a Siloam Springs Regional HospitalSiloam Springs Clinic Company, LLC (DE) Siloam Springs Holdings, LLC (DE) Silver Creek MRI, LLC (AZ) SJ Home Care, LLC# (DE) SkyRidge Clinical Associates, LLC (DE) South Abilene Radiology, LLC (DE) South Arkansas Physician Services, LLC (DE) SouthCrest, L.L.C. (OK) Southeast Alabama Maternity Center, LLC (AL) Southeast HMA Holdings, LLC (DE) Southern Texas Medical Center, LLC (DE) Southside Physician Network, LLC (DE) Southwest Florida HMA Holdings, LLC (DE) Southwest Physicians Risk Retention Group, Inc. (SC) Sparks PremierCare, L.L.C. (AR) Spokane Home Care Services, LLC# (DE) Spokane Valley Washington Hospital Company, LLC (DE) Spokane Washington Hospital Company, LLC (DE) Spring Hill HMA Medical Group, LLC (FL) Springdale Home Care Services, LLC# (DE) Sprocket Medical Management, LLC (TX) SS ParentCo., LLC (DE) St. Cloud Physician Management, LLC* (FL) St. Joseph Health System, LLC* (DE) d/b/a St. Joseph Health SystemStarke HMA Medical Group, LLC* (FL) Starke HMA, LLC* (FL) d/b/a Shands Starke Regional Medical CenterStatesboro HMA Medical Group, LLC (GA) Statesboro HMA Physician Management, LLC (GA) Statesville HMA Medical Group, LLC (NC) Statesville HMA Physician Management, LLC (NC) Statesville HMA, LLC (NC) d/b/a Davis Regional Medical CenterStatesville PPM, LLC (NC) StrokeCareNow, LLC# (IN) Page 20 of 24Community Health Systems, Inc.SUBSIDIARY LISTING Summit Surgical Suites, LLC# (IN) Sumter HMA, LLC (FL) Supply Chain Shared Service Center, LLC (DE) Surgery Center of Midwest City, LLC* (DE) Surgery Center of Salem County, L.L.C.* (NJ) Surgical Center of Amarillo, LLC (DE) Surgical Center of Carlsbad, LLC (DE) Surgical Clinic Solutions, LLC# (AL) Surgicare of Clarksville, LLC# (TN) Surgicare of Independence, Inc. (MO) Surgicare of San Leandro, Inc. (CA) Surgicare of Sherman, Inc. (TX) Surgicare of Victoria, Inc. (TX) Surgicare of Victoria, Ltd. (TX) Surgicare Outpatient Center of Lake Charles, Inc. (LA) Surgicenter of Johnson County, Inc. (KS) Surgicenters of America, Inc. (AZ) Susitna ASC Holdings, LLC* (DE) Susitna Surgery Center, LLC* (DE) SVRMC-HBP, LLC (DE) Tennessee HMA Holdings, LP (DE) Tennessee HMA Regional Service Center, LLC (TN) Tennyson Holdings, LLC (DE) Terrell Hospital, L.P. (DE) Terrell Medical Center, LLC (DE) Texas Bay Area Clinical Services, Inc.# (TX) The Sleep Disorder Center of Wyoming Valley, LLC (PA) The Surgery Center, LLC# (MS) The Vicksburg Clinic, LLC (DE) Timberland Medical Group (TX) Tomball Ambulatory Surgery Center, L.P. (TX) Tomball Clinic Asset Holding Company, LLC (DE) Tomball Texas Equipment Ventures, LLC (TX) Tomball Texas Holdings, LLC (DE) Tomball Texas Home Care Services, LLC# (DE) Tomball Texas Hospital Company, LLC (DE) Tomball Texas Ventures, LLC (DE) Triad Corporate Services, Limited Partnership (DE) Triad CSGP, LLC (DE) Triad CSLP, LLC (DE) Triad Healthcare System of Phoenix, L.P. (DE) Triad Healthcare, LLC (DE) Page 21 of 24Community Health Systems, Inc.SUBSIDIARY LISTING Triad Holdings III, LLC (DE) Triad Holdings IV, LLC (DE) Triad Holdings V, LLC (DE) Triad Holdings VI, Inc. (DE) Triad Indiana Holdings, LLC* (DE) Triad Nevada Holdings, LLC (DE) Triad of Alabama, LLC (DE) d/b/a Flowers HospitalTriad of Arizona (L.P.), Inc. (AZ) Triad of Phoenix, Inc. (AZ) Triad RC, Inc. (DE) Triad-Arizona I, Inc. (AZ) Triad-ARMC, LLC (DE) Triad-Denton Hospital GP, LLC (DE) Triad-Denton Hospital, L.P. (DE) Triad-El Dorado, Inc. (AR) Triad-Navarro Regional Hospital Subsidiary, LLC (DE) Triad-South Tulsa Hospital Company, Inc. (OK) Tri-Irish, Inc. (DE) TROSCO, LLC (DE) Tucson Home Care Services, LLC# (DE) Tug Valley Healthcare Alliance, Inc. (WV) Tullahoma HMA Physician Management, LLC (TN) Tullahoma HMA, LLC (TN) d/b/a Tennova Healthcare – HartonTunkhannock Clinic Company, LLC (DE) Tunkhannock Hospital Company, LLC (DE) d/b/a Tyler Memorial HospitalTunkhannock Hospital Physician Services, LLC (DE) Valley Advanced Imaging, LLC# (IN) Valley Advanced MRI, LLC# (IN) ValleyCare Cardiology Group, LLC (DE) Valparaiso Home Care Services, LLC# (DE) Van Buren H.M.A., LLC (AR) Van Buren HMA Central Business Office, LLC (AR) Vanderbilt-Gateway Cancer Center, G.P.# (DE) Venice HMA, LLC (FL) d/b/a Venice Regional Bayfront HealthVenice Home Care Services, LLC# (DE) Vero Beach Florida ASC, LLC* (DE) VHC Holdings, LLC (DE) VHC Medical, LLC (DE) Vicksburg Healthcare, LLC (DE) d/b/a Merit Health River RegionVicksburg HMA Physician Management, LLC (MS) Vicksburg Surgical Center, LLC (DE) Victoria Clinic Asset Holding Company, LLC (DE) Page 22 of 24Community Health Systems, Inc.SUBSIDIARY LISTING Victoria Hospital, LLC (DE) Victoria of Texas, L.P. (DE) d/b/a DeTar Hospital Navarro; DeTar Hospital NorthVictoria Texas Home Care Services, LLC# (DE) Virginia Care Company, LLC (DE) Virginia Hospital Company, LLC (VA) VirtualHealthConnect, LLC (DE) Warren Ohio Hospital Company, LLC (DE) Warren Ohio Physician Services, LLC (DE) Warren Ohio Rehab Hospital Company, LLC (DE) Warsaw Health System, LLC* (DE) d/b/a Kosciusko Community HospitalWashington Clinic Corp. (MS) Washington Hospital Corporation (MS) Washington Physician Corp. (MS) WA-SPOK DH CRNA, LLC (DE) WA-SPOK DH Urgent Care, LLC (DE) WA-SPOK Kidney Care, LLC (DE) WA-SPOK Medical Care, LLC (DE) WA-SPOK Primary Care, LLC (DE) WA-SPOK Pulmonary & Critical Care, LLC (DE) WA-SPOK VH CRNA, LLC (DE) WA-SPOK VH Urgent Care, LLC (DE) Waukegan Hospice, LLC# (DE) Weatherford Home Care Services, LLC# (DE) Weatherford Hospital Corporation (TX) Weatherford Texas Hospital Company, LLC (TX) Webb County Texas Home Care Services, LLC# (DE) Webb Hospital Corporation (DE) Webb Hospital Holdings, LLC (DE) Wesley Health System LLC (DE) d/b/a Merit Health WesleyWesley HealthTrust, Inc. (MS) Wesley Physician Services, LLC (DE) West Grove Home Care, LLC# (DE) West Grove Hospital Company, LLC (DE) Western Arizona Regional Home Health and Hospice, LLC# (AZ) Westmed (TX) WHMC, LLC (DE) Wichita Falls Texas Home Care, LLC# (TX) Wilkes-Barre Academic Medicine, LLC (DE) Wilkes-Barre Behavioral Hospital Company, LLC (DE) Wilkes-Barre Behavioral Ventures, LLC (DE) Wilkes-Barre Clinic Company, LLC (DE) Wilkes-Barre Community Residential Unit, LLC (DE) Page 23 of 24Community Health Systems, Inc.SUBSIDIARY LISTING Wilkes-Barre Holdings, LLC (DE) Wilkes-Barre Home Care Services, LLC# (DE) Wilkes-Barre Hospital Company, LLC (DE) d/b/a Wilkes-Barre General HospitalWilkes-Barre Intermountain Clinic, LLC (DE) Wilkes-Barre Personal Care Services, LLC (DE) Wilkes-Barre Radiation Oncology, LLC# (DE) Wiregrass Clinic, LLC (DE) Women & Children’s Hospital, LLC (DE) Women’s Health Partners, LLC (DE) Women’s Health Specialists of Birmingham, Inc. (AL) Women’s Health Specialists of Carlisle, LLC (PA) Woodland Heights Medical Center, LLC (DE) Woodward Clinic Company, LLC (DE) Woodward Health System, LLC (DE) d/b/a AllianceHealth WoodwardWoodward Home Care Services, LLC# (DE) Yakima HMA Physician Management, LLC (WA) Yakima HMA, LLC (WA) York Anesthesiology Physician Services, LLC (DE) York Clinic Company, LLC (DE) York Home Care Services, LLC# (DE) York Pathology Physician Services, LLC (DE) York Pennsylvania Holdings, LLC (DE) York Pennsylvania Hospital Company, LLC (DE) Youngstown Home Care Services, LLC# (DE) Youngstown Ohio Hospital Company, LLC (DE) Youngstown Ohio Laboratory Services Company, LLC (DE) Youngstown Ohio Outpatient Services Company, LLC (DE) Youngstown Ohio Physician Services Company, LLC (DE) Youngstown Ohio PSC, LLC (DE) Page 24 of 24Exhibit 23.1CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRMWe consent to the incorporation by reference in Registration Statement Nos. 333-61614, 333-100349, 333-107810, 333-121282, 333-144525, 333-163688,333-163689, 333-163691, 333-176893, 333-188343, 333-190260, 333-197813, 333-207772, 333-212874, 333-214389, and 333-226455 on Form S-8 ofour reports dated February 21, 2019, relating to the consolidated financial statements and consolidated financial statement schedule of Community HealthSystems, Inc. and subsidiaries (the “Company”), and the effectiveness of the Company’s internal control over financial reporting, appearing in this AnnualReport on Form 10-K of the Company for the year ended December 31, 2018./s/ Deloitte & Touche LLPNashville, TennesseeFebruary 21, 2019Exhibit 31.1CERTIFICATION PURSUANT TO SECTION 302 OF THESARBANES-OXLEY ACT OF 2002I, Wayne T. Smith, certify that:1. I have reviewed this annual report on Form 10-K of Community Health Systems, Inc.;2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make thestatements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects thefinancial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined inExchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for theregistrant and we have:a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensurethat material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities,particularly during the period in which this report is being prepared;b) designed such internal controls over financial reporting, or caused such internal control over financial reporting to be designed under oursupervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for externalpurposes in accordance with generally accepted accounting principles;c) evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectivenessof the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; andd) disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscalquarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, theregistrant’s internal control over financial reporting; and5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to theregistrant’s auditors and the audit committee of the registrant’s board of directors:a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonablylikely to adversely affect the registrant’s ability to record, process, summarize and report financial information; andb) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control overfinancial reporting. /s/ Wayne T. SmithWayne T. SmithChairman of the Boardand Chief Executive OfficerDate: February 21, 2019Exhibit 31.2CERTIFICATION PURSUANT TO SECTION 302 OF THESARBANES-OXLEY ACT OF 2002I, Thomas J. Aaron, certify that:1. I have reviewed this annual report on Form 10-K of Community Health Systems, Inc.;2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make thestatements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects thefinancial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined inExchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for theregistrant and we have:a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensurethat material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities,particularly during the period in which this report is being prepared;b) designed such internal controls over financial reporting, or caused such internal control over financial reporting to be designed under oursupervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for externalpurposes in accordance with generally accepted accounting principles;c) evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectivenessof the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; andd) disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscalquarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, theregistrant’s internal control over financial reporting; and5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to theregistrant’s auditors and the audit committee of the registrant’s board of directors:a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonablylikely to adversely affect the registrant’s ability to record, process, summarize and report financial information; andb) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control overfinancial reporting. /s/ Thomas J. AaronThomas J. AaronExecutive Vice President andChief Financial OfficerDate: February 21, 2019Exhibit 32.1CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANTTO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002In connection with the Annual Report of Community Health Systems, Inc. (the “Company”) on Form 10-K for the period ended December 31, 2018, asfiled with the Securities and Exchange Commission on the date hereof (the “Report”), I, Wayne T. Smith, Chairman of the Board and Chief Executive Officerof the Company, certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that:(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. /s/ Wayne T. SmithWayne T. SmithChairman of the Board andChief Executive OfficerFebruary 21, 2019Exhibit 32.2CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANTTO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002In connection with the Annual Report of Community Health Systems, Inc. (the “Company”) on Form 10-K for the period ended December 31, 2018, asfiled with the Securities and Exchange Commission on the date hereof (the “Report”), I, Thomas J. Aaron, Executive Vice President and Chief FinancialOfficer of the Company, certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that:(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. /s/ Thomas J. AaronThomas J. AaronExecutive Vice President andChief Financial OfficerFebruary 21, 2019

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