UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, 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 fiscal year ended December 31, 2024
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 or other jurisdiction of
incorporation or organization)
(IRS Employer
Identification No.)
4000 Meridian Boulevard
37067
Franklin, Tennessee
(Address of principal executive offices)
(Zip Code)
Registrant’s telephone number, including area code:
(615) 465-7000
Securities registered pursuant to Section 12(b) of the Act:
Title of Each Class
Trading Symbol(s)
Name of Each Exchange on Which Registered
Common Stock, $.01 par value
CYH
New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act: None
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 preceding 12 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 of this
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 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 financial accounting
standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under
Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☑
If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an error
to previously issued financial statements. ☐
Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrant’s executive
officers during the relevant recovery period pursuant to §240.10D-1(b). ☐
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 $406,873,392. Market value is determined by reference to the closing price on June 30, 2024 of
the Registrant’s Common Stock as reported by the New York Stock Exchange. The Registrant does not (and did not at June 30, 2024) have any non-voting common stock outstanding. As of
February 13, 2025, there were 138,923,216 shares of common stock, par value $.01 per share, outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
Certain information required for Part III of this annual report is incorporated by reference to portions of the Registrant’s definitive proxy statement for its 2025 annual meeting of
stockholders to be filed with the Securities and Exchange Commission within 120 days after the end of the Registrant’s fiscal year ended December 31, 2024.
TABLE OF CONTENTS
COMMUNITY HEALTH SYSTEMS, INC.
Year ended December 31, 2024
Page
PART I
Item 1.
Business
1
Item 1A.
Risk Factors
25
Item 1B.
Unresolved Staff Comments
46
Item 1C.
Cybersecurity
46
Item 2.
Properties
48
Item 3.
Legal Proceedings
51
Item 4.
Mine Safety Disclosures
52
PART II
Item 5.
Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
53
Item 6.
Reserved
54
Item 7.
Management’s Discussion and Analysis of Financial Condition and Results of Operations
55
Item 7A.
Quantitative and Qualitative Disclosures about Market Risk
73
Item 8.
Financial Statements and Supplementary Data
74
Item 9.
Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
120
Item 9A.
Controls and Procedures
120
Item 9B.
Other Information
120
Item 9C.
Disclosure Regarding Foreign Jurisdictions that Prevent Inspections
120
PART III
Item 10.
Directors, Executive Officers and Corporate Governance
123
Item 11.
Executive Compensation
123
Item 12.
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
123
Item 13.
Certain Relationships and Related Transactions, and Director Independence
123
Item 14.
Principal Accountant Fees and Services
123
PART IV
Item 15.
Exhibits and Financial Statement Schedules
124
Item 16.
Form 10-K Summary
132
1
Item 1. Business of Community Health Systems, Inc.
Overview of Our Company
We are one of the nation’s largest healthcare companies. Our affiliates are leading providers of healthcare services, developing and operating healthcare
delivery systems in 39 distinct markets across 15 states. At December 31, 2024, our subsidiaries own or lease 76 affiliated hospitals, with more than 11,000
beds, and operate more than 1,000 sites of care, including physician practices, urgent care centers, freestanding emergency departments, occupational
medicine clinics, imaging centers, cancer centers and ambulatory surgery centers. We generate revenues by providing a broad range of general and
specialized hospital healthcare services and outpatient services to patients in the communities in which we are located. For the hospitals and other sites of
care that we own and operate, we are paid for our services by governmental agencies, private insurers and directly by the patients we serve. Services
provided through our hospitals and outpatient facilities include general acute care, emergency room, general and specialty surgery, critical care, internal
medicine, obstetrics, diagnostic, psychiatric and rehabilitation services. An integral part of providing these services is our network of affiliated physicians
at our hospitals and affiliated businesses. At December 31, 2024, we employed approximately 1,900 physicians and an additional 1,200 licensed healthcare
practitioners. Through our management and operation of these businesses, we provide standardization and centralization of operations across key business
areas; strategic assistance to expand and improve services and facilities; implementation of patient safety and quality of care improvement programs and
assistance in the recruitment of additional physicians and licensed healthcare practitioners to the markets in which our hospitals are located. In a number of
our markets, we have partnered with local physicians, for-profit entities and/or not-for-profit providers in the ownership of our facilities.
Throughout this Form 10-K, we refer to Community Health Systems, Inc., or the Parent Company, and its consolidated subsidiaries in a simplified
manner and on a collective basis, using words like “we,” “our,” “us” and the “Company.” This drafting style is suggested by the Securities and Exchange
Commission, or SEC, and is not meant to indicate that the publicly-traded Parent Company or any particular subsidiary of the Parent Company owns or
operates any asset, business or property. The hospitals, operations and businesses described in this filing are owned and operated by distinct and indirect
subsidiaries of Community Health Systems, Inc.
Available Information
Our website address is www.chs.net and the investor relations section of our website is located at www.chs.net/investor-relations. Notwithstanding the
foregoing, the information contained on our website as noted above or elsewhere in this Form 10-K is not incorporated by reference into this Form 10-K.
We make available free of 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-K as well as amendments to those reports, as soon as reasonably practical after they are filed with, or furnished to, the SEC. The
SEC maintains a website that 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 of
Conduct 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
and 906 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 Strategy
The key elements of our business strategy are to:
Become a market leader and increase market share in the communities we serve
We operate across diverse markets that range from sole community providers to large regional networks. We are able to leverage our significant scale
and standardized systems to provide cost-effective services and best practices for our affiliate operations. Each of our markets develops and executes a
strategic plan with short- and long-term goals, based on their unique opportunities and the needs of their respective communities. In addition, as an
organization, we have implemented a number of strategic initiatives designed to improve market position, expand services to our patients, and capture a
greater share of healthcare spending 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.
2
Strengthening Regional Networks and Local Market Operations. We believe opportunities exist in select markets to create healthcare networks
consisting of multiple hospitals and corresponding outpatient services.
Regional networks are able to expand the breadth of services provided for our patients, centralize key services, deliver care in an organized and efficient
way across the network, improve alignment with physicians and other providers, and make services more attractive to managed care and other payors.
Currently, 46 of our hospitals operate in 12 unique regional networks.
We also operate healthcare systems that are built around a single acute-care hospital. In these markets, we are focused on supporting the hospital with
physician practices, outpatient services, clinical collaborations and partnerships that offer our patients health services across the continuum of care. These
hospitals 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—our
approach is data-driven and strategic to ensure our investments are responsive to community and patient needs and produce sound financial results. While
we continue to provide health services across a broad spectrum, we have focused our attention and resources on service lines we believe have the greatest
potential for growth, including primary care, emergency medicine, orthopedics, neuroscience, cardiovascular care, surgical services and behavioral health.
Significant investments have been made in existing markets to expand the scale of inpatient offerings, including through increasing bed capacity and
constructing new surgical and procedural suites. As the shift to delivering health services in outpatient settings accelerates, we continue to expand our care
offerings beyond hospital walls to include more outpatient access through primary care practices, urgent care centers, freestanding emergency departments,
ambulatory surgery centers, imaging and diagnostic centers and direct-to-consumer virtual health visits. We endeavor to advance the scale and breadth of
inpatient and outpatient capabilities through both direct investments and strategic partnerships.
We believe expanding our patient access footprint can attract new patients and increase patient retention, as well as our ability to connect patients from
one 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
healthcare services are built. Understanding this, we continuously assess our communities to identify service gaps and practice opportunities in order to
recruit an optimal mix of primary care physicians and specialists. We analyze demographic data and referral trends and employ recruiters at the corporate
level to support local hospital administrators in their physician recruitment efforts. In some markets, we employ physicians through recruitment or
acquisition of their existing practices. 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 participate in 11 Medicare Shared Savings Program
Accountable Care Organizations, which include approximately 3,000 employed and independent physicians in our communities. We look forward to
continuing to realize the benefits of these organizations, including opportunities to improve quality, deepen clinical collaboration and demonstrate
performance under a reimbursement system moving toward more value-based care arrangements.
Developing a More Consumer-Centric Experience and Facilitating Connections between Episodes of Care. Consumers continue to take a more active
role in healthcare decision-making, especially as they assume increasing responsibility for the cost of their healthcare. The rise in consumerism is
highlighting customer expectations that have not always been prioritized in the healthcare setting. We are working on ways to create more enduring
relationships with our patients by providing services that help people navigate their healthcare journeys and enable more seamless connections across
episodes of care 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 to
facilities 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;
•
expanding our network of outpatient services to create greater access and more convenience, including significant expansion of our ability to
provide remote patient care;
•
availability of virtual healthcare for certain services provided in the hospital and for direct-to-consumer, on-demand virtual visits with physicians
and other healthcare practitioners;
•
digital marketing and consumer engagement campaigns; and
3
•
other 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 profitability
Our hospital management teams are supported by experienced corporate leaders who have significant industry knowledge and a proven track record of
success. Local hospitals benefit from centralized clinical, operational, supply chain, financial and regulatory expertise that encompasses nearly every aspect
of our business. Additionally, we are able to leverage deep and meaningful data sources to facilitate informed decision-making and drive operational
improvements across the enterprise in areas such as drug and supply procurement, workforce optimization and staffing and emergency department and
operating room performance.
Standard policies and procedures in areas ranging from physician practice management to patient accounting to construction and facilities management
help to facilitate best practices, reduce variation and improve operating results. The following areas highlight some of our standardized and centralized
platforms.
Billing and Collections. We have adopted standard policies and procedures with respect to billing and collections. We have automated various
components of the collection cycle, including statements and collection letters, to help facilitate timely and accurate progression of our accounts through
the collection cycle. We have consolidated local hospital billing and collection functions into three centralized business offices and have completed the
transition of our hospital billing departments to this new infrastructure. These efforts have resulted in higher underpayment recoveries and reduced
operating costs.
Finance. Various finance functions are performed centrally within a shared business office, including accounting, cash management, accounts payable
and financial planning and analysis. Centralization of these functions is intended to ensure policies, practices and procedures are applied consistently
throughout the organization, that economies of scale are leveraged to reduce redundancy and costs, and that internal controls over financial reporting
operate effectively. In addition, centralization of various finance functions and transition to the use of a single finance platform, a module within the
recently implemented enterprise resource planning system, or ERP, supports real-time access to financial information and aides in strategic decision-
making.
Physician Support. We support newly recruited physicians to facilitate a smooth and effective transition into our communities. We have implemented
programs to improve physician workflow, reduce physician turnover, optimize staffing at physician clinics and standardize onboarding processes.
Human Resources. We have created a centralized nurse recruitment program to support our hospitals in their efforts to recruit the nurses needed for the
delivery of high quality care, which are a priority due to workforce shortages across the healthcare industry. We also operate nursing school programs on
some of our hospital campuses and partner with nursing schools in many of our communities. In addition, we have expanded programs aimed at employee
retention and satisfaction, including an expanded employee benefits program with higher levels of tuition reimbursement and student loan support. We also
operate leadership development programs and have established rewards and recognition initiatives. These programs and our human resource function are
enabled by the use of a common technology platform for human capital management. The human capital management module within the ERP aligns
various human resource functions, including workforce management, and is integrated with other modules of the ERP to enhance operational efficiency.
Procurement and Materials Management. We have standardized and centralized supply chain operations designed to improve procurement of the
medical supplies, equipment and pharmaceuticals used in our hospitals, as well as the contracting process for the requisition of other goods and services.
The supply chain function is enabled by way of the supply chain management module within the ERP. The supply chain management module works
directly with other modules of the ERP, including the finance module, such that the procure-to-pay process is fully integrated. We have a noncontrolling
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 vendors who 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
effective manner. 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.
4
Our case management program integrates the functions of utilization review, discharge planning, assessment of medical necessity and resource
management. Patients are assessed upon presentation to the hospital and throughout their course of care with ongoing reviews. Industry-standard criteria
are utilized in patient assessments and discharge plans are adjusted according to patient needs. Cases are monitored to prevent delays in service or
unnecessary utilization of resources. When a patient is ready for discharge, a case manager works with the patient’s attending physician to evaluate and
coordinate the patient’s needs for continued care in the post-acute setting.
Continuously improve patient safety and quality of care
We maintain quality assurance programs to monitor, support and advance quality of care standards and to meet Medicare and Medicaid accreditation
and regulatory 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, and creates 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
•
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 2012. 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.
The PSO has been recertified by the Agency for Healthcare Research and Quality through 2026.
Over the past decade, we have instituted numerous programs to improve safety in our hospitals and other patient care environments. We are also
deploying innovative programs to deliver better outcomes including, for example, remote monitoring for patients with certain chronic conditions,
maternal/fetal monitoring using artificial intelligence, or AI, and machine learning, or ML, as well as tele-sitting technology.
Industry Overview
According to the Centers for Medicare & Medicaid Services, or CMS, national healthcare expenditures grew 7.5% in 2023 to over $4.8 trillion, an
increase from the growth of 4.6% experienced in 2022. The increase in 2023 reflected growth in non-price factors, such as increased use and intensity of
healthcare goods and services, influencing strong growth in both Medicare and private health insurance spending. National healthcare expenditures
accounted for approximately 17.6% of total U.S. gross domestic product in 2023. CMS projections indicate that total U.S. healthcare spending is expected
to grow at an average annual rate of 5.4% for 2025 through 2032. CMS anticipates that total U.S. healthcare annual expenditures will exceed $7.7 trillion
by 2032, accounting for approximately 19.7% of the total U.S. gross domestic product. The CMS projections of healthcare spending are constructed using a
current-law framework. The most recent historical data was published in December 2024, and the most recent projections for future years were published in
June 2024, and do not take into account the actual expenditures in 2024. Through 2026, CMS expects expenditures to be influenced by the health sector’s
transition away from pandemic-related policies, including expected declines in Medicaid enrollment and the expiration of enhanced subsidies available for
purchasing health insurance through Affordable Care Act marketplaces. Following this transition, from 2027 through 2032, CMS expects health spending
patterns to be driven by a greater extent by traditional economic and demographic factors, with growth in spending reflecting personal healthcare price
inflation and increased use of healthcare goods and services.
Hospital services, the market within the healthcare industry in which we primarily operate, is the largest single category of healthcare expenditures.
Hospital care expenditures totaled over $1.5 trillion in 2023, an increase of 10.4% over 2022, increasing in comparison to the growth rate of 3.2% in 2022.
The growth rate in 2023 was driven by strong growth in spending for hospital care by all major payors, including private health insurance, Medicare and
Medicaid, and non-price factors including the use and intensity of services. CMS projects that the hospital services category will grow at an average of
5.4% annually from 2025 through 2032, reaching over $2.3 trillion by 2032.
5
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
Hospital Association, there are approximately 5,100 community hospitals in the U.S., which are not-for-profit owned, investor owned, or state or local
government owned. Of these hospitals, approximately 35% are located in communities not located within a metropolitan area designated by the U.S. Office
of Management and Budget and the Census Bureau. We believe that a majority of these hospitals are owned by not-for-profit or governmental 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, home care 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;
•
facility payor mix;
•
the terms of contracts with third-party payors, including managed care plans; and
•
the extent of Medicaid expansion.
Patients needing the most complex care are more often served by the larger and/or more specialized urban hospitals. We believe opportunities exist in
selected urban markets to create networks between urban hospitals and non-urban hospitals in order to expand the breadth of services offered in the non-
urban hospitals while improving physician alignment in those markets and making them more attractive to managed care organizations.
Hospital Industry Trends
Demographic Trends. According to the U.S. Census Bureau, in 2024, there were nearly 59 million Americans aged 65 or older in the U.S., comprising
approximately 17.7% of the total U.S. population. By the year 2030, the number of Americans aged 65 or older is expected to climb to 71 million, or
20.6% of the total population. The number of people aged 85 and older is also expected to increase from 6 million in 2023 to 9 million by the year 2030.
We believe that these anticipated increases will increase demand for healthcare services and the demand for innovative, more sophisticated means of
delivering those services. Hospitals, as the largest category of 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 of the service areas where our hospitals are located grew 6.9% from 2019 to 2024 and are expected
to grow by 3.4% from 2024 to 2029. The number of people aged 65 or older in these service areas grew by 14.0% from 2019 to 2024 and is expected to
grow by 14.0% from 2024 to 2029. People aged 65 or older comprised 19.0% of the total population in our service areas in 2024, and they may comprise
an estimated 20.9% of the total population in our service areas by 2029.
Consolidation. In addition to our own acquisitions and dispositions in recent years, consolidation activity in the hospital industry, primarily through
mergers 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 supply agreements
and access to professional liability 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.
6
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, growing financial
and economic pressures on the healthcare industry have resulted in a shift away from traditional reimbursement models. Government and private third-
party payors are increasingly adopting and exploring value-based purchasing initiatives, which typically emphasize the cost-effective delivery of care and
quality of outcomes. In addition, health insurance coverage models continue to evolve, with increased enrollment in Medicare Managed Care and Medicaid
managed care programs and in high-deductible health plans.
Shift to Outpatient Services. Because of the growing availability of stand-alone outpatient healthcare facilities, the increase in the services that can be
provided at these locations, and payor policies requiring or promoting treatment in outpatient settings, many individuals are seeking a broader range of
services at outpatient facilities. This trend has contributed to an increase in outpatient services while inhibiting the growth of inpatient admissions. Changes
to Medicare policy affecting the reimbursement methodology for certain items and services provided by off-campus provider-based hospital departments
have generally resulted in reduced payment rates for these hospital outpatient settings. In addition, CMS makes annual updates to the Inpatient Only List,
which is a list of procedures eligible to be reimbursed by Medicare only if performed in an inpatient setting. To the extent procedures become eligible to be
reimbursed by Medicare if performed in outpatient settings, demand for outpatient services may increase in comparison to demand for inpatient services.
Selected Operating Data
The following table sets forth operating statistics for each of the years presented for our hospitals. Statistics for 2024 include a full year of operations
for 76 hospitals and partial periods for two hospitals that were divested during the year, reflecting the operations of these hospitals prior to divestiture.
Statistics for 2023 include a full year of operations for 78 hospitals and partial periods for eight hospitals that were divested during the year, and one
hospital in which we sold a majority ownership during the year, reflecting the operations of these hospitals prior to divestiture. Statistics for 2022 include a
full year of operations for 86 hospitals and partial periods for one hospital that was divested during the year, one hospital that opened and three hospitals
that were closed during the year, reflecting the operations of these hospitals prior to divestiture, opening, or closure as applicable.
Year Ended December 31,
2024
2023
2022
(Dollars in millions)
Consolidated Data
Number of hospitals (at end of period) (10)
76
78
87
Licensed beds (at end of period)(1)
11,403
11,902
12,832
Beds in service (at end of period)(2)
9,641
10,234
10,936
Admissions(3)
422,040
435,913
434,765
Adjusted admissions(4)
958,531
992,552
975,737
Patient days(5)
1,853,387
1,957,536
2,052,864
Average length of stay (days)(6)
4.4
4.5
4.7
Occupancy rate (beds in service)(7)
52.5 %
52.4 %
49.2 %
Net operating revenues
$
12,634
$
12,490
$
12,211
Net inpatient revenues as a % of net operating revenues
47.8 %
46.6 %
46.8 %
Net outpatient revenues as a % of net operating revenues
52.2 %
53.4 %
53.2 %
Net (loss) income attributable to Community Health Systems, Inc.
stockholders
$
(516 )
$
(133 )
$
46
Net (loss) income attributable to Community Health Systems, Inc.
stockholders as a % of net operating revenues
(4.1 )%
(1.1 )%
0.4 %
Adjusted EBITDA(8)
$
1,540
$
1,453
$
1,466
Adjusted EBITDA as a % of net operating revenues(8)
12.2 %
11.6 %
12.0 %
Liquidity Data
Net cash flows provided by operating activities
$
480
$
210
$
300
Net cash flows provided by operating activities as a % of net
operating revenues
3.8 %
1.7 %
2.5 %
Net cash flows used in investing activities
$
(275 )
$
(26 )
$
(259 )
Net cash flows used in financing activities
$
(206 )
$
(264 )
$
(430 )
7
Year Ended December 31,
2024
2023
Increase
(Dollars in millions)
Same-Store Data(9)
Admissions(3)
412,226
399,383
3.2 %
Adjusted admissions(4)
937,404
912,530
2.7 %
Patient days(5)
1,802,121
1,788,074
Average length of stay (days)(6)
4.4
4.5
Occupancy rate (beds in service)(7)
51.1 %
50.4 %
Net operating revenues
$
12,426
$
11,773
5.5 %
Income from operations
$
1,529
$
1,389
10.1 %
Income from operations as a % of net operating revenues
12.3 %
11.8 %
Depreciation and amortization
$
480
$
473
(1)
Licensed beds are the number of beds for which the appropriate state agency licenses for a facility regardless of whether the beds are actually
available for patient 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
admissions by 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)
EBITDA is a non-GAAP financial measure which consists of net (loss) income attributable to Community Health Systems, Inc. before interest,
income taxes, and depreciation and amortization. Adjusted EBITDA, also a non-GAAP financial measure, is EBITDA adjusted to add back net
income attributable to noncontrolling interests and to exclude loss (gain) from early extinguishment of debt, impairment and (gain) loss on sale of
businesses, expense from third-party consulting costs associated with significant process and systems redesign across multiple functions as part of
the Company’s previously disclosed multi-year initiative to modernize and consolidate technology platforms and associated processes, expense
related to government and other legal matters and related costs, expense related to employee termination benefits and other restructuring charges, the
impact of a change in estimate to increase the professional liability claims accrual recorded during the fourth quarter of 2022 with respect to claims
incurred in prior years related to divested locations as well as a change in estimate to increase such accrual recorded during the third quarter of 2024,
and the gain on sale by HealthTrust of a majority interest in CoreTrust completed during the fourth quarter of 2022. The Company has from time to
time sold noncontrolling interests in certain of its subsidiaries or acquired subsidiaries with existing noncontrolling interest ownership positions. The
Company believes that it is useful to present Adjusted EBITDA because it adds back the portion of EBITDA attributable to these third-party
interests. The Company reports Adjusted EBITDA as a measure of financial performance. Adjusted EBITDA is a key measure used 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 metrics used in connection with
determining short-term cash incentive compensation and the achievement of vesting criteria with respect to performance-based equity awards. In
addition, management utilizes Adjusted EBITDA in assessing the Company’s consolidated results of operations and operational performance and in
comparing the Company’s results of operations between periods. The Company believes it is useful to provide investors and other users of the
Company’s financial statements this performance measure to align with how management assesses the Company’s results of operations. Adjusted
EBITDA also is comparable to a similar metric called Consolidated EBITDA, as defined in the Company’s asset-based loan facility, or the ABL
Facility, and the Company’s existing note indentures, which is a key component in the determination of the Company’s compliance with certain
covenants under the ABL Facility and such note indentures (including the Company’s ability to service debt and incur capital expenditures), and is
used to determine the interest rate and commitment fee payable under the ABL Facility (although Adjusted EBITDA does not include all of the
adjustments described in the ABL Facility). Adjusted EBITDA includes the Adjusted EBITDA attributable to hospitals that were divested during
the course of such year, but in each case solely to the extent relating to the period prior to the consummation of the applicable divestiture. For further
discussion of Consolidated EBITDA and how that measure is utilized in the calculation of covenants in the ABL Facility, see the Capital Resources
section of Part II, Item 7 of this Form 10-K.
8
Adjusted EBITDA is not a measurement of financial performance under U.S. generally accepted accounting principles, or U.S. GAAP. It should not
be considered in isolation or as a substitute for net income, operating income, or any other performance measure calculated in accordance with U.S.
GAAP. The items excluded from Adjusted EBITDA are significant components in understanding and evaluating financial performance. The
Company believes such adjustments are appropriate as the magnitude and frequency of such items can vary significantly and are not related to the
assessment of normal operating performance. Additionally, this calculation of Adjusted EBITDA may not be comparable to similarly titled
measures disclosed by other companies.
The following table reflects the reconciliation of Adjusted EBITDA, as defined, to net (loss) income attributable to Community Health Systems, Inc.
stockholders from our Consolidated Financial Statements for the years ended December 31, 2024, 2023 and 2022 (in millions):
Year Ended December 31,
2024
2023
2022
Net (loss) income attributable to Community Health Systems, Inc.
stockholders
$
(516 ) $
(133 ) $
46
Adjustments:
Provision for income taxes
79
191
170
Depreciation and amortization
486
505
534
Net income attributable to noncontrolling interests
154
149
133
Interest expense, net
860
830
858
Gain from early extinguishment of debt
(25 )
(72 )
(253 )
Gain from CoreTrust Transaction
—
—
(119 )
Impairment and (gain) loss on sale of businesses, net
301
(87 )
71
Expense from government and other legal matters and
related costs
—
36
5
Expense related to employee termination benefits and other
restructuring charges
—
12
6
Change in estimate for professional claims liability
149
—
15
Expense from business transformation costs
52
22
—
Adjusted EBITDA
$
1,540 $
1,453 $
1,466
(9)
Same-store operating results and statistical information include the results of businesses operated in the comparable current year and prior year
periods and exclude businesses divested or closed in the periods presented.
(10)
Effective December 31, 2024, the number of hospitals reflected in the chart above was updated to separately distinguish facilities providing
inpatient, acute-care services other than on the primary hospital campus. The number of hospitals presented for the prior-year comparative periods
has been updated to conform with the aforementioned change.
Sources of Revenue
The following table presents the approximate percentages of net operating revenues by payor source for the periods indicated. The data for the periods
presented are not strictly comparable due to the effect that businesses acquired, sold, closed or opened during each of the respective periods, as applicable,
have had on these statistics.
Year Ended December 31,
2024
2023
2022
Medicare
18.1 %
19.9 %
20.9 %
Medicare Managed Care
17.7
16.8
16.1
Medicaid
14.8
14.3
14.8
Managed Care and other third-party payors
48.1
47.9
47.5
Self-pay
1.3
1.1
0.7
Total
100.0 %
100.0 %
100.0 %
As shown above, we receive a substantial portion of our revenues from the Medicare, Medicare Managed Care and Medicaid programs. Included in
Managed Care and other third-party payors is net operating revenues from insurance companies with which we have insurance provider contracts,
insurance companies for which we do not have insurance provider contracts, workers’ compensation carriers and non-patient service revenue, such as gain
(loss) on investments, rental income and cafeteria sales. We generally expect the portion of revenues received from the Medicare, Medicare Managed Care
and Medicaid programs to increase
9
over the long-term due to the general aging of the population and other factors. There has been a trend toward increased enrollment in Medicare Managed
Care and Medicaid managed care programs, which may adversely affect our net operating revenues. We may also be impacted by regulatory requirements
imposed on insurers, such as minimum medical-loss ratios and specific benefit requirements. Furthermore, in the normal course of business, managed care
programs, insurance companies and employers actively negotiate the amounts paid to hospitals. Our relationships with payors may be impacted by price
transparency initiatives and out-of-network billing restrictions, including those in the No Surprises Act. There can be no assurance that we will retain our
existing reimbursement arrangements or that third-party payors will not attempt to further reduce the rates they pay for our services.
Net operating revenues include amounts estimated by management to be reimbursable by Medicare and Medicaid under prospective payment systems
and provisions of cost-based reimbursement and other payment methods. In addition, we are reimbursed by non-governmental payors using a variety of
payment methodologies. Amounts we receive for the treatment of patients covered by Medicare, Medicaid and non-governmental payors are generally less
than our standard billing rates. We account for the differences between the estimated program reimbursement rates and our standard billing rates as
contractual allowance adjustments, which we deduct from gross revenues to arrive at net operating revenues. Final settlements under some of these
programs are subject to adjustment based on administrative review and audit by third parties. We account for adjustments to previous 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 by an insignificant amount in each
of the years ended December 31, 2024, 2023 and 2022.
The payment rates under the Medicare program for hospital inpatient and outpatient acute care services are based on prospective payment systems,
which depend upon a patient’s diagnosis or the clinical complexity of services provided to a patient, among other factors. These rates are indexed for
inflation annually, although increases have historically been less than actual inflation.
Payment rates under the Medicaid program vary by state. In addition to the base payment rates for specific claims for services rendered to Medicaid
enrollees, several states utilize supplemental reimbursement programs to make separate payments that are not specifically tied to an individual’s care, some
of which offset a portion of the cost of providing care to Medicaid and indigent patients. These programs are funded with a combination of state and federal
resources, including, in certain instances, fees or taxes levied on the providers. The programs are generally authorized by CMS for a specified period of
time and require CMS’s approval to be extended. We are unable to predict whether or on what terms CMS will extend the supplemental programs in the
states in which we operate. Under these supplemental programs, we recognize revenue and related expenses in the period in which amounts are estimable
and payment 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 other program related costs are reflected in other operating expenses.
As of December 31, 2024, Indiana, Alabama, Texas and Florida represented our only areas of significant geographic concentration. Net operating
revenues generated by our hospitals in Indiana, as a percentage of consolidated net operating revenues, were 16.7% in 2024, 17.1% in 2023 and 17.3% in
2022. Net operating revenues generated by our hospitals in Alabama, as a percentage of consolidated net operating revenues, were 15.4% in 2024, 14.4% in
2023 and 13.3% in 2022. Net operating revenues generated by our hospitals in Texas, as a percentage of consolidated net operating revenues, were 12.5%
in 2024, 11.7% in 2023 and 11.7% in 2022. Net operating revenues generated by our hospitals in Florida, as a percentage of consolidated net operating
revenues, were 9.6% in 2024, 11.1% in 2023 and 11.6% in 2022.
Hospital revenues depend upon inpatient occupancy levels, the volume of outpatient procedures and the payment rates for hospital services provided,
which are a function of amounts charged, rates negotiated with third-party payors and rates determined by government payors. Charges and payment rates
for routine inpatient services vary significantly depending on the type of service performed and the geographic location 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 inpatient hospital
stays and to reduce costs by providing services 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 and
increases in colder weather months. Variations in the prevalence and severity of outbreaks of illnesses have also resulted in, and may continue to result in,
similar fluctuations of our business.
10
Government Regulation
Overview. Participants in the healthcare industry are subject to extensive government regulation at the federal, state and local levels. If we fail to comply
with applicable laws and regulations, we may be subject to criminal penalties and civil sanctions, our hospitals and other facilities could lose their licenses
and we could lose our ability to participate in Medicare, Medicaid and other government programs. These legal and regulatory standards address, among
other issues, licensure, certification, and enrollment with government programs; the necessity and adequacy of medical care; quality of medical equipment
and services; qualifications and supervision of medical and support personnel; the provision of services via telehealth; operating policies and procedures;
screening, stabilization and transfer of individuals who have emergency medical conditions; restrictions on the provision of medical care, including with
respect to reproductive care; distribution, maintenance and dispensing of pharmaceuticals and controlled substances; billing and coding for services;
handling overpayments; classifications of levels of care provided; preparing and filing cost reports; relationships with referral sources and referral
recipients; maintenance of adequate records; hospital use; rate-setting; building codes; environmental protection; patient, workforce and public safety;
privacy and security; interoperability and refraining from information blocking; the development and use of AI/ML and other predictive algorithms; debt
collection; balance billing and billing for out-of-network services; and communications with patients and consumers.
Hospitals are subject to periodic inspection by federal, state and local authorities to determine their compliance with applicable regulations and
requirements necessary for licensing and certification. All of our hospitals are licensed under appropriate state laws and are qualified to participate in
Medicare and Medicaid programs. In addition, most of our hospitals are accredited by The Joint Commission. This accreditation indicates that a hospital
satisfies the applicable health and administrative standards to participate in Medicare and Medicaid programs. Some other facilities and businesses we own
or operate are licensed under state laws and may be accredited and subject to periodic inspections to ensure compliance with applicable requirements.
Government regulations are subject to change. If applicable laws and regulations change, we may have to make changes to our facilities, equipment,
personnel and services so that our hospitals and other facilities and businesses maintain required licenses and remain certified and qualified to participate in
governmental healthcare programs. We believe that our facilities and other businesses substantially comply with current federal, state and local regulations
and standards. We cannot be certain that governmental officials responsible for enforcing these laws or whistleblowers will not assert that we 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 Public Policy. The healthcare industry is subject to changing political, regulatory, economic and other influences that may affect our
business. Regulatory uncertainty has increased as a result of recent decisions issued by the U.S. Supreme Court that affect review of federal agency actions,
and the outcome of the 2024 federal elections. The U.S. Supreme Court decisions increase judicial scrutiny of agency authority, shift greater responsibility
for statutory interpretation to courts and expand the timeline in which a plaintiff can sue regulators. In Loper Bright Enterprises v. Raimondo, the Court
overruled a legal framework that gave significant judicial deference to federal agency interpretations of federal statutes. The Court held that courts must
instead exercise independent judgment when deciding whether an agency has acted within its statutory authority and that courts may not defer to an agency
interpretation simply because a statute is ambiguous. The Loper Bright decision and other recent decisions of the U.S. Supreme Court are expected to
significantly impact government agency regulation, particularly within the heavily regulated healthcare industry, in part through an increase in legal
challenges to healthcare regulations and agency guidance and decisions. Federal agencies oversee, regulate and otherwise affect many aspects of our
business, including through Medicare and Medicaid payment and coverage policies, policies affecting the size of the uninsured population, administration
of state Medicaid programs and enforcement and interpretation of fraud and abuse laws. The recent Supreme Court decisions may also result in inconsistent
judicial interpretations and delays in and other impacts to agency rulemaking and legislative processes. The outcome of the 2024 federal elections,
including Republican control of both the executive and legislative branches, increases regulatory uncertainty and the potential for significant policy
changes. President Trump has issued executive orders that impact or may impact the healthcare industry, including an order establishing a presidential
advisory commission focused on restructuring and streamlining government agencies and reducing or eliminating regulations and federal government
programs and other expenditures.
The healthcare industry has been and continues to be impacted by healthcare reform efforts at the federal and state levels. Many recent changes have
sought to increase access to health insurance and reduce healthcare costs and government spending. For example, the Patient Protection and Affordable
Care Act, as amended by the Health Care and Education Reconciliation Act of 2010, collectively known as the Affordable Care Act, increased health
insurance coverage through a combination of public program expansion and private sector health insurance reforms. However, changes in the law’s
implementation, subsequent legislation and regulations, state initiatives and other factors have affected or may affect the number of individuals that elect or
are able to obtain public or private health insurance and the scope of such coverage, if obtained. For example, federal law temporarily enhanced subsidies
available for individuals to purchase coverage through Affordable Care Act health exchange marketplaces by lowering premiums and raising income
eligibility thresholds. The enhanced subsidies are available through 2025, but further extension is uncertain, and their expiration would increase the price of
coverage for many consumers and may significantly increase the uninsured rate. Other legislative and executive branch initiatives related to health
insurance could also result in increased prices for consumers
11
purchasing health insurance coverage or may permit the sale of insurance plans that do not satisfy current Affordable Care Act consumer protections,
which could increase rates of uninsured and underinsured individuals and destabilize insurance markets.
Healthcare providers may be significantly impacted by changes specific to the Medicaid program, including changes resulting from legislative and
administrative actions at the federal and state levels. Changes at the federal level may impact funding for, or the structure of, the Medicaid program and
may shape administration of the program at the state level. The Affordable Care Act expands the categories of individuals eligible for Medicaid coverage,
permits individuals with relatively higher incomes to qualify and provides states with enhanced funding for expansion populations. The majority of states
have adopted Medicaid expansion, including nine of the 15 states in which we operated hospitals at December 31, 2024. The states with the greatest
reductions in the number of uninsured adult residents have been the expansion states. However, a number of states have opted out of the Medicaid
expansion provisions, including Florida, Alabama, Tennessee, Mississippi and Texas, where we operated a significant number of hospitals as of December
31, 2024. Changes to the federal funding formula for Medicaid could have a particularly significant impact in states that expanded Medicaid, especially if
federal contributions for Medicaid expansion populations decrease and states are unable to offset the reductions. Further, some states have trigger laws that
would end their Medicaid expansion or require other changes if federal funding is reduced. CMS administrators may also make changes to Medicaid
payment models and may grant states additional flexibility in the administration of state Medicaid programs, including by allowing additional states to
condition Medicaid enrollment on work or other community engagement or permitting other eligibility restrictions. Some states use, or have applied to use,
waivers granted by CMS to implement expansion, impose different eligibility or enrollment conditions, or otherwise implement programs that vary from
federal standards. The Medicaid landscape is constantly evolving as the federal and state governments consider and test various models of delivery and
payment system reform.
In addition, there is uncertainty regarding the potential impact of other reform efforts at the federal and state levels. For example, some members of
Congress have proposed measures intended to accelerate the shift from traditional Medicare to Medicare Advantage or eliminating some or all of the
consumer protections established by the Affordable Care Act. Other recent initiatives and proposals include those aimed at price transparency and out-of-
network charges, which may impact prices and the relationships between healthcare providers, insurers and patients, and clinical transparency and value-
based purchasing. For example, CMS websites make available to the public certain data that hospitals and other providers submit in connection with
Medicare reimbursement claims, including hospital performance data on quality measures and patient satisfaction. In addition, Medicare reimbursement for
hospitals and other providers is adjusted based on quality and efficiency measures, and CMS currently administers various accountable care organizations,
or ACOs, and bundled payment demonstration projects. The CMS Innovation Center has highlighted the need to accelerate the movement to value-based
care and drive broader system transformation.
Fraud and Abuse Laws. Participation in the Medicare and Medicaid programs is heavily regulated by federal statute and regulation. If a hospital or
other type of provider fails to comply substantially with the requirements for participating in the programs or performs certain prohibited acts, such as those
listed below, their participation may be terminated and/or civil or criminal penalties may be imposed:
•
making claims to Medicare for services not provided or misrepresenting actual services provided in order to obtain higher payments;
•
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
be subject to fines, imprisonment or both. Additionally, any person or entity that knowingly and willfully falsifies or conceals a material fact or makes any
material false or fraudulent statements in connection with the delivery or payment of healthcare services by a healthcare benefit plan may be subject to
fines, imprisonment or both.
A section of the Social Security Act known as the “Anti-Kickback Statute” prohibits some business practices and relationships under Medicare,
Medicaid and other federal healthcare programs. These practices include the payment, receipt, offer, or solicitation of remuneration of any kind in
exchange for items or services that are reimbursed under a federal healthcare program. Courts have interpreted this statute broadly and have held that there
is a violation of the Anti-Kickback Statute if just one purpose of the remuneration is to generate referrals.
The Office of Inspector General of the Department of Health and Human Services, or OIG, is responsible for identifying and investigating fraud and
abuse activities in federal healthcare programs. As authorized by Congress, the OIG publishes regulations outlining activities and business relationships
that would be deemed not to violate the Anti-Kickback Statute. These regulations are known as “safe harbor” regulations. The failure of a particular
activity to comply with the safe harbor regulations does not necessarily mean that the activity violates the Anti-Kickback Statute; however, such failure
may lead to increased scrutiny by government enforcement authorities.
12
The OIG also provides guidance to healthcare providers by identifying types of activities that could violate the Anti-Kickback Statute. 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 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 that may be forgiven if a physician refers patients to the hospital;
•
payment of the costs of a physician’s travel and expenses for conferences or an honorarium for speaker events;
•
payment of services that require few, if any, substantive duties by the physician, or payment for services in excess of the fair market value of the
services 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
•
physician-owned entities (often referred to as physician-owned distributorships) that derive revenue from selling, or arranging for the sale of,
implantable medical devices ordered by their physician-owners for use on procedures that physician-owners perform on their own patients at
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 employment
contracts, leases, management agreements and professional service agreements. We provide financial incentives to recruit physicians to relocate to
communities 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,
we cannot assure you that regulatory authorities will not determine otherwise. If that happens, we could be subject to criminal and civil penalties and/or
exclusion from participating in Medicare, Medicaid or other government healthcare programs. Civil monetary penalties increase annually based on updates
to the consumer price index.
The Social Security Act also includes a provision commonly known as the “Stark Law.” This law prohibits physicians from referring Medicare and
Medicaid 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 penalties
that 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 Stark Law’s self-referral prohibition. CMS has issued regulations that interpret
these exceptions and other provisions of the Stark Law. One exception allows a physician to refer patients to a healthcare entity in which the physician has
an ownership interest if the entity is located in a rural area, as defined in the statute. There are also exceptions for many of the customary financial
arrangements between physicians and providers, including employment contracts, leases and recruitment agreements.
Another exception to the Stark Law, 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 department of the hospital, and the hospital meets certain “grandfathering”
requirements imposed by the Affordable Care Act. These requirements prohibit physicians from increasing the aggregate percentage of their ownership in
the hospital and restrict the ability of physician-owned hospitals from expanding the capacity of their aggregate licensed beds, operating rooms and
procedure rooms, beyond the ownership percentage and capacities in place in 2010. The whole hospital exception also contains public disclosure
requirements. A hospital is considered to 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 in any owner of the hospital, excluding physician ownership through publicly-traded securities that meet certain
conditions.
In addition to the restrictions and disclosure requirements applicable to physician-owned hospitals under the Stark Law, CMS regulations require
physician-owned hospitals and their physician owners to disclose certain ownership information to patients. Physician-owned hospitals must disclose their
physician ownership in writing to patients and must make a list of their physician owners available upon request. Additionally, each physician owner who
is a member of a physician-owned hospital’s medical staff must agree, as a condition of continued medical staff membership or admitting privileges, to
disclose in writing to all patients whom
13
they refer to the hospital their (or an immediate family member’s) ownership interest in the hospital. If a hospital fails to comply with these regulations, the
hospital could lose its Medicare provider agreement and be unable to participate in Medicare.
Law enforcement authorities, including the OIG, the courts and Congress have in recent years increased scrutiny of arrangements between healthcare
providers and potential referral sources to ensure that the arrangements are not designed as a mechanism to improperly pay for patient referrals and/or other
business. Investigators have demonstrated a willingness to look behind the formalities of a business transaction to determine the underlying 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 apply
regardless of the source of payment for care. These statutes typically provide for criminal and civil penalties, as well as loss of licensure. Little precedent
exists for 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
and regulations, state fraud and abuse laws, evolving interpretations of current requirements or the adoption of new, federal or state laws or regulations. We
are unable to predict whether other legislation or regulations 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 our operations. We are continuing to enter into new financial arrangements with physicians and other
providers in a manner structured to comply in all material respects with these laws. We strive to comply with applicable fraud and abuse laws. We cannot
assure you, however, that governmental officials responsible for 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 by the 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 False
Claims Act, or FCA, which can be used to prosecute Medicare and other government program fraud involving issues such as coding errors, billing for
service not provided and submitting false cost reports. The FCA also covers payments involving federal funds in connection with the health insurance
exchanges created under the Affordable Care Act, if those payments involve any federal funds. Liability under the FCA often arises when an entity
knowingly submits a false claim for reimbursement to the federal government. The FCA broadly defines the term “knowingly.” Although simple
negligence will not give rise to liability under the FCA, submitting a claim with reckless disregard to its truth or falsity may constitute “knowingly”
submitting a false claim and result in liability. Among the many other potential bases for liability under the FCA is the knowing and improper failure to
report and refund amounts owed to the government within 60 days of identifying an overpayment. An overpayment is deemed to be identified when a
person knowingly, as defined under the FCA, receives or retains an overpayment. Submission of a claim for an item or service generated in violation of the
Anti-Kickback Statute constitutes a false or fraudulent claim under the FCA. In some cases, whistleblowers, the federal government and courts have taken
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 the
government, plus substantial civil penalties for each separate false claim. These civil monetary penalties are adjusted annually based on updates to the
consumer price index. Settlements entered into prior to litigation usually involve a less severe calculation of damages. The FCA also contains “qui tam,” or
whistleblower provisions, which allow private individuals to bring actions on behalf of the government alleging that the defendant has defrauded the
federal government. If the government intervenes in the action and prevails, the party filing the initial complaint may share in any settlement or judgment.
If the government does not intervene in the action, the whistleblower plaintiff may pursue the action independently and may receive a larger share of any
settlement or judgment. When a private party brings a qui tam action under the FCA, the defendant generally will not be made aware of the lawsuit until
the government commences its own investigation or determines whether it will intervene. Every entity that receives at least $5 million annually in
Medicaid payments must have written policies for all employees, contractors and agents providing detailed information about false claims, false statements
and whistleblower protections under certain federal laws, including the FCA, and similar state laws.
A number of states, including states in which we operate, have adopted their own false claims provisions as well as their own whistleblower provisions
whereby 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
the FCA. From time to time, companies in the healthcare industry, including ours, may be subject to actions under the FCA or similar state laws.
14
Corporate Practice of Medicine; Fee-Splitting. Some states prohibit unlicensed persons or business entities, including corporations, from employing
physicians or certain other health professionals. Some states also prohibit direct or indirect payments to, or entering into fee-splitting arrangements with,
healthcare providers and unlicensed persons or business entities. Possible sanctions for violations of these restrictions include loss of a healthcare
provider’s license, civil and criminal penalties and rescission of business arrangements. These laws vary from state to state, are often vague and have
seldom been interpreted by the courts or regulatory agencies. We structure our arrangements with healthcare providers to comply with the relevant state
law. However, we cannot provide assurance that governmental officials responsible for enforcing these laws will not assert that we, or transactions in
which we are involved, are in violation of these 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, or EMTALA, imposes federal
requirements as to the care that must be provided to anyone who comes to facilities providing emergency medical services seeking care before they may be
transferred to another facility or otherwise denied care. Under this law, healthcare facilities are required to screen patients for emergency medical
conditions and stabilize them where such conditions exist, regardless of an individual’s ability to pay for treatment. Sanctions for failing to fulfill these
requirements include exclusion from participation in Medicare and Medicaid programs and civil money penalties, which are increased annually based on
updates to the consumer price index. In addition, the law creates private civil remedies that enable an 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 medical facility 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 that our practices comply with the law, we can give no
assurance that governmental officials responsible for enforcing the law will not assert we are in violation of this law or that interpretations of the law will
not change. In particular, hospitals may face conflicting interpretations as to the requirements imposed by EMTALA as interpreted by HHS in relation to
state laws that limit access to abortion or other reproductive health services. For example, CMS has provided guidance regarding EMTALA obligations
specific to patients who are pregnant or are experiencing pregnancy loss and the preemption of state law. This guidance is the subject of legal challenges.
The final ruling from a Texas case limits application of the HHS guidance in Texas.
Conversion Legislation. Many states, including some where we have hospitals and others where we may in the future acquire hospitals, have adopted
legislation regarding the sale or other disposition of hospitals operated by not-for-profit entities. In other states that do not have specific legislation, the
attorneys general have demonstrated an interest in these transactions under their general obligations to protect charitable assets from waste. These
legislative and 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 any significant difficulties or delays in completing the acquisition process. There can be no assurance, however, that future actions on the state
level will not seriously delay or even prevent our ability to acquire hospitals. If these activities are widespread, they could limit our ability to acquire
hospitals.
Antitrust Laws. The federal government and most states have enacted antitrust laws that prohibit certain types of conduct deemed to be anti-competitive.
These laws prohibit price fixing, market allocation, bid-rigging, concerted refusal to deal, market monopolization, price discrimination, tying arrangements,
acquisitions of competitors and other practices that have, or may have, an adverse effect on competition. In addition, some states have also passed
legislation requiring for-profit healthcare entities, including hospitals, to notify the state attorneys general or other designated entities in advance of sales or
other transactions. Violations of federal or state antitrust laws can result in various sanctions, including criminal and civil penalties. Antitrust enforcement
in the healthcare industry is currently a priority of the Federal Trade Commission, or FTC, and the U.S. Department of Justice. We believe we are in
compliance with such federal and state laws, but courts or regulatory authorities may reach a determination in the future that could adversely affect our
operations.
Certificates of Need. The construction of new facilities, the acquisition of existing facilities, significant capital expenditures and the addition of new
services at our facilities may be subject to state laws that require prior approval by state regulatory agencies. These certificate of need, or CON, laws
generally require that a state agency determine the public need and give approval prior to the construction or acquisition of facilities, significant capital
expenditure or the addition of new services. We currently operate healthcare facilities in a number of states that have adopted CON laws. If we fail to
obtain necessary state approval, we will not be able to expand our facilities, complete acquisitions or significant capital expenditures or add new services in
these states. Violation of these state laws may result in the imposition of civil sanctions or the revocation of a provider’s licenses.
HIPAA Administrative Simplification, Privacy and Security Standards and Interoperability Requirements. The Health Insurance Portability and
Accountability Act of 1996, or HIPAA, requires the use of uniform transaction standards for healthcare claims and payment transactions submitted or
received electronically. These provisions are intended to encourage electronic commerce in the healthcare industry. HHS has established transaction
standards and code sets that all healthcare providers must use when submitting or receiving certain healthcare transactions electronically and has issued
operating rules to promote uniformity in the implementation of each standardized electronic transaction. HIPAA also requires that each provider use a
National Provider Identifier.
15
As required by HIPAA, HHS has issued privacy and security regulations that extensively regulate the use and disclosure of protected health
information, and require covered entities, including health plans and most healthcare providers, to implement administrative, physical and technical
safeguards to protect the security of individually identifiable health information that is electronically maintained or transmitted. Business associates
(entities that handle protected health information on behalf of covered entities) are subject to direct liability for violation of applicable provisions of 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 is found
to be an agent of the covered entity.
Covered entities must report breaches of unsecured protected health information to affected individuals without unreasonable delay, but not to exceed
60 days 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. All
non-permitted uses or disclosures of unsecured protected health information are presumed to be breaches unless the covered entity or business associate
establishes that there is a low probability the information has been compromised. Various state laws and regulations may also require us to notify affected
individuals 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 civil
penalties are adjusted annually based on updates to the consumer price index. HHS is required to perform compliance audits. In addition to enforcement by
HHS, state attorneys general are authorized to bring civil actions seeking either injunction or damages in response to violations of HIPAA privacy and
security regulations that threaten the privacy of state residents. HHS may resolve HIPAA violations through informal means, such as allowing a covered
entity to implement a corrective action plan, but HHS has the discretion to move directly to impose monetary penalties and is required to impose penalties
for violations resulting from willful neglect. We are also subject to many federal or state privacy-related laws that are more restrictive than the privacy
regulations issued under HIPAA or that apply to other types of information. These laws vary and could impose additional penalties and subject us to
additional privacy and security restrictions. For example, the FTC uses its consumer protection authority to initiate enforcement actions in response to data
breaches. In addition, various states have enacted, and other states are considering, laws and regulations concerning the privacy and security of consumer
and other personal information. To the extent we are subject to such requirements, these laws and regulations often have far-reaching effects, are subject to
amendments and changing requirements and updates to regulators’ enforcement priorities, may require us to modify our data processing practices and
policies, and may subject our business to a risk of increased potential liability. These laws and regulations often provide for civil penalties for violations,
and some provide a private right of action for data breaches, which may increase the likelihood or impact of data breach litigation. We have developed and
utilize an information privacy and security compliance plan as part of our effort to comply with HIPAA and other federal and state privacy and security
requirements. The privacy regulations and security laws and regulations have imposed, and will continue to impose, significant costs on us in order to
comply with these standards.
Healthcare providers and industry participants are also subject to an increasing number of requirements intended to promote the interoperability and
exchange of patient health information. For example, healthcare providers and certain other entities are subject to information blocking restrictions
pursuant to the 21st Century Cures Act that prohibit practices that are likely to interfere with the access, exchange or use of electronic health information,
except as required by law or specified by HHS as a reasonable and necessary activity. Violations may result in penalties or other significant disincentives.
In a final rule published in July 2024, HHS established disincentives for hospitals, clinicians (including group practices) eligible for the Merit-Based
Incentive Payment System, or MIPS, and ACOs and ACO providers that commit information blocking. Hospitals found to have committed information
blocking will not qualify as “meaningful electronic health record users” under the Medicare Promoting Interoperability Program and as a result will lose
75% of the annual market basket increase they would otherwise receive. Similar penalties apply to MIPS-eligible clinicians and ACOs, ACO participants,
and ACO providers or suppliers under the Medicare Shared Savings Program.
Price Transparency and Consumer Billing Limitations. The healthcare industry is subject to various federal and state initiatives and requirements
related to price transparency and out-of-network charges, which may impact prices, our competitive position and the relationships between hospitals,
insurers, patients, and ancillary providers. For example, federal regulations require hospitals to publish a list of their standard charges for all items and
services, including discounted cash prices and payer-specific and de-identified negotiated charges, in a machine-readable, publicly accessible online file.
Hospitals are required to publish a consumer-friendly list of standard charges for certain “shoppable” services (i.e., services that can be scheduled by a
patient in advance) and associated ancillary services or, alternatively, maintain an online price estimator tool. CMS may impose civil monetary penalties for
noncompliance with these price transparency requirements. Further, CMS requires most health insurers to publish online charges negotiated with providers
for healthcare services. Most health insurers must also provide online price comparison tools to help individuals get personalized cost estimates for covered
items and services.
16
In addition, the No Surprises Act imposes various requirements on providers and health plans intended to prevent “surprise” medical bills, and several
states have implemented similar laws intended to protect consumers. The No Surprises Act prohibits providers from charging patients an amount beyond
the in-network cost sharing amount for items and services rendered by out-of-network providers (i.e., prohibits balance billing), subject to limited
exceptions. The No Surprises Act also impacts the payment received by an out-of-network provider from a health plan for items and services to which the
prohibitions on balance billing apply. For items and services for which balance billing is prohibited (even when no balance billing occurs), the No Surprises
Act establishes an independent dispute resolution, or IDR, process for providers and payers to handle payment disputes that cannot be resolved through
direct negotiations. The final rule establishing the IDR process is currently the subject of legal challenges, and government agencies have proposed various
changes, creating uncertainty and resulting in delays in claims resolution. The No Surprises Act also requires providers to provide a good faith estimate of
expected charges to uninsured or self-pay individuals in connection with scheduled items or services, in advance of the date of the scheduled item or
service, or upon request of the individual. HHS is delaying enforcement with regard to good faith estimates to uninsured individuals that do not include
expected charges for co-providers or co-facilities until the agency issues additional regulations. If the actual charges to an uninsured or self-pay patient
exceed the good faith estimate by an amount deemed to be substantial by regulation (which is currently $400) or the provider furnishes an item or service
that was not included in the good faith estimate, the patient may invoke a patient-provider dispute resolution process established by regulation to challenge
the higher amount.
Payment
Medicare. Medicare is a federal health insurance program that provides certain hospital and medical insurance benefits to persons aged 65 and over,
some disabled persons, persons with end-stage renal disease and persons with amyotrophic lateral sclerosis, also known as ALS or Lou Gehrig’s Disease.
Payments for inpatient acute hospital services are generally made pursuant to a prospective payment system, or PPS. Under the inpatient PPS, our
hospitals are paid a predetermined amount for each hospital discharge based on the patient’s diagnosis. Specifically, each discharge is assigned to a
Medicare severity diagnosis-related group, commonly known as an “MS-DRG,” based upon the patient’s condition and treatment during the relevant
inpatient stay. The MS-DRGs are severity-adjusted to account for the severity of each patient’s condition and expected resource consumption. Each MS-
DRG has a payment weight assigned to it that is based on the average resources used to treat Medicare patients in that MS-DRG. MS-DRG payments are
based on national averages and not on charges or costs specific to a hospital. Medicare sets discharge base rates (standardized payment amounts), which are
adjusted according to the MS-DRG relative weights and geographic factors. In addition, hospitals may qualify for an “outlier” payment when a patient’s
treatment costs are extraordinarily high and exceed a specified regulatory threshold.
The MS-DRG payment rates for inpatient acute services are adjusted by an update factor on October 1 of each year, the beginning of the federal fiscal
year. The index used to adjust the MS-DRG payment rates, known as the “market basket index,” gives consideration to the inflation experienced by
hospitals in purchasing goods and services. MS-DRG payment rates were increased by the “market basket index” update of 3.3% and 3.4% for each of
federal fiscal years 2024 and 2025, respectively, subject to certain adjustments. For federal fiscal year 2024 and 2025, the market basket update was
reduced by 0.2 percentage points and 0.5 percentage points, respectively, for the productivity adjustment. A reduction of 25% of the market basket update
occurs if patient quality data is not submitted, and a reduction of 75% of the market basket update occurs for hospitals that fail to demonstrate meaningful
use of certified electronic health records, or EHR, technology without receiving a hardship exception. Additional adjustments may apply, depending on
patient-specific or hospital-specific factors and shifts in payment policy. We anticipate that additional adjustments may apply to reimbursement rates under
the inpatient PPS in future payment years as a result of 2024 court decisions that vacated a low wage index policy CMS adopted in 2020. The policy had
funded an increase to the wage index value for hospitals with low wage indexes by decreasing reimbursement for all other hospitals. CMS addressed the
impact of the decision prospectively in its final rule updating inpatient hospital payment rates and policies for federal fiscal year 2025, but it is not yet clear
how the agency will address the impact the low wage policy had in 2020 through 2024.
The MS-DRG payment rates are also adjusted to promote value-based purchasing, linking payments to quality and efficiency. First, hospitals that meet
or exceed certain quality performance standards receive greater reimbursement under CMS’s Hospital Value-Based Purchasing Program, while hospitals
that do not satisfy certain quality performance standards receive reduced Medicare inpatient hospital payments. CMS withholds 2% of participating
hospitals’ Medicare payments and uses the total amount collected to fund payments that reward hospitals based on a set of quality and resource use
measures. CMS scores each hospital on its achievement relative to other hospitals and improvement relative to that hospital’s own past performance.
Second, hospitals experiencing “excess readmissions” within 30 days from the patient’s date of discharge following treatment for designated conditions or
procedures during a prior performance review period receive reduced payments for all inpatient discharges in the fiscal year, not just discharges relating to
the conditions or procedures subject to the readmission standard. The payment reduction, which can be up to 3% of a hospital’s base payments, is
determined by assessing that hospital’s readmissions relative to hospitals with similar proportions of dual-eligible patients. Third, the bottom quartile of
hospitals based on the national risk-adjusted hospital acquired condition, or HAC, rates in the previous year have their total inpatient operating Medicare
payments reduced by 1%. Moreover, Medicare does not reimburse for care
17
related to certain HACs. For cases in which a designated HAC was not present on admission, CMS does not allow the discharge to be assigned to a higher-
paying MS-DRG based on the HAC, and the case is paid as though the secondary diagnosis (HAC) was not present.
In addition, hospitals may qualify for Medicare disproportionate share hospital, or DSH, payment adjustments when their percentage of low-income
patients exceeds specified regulatory thresholds. A majority of our hospitals qualify to receive these adjustments. The methodology for calculating DSH
payment adjustments is affected by shifts in CMS payment policy. For example, in August 2023, CMS changed the DSH formula by altering how days of
care provided to patients who are eligible for benefits from Section 1115 Demonstrations are included in the Medicaid fraction and by excluding from the
Medicaid fraction days of care of patients for which hospitals are paid from demonstration-authorized uncompensated or undercompensated care pools in a
manner that will effectively decrease DSH payments for many hospitals. However, in August 2024, a district court in Texas vacated the regulation
effecting this change. Separately, in November 2024, the U.S. Supreme Court heard oral arguments in a dispute focused on whether all patients enrolled in
Supplemental Security Income, or SSI, assistance, even if no SSI payments were made during the month of a patient’s hospital admission, should be
counted in the DSH methodology. These and other regulatory changes and court rulings could adversely impact our results of operations. CMS also
distributes an additional payment to each DSH hospital for its proportion of uncompensated care costs relative to the uncompensated care amount of other
DSH hospitals. The uncompensated care amount is hospital-specific and generally includes charity care and non-Medicare and non-reimbursable Medicare
bad debt. The Medicare DSH adjustments and uncompensated care payments as a percentage of net operating revenues were 0.68% and 0.75% for the
years ended December 31, 2024 and 2023, respectively.
We also receive Medicare reimbursement for hospital outpatient services through a PPS. Services paid under the hospital outpatient PPS are grouped
into ambulatory payment classifications, or APCs. Services for each APC are similar clinically and in terms of the resources they require. APC payment
rates are generally determined by applying a conversion factor, which CMS updates annually using a market basket. For calendar year 2024, CMS
estimated an increase in hospital outpatient PPS payments of 3.1%, reflecting a market basket increase of 3.3%, with a negative 0.2 percentage point
productivity adjustment. For calendar year 2025, CMS estimated an increase in hospital outpatient PPS payments of 2.9%, reflecting a market basket
increase of 3.4%, with a negative 0.5 percentage point productivity adjustment. A 2.0 percentage point reduction to the market basket update applies to
hospitals that do not submit required patient quality data.
The Medicare reimbursement for outpatient services may also be affected by broad shifts in payment policy. For example, recent changes related to the
340B Drug Pricing Program have implications for all hospitals reimbursed under the outpatient PPS, including those, like ours, that do not participate in the
program. The 340B program allows non-profit healthcare organizations to purchase certain outpatient drugs from pharmaceutical manufacturers at
discounted rates. In 2018, CMS implemented a payment policy that reduced Medicare payments for 340B hospitals for most drugs obtained at 340B-
discounted rates and that resulted in increased payments for non-340B hospitals. In June 2022, the U.S. Supreme Court invalidated past payment cuts for
hospitals participating in the 340B Drug Pricing Program. In light of the U.S. Supreme Court decision and to achieve budget neutrality, CMS reduced
payment rates for non-drug services under the outpatient PPS for calendar year 2023, and distributed lump sum payments to affected 340B providers as the
remedy for calendar years 2018 through 2022. In order to comply with budget neutrality requirements, HHS finalized a corresponding offset in future non-
drug item and service payments for all outpatient PPS providers (except new providers) that will reduce the outpatient PPS conversion factor by 0.5%
annually beginning in calendar year 2026 and continuing for approximately 16 years.
CMS has implemented an expanded site-neutral payment policy for off-campus provider-based departments paid under the outpatient PPS. Under the
policy, all off-campus provider-based departments are paid the Medicare Physician Fee Schedule, or MPFS, -equivalent rate for clinic visits, which is
generally substantially lower than the outpatient PPS rate. The MPFS-equivalent rate for calendar year 2025 is approximately 40% of the outpatient PPS
rate.
CMS uses fee schedules to pay for physician services, physical, occupational and speech therapies, durable medical equipment, clinical diagnostic
laboratory services, freestanding surgery center services, and certain other items and services. Under the MPFS, CMS has assigned a national relative value
unit, or RVU, to most medical procedures and services that reflects the resources required to provide the services relative to all other services. Each RVU is
calculated based on a combination of the time and intensity of work required, overhead expense attributable to the service, and professional liability
insurance expense. These elements are each modified by a geographic adjustment factor to account for local practice costs and are then aggregated. To
determine the payment rate for a particular service, the sum of the geographically adjusted RVUs is multiplied by a conversion factor. For calendar year
2025, CMS decreased the conversion factor by approximately 2.83%.
18
CMS requires physicians and certain other healthcare clinicians paid under Medicare Part B to participate in one of two tracks under the Quality
Payment Program, or QPP, which is a value-based payment program intended to reward high-quality patient care. Under both tracks, performance data
collected each performance year affects Medicare payments two years later. CMS expects to transition increasing financial risk to providers as QPP
evolves. The Advanced Alternative Payment Model, or Advanced APM, encourages participation in specific innovative payment models approved by CMS
through financial incentives. Incentive payments for participation in an Advanced APM were initially set to expire after the 2023 performance year (with
associated payments in 2025), but were extended for one year at a lower rate. After the 2024 performance year and associated payments in 2026, Advanced
APM incentive payments will no longer be available. Instead, qualifying providers will receive positive adjustments to their MPFS payment rates. In
addition, providers are exempt from the reporting requirements and payment adjustments imposed under the Merit-Based Incentive Payment System, or
MIPS, if the provider has sufficient participation in an Advanced APM. Alternatively, providers may participate in the MIPS track, under which physicians
receive performance-based payment incentives or payment reductions based on their performance with respect to clinical quality, resource use, clinical
improvement activities and meeting Promoting Interoperability standards related to the meaningful use of EHRs.
In addition to the Medicare reimbursement reductions and adjustment discussed above, the Budget Control Act of 2011, or BCA, requires automatic
spending reductions to reduce the federal deficit, resulting in a uniform percentage reduction across all Medicare programs of 2% per fiscal year that
extends through the first eight months of federal fiscal year 2032. These reductions apply to certain other federally funded healthcare programs, including
TRICARE. We anticipate that the federal deficit will continue to place pressure on government healthcare programs, and it is possible that future deficit
reduction legislation will impose additional spending reductions.
Medicaid. Medicaid is a program funded jointly by state and federal governments, and administered by the states, that provides hospital and medical
benefits to qualifying low-income individuals. The number of individuals enrolled in Medicaid declined in 2024 in comparison to 2023. This decline
reversed a trend of increased enrollment that occurred as a result of COVID-19 relief legislation that authorized a temporary increase in federal funds for
certain Medicaid expenditures in states that maintained continuous Medicaid enrollment through March 2023, among other requirements.
Most state Medicaid payments are made under a PPS or under programs that negotiate payment levels with individual hospitals. In addition to the base
payment rates for specific claims for services rendered to Medicaid enrollees, states utilize supplemental reimbursement programs to make separate
payments that are not specifically tied to an individual’s care. Supplemental payments may be in the form of Medicaid DSH payments, which are intended
to offset hospitals’ uncompensated care costs. Medicaid DSH payments are funded by both the federal government and state governments. States generally
have broad discretion to define which hospitals qualify for the Medicaid DSH payments and to determine payment amounts, but CMS published a final rule
in February 2024 affecting how states calculate hospital-specific caps for the payments. In addition, current law provides for Medicaid DSH payments to be
reduced by $8.0 billion for the period from April 1, 2025 through September 30, 2025 and per year in each of federal fiscal years 2026 and 2027. Medicaid
DSH payments as a percentage of our net operating revenues were 0.19% and 0.21% for the years ended December 31, 2024 and 2023, respectively.
Supplemental payments may also be in the form of non-DSH payments, such as upper payment limit payments, which are intended to address the
difference between Medicaid fee-for-service payments and Medicare reimbursement rates, and payments under other programs that vary by state under
Section 1115 waivers. These supplemental reimbursement programs are generally authorized by CMS for a specified period of time and require CMS’s
approval to be extended.
Outside of the government response to COVID-19, budgetary pressures have, in recent years, resulted and likely will continue to result in decreased
spending, or decreased spending growth, for Medicaid programs in many states. The federal government and many states are using or considering various
strategies to reduce Medicaid expenditures, and most states have adopted broad taxes on healthcare providers to fund the non-federal share of Medicaid
programs. Many states have also adopted, or are considering, legislation designed to reduce coverage, enroll Medicaid recipients in managed care programs
and/or impose additional taxes on hospitals to help finance or expand the states’ Medicaid systems. In addition, many states use, or have applied to CMS to
use, waivers granted by CMS to implement Medicaid expansion, impose different eligibility or enrollment restrictions, or otherwise implement programs
that vary from federal standards. In recent years, aspects of existing or proposed Medicaid waiver programs have been subject to legal challenge, resulting
in uncertainty. Additionally, federal legislation and administrative policies that shape administration of the Medicaid programs at the state level are subject
to change, including as a result of changes in the presidential administration. For example, a federal court permitted Georgia to impose work and
community engagement requirements under a Medicaid demonstration program that launched in mid-2023, and CMS administrators may in the future
allow states to impose such conditions on enrollment or permit other eligibility restrictions. Changes to the federal funding formula for Medicaid could also
have a significant impact on Medicaid programs and enrollment, particularly if federal contributions for Medicaid expansion populations decrease and
those states are unable to offset the reductions. Further, some states have trigger laws that would end their Medicaid expansion or require other changes if
federal funding is reduced.
19
TRICARE. TRICARE is the Department of Defense’s healthcare program for active duty service members of the armed forces and others, including
certain family members, retirees, and survivors. For inpatient services, TRICARE generally reimburses hospitals based on a diagnosis-related group, or
DRG, system modeled on the Medicare inpatient PPS. For outpatient services, TRICARE reimburses hospitals based on a PPS that 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, are
required to meet specified financial reporting requirements. Federal and, where applicable, state regulations require submission of annual cost reports
identifying 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 in
adjustments 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.
Medicare and Medicaid Managed Care. Enrollment in Managed Medicare, also known as Medicare Part C or Medicare Advantage, and managed
Medicaid programs has increased in recent years as the federal and state governments seek to control healthcare costs. Under the Managed Medicare
program, the federal government contracts with private health plans to provide members with Medicare benefits. In addition to covering Medicare Part A
and Part B benefits, the plans may choose to offer supplemental benefits and impose higher premiums and cost-sharing obligations. Similarly, managed
Medicaid programs enable states to contract with private entities to handle program responsibilities like care management and claims adjudication.
Many states have implemented state directed payment, or SDP, arrangements to direct certain Medicaid managed care expenditures. These
arrangements, which are generally subject to annual approval by CMS, allow states to implement delivery system and provider payment initiatives by
requiring Medicaid managed care organizations to pay providers according to specific rates or methods. States are increasingly using SDP arrangements,
and some states have converted supplemental payment programs to SDP arrangements, diverting previously available funding. The use and nature of SDP
arrangements are subject to policy changes. For example, CMS published a rule in May 2024 that addresses access, financing and quality within Medicaid
managed care programs, known as the Medicaid Managed Care Rule. The rule, elements of which will be phased in through 2028, includes new and
updated requirements for SDP arrangements intended to ensure a more consistent and transparent approach for participating states. The rule removes
regulatory barriers to help states use SDP arrangements to implement value-based purchasing payment arrangements and include non-network providers in
SDP arrangements. The rule also requires provider payment levels for SDPs for inpatient and outpatient hospital services and other specified services to not
exceed the average commercial rate. Further, the rule requires states to ensure that providers receiving SDPs comply with restrictions on participating in
arrangements related to healthcare provider taxes that involve the redistribution of Medicaid payments.
Medicare Administrative Contractors. CMS competitively bids the Medicare fiscal intermediary and Medicare carrier functions to Medicare
Administrative Contractors, or MACs, in 12 jurisdictions. Each MAC is geographically assigned and serves both Part A and Part B providers within a
given jurisdiction. Qualified chain providers have the option of having all hospitals use one home office MAC, and we chose to do so. CMS periodically
re-solicits bids, and the MAC servicing a geographic area can change as a result of the bid competition. MAC transition periods can impact claims
processing functions and the resulting cash flow.
Medicare and Medicaid Integrity. CMS contracts with third parties to promote the integrity of the Medicare program through review of quality
concerns and detection of improper payments. Quality Improvement Organizations, or QIOs, for example, are groups of physicians and other healthcare
quality experts that work on behalf of CMS to ensure that Medicare pays only for goods and services that are reasonable and necessary and that are
provided in the most appropriate setting. Under the Recovery Audit Contractor, or RAC, program, CMS contracts with RACs nationwide to conduct post-
payment reviews to detect and correct improper payments in the Medicare program, as required by statute. RACs review claims submitted to Medicare for
billing compliance, including correct coding and medical necessity. Compensation for RACs is on a contingency basis and based upon the amount of
overpayments and underpayments identified, 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 on each 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 refer
suspected fraud and abuse to appropriate law enforcement agencies. Medicaid RAC programs vary by state in design and operation. Under the Medicaid
Integrity Program, CMS contracts with Unified Program Integrity Contractors, or UPICs, to perform audits, investigations and other integrity activities.
Working across five geographic jurisdictions, UPICs collaborate with states and coordinate provider investigations across the Medicare and Medicaid
programs.
20
We maintain policies and procedures to respond to the RAC requests and payment denials. Payment recoveries resulting from RAC reviews and denials
are appealable, and we pursue reversal of adverse determinations at appropriate appeal levels. Depending upon the growth of RAC programs and our
success in appealing claims in future periods, our cash flows and results of operations could be negatively impacted.
Accountable Care Organizations. An ACO is a network of providers and suppliers (including hospitals, physicians and other designated professionals)
that work together to invest in infrastructure and redesign delivery processes to achieve high quality and efficient delivery of services and to increase
provider accountability by tying reimbursement to patient outcomes or related measures. ACOs, which have gained traction in both the public and private
sectors, are intended to produce savings as a result of improved quality and operational efficiency. For example, the Medicare Shared Savings Program
seeks to promote accountability and coordination of care for Medicare fee-for-service beneficiaries through the creation of ACOs. Medicare-approved
ACOs that achieve quality performance standards established by HHS are eligible to share in a portion of the amounts saved by the Medicare program, but
conversely, under some payment tracks, may be required to pay shared losses if quality-adjusted Medicare expenditures exceed an established benchmark.
Participation in payment tracks with downside risk is increasing. HHS has significant discretion to determine key elements of Medicare ACO programs.
Certain waivers and exceptions are available from fraud and abuse laws for ACOs.
The Center for Medicare and Medicaid Innovation, or 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 Medicaid programs, while maintaining or improving quality of care. By 2030, the CMS Innovation Center aims to have all fee-for-
service Medicare beneficiaries and most Medicaid beneficiaries in a care relationship with accountability for quality and total cost of care. CMS also
indicated it will streamline its payment model portfolio and consider how to ensure broad provider participation.
Bundled Payment Initiatives. Providers participating in bundled payment initiatives accept accountability for costs and quality of care by agreeing to
receive one payment for services provided to Medicare patients for certain medical conditions or episodes of care. By rewarding providers for increasing
quality and reducing costs and penalizing providers if costs exceed a certain amount, bundled payment models are intended to lead to higher quality, more
coordinated care at a lower cost to the Medicare program. The CMS Innovation Center has implemented bundled payment models, including the Bundled
Payment for Care Improvement Advanced, or BPCI Advanced, initiative, which is expected to run through December 2025. Generally, participation in
bundled payment programs is voluntary, but CMS required hospitals in selected markets to participate in mandatory bundled payment initiatives for
specific orthopedic procedures, which ended December 31, 2024, and hospitals in selected markets will be required to participate in the Transforming
Episode Accountability Model, a new model focused on five specified surgical procedure episodes, beginning in January 2026. The CMS Innovation
Center signaled its intent to increase provider participation through implementation of more mandatory models. We expect value-based purchasing
programs, including models that condition reimbursement on patient outcome measures, to become more common with both governmental and non-
governmental payors.
Commercial Insurance and Managed Care Companies. Our hospitals provide services to individuals covered by private healthcare insurance or by
health plans administered by managed care companies. These payors pay our hospitals or in some cases reimburse their policyholders based upon the
hospital’s established charges and the coverage provided in the insurance policy. Payors try to limit their costs by negotiating with hospitals and other
healthcare providers for discounts to established charges. Commercial insurers and managed care companies also seek to reduce payments to hospitals by
establishing payment rules that in effect re-characterize the services ordered by physicians or are intended to shift certain procedures to outpatient settings,
where payment rates are typically lower. For example, some payors stringently review each patient’s length of stay in the hospital and re-characterize as
outpatient all inpatient stays of less than a particular duration (e.g., 24 hours). Similarly, some payors impose prior authorization requirements to review the
admission and course of treatment of patients. Reductions in payments and denials of coverage for services provided by our hospitals and other facilities
could adversely affect us.
Supply Contracts
We purchase items, primarily medical supplies, medical equipment and pharmaceuticals, under an agreement with HealthTrust, a GPO in which we are
a noncontrolling partner. The current term of this agreement expires in December 2025, with automatic renewal terms of one year unless either party
terminates by giving notice of non-renewal. At December 31, 2024, we had a 12.6% ownership interest in HealthTrust. By participating in this
organization, we are able to procure items at competitively priced rates for our hospitals. There can be no assurance that our arrangement with HealthTrust
will continue to provide the discounts that we have historically received.
21
Competition
The hospital industry is highly competitive. The competition among hospitals and other healthcare providers, including urgent care centers and other
outpatient providers, many of which offer similar services, has intensified with the implementation of price transparency initiatives and as patients have
become more conscious of rising costs and quality of care in their healthcare decision-making process. The majority of our hospitals are located in
generally larger non-urban service areas in which we believe we are the primary, if not the sole, provider of general acute care health services. These
hospitals in non-urban service areas may face limited or no direct competition from within 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 of reasons, including the need for services we do not offer, payor networks that exclude our
providers or physician referrals. Patients who are required to seek services from these other hospitals may subsequently shift their preferences to those
hospitals for services we do provide. Our other hospitals, in selected urban service areas, may face competition from hospitals that are more established
than our hospitals. Some of our competitors offer services, including extensive medical research and medical education programs, which are not offered by
our facilities. In addition, in certain markets where we operate, large teaching hospitals provide highly specialized facilities, equipment and services that
may not be available at our hospitals. We also face competition from other specialized care providers, including outpatient surgery, orthopedic, oncology
and diagnostic centers. We believe that we will continue 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. Cost-reduction strategies by large employer groups
and their affiliates may increase this competition.
In most markets 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. These hospitals are owned by tax-supported governmental agencies or not-for-profit entities supported by endowments and charitable
contributions. These hospitals are exempt from sales, property and income taxes. Such exemptions and support are not available to our hospitals and may
provide the tax-supported or not-for-profit entities an advantage in funding general and capital expenditures and offering services more specialized than
those available at our hospitals.
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 a
patient is admitted to the hospital and the procedures to be performed. Admitting physicians may be on the medical staffs of other hospitals in addition to
those of our hospitals. We attempt to attract physicians and our physicians’ patients to our hospitals by offering quality services and facilities, convenient
locations and state-of-the-art equipment. Some competitors are implementing physician alignment strategies, such as employing physicians, acquiring
physician practice groups, and participating in ACOs or other clinical integration models.
Another significant factor in the competitive position of our hospitals and other facilities is our ability to obtain and maintain favorable contracts with
third-party payors. Generally, hospitals and other providers compete for service contracts with third-party payors on the basis of price, market reputation,
geographic location, quality and range of services, and medical staff quality, among other factors. Laws and regulations may impact our contract terms and
ability to contract with third-party payors, such as laws that permit payors to guide patients to particular providers or eliminate restrictions on placing
providers into preferred tiers. Health plans increasingly utilize narrow networks that restrict the number of participating providers or tiered networks that
impose significantly higher cost-sharing obligations on patients who obtain services from providers in a disfavored tier. Other healthcare providers may
also impact our ability to enter into contracts with third-party payors or negotiate favorable terms and conditions, including through their negotiation of
exclusivity provisions. Price and clinical transparency initiatives and increasing vertical integration efforts involving third-party payers and healthcare
providers, among other factors, may increase these challenges. Moreover, the trend toward consolidation among private third-party payors tends to increase
payor bargaining power over fee structures.
Trends towards clinical and price transparency and value-based purchasing may also impact our competitive position by affecting patient volumes and
our ability to attract patients. For example, CMS websites publicize data that hospitals and other providers submit in connection with Medicare
reimbursement claims, including performance data related to quality measures and patient satisfaction surveys. In addition, hospitals are required to publish
online a list of their standard charges for all items and services, including gross charges, discounted cash prices and payor-specific and de-identified
negotiated charges, in a machine-readable, publicly accessible online file.
Compliance Program
We take an operations team approach to compliance and utilize corporate experts for program design efforts and facility leaders for employee-level
implementation. We believe compliance is another area that demonstrates our utilization of standardization and centralization techniques and initiatives,
which yield efficiencies and consistency throughout our facilities. We recognize that our compliance with applicable laws and regulations depends on
individual 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 our
business.
22
Our company-wide compliance program has been in place since 1997. Currently, the program’s elements include leadership, management and oversight
at the 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 address
the functional and operational aspects of our business. Included within these functional areas are materials and activities for business sub-units, including
laboratory, radiology, pharmacy, emergency, surgery, observation, home care, skilled nursing and clinics. Specific areas identified through regulatory
interpretation and enforcement activities have also been addressed in our program. Claims preparation and submission, including coding, billing and cost
reports, 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 of
policy and training, standardized documentation requirements and review and audit. Another focus of the program is the interpretation and implementation
of 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 the
statement of ethical responsibility expected of our employees and business associates who work in the accounting, financial reporting and asset
management areas of our Company. Our Code of Conduct is posted on our website at www.chs.net/company-overview/compliance.
Human Capital
Overview
At December 31, 2024, we had approximately 60,000 employees, including approximately 15,000 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
conditions relating to employment. At December 31, 2024, certain employees at three of our hospitals are represented by various labor unions. It is possible
that union organizing efforts will take place at additional hospitals in the future. We consider our employee relations to be good and have not experienced
work stoppages that have materially, adversely affected our business or results of operations.
Our industry has been facing unprecedented workforce challenges, which have given rise to significant operating issues for healthcare providers. To
address this challenge, we have implemented several initiatives to improve retention, recruiting, compensation programs and productivity. An area that has
been particularly challenging for providers is registered nurse, or RN, recruitment and retention. We had a centralized clinical recruiting function in place
for a limited number of our markets beginning in 2018 which was later expanded to cover RN roles across all of our health systems. Due to the resulting
positive impact on recruiting, we then expanded the function to also cover difficult-to-fill allied health positions. As of late 2024, this centralized team now
covers all health system roles and we have also established a centralized onboarding team to gain efficiencies and improve the new hire experience, which
we believe will result in improved retention. Since we have implemented our centralized recruiting function, we have seen an increase in clinical position
hires and a decreased time-to-fill for these key patient care roles, which has also decreased our level of reliance on higher cost contract labor. In addition to
these efforts, we have been working to bring international RNs to our hospitals through the visa process. We have significantly expanded this effort by
working with various outside firms specializing in international recruitment, and we are also offering a direct-to-hire model. We believe that these efforts
will aid in our ability to take patient transfer requests, shorten emergency department wait times and lessen dependency on high cost contract labor. Finally,
we have expanded our hospital-based nursing programs through our partnership with Jersey College and have seven campuses open in six states.
Partnerships with other local nursing programs have also been strengthened across the enterprise to expand clinical faculty and increase enrollment.
Due to the challenges noted above and other factors, our hospitals and other healthcare facilities, like many other healthcare providers, have
experienced increased labor costs. 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 expensive temporary or contract personnel. We also depend on the available labor pool of semi-skilled and unskilled employees
in each of the markets in which we operate. In some of our markets, employers across various industries have increased their wages for these roles, which
has created more competition for this sector of employees. As a result of these and other factors, our labor costs could continue to increase. The extent of
unionization may affect labor costs in the future. In addition, the states in which we operate could adopt mandatory nurse-staffing ratios or could revise
mandatory nurse-staffing ratios or related measures already in place. State-mandated nurse-staffing ratios or other measures to regulate staffing could
significantly affect labor costs and have an adverse impact on revenues if we are required to limit patient admissions in order to comply with such
requirements.
23
Our hospitals are staffed by licensed physicians, including both employed physicians and physicians who are not employees of our hospitals. Some
physicians provide services in our hospitals under contracts, which generally describe a term of service, provide and establish the duties and obligations of
such physicians, require the maintenance of certain performance criteria and fix compensation for such services. Any licensed physician may apply to be
accepted 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 with
established credentialing criteria, must approve acceptance to the staff. Members of the medical staffs of our hospitals often also serve on the medical staffs
of other hospitals and may terminate their affiliation with one of our hospitals at any time.
We believe that our employees are vital contributors to our success, and we devote significant resources to recruit, retain and develop our workforce.
Certain areas of focus in this regard are summarized below.
Workforce Diversity and Competency
We are committed to workforce diversity and competency, including recruiting and retaining a diverse population of employees with respect to their
experiences, education, socioeconomic status, race, color, ethnicity, religion, national origin, disability, culture, sexual orientation and gender identity or
expression that are reflective of the communities we serve.
Our workforce diversity and competency objectives include a focus on workforce diversity and health equity. For example, as we strive to deepen our
culture of inclusion, we endeavor to strengthen our individual and collective cultural competence through both formal training and development programs.
Our health equity work is rooted in a desire to provide care that does not vary in quality because of personal characteristics such as gender, ethnicity,
geographic location or socioeconomic status.
By fostering a culture of inclusion, we believe that we are able to retain the best and brightest talent by making all employees feel valued by members
of their respective team. As of December 31, 2024, approximately 80% of our employees were women and approximately 31% were people of color.
Training and Talent Development
The delivery of high quality patient care is predicated on proper education and continued training. We provide a wide range of development programs
and resources to support our employees, including temporary and contract personnel. In this regard, our talent development strategy is facilitated through
our Advanced Learning Center platform, or ALC, a web-based portal, which provides employees and contractors access to computer-based training courses
as well as instructor-led classes. Our ALC provides training in many areas, including clinical, compliance, information technology, employee development,
health information management, human resources, workplace safety and security, as well as hands-on resuscitation skills training. We offer continuing
education credits for many of these disciplines. We are committed to continue to offer a quality library of training courses, which, at present, consists of
approximately 13,600 courses published companywide, with a significant number of additional courses published at local facility levels.
The quality of our training is assured through a robust annual course review process. Each course is reviewed by the author or subject matter expert for
current accuracy of content, relevancy and utilization. Updates are made based on current standards as well as feedback from individuals who complete the
courses. Under the direction of our senior leadership, some courses are assigned to learners based on their role in our organization. The vast majority of the
library is available for self-enrollment by our employees at no additional cost to the learner.
We also provide a wide range of other development programs and resources as part of our Pathways benefit offering. Pathways includes an expanded
tuition reimbursement program for all staff looking to further their education in any discipline offered by our health systems, a student loan repayment
program for numerous key clinical roles and reimbursement for licenses and certifications that are required for each individual role. We operate nursing
school programs on some of our hospital campuses and partner with nursing schools in many of our communities, as a way to provide educational
pathways to those desiring to become professional nurses; an executive development program, which identifies and develops qualified personnel for
leadership-level positions at our healthcare facilities; our Community Leadership Excellence and Development Series, or LEADS, which is a proprietary
training program for directors, managers and supervisors at our hospitals and corporate offices; and residency training programs.
Employee Safety
The safety of our employees is of the utmost importance and is key to the continuous delivery of high quality patient care. We strive to protect our
employees through continued communication, data analysis, equipment evaluation and education. Leadership methods, which employ a “safety-first”
mindset, are practiced in our hospitals, including in safety huddles performed regularly by personnel at our hospitals. Each huddle consists of a three-part
agenda: (1) a look back at any significant safety or quality issues in the
24
past 24 hours, (2) a look ahead to any anticipated safety or quality issues in the next 24 hours, and (3) a follow-up on safety critical issues requiring a rapid
response.
Environmental Matters
We are subject to a number of federal, state and local environmental laws, rules and regulations that govern, among other things, our disposal of
medical waste, as well as our use, storage, transportation and disposal of hazardous and toxic materials. In addition, we could be affected by climate change
to the extent that climate change results in severe weather conditions or other disruptions impacting the communities in which our facilities are located or
adversely impacts general economic conditions, including in communities in which our facilities are located. Moreover, legal requirements regulating
greenhouse gas emissions and energy inputs or otherwise associated with the transition to a lower carbon economy may increase in the future, which could
increase our costs associated with compliance and otherwise disrupt and adversely affect our operations.
At the current time, our compliance with environmental legal requirements, including legal requirements relating to climate change, does not have a
material effect on our capital expenditures, financial results or operations. However, it is possible that future environmental-related developments may
impact us, including as a result of climate change and/or new legal requirements associated with the transition to a lower carbon economy, in a manner that
we are currently unable to predict.
We recognize the environment is an exhaustible resource and the importance of using the environment and its resources responsibly. We have taken
actions with respect to various sustainability matters with a focus on the reduction of our carbon footprint, water and energy usage and material waste. For
additional information about our ongoing environmental sustainability actions and practices, refer to our most recent Sustainability Report, which is
available in the Company Overview-Sustainability section of our website. Notwithstanding the foregoing, the information on our website, including our
most recent Environmental Sustainability Report, is not incorporated by reference into this Form 10-K.
Professional Liability Claims
As 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
the operations of hospitals, we maintain professional liability insurance and general liability insurance on a claims-made basis in excess of those amounts
for which we are self-insured, in amounts we believe to be sufficient for our operations. We also maintain umbrella liability coverage for claims, which,
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 or may
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, see our
discussion of professional liability claims in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Part II, Item 7
of this Form 10-K.
25
Item 1A. Risk Factors
Our 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 of
operations or financial condition could be materially and adversely affected, and our actual results may differ materially from those predicted in any
forward-looking statements we make in any public disclosures. The considerations and risks that follow are organized within relevant headings but may be
relevant to other headings as well. Additional factors that could affect our business, results of operations and financial condition are discussed elsewhere
in this Report (including in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Part II, Item 7 of this Form 10-
K). Moreover, risks or uncertainties not presently known to us, or that we currently deem immaterial, also may adversely affect our business, results of
operations and financial condition.
Summary of Risk Factors
The following is a summary of the risk factors set forth below.
Risks Related to Our Indebtedness
•
Our indebtedness could adversely affect our ability to meet obligations under existing indebtedness or raise additional capital.
•
We may be able to incur substantially more debt.
•
We may not be able to generate sufficient cash to service all of our indebtedness.
•
We have a substantial amount of indebtedness with certain series of our outstanding notes and other debt scheduled to mature in close proximity to
each other.
•
Restrictive covenants in the agreements governing our indebtedness may adversely affect us.
•
Higher interest rates could adversely impact us.
•
If we are unable to make payments on our indebtedness, we could be in default under the terms of our indebtedness agreements.
Risks Related to Economic Conditions
•
Our financial results have been, and may continue to be, adversely impacted by challenging macroeconomic conditions.
Risks Related to Our Business
•
If we are unable to complete divestitures as advisable, our performance could be adversely affected.
•
The impact of past acquisitions, as well as potential future acquisitions, could have a negative effect on our operations.
•
If we are unable to effectively compete, patients could use other hospitals and healthcare providers.
•
We may be adversely affected by consolidation among health insurers and other industry participants.
•
The failure to obtain our medical supplies at favorable prices could cause our operating results to decline.
•
Our revenues may decline if reimbursement rates are reduced or if we do not maintain favorable contract terms with payors.
•
Growth in self-pay volume or deterioration in collectability could adversely affect our financial performance.
•
Some of the non-urban communities in which we operate face challenging economic conditions.
•
The demand for our services can be impacted by factors beyond our control.
•
The emergence and effects related to a future pandemic, epidemic, outbreak of an infectious disease or other public health crisis could adversely
impact our business and operations.
•
The industry trend towards value-based purchasing may negatively impact our business.
•
Our revenues are somewhat concentrated in a relatively small number of states.
•
If the redesign and consolidation of key business functions, including through implementation of a core ERP system, does not achieve targeted
outcomes, our business and financial results may be adversely impacted.
Risks Related to Human Capital
•
Our performance depends on our ability to recruit and retain quality physicians.
26
•
Our labor costs have been, and may continue to be, adversely affected by competitive labor market conditions and the shortage of qualified nurses
and other healthcare personnel.
•
We may be unable to attract, hire and retain a highly qualified and diverse workforce, including key management.
•
We may be adversely impacted by the inability of third parties with whom we contract to provide hospital-based physicians as the result of industry-
wide disruptions in the market for outsourced medical specialists.
Risks Related to Legal Proceedings
•
We are the subject of various legal, regulatory and governmental proceedings.
•
We could be subject to substantial uninsured liabilities or increased insurance costs as a result of significant legal actions.
Risks Related to Government Regulation
•
Our business may be adversely impacted by changes and uncertainty in the healthcare industry.
•
If we fail to comply with extensive laws and regulations, we could suffer penalties or be required to make changes to our operations.
•
Any failure to comply with legal requirements governing the privacy and security of health information could adversely affect us.
•
Healthcare technology initiatives, particularly those related to sharing patient data and interoperability, may adversely affect our operations.
•
State efforts to regulate the construction, acquisition or expansion of healthcare facilities could adversely impact us.
•
We may incur additional tax liabilities.
Risks Related to Impairment
•
If the fair value of our reporting unit declines, a material non-cash charge to earnings from impairment of our goodwill could result.
•
A significant decline in operating results at one or more of our facilities could result in an impairment in the fair value of our long-lived assets.
Risks Related to Cybersecurity and Technology
•
Our operations could be significantly impacted by interruptions or restrictions in access to our information systems.
•
A cyber-attack or security breach could harm our business and patients and expose us to liability.
•
If we fail to comply with technology agreements, we may be required to pay damages and could lose license rights.
For a more complete discussion of these risk factors, see below.
Risks Related to Our Indebtedness
Our level of indebtedness could adversely affect our ability to refinance existing indebtedness or raise additional capital to fund our operations, limit
our ability 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’s
Discussion and Analysis of Financial Condition and Results of Operations” in Part II, Item 7 of this Form 10-K and Note 6 of the Notes to Consolidated
Financial Statements included under Part II, Item 8 of this Form 10-K. The maximum aggregate principal amount under the ABL Facility is $1.0 billion,
subject to borrowing base capacity. At December 31, 2024, we had outstanding borrowings of $341 million and approximately $491 million of additional
borrowing capacity (after taking into consideration $66 million of outstanding letters of credit) under the ABL Facility.
27
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 not be
available for other purposes, including to fund our operations, capital expenditures, financial obligations and future business opportunities;
•
some of our borrowings, including any borrowings under the ABL Facility, accrue interest at variable rates, exposing us to the risk of increased
interest rates, which risk is heightened by the current high interest rate environment;
•
it may limit our ability to make strategic acquisitions or cause us to make non-strategic divestitures;
•
it may limit our ability to adjust to changing market conditions and place us at a competitive disadvantage compared to our competitors that are less
highly leveraged; and
•
it may increase our vulnerability in connection with adverse changes in general economic, industry or competitive conditions, or government
regulations or other adverse developments.
Despite current indebtedness levels, we may still be able to incur substantially more debt. This could further exacerbate the risks described in this
section.
We and our subsidiaries have the ability to incur substantial additional indebtedness in the future, subject to restrictions contained in the ABL Facility
and the indentures governing our outstanding notes. The maximum aggregate principal amount under the ABL Facility is $1.0 billion, subject to borrowing
base capacity. At December 31, 2024, we had outstanding borrowings of $341 million and approximately $491 million of additional borrowing capacity
(after taking into consideration $66 million of outstanding letters of credit) under the ABL Facility. The aggregate amount we may draw under the ABL
Facility may not exceed the “borrowing base” (as calculated thereunder) less outstanding letters of credit thereunder, which fluctuates from time to time.
Aside from the ABL Facility, our ability to incur other additional secured debt (other than secured debt used to refinance existing secured debt) is highly
limited by certain of the indentures governing our outstanding notes. If additional indebtedness is added to our current debt levels, the related risks that we
currently face related to indebtedness as noted in this section could increase.
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 obligations
under 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 to
prevailing economic and competitive conditions and to financial, business, regulatory and other factors beyond our control. We cannot assure you that we
will 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, the borrower under the ABL Facility and issuer of our outstanding notes is a holding company with no direct operations. Its principal assets
are the equity interests we hold in our operating subsidiaries. As a result, we are dependent upon dividends and other payments from our subsidiaries to
generate the funds necessary to meet our outstanding debt service and other obligations. Our subsidiaries may not generate sufficient cash from operations
to enable us to make principal and interest payments on our indebtedness. In addition, any payments of dividends, distributions, loans or advances to us by
our subsidiaries could be subject to legal and contractual restrictions.
Our subsidiaries are permitted under the terms of our indebtedness to incur additional indebtedness that may restrict payments from those subsidiaries
to us. The agreements governing the current and future indebtedness of our subsidiaries may not permit those subsidiaries to provide us with sufficient cash
to fund payments on our indebtedness when due. Our non-guarantor subsidiaries are separate and distinct legal entities, and they have no obligation,
contingent or otherwise, to pay amounts due under the terms of our indebtedness or to make any funds available to pay those amounts, whether by
dividend, distribution, loan or other payment. If our cash flows and capital resources are insufficient to fund our debt service obligations, we could face
substantial liquidity problems and may be forced to reduce or delay capital expenditures, sell assets or operations, seek additional capital or restructure or
refinance our indebtedness. Our ability to refinance our indebtedness on favorable terms, or at all, is directly affected by the then current macroeconomic
conditions, financial and capital market conditions as well as the then current interest rate environment. In addition, our ability to incur additional secured
indebtedness (which would generally enable us to achieve better pricing than the incurrence of unsecured indebtedness) depends in part on the value 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 other factors. We
may find it necessary or prudent to refinance certain of our outstanding indebtedness, the terms of which may not be favorable to us.
28
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
debt service obligations or that these actions would be permitted under the terms of our existing or future debt agreements, including the ABL Facility and
the indentures governing our outstanding notes. For example, the ABL Facility and the indentures governing our outstanding notes restrict our ability to
dispose of certain assets and use the proceeds from any dispositions. We may not be able to consummate those dispositions and any proceeds we receive
may not be adequate to meet any debt service obligations then due.
We have a substantial amount of indebtedness under certain series of our outstanding notes and other debt scheduled to mature in close proximity to
each other.
As further described in the Liquidity and Capital Resources section of “Management’s Discussion and Analysis of Financial Condition and Results of
Operations” in Part II, Item 7 of this Form 10-K and Note 6 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 under certain series of our outstanding notes and other debt scheduled to mature in close proximity to
each other. 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 the ability to borrow or otherwise raise the amounts necessary to repay all such amounts, and the prior maturity of such other substantial indebtedness
may make it difficult to refinance the notes or repay them at maturity. Our ability to refinance our indebtedness on favorable terms, or at all, is dependent
on (among other things) conditions in the credit and capital markets, which are beyond our control.
Restrictive covenants in the agreements governing our indebtedness may adversely affect us.
The ABL Facility and the indentures governing our outstanding notes contain various covenants that limit our ability to take certain actions, including
our 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, the ABL Facility contains restrictive covenants and may, in certain circumstances, require us to maintain a specified financial ratio and
satisfy other financial condition tests. Our ability to meet these restrictive covenants and financial ratio and tests (if applicable) may be affected by events
beyond our control, and we cannot assure you that we will meet those tests.
In addition, our ability to incur additional secured debt (other than (i) secured debt to refinance existing secured debt and (ii) indebtedness incurred
under our ABL Facility) is highly limited.
A breach of any of these covenants could result in a default under the ABL Facility and the indentures governing our outstanding notes. Upon the
occurrence of an event of default under the ABL Facility or any of the indentures governing our outstanding notes, all amounts outstanding under the
applicable indebtedness may become immediately due and payable and all commitments under the ABL Facility to extend further credit may be terminated.
If we were unable to repay those amounts, the holders of such indebtedness could, subject to applicable intercreditor agreements, proceed against the
collateral granted to them to secure that indebtedness. If holders of any of our indebtedness accelerate the maturity date of any of our indebtedness, we
cannot assure you that we will have sufficient assets to repay the indebtedness that has been accelerated (and all other indebtedness that is also accelerated
by virtue of applicable cross-acceleration provisions in the agreements governing our indebtedness).
29
Higher interest rates could increase the cost of refinancing our indebtedness and could cause our debt service obligations to increase significantly.
The current high interest rate environment has adversely impacted us, and could continue to adversely impact us. If interest rates remain at their current
elevated levels or increase, this could adversely impact our ability to refinance existing indebtedness or obtain additional debt financing on acceptable
terms or at all, and otherwise could increase our debt service obligations in connection with future debt refinancings. In addition, any borrowings under the
ABL Facility are at variable rates of interest and expose us to interest rate risk. If interest rates increase, our debt service obligations on such variable rate
indebtedness would increase even though the amount borrowed remained the same, and our net income would decrease. As of December 31, 2024, we had
outstanding borrowings of $341 million under the ABL Facility.
If we default on our obligations to pay our indebtedness, or if we otherwise fail to comply with the various covenants in the instruments governing 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, if
any, and interest on our indebtedness, or if we otherwise fail to comply with the various covenants, including financial and operating covenants, in the
instruments governing our indebtedness, including covenants in the ABL Facility and the indentures governing our outstanding notes, we could be in
default under the terms of the agreements governing such indebtedness. In the event of any default, the holders of such indebtedness could elect to declare
all the funds borrowed to be immediately due and payable, together with accrued and unpaid interest; the lenders under the ABL Facility could elect to
terminate their commitments thereunder, cease making further loans and direct the applicable collateral agents to institute foreclosure proceedings against
our 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
the required lenders under the ABL Facility to avoid being in default. If we breach our covenants under the ABL Facility and seek a waiver, we may not be
able to obtain a waiver from the required lenders. If this occurs, we would be in default under the ABL Facility, the lenders could exercise their rights, as
described above, and we could be forced into bankruptcy or liquidation.
Risks Related to Economic Conditions
Our financial results have been, and may continue to be, adversely impacted by challenging macroeconomic conditions.
Economic conditions in the United States continue to be challenging in certain respects, and the United States economy has experienced significant
inflationary pressures in recent periods, elevated interest rates, challenging labor market conditions, and uncertainty and possible adverse effects associated
with current geopolitical instability. Taking into account these factors, we have incurred in certain recent periods, and may continue to incur, increased
expenses arising from factors such as wage inflation for permanent employees, increased rates for and utilization of temporary contract labor (including
contract nursing personnel) and increased rates for outsourced medical specialists. Moreover, if economic conditions in the United States significantly
deteriorate, any such developments could materially and adversely affect our results of operations, financial position, and/or our cash flows.
Other risks we face during periods of economic weakness include potential declines in the population covered by commercial insurance, increased
patient decisions to postpone or cancel elective and non-emergency healthcare procedures (including delaying surgical procedures), which may lead to
poorer health and higher acuity interventions, potential increases in the uninsured and underinsured populations, increased adoption of health plan
structures that shift financial responsibility to patients, and increased difficulties in collecting patient receivables for copayment and deductible receivables.
In addition, challenging macroeconomic conditions in the United States (including elevated interest rates) have had, and may continue to have, an adverse
impact on capital market conditions, which could limit our ability to refinance existing indebtedness or obtain additional debt or equity financing on
acceptable terms or at all. Challenging macroeconomic conditions in the United States have also resulted in, and may continue to result in, increased budget
deficits at federal, state and local governmental levels, which may negatively impact spending for health and human services programs, including
Medicare, Medicaid and similar programs that represent significant third-party payor sources for our healthcare facilities. Moreover, it is difficult to predict
whether, when, or what additional deficit reduction initiatives may be proposed by Congress, but future legislation may include additional Medicare
spending reductions, which may adversely affect our business and financial results. Further, there is ongoing uncertainty regarding the federal budget and
federal spending levels, including the possible impacts of a failure to increase the “debt ceiling.” Any U.S. government default on its debt could have broad
macroeconomic effects. In addition, any shutdown of the federal government, failure to enact annual appropriations, hold on congressionally authorized
spending or interruptions in the distribution of governmental funds could adversely affect our financial results.
30
Risks Related to Our Business
If we are unable to complete divestitures as we may deem advisable, our results of operations and financial condition could be adversely affected.
We have divested certain of our hospitals and non-hospital businesses in recent years, and may give consideration to divesting certain additional
hospitals and non-hospital businesses. For a description of recent divestitures, see “Acquisition, Divestiture and Closure Activity” under Part II, Item 7 of
this Form 10-K. Generally, these hospitals and non-hospital businesses are not in one of our strategically beneficial service areas, are less complementary
to our business strategy and/or have lower operating margins. In addition, we continue to receive interest from potential acquirers for certain of our
hospitals and non-hospital businesses. As such, we may sell additional hospitals and/or non-hospital businesses if we consider any such disposition to be in
our best interests. However, there is no assurance that potential divestitures will be completed or, if they are completed, the aggregate amount of proceeds
we will receive, that potential divestitures will be completed within our targeted timeframe, or that potential divestitures will be completed on terms
favorable to us. Moreover, the current challenging macroeconomic environment may make it more difficult for us to complete divestitures on acceptable
terms or at all. Additionally, the results of operations for these hospitals and non-hospital businesses that we may divest and the potential gains or losses on
the sales of those businesses may adversely affect our results of operations. We may also incur asset impairment charges related to potential 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 and governmental notices and approvals, which, if not satisfied or obtained, may prevent us from completing the
sale. Divestitures may also involve continued financial exposure related to the divested business, such as through indemnities or retained obligations, that
present risk to us.
Any future divestiture activities may present financial, managerial, and operational risks. Those risks include diversion of management attention from
improving existing operations; additional restructuring charges and the related impact from separating personnel, renegotiating contracts, and restructuring
financial and other systems; adverse effects on existing business relationships with patients and third-party payors; and the potential that the collectability
of any patient accounts receivable retained from any divested hospital may be adversely impacted. Any of these factors could adversely affect our financial
condition and results of operations.
The 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, and we may complete additional acquisitions in the future. However, not-for-
profit hospital systems and other for-profit hospital companies generally attempt to acquire the same type of hospitals as we may desire to acquire. Some of
the competitors for our acquisitions have greater financial resources than we have. Furthermore, some hospitals are sold through an auction process, which
may result 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 previously acquired have had lower operating margins than we do and operating losses incurred prior to the
time we acquired them. Hospitals or other businesses acquired in the future may have similar financial performance issues. In the past, we have
experienced difficulties and delays in improving the operating margins or effectively integrating the operations of certain acquired hospitals and other
businesses. In the future, if we are unable to improve the operating margins of acquired hospitals or other businesses, operate them profitably, or effectively
integrate their operations, our results of operations and business may be adversely affected.
Moreover, hospitals or other businesses that we have acquired, or in the future could acquire, may have unknown or contingent liabilities, including
liabilities associated with ongoing legal proceedings or for failure to comply with healthcare laws and regulations. Although we generally seek
indemnification from sellers covering these matters, we may nevertheless have material liabilities for past activities of acquired hospitals and other
businesses.
If we are unable to effectively compete, patients could use other hospitals and healthcare providers, and our business may be adversely impacted.
The healthcare industry is highly competitive among hospitals, other healthcare providers and other industry participants, for patients, affiliations with
physicians and other personnel and acquisitions. Generally, other hospitals and healthcare facilities, including specialized care providers such as outpatient
surgery, orthopedic, oncology and diagnostic centers, in our service areas provide services similar to those we offer. Many individuals are seeking a
broader range of services at outpatient facilities as a result of the growing availability of outpatient facilities, the increase in payor reimbursement policies
that restrict inpatient coverage and the increase in services that can be provided on an outpatient basis, among other factors. Changes in licensure or other
regulations, recognition of new provider types or payment models and industry consolidation could negatively impact our competitive position. For
example, in states with certificate of need or similar prior approval requirements, removal of these requirements could remove
31
barriers to entry and increase competition in our service areas. 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. Increasing consolidation within the payor industry, vertical integration efforts involving payors and healthcare providers and
cost-reduction strategies by payors, large employer groups and their affiliates may impact our ability to contract with payors on favorable terms and
participate in favorable payment tiers or provider networks and otherwise may affect our competitive position. Legislative and regulatory initiatives, such
as changes in Texas law that eliminated restrictions on tiered networks and steering patients to particular providers, may accelerate or otherwise impact
these trends.
The majority of our hospitals are located in generally larger non-urban service areas in which we believe we are the primary, if not the sole, provider of
general acute care health services. As a result, the most significant competition for providers of general acute care services are hospitals outside of our
primary service areas, typically hospitals in larger urban areas that provide more complex services. Patients in our primary service areas may travel to other
hospitals because of physician referrals, payor networks that exclude our providers or the need for services we do not offer, among other reasons. Patients
who receive services from these other hospitals may subsequently shift their preferences to those hospitals for the services we provide.
Our hospitals that are located in urban service areas may face competition from hospitals that are more established than our hospitals. Some of our
competitors offer services, including extensive medical research and medical education programs, which are not offered by our facilities. In addition, in
certain markets where we operate, there are large teaching hospitals that provide highly specialized facilities, equipment and services that may not be
available at our hospitals.
At December 31, 2024, 47 of our hospitals competed with one or more non-affiliated hospitals in their respective primary service areas. In most markets
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. These hospitals
are owned by tax-supported governmental agencies or not-for-profit entities supported by endowments and charitable contributions. These hospitals are
exempt from sales, property and income taxes. Such exemptions and support are not available to our hospitals and may provide the tax-supported or not-
for-profit entities an advantage in funding general and capital expenditures and offering services more specialized than those available at our hospitals. If
our competitors are better able to attract patients with these offerings, we may experience an overall decline in patient volume.
Trends toward transparency and value-based purchasing may have an impact on our competitive position, ability to obtain and maintain favorable
contract terms, and patient volumes in ways that are difficult to predict. CMS websites make available to the public certain data that hospitals and various
other types of Medicare-certified providers submit in connection with Medicare reimbursement claims, including performance data related to quality
measures and patient satisfaction surveys. If any of our hospitals or other provider types achieve poor results (or results that are lower than our competitors)
on the quality measures or on patient satisfaction surveys, we may attract fewer patients. Further, every hospital must establish and update annually a
public, online listing of the hospital’s standard charges for all items and services, including discounted cash prices and payor-specific charges, and must
also publish a consumer-friendly list of standard charges for certain “shoppable” services or maintain an online price estimator tool for the shoppable
services. HHS also requires health insurers to publish online charges negotiated with providers for healthcare services, and health insurers must provide
online price comparison tools to help individuals get personalized cost estimates for all covered items and services.
The No Surprises Act creates additional price transparency requirements that may impact our competitive position, including requiring providers to
send uninsured or self-pay patients and health plans of insured patients a good faith estimate of the expected charges and diagnostic codes prior to the
scheduled date of the service or item or upon request. Until HHS issues additional regulations, HHS is deferring enforcement of portions of the good faith
estimate requirements. It is unclear how price transparency requirements and similar initiatives will affect consumer behavior, our relationships with
payors, or our ability to set and negotiate prices, but our competitive position could be negatively affected if our standard charges are higher or are
perceived to be higher than the charges of our competitors.
We expect these competitive trends to continue. We pursue various strategies intended to ensure our hospitals and other facilities are competitive,
including by enhancing outpatient service offerings, offering competitive pricing to group purchasers of healthcare services, upgrading facilities and
equipment, exploring new and expanded services and programs and engaging quality physicians and other skilled clinical personnel. However, if we are
unable to compete effectively with other hospitals and other healthcare providers and patients seek healthcare services at providers other than our hospitals
and affiliated businesses, we could experience declines in patient volumes, which could adversely affect our business.
32
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 also
increasingly pursuing vertical integration or other alignment initiatives with healthcare providers. Consolidation within the health insurance industry may
result in insurers having increased negotiating leverage and competitive advantages, such as greater access to performance and pricing data. Our ability to
negotiate prices and favorable terms in our contracts with health insurers in certain markets could be affected negatively as a result of this consolidation.
We cannot predict whether we will be able to negotiate favorable terms with payors and otherwise respond effectively to the impact of increased
consolidation in the payor industry or vertical integration efforts.
We may also be affected by consolidation among other healthcare industry participants. For example, many providers are implementing physician
alignment strategies, such as employing physicians, acquiring physician practice groups and participating in ACOs or other clinical integration models.
Consolidation among other healthcare industry participants may intensify competitive pressure and affect the industry in ways that are difficult to predict.
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 extends through the end of December 2025, with
automatic renewal terms of one year, unless either party terminates by giving notice of non-renewal. GPOs attempt to obtain favorable pricing on medical
supplies with manufacturers and vendors, sometimes by negotiating exclusive supply arrangements in exchange for discounts. To the extent these exclusive
supply arrangements are challenged or deemed unenforceable, we could incur higher costs for our medical supplies obtained through HealthTrust. Further,
costs of supplies and drugs may continue to increase due to various factors, including market pressure from pharmaceutical companies, new product
releases, supply shortages and supply chain disruptions, including as a result of import taxes or trade restrictions. Also, there can be no assurance that our
arrangement with HealthTrust will provide the discounts we expect to achieve.
If reimbursement rates paid by federal or state healthcare programs or commercial payors are reduced, if we are unable to maintain favorable contract
terms with payors or comply with our payor contract obligations, if insured individuals move to insurance plans with greater coverage exclusions or
narrower networks or if insurance coverage is otherwise restricted or reduced, our net operating revenues may decline.
During the year ended December 31, 2024, 32.9% of our net operating revenues came from the Medicare and Medicaid programs. However, as
healthcare expenditures continue to increase, federal and state governments have made, and may continue to make, significant changes in the Medicare and
Medicaid programs. These changes may include reductions in reimbursement levels, funding restrictions, limitations on scope of coverage or patient
eligibility, changes affecting utilization review and new or modified Medicaid waiver programs. Some of these changes have decreased, or could decrease,
the amount of money we receive for our services relating to the Medicare and Medicaid programs. For example, as a result of sequestration measures that
extend through the first eight months of federal fiscal year 2032, Medicare payments are automatically reduced by 2% per fiscal year. It is difficult to
predict whether, when or what other deficit reduction initiatives may be proposed by Congress, but we anticipate that efforts to address the federal budget
deficit will continue to place pressures on government healthcare programs. In addition, from time to time, CMS revises the reimbursement systems used to
reimburse healthcare providers, including changes to the inpatient hospital MS-DRG system and other payment systems, which may result in reduced
Medicare payments. Our business may also be adversely affected by delays or issues implementing reimbursement-related rules and interruptions in the
distribution of governmental funds. Changes to government healthcare programs that reduce Medicare reimbursement may also negatively impact
payments from commercial payors, since, in some cases, commercial payors rely on all or portions of Medicare payment systems to determine commercial
payment rates.
In addition, government and commercial payors as well as other third parties from whom we receive payment for our services attempt to control
healthcare costs by, for example, requiring hospitals and other providers to discount payments for their services in exchange for exclusive or preferred
participation in their benefit plans, reducing coverage of inpatient and emergency room services and shifting care to outpatient settings, implementing site-
neutral payment policies to align payment for services across care settings, using utilization review tools including prior authorizations and implementing
alternative payment models. We are increasingly involved in disputes with payors, as cost control efforts have resulted in an increase in reimbursement
denials and delays by governmental and commercial payors, which may increase operational and administrative costs and decrease the reimbursement we
receive. Efforts to impose more stringent cost controls are expected to continue and may be enhanced by the increasing consolidation of insurance and
managed care companies, vertical integration of health insurers with healthcare providers and regulatory changes. These efforts may reduce our revenues
and adversely affect our business and financial condition.
Our ability to maintain and obtain favorable contracts with commercial payors significantly affects the revenues and operating results of our facilities.
During the year ended December 31, 2024, 65.8% of our net operating revenues came from commercial payors. Commercial payors typically reimburse
healthcare providers at a higher rate than Medicare, Medicaid, other government
33
healthcare programs or self-pay patients. Commercial payors continue to demand discounted fee structures, and the trend toward consolidation among
private third-party payors tends to increase payor bargaining power. Payors may utilize plan structures such as narrow networks and tiered networks, and
other healthcare providers may negotiate exclusivity provisions or otherwise impact our ability to contract with third-party payors. Price and clinical
transparency initiatives and increasing vertical integration efforts involving third-party payers and healthcare providers may also impact our ability to
obtain or maintain favorable contract terms. For example, hospitals are required to publish online payor-specific negotiated charges and de-identified
minimum and maximum charges. In addition, alignment efforts between third-party payers and healthcare providers and the requirements of the No
Surprises Act provide payers with increased access to performance and pricing data, which may increase payer bargaining power.
Enrollment of individuals in high-deductible health plans, sometimes referred to as consumer-directed plans, has increased over the last decade. In
comparison to traditional health plans, these plans tend to have lower reimbursement rates for providers along with higher co-pays and deductibles due
from the patient, which subjects us to increased collection cost and risk of write-offs of uncollectible amounts. Further, high-deductible health plans may
exclude our hospitals and employed physicians from coverage.
Limitations on balance billing may reduce the amount that hospitals and other providers are able to collect for out-of-network services. For example, the
No Surprises Act prohibits providers from charging patients an amount beyond the in-network cost sharing amount for services rendered by out-of-network
providers, subject to limited exceptions. For services for which balance billing is prohibited (even when no balance billing occurs), the No Surprises Act
includes provisions that may limit the amounts received by out-of-network providers by health plans, and also establishes an independent dispute resolution
process for providers and payors to handle payment disputes that cannot be resolved through direct negotiation. The regulations and related guidance
implementing the No Surprises Act, including those establishing the dispute resolution process, are the subject of legal challenges and, potentially,
regulatory changes.
If we are unable to negotiate increased reimbursement rates, maintain existing rates or other favorable contract terms, effectively respond to payor cost
controls and reimbursement policies or comply with the terms of our payor contracts, the payments we receive for our services may be reduced, which may
cause our net operating revenues to decline and could adversely affect our business.
If we experience continued growth in self-pay volume and revenues or if we experience deterioration in the collectability of patient responsibility
accounts, our financial 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
all of the outstanding balance, with the remaining outstanding balance (generally deductibles and co-payments) owed by the patient. Collections are
impacted by the economic ability of patients to pay and the effectiveness of our collection efforts. Significant changes in payor mix, business office
operations, economic conditions or trends in federal and state governmental healthcare coverage may affect our collection of accounts receivable and are
considered in our estimates of accounts receivable collectability.
In recent years, federal and state legislatures have considered or passed various proposals impacting or potentially impacting the size of the uninsured
population. The number and identity of states that choose to expand or otherwise modify Medicaid programs and the terms of expansion and other program
modifications continue to evolve. Further, under early COVID-related legislation, states that maintained continuous Medicaid enrollment, among other
requirements, were eligible for a temporary increase in federal funds for state Medicaid expenditures. The resumption of Medicaid eligibility
redeterminations following the expiration of this continuous coverage requirement in 2023 has resulted in significant Medicaid coverage disruptions and
dis-enrollments of Medicaid enrollees, and overall Medicaid enrollment declined in 2024 in comparison to 2023. Medicaid enrollment may also be affected
by potential changes to the federal funding formula for Medicaid. For example, some states have trigger laws that would end their Medicaid expansion or
require other changes if federal funding for expansion populations is reduced. In addition, COVID-19 relief legislation temporarily increased the value of
premium tax credit subsidies for subsidy-eligible individuals purchasing health insurance coverage through the federal and state-run marketplaces and
expanded eligibility for the tax credit subsidies to more individuals. Subsequent legislation extended these enhanced subsidies through 2025, but further
extension is uncertain. Some states impose financial penalties on individuals who fail to maintain health insurance mandates or offer public health
insurance options. These variables, among others, make it difficult to predict the number of uninsured individuals and what percentage of our total revenue
will be comprised of self-pay revenues.
We may be adversely affected by the growth in patient responsibility accounts as a result of the adoption of plan structures, including health savings
accounts, narrow networks and tiered networks, that shift greater responsibility for care to individuals through greater exclusions and copayment and
deductible 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
charges for out-of-network services. For example, the No Surprises Act requires providers to send uninsured and self-pay patients a good faith estimate of
expected charges for items and services. The estimate must be provided in advance of the scheduled date for the item or service or upon request and cover
items and
34
services that are reasonably expected to be provided together with the primary item or services, including those that may be provided by other providers. If
the uninsured or self-pay patient receives a bill that is substantially greater than the expected charges in the good faith estimate or the provider furnishes an
item or service that was not included in the good faith estimate, they may initiate a patient-provider dispute resolution process established by regulation. In
addition, a deterioration of economic conditions in the United States could potentially lead to higher levels of uninsured patients, result in higher levels of
patients covered by lower paying government programs, result in fiscal uncertainties for both government payors and private insurers and/or limit the
economic ability of patients to make payments for which they are responsible. If we experience continued growth in self-pay volume or deterioration in
collectability of patient responsibility accounts, our financial condition or results of operations could be adversely affected.
Some of the non-urban communities in which we operate face challenging economic conditions, and the failure of certain employers, or the closure of
certain manufacturing and other facilities in our markets, could have a disproportionate impact on our hospitals.
Some of the non-urban communities in which we operate have been facing particularly challenging economic conditions, which in certain instances
predate, and/or are broader than or disproportionately exacerbated by, the current challenging macroeconomic conditions impacting the United States
economy. In addition, the economies in the non-urban communities in which our hospitals primarily operate are often dependent on a small number of
large employers, especially manufacturing or similar facilities. These employers often provide income and health insurance for a disproportionately large
number of community residents who may depend on our hospitals for care. The failure of one or more large employers, or the closure or substantial
reduction in the number of individuals employed at manufacturing or other facilities located in or near many of the non-urban communities in which our
hospitals primarily operate, could cause affected employees to move elsewhere for employment or lose insurance coverage that was otherwise available to
them. When patients are experiencing personal financial difficulties or have concerns about general economic conditions, they may delay or forgo elective
procedures, choose to seek care in emergency rooms and purchase high-deductible insurance plans or no insurance at all, which increases a hospital’s
dependence on self-pay revenue and may adversely affect our results of operations.
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 volume, case-mix and acuity trends may be impacted by factors beyond our control. For example,
seasonal fluctuations in the severity of influenza and other critical illnesses, such as COVID-19, unplanned shutdowns or unavailability of our facilities due
to weather or other unforeseen events, decreases in trends in high-acuity service offerings, changes in competition from other service providers, turnover in
physicians affiliated with our hospitals, governmental restrictions on the provision of medical care and changes in medical practices, treatment regimens
and medical technology can have an impact on the demand for services at our hospitals and affiliated providers.
In addition, trends in physician treatment protocols and health plan design, such as health plans that shift greater financial responsibility to patients,
could result in shifts to lower intensity and lower cost treatment methodologies or in patients seeking care from other providers. Our inpatient admissions
may decline if various inpatient hospital procedures become eligible for reimbursement when performed in outpatient settings, and we may also be
impacted by expansion of in-home acute care models. In addition, certain of our facilities are located in hurricane-prone coastal regions in Florida and other
states, and our operations from time to time have been adversely impacted by, and may continue to be adversely impacted by, severe weather conditions,
such as hurricanes, tornadoes, floods, and winter storms. For example, certain of our facilities in Florida, Georgia and Tennessee experienced an
interruption in their business and incurred additional costs as a direct result of Hurricane Helene, which made landfall in late September 2024 and
Hurricane Milton, which made landfall in early October 2024. Further, our hospital in Punta Gorda, Florida, which is contemplated to be sold pursuant to
an asset purchase agreement entered into by us in November 2024, has indefinitely suspended inpatient operations due to the effects of Hurricanes Helene
and Milton. Adverse weather conditions may be more frequent and/or severe as the result of climate change. Moreover, we could be affected by climate
change and other environmental issues to the extent such issues adversely affect the general economy or specific markets, adversely impact our supply
chain or increase the costs of supplies needed for our operations or otherwise result in disruptions impacting the communities in which our facilities are
located. In addition, legal requirements regulating greenhouse gas emissions and energy inputs or otherwise associated with the transition to a lower carbon
economy may increase in the future, which could increase our costs associated with compliance and otherwise disrupt and adversely affect our operations.
The impact of these or other factors beyond our control could have an adverse effect on our business, financial position and results of operations.
35
The emergence and effects related to a future pandemic, epidemic, outbreak of an infectious disease or other public health crisis could adversely
impact our business and operations.
As a provider of healthcare services, we are subject to the health, economic and other effects of public health conditions, and were significantly
impacted by the public health and economic effects of the COVID-19 pandemic. If a future pandemic, epidemic, outbreak of an infectious disease or other
public health crisis were to occur in a market in which we operate or otherwise affects our markets, our business and operations could be adversely
affected. Any such crisis could diminish the public trust in healthcare facilities, especially hospitals that fail to accurately or timely diagnose, or that are
treating (or have treated) patients affected by, contagious diseases. If any of our facilities are involved, or perceived as being involved, in treating patients
for such a contagious disease, other patients might cancel elective procedures or fail to seek needed care at our facilities. Patient volumes may decline or
volumes of uninsured and underinsured patients may increase, depending on the economic circumstances surrounding the pandemic, epidemic, or outbreak.
Further, a pandemic, epidemic, or outbreak might adversely impact our business by causing a temporary shutdown or diversion of patients, by causing
disruption or delays in supply chains for materials and products or by causing staffing shortages in our facilities. Although we have contingency plans in
place, including infection control and disaster plans, the potential impact of, as well as the public’s and government’s response to, any such future
pandemic, epidemic or outbreak of an infectious disease with respect to our markets or our facilities is difficult to predict and could adversely impact our
business and operations.
The industry trend towards value-based purchasing may negatively impact our business.
There is a trend toward value-based purchasing of healthcare services across the healthcare industry among both government and commercial payors.
Generally, value-based purchasing initiatives tie payment to the quality and efficiency of care. For example, hospital payments may be negatively impacted
by the occurrence of HACs. Medicare does not reimburse for care related to HACs, by disallowing the hospital to be assigned a higher paying MS-DRG if
certain HACs were not present on admission and the identified HAC is the only condition resulting in the assignment of the higher paying MS-DRG.
Hospitals in the bottom quartile of HAC rates receive a 1% reduction in their total Medicare payments the following year. In addition, federal funds may
not be used under the Medicaid program to reimburse providers for services provided to treat HACs. Hospitals that experience excess readmissions for
designated conditions receive reduced payments for all inpatient discharges in the fiscal year. HHS also reduces Medicare inpatient hospital payments for
all discharges by a required percentage and pools the amount collected from these reductions to fund payments to reward hospitals that meet or exceed
certain quality performance standards. Further, Medicare requires hospitals and other providers to report certain quality data to receive full reimbursement
updates.
HHS continues to focus on tying Medicare payments to quality or value through alternative payment models, which generally aim to make providers
more attentive to the quality and cost of care they deliver to patients. Examples of alternative payment models include ACOs and bundled payment
arrangements. An ACO is a care coordination model intended to produce savings as a result of improved quality and operational efficiency. By 2030, the
CMS Innovation Center aims to have all fee-for-service Medicare beneficiaries and the vast majority of Medicaid beneficiaries in an accountable care
relationship with providers who are responsible for quality and total medical costs. In bundled payment models, providers accept accountability for costs
and quality of care by receiving one payment for services provided to patients for certain medical conditions or episodes of care. Providers may receive
supplemental Medicare payments or owe repayments to CMS depending on whether spending exceeds or falls below a specified spending target and
whether certain quality standards are met. Generally, participation in Medicare bundled payment programs is voluntary, but CMS required hospitals in
selected markets to participate in a bundled payment initiative for specific orthopedic procedures, which ended December 31, 2024. Hospitals in selected
markets will be required to participate in a new model focused on five specified surgical procedure episodes beginning in January 2026. CMS has signaled
its intent to streamline its payment models and to increase provider participation through implementation of more mandatory models.
There are also several state-driven value-based care initiatives. For example, some states have aligned quality metrics across payors through legislation
or regulation. CMS has signaled its intent to support value-based initiatives in the Medicaid context. For example, a final rule issued in May 2024 reduces
state burdens for implementing some SDP arrangements, with the intent of helping states use these arrangements to implement value-based initiatives.
Commercial payors are transitioning toward value-based reimbursement arrangements as well. For example, many commercial payors require hospitals to
report quality data and restrict reimbursement for certain preventable adverse events.
We expect value-based purchasing programs, including programs that condition reimbursement on patient outcome measures, to become more common
and to involve a higher percentage of reimbursement amounts. It is unclear whether these and other alternative payment models will successfully
coordinate care and reduce costs and 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 the outcomes demonstrated by our competitors, are unable to meet or exceed the quality performance standards under any
applicable value-based purchasing program or otherwise fail to effectively provide or coordinate the efficient delivery of quality healthcare services, our
reputation in the industry
36
may be negatively 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 relatively small number of states, which makes us particularly sensitive to regulatory and economic
changes in those states.
Our revenues are particularly sensitive to regulatory and economic changes in states in which we generate a significant portion of our revenues,
including Indiana, Alabama, Texas and Florida. Accordingly, any change in the current demographic, economic, competitive, or regulatory conditions in
these states could have an adverse effect on our business, financial condition, or results of operations. In particular, changes to Medicaid and other payment
programs in these states, including modifications, expiration or termination of Medicaid waiver programs or supplemental payment programs, could also
have an adverse effect on our business, financial condition, results of operations, or cash flows. For example, a Medicaid waiver in Texas provides the
federal authority for operations of most of the state’s Medicaid managed care programs and provides funding for uncompensated care. Although CMS has
approved the Texas waiver program through 2030, various payment programs operated under the waiver, such as SDP programs, have more limited
approval periods. If SDP programs or similar programs in which we participate are modified or not extended or CMS does not continue to approve these
programs, our revenues could be negatively impacted.
If the redesign and consolidation of key business functions, including through the implementation of an ERP, does not achieve targeted outcomes, our
business and financial results may be adversely impacted.
The transformative process of redesigning numerous workflows and modernizing and consolidating our technology platforms and associated processes
across our organization, which began with implementation of a new ERP starting in the fourth quarter of 2023, was substantially completed by the end of
2024. As part of this process, we created shared business operations to carry out certain financial and operational functions, and completed the phased
implementation of supply chain, finance, workforce management and human capital modules of the new ERP. The redesign of various business processes
and implementation of this ERP and other aspects of this transformative process required an investment of significant personnel and financial resources,
including substantial expenditures for third-party consultants and system hardware and software. Consolidation of key business functions and the redesign
of various ERP-enabled processes are expected to enhance the efficiency of our operations and yield cost savings in future periods. However, if our efforts
to optimize newly established processes are not successful, such processes do not function as intended, or targeted cost savings are not achieved, our
financial position, results of operations and cash flows may be adversely affected.
Risks Related to Human Capital
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, our
ability to employ quality physicians, the admitting and utilization practices of employed and independent physicians, maintaining good relations with those
physicians and controlling costs related to the employment of physicians. Although we employ some physicians, physicians are often not employees at our
healthcare facilities at which they practice. In many of the markets we serve, many physicians have admitting privileges at other healthcare facilities in
addition to our healthcare facilities. Such physicians may terminate their affiliation with or employment by our healthcare facilities at any time. Moreover,
we are facing increased competition from health insurers and private equity-backed companies seeking to acquire or affiliate with physicians or physician
practices.
We may face increased challenges recruiting and retaining quality physicians as the physician population reaches retirement age, if there is a shortage of
physicians willing and able to provide comparable services. In some markets, physician recruitment and retention may be affected by a shortage of
physicians in certain specialties, difficulties in obtaining professional liability insurance and state law restrictions on the provision of medical care,
including reproductive health services. The types, amount and duration of compensation and assistance we can provide when recruiting physicians are
limited by the federal Physician Self-Referral Law (commonly known as the Stark Law), the federal Anti-Kickback Statute and similar state restrictions. If
we are unable to provide adequate support personnel or technologically advanced equipment and facilities that meet the needs of those physicians and their
patients, our ability to recruit and retain quality physicians may be negatively impacted. Challenges recruiting and retaining physicians may affect our
admissions and capacity and may otherwise adversely impact our business.
Our performance and labor costs have been, and may continue to be, adversely affected by challenging labor market conditions and the shortage of
qualified nurses and other healthcare personnel.
The operations of our healthcare facilities depend on the efforts, abilities and experience of our facility management, healthcare professionals, such as
nurses, pharmacists, lab technicians, and medical support personnel. We compete with other healthcare
37
providers in recruiting and retaining qualified facility management and personnel responsible for the daily operations of our healthcare facilities, including
nurses, other non-physician healthcare professionals and medical support personnel.
The healthcare industry has been experiencing a challenging labor market arising out of current macroeconomic conditions. Our hospitals and other
healthcare facilities, like many other healthcare providers, have experienced increased labor costs due to labor shortages, public health conditions,
inflationary conditions, workforce burnout and other factors. We may be required to continue to enhance wages and benefits to recruit and retain nurses,
other healthcare professionals and medical support personnel, and/or to hire more expensive temporary or contract personnel. In addition, in some markets
in which we operate, a shortage of available nurses, other healthcare professionals and medical support personnel has been an operating issue. To the extent
we are unable to maintain sufficient staffing levels at our hospitals, we may be required to limit the acute healthcare services provided at certain of our
hospitals, which would have a corresponding adverse effect on our net operating revenues. We also depend on the available labor pool of semi-skilled and
unskilled employees in each of the markets in which we operate. In some of our markets, employers across various industries have increased their wages
for these roles, which has created more competition for this sector of employees. The impact of labor shortages across the healthcare industry may result in
other healthcare facilities, such as nursing homes, limiting admissions, which may constrain our ability to discharge patients to such facilities and further
exacerbate the demand on our resources.
In addition, federal and state laws and regulations may increase our costs of maintaining qualified nurses and other medical support personnel. The
federal government or the states in which we operate could adopt mandatory nurse-staffing ratios or related measures aimed at regulating staffing or could
revise state-level mandatory nurse-staffing ratios or related measures already in place. Any of these measures could significantly affect labor costs and
could have an adverse impact on revenues if we are required to limit admissions, hire additional personnel or incur other costs in order to comply with such
requirements.
We may be unable to attract, hire, and retain a highly qualified and diverse workforce, including key management.
At December 31, 2024, certain employees at three of our hospitals were represented by various labor unions. While we have not experienced work
stoppages to date that have material and adversely affected our business or results of operations, increased or ongoing labor union activity could adversely
affect our labor costs or otherwise adversely impact us. 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 continued operation
during any strikes could increase our labor costs and otherwise adversely impact us. Finally, potential changes to federal labor laws and regulations, could
increase the likelihood of employee unionization activity and the ability of employees to unionize, which could adversely impact our operations and
financial results.
If our labor costs continue to increase, we may not be able to raise rates to offset these increased costs. Because a significant percentage of our revenues
consists of fixed, prospective payments, our ability to pass along increased labor costs is constrained. In the event we are not entirely effective at recruiting
and retaining qualified facility management, nurses and other medical support personnel, or in controlling labor costs, this could continue to have an
adverse effect on our results of operations.
We may be adversely impacted by the inability of third parties with whom we contract to provide hospital-based physicians as the result of industry-wide
disruptions in the market for outsourced medical specialists.
The success of our hospitals depends in part on the adequacy of staffing, including through contracts with third parties. We contract with various third
parties who provide hospital-based physicians in a number of specialties, including emergency, anesthesiology, hospitalist/inpatient care, radiology, tele-
radiology and surgery. Third-party providers of hospital-based physicians, including those with whom we contract, have experienced significant disruption
in the form of regulatory changes, including those stemming from enactment of the No Surprises Act, challenging labor market conditions resulting from a
shortage of physicians and inflationary wage-related pressures, as well as increased competition through consolidation of physician groups. In some
instances, providers of outsourced medical specialists have become insolvent and unable to fulfill their contracts with us for providing hospital-based
physicians. Our efforts to mitigate the potential impact to our business from third-party providers who are unable to fulfill their contracts to provide
hospital-based physicians, including through acquisitions of outsourced medical specialist businesses, employment of physicians and re-negotiation or
assumption of existing contracts, may be unsuccessful. If we are unable to adequately contract with providers, or effectively respond to and mitigate the
potential impact of third-party providers not fulfilling their contracts, our admissions may decrease, and our operating performance, capacity and growth
prospects may be adversely affected, which may adversely impact our business and financial results.
38
Risks Related to Legal Proceedings
We are the subject of various legal, regulatory and governmental proceedings that, if resolved unfavorably, could have an adverse effect on us, and we
may be subject to other loss contingencies, both known and unknown.
We are a party to various legal, regulatory and governmental proceedings and other related matters, including 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 current or potential future legal, regulatory or governmental
proceedings or other loss contingencies, or if we become subject to any such loss contingencies in the future, there could be an adverse impact on 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
monetary payments and corporate integrity agreements, each of which could have an adverse effect on our business, financial condition, results of
operations and/or cash flows.
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 professional liability,
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 be subject 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, we maintain claims-made professional 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 be available at a reasonable cost for us to maintain adequate levels of insurance. Additionally, our insurance coverage does not cover all claims against
us, such as fines, penalties, or other damage and legal expense payments resulting from qui tam lawsuits. We cannot predict the outcome of current or
future legal actions against us or the effect that judgments or settlements in such matters may have on us or on our insurance costs. Additionally, all
professional and general liability insurance we purchase is subject to policy limitations. If the aggregate limit of any of our professional and general
liability policies is exhausted, 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 those obligations 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 our business, financial condition or results of operations.
Risks Related to Government Regulation
Our business may be adversely impacted by changes and uncertainty in the healthcare industry, including healthcare public policy developments and
other changes to laws and regulations.
The healthcare industry is subject to changing political, regulatory and other influences. Regulatory uncertainty has increased as a result of decisions
issued by the U.S. Supreme Court in June 2024 that affect review of federal agency actions. These decisions increase judicial scrutiny of agency authority,
shift greater responsibility for statutory interpretation to courts, expand the time period during which a plaintiff can sue regulators and may result in
inconsistent judicial interpretations and delays in agency rulemaking processes. In Loper Bright Enterprises v. Raimondo, the Court overruled a legal
framework that gave significant judicial deference to federal agency interpretations of federal statutes. The Court held that courts must instead exercise
independent judgment when deciding whether an agency has acted within its statutory authority and that courts may not defer to an agency interpretation
simply because a statute is ambiguous. The Loper Bright decision and other recent decisions of the U.S. Supreme Court could have significant impacts on
government agency regulation, particularly within the heavily regulated healthcare industry, and may have broad implications for our business. While the
effects of these decisions will become more apparent in the future, we anticipate an increase in legal challenges to healthcare regulations and agency
guidance and decisions, including but not limited to those issued by HHS and its agencies, including CMS, the FDA, and the OIG. Federal agencies
oversee, regulate and otherwise affect many aspects of our business, including through Medicare and Medicaid payment and coverage policies, policies
affecting the size of the uninsured population, administration of state Medicaid programs and enforcement and interpretation of fraud and abuse laws.
Impacts of the recent Supreme Court decisions could require us to make changes to our operations and have a material negative impact on our business.
The healthcare industry has been and continues to be impacted by healthcare reform efforts. For example, the Affordable Care Act affects how
healthcare services are covered, delivered, and reimbursed, and expanded health insurance coverage through a combination of public program expansion
and private sector health insurance reforms. However, changes in the law’s implementation, subsequent legislation and regulations, state initiatives and
other factors have and may continue to affect the number of individuals
39
that elect to obtain public or private health insurance or the scope of such coverage, if obtained, and may impact our payer mix. Reductions in the number
of insured individuals or the scope of insurance coverage, or an increase in patients covered under governmental health programs or other health plans with
lower reimbursement levels, may have an adverse effect on our business. For example, federal legislation temporarily enhanced subsidies available for
purchasing coverage through Affordable Care Act marketplaces by lowering premiums and raising income eligibility thresholds. Subsequent legislation
extended these enhanced subsidies through 2025, but further extension is uncertain, and their expiration may significantly raise the uninsured rate. Other
legislative and executive branch initiatives related to health insurance could also result in increased prices for consumers purchasing health insurance
coverage or may permit the sale of insurance plans that do not satisfy current Affordable Care Act consumer protections, which could increase rates of
uninsured and underinsured individuals and destabilize insurance markets. Reductions in the number of insured individuals or the scope of insurance
coverage may have an adverse effect on our business.
The Affordable Care Act has been, and continues to be, subject to legislative and regulatory changes and court challenges. There is uncertainty
regarding whether, when, and how the Affordable Care Act will be further changed, whether the Affordable Care Act will be repealed or replaced, and how
the Affordable Care Act will be interpreted and implemented. Changes to the interpretation or implementation of the Affordable Care Act could eliminate
or alter provisions beneficial to us while leaving in place provisions reducing our reimbursement, or otherwise have an adverse effect on our business.
In addition, the Medicare and Medicaid programs are subject to change, including as a result of the recent change in the presidential administration. For
example, some members of Congress have proposed measures intended to accelerate the shift from traditional Medicare to Medicare Advantage, repealing
the Affordable Care Act or eliminating some of its consumer protections. The outcome of the 2024 federal elections, including Republican control of both
the executive and legislative branches, increases regulatory uncertainty. Changes in governmental administration, including changes in agency structures
and staffing, such as reduction or elimination of personnel and agencies, may result in changes to established rulemaking conventions and timelines,
including for regularly issued reimbursement rules, among other effects. Legislation and administrative actions at the federal level may also impact funding
for, or the structure of, the Medicaid program and may shape administration of the Medicaid program at the state level. Changes to the federal funding
formula for Medicaid could significantly impact states that expanded Medicaid under the Affordable Care Act, especially if federal contributions for
Medicaid expansion populations decrease and states are unable to offset the reductions. Further, some states have trigger laws that would end their
Medicaid expansion or require other changes if federal funding is reduced. CMS may make changes to Medicaid payment models and grant states
additional flexibility in the administration of state Medicaid programs, including by allowing additional states to condition Medicaid enrollment on work or
other community engagement or permitting other eligibility restrictions.
Other recent health reform initiatives and proposals at the federal and state levels include those focused on price transparency and out-of-network
charges, which may impact prices, our competitive position, patient volumes and the relationships between hospitals, patients, payors, and ancillary
providers (such as anesthesiologists, radiologists, and pathologists). For example, among other consumer protections, the No Surprises Act imposes various
requirements on providers and health plans intended to prevent “surprise” medical bills. Some states are considering or have imposed rate-setting measures,
including limits on hospital rates, or site-neutral pricing requirements. Other industry participants, such as private payors and large employer groups and
their affiliates, may also introduce financial or delivery system reforms.
There is uncertainty regarding whether, when, and what other public policy initiatives will be adopted through governmental avenues and/or the private
sector, the timing and implementation of any such efforts, and the impact of those efforts on providers as well as other healthcare industry participants. It is
difficult to predict the nature and/or success of current and future public policy changes, any of which may have an adverse impact on our business.
If we fail to comply with extensive laws and government regulations, including fraud and abuse laws, we could suffer penalties or be required to make
significant changes to our operations.
The healthcare industry is governed by extensive and complex laws and regulations at the federal, state and local government levels. These laws and
regulations include requirements related to licensure, certification, and enrollment with government programs; the necessity and adequacy of medical care;
quality of medical equipment and services; qualifications and supervision of medical and support personnel; the provision of services via telehealth;
operating policies and procedures; screening, stabilization and transfer of individuals who have emergency medical conditions; restrictions on the provision
of medical care, including with respect to reproductive care; distribution, maintenance and dispensing of pharmaceuticals and controlled substances; billing
and coding for services; proper handling of overpayments; classification of levels of care provided; preparing and filing cost reports; relationships with
referral sources and referral recipients; maintenance of adequate records; hospital use; rate-setting; building codes; environmental protection; patient,
workforce and public safety; privacy and security; interoperability and refraining from information blocking; development and use of AI/ML and other
predictive algorithms; debt collection; limits or prohibitions on balance billing and billing for out-of-network services; and communications with patients
and consumers. Examples of these laws include HIPAA, the Stark Law, the federal Anti-Kickback Statute, the federal False Claims Act, the EMTALA and
similar state laws.
40
There are heightened coordinated civil and criminal enforcement efforts by both federal and state government agencies relating to the healthcare
industry, including the hospital segment. Enforcement actions have focused on financial arrangements between hospitals and physicians, billing for
services without adequately documenting medical necessity and billing for services outside the coverage guidelines for such services. Specific to our
hospitals, we have received inquiries and subpoenas from various governmental agencies regarding these and other matters, and we are also subject to
various claims 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.
If we fail to comply with applicable laws and regulations, which are subject to change, we could be subject to liabilities, including civil penalties, civil
lawsuits and related damages, the loss of our licenses to operate one or more facilities, exclusion of one or more facilities from participation in the
Medicare, Medicaid and other federal and state healthcare programs, and criminal penalties. The costs of compliance with, and the other burdens imposed
by, these and other laws or regulatory actions may increase our operational costs, result in interruptions or delays in the availability of systems and/or result
in a patient volume decline. We may also face audits or investigations by government agencies relating to our compliance with applicable laws and
regulations. An adverse outcome under any such investigation or audit could result in liability, result in adverse publicity and adversely affect our business.
Evolving interpretations or enforcement of applicable laws or regulations could subject our current practices to allegations of impropriety or illegality or
could require us to make changes in our facilities or operations. In addition, other legislation or regulations may be adopted that could adversely affect our
business.
Actual or perceived failures to comply with legal requirements regarding the privacy and security of health information or other regulated, sensitive or
confidential information, or legal requirements regarding data privacy or data protection, could adversely affect our business, results of operations and
financial condition.
The data protection landscape is rapidly evolving. We are subject to numerous state and federal laws, requirements and regulations governing the
collection, use, storage, processing, disclosure, retention, privacy and security of health-related and other regulated, sensitive or confidential information
and may become subject to additional legal requirements of this nature in the future. For example, the Health Insurance Portability and Accountability Act
of 1996, the Health Information Technology for Economic and Clinical Health Act of 2009, each as amended, and the privacy and security regulations that
implement these laws (collectively, “HIPAA”) establish national privacy and security standards for the protection of protected health information, or PHI,
by health plans, healthcare clearinghouses and certain healthcare providers, referred to as covered entities, and the business associates with whom such
covered entities contract for services. HIPAA regulates permissible uses and disclosures of PHI and requires covered entities and business associates to
adopt administrative, physical and technical safeguards to protect such information. Covered entities must notify affected individuals without unreasonable
delay of breaches of unsecured PHI, the HHS Office for Civil Rights, or OCR, which enforces HIPAA, and, in the case of larger breaches, the media.
Failure to comply with the HIPAA privacy and security standards can result in civil monetary penalties, resolution agreements, monitoring agreements, and
criminal penalties including fines and/or imprisonment. A covered entity may be subject to penalties as a result of a business associate violating HIPAA. In
addition, state attorneys general may enforce the HIPAA privacy and security regulations in response to violations that threaten the privacy of state
residents. Although HIPAA does not create a private right of action allowing individuals to sue in civil court for violations, the laws and regulations have
been used as the basis for duty of care in state civil suits such as those for negligence or recklessness in the misuse or breach of PHI.
There are numerous other laws and legislative and regulatory initiatives at the federal and state levels governing the confidentiality, privacy,
availability, integrity and security of PHI and other types of personal information. Certain state laws may be more stringent, broader in scope or offer
greater individual rights with respect to PHI than HIPAA, state laws may differ from each other, and the interplay of federal and state laws may be subject
to varying interpretations by courts and government agencies, all of which may complicate compliance efforts. Where state laws are more protective than
HIPAA or apply more broadly, we have to comply with their stricter provisions. Not only do some of these state laws impose fines and other penalties
upon violators, but some may afford private rights of action to individuals who believe their personal information has been misused. We may not remain in
compliance with diverse privacy and security requirements in all of the jurisdictions in which we do business, particularly to the extent they are
inconsistent, rapidly changing and/or ambiguous and uncertain as to their applicability to our business practices.
In addition, we are subject to consumer protection laws and regulations in connection with our business activities. For example, the FTC uses its
consumer protection authority to initiate enforcement actions in response to data breaches. Failing to take appropriate steps to keep consumers’ personal
information secure may violate the Federal Trade Commission Act, or the FTCA. For information that is not subject to HIPAA and deemed to be “personal
health records,” the FTC may also impose penalties for violations of the Health Breach Notification Rule, or HBNR, to the extent we are considered a
“personal health record-related entity” or “third party service provider.” The FTC has taken several enforcement actions under HBNR and indicated that the
FTC will continue to protect consumer privacy through greater use of the agency’s enforcement authorities. As a result, we expect scrutiny by federal and
state regulators and others of our collection, use and disclosure of health information. Additionally, federal and state consumer protection laws are
increasingly being applied by FTC and states’ attorneys general to regulate the collection, use, storage, and disclosure of
41
personal or personally identifiable information, through websites or otherwise, and to regulate the presentation of website content. Our marketing and
patient engagement activities are subject to communications laws such as the Telephone Consumer Protection Act, or the TCPA, and the Controlling the
Assault of Non-Solicited Pornography and Marketing Act, or CAN-SPAM. Determination by a court or regulatory agency that our calling, texting or email
practices violate the TCPA or CAN-SPAM could subject us to civil penalties and could require us to change some portions of our business. Even an
unsuccessful challenge by patients or regulatory authorities of our activities could result in adverse publicity and could require a costly response from and
defense by us.
Other federal and state laws that restrict the use and protect the privacy and security of personally identifiable information may not be preempted by
HIPAA, may apply to new categories of health information, such as “consumer health data,” and may be subject to varying interpretations by the courts
and government agencies. These varying interpretations can create complex compliance issues for us and our partners and potentially expose us to
additional expense, adverse publicity, and liability, any of which could adversely affect our business.
Although we strive to comply with applicable laws and regulations, the requirements related to the collection, use, storage, processing, disclosure,
retention, privacy and security of health and other regulated, sensitive or confidential information are evolving rapidly and may be interpreted or applied in
an inconsistent manner across jurisdictions. The cost of compliance with these laws and regulations is high and is likely to increase in the future. Any
failure or perceived failure by us to comply with applicable data privacy and security laws or regulations, our internal policies and procedures or our
contracts governing our processing of health and other regulated, sensitive or confidential information, or to otherwise adequately address privacy and
security concerns, could result in negative publicity, government investigations and enforcement actions, claims by third parties and damage to our
reputation, any of which could have a material adverse effect on our business, operations, or financial results.
Healthcare technology initiatives, particularly those related to sharing patient data and interoperability, may adversely affect our business and results
of operations.
CMS incentivizes the adoption and meaningful use of certified EHR technology through its Medicare Promoting Interoperability Programs and Quality
Payment Program. Eligible hospitals that fail to demonstrate meaningful use of certified EHR technology and have not applied and qualified for a hardship
exception are subject to reduced reimbursement from Medicare. 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 penalties and lawsuits that may have an adverse effect on our consolidated financial position and
consolidated results of operations.
As EHR technologies have become widespread, the federal government has increased its focus on promoting patient access to healthcare data and
interoperability. The 21st Century Cures Act and implementing regulations prohibit information blocking by healthcare providers and certain other entities.
Information blocking is defined as engaging in activities that are likely to interfere with the access, exchange or use of electronic health information,
subject to limited exceptions. Under a rule finalized by HHS in July 2024, a hospital found to have engaged in information blocking will not qualify as a
“meaningful electronic health record user” under the Medicare Promoting Interoperability Program and as a result will lose 75% of the annual market
basket increase it would otherwise receive, and MIPS-eligible clinicians, ACOs and ACO participants face similar disincentives.
Current and future initiatives related to healthcare technology (including AI/ML), data sharing, and interoperability may require changes to our
operations, impose new and complex obligations on us, affect our relationships with providers, vendors, healthcare information exchanges and other third
parties and require investments in infrastructure. We may be subject to significant penalties or other disincentives or experience reputational damage for
failure to comply with applicable laws and regulations. It is difficult to predict how these initiatives will affect our relationships with providers and
vendors, participation in healthcare information exchanges or networks, the exchange of patient data and patient engagement.
42
The legal and regulatory framework with respect to AI/ML initiatives is evolving and remains uncertain. In December 2023, HHS finalized
transparency requirements for AI and other predictive algorithms used in certified health information technology, such as decision support interventions.
We expect that additional laws, regulations, and policies will be enacted, including as a result of changes in the presidential administration, and existing
laws and regulations may be interpreted in new ways, which could affect our operations and the ways in which we may use AI technology (e.g., the use of
clinical support decision tools in patient care). If we are unable to use AI/ML as the result of such laws and regulations, regulators restrict our ability to use
AI/ML for certain purposes or our confidential information becomes part of a dataset that is accessible by other third-party AI/ML applications and uses, it
could make our business less efficient, result in competitive disadvantages, increase our operating costs, hinder our ability to provide services, and subject
us to potential liabilities. In addition, to the extent we use, may use or permit the data we create, receive, maintain, and transmit to be used by any AI/ML
platforms, we may be subject to additional risks under health privacy and other laws and regulations. The cost to comply with applicable laws and
regulations could be significant and could adversely affect our business, financial condition and results of operations. Any failure or perceived failure by us
to comply with AI/ML laws and regulations could result in proceedings, investigations or actions against us by individuals, consumer rights groups,
government agencies or others. We could incur significant costs in investigating and defending such claims and, if found liable, pay significant damages or
fines or be required to make changes to our technology and business. Any such proceedings and any subsequent adverse outcomes may subject us to
significant negative publicity. Further, to the extent that we rely on or use the output of AI/ML, any inaccuracies, biases or errors could hinder our ability to
provide services and otherwise have adverse impacts on us, our business, our results of operations or financial condition. While the ultimate impact of
regulatory and legal risks associated with AI/ML is not fully known, if any of these events were to occur, our business, results of operations and financial
condition could be materially adversely affected.
State efforts to regulate the construction, acquisition or expansion of healthcare facilities could limit our ability to build or acquire additional
healthcare facilities, 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 expenditures
exceeding a prescribed amount, changes in bed capacity or services and some other matters. In evaluating a proposal, these states consider the need for
additional 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 to
invest in construction of a replacement or expanded facility were to be lost through an appeal process or revoked, we may not be able to recover the value
of our investment.
Many states have adopted legislation regarding the sale or other disposition of hospitals operated by municipal or not-for-profit entities. In some states
that do not have specific legislation, the attorneys general have demonstrated an interest in these transactions under their general obligation to protect the
use of charitable assets. These legislative and administrative efforts focus primarily on the appropriate valuation of the assets divested and the use of the
proceeds of the sale by the non-profit seller. In addition, some states require for-profit entities, including hospitals, to notify state attorneys general or other
designated entities in advance of sales or other transactions. While these notice requirements, reviews and, in some instances, approval processes can add
additional time to the closing of a hospital acquisition, we have not yet had any significant difficulties or delays in completing acquisitions. However, if we
encounter delays when we seek to acquire hospitals or a state prohibits a transaction, these restrictions could have a negative impact on our business and
growth plans.
We may incur additional tax liabilities.
We are subject to tax in the United States as well as those states in which we do business. Changes in tax laws, including increased rates, or
interpretations of tax laws by taxing authorities or other standard setting bodies, could increase our tax obligations and materially and adversely impact our
results of operations.
Risks Related to Impairment
If the fair value of our reporting unit declines, a material non-cash charge to earnings from impairment of our goodwill could result.
On an ongoing basis, under U.S. GAAP, we evaluate, based on the fair value of our reporting unit, whether the carrying value of our goodwill is
impaired when events or changes in circumstances indicate that such carrying value may not be recoverable. Goodwill is evaluated for impairment annually
and when an event occurs or circumstances change that, more likely than not, reduce the fair value of the reporting unit below its carrying value.
In assessing the fair value of this reporting unit, we consider, among other things, the most recent price of our common stock and fair value of our long-
term debt, our recent financial results, estimates of future revenue and expense growth, estimated market multiples, expected capital expenditures, income
tax rates, costs of invested capital and a discount rate. We performed our last annual
43
goodwill impairment evaluation during the fourth quarter of 2024 using the October 31, 2024 measurement date, which indicated no impairment.
We could record material impairment charges in the future if our estimates or assumptions with respect to such fair value determination change in the
future. In this regard, we recorded material non-cash impairment charges with respect to our hospital operations reporting unit in 2016 and 2017.
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 to
earnings 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 intangible
assets, including capitalized internal-use software. If one of our facilities experiences declining operating results or is adversely impacted by one or more of
these 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
evaluate whether changes in future undiscounted cash flows reflect an impairment in the fair value of our long-lived assets. Additionally, if we decide to
sell a business, we evaluate whether a business or a group of businesses is impaired based on an analysis of the selling price from a definitive agreement
compared to the carrying value of the net assets being sold. We have incurred, and expect to continue to incur, non-cash charges to earnings, which may be
material, where the carrying value of our long-lived assets is impaired.
Risks Related to Cybersecurity and Technology
Our operations could be significantly impacted by interruptions or restrictions in access to our information systems.
Our operations depend heavily on the proper function, availability and security of our information systems, as well as those of our third-party providers,
to collect, maintain, process and use sensitive data and other clinical, operational and financial information. Information systems require an ongoing
commitment of significant resources to maintain and enhance existing systems and to develop new systems in order to keep pace with continual changes in
information technology. Failure to adequately manage implementation of new technology, updates or enhancements of platforms or interfaces between
platforms could place us at a competitive disadvantage, disrupt our operations, and have a material, adverse impact on our business and results of
operations. Further, we may be adversely impacted by costs associated with new and expensive technology. In addition, we rely on third-party providers of
financial, clinical, patient accounting and network information services, including those that interface with our own systems, and, as a result, we face
operational challenges in maintaining multiple provider platforms and facilitating the interface of such systems with one another. We rely on these third-
party providers to have appropriate controls to protect confidential information and other sensitive or regulated data. While we take steps to require third-
party providers to protect confidential information and sensitive data, we do not control the information systems of third-party providers, and in some
cases, we may have difficulty accessing information archived on third-party systems.
Our networks and information systems, and the networks and information systems of third parties that we rely upon, are also subject to disruption due
to events such as a natural disaster, fire, telecommunications failure, power outages, new system implementations, computer viruses, ransomware or other
malware, security breaches, cyber-attacks (including ransomware), human acts (such as inadvertent or intentional misuse by employees), acts of war,
terrorist or criminal activities or other catastrophic events. Disaster recovery planning, whether conducted by us or a third party, cannot account for all
eventualities, and may not be sufficient to mitigate against or recover from such events. If the information systems on which we rely fail or are interrupted
or if our access to these systems is limited in the future, or if we experience data loss or manipulation, it could result in unauthorized disclosure, misuse,
loss or alteration of such data, interruptions and delays in our normal business operations, potential liability under applicable laws, regulatory penalties, and
damage to our reputation. Any of these could have an adverse effect on our business, financial condition or results of operations.
A cyber-attack or security breach could result in the compromise of our facilities, confidential data or critical data systems and give rise to potential
harm to patients, remediation and other expenses, expose us to liability under HIPAA, privacy and data protection laws and regulations, consumer
protection laws, common law or other theories, subject us to litigation and federal and state governmental inquiries or actions, damage our reputation,
adversely impact our financial results and otherwise be disruptive to our business.
We rely extensively on information technology systems to manage clinical and financial data, to communicate with our patients, payors, vendors and
other third parties, to summarize and analyze operating results, and for a number of other critical operational functions. We have made significant
investments in technology to protect our systems, equipment and medical devices and information from cybersecurity risks. These risks include incidents
involving ransomware and other malicious software, phishing, advanced persistent threats, social engineering, credential stuffing or distributed denial-of-
service attacks, or other attempts by third
44
parties to access, acquire, use, disclose, misappropriate or manipulate our information or disrupt our operations. Although we monitor and routinely test our
security systems and processes and have redundancies as well as other proactive measures designed to protect the integrity, security and availability of the
systems and data we manage and control, there can be no assurance that we, or our third-party vendors and providers, will not be subject to security
breaches and other cybersecurity incidents. In this regard, we are frequently the target of cybersecurity attacks and other threats that could have a security
impact, and we have experienced cybersecurity incidents from time to time. In particular, on February 13, 2023, we disclosed a security incident in which a
third-party vendor who provides a secure file transfer software platform utilized by our subsidiaries experienced a security breach whereby PHI and
personal information of certain patients of our healthcare facilities were exposed to an unauthorized third party.
The current cyber threat environment presents increased risk for all companies, particularly companies in the healthcare industry, as the volume and
intensity of cyber-attacks on hospitals and health systems has continued to increase, and we expect to experience an increase in cybersecurity threats in the
future. Moreover, advanced new attacks against our information systems and devices or those of our third-party vendors create risk of cybersecurity
incidents, including ransomware, malware and phishing incidents. The preventive actions we take to reduce the risk of such incidents and protect our
systems and data may not be sufficient in the future. In addition, cybersecurity threats continue to evolve. Additionally, the rapid evaluation and increased
adoption of AI technologies may heighten our cybersecurity risks by making cyber-attacks more difficult to detect, contain and mitigate, particularly with
detection devices that use voice recognition or authentication. Because the techniques used in cyber-attacks change frequently and may not be immediately
recognized, we may experience security or data breaches that remain undetected for an extended time. We may be required to expend significant additional
resources to continue to modify or enhance our protective measures or to investigate and remediate any information security vulnerabilities, and we still
might not be able to anticipate or prevent certain attack methods.
Further, cybersecurity threats, including those that result in a data or security breach, could impact the integrity, availability or security of PHI and other
data subject to privacy laws and regulations, disrupt our information technology systems, equipment, medical devices or business and threaten the access
and utilization of critical information technology and data. Our ability to provide various healthcare services could be affected, particularly with respect to
telehealth services. In addition, medical devices that connect to hospital networks or the internet may be vulnerable to cybersecurity incidents, which may
impact patient safety.
We may be at increased risk because we outsource certain services or functions to, or have systems that interface with, third parties. Some of these third
parties’ information systems are also subject to the risks outlined above and may store or have access to our data and may not have effective controls,
processes or practices to protect our information from attack, damage or unauthorized access, acquisition, use or disclosure. A breach or attack affecting
any of these third parties could harm our business. In addition, the definitive agreements we enter into in connection with the divestiture of hospitals
routinely obligate us to provide transition services to the buyer, including access to our legacy information systems, for a defined transition period. By
providing access to our information systems to non-employees, we may be exposed to cyber-attacks, ransomware or security or data breaches that originate
outside of our internal processes and practices designed to prevent such threats from occurring. Further, consumer confidence in the integrity, availability
and confidentiality of information systems and information, including patient information and operations data, in the healthcare industry generally could be
impacted to the extent there are successful cyber-attacks at other healthcare services companies, which could have a material adverse effect on our
business, operations or financial results.
As cyber threats continue to evolve and increase in volume and sophistication, we may be required to expend significant additional resources to
continue to modify or enhance our protective measures. We may also be required to incur additional expenses to comply with evolving federal and state
requirements related to cybersecurity, including those focused on healthcare providers. Despite our efforts to minimize our exposure to cyber-attacks, there
can be no assurance that our controls and procedures in place will be sufficient or timely. If we or our information, systems are subject to cyber-attacks or
security or data breaches in the future, or the information systems of third parties with whom we conduct business are subject to cyber-attacks or security or
data breaches in the future in a manner which impacts us or our information systems, this could result in harm to patients; business and operational
interruptions and delays; the loss, misappropriation, corruption or unauthorized access, acquisition, use or disclosure of data or inability to access data;
litigation and potential liability under privacy, security, breach notification and consumer protection laws or other applicable laws, including HIPAA;
reputational damage; federal and state governmental inquiries, civil monetary penalties, settlement agreements, corrective action plans and monitoring
requirements, any of which could have an adverse effect on our business, financial condition or results of operations. Moreover, any significant
cybersecurity event may require us to devote significant management time and resources to address and respond to any such event, interfere with the
pursuit of other important business strategies and initiatives, and cause us to incur additional expenditures, which could be material, including to investigate
such events, remedy cybersecurity problems, recover lost data, prevent future compromises and adapt systems and practices in response to such events.
Further, there is no assurance that any remedial actions will meaningfully limit the success of future attempts to breach our information systems,
particularly because malicious actors are increasingly sophisticated and utilize tools and techniques specifically designed to circumvent security measures,
avoid detection and obfuscate forensic evidence, which means we may be unable to identify, investigate or remediate effectively or in a timely manner.
45
Additionally, we are subject to an increasing number of cybersecurity reporting obligations in different jurisdictions that vary in their scope and
application, which may create conflicting reporting obligations and inhibit our ability to quickly provide complete and reliable information to patients,
business relations, and regulators, as well as to the public. Moreover, while we have insurance coverage in place designed to address certain aspects of
cybersecurity risks, such insurance coverage may be insufficient to cover all losses or all types of claims that may arise.
If we fail to comply with our obligations under license or technology agreements with third parties, we may be required to pay damages and we could
lose license rights that are critical to our business.
We license certain intellectual property, including technologies and software from third parties, that is important to our business, and in the future, we
may enter into additional agreements that provide us with licenses to valuable intellectual property or technology. If we fail to comply with any of the
obligations under our license agreements, we may be required to pay damages and the licensor may have the right to terminate the license. Termination by
the licensor would cause us to lose valuable rights, and could prevent us from selling our solutions and services, or adversely impact our ability to
commercialize future solutions and services. Our business would suffer if any current or future licenses terminate, if the licensors fail to abide by the terms
of the license agreement, if the licensors fail to enforce licensed intellectual property against infringing third parties, if the licensed intellectual property are
found to be invalid or unenforceable, or if we are unable to enter into necessary license agreements on acceptable terms or at all. Any of the foregoing
could have an adverse effect on our business, financial condition or results of operations.
46
Item 1B. Unresolved Staff Comments
None
Item 1C. Cybersecurity
Risk Management
We place the utmost importance on information security and privacy, including protecting the personal medical, financial and insurance information of
our patients and employees. As part of a larger digital technology program, we have a cybersecurity risk management program designed to assess, identify
and manage material risks from cybersecurity threats. Our cybersecurity risk management program is designed to employ industry best practices across our
operations and business functions, including through monitoring and assessing our threat environment; vulnerability assessments; detecting and responding
to cyber-attacks, cybersecurity incidents, and data breaches; cybersecurity crisis preparedness and incident response plans; and investments in cybersecurity
infrastructure and technology intended to reduce cybersecurity risk. Key aspects of our cybersecurity risk management program include the following:
•
adoption of the National Institute of Standards and Technology, or NIST, Cybersecurity Framework to assess the maturity of our
cybersecurity programs;
•
periodic comprehensive cybersecurity program assessments conducted by an external cybersecurity consultant;
•
enterprise-wide security and privacy policies that are reviewed and updated annually;
•
information security and privacy training included in mandatory onboarding and annual compliance training for all personnel;
•
regular testing, both by internal and external resources, of information security defenses;
•
incident response procedures;
•
third-party cyber risk program to assess cybersecurity and information security risk associated with third parties that perform contracted
services using information on our network; and
•
a security operations center that is designed to continuously monitor information on our network, investigate potential cyber threats and
report on information security incidents.
We engage consulting firms and other third parties in connection with our cybersecurity risk management processes. For example, third parties are
engaged from time to time to conduct evaluations of our security controls, including penetration testing and independent audits, and to advise the Board of
Directors, the Audit and Compliance Committee of the Board of Directors and/or our senior management team regarding cybersecurity matters.
We have processes to oversee and identify material cybersecurity risks associated with our use of third-party service providers. As part of these
processes, we conduct cybersecurity due diligence where deemed advisable with respect to third-party service providers that will be accessing our
information technology systems, including access to view or store sensitive data, prior to their engagement. Moreover, we have processes designed to
oversee and identify material cybersecurity risks associated with the information systems of third-party service providers. In addition, third-party service
providers that have access to our information technology systems, including access to view or store sensitive data, are contractually obligated to report
cybersecurity incidents to us so that we can assess the impact of any such incident on our business.
The current cyber threat environment presents increased risk for all companies, particularly companies in our industry, as the volume and intensity of
cybersecurity attacks on hospitals and health systems has continued to increase. We are regularly the target of cybersecurity attacks and other threats that
could have a security impact, and we have experienced security incidents from time to time.
We do not believe that risks we have identified to date from cybersecurity threats, including as a result of any previous cybersecurity incidents, have
materially affected or are reasonably likely to materially affect us, including our business strategy, results of operations or financial condition. However,
despite our security measures, there is no assurance that we, or the third parties with which we interact, will not experience a cybersecurity incident in the
future that materially affects us. For additional information regarding the risks to us associated with cybersecurity incidents, see “A cyber-attack or security
breach could result in the compromise of our facilities, confidential data or critical data systems and give rise to potential harm to patients, remediation
and other expenses, expose us to liability under HIPAA, privacy and data protection laws and regulations, consumer protection laws,
47
common law or other theories, subject us to litigation and federal and state governmental inquiries and actions, damage our reputation, adversely impact
our financial results and otherwise be disruptive to our business.” included in Part I, Item 1A of this Form 10-K.
We maintain a cybersecurity insurance policy that provides coverage in connection with cybersecurity incidents. However, costs and damages
associated with cybersecurity incidents may not be fully insured under our insurance policy, and (to the extent otherwise covered) are subject to applicable
deductibles.
Governance
Our cybersecurity risk management processes are integrated into our overall risk management system. Our Board of Directors is responsible for the
overall supervision of our risk management activities. The Board of Directors’ oversight of the material risks faced by us occurs at both the full board level
and at the committee level. In addition, the Audit and Compliance Committee has primary oversight responsibility regarding our information security, data
security, data privacy, and other cybersecurity programs, procedures and risks. Further, the Audit and Compliance Committee and our Board of Directors
receive updates at least quarterly from management, including our Chief Digital and Information Officer, or CDIO, covering our programs for managing
cybersecurity risks, including data privacy and data protection risks. Additionally, the Audit and Compliance Committee and the Board of Directors
actively participate in discussions with management and among themselves regarding cybersecurity risks.
Risk management is administered at a management level through a multi-disciplinary Enterprise Risk Committee comprised of members of
management, including our CDIO. The Enterprise Risk Committee identifies and monitors what we believe to be the key risks currently facing the
organization, including cybersecurity risks. A comprehensive presentation regarding our enterprise risk management process and our key risks is presented
to the full Board of Directors on an annual basis.
In addition, we have established a Cyber Risk Executive Steering Committee, a multi-disciplinary management-level team chaired by our CDIO which
is responsible for assessing and overseeing our information security and cybersecurity risk management policies, practices and priorities and for assessing
and monitoring key cybersecurity risks with respect to reporting such risks within the organization.
At a management level, our cybersecurity risk management efforts are led by our Chief Information Security Officer, or CISO, who reports directly to
the CDIO. Our current CISO was appointed as our Vice President and Chief Information Security Officer in 2024, and brings more than 25 years of
experience in cybersecurity, technology and risk management. He has more than 15 years of experience in the healthcare industry, including his service
with the Company since 2022. Prior to joining us, he served as Deputy Chief Information Security Officer at another large healthcare organization. Further,
our CDIO has expertise in cybersecurity risk management through his more than 25 years of experience in cybersecurity, technology and data privacy
roles, including his service as the Company’s CISO from 2021 to 2024 and his service as CISO at another large organization prior to being employed by
us. In addition to our CISO and CDIO, other individuals on our cybersecurity team have cybersecurity experience or certifications relevant to their
respective role.
A key component of our enterprise risk management program is our incident response plan, which provides for controls and procedures in connection
with cybersecurity incidents. Under this plan, we have established a cybersecurity incident command, a multi-disciplinary management-level team led by
the CISO. The plan provides that the incident response team will conduct an initial assessment in the event of a cybersecurity incident meeting certain
criteria elevated for the review of senior members of the cybersecurity team. In such event, the plan provides that the incident response team will assess
whether a cybersecurity incident has the potential to materially impact the organization and whether public disclosure is required or advisable in connection
therewith, and further provides that, if appropriate, any such cybersecurity incident may be further elevated for the review of senior management, the Audit
and Compliance Committee and/or the Board of Directors.
48
Item 2. Properties
We own our corporate headquarters building located in Franklin, Tennessee. In addition to the headquarters in Franklin, we maintain regional service
centers related to certain of our shared services initiatives. These service centers are located near our corporate headquarters or in the markets in which we
operate hospitals.
Most of our hospitals are general care hospitals offering a wide range of inpatient and outpatient medical services. These services generally include
general acute care, emergency room, general and specialty surgery, critical care, internal medicine, obstetrics, diagnostic, psychiatric and rehabilitation
services. In addition, some of our hospitals provide skilled nursing and home care services based on individual community needs.
The following tables shows the location, date of acquisition or lease inception and the number of licensed beds for the 76 hospitals owned or leased at
December 31, 2024. Effective December 31, 2024, facilities operating other than on a main hospital campus that provide inpatient, acute-care services are
presented separately. The operating results of hospitals in the following table are consolidated for financial reporting purposes.
49
Hospital
City
Licensed
Beds(1)
Date of
Acquisition/
Lease
Inception
Ownership
Type
Alabama
South Baldwin Regional Medical Center
Foley
142
June, 2000
Leased
Grandview Medical Center
Birmingham
434
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
125
July, 2007
Owned
Arizona
Western Arizona Regional Medical Center
Bullhead City
139
July, 2000
Owned
Northwest Medical Center
Tucson
242
July, 2007
Owned
Tucson Women’s Hospital
Tucson
45
July, 2007
Owned
Oro Valley Hospital
Oro Valley
146
July, 2007
Owned
Tucson Northwest Transitions Inpatient Rehabilitation
Oro Valley
30
July, 2007
Owned
Northwest Medical Center Sahuarita
Sahuarita
18
November, 2020
Owned
Northwest Medical Center Houghton
Houghton
44
June, 2022
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
Florida
North Okaloosa Medical Center
Crestview
110
March, 1996
Owned
Shorepoint Health Port Charlotte
Port Charlotte
254
January, 2014
Owned
Shorepoint Health Punta Gorda
Punta Gorda
208
January, 2014
Owned
Lower Keys Medical Center
Key West
118
January, 2014
Leased
Key West Depoo Medical
Key West
49
January, 2014
Leased
Physicians Regional Healthcare System - Collier
Naples
130
January, 2014
Owned
Physicians Regional Healthcare System - Pine Ridge
Naples
177
January, 2014
Owned
Physicians Regional Healthcare System - North
Naples
50
January, 2014
Owned
Santa Rosa Medical Center
Milton
129
January, 2014
Leased
Georgia
East Georgia Regional Medical Center
Statesboro
149
January, 2014
Owned
Indiana
Lutheran Health Network
Bluffton Regional Medical Center
Bluffton
40
July, 2007
Owned
Dupont Hospital
Fort Wayne
131
July, 2007
Owned
Lutheran Hospital
Fort Wayne
396
July, 2007
Owned
Lutheran Musculoskeletal Center
Fort Wayne
37
July, 2007
Owned
Lutheran Downtown Hospital
Fort Wayne
191
July, 2007
Owned
Dukes Memorial Hospital
Peru
25
July, 2007
Owned
Kosciusko Community Hospital
Warsaw
72
July, 2007
Owned
Northwest Health - Porter Hospital
Valparaiso
287
May, 2007
Owned
Northwest Health - Portage
Valparaiso
14
May, 2007
Owned
Northwest Health - La Porte Hospital
La Porte
227
March, 2016
Owned
Northwest Health - Starke Hospital
Knox
53
March, 2016
Leased
50
Mississippi
Merit Health Wesley
Hattiesburg
211
July, 2007
Owned
Merit Health River Region
Vicksburg
261
July, 2007
Owned
Merit Health Biloxi
Biloxi
153
January, 2014
Leased
Merit Health Central
Jackson
379
January, 2014
Leased
Merit Health Rankin
Brandon
134
January, 2014
Leased
Merit 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
240
January, 2014
Owned
Poplar Bluff Regional Medical Center - Westwood
Poplar Bluff
170
January, 2014
Owned
New Mexico
Eastern New Mexico Medical Center
Roswell
162
April, 1998
Owned
Carlsbad Medical Center
Carlsbad
99
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
Oklahoma
AllianceHealth Madill
Madill
25
January, 2014
Leased
AllianceHealth Durant
Durant
138
January, 2014
Owned
Pennsylvania
Commonwealth Health Network
Wilkes-Barre General Hospital
Wilkes-Barre
369
April, 2009
Owned
Regional Hospital of Scranton
Scranton
186
May, 2011
Owned
Moses Taylor Hospital
Scranton
122
January, 2012
Owned
Tennessee
Tennova Healthcare - Clarksville
Clarksville
270
July, 2007
Owned
Tennova - Jefferson Memorial Hospital
Jefferson City
58
January, 2014
Leased
Tennova - LaFollette Medical Center
LaFollette
66
January, 2014
Owned
Tennova - Newport Medical Center
Newport
130
January, 2014
Owned
Tennova - North Knoxville Medical Center
Powell
172
January, 2014
Owned
Tennova - Turkey Creek Medical Center
Knoxville
111
January, 2014
Owned
Texas
Lake Granbury Medical Center
Granbury
73
January, 1997
Leased
Laredo Medical Center
Laredo
326
October, 2003
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
DeTar Healthcare System
Victoria
163
July, 2007
Owned
DeTar Healthcare System - North
Victoria
115
July, 2007
Owned
Cedar Park Regional Medical Center
Cedar Park
126
December, 2007
Owned
Total Licensed Beds at December 31, 2024
11,403
Total Hospitals at December 31, 2024
76
51
(1)
Licensed beds are the number of beds for which the appropriate state agency licenses for a facility regardless of whether the beds are actually
available for patient use.
The real property of substantially all of our wholly-owned hospitals is also encumbered by mortgages to support obligations under the ABL Facility and
outstanding senior secured notes.
Item 3. Legal Proceedings
From time to time, we receive inquiries or subpoenas from state regulators, state Medicaid Fraud Control units, fiscal intermediaries, CMS, the U.S.
Department of Justice and other government entities regarding various Medicare and Medicaid issues. In addition, we are subject to other claims and
lawsuits arising in the ordinary course of our business including lawsuits and claims related to billing and collection practices at our hospitals. Based on
current knowledge, management does not believe that loss contingencies arising from pending legal, regulatory and governmental matters, including the
matters described herein, will have a material adverse effect on the consolidated financial position or liquidity of the Company. However, in light of the
inherent uncertainties involved in pending legal, regulatory and governmental matters, some of which are beyond our control, 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 to our results of operations
or cash flows for any particular reporting period. Settlements of suits involving Medicare and Medicaid issues routinely require both monetary payments as
well as corporate integrity agreements. Additionally, qui tam or “whistleblower” actions initiated under the FCA may be pending but placed under seal by
the court to comply with the FCA’s requirements for filing such suits. In September 2014, the Criminal Division of the U.S. Department of Justice
announced that all qui tam cases will be shared with their Division to determine if a parallel criminal investigation should be opened. The Criminal
Division has also frequently stated an intention to pursue corporations in criminal prosecutions, including in its most recent Memorandum dated September
15, 2022. From time to time, we detect issues of non-compliance with Federal healthcare laws pertaining to claims submission and reimbursement practices
and/or financial relationships with physicians. We avail ourselves of various mechanisms to address potential overpayments arising out of these issues,
including repayment of claims, rebilling of claims, and participation in voluntary disclosure protocols offered by CMS and the Office of Inspector General.
Participating in voluntary repayments and voluntary disclosure protocols can have the potential for significant settlement obligations or even enforcement
action.
The following legal proceedings are described in detail because, although certain legal proceedings 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 security holders. This discussion does not include claims and lawsuits covered by medical professional liability, general liability or
employment practices insurance and risk retention 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.
Government Investigations and Qui Tam Litigation
On January 11, 2024, we received a Civil Investigative Demand, or CID, from the Department of Justice for documents and information relating to a
variety of subjects, including practices and procedures related to utilization review, inpatient admissions and inpatient dialysis at our hospitals. Based upon
our review of the CID, the documents we have reviewed and the witnesses we have interviewed, we believe at this time that the CID relates to allegations
made by a former employee at one of our hospitals in 2022 and that these allegations were thoroughly and fully investigated to our satisfaction at the time
they were originally made. We continue to cooperate fully with this investigation.
On May 4, 2022, our affiliate, Northwest Arkansas Hospitals, LLC, or Northwest, terminated for cause the professional services agreement of Brian
Hyatt, M.D., a psychiatrist and former medical director of the behavioral health unit at Northwest, over concerns regarding his medical practices. On
October 31, 2024, the Department of Justice notified us that it is conducting a criminal investigation of Dr. Hyatt’s conduct while he was the medical
director of the behavioral health unit at Northwest. The Department of Justice has advised Northwest and several of its current and former officers and
employees that they are also subjects of its investigation. We are cooperating fully with the investigation.
Commercial Litigation and Other Lawsuits
Tower Health, f/k/a Reading Health System, et al v. CHS/Community Health Systems, Inc., et al. This breach of contract action is pending in the United
States District Court for the Eastern District of Pennsylvania. The plaintiffs allege breaches of an asset purchase agreement in connection with the sale of
Pottstown Memorial Medical Center. The alleged breaches regard plaintiffs’ contention that the defendants failed to disclose certain conditions related to
the physical plant of the hospital, along with various other alleged breaches of the asset purchase agreement. The plaintiffs filed an amended complaint on
July 22, 2019. Trial for this matter began May 3, 2021, and closed on October 5, 2021. On September 6, 2022, the District Court issued a Memorandum
Opinion denying all of Tower Health’s claims and entering a judgment in favor of the Company. The District Court also awarded the Company its
attorneys’ fees and costs. On October 4, 2022, Tower Health filed a Rule 59 motion to alter or amend the District Court’s judgment and a Rule
52
15 motion to amend its pleadings. The Company has filed oppositions to both motions and has separately moved for its attorney’s fees. On August 11,
2023, the District Court denied Tower Health’s Rule 59 and Rule 15 motions. Tower Health appealed the District Courts judgment to the United States
Court of Appeals for the Third Judicial District. The Third Circuit Court of Appeals affirmed the District Court’s opinion, awarded our attorneys’ fees and
costs on appeal, and ordered the case remanded to the District Court on October 2, 2024. The District Court will now hear our application for attorneys’
fees.
Daniel H. Golden, as Litigation Trustee of the QHC Litigation Trust, and Wilmington Savings Fund Society, FSB, solely in its capacity as indenture
trustee v. Community Health Systems, Inc., et al. A complaint in this case was filed on October 25, 2021 in the United States Bankruptcy Court for the
District of Delaware against various persons, including the Company, certain subsidiaries of the Company, certain former executive officers of the
Company and Credit Suisse Securities (USA) LLC. Plaintiff Daniel H. Golden is the litigation trustee for a litigation trust, which was formed under the
plan of reorganization of Quorum Health Corporation, or QHC, and certain affiliated entities confirmed by order of the United States Bankruptcy Court for
the District of Delaware wherein QHC and certain affiliated entities contributed various causes of action to such litigation trust. Plaintiff Wilmington
Savings Fund Society is the indenture trustee for certain notes issued by QHC. The complaint seeks damages and other forms of recovery arising out of
certain alleged actions taken by the Company and the other defendants in connection with the spin-off of QHC, which was completed on April 29, 2016,
and includes claims for unjust enrichment and for avoidance of certain transactions and payments by QHC to the Company connected with the spin-off,
including the $1.21 billion paid by QHC to the Company as part of the spin-off transactions. We filed a motion to dismiss on January 14, 2022, and oral
argument on that motion was heard on July 21, 2022. On March 16, 2023, the District Court granted in part and denied in part our motion to dismiss. We
continue to vigorously defend this case.
Management of Significant Legal Proceedings
In accordance with our governance documents, including our Governance Guidelines and the charter of the Audit and Compliance Committee, our
management of significant legal proceedings is overseen by the independent members of the Board of Directors and, in particular, the Audit and
Compliance Committee. The Audit and Compliance Committee is charged with oversight of compliance, regulatory and litigation matters, and enterprise
risk management. Management has been instructed to refer all significant legal proceedings and allegations of financial statement fraud, error, or
misstatement to the Audit and Compliance Committee for its oversight and evaluation. Consistent with New York Stock Exchange and Sarbanes-Oxley
independence requirements, the Audit and Compliance Committee is comprised entirely of individuals who are independent of our management, and are
financially literate in accordance with New York Stock Exchange listing standards. In addition, four of the five members 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 voluntary
compliance program, including its auditing and monitoring functions and confidential disclosure program. In recent years, the voluntary compliance
program has addressed the potential for a variety of billing errors that might be the subject of audits and payment denials by the CMS Recovery Audit
Contractors’ 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 risk
from these government audits have included significant policy and guidance revisions, training and education, and auditing.
Item 4. Mine Safety Disclosures
Not applicable.
53
PART II
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
We 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 the
New York Stock Exchange under the symbol CYH. As of February 13, 2025, there were approximately 179 holders of record of our common stock.
Stock Performance Graph
The following graph sets forth the cumulative return of our common stock during the five year period ended December 31, 2024, as compared to the
cumulative 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
an initial investment of $100 in our common stock and in each of the foregoing indices and the reinvestment of dividends where applicable. The
comparisons in the graph below are based on historical data and are not indicative of, or intended to forecast, future performance of our common stock.
COMPARISON OF 5 YEAR CUMULATIVE TOTAL RETURN
Among 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. The ABL Facility and the indentures governing the senior and senior secured notes
contain various covenants under which the assets of our subsidiaries are subject to certain restrictions relating to, among other matters, dividends and
distributions, as referenced in the paragraph below.
54
The ABL Facility and the indentures governing each series of our outstanding notes restrict our subsidiaries from, among other matters, paying
dividends and making distributions to us, which thereby limits our ability to pay dividends and/or repurchase stock. At December 31, 2024, under the most
restrictive test in these agreements (and subject to certain exceptions), we have approximately $300 million of capacity to pay permitted dividends and/or
repurchase shares of stock or make other restricted payments.
The following table contains information about our purchases of common stock during the three months ended December 31, 2024.
Period
Total
Number
of Shares
Purchased
(a)
Average
Price
Paid per
Share
Total
Number
of Shares
Purchased
as Part of
Publicly
Announced
Plans or
Programs(b)
Maximum
Number of
Shares That
May Yet Be
Purchased
Under the
Plans or
Programs(b)
October 1, 2024 -
October 31, 2024
7,790 $
5.92
—
—
November 1, 2024 -
November 30, 2024
975
4.38
—
—
December 1, 2024 -
December 31, 2024
650
3.42
—
—
Total
9,415 $
5.59
—
—
(a)
Includes 9,415 shares withheld by us to satisfy the payment of tax obligations related to the vesting of restricted stock awards.
(b)
We had no open market share repurchase programs for shares of our common stock during the three months ended December 31, 2024.
Item 6. Reserved
Reserved.
55
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
You should read this discussion together with our Consolidated Financial Statements and the accompanying Notes to Consolidated Financial Statements
included elsewhere in this Form 10-K.
Executive Overview
We are one of the nation’s largest healthcare companies. Our affiliates are leading providers of healthcare services, developing and operating healthcare
delivery systems in 39 distinct markets across 15 states. As of December 31, 2024, our subsidiaries own or lease 76 affiliated hospitals, with more than
11,000 beds, and operate more than 1,000 sites of care, including physician practices, urgent care centers, freestanding emergency departments,
occupational medicine clinics, imaging centers, cancer centers and ambulatory surgery centers. We generate revenues by providing a broad range of
general and specialized hospital healthcare services and outpatient services to patients in the communities in which we are located. For the hospitals and
other sites of care that we own and operate, we are paid for our services by governmental agencies, private insurers and directly by the patients we serve.
Acquisition, Divestiture and Closure Activity
During the year ended December 31, 2024, we paid approximately $25 million to acquire the operating assets and related businesses of certain
physician practices, clinics, ambulatory surgery centers and other ancillary businesses that operate within the communities served by our hospitals. The
purchase price for these transactions was primarily allocated to property and equipment, intangible assets, working capital, noncontrolling interests and
goodwill.
During 2024, we completed the divestiture of two hospitals. These hospitals represented annual net operating revenues in 2023 of approximately $198
million and we received total net proceeds of approximately $174 million in connection with these dispositions. These total net proceeds do not include
additional cash consideration which may be received in connection with the sale of Tennova Healthcare – Cleveland that was completed on August 1, 2024
(beyond the approximately $160 million in cash received at closing), which additional payments are contingent upon potential modifications to
supplemental reimbursement programs as more specifically provided in the asset purchase agreement underlying the transaction. Such modifications are
not complete as of December 31, 2024 and an estimate of consideration that may be received by the Company in 2025 has therefore not been recognized.
During 2023, we completed the divestiture of eight hospitals and the sale of a majority interest in one hospital. These hospitals represented annual net
operating revenues in 2022 of approximately $594 million and we received total net proceeds of approximately $518 million in connection with these
dispositions, inclusive of approximately $85 million received at a preliminary closing on December 30, 2022 in connection with the disposition of
Greenbrier Valley Medical Center.
During 2022, we completed the divestiture of one hospital. This hospital represented annual net operating revenues in 2021 of approximately $18
million, and we received total net proceeds of less than $1 million in connection with this disposition.
The following table provides a summary of hospitals that we divested (or, in the case of Lutheran Rehabilitation Hospital, in which the Company sold a
majority interest) during the years ended December 31, 2024, 2023 and 2022:
Hospital
Buyer
City, State
Licensed
Beds
Effective Date
2024 Divestitures:
Tennova Healthcare - Cleveland
Hamilton Health Care Systems, Inc.
Cleveland, TN
351
August 1, 2024
Davis Regional Medical Center
Iredell Memorial Hospital
Statesville, NC
144
October 1, 2024
2023 Divestitures:
Greenbrier Valley Medical Center
Vandalia Health, Inc.
Ronceverte, WV
122
January 1, 2023
Plateau Medical Center
Vandalia Health, Inc.
Oak Hill, WV
25
April 1, 2023
Medical Center of South Arkansas
SARH Holdings, Inc.
El Dorado, AR
166
July 1, 2023
Lutheran Rehabilitation Hospital
Select Medical Corporation
Fort Wayne, IN
36
September 1, 2023
AllianceHealth Ponca City
Integris Health
Ponca City, OK
140
November 1, 2023
AllianceHealth Woodward
Integris Health
Woodward, OK
87
November 1, 2023
Bravera Health Brooksville
Tampa General Hospital
Brooksville, FL
120
December 1, 2023
Bravera Health Spring Hill
Tampa General Hospital
Spring Hill, FL
124
December 1, 2023
Bravera Health Seven Rivers
Tampa General Hospital
Crystal River, FL
128
December 1, 2023
2022 Divestiture:
AllianceHealth Seminole
SSM Health Care of Oklahoma, Inc.
Seminole, OK
32
July 1, 2022
56
During the three months ended September 30, 2022, we completed the closure of Shorepoint Health Venice hospital (312 licensed beds) in Venice,
Florida. We recorded an impairment charge of approximately $29 million during the year ended December 31, 2022, to adjust the fair value of the long-
lived assets of this hospital, including property and equipment and capitalized software costs, based on their estimated fair value.
During the three months ended September 30, 2022, the provision of inpatient services and substantially all outpatient services ceased at First Hospital
Wyoming Valley (psychiatric hospital) (149 licensed beds) in Wilkes-Barre, Pennsylvania, resulting in the closure of this facility being substantially
complete at September 30, 2022. We completed the closure of First Hospital Wyoming Valley during the three months ended December 31, 2022. We
recorded an impairment charge of approximately $15 million during the year ended December 31, 2022, to adjust the fair value of the long-lived assets of
this hospital, including property and equipment and capitalized software costs, based on their estimated fair value.
Effective December 31, 2022, the lease for AllianceHealth Clinton (56 licensed beds) in Clinton, Oklahoma expired and was not renewed. We recorded
an impairment charge of approximately $1 million during the year ended December 31, 2022 in conjunction with exiting the lease to operate this hospital.
On November 7, 2024, we entered into a definitive agreement to sell our 50% interest in Merit Health Biloxi (153 licensed beds) in Biloxi, Mississippi,
to an affiliate of Memorial Hospital of Gulfport, which had a preexisting 50% ownership interest in Merit Health Biloxi. This divestiture was completed on
February 1, 2025.
In addition to hospitals divested as reflected above, we have entered into definitive agreements to sell four hospitals as noted below where the
divestiture has not yet been completed. As previously disclosed in a Current Report on Form 8-K, on November 22, 2024, we entered into a definitive
agreement to sell ShorePoint Health Port Charlotte (254 licensed beds) in Port Charlotte, Florida, certain assets of ShorePoint Health Punta Gorda (208
licensed beds) in Punta Gorda, Florida, and certain ancillary businesses related to such facilities to subsidiaries of Adventist Health System Sunbelt
Healthcare Corporation. Due to the effects of Hurricane Helene and Hurricane Milton, the Punta Gorda hospital has indefinitely suspended inpatient
operations. As previously disclosed in a Current Report on Form 8-K, on December 11, 2024, we entered into a definitive agreement to sell Lake Norman
Regional Medical Center (123 licensed beds) in Mooresville, North Carolina, and related businesses, to Duke University Health System, Inc. Finally, on
January 29, 2025, we entered into a definitive agreement to sell our 50% interest in Merit Health Madison (67 licensed beds) in Canton, Mississippi, to an
affiliate of the University of Mississippi Medical Center, which currently has a 50% ownership interest in Merit Health Madison. There can be no
assurance that these transactions will be completed, or if these transactions are completed, the ultimate timing of the completion of these transactions.
Moreover, we may give consideration to divesting certain additional hospitals and non-hospital businesses. Generally, these hospitals and non-hospital
businesses are not in one of our strategically beneficial services areas, are less complementary to our business strategy and/or have lower operating
margins. In addition, we continue to receive interest from potential acquirers for certain of our hospitals and non-hospital businesses. As such, we may sell
additional hospitals and/or non-hospital businesses if we consider any such disposition to be in our best interests. We expect proceeds from any such
divestitures to be used for general corporate purposes (including potential debt repayments and/or debt repurchases) and capital expenditures.
Overview of Operating Results
Net operating revenues increased from approximately $12.5 billion for the year ended December 31, 2023 to approximately $12.6 billion for the year
ended December 31, 2024. On a same-store basis, net operating revenues for the year ended December 31, 2024 increased $653 million, compared to the
same period in 2023.
We had net loss of $(362) million during the year ended December 31, 2024, compared to net income of $16 million for the year ended December 31,
2023. Net loss for the year ended December 31, 2024 included the following:
•
an after-tax benefit of $27 million for gain from early extinguishment of debt,
•
an after-tax charge of $40 million for expense related to costs associated with our multi-year initiative to modernize and consolidate technology
platforms and associated processes,
•
an after-tax charge of $250 million resulting from the impairment of long-lived assets that were idled, disposed or held-for-sale, a loss on the sale of
one hospital and a gain on the sale of one hospital,
•
an after-tax charge of $116 million for a change in estimate for professional liability claims accrual.
57
Net income for the year ended December 31, 2023 included the following:
•
an after-tax charge of $28 million for expense related to government and other legal matters and related costs,
•
an after-tax benefit of $61 million for gain from early extinguishment of debt,
•
an after-tax charge of $17 million for expense related to costs associated with our multi-year initiative to modernize and consolidate technology
platforms and associated processes,
•
an after-tax benefit of $42 million resulting from gains on the sale of five hospitals and the sale of a majority interest in one hospital, offset by losses
on the sale of three hospitals and impairment of long-lived assets that were idled, disposed or held-for-sale, and
•
an after-tax charge of $10 million for restructuring charges related to the closure of businesses as well as service line closures and consolidations at
certain hospitals.
Consolidated inpatient admissions for the year ended December 31, 2024, decreased 3.2%, compared to the year ended December 31, 2023, and
consolidated adjusted admissions for the year ended December 31, 2024, decreased 3.4%, compared to the year ended December 31, 2023. Same-store
inpatient admissions for the year ended December 31, 2024, increased 3.2%, compared to the year ended December 31, 2023, and same-store adjusted
admissions for the year ended December 31, 2024, increased 2.7%, compared to the year ended December 31, 2023.
Self-pay revenues represented approximately 1.3% and 1.1% of net operating revenues for the years ended December 31, 2024 and 2023, respectively.
The amount of foregone revenue related to providing charity care services as a percentage of net operating revenues was approximately 9.5% and 10.4%
for the years ended December 31, 2024 and 2023, respectively. Direct and indirect costs incurred in providing charity care services as a percentage of net
operating revenues was approximately 0.9% and 1.1% for the years ended December 31, 2024 and 2023, respectively.
Overview of Legislative and Other Governmental Developments
The healthcare industry is subject to changing political, regulatory, economic and other influences that may affect our business. Regulatory uncertainty
has increased as a result of recent decisions issued by the U.S. Supreme Court that affect review of federal agency actions, including Loper Bright
Enterprises v. Raimondo, and the outcome of the 2024 federal elections. These U.S. Supreme Court decisions increase judicial scrutiny of agency authority,
shift greater responsibility for statutory interpretation to courts and expand the timeline in which a plaintiff can sue regulators. These decisions are expected
to significantly impact government agency regulation, particularly within the heavily regulated healthcare industry, in part through an increase in legal
challenges to healthcare regulations and agency guidance and decisions. Federal agencies oversee, regulate and otherwise affect many aspects of our
business, including through Medicare and Medicaid policies, policies affecting the size of the uninsured population and enforcement and interpretation of
fraud and abuse laws. These recent Supreme Court decisions may also result in inconsistent judicial interpretations and delays in and other impacts to
agency rulemaking and legislative processes. The outcome of the 2024 federal elections, including Republican control of both the executive and legislative
branches, also increases regulatory uncertainty and the potential for significant policy changes.
In recent years, the U.S. Congress and certain state legislatures have introduced and passed a large number of proposals and legislation affecting the
healthcare system, including laws intended to increase access to health insurance and reduce healthcare costs and government spending. For example, the
Affordable Care Act, affects how healthcare services are covered, delivered and reimbursed, and expanded health insurance coverage through a
combination of public program expansion and private sector health insurance reforms. However, changes in the law’s implementation, subsequent
legislation and regulations, state initiatives and other factors have affected or may affect the number of individuals that elect or are able to obtain public or
private health insurance and the scope of such coverage, if obtained. For example, COVID-19 relief legislation temporarily enhanced subsidies available
for individuals to purchase coverage through Affordable Care Act marketplaces. Subsequent legislation extended these enhanced subsidies through 2025,
but further extension is uncertain, and expiration of the enhanced subsidies may significantly increase the uninsured rate. Other legislative and executive
branch initiatives related to health insurance could also result in increased prices for consumers purchasing health insurance coverage or may permit the
sale of insurance plans that do not satisfy current Affordable Care Act consumer protections, which could increase rates of uninsured and underinsured
individuals and destabilize insurance markets.
Of critical importance to us is the potential impact of any changes specific to the Medicaid program, including changes resulting from legislative and
administrative actions at the federal and state levels, particularly those related to funding and expansion provisions of the Affordable Care Act. The states
with the greatest reductions in the number of uninsured adult residents have expanded Medicaid under the Affordable Care Act. Of the 15 states in which
we operated hospitals as of December 31, 2024, nine states have taken action to expand their Medicaid programs. At this time, the other six states have
opted out of Medicaid expansion, including Florida, Alabama, Tennessee, Mississippi and Texas, where we operated a significant number of hospitals at
December 31,
58
2024. Changes to federal funding formulas for Medicaid could have a particularly significant impact in states that expanded Medicaid, especially if federal
contributions for Medicaid expansion populations decrease and states are unable to offset the reductions. Further, some states have trigger laws that would
end their Medicaid expansion or require other changes if federal funding is reduced. CMS administrators may also make changes to Medicaid payment
models and may grant states additional flexibilities in the administration of Medicaid programs, including by allowing additional states to condition
Medicaid enrollment on work or other community engagement or to impose other eligibility or coverage restrictions.
There is a trend across the healthcare industry toward value-based purchasing. CMS adjusts Medicare reimbursement for hospitals and other providers
based on quality measures and administers various ACOs and alternative payment model demonstration projects. Other recent reform initiatives and
proposals at the federal and state levels include those focused on price transparency, and limiting out-of-network billing. For example, the No Surprises Act
imposes various requirements on providers and health plans intended to prevent “surprise” medical bills.
Throughout the acute phase of the COVID-19 pandemic that began in 2020, federal and state governments passed legislation, promulgated regulations
and took other administrative actions intended to assist healthcare providers in providing care to COVID-19 and other patients during the public health
emergency and to provide financial relief. The public health emergency declared by HHS in response to the pandemic expired in May 2023. We received
pandemic relief fund payments through various federal, state and local programs of approximately $161 million during the year ended December 31, 2022.
Approximately $173 million was recognized as pandemic relief funds within the consolidated statements of (loss) income during the year ended December
31, 2022. We did not receive or recognize any significant level of payments or benefits under the Coronavirus Aid, Relief, and Economic Security Act, or
the CARES Act, or other COVID-19 related stimulus and relief legislation during the years ended December 31, 2024 and 2023, and we do not expect to
receive or recognize any significant level of payments or benefit under the CARES Act and other existing legislation related to COVID-19 in future
periods.
The federal deficit and other federal and state budgetary pressures have affected government healthcare program expenditures, and we anticipate these
effects will continue. For example, the payment reductions required by the Budget Control Act of 2011 and subsequent legislation are currently set to
continue through the first eight months of federal fiscal year 2032. It is possible that future deficit reduction legislation will impose additional spending
reductions.
Reimbursement by government programs may be affected by broad shifts in payment policy. For example, recent changes related to the 340B Drug
Pricing Program have implications for all hospitals reimbursed under the outpatient PPS, including those, like ours, that do not participate in the program.
In 2018, CMS implemented a payment policy that reduced Medicare payments for 340B hospitals for most drugs obtained at 340B-discounted rates and
that resulted in increased payments for non-340B hospitals. In June 2022, the U.S. Supreme Court, in American Hospital Association v. Becerra,
invalidated past payment cuts for hospitals participating in the 340B Drug Pricing Program. In light of the U.S. Supreme Court decision and to achieve
budget neutrality, CMS reduced payment rates for non-drug services under the outpatient PPS for calendar year 2023, and lump sum payments were
distributed to affected 340B providers as the remedy for calendar years 2018 through 2022. Moreover, in order to comply with budget neutrality
requirements, HHS finalized a corresponding offset in future non-drug item and service payments for all outpatient PPS providers (except new providers)
that will reduce the outpatient PPS conversion factor by 0.5% annually. This adjustment will start in calendar year 2026 and continue for approximately 16
years. This reduction to payment rates adversely affected our results for the years ended December 31, 2023 and 2024, and the reduction to the outpatient
PPS conversion factor as noted above is anticipated to adversely impact our results beginning in 2026.
In addition, future payment adjustments may apply to hospitals reimbursed under the inpatient PPS as a result of a 2024 court decision that vacated a
low wage index policy CMS adopted in 2020. Under the policy, CMS increased the wage index values for hospitals with low wage index, thereby
increasing their reimbursement, and offset these increases by decreasing reimbursement for all other hospitals. CMS addressed the impact of the court
decision prospectively in its final rule updating inpatient hospital payment rates and policies for federal fiscal year 2025, removing the upward
reimbursement adjustment for the low-wage hospitals and the related budget neutrality factor that decreased reimbursement for all other hospitals.
However, it is not yet clear whether, when, or how the agency will address the impact of the low wage policy in federal fiscal years 2020 through 2024.
59
Sources of Revenue
The following table presents the approximate percentages of net operating revenues by payor source for the periods indicated. The data for the periods
presented are not strictly comparable due to the effect that businesses acquired, sold, closed or opened during each of the respective periods, as applicable,
have had on these statistics.
Year Ended December 31,
2024
2023
2022
Medicare
18.1 %
19.9 %
20.9 %
Medicare Managed Care
17.7
16.8
16.1
Medicaid
14.8
14.3
14.8
Managed Care and other third-party payors
48.1
47.9
47.5
Self-pay
1.3
1.1
0.7
Total
100.0 %
100.0 %
100.0 %
As shown above, we receive a substantial portion of our revenues from the Medicare, Medicare Managed Care and Medicaid programs. Included in
Managed Care and other third-party payors is net operating revenues from insurance companies with which we have insurance provider contracts,
insurance companies for which we do not have insurance provider contracts, workers’ compensation carriers and non-patient service revenue, such as gain
(loss) on investments, rental income and cafeteria sales. We generally expect the portion of revenues received from the Medicare, Medicare Managed Care
and Medicaid programs to increase over the long-term due to the general aging of the population and other factors. There has been a trend toward increased
enrollment in Medicare Managed Care and Medicaid managed care programs, which may adversely affect our net operating revenues. We may also be
impacted by regulatory requirements imposed on insurers, such as minimum medical-loss ratios and specific benefit requirements. Furthermore, in the
normal course of business, managed care programs, insurance companies and employers actively negotiate the amounts paid to hospitals. Our relationships
with payors may be impacted by price transparency initiatives and out-of-network billing restrictions, including those in the No Surprises Act. There can be
no assurance that we will retain our existing reimbursement arrangements or that third-party payors will not attempt to further reduce the rates they pay for
our services.
Net operating revenues include amounts estimated by management to be reimbursable by Medicare and Medicaid under prospective payment systems
and provisions of cost-based reimbursement and other payment methods. In addition, we are reimbursed by non-governmental payors using a variety of
payment methodologies. Amounts we receive for the treatment of patients covered by Medicare, Medicaid and non-governmental payors are generally less
than our standard billing rates. We account for the differences between the estimated program reimbursement rates and our standard billing rates as
contractual allowance adjustments, which we deduct from gross revenues to arrive at net operating revenues. Final settlements under some of these
programs are subject to adjustment based on administrative review and audit by third parties. We account for adjustments to previous 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 by an insignificant amount in each
of the years ended December 31, 2024, 2023 and 2022.
The payment rates under the Medicare program for hospital inpatient and outpatient acute care services are based on prospective payment systems,
which depend upon a patient’s diagnosis or the clinical complexity of services provided to a patient, among other factors. These rates are indexed for
inflation annually, although increases have historically been less than actual inflation. CMS has published the final rule establishing payment rates for
federal fiscal year 2025 (which began October 1, 2024) for hospital inpatient acute care services reimbursed under the prospective system, increasing
payment rates by approximately 2.9%. This increase reflects a market basket increase of 3.4%, reduced by a 0.5 percentage point productivity adjustment.
Hospitals that do not submit required patient quality data are subject to a reduction in payments. We are complying with this data submission requirement.
Payments may also be affected by various other adjustments, including those that depend on patient-specific or hospital specific factors. For example, the
“two midnight rule” establishes admission and medical review criteria for inpatient services limiting when services to Medicare beneficiaries are payable as
inpatient hospital services. Reductions in the rate of increase or overall reductions in Medicare reimbursement may cause a decline in the growth of our net
operating revenues.
Payment rates under the Medicaid program vary by state. In addition to the base payment rates for specific claims for services rendered to Medicaid
enrollees, several states utilize supplemental reimbursement programs to make separate payments that are not specifically tied to an individual’s care, some
of which offset a portion of the cost of providing care to Medicaid and indigent patients. These programs are funded with a combination of state and federal
resources, including, in certain instances, fees or taxes levied on the providers. The programs are generally authorized by CMS for a specified period of
time and require CMS’s approval to be extended. We are unable to predict whether or on what terms CMS will extend the supplemental programs in the
states in which we operate. Under these supplemental programs, we recognize revenue and related expenses in the period in which amounts are estimable
60
and payment 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 other program related costs are reflected in other operating expenses.
Results of Operations
Our hospitals and other sites of care offer a broad variety of inpatient and outpatient medical and surgical services. These include general acute care,
emergency room, general and specialty surgery, critical care, internal medicine, obstetrics, diagnostic services, psychiatric and rehabilitation services.
Utilization of services and our results of operations are dependent on a multitude of factors including seasonal fluctuations in demand. Historically, the
strongest demand for hospital services generally occurs during the winter months, and the weakest demand generally occurs during the summer months.
The following tables summarize, for the periods indicated, selected operating data.
Year Ended December 31,
2024
2023
2022
Operating results, as a percentage of net operating revenues:
Net operating revenues
100.0 %
100.0 %
100.0 %
Operating expenses (a)
(89.5 )
(89.0 )
(88.3 )
Depreciation and amortization
(3.8 )
(4.0 )
(4.4 )
Impairment and gain (loss) on sale of businesses, net
(2.4 )
0.7
(0.6 )
Income from operations
4.3
7.7
6.7
Interest expense, net
(6.8 )
(6.7 )
(7.0 )
Gain from early extinguishment of debt
0.2
0.6
2.1
Gain from CoreTrust Transaction
—
—
1.0
Equity in earnings of unconsolidated affiliates
0.1
0.1
0.1
(Loss) income before income taxes
(2.2 )
1.7
2.9
Provision for income taxes
(0.7 )
(1.6 )
(1.4 )
Net (loss) income
(2.9 )
0.1
1.5
Less: Net income attributable to noncontrolling interests
(1.2 )
(1.2 )
(1.1 )
Net (loss) income attributable to Community Health Systems,
Inc. stockholders
(4.1 )%
(1.1 )%
0.4 %
Year Ended December 31,
2024
2023
Percentage increase (decrease) from prior year:
Net operating revenues
1.2 %
2.3 %
Admissions (b)
(3.2 )
0.3
Adjusted admissions (c)
(3.4 )
1.7
Average length of stay (d)
(2.2 )
(4.3 )
Net (loss) income attributable to Community Health Systems,
Inc. stockholders
(288.0 )
(389.1 )
Same-store percentage increase from prior year (e):
Net operating revenues
5.5 %
4.8 %
Admissions (b)
3.2
3.5
Adjusted admissions (c)
2.7
5.3
(a)
Operating expenses include salaries and benefits, supplies, other operating expenses, and lease cost and rent, net of the reduction in operating
expenses resulting from the recognition of pandemic relief funds.
(b)
Admissions represents the number of patients admitted for inpatient treatment.
(c)
Adjusted admissions is a general measure of combined inpatient and outpatient volume. Adjusted admissions is computed by multiplying
admissions by gross patient revenues and then dividing that number by gross inpatient revenues.
(d)
Average length of stay represents the average number of days inpatients stay in our hospitals.
(e)
Excludes information for businesses sold or closed during each of the respective periods, as applicable.
Items (b) – (e) are metrics used to manage our performance. These metrics provide useful insight to investors about the volume and acuity of services
we provide, which aid in evaluating our financial results.
61
Year Ended December 31, 2024 Compared to Year Ended December 31, 2023
Net operating revenues increased by 1.2% to approximately $12.6 billion for the year ended December 31, 2024, from approximately $12.5 billion for
the year ended December 31, 2023. Net operating revenues on a same-store basis from hospitals that were operated throughout both periods increased $653
million, or 5.5%, during the year ended December 31, 2024, compared to the same period in 2023. On a period-over-period basis, the increase in same-
store net operating revenues was primarily attributable to higher inpatient and outpatient volumes, increased reimbursement rates, favorable changes in
payor mix and higher revenues from supplemental reimbursement programs, partially offset by lower acuity and increased patient claim denials. Non-
same-store net operating revenues decreased $509 million during the year ended December 31, 2024, compared to the same period in 2023, with the
decrease attributable primarily to the divestiture of hospitals during 2024 and 2023. On a consolidated basis, inpatient admissions decreased by 3.2% and
adjusted admissions decreased by 3.4% during the year ended December 31, 2024, compared to the same period in 2023. On a same-store basis, net
operating revenues per adjusted admission increased 2.8%, while inpatient admissions increased by 3.2% and adjusted admissions increased by 2.7% for
the year ended December 31, 2024, compared to the same period in 2023.
Operating expenses, as a percentage of net operating revenues, increased from 92.3% during the year ended December 31, 2023 to 95.7% during the
year ended December 31, 2024. Operating expenses, excluding depreciation and amortization and impairment and (gain) loss on sale of businesses, as a
percentage of net operating revenues, increased from 89.0% for the year ended December 31, 2023 to 89.5% for the year ended December 31, 2024.
Salaries and benefits decreased as a percentage of net operating revenues from 43.4% for the year ended December 31, 2023 to 42.9% for the year ended
December 31, 2024, primarily due to an increase in net operating revenues, partially offset by increased hiring commensurate with lower utilization of
contract labor. Supplies, as a percentage of net operating revenues, decreased from 16.0% for the year ended December 31, 2023 to 15.4% for the year
ended December 31, 2024, primarily due to changes in the mix of services, the benefit of cost savings initiatives and an increase in net operating revenues.
Other operating expenses, as a percentage of net operating revenues, increased from 27.0% for the year ended December 31, 2023 to 28.8% for the year
ended December 31, 2024, primarily due to a change in estimate for the professional liability claims accrual, increased expense for supplemental
reimbursement programs and outsourced medical specialists, partially offset by decreased costs for contract labor and an increase in net operating revenues.
Lease cost and rent, as a percentage of net operating revenues, decreased from 2.6% for the year ended December 31, 2023 to 2.4% for the year ended
December 31, 2024.
Depreciation and amortization, as a percentage of net operating revenues, decreased to 3.8% for the year ended December 31, 2024 from 4.0% for the
year ended December 31, 2023 primarily due to an increase in net operating revenues and a reduction in the amortization of capitalized internal-use
software.
Impairment and (gain) loss on sale of businesses, net was expense of $301 million for the year ended December 31, 2024, compared to a gain of $87
million for the same period in 2023. The expense in 2024 and the gain in 2023 related primarily to divestiture activity during each respective period as
discussed more specifically under “Acquisition, Divestiture and Closure Activity” herein.
Interest expense, net, increased by $30 million to $860 million for the year ended December 31, 2024 compared to $830 million for the same period in
2023. This was primarily due to our refinancing activity during 2024 and 2023.
Gain from early extinguishment of debt of $25 million was recognized during the year ended December 31, 2024, compared to $72 million in the same
period in 2023, as a result of our refinancing activity during 2024 and 2023.
Equity in earnings of unconsolidated affiliates, as a percentage of net operating revenues, remained consistent at 0.1% for the years ended December 31,
2024 and 2023.
The net results of the above-mentioned changes resulted in (loss) income before income taxes changing by $490 million to a loss of $(283) million for
the year ended December 31, 2024 from income of $207 million for the same period in 2023.
Our provision for income taxes for the years ended December 31, 2024 and 2023 was $79 million and $191 million, respectively, and the effective tax
rates were (27.9)% and 92.3% for the years ended December 31, 2024 and 2023, respectively. The decrease in the provision for income taxes for the year
ended December 31, 2024, compared to the same period in 2023, was primarily due to a decrease in non-deductible goodwill related to divested hospitals
and a decrease in income before income taxes in 2024 compared to 2023. The difference in our effective tax rate for the year ended December 31, 2024,
compared to the same period in 2023, was due to the aforementioned decrease in the provision for income taxes and the decrease in (loss) income before
taxes.
Net (loss) income, as a percentage of net operating revenues, was (2.9)% for the year ended December 31, 2024, compared to 0.1% for the same period
in 2023.
62
Net income attributable to noncontrolling interests, as a percentage of net operating revenues, was 1.2% for both of the years ended December 31, 2024
and 2023.
Net loss attributable to Community Health Systems, Inc. was $(516) million for the year ended December 31, 2024, compared to $(133) million for the
same period in 2023.
Year Ended December 31, 2023 Compared to Year Ended December 31, 2022
Net operating revenues increased by 2.3% to approximately $12.5 billion for the year ended December 31, 2023, from approximately $12.2 billion for
the year ended December 31, 2022. Net operating revenues on a same-store basis from hospitals that were operated throughout both periods increased $552
million, or 4.8%, during the year ended December 31, 2023, compared to the same period in 2022. On a period-over-period basis, the increase in net
operating revenues was primarily attributable to higher inpatient and outpatient volumes, increased reimbursement rates, higher acuity and an increase in
non-patient revenue, partially offset by unfavorable changes in payor mix. Non-same-store net operating revenues decreased $273 million during the year
ended December 31, 2023, compared to the same period in 2022, with the decrease attributable primarily to the divestiture of hospitals during 2023 and
2022. On a consolidated basis, inpatient admissions increased by 0.3% and adjusted admissions increased by 1.7% during the year ended December 31,
2023, compared to the same period in 2022. On a same-store basis, net operating revenues per adjusted admission decreased 0.5%, while inpatient
admissions increased by 3.5% and adjusted admissions increased by 5.3% for the year ended December 31, 2023, compared to the same period in 2022.
Operating expenses, as a percentage of net operating revenues, decreased from 93.3% during the year ended December 31, 2022 to 92.3% during the
year ended December 31, 2023. Operating expenses, excluding depreciation and amortization and impairment and (gain) loss on sale of businesses, as a
percentage of net operating revenues, increased from 88.3% for the year ended December 31, 2022 to 89.0% for the year ended December 31, 2023.
Salaries and benefits decreased as a percentage of net operating revenues from 43.6% for the year ended December 31, 2022 to 43.4% for the year ended
December 31, 2023, primarily due to an increase in net operating revenues, partially offset by increased hiring commensurate with lower utilization of
contract labor. Supplies, as a percentage of net operating revenues, decreased from 16.2% for the year ended December 31, 2022 to 16.0% for the year
ended December 31, 2023. Other operating expenses, as a percentage of net operating revenues, decreased from 27.3% for the year ended December 31,
2022 to 27.0% for the year ended December 31, 2023, primarily due to an increase in net operating revenues and lower utilization of and rates paid for
contract labor, partially offset by higher costs for professional liability insurance and higher rates paid for outsourced medical specialists. Lease cost and
rent, as a percentage of net operating revenues, remained consistent at 2.6% for the years ended December 31, 2023 and 2022. Pandemic relief funds, as a
percentage of net operating revenues, were 0.0% for the year ended December 31, 2023, compared to (1.4)% for the same period in 2022.
Depreciation and amortization, as a percentage of net operating revenues, decreased to 4.0% for the year ended December 31, 2023 from 4.4% for the
year ended December 31, 2022.
Impairment and (gain) loss on sale of businesses, net was a gain of $87 million for the year ended December 31, 2023, compared to expense of $71
million for the same period in 2022. The gain in 2023 and the expense in 2022 related primarily to divestiture activity during each respective period as
discussed more specifically under “Acquisition, Divestiture and Closure Activity” herein.
Interest expense, net, decreased by $28 million to $830 million for the year ended December 31, 2023 compared to $858 million for the same period in
2022. This was primarily due to our refinancing activity during 2023 and 2022.
Gain from early extinguishment of debt of $72 million was recognized during the year ended December 31, 2023, compared to a gain from early
extinguishment of debt of $253 million in the same period in 2022, as a result of our refinancing activity during 2023 and 2022.
There was no gain from the CoreTrust Transaction during the year ended December 31, 2023. Gain from the CoreTrust Transaction of $119 million was
recognized during the year ended December 31, 2022.
Equity in earnings of unconsolidated affiliates, as a percentage of net operating revenues, remained consistent at 0.1% for the years ended December 31,
2023 and 2022.
The net results of the above-mentioned changes resulted in income before income taxes decreasing $142 million to $207 million for the year ended
December 31, 2023 from $349 million for the same period in 2022.
Our provision for income taxes for the years ended December 31, 2023 and 2022 was $191 million and $170 million, respectively, and the effective tax
rates were 92.3% and 48.7% for the years ended December 31, 2023 and 2022, respectively. The increase in the provision for income taxes for the year
ended December 31, 2023, compared to the same period in 2022, was primarily due to non-deductible goodwill related to divested hospitals in 2023
compared to 2022. The difference in our effective tax rate for the year ended
63
December 31, 2023, compared to the same period in 2022, was due to the aforementioned increase in the provision for income taxes and the decrease in
income before taxes.
Net income, as a percentage of net operating revenues, was 0.1% for the year ended December 31, 2023, compared to 1.5% for the same period in 2022.
Net income attributable to noncontrolling interests, as a percentage of net operating revenues, was 1.2% for the year ended December 31, 2023,
compared to 1.1% for the same period in 2022.
Net (loss) income attributable to Community Health Systems, Inc. was net loss of $(133) million for the year ended December 31, 2023, compared to
net income of $46 million for the same period in 2022.
Liquidity and Capital Resources
2024 Compared to 2023
Net cash provided by operating activities was approximately $480 million for the year ended December 31, 2024, compared to $210 million for the year
ended December 31, 2023. The increase in cash provided by operating activities is primarily due to increased collections of patient accounts receivable and
lower cash paid for interest, partially offset by increased income tax payments. Total cash paid for interest decreased to approximately $741 million for the
year ended December 31, 2024, from approximately $801 million for the year ended December 31, 2023. Cash paid for income taxes, net of refunds
received, resulted in a net payment of $171 million and $91 million during the years ended December 31, 2024 and 2023, respectively.
Our net cash used in investing activities was approximately $275 million for the year ended December 31, 2024, compared to approximately $26
million for the year ended December 31, 2023, an increase of approximately $249 million. The increase in net cash used in investing activities during the
year ended December 31, 2024, compared to the prior year, was impacted by a decrease of $258 million in cash proceeds from dispositions of hospitals and
other ancillary operations and a decrease of $96 million in cash from the net impact of the purchases and sales of available-for-sale debt and equity
securities, partially offset by a decrease of $107 million in cash used for the purchase of property and equipment.
Our net cash used in financing activities was $206 million for the year ended December 31, 2024, compared to $264 million for the year ended
December 31, 2023, a decrease of $58 million. This was primarily due to the net impact of our debt borrowings and repayments during the year ended
December 31, 2024, compared to the same period in 2023.
2023 Compared to 2022
Net cash provided by operating activities was approximately $210 million for the year ended December 31, 2023, compared to $300 million for the year
ended December 31, 2022. The decrease in cash provided by operating activities is partially the result of the payment of accumulated benefits under the
Company’s supplemental executive retirement plan, or SERP. Because securities are held in a rabbi trust to be used for the payment of SERP benefits, the
aforementioned cash outflow is offset by inflows from sales of investments, which are reflected as a cash inflow from investing activities as noted below.
Total cash paid for interest decreased to approximately $801 million for the year ended December 31, 2023, from approximately $835 million for the year
ended December 31, 2022. Cash paid for income taxes, net of refunds received, resulted in a net payment of $91 million and $6 million during the years
ended December 31, 2023 and 2022, respectively.
Our net cash used in investing activities was approximately $26 million for the year ended December 31, 2023, compared to approximately $259
million for the year ended December 31, 2022, a decrease of approximately $233 million. The decrease in net cash used in investing activities during the
year ended December 31, 2023, compared to the prior year, was primarily impacted by an increase of $99 million in cash from the net impact of the
purchases and sales of available-for-sale debt and equity securities, including securities sold to pay SERP benefits as noted above, an increase of $343
million in cash proceeds from dispositions of hospitals and other ancillary operations, a decrease of $8 million in cash used to purchase investments in
unconsolidated affiliates, an increase of $29 million in cash paid for acquisitions of facilities and other related businesses, an increase of $52 million in cash
used for the purchase of property and equipment, an increase of $5 million in cash used to purchase other investments, a decrease of $10 million in cash
proceeds from the sale of property and equipment, and a decrease resulting from $121 million in cash representing our share of proceeds from the
CoreTrust Transaction distributed during the year ended December 31, 2022, compared to the year ended December 31, 2023.
Our net cash used in financing activities was $264 million for the year ended December 31, 2023, compared to $430 million for the year ended
December 31, 2022, a decrease of $166 million. This was primarily due to the net effect of our debt repayments, refinancing activities, and cash paid for
deferred financing costs and other debt-related costs during the year ended December 31, 2023, compared to the same period in 2022.
64
Liquidity
Net working capital was approximately $956 million and $1.1 billion at December 31, 2024 and December 31, 2023, respectively. Net working capital
decreased by approximately $110 million between December 31, 2023 and December 31, 2024. The decrease is primarily due to decreases in prepaid
expenses and taxes and prepaid income taxes and increases in accrued interest, accrued liabilities for employee compensation and other current liabilities
during the year ended December 31, 2024, partially offset by increases in patient accounts receivable and other current assets and decreases in current
operating lease liabilities.
In addition to cash flows from operations, available sources of capital include amounts available under the asset-based loan (ABL) credit agreement, or
the ABL Credit Agreement, as amended and restated on June 5, 2024, and anticipated access to public and private debt markets as well as proceeds from
the disposition of hospitals or other investments such as our minority equity interests in various businesses, as applicable.
Pursuant to the ABL Credit Agreement, the lenders have extended to CHS/Community Health Systems, Inc., or CHS, a revolving asset-based loan
facility. The maximum aggregate amount under the ABL Facility is $1.0 billion, subject to borrowing base capacity. At December 31, 2024, we had
outstanding borrowings of $341 million and approximately $491 million of additional borrowing capacity (after taking into consideration $66 million of
outstanding letters of credit) under the ABL Facility. Letters of credit were reduced during the year ended December 31, 2024 by $15 million, primarily in
relation to a professional liability claim that was settled and funded during the year ended December 31, 2024. Principal amounts outstanding under the
ABL Facility, if any, will be due and payable in full on June 5, 2029.
2024 Financing Activity
On June 5, 2024, CHS completed the offering of an additional $1.225 billion aggregate principal amount of its outstanding 10.875% Senior Secured
Notes due 2032, or the Tack-On Notes, at an issue price of 102.000%, plus accrued and unpaid interest from December 22, 2023 to the closing date (which
equaled approximately $60 million). The Tack-On Notes are part of the same series as, and rank equally with, the 10⅞% Senior Secured Notes due 2032
issued in December 2023. Proceeds from the offering of the Tack-On Notes, together with cash on hand, were used to redeem all of the remaining $1.116
billion of outstanding 8.000% Senior Secured Notes due 2026, to fund senior note repurchases in the amount of approximately $98 million resulting in the
extinguishment of $130 million principal amount of the 6⅞% Senior Notes due 2028, pay related fees and expenses and for general corporate purposes.
On June 5, 2024, the ABL Credit Agreement, as noted above, was amended and restated to, among other things, extend the maturity to June 5, 2029.
During the year ended December 31, 2024, the Company extinguished approximately $143 million principal value of the 5⅝% Senior Secured Notes
due 2027 through open market repurchases utilizing cash on hand. An immaterial pre-tax and after-tax loss from early extinguishment resulted from these
repurchases.
2023 Financing Activity
On December 22, 2023, we completed a private offering of $1.000 billion aggregate principal amount of 10⅞% Senior Secured Notes due January 15,
2032, or the 10⅞% Senior Secured Notes due 2032. The proceeds of the offering were used, together with cash on hand, to redeem $985 million aggregate
principal amount of 8% Senior Secured Notes due 2026 via a tender offer, which was funded on December 28, 2023, and to pay related fees and expenses.
The 10⅞% Senior Secured Notes due 2032 bear interest at a rate of 10.875% per year payable semi-annually in arrears on February 15 and August 15 of
each year, commencing on August 15, 2024.
During the year ended December 31, 2023, we extinguished a portion of certain series of our outstanding notes through a combination of open market
and privately negotiated repurchases, as follows (in millions):
Principal Amount
6% Senior Secured Notes due 2029
$
256
6⅞% Junior-Priority Secured Notes due 2029
142
6⅛% Junior-Priority Secured Notes due 2030
4
Total principal amount of debt extinguished
$
402
65
A pre-tax gain from early extinguishment of debt of approximately $72 million was recognized associated with these financing activities during the year
ended December 31, 2023.
Additional Liquidity Information
For information regarding our amended and restated asset-based loan (ABL) credit agreement and our other outstanding indebtedness, see Note 6 of the
Notes to Consolidated Financial Statements included under Part II, Item 8 of this Form 10-K. Our ability to meet the restricted covenants and financial
ratios and tests in the ABL Facility and the indentures governing our outstanding notes can be affected by events beyond our control, and we cannot assure
you that we will meet those tests. A breach of any of these covenants could result in a default under the ABL Facility and/or the indentures that govern our
outstanding notes. Upon the occurrence of an event of default under the ABL Facility or indentures that govern our outstanding notes, all amounts
outstanding under the ABL Facility and the indentures that govern our outstanding notes may become immediately due and payable and all commitments
under the ABL Facility to extend further credit may be terminated.
As of December 31, 2024, approximately $20 million of our outstanding debt of approximately $11.5 billion is due within the next 12 months and
approximately 97% of our outstanding debt has a fixed rate of interest. Our debt as a percentage of total capitalization was 117% at December 31, 2024,
compared to 111% at December 31, 2023.
Net proceeds from divestitures, if any, are expected to be used for general corporate purposes (including potential debt repayments and/or debt
repurchases) and capital expenditures.
Challenging economic conditions may negatively impact our service mix, revenue mix, payor mix and patient volumes, as well as our ability to collect
outstanding receivables. Any material increase in our billing cycles or deterioration in the collectability of our accounts receivable would adversely affect
our cash flows and results of operations and may require an increased level of working capital.
We believe that our current levels of cash, internally generated cash flows and current levels of availability for additional borrowing under the ABL
Facility, our anticipated continued access to the capital markets, and the use of proceeds from any potential future dispositions as noted above, will be
sufficient to finance acquisitions, capital expenditures, working capital requirements, and any debt repurchases or other debt repayments we may elect to
make or be required to make through the next 12 months and the foreseeable future thereafter. However, the then current macroeconomic conditions,
financial and capital market conditions, and the then current interest rate environment may adversely impact our ability to refinance our indebtedness or
otherwise access capital on favorable terms, or at all.
As noted above, during the years ended December 31, 2024 and 2023, we extinguished a portion of certain series of our outstanding notes through open
market and privately negotiated repurchases, and we may elect from time to time to continue to purchase our outstanding debt in open market purchases,
privately negotiated transactions or otherwise. Any such debt repurchases will depend upon prevailing market conditions, our liquidity requirements,
contractual restrictions, applicable securities laws requirements, and other factors.
Capital Resources
Material cash requirements from known contractual and other obligations primarily consist of purchase obligations, long-term debt and related interest
payments, operating leases, finance leasing and financing obligations, and capital expenditures related to routine capital, information systems infrastructure
and applications, replacement or de novo construction projects and bed expansion projects, certain commitments and other investments. Refer to Notes 6, 9
and 16 of the Notes to Consolidated Financial Statements for amounts outstanding at December 31, 2024 related to long-term debt, and related interest
payments, operating leases, finance leasing and financing obligations, and certain commitments.
Purchase obligations include supplies and third-party services purchased in the normal course of business. Open purchase orders total $146 million at
December 31, 2024 and substantially all such amounts are due in the next 12 months. Other investments include, among other things, purchases of
investments in unconsolidated affiliates which are expected to be incurred within the next 24 months.
Cash expenditures for purchases of facilities and other related businesses were approximately $25 million in 2024, $38 million in 2023 and $9 million
in 2022. Our expenditures for the years ended December 31, 2024, 2023 and 2022, were primarily related to physician practices, clinics, ambulatory
surgery centers and other ancillary businesses.
66
Capital expenditures relate primarily to expansion and renovation of existing facilities, construction of additional access points such as freestanding
emergency departments and ambulatory surgery centers, investments in higher acuity service lines and information technology infrastructure, as well as
routine expenditures for equipment, minor renovations and other upgrades. Capital expenditures for the year ended December 31, 2024 totaled $360
million compared to $467 million in 2023 and $415 million in 2022. Included in the capital expenditures for the year ended December 31, 2022, were costs
to construct replacement hospitals totaling $17 million, primarily related to the construction of a replacement facility in Fort Wayne, Indiana.
Pursuant to a hospital purchase agreement from our March 1, 2016 acquisition of Northwest Health - Starke, formerly known as Starke Hospital, we
committed to make an investment of up to $15 million toward the construction of a replacement facility in Knox, Indiana. Construction 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 the event 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 lease with the lessor for Northwest
Health - Starke.
In addition to the commitment to spend up to $15 million toward the construction of a replacement facility in Knox, Indiana, other off-balance sheet
arrangements consist of letters of credit issued on the ABL Facility, primarily in support of potential insurance-related claims and specified outstanding
bonds of approximately $66 million as well as approximately $9 million representing the maximum potential amount of future payments under physician
recruiting guarantee commitments in excess of the liability recorded at December 31, 2024.
We expect total capital expenditures of approximately $350 million to $400 million in 2025.
Reimbursement, Legislative and Regulatory Changes
Ongoing legislative and regulatory efforts and judicial interpretations could reduce or otherwise adversely affect the payments we receive from
Medicare and Medicaid and other payors. Within the statutory framework of the Medicare and Medicaid programs, there are substantial areas subject to
administrative rulings, interpretations and discretion that are at times subject to court challenges, which may further affect payments made under those
programs. We expect legal challenges to healthcare regulations and agency guidance, including those related to Medicare and Medicaid payment policies,
to increase as a result of recent U.S. Supreme Court decisions as noted above. The increased potential for legal challenges may result in delays in and other
impacts to the agency rulemaking process. Further, the federal and state governments may reduce the funds available under the Medicare and Medicaid
programs, require repayment of previously received funds or require more stringent utilization and quality reviews of hospital facilities. Additionally, there
may be a continued rise in managed care programs and further restructuring of the financing and delivery of healthcare in the United States. These events
could adversely impact our future financial results. We cannot estimate the impact of Medicare and Medicaid reimbursement changes that have been
enacted or otherwise determined or that are currently or may in the future be under consideration. We cannot predict whether additional reimbursement
reductions will be made or whether any such changes or other restructuring of the financing and delivery of healthcare would have a material adverse effect
on our business, financial conditions, results of operations, cash flow, capital resources and liquidity.
Critical Accounting Policies
The discussion and analysis of our financial condition and results of operations are based upon our consolidated financial statements, which have been
prepared in accordance with U.S. GAAP. The preparation of these financial statements requires us to make estimates and judgments that affect the reported
amount of assets and liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities at the date of our consolidated financial
statements. Actual results may differ from these estimates under different assumptions or conditions.
Critical accounting policies are defined as those policies that involve a significant level of estimation uncertainty and have had or are reasonably likely
to have a material impact on the financial condition or results of operations of the registrant. We believe that our critical accounting policies are limited to
those described below. The following information should be read in conjunction with our significant accounting policies included in Note 1 of the Notes to
the Consolidated Financial Statements included under Part II, Item 8 of this Form 10-K.
Revenue Recognition
Net operating revenues include amounts estimated by management to be reimbursable by Medicare and Medicaid under prospective payment systems
and provisions of cost-reimbursement and other payment methods. In addition, we are reimbursed by non-governmental payors using a variety of payment
methodologies. Amounts we receive for treatment of patients covered by these programs are generally less than our standard billing rates. Explicit price
concessions are recorded for contractual allowances that are calculated and recorded through a combination of internally- and externally-developed data
collection and analysis tools to automate the monthly estimation of required contractual allowances. Within these automated systems, payors’ historical
paid claims data and
67
contracted amounts are utilized to calculate the contractual allowances. This data is updated on a monthly basis. All hospital contractual allowance
calculations are subjected to monthly review by management to ensure reasonableness and accuracy. We account for the differences between the estimated
program reimbursement rates and the standard billing rates as contractual allowance adjustments, which is one component of the deductions from gross
revenues to arrive at net operating revenues. The process of estimating contractual allowances requires us to estimate the amount expected to be received
based on payor contract provisions. The key assumption in this process is the estimated contractual reimbursement percentage, which is based on payor
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
actual contractual reimbursement percentage under government programs and managed care contracts differed by 1% at December 31, 2024 from our
estimated reimbursement percentage, net loss for the year ended December 31, 2024 would have changed by approximately $100 million, and net accounts
receivable at December 31, 2024 would have changed by $128 million. Final settlements under some of these programs are subject to adjustment based on
administrative review and audit by third parties. We account for adjustments to previous 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 by an insignificant amount for each of the years ended December 31, 2024,
2023 and 2022.
Patient Accounts Receivable
Substantially all of our accounts receivable are related to providing healthcare services to patients at our hospitals and affiliated businesses. Collection
of these accounts receivable is our primary source of cash and is critical to our operating performance. Our primary collection risks relate to uninsured
patients and outstanding patient balances for which the primary insurance payor has paid some but not all of the outstanding balance, with the remaining
outstanding balance (generally deductibles and co-payments) owed by the patient. For all procedures scheduled in advance, our policy is to verify insurance
coverage prior 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 without
regard to aging category, based on collection history, adjusted for expected recoveries and any anticipated changes in trends. Our ability to estimate the
transaction price and any implicit price concessions is not impacted by not utilizing an aging of our net accounts receivable as we believe that substantially
all 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 our
collection history. We believe that we collect substantially all of our third-party insured receivables, which include receivables from governmental
agencies.
Patient accounts receivable can be impacted by the effectiveness of our collection efforts and, as described in our significant accounting policies
included in Note 1 of the Notes to Consolidated Financial Statements included under Part II, Item 8 of this Form 10-K, numerous factors may affect the net
realizable value of accounts receivable. If the actual collection percentage differed by 1% at December 31, 2024 from our estimated collection percentage
as a result of a change in expected recoveries, net loss for the year ended December 31, 2024 would have changed by $38 million, and net accounts
receivable at December 31, 2024 would have changed by $49 million. We also continually review our overall reserve adequacy by monitoring historical
cash collections as a percentage of trailing net operating revenues, as well as by analyzing current period net operating revenues and admissions by payor
classification, days revenue outstanding, the composition of self-pay receivables between pure self-pay patients and the patient responsibility portion of
third-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 or when such amounts are placed with outside collection agencies. We
believe this policy accurately reflects our ongoing collection efforts and is consistent with industry practices. We had approximately $1.6 billion and $1.7
billion at December 31, 2024 and 2023, respectively, being pursued by various outside collection agencies. We expect to collect less than 4%, net of
estimated collection fees, of the amounts being pursued by outside collection agencies. As these amounts have been written-off, they are not included in our
accounts receivable. Collections on amounts previously written-off are recognized as a recovery of net operating revenues when received. However, we
take into consideration estimated collections of these future amounts written-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 and divested facilities, was 55
days and 58 days at December 31, 2024 and 2023, respectively.
68
Total gross accounts receivable (prior to allowance for contractual adjustments and implicit price concessions) was approximately $17.3 billion and
$16.8 billion at December 31, 2024 and 2023, respectively. The approximate percentage of total gross accounts receivable (prior to allowance for
contractual adjustments and implicit price concessions) summarized by payor and aging categories is as follows:
At December 31, 2024:
% of Gross Receivables
Payor
0 - 90 Days
90 - 180 Days
180 - 365 Days
Over 365 Days
Medicare
10 %
— %
— %
— %
Medicare Managed Care
16 %
3 %
3 %
2 %
Medicaid
6 %
1 %
1 %
1 %
Managed Care and other third-party payors
19 %
3 %
3 %
3 %
Self-Pay
7 %
6 %
8 %
8 %
At December 31, 2023:
% of Gross Receivables
Payor
0 - 90 Days
90 - 180 Days
180 - 365 Days
Over 365 Days
Medicare
10 %
1 %
1 %
— %
Medicare Managed Care
16 %
3 %
3 %
2 %
Medicaid
6 %
1 %
1 %
1 %
Managed Care and other third-party payors
18 %
3 %
3 %
3 %
Self-Pay
7 %
6 %
7 %
8 %
The approximate percentage of total gross accounts receivable (prior to allowances for contractual adjustments and implicit price concessions)
summarized by payor type is as follows:
December 31,
2024
2023
Insured receivables
72.4 %
72.1 %
Self-pay receivables
27.6
27.9
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 other
self-pay discounts and contractuals, as a percentage of gross self-pay receivables, was approximately 90% and 91% at December 31, 2024 and 2023,
respectively. If the receivables that have been written-off, but where collections are still being pursued by outside collection agencies, were included in
both the allowances and gross self-pay receivables specified above, the percentage of combined allowances to total self-pay receivables would have been
93% at both December 31, 2024 and 2023.
Goodwill
At December 31, 2024, we had approximately $3.8 billion of goodwill recorded, all of which resides at our hospital operations reporting unit. Goodwill
represents the excess of the fair value of the consideration conveyed in an acquisition over the fair value of net assets acquired. Goodwill is evaluated for
impairment annually and when an event occurs or circumstances change that, more likely than not, reduce the fair value of the reporting unit below its
carrying value. We performed our last annual goodwill impairment evaluation during the fourth quarter of 2024 using the October 31, 2024 measurement
date, which indicated no impairment.
The determination of fair value in our goodwill impairment analysis is based on an estimate of fair value for the hospital operations reporting 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 our common stock
and fair value of our long-term debt, our recent financial results, estimates of future revenue and expense growth, estimated market multiples, expected
capital expenditures, income tax rates, costs of invested capital and a discount rate.
Future estimates of fair value could be adversely affected if the actual outcome of one or more of the assumptions described above changes materially
in the future, including as a result of any decline in or increased volatility of our stock price and the fair value of our long-term debt, lower than expected
hospital volumes and/or net operating revenues, higher market interest rates, increased operating costs or other adverse impacts on our financial results.
Such changes impacting the calculation of our fair value could result in a material impairment charge in the future.
69
Professional Liability Claims
As part of our business of providing healthcare services, we are subject to legal actions alleging liability on our part. We accrue for losses resulting from
such liability claims, as well as loss adjustment expenses that are out-of-pocket and directly related to such liability claims. These direct out-of-pocket
expenses 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-house
legal and risk management departments. The losses resulting from professional liability claims primarily consist of estimates for known claims, as well as
estimates for incurred but not reported claims. The estimates are based on specific claim facts, our historical claim reporting and payment patterns, the
nature and 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. As discussed below, since we purchase excess insurance on a claims-made basis that transfers risk
to third-party insurers, the estimated liability for professional and general liability claims does include an amount for the losses covered by our excess
insurance. We also record a receivable for the expected reimbursement of losses covered by our excess insurance. Since we believe that the amount and
timing of our future claims payments are reliably determinable, we discount the amount we accrue for losses resulting from professional liability claims.
The net present value of the projected payments was discounted using weighted-average risk free rates of 3.7% in both 2024 and 2023, and 3.8% in
2022. This liability is adjusted for new claims information in the period such information becomes known to us. Professional liability expense includes the
losses resulting from professional liability claims and loss adjustment expense, as well as excess insurance premiums, and is presented within other
operating expenses in the accompanying consolidated statements of (loss) income.
Our processes for obtaining and analyzing claims and incident data are standardized across all of our businesses 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 and circumstances related to that claim. In addition, we routinely monitor current key statistics and volume indicators in our assessment of utilizing
historical trends. The average lag period between claim occurrence and payment of a final settlement is between three and four years, although the facts and
circumstances of individual claims could result in the timing of such payments being different from this average. Since claims are paid promptly after
settlement with the claimant is reached, settled claims represent approximately 4% or less 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 claim
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 are
determined, information is stratified by loss layers and retentions, accident years, reported years and geography. Several actuarial methods are used to
produce estimates of ultimate paid losses and reserves for incurred but not reported claims. Each of these methods uses our company-specific historical
claims data and other information. Company-specific data includes information regarding our business, including historical paid losses and loss adjustment
expenses, historical and current 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. Significant assumptions are made on
the basis of the aforementioned information in estimating reserves for incurred but not reported claims. A 1% change in assumptions for either severity or
frequency at December 31, 2024 would have increased or decreased the reserve by approximately $5 million to $10 million.
Based on these analyses, we periodically review and determine our estimate of the professional liability claims. The determination of management’s
estimate, including the preparation of the reserve analysis that supports such estimate, involves subjective judgment of management. Changes in reserve
data or the trends and factors that influence reserve 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 until 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, we typically cannot quantify
the precise impact of such factors on our estimates of the liability. Due to our standardized and consistent processes for handling claims and the long
history and depth of our company-specific data, our methodologies have historically produced reliably determinable estimates of ultimate paid losses.
Management considers any changes in the amount and pattern of its historical paid losses up through the most recent reporting period to identify any
fundamental shifts or trends in claim development experience in determining the estimate of professional liability claims. However, due to the subjective
nature of this estimate and the impact that previously unforeseen shifts in actual claim experience can have, future estimates of professional liability could
be adversely impacted when actual paid losses develop unexpectedly based on assumptions and settlement events that were not previously known or
anticipated.
70
Year Ended December 31,
2024
2023
2022
Accrual for professional liability claims, beginning of year
$
443 $
467 $
533
Liability for insured claims (1)
13
17
(5 )
Expense (income) related to:
Current accident year
145
98
92
Prior accident years
170
69
19
Expense (income) from discounting
—
1
(18 )
Total incurred loss and loss expense (2)
315
168
93
Paid claims and expenses related to:
Current accident year
—
—
—
Prior accident years
(198 )
(209 )
(154 )
Total paid claims and expenses
(198 )
(209 )
(154 )
Accrual for professional liability claims, end of year
$
573 $
443 $
467
(1)
The liability for insured claims is recorded in the consolidated balance sheets with a corresponding insurance recovery receivable.
(2)
Total expense, including premiums for insured coverage, was $372 million in 2024, $208 million in 2023 and $132 million in 2022.
In the ordinary course of business, our expense with respect to professional liability claims, which is actuarially determined, is limited to amounts not
covered by third-party insurance policies, which typically provide coverage for professional liability claims. During the year ended December 31, 2022, we
experienced an increase in the amounts paid or expected to be paid to settle outstanding professional liability claims related to divested locations, compared
to the same period in the prior year and to previous actuarially determined estimates. This resulted in a change in estimate of $15 million during the year
ended December 31, 2022. During the year ended December 31, 2023, we experienced an increase in the amounts paid or expected to be paid to settle
outstanding professional liability claims, compared to the same period in the prior year and to previous actuarially determined estimates due to adverse
claim developments. During the year ended December 31, 2024, in connection with our periodic review of the professional liability claims accrual, we,
with input from our third-party actuary, considered recent increases in the amounts paid to resolve outstanding professional liability claims arising in prior
periods as well as recent increases in individual claim accruals for unresolved prior period claims. The emergence in the period of adverse developments,
including from social inflationary pressures, impacted the actuarially determined estimate for the resolution of professional liability claims and resulted in
an upward revision to the professional liability claims accrual estimate in the amount of $149 million during the year ended December 31, 2024, the
majority of which increase in estimate related to divested locations. There were no other significant changes in our estimate of the reserve for professional
liability claims during the years ended December 31, 2024, 2023 and 2022.
We are primarily self-insured for professional liability claims; however, we obtain excess insurance that transfers the risk of loss to a third-party insurer
for claims in excess of 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 our 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. 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 the insured risk at certain hospitals based upon insurance pricing and other factors and may continue that practice in the future.
Excess insurance for all hospitals has been purchased through commercial insurance companies and generally covers us for liabilities 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 per occurrence 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 or after 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 at least $215 million per occurrence
and in the aggregate for claims reported on or after June 1, 2015. In addition, for integrated occurrence professional liability 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 after
June 1, 2015 through June 1, 2020. The $75 million in integrated occurrence coverage will also apply to claims reported between June 1, 2020 and June 1,
2025 for events that occurred prior to June 1, 2020 but which were not previously known or reported. For certain policy years prior to June 1, 2014, if the
first aggregate layer of excess coverage becomes fully utilized, then the self-insured retention will
71
increase to $10 million per claim for any subsequent claims in that policy year until our 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.
Income Taxes
We must make estimates in recording provision for income taxes, including determination of deferred tax assets and deferred tax liabilities and any
valuation 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 $42 million at December 31, 2024. A total of $5
million of interest and penalties is included in the amount of liability for uncertain tax positions at December 31, 2024. It is our policy to recognize interest
and penalties related to unrecognized benefits in our consolidated statements of (loss) income 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
settlements with taxing authorities; however, we do not anticipate the change will have a material impact on our consolidated results of operations or
consolidated financial position.
Our income tax return for the 2018 tax year has been effectively settled with the Internal Revenue Service in 2024. The settlement was not material to
our consolidated results of operations or consolidated financial position. Our income tax return for the 2021 and 2022 tax years are under examination by
the Internal Revenue Service. We believe the result of this examination will not be material to our consolidated results of operations or consolidated
financial position.
Recent Accounting Pronouncements
In December 2023, the Financial Accounting Standards Board issued Accounting Standards Update, or ASU, 2023-09, “Income Taxes (Topic 740),
Improvements to Income Tax Disclosures.” This ASU establishes new requirements for the categorization and disaggregation of information in the rate
reconciliation as well as for disaggregation of income taxes paid. Additionally, this ASU modifies and eliminates certain existing requirements for
indefinitely reinvested foreign earnings and unrecognized tax benefits. This ASU is effective for annual periods beginning after December 15, 2024 and
interim periods beginning after December 15, 2025. The amendments in this ASU should be applied on a prospective basis and early adoption is permitted.
We are currently evaluating the impact that adoption of this ASU will have on our consolidated financial statements.
We have evaluated all other recently issued, but not yet effective, ASUs and do not expect the eventual adoption of such ASUs to have a material
impact on our consolidated financial position or results of operations.
FORWARD-LOOKING STATEMENTS
This Form 10-K contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, Section 21E of the
Securities Exchange Act of 1934, as amended, and the Private Securities Litigation Reform Act of 1995 that involve risk and uncertainties. Statements that
are predictive in nature, that depend upon or refer to future events or conditions or that include words such as “expects,” “anticipates,” “intends,” “plans,”
“believes,” “estimates,” “thinks,” and similar expressions are forward-looking statements. These statements involve known and unknown risks,
uncertainties, and other factors that may cause our actual results and performance to be materially different from any future results or performance
expressed or implied by these forward-looking statements. A number of factors could affect the future results of the Company or the healthcare industry
generally and could cause the Company’s expected results to differ materially from those expressed in this Form 10-K. These factors include, among other
things:
•
general economic and business conditions, both nationally and in the regions in which we operate, including the impact in recent periods of
challenging macroeconomic conditions and inflationary pressures, the current high interest rate environment, and current geopolitical instability, as
well as the potential impact on us of political, financial, credit and capital conditions;
•
the impact of current and future healthcare public policy developments and possible changes to federal, state or local laws, regulations and policies
affecting the healthcare industry, including changes affecting the structure of or funding for the Medicare and Medicaid programs;
•
changes by the federal and state governments to state Medicaid programs, including the extent and nature of structural and funding changes and
manner in which any such changes are implemented, and other developments that affect the administration of health insurance exchanges or alter or
reduce the provision of, or payment for, healthcare to state residents through legislation, regulation or otherwise;
72
•
changes related to health insurance enrollment, including those affecting the beneficiary enrollment process and the stability of health insurance
exchanges, and the expiration of the temporarily enhanced subsidies available for individuals to purchase coverage through Affordable Care Act
marketplaces;
•
risks associated with our substantial indebtedness, leverage and debt service obligations, including our ability to refinance such indebtedness on
acceptable terms or to incur additional indebtedness, and our ability to remain in compliance with debt covenants;
•
demographic changes;
•
changes in, or the failure to comply with, federal, state or local laws or governmental regulations affecting our business;
•
judicial developments impacting the Company or the healthcare industry, including the potential impact of the recent decisions of the U.S. Supreme
Court regarding the actions of federal agencies;
•
potential adverse impact of known and unknown legal, regulatory and governmental proceedings and other loss contingencies, including
governmental investigations and audits, and federal and state false claims act litigation;
•
our ability to enter into and maintain provider arrangements with payors and the terms of these arrangements, which may be further affected by the
increasing consolidation of health insurers and managed care companies and vertical integration efforts involving payors and healthcare providers;
•
changes in, or the failure to comply with, contract terms with payors and changes in reimbursement policies, methodologies or rates paid by federal
or state healthcare programs or commercial payors;
•
security breaches, cyber-attacks, loss of data, other cybersecurity threats or incidents, including those experienced with respect to our information
systems or the information systems of third parties with whom we conduct business, and any actual or perceived failures to comply with legal
requirements governing the privacy and security of health information or other regulated, sensitive or confidential information, or legal requirements
regarding data privacy or data protection;
•
the development, adoption and use of emerging technologies, including artificial intelligence and machine learning;
•
any potential impairments in the carrying value of goodwill, other intangible assets, or other long-lived assets, or changes in the useful lives of other
intangible assets;
•
the effects related to the sequestration spending reductions pursuant to the Budget Control Act of 2011 and the potential for future deficit reduction
legislation;
•
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-based
purchasing and increased reimbursement denials by insurers;
•
the impact of competitive labor market conditions, including in connection with our ability to hire and retain qualified nurses, physicians, other
medical personnel and key management, and increased labor expenses arising from inflation and/or competition for such positions;
•
the inability of third parties with whom we contract to provide hospital-based physicians and the effectiveness of our efforts to mitigate such non-
performance including through acquisitions of outsourced medical specialist businesses, engagement with new or replacement providers,
employment of physicians and re-negotiation or assumption of existing contracts;
•
any failure to obtain medical supplies or pharmaceuticals at favorable prices;
•
liabilities and other claims asserted against us, including self-insured professional liability claims;
•
competition;
•
trends toward treatment of patients in less acute or specialty healthcare settings, including ambulatory surgery centers or specialty hospitals or via
telehealth;
•
changes in medical or other technology;
•
any failure of key business functions, including our ability to realize the intended benefits of a new core enterprise resource planning system and the
redesigned and consolidated processes which are supported by such system;
•
changes in U.S. GAAP;
•
the availability and terms of capital to fund any additional acquisitions or replacement facilities or other capital expenditures;
73
•
our ability to successfully make acquisitions or complete divestitures, 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 or divestitures;
•
the impact that changes in our relationships with joint venture or syndication partners could have on effectively operating our hospitals or ancillary
services or in advancing strategic opportunities;
•
our ability to successfully integrate any acquired hospitals and/or outpatient facilities, or to realize expected benefits from acquisitions such as
increased growth in patient service revenues;
•
the impact of severe weather conditions and climate change, as well as the timing and amount of insurance recoveries in relation to severe weather
events;
•
our ability to obtain adequate levels of insurance, including general liability, professional liability, cyber liability and directors’ and officers’ liability
insurance;
•
timeliness of reimbursement payments received under government programs;
•
effects related to pandemics, epidemics, outbreaks of infectious diseases or other public health crises;
•
any failure to comply with our obligations under license or technology agreements;
•
challenging economic conditions in non-urban communities in which we operate;
•
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;
•
any changes in or interpretations of income tax laws and regulations; and
•
the risk factors set forth in this Form 10-K 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
significant regulatory, economic and competitive uncertainties and contingencies, which are difficult or impossible to predict accurately and may be
beyond our control. Accordingly, we cannot give any assurance that our expectations will in fact occur, and we caution that actual results may differ
materially from those in the forward-looking statements. Given these uncertainties, prospective investors are cautioned not to place undue reliance on these
forward-looking statements. These forward-looking statements are made as of the date of this filing. We undertake no obligation to revise or update any
forward-looking statements, or to make any other forward-looking statements, whether as a result of new information, future events or otherwise.
Item 7A. Quantitative and Qualitative Disclosures about Market Risk
We are exposed to market risk related to changes in market value of marketable securities including debt and equity securities held by our wholly-
owned captive insurance subsidiaries as well as securities held for certain deferred compensation plans. Available-for-sale debt securities are reported at
fair value as determined by quoted market prices, with unrealized gains and losses reported as a separate component of stockholders’ deficit. Trading
securities are reported at fair value with unrealized gains and losses included in earnings. There was no comprehensive income or loss resulting from
unrealized gains or losses on marketable securities during the year ended December 31, 2024.
We are exposed to market risk related to market illiquidity. Investments in debt and equity securities of our insurance subsidiaries could be impaired by
the inability to access the capital markets. Should the insurance subsidiaries require significant amounts of cash in excess of normal cash requirements to
pay claims and other expenses on short notice, we may have difficulty selling these investments in a timely manner or be forced to sell them at a price less
than what we might otherwise have been able to in a normal market environment. We may be required to recognize credit-related impairments on our
investment securities in future periods should issuers default on interest payments or should the fair market valuations of the securities deteriorate due to
ratings downgrades or other issue-specific factors.
We are also exposed to market risk related to changes in interest rates, primarily as a result of the ABL Facility, which bears interest based on floating
rates. At December 31, 2024, we had outstanding borrowings of $341 million under the ABL Facility.
The estimated fair value of our long-term debt, excluding finance leases, was approximately $9.9 billion at December 31, 2024. The estimates of fair
value are based upon the quoted market prices for the same or similar issues of long-term debt with the same maturities. Based on a hypothetical 1%
increase in interest rates, the potential annualized reduction to future pre-tax earnings would be approximately $117 million. To mitigate the impact of
fluctuations in interest rates, we generally target a majority of our debt portfolio to be maintained at fixed rates.
74
Item 8. Financial Statements and Supplementary Data
Index to Financial Statements
Page
Community Health Systems, Inc. Consolidated Financial Statements:
Report of Independent Registered Public Accounting Firm (PCAOB ID No. 34)
75
Consolidated Statements of (Loss) Income for the Years Ended December 31, 2024, 2023 and 2022
77
Consolidated Statements of Comprehensive (Loss) Income for the Years Ended December 31, 2024, 2023 and 2022
78
Consolidated Balance Sheets as of December 31, 2024 and 2023
79
Consolidated Statements of Stockholders’ Deficit for the Years Ended December 31, 2024, 2023 and 2022
80
Consolidated Statements of Cash Flows for the Years Ended December 31, 2024, 2023 and 2022
81
Notes to Consolidated Financial Statements
82
75
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the stockholders and the Board of Directors of Community Health Systems, Inc.
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of Community Health Systems, Inc. and subsidiaries (the “Companyˮ) as of December
31, 2024 and 2023, the related consolidated statements of (loss) income, comprehensive (loss) income, stockholders’ deficit, and cash flows, for each of the
three years in the period ended December 31, 2024, and the related notes (collectively referred to as the “financial statementsˮ). In our opinion, the
financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2024 and 2023, and the results of its
operations and its cash flows for each of the three years in the period ended December 31, 2024, in conformity with accounting 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’s
internal control over financial reporting as of December 31, 2024, based on criteria established in Internal Control — Integrated Framework (2013) issued
by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated February 19, 2025 expressed an unqualified opinion on
the Company’s internal control over financial reporting.
Basis for Opinion
These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial
statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the
Company in 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
reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included
performing procedures to 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 included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the
overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
Critical Audit Matters
The critical audit matters communicated below are matters arising from the current-period audit of the financial statements that were communicated or
required to be communicated to the audit committee and that (1) relate to accounts or disclosures that are material to the financial statements and (2)
involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion
on the financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical
audit matters or on the accounts or disclosures to which they relate.
Patient Accounts Receivable — Refer to Note 1 to the financial statements
Critical Audit Matter Description
Patient accounts receivable are recorded net of implicit price concessions for insured and self-pay patients. The Company’s primary collection risks
relate to uninsured patients and outstanding patient balances for which the primary insurance payor has paid some, but not all of the outstanding balance,
with the remaining outstanding balance (generally deductibles and co-payments) owed by the patient. The Company estimates any adjustments to the
transaction price for implicit price concessions by reserving a percentage of all self-pay accounts receivable without regard to aging category, based on
collection history, adjusted for expected recoveries and any anticipated changes in trends.
76
Given that auditing management’s estimate of self-pay price concessions was complex and judgmental due to the significant data inputs and subjective
assumptions utilized in determining related amounts, performing audit procedures to evaluate whether the self-pay price concessions were appropriately
recorded as of December 31, 2024, required a high degree of auditor judgment and an increased extent of effort.
How the Critical Audit Matter Was Addressed in the Audit
Our audit procedures related to management’s estimate of implicit price concessions associated with self-pay accounts receivable included the
following, among others:
•
We tested management’s internal controls that address the risks of material misstatement related to the Company’s estimation of implicit self-pay
price concessions.
•
We evaluated management’s methodology and related assumptions, including cash collections, by comparing actual results to management’s
historical estimates.
•
We developed an expectation for self-pay price concession by payor and compared it to the recorded balance.
•
We evaluated the appropriateness of the industry, economic, and Company factors that were used in determining the net realizable value of self-
pay accounts receivable.
Professional Liability Claims — Refer to Note 16 to the financial statements
Critical Audit Matter Description
As part of the Company’s business of providing health care services, they are subject to legal actions alleging liability on their part. The Company
accrues for losses resulting from such liability claims, as well as loss adjustment expenses that are out-of-pocket and directly related to such liability
claims. These direct out-of-pocket expenses include fees of outside counsel and experts.
The Company is self-insured for professional liability claims up to certain self-insured retention limits based on the policy year. Professional liabilities
consist of the projected settlement value of reported and unreported claims. The self-insurance reserves are estimated based on the Company’s historical
claims experience, supplemented with industry experience, as necessary, and is established using actuarial methods followed in the insurance industry.
Given the subjectivity of estimating the projected settlement value of reported and unreported claims, performing audit procedures to evaluate whether
professional liability claims were appropriately recorded as of December 31, 2024, required a high degree of auditor judgment and an increased extent of
effort, including the need to involve our actuarial specialists.
How the Critical Audit Matter Was Addressed in the Audit
Our audit procedures related to the self-insured professional liability claims included the following, among others:
•
We tested management’s internal controls that address the risks of material misstatement related to professional liability claims, including those
over the projection of the settlement value of reported and unreported claims.
•
We tested the underlying data that served as the basis for the actuarial analysis, including historical claims, to test that the inputs to the actuarial
estimate were reasonable.
•
With the assistance of our actuarial specialists, we developed independent estimates of the professional liability claims, including loss data and
industry claim development factors, and compared our estimates to management’s estimates.
/s/ Deloitte & Touche LLP
Nashville, Tennessee
February 19, 2025
We have served as the Company’s auditor since 1996.
77
COMMUNITY HEALTH SYSTEMS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF (LOSS) INCOME
Year Ended December 31,
2024
2023
2022
(In millions, except share and per share data)
Net operating revenues
$
12,634 $
12,490 $
12,211
Operating expenses:
Salaries and benefits
5,418
5,415
5,330
Supplies
1,946
1,993
1,975
Other operating expenses
3,642
3,388
3,336
Lease cost and rent
299
319
317
Pandemic relief funds
—
—
(173 )
Depreciation and amortization
486
505
534
Impairment and (gain) loss on sale of businesses, net
301
(87 )
71
Total operating expenses
12,092
11,533
11,390
Income from operations
542
957
821
Interest expense, net of interest income of $3, $2 and $2 in 2024, 2023
and 2022, respectively
860
830
858
Gain from early extinguishment of debt
(25 )
(72 )
(253 )
Gain from CoreTrust Transaction
—
—
(119 )
Equity in earnings of unconsolidated affiliates
(10 )
(8 )
(14 )
(Loss) income before income taxes
(283 )
207
349
Provision for income taxes
79
191
170
Net (loss) income
(362 )
16
179
Less: Net income attributable to noncontrolling interests
154
149
133
Net (loss) income attributable to Community Health
Systems, Inc. stockholders
$
(516 ) $
(133 ) $
46
(Loss) earnings per share attributable to Community Health Systems,
Inc. stockholders:
Basic
$
(3.90 ) $
(1.02 ) $
0.35
Diluted
$
(3.90 ) $
(1.02 ) $
0.35
Weighted-average number of shares outstanding:
Basic
132,101,768
130,445,677
128,808,387
Diluted
132,101,768
130,445,677
130,060,319
See accompanying notes to the consolidated financial statements.
78
COMMUNITY HEALTH SYSTEMS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE (LOSS) INCOME
Year Ended December 31,
2024
2023
2022
(In millions)
Net (loss) income
$
(362 ) $
16 $
179
Other comprehensive income (loss), net of income taxes:
Net change in fair value of available-for-sale debt securities, net
of tax of $0, $1 and $5 for the years ended December 31, 2024,
2023 and 2022, respectively
—
6
(17 )
Amortization and recognition of unrecognized pension cost
components, net of tax of $1, $0 and $3 for the years ended
December 31, 2024, 2023 and 2022, respectively
4
1
10
Other comprehensive income (loss)
4
7
(7 )
Comprehensive (loss) income
(358 )
23
172
Less: Comprehensive income attributable to noncontrolling interests
154
149
133
Comprehensive (loss) income attributable to Community Health Systems,
Inc. stockholders
$
(512 ) $
(126 ) $
39
See accompanying notes to the consolidated financial statements.
79
COMMUNITY HEALTH SYSTEMS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
December 31, 2024
December 31, 2023
(In millions, except share data)
ASSETS
Current assets:
Cash and cash equivalents
$
37
$
38
Patient accounts receivable (Note 1)
2,286
2,231
Supplies
331
328
Prepaid income taxes
53
76
Prepaid expenses and taxes
236
260
Other current assets
358
275
Total current assets
3,301
3,208
Property and equipment
Land and improvements
427
474
Buildings and improvements
5,658
5,951
Equipment and fixtures
3,075
3,086
Property and equipment
9,160
9,511
Less accumulated depreciation and amortization
(4,384 )
(4,304 )
Property and equipment, net
4,776
5,207
Goodwill
3,789
3,958
Deferred income taxes
13
29
Other assets, net of accumulated amortization of $1,501 and $1,518 at December 31, 2024
and 2023, respectively
2,175
2,053
Total assets
$
14,054
$
14,455
LIABILITIES AND STOCKHOLDERS’ DEFICIT
Current liabilities:
Current maturities of long-term debt
$
20
$
21
Current operating lease liabilities
115
124
Accounts payable
913
912
Accrued liabilities:
Employee compensation
596
571
Accrued interest
222
160
Other
479
354
Total current liabilities
2,345
2,142
Long-term debt
11,432
11,466
Deferred income taxes
231
369
Long-term operating lease liabilities
535
563
Other long-term liabilities
828
739
Total liabilities
15,371
15,279
Redeemable noncontrolling interests in equity of consolidated subsidiaries
359
323
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;
138,919,641 shares issued and outstanding at December 31, 2024, and
136,774,911 shares issued and outstanding at December 31, 2023
1
1
Additional paid-in capital
2,175
2,185
Accumulated other comprehensive loss
(10 )
(14 )
Accumulated deficit
(4,080 )
(3,564 )
Total Community Health Systems, Inc. stockholders’ deficit
(1,914 )
(1,392 )
Noncontrolling interests in equity of consolidated subsidiaries
238
245
Total stockholders’ deficit
(1,676 )
(1,147 )
Total liabilities and stockholders’ deficit
$
14,054
$
14,455
See accompanying notes to the consolidated financial statements.
80
COMMUNITY HEALTH SYSTEMS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ DEFICIT
Community Health Systems, Inc. Stockholders
Redeem
able
Noncont
rolling
Common Stock
Additiona
l
Paid-in
Accumulate
d
Other
Comprehen
sive
Accumul
ated
Noncontrol
ling
Total
Stockholder
s’
Interests
Shares
Amou
nt
Capital
Loss
Deficit
Interests
Deficit
(In millions, except share data)
Balance, December 31, 2021
$
480
132,146,28
2 $
1 $
2,118 $
(14 ) $
(3,477 ) $
82 $
(1,290 )
Comprehensive income (loss)
92
—
—
—
(7 )
46
41
80
Contributions from noncontrolling interests
2
—
—
—
—
—
11
11
Distributions to noncontrolling interests
(80 )
—
—
—
—
—
(45 )
(45 )
Purchase of subsidiary shares from noncontrolling interests
1
—
—
(6 )
—
—
—
(6 )
Noncontrolling interests in acquired entity
6
—
—
—
—
—
3
3
Adjustment to redemption value of redeemable
noncontrolling interests
40
—
—
(40 )
—
—
—
(40 )
Cancellation of restricted stock for tax withholdings on
vested shares
—
(828,952 )
—
(8 )
—
—
—
(8 )
Issuance of common stock in connection with the exercise
of stock options
—
56,500
—
—
—
—
—
—
Stock-based compensation
—
3,329,887
—
20
—
—
—
20
Balance, December 31, 2022
541
134,703,71
7
1
2,084
(21 )
(3,431 )
92
(1,275 )
Comprehensive income (loss)
73
—
—
—
7
(133 )
76
(50 )
Contributions from noncontrolling interests
1
—
—
—
—
—
4
4
Distributions to noncontrolling interests
(72 )
—
—
—
—
—
(69 )
(69 )
Purchase of subsidiary shares from noncontrolling interests
(7 )
—
—
5
—
—
—
5
Other reclassifications of noncontrolling interests
(266 )
—
—
121
—
—
142
263
Noncontrolling interests in acquired entity
10
—
—
—
—
—
—
—
Adjustment to redemption value of redeemable
noncontrolling interests
43
—
—
(43 )
—
—
—
(43 )
Cancellation of restricted stock for tax withholdings on
vested shares
—
(722,606 )
—
(4 )
—
—
—
(4 )
Issuance of common stock in connection with the exercise
of stock options
—
15,001
—
—
—
—
—
—
Stock-based compensation
—
2,778,799
—
22
—
—
—
22
Balance, December 31, 2023
323
136,774,91
1
1
2,185
(14 )
(3,564 )
245
(1,147 )
Comprehensive income (loss)
58
—
—
—
4
(516 )
96
(416 )
Contributions from noncontrolling interests
1
—
—
—
—
—
—
—
Distributions to noncontrolling interests
(55 )
—
—
—
—
—
(100 )
(100 )
Purchase of subsidiary shares from noncontrolling interests
34
—
—
(28 )
—
—
—
(28 )
Other reclassifications of noncontrolling interests
1
—
—
—
—
—
1
1
Disposition of less-than-wholly owned hospital
(4 )
—
—
—
—
—
(4 )
(4 )
Noncontrolling interests in acquired entity
3
—
—
—
—
—
—
—
Adjustment to redemption value of redeemable
noncontrolling interests
(2 )
—
—
2
—
—
—
2
Cancellation of restricted stock for tax withholdings on
vested shares
—
(657,876 )
—
(1 )
—
—
—
(1 )
Stock-based compensation
—
2,802,606
—
17
—
—
—
17
Balance, December 31, 2024
$
359
138,919,64
1 $
1 $
2,175 $
(10 ) $
(4,080 ) $
238 $
(1,676 )
See accompanying notes to the consolidated financial statements.
81
COMMUNITY HEALTH SYSTEMS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
Year Ended December 31,
2024
2023
2022
(In millions)
Cash flows from operating activities:
Net (loss) income
$
(362 ) $
16 $
179
Adjustments to reconcile net (loss) income to net cash provided by
operating activities:
Depreciation and amortization
486
505
534
Deferred income taxes
(116 )
35
165
Stock-based compensation expense
17
22
20
Impairment and (gain) loss on sale of businesses, net
301
(87 )
71
Gain from early extinguishment of debt
(25 )
(72 )
(253 )
Gain from CoreTrust Transaction
—
—
(119 )
Other non-cash expenses, net
188
181
182
Changes in operating assets and liabilities, net of effects of acquisitions
and divestitures:
Patient accounts receivable
(66 )
(193 )
22
Supplies, prepaid expenses and other current assets
(75 )
(82 )
(128 )
Accounts payable, accrued liabilities and income taxes
137
(50 )
(158 )
Other
(5 )
(65 )
(215 )
Net cash provided by operating activities
480
210
300
Cash flows from investing activities:
Acquisitions of facilities and other related businesses
(25 )
(38 )
(9 )
Purchases of property and equipment
(360 )
(467 )
(415 )
Proceeds from disposition of hospitals and other ancillary operations
174
432
89
Proceeds from sale of property and equipment
5
28
38
Purchases of available-for-sale debt securities and equity securities
(81 )
(137 )
(114 )
Proceeds from sales of available-for-sale debt securities and equity
securities
80
232
110
Purchases of investments in unconsolidated affiliates
(9 )
(11 )
(19 )
Distribution of CoreTrust Transaction proceeds
—
—
121
Increase in other investments
(59 )
(65 )
(60 )
Net cash used in investing activities
(275 )
(26 )
(259 )
Cash flows from financing activities:
Repurchase of restricted stock shares for payroll tax withholding
requirements
(1 )
(4 )
(8 )
Deferred financing costs and other debt-related costs
(9 )
(3 )
(74 )
Proceeds from noncontrolling investors in joint ventures
1
5
13
Redemption of noncontrolling investments in joint ventures
(3 )
(1 )
(5 )
Distributions to noncontrolling investors in joint ventures
(155 )
(141 )
(125 )
Other borrowings
25
39
48
Issuance of long-term debt
1,236
989
1,535
Proceeds from ABL Facility
3,763
3,176
542
Repayments of long-term indebtedness
(5,063 )
(4,324 )
(2,356 )
Net cash used in financing activities
(206 )
(264 )
(430 )
Net change in cash and cash equivalents
(1 )
(80 )
(389 )
Cash and cash equivalents at beginning of period
38
118
507
Cash and cash equivalents at end of period
$
37 $
38 $
118
Supplemental disclosure of cash flow information:
Interest payments
$
(741 ) $
(801 ) $
(835 )
Income tax payments, net of refunds
$
(171 ) $
(91 ) $
(6 )
See accompanying notes to the consolidated financial statements.
COMMUNITY HEALTH SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
82
1. BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES
Business. Community Health Systems, Inc. is a holding company and operates no business in its own name. On a consolidated basis, Community
Health Systems, Inc. and its subsidiaries (collectively the “Company”) own, lease and operate general acute care hospitals as well as outpatient facilities in
communities across the country. At December 31, 2024, the Company’s subsidiaries own or lease 76 affiliated hospitals, with more than 11,000 beds, and
operate more than 1,000 sites of care, including physician practices, urgent care centers, freestanding emergency departments, occupational medicine
clinics, imaging centers, cancer centers and ambulatory surgery centers. Effective December 31, 2024, the count of affiliated hospitals was updated to
separately distinguish facilities providing inpatient, acute-care services other than on the primary hospital campus. Throughout these notes to the
consolidated financial statements, Community Health Systems, Inc. (the “Parent Company”) and its consolidated subsidiaries are referred to on a collective
basis as the “Company.” This drafting style is not meant to indicate that the publicly-traded Parent Company or any particular subsidiary of the Parent
Company owns or operates any asset, business, or property. The hospitals, operations and businesses described in this filing are owned and operated, and
management services provided, by distinct and indirect subsidiaries of Community Health Systems, Inc.
At December 31, 2024, Indiana, Alabama, Texas and Florida represent the only areas of significant geographic concentration. Net operating revenues
generated by the Company’s hospitals in Indiana, as a percentage of consolidated net operating revenues, were 16.7% in 2024, 17.1% in 2023, and 17.3%
in 2022. Net operating revenues generated by the Company’s hospitals in Alabama, as a percentage of consolidated net operating revenues, were 15.4% in
2024, 14.4% in 2023, and 13.3% in 2022. Net operating revenues generated by the Company’s hospitals in Texas, as a percentage of consolidated net
operating revenues, were 12.5% in 2024, 11.7% in 2023, and 11.7% in 2022. Net operating revenues generated by the Company’s hospitals in Florida, as a
percentage of consolidated net operating revenues, were 9.6% in 2024, 11.1% in 2023, and 11.6% in 2022.
Use of Estimates. The preparation of financial statements in conformity with U.S. generally accepted accounting principles (“U.S. GAAP”) requires
management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements. Actual results could differ from
these estimates under different assumptions or conditions.
Principles of Consolidation. The consolidated financial statements include the accounts of the Parent Company, its subsidiaries, all of which are
controlled by the Parent Company through majority voting control, and variable interest entities for which the Company is the primary beneficiary. All
intercompany accounts, profits and transactions have been eliminated. Noncontrolling interests in less-than-wholly-owned consolidated subsidiaries of the
Parent Company are presented as a component of total equity in the consolidated balance sheets to distinguish between the interests of the Parent Company
and the interests of the noncontrolling owners. Revenues, expenses and income from these subsidiaries are included in the consolidated amounts as
presented in the consolidated statements of (loss) income, along with a net income measure that separately presents the amounts attributable to the
controlling interests and the amounts attributable to the noncontrolling interests for each of the periods presented. Noncontrolling interests that are
redeemable or may become redeemable at a fixed or determinable price at the option of the holder or upon the occurrence of an event outside of the control
of the Company are presented in mezzanine equity in the consolidated balance sheets.
Reclassifications. Certain prior period amounts have been reclassified to conform to the current period presentation within these notes to the
consolidated financial statements.
Cost of Revenue. Substantially all of the Company’s operating expenses are “cost of revenue” items. Operating expenses that could be classified as
general and administrative by the Company would include the Company’s corporate office costs at its Franklin, Tennessee office, which were $304
million, $248 million and $229 million for the years ended December 31, 2024, 2023 and 2022, respectively. Included in these corporate office costs is
stock-based compensation of $17 million, $22 million and $20 million for the years ended December 31, 2024, 2023 and 2022, respectively. The increase
in corporate office costs during the year ended December 31, 2024, compared to the same period in 2023, is primarily due to the impact of certain non-
recurring adjustments.
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.
Marketable Securities. The Company’s marketable securities consist of debt securities that are classified as trading or available-for-sale and equity
securities. Available-for-sale debt securities are reported at fair value as determined by quoted market prices, with unrealized gains and losses reported as a
separate component of stockholders’ deficit. Trading securities are reported at fair value with unrealized gains and losses included in earnings. Other
comprehensive income (loss), net of tax, included unrealized gains of $6 million and an unrealized loss of $17 million during the years ended December
31, 2023 and 2022, respectively. There was no
COMMUNITY HEALTH SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
83
comprehensive income or loss resulting from unrealized gains and losses on marketable securities for the year ended December 31, 2024.
Property and Equipment. Property and equipment are recorded at cost. Depreciation is recognized using the straight-line method over the estimated
useful 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). Costs
capitalized as construction in progress were $88 million and $343 million at December 31, 2024 and 2023, respectively. Expenditures for renovations and
other significant improvements are capitalized; however, maintenance and repairs which do not improve or extend the useful lives of the respective assets
are charged to operations as incurred. Interest capitalized related to construction in progress was $17 million, $13 million and $9 million for the years
ended December 31, 2024, 2023 and 2022, respectively. Purchases of property and equipment and internal-use software accrued in accounts payable and
not yet paid were $129 million and $101 million at December 31, 2024 and 2023, respectively.
The Company also leases certain facilities and equipment under finance leases (see Note 9). Such assets are amortized on a straight-line basis over the
lesser of the term of the lease or the remaining useful lives of the applicable assets. During the year ended December 31, 2024, the Company had non-cash
investing activity of $3 million related to certain facility and equipment additions that were financed through finance 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
an event occurs or circumstances change such that it is more likely than not that impairment may exist. The Company performs its annual testing of
impairment for goodwill in the fourth quarter of each year. There was no goodwill impairment charge during the years ended December 31, 2024, 2023 and
2022 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
professional liability and workers’ compensation insurance liability; costs to recruit physicians to the Company’s markets, which are deferred and expensed
over the term of the respective physician recruitment contract, generally three years, and included in amortization expense; equity method investments;
right-of-use (“ROU”) assets for operating leases; and capitalized internal-use software costs, which are expensed over the expected useful life, which is
generally three years for routine software, and included in amortization expense.
Revenue Recognition.
Net Operating Revenues
Net operating revenues are recorded at the transaction price estimated by the Company to reflect the total consideration due from patients and third-
party payors in exchange for providing goods and services in patient care. These services are considered to be a single performance 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 recorded for price concessions related to
third-party contractual arrangements as well as patient discounts and other patient price concessions. During each of the years ended December 31, 2024,
2023 and 2022, the impact of changes to the inputs used to determine the transaction price was considered immaterial.
Currently, several states utilize supplemental reimbursement programs for the purpose of providing reimbursement to providers that is not specifically
tied to an individual’s care, some of which offsets a portion of the cost of providing care to Medicaid and indigent patients. The programs are funded with a
combination of state and federal resources, including, in certain instances, fees or taxes levied on the providers. The programs are generally authorized by
the Centers for Medicare & Medicaid Services (“CMS”) for a specified period of time and require CMS’s approval to be extended. Under these
supplemental programs, the Company recognizes revenue and related expenses in the period in which amounts are estimable and payment is reasonably
assured. Reimbursement under these programs is reflected in net operating revenues. Taxes or other program-related costs are reflected in other operating
expenses.
COMMUNITY HEALTH SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
84
The Company’s net operating revenues during the years ended December 31, 2024, 2023 and 2022 have been presented in the following table based on
an allocation of the estimated transaction price with the patient between the primary patient classification of insurance coverage (in millions):
Year Ended December 31,
2024
2023
2022
Medicare
$
2,282 $
2,484 $
2,547
Medicare Managed Care
2,242
2,103
1,968
Medicaid
1,870
1,790
1,807
Managed Care and other third-party payors
6,078
5,978
5,806
Self-pay
162
135
83
Total
$
12,634 $
12,490 $
12,211
Patient Accounts Receivable
Patient accounts receivable are recorded at net realizable value based on certain assumptions determined by each payor. For third-party payors including
Medicare, Medicare Managed Care, Medicaid and Managed Care, the net realizable value is based on the estimated contractual reimbursement percentage,
which is based on current contract prices or historical paid claims data by payor. For self-pay accounts receivable, which includes patients who are
uninsured and the patient responsibility portion for patients with insurance, the net realizable value is determined using estimates of historical collection
experience without regard to aging category. These estimates are adjusted for estimated conversions of patient responsibility portions, expected recoveries
and any anticipated changes in trends.
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 of
accounts receivable. The Company also continually reviews the net realizable value of accounts receivable by monitoring historical cash collections as a
percentage of trailing net operating revenues, as well as by analyzing current period net operating revenues and admissions by payor classification, days
revenue outstanding, the composition of self-pay receivables between pure self-pay patients and the patient responsibility portion of third-party insured
receivables, the impact of recent acquisitions and dispositions and the impact of current macroeconomic conditions and other events.
Final settlements for some payors and programs are subject to adjustment based on administrative review and audit by third parties. As a result of these
final settlements, the Company has recorded amounts due to third-party payors of $125 million and $97 million at December 31, 2024 and 2023,
respectively, and these amounts are included in accrued liabilities-other in the accompanying consolidated balance sheets. Amounts due from third-party
payors were $161 million and $130 million at December 31, 2024 and 2023, 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 2020.
Charity Care
In the ordinary course of business, the Company renders services to patients who are financially unable to pay for hospital care. The Company’s policy
is to not pursue collections for such amounts; therefore, the related charges for those patients who are financially unable to pay and that otherwise do not
qualify for reimbursement from a governmental program are not reported in net operating revenues, and are thus classified as charity care. The Company
determines amounts that qualify for charity care based on the patient’s household income relative to the federal poverty level guidelines, as established by
the federal government.
These charity care services are estimated to be $1.2 billion, $1.3 billion and $1.4 billion for the years ended December 31, 2024, 2023 and 2022,
respectively, representing the value (at the Company’s standard charges) of these charity care services that are excluded from net operating revenues. The
estimated cost incurred by the Company to provide these charity care services to patients who are unable to pay was approximately $117 million, $140
million and $166 million for the years ended December 31, 2024, 2023 and 2022, respectively. The estimated cost of these charity care services was
determined using a ratio of cost to gross charges and applying that ratio to the gross charges associated with providing care to charity patients for the
period.
Leases. Leases are recorded in the consolidated balance sheets through recognition of a liability for the discounted present value of future fixed lease
payments and a corresponding ROU asset. The ROU asset recorded at commencement of the lease represents the right to use the underlying asset over the
lease term in exchange for the lease payments. Leases with an initial term of 12 months or less that do not have an option to purchase the underlying asset
that is deemed reasonably certain to be exercised are not recorded in the consolidated balance sheets; rather, rent expense for these leases is recognized on a
straight-line basis over the lease term, or when
COMMUNITY HEALTH SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
85
incurred if a month-to-month lease. When readily determinable, the Company uses the interest rate implicit in a lease to determine the present value of
future lease payments. For leases where the implicit rate is not readily determinable, the Company’s incremental borrowing rate is utilized. The Company
calculates its incremental borrowing rate on a quarterly basis using a third-party financial model that estimates the rate of interest the Company would have
to pay to borrow an amount equal to the total lease payments on a collateralized basis over a term similar to the lease. The Company’s lease agreements do
not contain any material residual value guarantees or material restrictive covenants.
Physician Income Guarantees. The Company enters into physician recruiting agreements under which it supplements physician income to a minimum
amount over a period of time, typically one year, while the physicians establish themselves in the community. As part of the agreements, the physicians are
committed to practice in the community for a period of time, typically three years, which extends beyond their income guarantee period. The Company
records an asset and liability for the estimated fair value of minimum revenue guarantees on new agreements and the asset is amortized over the life of each
respective agreement. Adjustments to the ultimate value of the guarantee paid to physicians are recognized in the period that the change in estimate is
identified. At December 31, 2024 and 2023, the unamortized portion of these physician income guarantees was $8 million and $9 million, respectively, and
is recorded in other assets in the consolidated balance sheets.
Concentrations of Credit Risk. The Company grants unsecured credit to its patients, most of whom reside in the service area of the Company’s
facilities and 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 $175 million and $194 million at December 31, 2024 and 2023, respectively, representing 5% and 6% of consolidated net accounts
receivable at December 31, 2024 and 2023, respectively.
Accounting for the Impairment or Disposal of Long-Lived Assets. During the year ended December 31, 2024, the Company recorded a net expense of
approximately $301 million, comprised of (i) an approximate $263 million impairment charge recorded to reduce the carrying value of several assets that
were idled, disposed of or which were previously classified as held-for-sale, (ii) an approximate $34 million impairment charge recorded to reduce the
carrying value of a hospital that was deemed held-for-sale based on the difference between carrying value of the hospital disposal group compared to the
estimated fair value less costs to sell, and (iii) an approximate $8 million impairment charge to adjust the carrying value of long-lived assets at a hospital
that was sold at a sales price below carrying value, partially offset by a gain of approximately $4 million related to the sale of one hospital. During the year
ended December 31, 2024, approximately $111 million of goodwill was allocated from the hospital operations reporting unit associated with the disposal
groups for which impairment charges or a gain on sale was recorded during the period.
During the year ended December 31, 2023, the Company recorded a net gain of approximately $87 million, comprised of a gain of $145 million related
to the sale of five hospitals and the sale of a majority interest in one hospital, offset by (i) an approximate $49 million impairment charge to adjust the
carrying value of long-lived assets at three hospitals that were sold at a sales price below carrying value, and (ii) an approximate $9 million impairment
charge recorded to reduce the carrying value of several assets that were idled, disposed of or held-for-sale. During the year ended December 31, 2023,
approximately $186 million of goodwill was allocated from the hospital operations reporting unit associated with the disposal groups for which impairment
charges or a gain on sale was recorded during the period.
Income Taxes. The Company accounts for income taxes under the asset and liability method, in which deferred income tax assets and liabilities are
recognized for the tax consequences of “temporary differences” by applying enacted statutory tax rates applicable to future years to differences between the
financial 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 in
the consolidated statements of (loss) income during the period in which the tax rate change becomes law.
Other Comprehensive Loss. Other comprehensive loss is the change in equity of a business enterprise during a period from transactions and other
events and circumstances from non-owner sources.
Supplier Finance Program. The Company has an agreement with a third-party financial institution that allows participating suppliers the ability to
finance payment obligations from the Company. The Company is not party to the agreements among suppliers and the third-party financial institution and
does not receive compensation from this arrangement. The Company’s obligation to its suppliers, including amounts due and scheduled payment dates, are
not impacted by the suppliers’ decision to finance amounts under the arrangement. The Company has not pledged assets as security or provided guarantees
as part of this program. The Company’s outstanding payment obligations under the supplier finance program, which are included in accounts payable in the
Company’s consolidated balance sheets, totaled $3 million, $3 million and $9 million at December 31, 2024, 2023 and 2022, respectively. Payment
obligations under the program average approximately $25 million to $35 million per quarter and are timely settled such that the inflows into the program
approximate the outflows in each period presented.
COMMUNITY HEALTH SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
86
Segment Reporting. A public company is required to report annual and interim financial and descriptive information about its reportable operating
segments. Operating segments, as defined, are components of an enterprise about which separate financial information is available that is evaluated
regularly by the chief operating decision maker in deciding how to allocate resources and in assessing performance. Aggregation of similar operating
segments into a single reportable operating segment is permitted if the businesses have similar economic characteristics and meet the criteria established by
U.S. GAAP. The Company operates a single operating segment represented by hospital operations (which includes the Company’s acute care hospitals and
related healthcare entities that provide inpatient and outpatient healthcare services).
COVID-19 Pandemic. Throughout the acute phase of the COVID-19 pandemic that began in 2020, federal and state governments passed legislation,
promulgated regulations and took other administrative actions intended to assist healthcare providers in providing care to COVID-19 and other patients
during the public health emergency and to provide financial relief. Various stimulus laws, including the Coronavirus Aid, Relief and Economic Security
Act (the “CARES Act”) and the American Rescue Plan Act of 2021, among others, authorized significant funding to be distributed to eligible healthcare
providers through the Public Health and Social Services Emergency Fund (the “PHSSEF”). PHSSEF payments were intended to compensate healthcare
providers for lost revenues and incremental expenses incurred in response to the COVID-19 pandemic and are not required to be repaid, provided that
recipients attest to and comply with certain terms and conditions, including audit and reporting requirements. Various state and local programs also exist to
provide relief, either independently or through distribution of monies received via the CARES Act and other enacted federal legislation.
The Company received pandemic relief fund payments through various federal, state and local programs of approximately $161 million during the year
ended December 31, 2022. Approximately $173 million was recognized as pandemic relief funds within the consolidated statements of (loss) income
during the year ended December 31, 2022. The Company did not receive or recognize any significant level of payments or benefits under the CARES Act
or other COVID-19 related stimulus and relief legislation during the years ended December 31, 2024 and 2023.
New Accounting Pronouncements. In December 2023, the Financial Accounting Standards Board issued Accounting Standards Update (“ASU”)
2023-09, “Income Taxes (Topic 740), Improvements to Income Tax Disclosures.” This ASU establishes new requirements for the categorization and
disaggregation of information in the rate reconciliation as well as for disaggregation of income taxes paid. Additionally, this ASU modifies and eliminates
certain existing requirements for indefinitely reinvested foreign earnings and unrecognized tax benefits. This ASU is effective for annual periods beginning
after December 15, 2024 and interim periods beginning after December 15, 2025. The amendments in this ASU should be applied on a prospective basis
and early adoption is permitted. The Company is currently evaluating the impact that adoption of this ASU will have on its consolidated financial
statements.
The Company has evaluated all other recently issued, but not yet effective, ASUs and does not expect the eventual adoption of these ASUs to have a
material impact on its consolidated financial position or results of operations.
2. ACCOUNTING FOR STOCK-BASED COMPENSATION
Stock-based compensation awards have been granted under the Community Health Systems, Inc. Amended and Restated 2009 Stock Option and Award
Plan, which was most recently amended and restated as of March 22, 2023 and most recently approved by the Company’s stockholders at the annual
meeting of stockholders held on May 9, 2023 (the “2009 Plan”).
The 2009 Plan provides for the grant of incentive stock options intended to qualify under Section 422 of the Internal Revenue Code and for the grant of
stock options which do not so qualify, stock appreciation rights, restricted stock, restricted stock units (“RSUs”), performance-based shares or units and
other share awards. Persons eligible to receive grants under the 2009 Plan include the Company’s directors, officers, employees and consultants. To date,
all options granted under the 2009 Plan have been “nonqualified” stock options for tax purposes. Generally, these options vest in one-third increments on
each of the first three anniversaries of the option grant date and expire on the tenth anniversary of the option grant date. The exercise price of all options
granted under the 2009 Plan is equal to the fair value of the Company’s common stock on the option grant date. At December 31, 2024, 3,867,118 shares of
unissued common stock were reserved for future grants under the 2009 Plan.
COMMUNITY HEALTH SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
87
The following table reflects the impact of total compensation expense related to stock-based equity plans on the reported operating results for the
respective periods (in millions):
Year Ended December 31,
2024
2023
2022
Effect on (loss) income before income taxes
$
(17 ) $
(22 ) $
(20 )
Effect on net (loss) income
$
(13 ) $
(17 ) $
(15 )
At December 31, 2024, $19 million of unrecognized stock-based compensation expense related to outstanding unvested stock options, restricted stock
and RSUs (the terms of which are summarized below) was expected to be recognized over a weighted-average period of 19 months. Of that amount, $3
million related to outstanding unvested stock options was expected to be recognized over a weighted-average period of 18 months and $16 million related
to outstanding unvested restricted stock and RSUs was expected to be recognized over a weighted-average period of 19 months. There were no
modifications to awards during the years ended December 31, 2024, 2023 and 2022.
The fair value of stock options was estimated using the Black Scholes option pricing model with the following assumptions and weighted-average fair
values during the years ended December 31, 2024, 2023 and 2022:
Year Ended December 31,
2024
2023
2022
Expected volatility
90.1 %
87.3%
84.3% - 87.5%
Expected dividends
—
—
—
Expected term
6 years
6 years
3 - 6 years
Risk-free interest rate
4.3%
4.2%
1.5% - 1.6%
In determining the expected term, the Company examined concentrations of option holdings and historical patterns of option exercises and forfeitures,
as well as forward-looking factors, in an effort to determine if there were any discernible employee populations. From this analysis, in determining the
expected term for the years ended December 31, 2024 and 2023, the Company identified one population, consisting of persons receiving grants of stock
options. Additionally, in determining the expected term for the year ended December 31, 2022, two populations were identified, one consisting of certain
senior executives who have since retired as executive officers, and the other consisting of substantially all other recipients. The computation of expected
term was performed using the simplified method for all stock options granted in the periods presented. The simplified method was used as a result of the
Company determining that historical exercise data does not provide a reasonable basis for the expected term of its grants, due primarily to the limited
number of stock option exercises that have occurred.
The risk-free interest rate is based on the U.S. Treasury yield curve in effect at the time of the grant. The pre-vesting forfeiture rate is based on historical
rates and forward-looking factors for each population identified. The Company adjusts the estimated forfeiture rate to its actual experience.
The expected volatility rate was estimated based on historical volatility. In determining expected volatility, the Company also reviewed the market-
based implied volatility of actively traded options of its common stock and determined that historical volatility utilized to estimate the expected volatility
rate did not differ significantly from the implied volatility.
COMMUNITY HEALTH SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
88
Options outstanding and exercisable under the 2009 Plan as of December 31, 2024, and changes during each of the years in the three-year period prior
to December 31, 2024, were as follows (in millions, except share and per share data):
Shares
Weighted-
Average
Exercise
Price
Weighted-
Average
Remaining
Contractual
Term
Aggregate
Intrinsic
Value as of
December 31,
2024
Outstanding at December 31, 2021
2,301,753 $
6.77
Granted
760,000
10.18
Exercised
(56,500 )
4.97
Forfeited and cancelled
(173,502 )
13.41
Outstanding at December 31, 2022
2,831,751
7.32
Granted
814,000
6.15
Exercised
(15,001 )
4.95
Forfeited and cancelled
—
—
Outstanding at December 31, 2023
3,630,750
7.07
Granted
901,000
2.87
Exercised
—
—
Forfeited and cancelled
(41,000 )
4.97
Outstanding at December 31, 2024
4,490,750 $
6.24
6.9 years $
—
Exercisable at December 31, 2024
3,618,738 $
6.81
6.4 years $
—
The weighted-average grant date fair value of stock options granted during the years ended December 31, 2024, 2023 and 2022, was $2.19, $4.61 and
$7.25, respectively. The aggregate intrinsic value (calculated as the number of in-the-money stock options multiplied by the difference between the
Company’s closing stock price on the last trading day of the reporting period ($2.99) 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 all option holders exercised their options on December 31, 2024.
This amount changes based on the market value of the Company’s common stock. There were no stock option exercises during the year ended December
31, 2024. The aggregate intrinsic value of options exercised during the years ended December 31, 2023 and 2022 was less than $1 million for both years.
The aggregate intrinsic value of options vested and expected to vest approximates that of the outstanding options.
The Company has also awarded restricted stock under the 2009 Plan to employees of certain subsidiaries. With respect to time-based vesting restricted
stock that has been awarded under the 2009 Plan, the restrictions on these shares have generally lapsed in one-third increments on each of the first three
anniversaries of the award date. In addition, certain of the restricted stock awards granted to the Company’s senior executives have contained performance
objectives required to be met in addition to any time-based vesting requirements. If the applicable performance objectives are not attained, these awards
will be forfeited in their entirety. For performance-based awards, the performance objectives are measured cumulatively over a three-year period. If the
applicable target performance objective is met at the end of the three-year period, then the restricted stock award subject to such performance objective will
vest in full on the third anniversary of the award date. Additionally, for these performance-based awards, based on the level of achievement for the
applicable performance objective within the parameters specified in the award agreement, the number of shares to be issued in connection with the vesting
of the award may be adjusted to decrease or increase the number of shares specified in the original award. Notwithstanding the above-mentioned
performance objectives and vesting requirements, the restrictions with respect to restricted stock granted under the 2009 Plan may lapse earlier in the event
of death, disability, change in control of the Company or, other than for performance-based awards, termination of employment by the Company for any
reason other than for cause of the holder of the restricted stock. On March 1, 2024, restricted stock awards subject to performance objectives granted on
March 1, 2021 vested based on the Company’s cumulative performance compared to performance objectives for the 2021 through 2023 performance
period, which were set prior to the date of grant. Such awards vested at 80% of the number of shares originally granted to the Company’s then executive
chairman, chief executive officer and chief financial officer based on the performance objectives applicable to the then executive chairman, chief executive
officer and chief financial officer, and at 100% of the number of shares originally granted to other senior executives based on the performance objectives
applicable to such other senior executives. Restricted stock awards subject to performance objectives that have not yet been satisfied are not considered
outstanding for purposes of determining diluted earnings per share unless the performance objectives have been satisfied on the basis of results through the
end of each respective reporting period.
COMMUNITY HEALTH SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
89
Restricted stock outstanding under the 2009 Plan as of December 31, 2024, and changes during each of the years in the three-year period prior to
December 31, 2024, were as follows:
Shares
Weighted-
Average Grant
Date Fair Value
Unvested at December 31, 2021
4,995,314 $
6.30
Granted
3,253,000
8.95
Vested
(2,561,575 )
5.70
Forfeited
(145,674 )
8.89
Unvested at December 31, 2022
5,541,065
8.53
Granted
2,746,000
6.04
Vested
(2,164,570 )
6.85
Forfeited
(68,672 )
8.16
Unvested at December 31, 2023
6,053,823
8.00
Granted
2,858,000
2.89
Vested
(2,211,906 )
8.39
Forfeited
(190,672 )
7.68
Unvested at December 31, 2024
6,509,245
5.63
RSUs have been granted to the Company’s non-management directors under the 2009 Plan. Each of the Company’s then serving non-management
directors received grants under the 2009 Plan of 62,718 RSUs, 29,268 RSUs and 17,682 RSUs on March 1, 2024, 2023 and 2022, respectively. The March
2024, 2023 and 2022 grants each had a grant date fair value of approximately $180,000. In addition to the grants set forth above, on March 1, 2024 and
2023, the Chairman of the Board of Directors was awarded an additional grant of 92,334 RSUs and 43,089 RSUs, respectively, each with a grant date fair
value of approximately $265,000, as additional compensation for serving as Chairman of the Board of Directors. Pursuant to the Company’s non-
management director compensation program, on June 1, 2024, a new non-management director, who was elected to the Board of Directors at the Annual
Meeting of the Company’s stockholders on May 7, 2024, received a grant of 62,718 RSUs (the same number of RSUs granted to the other non-
management directors on March 1, 2024), which had a grant date fair value of approximately $248,000. Vesting of RSUs granted to non-management
directors occurs in one-third increments on each of the first three anniversaries of the award date or upon the director’s earlier cessation of service on the
Board of Directors, other than for cause. Each non-management director may elect, prior to the beginning of the calendar year in which the award is
granted, to defer the receipt of shares of the Company’s common stock issuable upon vesting until either his or her (i) separation from service with the
Company or (ii) attainment of an age specified in advance by the non-management director. A total of five directors elected to defer the receipt of shares of
the Company’s common stock upon vesting of the RSUs granted on March 1, 2024 to a future date and the new non-management director elected to defer
the receipt of shares of the Company’s common stock upon vesting of the RSUs granted on June 1, 2024 to a future date. A total of four directors elected to
defer the receipt of shares of the Company’s common stock upon vesting of the RSUs granted on March 1, 2023 to a future date, and a total of three
directors elected to defer the receipt of shares of the Company’s common stock upon vesting of the RSUs granted on March 1, 2022 to a future date.
COMMUNITY HEALTH SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
90
RSUs outstanding under the 2009 Plan as of December 31, 2024, and changes during each of the years in the three-year period prior to December 31,
2024, were as follows:
Shares
Weighted-
Average Grant
Date Fair Value
Unvested at December 31, 2021
486,598 $
6.17
Granted
176,820
9.66
Vested
(151,058 )
5.63
Forfeited
—
—
Unvested at December 31, 2022
512,360
7.54
Granted
365,037
6.15
Vested
(101,471 )
7.75
Forfeited
—
—
Unvested at December 31, 2023
775,926
6.86
Granted
907,668
2.95
Vested
(135,278 )
7.66
Forfeited
—
—
Unvested at December 31, 2024
1,548,316
4.49
3. ACQUISITIONS, DIVESTITURES AND CLOSURES
Acquisitions
The Company accounts for all transactions that represent business combinations using the acquisition method of accounting, where the identifiable
assets acquired, the liabilities assumed and any noncontrolling interest in the acquired entity are recognized and measured at their fair values on the date the
Company obtains control in the acquiree. Such fair values that are not finalized for reporting periods following the acquisition date are estimated and
recorded as provisional amounts. Adjustments to these provisional amounts during the measurement period (defined as the date through which all
information required to identify and measure the consideration transferred, the assets acquired, the liabilities assumed and any noncontrolling interests has
been obtained, limited to one year from the acquisition date) are recorded when identified. Goodwill is determined as the excess of the fair value of the
consideration conveyed in the acquisition over the fair value of the net assets acquired.
The Company accounts for asset acquisitions pursuant to a cost accumulation model. Direct transaction costs are recognized as part of the cost of an
acquisition. The Company also evaluates which elements of a transaction should be accounted for as part of an asset acquisition and which should be
accounted for separately. The cost of an asset acquisition, including transaction costs, is allocated to identifiable assets acquired and liabilities assumed
based on a relative fair value basis. Goodwill is not recognized in an asset acquisition.
During the years ended December 31, 2024, 2023 and 2022, one or more subsidiaries of the Company paid approximately $25 million, $38 million and
$9 million, respectively, to acquire the operating assets and related businesses of certain physician practices, clinics, ambulatory surgery centers, urgent
care centers and other ancillary businesses that operate within the communities served by the Company’s affiliated hospitals. During the year ended
December 31, 2024, a majority of the amount paid related to the Company's purchase of a group of urgent care centers operating in and around Tucson,
Arizona. During the year ended December 31, 2023, a majority of the amount paid related to the Company’s purchase of certain assets from American
Physician Partners (“APP”). This transaction, which resulted in the Company recording a definite-lived intangible asset for the acquisition of an assembled
workforce, was accounted for as an asset acquisition. In connection with these acquisitions, inclusive of the urgent care centers and APP, the Company
allocated the purchase price to property and equipment, working capital, intangible assets, noncontrolling interests and goodwill.
COMMUNITY HEALTH SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
91
Divestitures
The following table provides a summary of hospitals that the Company divested (or, in the case of Lutheran Rehabilitation Hospital, in which the
Company sold a majority interest) during the years ended December 31, 2024, 2023 and 2022.
Hospital
Buyer
City, State
Licensed
Beds
Effective Date
2024 Divestitures:
Tennova Healthcare - Cleveland
Hamilton Health Care Systems, Inc.
Cleveland, TN
351
August 1, 2024
Davis Regional Medical Center
Iredell Memorial Hospital
Statesville, NC
144
October 1, 2024
2023 Divestitures:
Greenbrier Valley Medical Center
Vandalia Health, Inc.
Ronceverte, WV
122
January 1, 2023
Plateau Medical Center
Vandalia Health, Inc.
Oak Hill, WV
25
April 1, 2023
Medical Center of South Arkansas
SARH Holdings, Inc.
El Dorado, AR
166
July 1, 2023
Lutheran Rehabilitation Hospital
Select Medical Corporation
Fort Wayne, IN
36
September 1, 2023
AllianceHealth Ponca City
Integris Health
Ponca City, OK
140
November 1, 2023
AllianceHealth Woodward
Integris Health
Woodward, OK
87
November 1, 2023
Bravera Health Brooksville
Tampa General Hospital
Brooksville, FL
120
December 1, 2023
Bravera Health Spring Hill
Tampa General Hospital
Spring Hill, FL
124
December 1, 2023
Bravera Health Seven Rivers
Tampa General Hospital
Crystal River, FL
128
December 1, 2023
2022 Divestitures:
AllianceHealth Seminole
SSM Health Care of Oklahoma, Inc.
Seminole, OK
32
July 1, 2022
Effective August 1, 2024, the Company completed the sale of Tennova Healthcare – Cleveland to Hamilton Health Care Systems, Inc. In addition to the
base purchase price of approximately $160 million which was received at a preliminary closing on July 31, 2024, the Company is entitled to receive
additional cash consideration contingent upon potential modifications to supplemental reimbursement programs as more specifically provided in the asset
purchase agreement underlying the transaction. Such modifications are not complete as of December 31, 2024 and an estimate of consideration that may be
received by the Company in 2025 has not been recognized.
On November 7, 2024, a subsidiary of the Company entered into a definitive agreement to sell its 50% interest in Merit Health Biloxi (153 licensed
beds) in Biloxi, Mississippi, to an affiliate of Memorial Hospital of Gulfport, which had a preexisting 50% ownership interest in Merit Health Biloxi. This
disposition was completed on February 1, 2025, as further described in Note 17.
On November 22, 2024, the Company entered into a definitive agreement to sell ShorePoint Health Port Charlotte (254 licensed beds) in Port Charlotte,
Florida, certain assets of ShorePoint Health Punta Gorda (208 licensed beds) in Punta Gorda, Florida, and certain ancillary businesses related to such
facilities to subsidiaries of Adventist Health System Sunbelt Healthcare Corporation. Due to the effects of Hurricane Helene and Hurricane Milton, the
Punta Gorda hospital has indefinitely suspended inpatient operations.
On December 11, 2024, the Company entered into a definitive agreement to sell Lake Norman Regional Medical Center (123 licensed beds) in
Mooresville, North Carolina, and related businesses, to Duke University Health System, Inc.
The hospitals for which definitive agreements had been reached but for which the sale was not complete, were classified as held-for-sale at December
31, 2024.
The following table discloses amounts included in the consolidated balance sheet for hospitals classified as held-for-sale as of December 31, 2024 and
2023 (in millions). Other current assets primarily includes patient accounts receivable and prepaid expenses. Other assets, net, primarily includes the net
property and equipment and goodwill for the hospitals held-for-sale. Accrued liabilities primarily includes lease obligations for the hospitals held-for-sale.
No divestitures or potential divestitures meet the criteria for reporting as a discontinued operation at December 31, 2024, 2023, or 2022.
December 31,
2024
2023
Other current assets
$
28
$
6
Other assets, net
395
218
Accrued liabilities
(43 )
(13 )
COMMUNITY HEALTH SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
92
Closures
During the three months ended September 30, 2022, the Company completed the closure of ShorePoint Health Venice hospital (312 licensed beds) in
Venice, Florida. The Company recorded an impairment charge of approximately $29 million during the year ended December 31, 2022, to adjust the fair
value of the long-lived assets of this hospital, including property and equipment and capitalized software costs, based on their estimated fair value.
During the three months ended September 30, 2022, the provision of inpatient services and substantially all outpatient services ceased at First Hospital
Wyoming Valley (psychiatric hospital) (149 licensed beds) in Wilkes-Barre, Pennsylvania, resulting in the closure of this facility being substantially
complete as of September 30, 2022. The Company completed the closure of First Hospital Wyoming Valley during the three months ended December 31,
2022. The Company recorded an impairment charge of approximately $15 million during the year ended December 31, 2022, to adjust the fair value of the
long-lived assets of this hospital, including property and equipment and capitalized software costs, based on their estimated fair value.
Other
On December 31, 2022, the lease for AllianceHealth Clinton (56 licensed beds) in Clinton, Oklahoma, expired and was not renewed. The Company
recorded an impairment charge of approximately $1 million during the year ended December 31, 2022 in conjunction with exiting the lease to operate this
hospital.
4. GOODWILL AND OTHER INTANGIBLE ASSETS
Goodwill
The changes in the carrying amount of goodwill for the years ended December 31, 2024 and 2023 are as follows (in millions):
Balance, beginning balance
2024
2023
Goodwill
$
6,772 $
6,980
Accumulated impairment losses
(2,814 )
(2,814 )
3,958
4,166
Goodwill acquired as part of acquisitions during current year
24
23
Goodwill allocated to hospitals divested or held-for-sale
(193 )
(231 )
Balance, end of year
Goodwill
6,603
6,772
Accumulated impairment losses
(2,814 )
(2,814 )
$
3,789 $
3,958
Goodwill allocated to hospitals divested or held-for-sale reflects the net activity of changing the classification of entities as held-and-used or held-for-
sale during the year ended December 31, 2024.
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 a component of the entity). Management has determined that the Company’s operating segment meets the criteria to be classified as a reporting unit. At
December 31, 2024, after giving effect to the 2024 acquisition and divestiture activity, the Company had approximately $3.8 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 the
reporting unit below its carrying value. The Company performed its last annual goodwill impairment evaluation during the fourth quarter of 2024 using an
October 31, 2024 measurement date, which indicated no impairment.
The Company estimates the fair value of the reporting unit using both a discounted cash flow model as well as a market multiple model. The cash flow
forecasts are adjusted by an appropriate discount rate based on the Company’s estimate of a market participant’s weighted-average cost of capital. These
models are both based on the Company’s best estimate of future revenues and operating expenses and are reconciled to the Company’s consolidated market
capitalization, with consideration of the amount a potential acquirer would be required to pay, in the form of a control premium, in order to gain sufficient
ownership to set policies, direct operations and control management decisions.
COMMUNITY HEALTH SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
93
The determination of fair value in the Company’s goodwill impairment analysis is based on an estimate of fair value for the reporting 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 the Company’s common
stock and fair value of long-term debt, the Company’s recent financial results, estimates of future revenue and expense growth, estimated market multiples,
expected capital expenditures, income tax rates, costs of invested capital and a discount rate.
Future estimates of fair value could be adversely affected if the actual outcome of one or more of the assumptions described above changes materially
in the future, including as a result of any decline in the Company’s stock price and the fair value of its long-term debt, an increase in the volatility of the
Company’s stock price and the fair value of its long-term debt, lower-than-expected hospital volumes and/or net operating revenues, higher market interest
rates, increased operating costs or other adverse impacts on the Company’s financial results. Such changes impacting the calculation of fair value could
result in a material impairment charge in the future.
The determination of fair value of the Company’s hospital operations reporting unit as part of its goodwill impairment measurement represents a Level
3 fair value measurement in the fair value hierarchy due to its use of internal projections and unobservable measurement inputs.
Intangible Assets
During the years ended December 31, 2024 and 2023, the Company acquired goodwill as well as definite-lived intangible assets for the acquisition of
assembled workforces. The gross carrying amount of the Company’s other intangible assets subject to amortization was $28 million and $27 million at
December 31, 2024 and 2023, respectively, and the net carrying amount was $15 million and $20 million at December 31, 2024 and 2023, respectively.
The carrying amount of the Company’s other intangible assets not subject to amortization was $38 million and $41 million at December 31, 2024 and
2023, respectively. Other intangible assets are included in other assets, net on the Company’s consolidated balance sheets. The Company’s intangible assets
include an assembled workforce and various contract-based intangible assets related 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 expected
residual values related to these intangible assets. Amortization expense on these intangible assets was $9 million, $5 million and $1 million during the years
ended December 31, 2024, 2023 and 2022, respectively. Amortization expense on intangible assets is estimated to be $9 million, $5 million and $1 million
in 2025, 2026 and 2027, respectively.
The gross carrying amount of capitalized software for internal use was approximately $982 million and $959 million at December 31, 2024 and 2023,
respectively, and the net carrying amount was approximately $119 million and $144 million at December 31, 2024 and 2023, respectively. The estimated
amortization period for capitalized internal-use software is generally three years. There is no expected residual value for capitalized internal-use software.
At December 31, 2024, there were approximately $90 million of capitalized costs for internal-use software that is currently in the development stage and
will begin amortization once the software project is complete and ready for its intended use. Amortization expense on capitalized internal-use software was
$80 million, $80 million and $85 million during the years ended December 31, 2024, 2023 and 2022, respectively. Amortization expense on capitalized
internal-use software is estimated to be $51 million in 2025, $39 million in 2026, $17 million in 2027, $10 million in 2028, $2 million in 2029 and less than
$1 million thereafter.
5. INCOME TAXES
The provision for income taxes consists of the following (in millions):
Year Ended December 31,
2024
2023
2022
Current:
Federal
$
182 $
149 $
—
State
13
7
5
195
156
5
Deferred:
Federal
(125 )
(5 )
166
State
9
40
(1 )
(116 )
35
165
Total provision for income taxes for income
$
79 $
191 $
170
COMMUNITY HEALTH SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
94
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,
2024
2023
2022
Amount
%
Amount
%
Amount
%
Provision for income taxes at statutory
federal rate
$
(60 )
21.0 % $
44
21.0 % $
73
21.0 %
State income taxes, net of federal income tax benefit
17
(5.9 )
37
17.9
3
0.8
Net income attributable to noncontrolling interests
(32 )
11.3
(31 )
(14.9 )
(28 )
(8.0 )
Change in valuation allowance
144
(50.9 )
88
42.5
122
34.9
Change in uncertain tax position
6
(2.0 )
10
4.9
—
—
Nondeductible goodwill
15
(5.3 )
29
14.1
—
—
Amended return adjustments
—
—
9
4.3
—
—
Change in tax refunds
(11 )
3.9
—
—
—
—
Permanent differences
7
(2.5 )
4
1.9
2
0.6
Provision to return
(6 )
2.1
1
0.6
(1 )
(0.3 )
Other
(1 )
0.4
—
—
(1 )
(0.3 )
Provision for income taxes and
effective tax rate for income
$
79
(27.9 )% $
191
92.3 % $
170
48.7 %
The Company’s effective tax rates were (27.9)%, 92.3% and 48.7% for the years ended December 31, 2024, 2023 and 2022, respectively. The decrease
in the Company’s effective tax rate for the year ended December 31, 2024, when compared to the year ended December 31, 2023, was primarily due to a
decrease in non-deductible goodwill related to divested hospitals and a decrease in (loss) income before income taxes in 2024 compared to 2023. The
decrease in the Company’s effective tax rate for the year ended December 31, 2023, when compared to the year ended December 31, 2022, was primarily
due to non-deductible goodwill related to hospitals divested in 2023 and a decrease in income before taxes.
COMMUNITY HEALTH SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
95
Deferred income taxes are based on the estimated future tax effects of differences between the financial statement and tax bases of assets and liabilities
under the provisions of the enacted tax laws. Deferred income taxes at December 31, 2024 and 2023 consist of (in millions):
December 31,
2024
2023
Assets
Liabilities
Assets
Liabilities
Net operating loss and credit carryforwards
$
615 $
— $
533 $
—
Property and equipment
—
261
—
326
Self-insurance liabilities
34
—
16
—
Prepaid expenses
—
28
—
30
Intangibles
—
142
—
163
Investments in unconsolidated affiliates
—
81
—
72
Other liabilities
—
5
—
7
Long-term debt and interest
7
—
32
—
Accounts receivable
54
—
16
—
IRC Section 163(j) interest limitation
682
—
582
—
Accrued vacation
18
—
19
—
Accrued bonus
31
—
27
—
Other comprehensive income
2
—
4
—
Right-of-use assets
—
128
—
165
Right-of-use liability
136
—
173
—
Stock-based compensation
2
—
4
—
Deferred compensation
41
—
38
—
IRC Section 481(a) adjustments
—
—
—
57
Other
23
—
19
—
Total
1,645
645
1,463
820
Valuation allowance
(1,218 )
—
(983 )
—
Total deferred income taxes
$
427 $
645 $
480 $
820
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 future
taxable income and the expected timing of temporary difference reversals. The Company has gross federal net operating loss carryforwards of
approximately $176 million and state net operating loss carryforwards of approximately $10.8 billion, which expire from 2025 through 2044. The
Company’s tax affected federal and state net operating loss and credit carryforwards are approximately $37 million and $578 million, respectively. A
valuation allowance of approximately $1.2 billion has been recognized for federal and state net operating loss carryforwards, state credit carryforwards and
federal and state deferred tax assets that the Company does not expect to be able to realize. With respect to the deferred tax liability pertaining to
intangibles, as included above, goodwill purchased in connection with certain of the Company’s business acquisitions is amortizable for income tax
reporting purposes. However, for financial reporting purposes, there is no corresponding amortization allowed with respect to such purchased goodwill.
The valuation allowance for federal and state jurisdictions where the Company concluded that the associated deferred tax assets would not be realized
increased by $144 million and $91 million, respectively, for the year ended December 31, 2024, and increased by $88 million and $66 million,
respectively, for the year ended December 31, 2023.
The total amount of unrecognized benefit that would affect the effective tax rate, if recognized, was $42 million as of December 31, 2024. A total of $5
million of interest and penalties is included in the amount of the liability for uncertain tax positions at December 31, 2024. It is the Company’s policy to
recognize interest and penalties related to unrecognized benefits in its consolidated statements of (loss) income 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
settlements with taxing authorities; however, the Company does not anticipate the change will have a material impact on the Company’s consolidated
results of operations or consolidated financial position.
COMMUNITY HEALTH SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
96
The following is a tabular reconciliation of the total amount of unrecognized tax benefit for the years ended December 31, 2024, 2023 and 2022 (in
millions):
Year Ended December 31,
2024
2023
2022
Unrecognized tax benefit, beginning of year
$
58 $
50 $
42
Gross increases — tax positions in current period
3
9
8
Reductions — tax positions in prior period
—
(1 )
—
Settlements
(9 )
—
—
Unrecognized tax benefit, end of year
$
52 $
58 $
50
The Company’s income tax return for the 2018 tax year has been effectively settled with the Internal Revenue Service in 2024. The settlement was not
material to the Company’s consolidated results of operations or consolidated financial position. The Company’s income tax return for the 2021 and 2022
tax years are under examination by the Internal Revenue Service. The Company believes the result of this examination will not be material to its
consolidated results of operations or consolidated financial position.
Cash paid for income taxes, net of refunds received, was $171 million, $91 million and $6 million during the years ended December 31, 2024, 2023 and
2022, respectively.
6. LONG-TERM DEBT
Long-term debt, net of unamortized debt issuance costs and discounts or premiums, consists of the following (in millions):
December 31,
2024
2023
8% Senior Secured Notes due 2026
$
— $
1,116
8% Senior Secured Notes due 2027
700
700
5⅝% Senior Secured Notes due 2027
1,757
1,900
6⅞% Senior Notes due 2028
626
756
6% Senior Secured Notes due 2029
644
644
5¼% Senior Secured Notes due 2030
1,535
1,535
4¾% Senior Secured Notes due 2031
1,058
1,058
10⅞% Senior Secured Notes due 2032
2,225
1,000
6⅞% Junior-Priority Secured Notes due 2029
1,244
1,244
6⅛% Junior-Priority Secured Notes due 2030
1,227
1,227
ABL Facility
341
247
Finance lease and financing obligations
343
366
Other
24
32
Less: Unamortized deferred debt issuance costs
(272 )
(338 )
Total debt
11,452
11,487
Less: Current maturities
(20 )
(21 )
Total long-term debt
$
11,432 $
11,466
8% Senior Secured Notes due 2027
On November 19, 2019, CHS/Community Health Systems, Inc. (“CHS”) issued approximately $700 million aggregate principal amount of the 8%
Senior Secured Notes due December 15, 2027 (the “8% Senior Secured Notes due 2027”) in connection with the 2019 Exchange Offer. No cash proceeds
were received from the 2019 Exchange Offer. The 8% Senior Secured Notes due 2027 bear interest at a rate of 8.000% per annum, payable semi-annually
in arrears on June 15 and December 15 of each year. Interest on the 8% Senior Secured Notes due 2027 accrues from the initial issuance date of the 8%
Senior Secured Notes due 2027. Interest is calculated on the basis of a 360-day year comprised of 12 30-day months. The 8% Senior Secured Notes due
2027 are scheduled to mature on December 15, 2027. The 8% Senior Secured Notes due 2027 are unconditionally guaranteed on a senior-priority secured
basis by the Company and each of CHS’ current and future domestic subsidiaries that provide guarantees under the ABL Facility, any capital market debt
securities of CHS (including CHS᾿ outstanding senior notes) and certain other long-term debt of CHS.
COMMUNITY HEALTH SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
97
The 8% Senior Secured Notes due 2027 and the related guarantees are secured by shared (i) first-priority liens on the Non-ABL Priority Collateral and
(ii) second-priority liens on the ABL Priority Collateral that secures on a first-priority basis the ABL Facility, in each case subject to permitted liens
described in the indenture governing the 8% Senior Secured Notes due 2027.
CHS may redeem some or all of the 8% Senior Secured Notes due 2027 at any time on or after December 15, 2022 upon not less than 15 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, 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 period set forth below:
Period
Redemption Price
December 15, 2024 to December 14, 2027
100.000 %
5⅝% Senior Secured Notes due 2027
On December 28, 2020, CHS completed a private offering of $1.9 billion aggregate principal amount of 5⅝% Senior Secured Notes due March 15,
2027 (the “5⅝% Senior Secured Notes due 2027”). The proceeds of the offering were used to repurchase approximately $2.579 billion of the outstanding
principal amount of 6¼% Senior Secured Notes due 2023 that were validly tendered and accepted for purchase pursuant to the early tender deadline of a
tender offer that launched on December 11, 2020, and to pay related fees. The remaining principal value of 6¼% Senior Secured Notes due 2023 that were
not validly tendered as of the early tender deadline were redeemed or repurchased via the completion of the tender offer on January 11, 2021 or redemption
on January, 28, 2021. The 5⅝% Senior Secured Notes due 2027, which mature on March 15, 2027, bear interest at a rate of 5⅝% per year payable semi-
annually in arrears on March 15 and September 15 of each year, commencing on September 15, 2021. The 5⅝% Senior Secured Notes due 2027 are
unconditionally guaranteed on a senior-priority secured basis by the Company and each of CHS’ current and future domestic subsidiaries that provide
guarantees under the ABL Facility, any capital market debt securities of CHS (including CHS’ outstanding senior notes) and certain other long-term debt of
CHS.
The 5⅝% Senior Secured Notes due 2027 and the related guarantees are secured by shared (i) first-priority liens on the Non-ABL Priority Collateral
and (ii) second-priority liens on the ABL Priority Collateral that secures on a first-priority basis the ABL Facility, in each case subject to permitted liens
described in the indenture governing the 5⅝% Senior Secured Notes due 2027.
At any time and from time to time on or after December 15, 2023, CHS may redeem the 5⅝% Senior Secured Notes due 2027 in whole or in part, upon
not less than 15 no more than 60 days’ prior written notice at a redemption price equal to the percentage of principal amount set forth below plus accrued
and unpaid interest, if any, on the 5⅝% Senior Secured Notes due 2027 redeemed, to, but excluding, the applicable date of redemption, if redeemed during
the 12 month period beginning on December 15 of the years indicated below:
Period
Redemption Price
December 15, 2024 to December 14, 2025
101.406 %
December 15, 2025 to December 14, 2027
100.000 %
During the year ended December 31, 2024, the Company extinguished approximately $143 million principal value of the 5⅝% Senior Secured Notes
due 2027 through open market repurchases utilizing cash on hand.
6⅞% Senior Notes due 2028
On November 19, 2019, CHS issued approximately $1.7 billion aggregate principal amount of the 6⅞% Senior Notes due April 1, 2028 (“the 6⅞%
Senior Notes due 2028”) in connection with the 2019 Exchange Offer. No cash proceeds were received in the 2019 Exchange Offer. The 6⅞% Senior
Notes due 2028 bear interest at a rate of 6.875% per annum, payable semi-annually in arrears on April 1 and October 1 of each year. Interest on the 6⅞%
Senior 2028 Notes accrues from the initial issuance date of the 6⅞% Senior Notes due 2028. Interest is calculated on the basis of a 360-day year comprised
of 12 30-day months. The 6⅞% Senior Notes due 2028 are scheduled to mature on April 1, 2028. The 6⅞% Senior Notes due 2028 are unconditionally
guaranteed on a senior-priority unsecured basis by the Company and each of the CHS current and future domestic subsidiaries that provide guarantees
under the ABL Facility, any capital market debt securities of CHS (including CHS᾿ outstanding senior notes) and certain other long-term debt of CHS.
COMMUNITY HEALTH SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
98
CHS may redeem some or all of the 6⅞% Senior Notes due 2028 at any time on or after April 1, 2023 upon not less than 15 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,
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
April 1, 2024 to March 31, 2025
101.719 %
April 1, 2025 to March 31, 2028
100.000 %
On December 7, 2020, CHS entered into a privately negotiated agreement with a multi-asset investment manager who has certain funds and accounts
which are holders of the 6⅞% Senior Notes due 2028. Pursuant to the agreement, the Company exchanged $700 million aggregate principal amount of the
6⅞% Senior Notes due 2028 for an aggregate consideration of $400 million of cash and 10 million newly issued shares of the Company’s common stock.
The exchange transaction was completed on December 9, 2020 and the shares of common stock issued in the exchange were not, and are not required to be,
registered under the Securities Act of 1933 pursuant to an exemption from registration provisions via Section 3(a)(9) of the Securities Act of 1933. A gain
from early extinguishment of debt of approximately $205 million was recognized associated with this exchange.
During the year ended December 31, 2020, the Company extinguished $226 million in principal of the 6⅞% Senior Notes due 2028 through open
market repurchases and approximately $7 million via a tender offer that commenced on October 30, 2020 and expired on November 30, 2020.
6% Senior Secured Notes due 2029
On December 28, 2020, CHS completed a private offering of $900 million aggregate principal amount of 6% Senior Secured Notes due January 15,
2029 (the “6% Senior Secured Notes due 2029”). The proceeds of the offering were used, together with proceeds from the 5⅝% Senior Secured Notes due
2027 described above, to repurchase approximately $2.579 billion of the outstanding principal amount of 6¼% Senior Secured Notes due 2023 that were
validly tendered and accepted for purchase pursuant to the early tender deadline of a tender offer that launched on December 11, 2020, and to pay related
fees. The remaining principal value of 6¼% Senior Secured Notes due 2023 that were not validly tendered as of the early tender deadline were redeemed or
repurchased via the completion of the tender offer on January 11, 2021 or redemption on January, 28, 2021. The 6% Senior Secured Notes due 2029, which
mature on January 15, 2029, bear interest at a rate of 6% per year payable semi-annually in arrears on January 15 and July 15 of each year, commencing on
July 15, 2021. The 6% Senior Secured Notes due 2029 are unconditionally guaranteed on a senior-priority secured basis by each of CHS’ current and
future domestic subsidiaries that provide guarantees under the ABL Facility, any capital market debt securities of CHS (including CHS’ outstanding senior
notes) and certain other long-term debt of CHS.
The 6% Senior Secured Notes due 2029 and the related guarantees are secured by shared (i) first-priority liens on the Non-ABL Priority Collateral and
(ii) second-priority liens on the ABL Priority Collateral that secures on a first-priority basis the ABL Facility, in each case subject to permitted liens
described in the indenture governing the 6% Senior Secured Notes due 2029.
CHS is entitled, at its option, to redeem all or a portion of the 6% Senior Secured Notes due 2029 at any time prior to January 15, 2024, upon not less
than 15 nor more than 60 days’ notice, at a price equal to 100% of the principal amount of the 6% Senior Secured Notes due 2029 redeemed plus accrued
and unpaid interest, if any, plus a “make-whole” premium, as described in the indenture governing the 6% Senior Secured Notes due 2029.
CHS may redeem up to 40% of the aggregate principal amount of the 6% Senior Secured Notes due 2029 at any time prior to January 15, 2024 using
the net proceeds from certain equity offerings at the redemption price of 106.000% of the principal amount of the 6% Senior Secured Notes due 2029
redeemed, plus accrued and unpaid interest, if any.
At any time and from time to time on or after January 15, 2024, CHS may redeem the 6% Senior Secured Notes due 2029 in whole or in part, upon not
less than 15 nor more than 60 days’ prior written notice at a redemption price equal to the percentage of principal amount set forth below plus accrued and
unpaid interest, if any, on the 6% Senior Secured Notes due 2029 redeemed, to, but excluding, the applicable date of redemption, if redeemed during the 12
month period beginning on January 15 of the years indicated below:
Period
Redemption Price
January 15, 2025 to January 14, 2026
101.500 %
January 15, 2026 to January14, 2029
100.000 %
COMMUNITY HEALTH SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
99
5¼% Senior Secured Notes due 2030
On February 4, 2022, CHS completed a private offering of $1.535 billion aggregate principal amount of 5¼% Senior Secured Notes due May 15, 2030
(the “5¼% Senior Secured Notes due 2030”). The proceeds of the offering were used to redeem the 6⅝% Senior Secured Notes due 2025 on February 4,
2022, and to pay related fees and expenses. The 5¼% Senior Secured Notes due 2030 bear interest at a rate of 5.250% per year payable semi-annually in
arrears on May 15 and November 15, commencing on November 15, 2022. The 5¼% Senior Secured Notes due 2030 are unconditionally guaranteed on a
senior-priority secured basis by each of CHS’ current and future domestic subsidiaries that provide guarantees under the ABL Facility, any capital market
debt securities of CHS (including CHS’ outstanding senior notes) and certain other long-term debt of CHS.
The 5¼% Senior Secured Notes due 2030 and the related guarantees are secured by shared (i) first-priority liens on the Non-ABL Priority Collateral
and (ii) second-priority liens on the ABL Priority Collateral that secures on a first-priority basis the ABL Facility, in each case subject to permitted liens
described in the indenture governing the 5¼% Senior Secured Notes due 2030.
CHS is entitled, at its option, to redeem all or a portion of the 5¼% Senior Secured Notes due 2030 at any time prior to May 15, 2025, upon not less
than 10 nor more than 60 days’ notice, at a price equal to 100% of the principal amount of the 5¼% Senior Secured Notes due 2030 redeemed plus accrued
and unpaid interest, if any, plus a “make-whole” premium, as described in the indenture governing the 5¼% Senior Secured Notes due 2030.
CHS may redeem up to 40% of the aggregate principal amount of the 5¼% Senior Secured Notes due 2030 at any time prior to May 15, 2025 using the
net proceeds from certain equity offerings at a redemption price of 105.250% of the principal amount of the 5¼% Senior Secured Notes due 2030
redeemed, plus accrued and unpaid interest, if any. In addition, any time prior to May 15, 2025, but not more than once during each 12 month period, CHS
may redeem up to 10% of the original aggregate principal amount of the 5¼% Senior Secured Notes due 2030 at a redemption price equal to 103% of the
principal amount of the 5¼% Senior Secured Notes due 2030 to be redeemed, plus accrued and unpaid interest, if any.
At any time and from time to time on or after May 15, 2025, CHS may redeem the 5¼% Senior Secured Notes due 2030 in whole or in part, upon not
less than 10 nor more than 60 days’ prior written notice at a redemption price equal to the percentage of principal amount set forth below plus accrued and
unpaid interest, if any, on the 5¼% Senior Secured Notes due 2030 redeemed, to, but excluding, the applicable date of redemption, if redeemed during the
12 month period beginning on May 15 of the years indicated below:
Period
Redemption Price
May 15, 2025 to May 14, 2026
102.625 %
May 15, 2026 to May 14, 2027
101.313 %
May 15, 2027 to May 14, 2030
100.000 %
4¾% Senior Secured Notes due 2031
On February 9, 2021, CHS completed a private offering of $1.095 billion aggregate principal amount of 4¾% Senior Secured Notes due February 15,
2031 (the “4¾% Senior Secured Notes due 2031”). The proceeds of the offering, together with cash on hand, were used to redeem the 8⅝% Senior Secured
Notes due 2024 on February 9, 2021, and to pay related fees and expenses. The 4¾% Senior Secured Notes due 2031 bear interest at a rate of 4.750% per
year payable semi-annually in arrears on February 15 and August 15, commencing on August 15, 2021. The 4¾% Senior Secured Notes due 2031 are
unconditionally guaranteed on a senior-priority secured basis by each of CHS’ current and future domestic subsidiaries that provide guarantees under the
ABL Facility, any capital market debt securities of CHS (including CHS’ outstanding senior notes) and certain other long-term debt of CHS.
The 4¾% Senior Secured Notes due 2031 and the related guarantees are secured by shared (i) first-priority liens on the Non-ABL Priority Collateral
and (ii) second-priority liens on the ABL Priority Collateral that secures on a first-priority basis the ABL Facility, in each case subject to permitted liens
described in the indenture governing the 4¾% Senior Secured Notes due 2031.
CHS is entitled, at its option, to redeem all or a portion of the 4¾% Senior Secured Notes due 2031 at any time prior to February 15, 2026, upon not
less than 15 nor more than 60 days’ notice, at a price equal to 100% of the principal amount of the 4¾% Senior Secured Notes due 2031 redeemed plus
accrued and unpaid interest, if any, plus a “make-whole” premium, as described in the indenture governing the 4¾% Senior Secured Notes due 2031.
COMMUNITY HEALTH SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
100
Any time prior to February 15, 2026, but not more than once during each 12 month period, CHS may redeem up to 10% of the original aggregate
principal amount of the 4¾% Senior Secured Notes due 2031 at a redemption price equal to 103% of the principal amount of the 4¾% Senior Secured
Notes due 2031 to be redeemed, plus accrued and unpaid interest, if any.
At any time and from time to time on or after February 15, 2026, CHS may redeem the 4¾% Senior Secured Notes due 2031 in whole or in part, upon
not less than 15 nor more than 60 days’ prior written notice at a redemption price equal to the percentage of principal amount set forth below plus accrued
and unpaid interest, if any, on the 4¾% Senior Secured Notes due 2031 redeemed, to, but excluding, the applicable date of redemption, if redeemed during
the 12 month period beginning on February 15 of the years indicated below:
Period
Redemption Price
February 15, 2026 to February 14, 2027
102.375 %
February 15, 2027 to February 14, 2028
101.583 %
February 15, 2028 to February 14, 2029
100.792 %
February 15, 2029 to February 14, 2031
100.000 %
10⅞% Senior Secured Notes due 2032
On December 22, 2023, CHS completed a private offering of $1.000 billion aggregate principal amount of 10⅞% Senior Secured Notes due January 15,
2032 (the “10⅞% Senior Secured Notes due 2032”). The proceeds of the offering, together with cash on hand, were used to redeem $985 million aggregate
principal value of the 8% Senior Secured Notes due 2026 on December 28, 2023, and to pay related fees and expenses. The 10⅞% Senior Secured Notes
due 2032 bear interest at a rate of 10.875% per year payable semi-annually in arrears on February 15 and August 15, commencing on August 15, 2024. The
10⅞% Senior Secured Notes due 2032 are unconditionally guaranteed on a senior-priority secured basis by the Company and each of CHS’ current and
future domestic subsidiaries that provide guarantees under the ABL Facility, any capital market debt securities of CHS (including CHS’ outstanding senior
notes) and certain other long-term debt of CHS.
The 10⅞% Senior Secured Notes due 2032 and the related guarantees are secured by shared (i) first-priority liens on the Non-ABL Priority Collateral
and (ii) second-priority liens on the ABL Priority Collateral that secures on a first-priority basis the ABL Facility, in each case subject to permitted liens
described in the indenture governing the 10⅞% Senior Secured Notes due 2032.
CHS is entitled, at its option, to redeem all or a portion of the 10⅞% Senior Secured Notes due 2032 at any time prior to February 15, 2027, upon not
less than 10 nor more than 60 days’ notice, at a price equal to 100% of the principal amount of the 10⅞% Senior Secured Notes due 2032 redeemed plus
accrued and unpaid interest, if any, plus a “make-whole” premium, as described in the indenture governing the 10⅞% Senior Secured Notes due 2032.
CHS may redeem up to 40% of the aggregate principal amount of the 10⅞% Senior Secured Notes due 2032 at any time prior to February 15, 2027
using the net proceeds from certain equity offerings at a redemption price of 110.875% of the principal amount of the 10⅞% Senior Secured Notes due
2032 redeemed, plus accrued and unpaid interest, if any. In addition, any time prior to February 15, 2027, but not more than once during each 12 month
period, CHS may redeem up to 10% of the original aggregate principal amount of the 10⅞% Senior Secured Notes due 2032 at a redemption price equal to
103% of the principal amount of the 10⅞% Senior Secured Notes due 2032 to be redeemed, plus accrued and unpaid interest, if any.
At any time and from time to time on or after February 15, 2027, CHS may redeem the 10⅞% Senior Secured Notes due 2032 in whole or in part, upon
not less than 10 nor more than 60 days’ prior written notice at a redemption price equal to the percentage of principal amount set forth below plus accrued
and unpaid interest, if any, on the 10⅞% Senior Secured Notes due 2032 redeemed, to, but excluding, the applicable date of redemption, if redeemed
during the 12 month period beginning on February 15 of the years indicated below:
Period
Redemption
Price
February 15, 2027 to February 14, 2028
105.438 %
February 15, 2028 to February 14, 2029
102.719 %
February 15, 2029 to January 14, 2032
100.000 %
COMMUNITY HEALTH SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
101
On June 5, 2024, CHS completed the offering of an additional $1.225 billion aggregate principal amount of its outstanding 10.875% Senior Secured
Notes due 2032 (the “Tack-On Notes”) at an issue price of 102.000%, plus accrued and unpaid interest from December 22, 2023 to the closing date (which
equaled approximately $60 million). The Tack-On Notes are part of the same series as, and rank equally with, the 10⅞% Senior Secured Notes due 2032
issued in December 2023. Following the issuance of the Tack-On Notes, the total aggregate principal amount of outstanding 10⅞% Senior Secured Notes
due 2032 is $2.225 billion.
Proceeds from the offering of the Tack-On Notes, together with cash on hand, were used to redeem all $1.116 billion of the outstanding 8.000% Senior
Secured Notes due 2026, to fund repurchases of the Company’s 6⅞% Senior Notes due 2028 as noted below, to pay related fees and expenses and for
general corporate purposes. Approximately $98 million of the proceeds from the Tack-On Notes, was also used to extinguish $130 million principal value
of the Company’s 6⅞% Senior Notes due 2028 in a privately negotiated transaction.
6⅞% Junior-Priority Secured Notes due 2029
On February 2, 2021, CHS completed a private offering of $1.775 billion aggregate principal amount of 6⅞% Junior-Priority Secured Notes due April
15, 2029 (the “6⅞% Junior-Priority Secured Notes due 2029”). The proceeds of the offering, together with cash on hand, were used to redeem the 9⅞%
Junior-Priority Secured Notes due 2023 in February 2021 and to pay related fees and expenses. The 6⅞% Junior-Priority Secured Notes due 2029 bear
interest at a rate of 6.875% per year payable semi-annually in arrears on April 15 and October 15 of each year, commencing on October 15, 2021. The
6⅞% Junior-Priority Secured Notes due 2029 are unconditionally guaranteed on a junior-priority secured basis by the Company and each of the current and
future domestic subsidiaries of CHS that provide guarantees under CHS’ ABL Facility, any capital market debt securities of CHS (including CHS’
outstanding senior notes) and certain other long-term debt of CHS.
The 6⅞% Junior-Priority Secured Notes due 2029 and the related guarantees are secured by shared (i) second-priority liens on the Non-ABL Priority
Collateral that secures on a first-priority basis CHS’ senior-priority secured 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 CHS’ senior-priority secured notes), in each case subject to permitted
liens described in the indenture governing the 6⅞% Junior-Priority Secured Notes due 2029.
At any time and from time to time on or after April 15, 2024, CHS may redeem the 6⅞% Junior-Priority Secured Notes due 2029 in whole or in part,
upon not less than 15 nor more than 60 days’ prior written notice at a redemption price equal to the percentage of principal amount set forth below plus
accrued and unpaid interest, if any, on the 6⅞% Junior-Priority Secured Notes due 2029 redeemed, to, but excluding, the applicable date of redemption, if
redeemed during the 12 month period beginning on April 15 of the years indicated below:
Period
Redemption Price
April 15, 2024 to April 14, 2025
103.438 %
April 15, 2025 to April 14, 2026
101.719 %
April 15, 2026 to April 14, 2029
100.000 %
6⅛% Junior-Priority Secured Notes due 2030
On May 19, 2021, CHS completed a private offering of $1.440 billion aggregate principal amount of 6⅛% Junior-Priority Secured Notes due April 1,
2030 (the “6⅛% Junior-Priority Secured Notes due 2030”). The proceeds of the offering, together with cash on hand, were used to redeem the 8⅛% Junior-
Priority Secured Notes due 2024 on May 19, 2021, and to pay related fees and expenses. The 6⅛% Junior-Priority Secured Notes due 2030 bear interest at
a rate of 6.125% per year payable semi-annually in arrears on April 1 and October 1, commencing on October 1, 2021. The 6⅛% Junior-Priority Secured
Notes due 2030 are unconditionally guaranteed on a junior-priority secured basis by each of CHS’ current and future domestic subsidiaries that provide
guarantees under the ABL Facility, any capital market debt securities of CHS (including CHS’ outstanding senior notes) and certain other long-term debt of
CHS.
The 6⅛% Junior-Priority Secured Notes due 2030 and the related guarantees are secured by shared (i) second-priority liens on the Non-ABL Priority
Collateral and (ii) third-priority liens on the ABL Priority Collateral that secures on a first-priority basis the ABL Facility, in each case subject to permitted
liens described in the indenture governing the 6⅛% Junior-Priority Secured Notes due 2030.
CHS is entitled, at its option, to redeem all or a portion of the 6⅛% Junior-Priority Secured Notes due 2030 at any time prior to April 1, 2025, upon not
less than 15 nor more than 60 days’ notice, at a price equal to 100% of the principal amount of the 6⅛%
COMMUNITY HEALTH SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
102
Junior-Priority Secured Notes due 2030 redeemed plus accrued and unpaid interest, if any, plus a “make-whole” premium, as described in the indenture
governing the 6⅛% Junior-Priority Secured Notes due 2030.
At any time and from time to time on or after April 1, 2025, CHS may redeem the 6⅛% Junior-Priority Secured Notes due 2030 in whole or in part,
upon not less than 15 nor more than 60 days’ prior written notice at a redemption price equal to the percentage of principal amount set forth below plus
accrued and unpaid interest, if any, on the 6⅛% Junior-Priority Secured Notes due 2030 redeemed, to, but excluding, the applicable date of redemption, if
redeemed during the 12 month period beginning on April 1 of the years indicated below:
Period
Redemption Price
April 1, 2025 to March 31, 2026
103.063 %
April 1, 2026 to March 31, 2027
101.531 %
April 1, 2027 to March 31, 2030
100.000 %
During the years ended December 31, 2024, 2023 and 2022, the Company extinguished a portion of certain series of its outstanding notes through open
market repurchases, and privately negotiated repurchases with a limited number of holders, as follows (in millions):
December 31,
2024
2023
2022
5⅝% Senior Secured Notes due 2027
$
143 $
— $
—
6⅞% Senior Notes due 2028
130
—
11
6% Senior Secured Notes due 2029
—
256
—
4¾% Senior Secured Notes due 2031
—
—
37
6⅞% Junior-Priority Secured Notes due 2029
—
142
389
6⅛% Junior-Priority Secured Notes due 2030
—
4
208
Total principal amount of debt extinguished
$
273 $
402 $
645
Financing and repayment transactions discussed above, including open market and privately negotiated repurchases, resulted in a pre-tax and after-tax
gain from early extinguishment of debt of $25 million and $27 million, respectively, for the year ended December 31, 2024, a pre-tax and after-tax gain
from early extinguishment of debt of $72 million and $61 million, respectively, for the year ended December 31, 2023, a pre-tax and after-tax loss from
early extinguishment of $253 million and $208 million, respectively, for the year ended December 31, 2022.
COMMUNITY HEALTH SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
103
ABL Facility
On June 5, 2024, the Company and CHS entered into an amendment and restatement agreement (the “Amendment”) to refinance and replace the
amended and restated asset-based loan (“ABL”) credit agreement (the “ABL Credit Agreement” and, as amended by the Amendment, the “Amended and
Restated ABL Credit Agreement”), dated as of November 22, 2021, with JPMorgan Chase Bank, N.A., as administrative agent, and the lenders and other
agents party thereto. Pursuant to the Amended and Restated ABL Credit Agreement, the lenders have extended to CHS a revolving asset-based loan facility
(the “ABL Facility”) in the maximum aggregate principal amount of $1.0 billion, subject to borrowing base capacity. The ABL Facility includes borrowing
capacity available for letters of credit of $200 million. CHS and all domestic subsidiaries of CHS that guarantee CHS’ other outstanding senior and senior
secured indebtedness guarantee the obligations of CHS under the ABL Facility. Subject to certain exceptions, all obligations under 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, as well as a perfected junior-
priority security interest in substantially all of the other assets of the Company, CHS and the guarantors, subject to customary exceptions and intercreditor
arrangements. At December 31, 2024, the Company had outstanding borrowings of $341 million and approximately $491 million of additional borrowing
capacity (after taking into consideration the $66 million of outstanding letters of credit) under the ABL Facility. The issued letters of credit were primarily
in support of potential insurance-related claims and certain bonds. Letters of credit were reduced during the year ended December 31, 2024 by $15 million,
primarily in relation to a professional liability claim that was settled and funded during the year ended December 31, 2024.
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) a base
rate or (b) the Federal Reserve’s secured overnight financing rate (“SOFR”). The applicable margin under the ABL Facility is determined based on excess
availability as a percentage of the maximum commitment amount under the ABL Facility at a rate per annum of 0.75%, 1.00% and 1.25% for loans based
on the base rate and 1.75%, 2.00% and 2.25% for loans based on SOFR. The applicable commitment fee rate under the ABL Facility is determined based
on average utilization as a percentage of the maximum commitment amount under the ABL Facility at a rate per annum of either 0.25% or 0.375% times
the unused portion of the ABL Facility.
Principal amounts outstanding under the ABL Facility will be due and payable in full on June 5, 2029. The ABL Facility includes a 91-day springing
maturity applicable if more than $350 million in the aggregate principal amount of the 5⅝% Senior Secured Notes due 2027 or any indebtedness incurred
to refinance the foregoing are scheduled to mature or similarly become due on a date prior to June 5, 2029. In such event, principal amounts outstanding
under the ABL Facility will be accelerated and all amounts outstanding under the ABL Facility will become immediately due and payable.
The ABL Facility contains customary representations and warranties, subject to limitations and exceptions, and customary covenants restricting the
Company’s 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 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 sale and leaseback transactions or (11) change the Company’s fiscal year. The Company is also required to comply with a consolidated fixed
coverage ratio, upon certain triggering events described below, and various affirmative covenants. The consolidated fixed coverage ratio is calculated as the
ratio of (x) consolidated EBITDA (as defined in the ABL Facility) less capital expenditures to (y) the sum of consolidated interest expense (as defined in
the ABL Facility), scheduled principal payments, income taxes and restricted payments made in cash or in permitted investments. For purposes of
calculating the consolidated fixed charge coverage ratio, the calculation of consolidated EBITDA as defined in the ABL Facility is a trailing 12-month
calculation that begins with the Company’s consolidated net income, with certain 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. The consolidated fixed charge coverage ratio is a required covenant only in periods where the total borrowings
outstanding under the ABL Facility reduce the amount available in the facility to less than the greater of (i) $95 million or (ii) 10% of the calculated
borrowing base. As a result, in the event the Company has less than $95 million available under the ABL Facility, the Company would need to comply with
the consolidated fixed charge coverage ratio. At December 31, 2024, the Company is not subject to the consolidated fixed charge coverage ratio as such
triggering event had not occurred during the year ended December 31, 2024.
In addition, in the event the amount of borrowings and letters of credit outstanding at any time under the ABL Facility exceeds the borrowing base at
such time, the Company will be required to, first, repay outstanding borrowings and, second, replace or cash collateralize outstanding letters of credit, in an
aggregate amount sufficient to eliminate such excess.
COMMUNITY HEALTH SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
104
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 ABL
Facility Agreement when due (taking into account any applicable grace period), (2) any representation or warranty proving to have been materially
incorrect when made, (3) covenant defaults subject, with respect to certain covenants, to an available cure and applicable grace periods, (4) bankruptcy and
insolvency events, (5) a cross default to certain 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 ABL agent or lenders under the ABL Facility.
At December 31, 2024, the scheduled maturities of long-term debt outstanding, including finance lease and financing obligations for each of the next
five years and thereafter are as follows (in millions):
Year Ending December 31,
Amount
2025
$
20
2026
10
2027
2,466
2028
635
2029
2,237
Thereafter
6,356
Total maturities
11,724
Less: Deferred debt issuance costs
(272 )
Total long-term debt
$
11,452
The Company paid interest of approximately $741 million, $801 million and $835 million on borrowings during the years ended December 31, 2024,
2023 and 2022, respectively.
7. FAIR VALUE OF FINANCIAL INSTRUMENTS
The fair value of financial instruments has been estimated by the Company using available market information at December 31, 2024 and 2023, and
valuation methodologies considered appropriate. The estimates presented in the table below are not necessarily indicative of amounts the Company could
realize in a current market exchange (in millions):
December 31, 2024
December 31, 2023
Carrying
Estimated
Fair
Carrying
Estimated
Fair
Amount
Value
Amount
Value
Assets:
Cash and cash equivalents
$
37 $
37 $
38 $
38
Investments in equity securities
69
69
69
69
Available-for-sale debt securities
192
192
182
182
Trading securities
5
5
5
5
Liabilities:
8% Senior Secured Notes due 2026
—
—
1,109
1,114
8% Senior Secured Notes due 2027
696
700
695
679
5⅝% Senior Secured Notes due 2027
1,722
1,686
1,847
1,767
6⅞% Senior Notes due 2028
622
457
750
470
6% Senior Secured Notes due 2029
626
577
622
580
5¼% Senior Secured Notes due 2030
1,468
1,261
1,458
1,287
4¾% Senior Secured Notes due 2031
1,054
822
1,054
834
10⅞% Senior Secured Notes due 2032
2,212
2,299
982
1,047
6⅞% Junior-Priority Secured Notes due 2029
1,175
940
1,162
812
6⅛% Junior-Priority Secured Notes due 2030
1,175
842
1,167
781
ABL Facility and other debt
359
359
275
275
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 fair
value is determined using the methodologies discussed below in accordance with accounting standards related to the determination of fair value based on
the U.S. GAAP fair value hierarchy as discussed in Note 8. The estimated fair value
COMMUNITY HEALTH SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
105
for financial instruments with a fair value that does not equal its carrying value is considered a Level 1 valuation. The Company utilizes the market
approach and obtains indicative pricing through publicly available subscription services such as Bloomberg to determine fair values 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.
Available-for-sale debt 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.
Senior Notes, Senior Secured Notes and Junior-Priority Secured Notes. 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 approximates fair value due to the nature of these obligations.
8. FAIR VALUE
Fair Value Hierarchy
Fair value is a market-based measurement, not an entity-specific measurement. Therefore, a fair value measurement should be determined based on the
assumptions that market participants would use in pricing the asset or liability. As a basis for considering market participant assumptions in fair value
measurements, the Company utilizes the U.S. GAAP fair value hierarchy that distinguishes between market participant assumptions based on market data
obtained from sources independent of the reporting entity (observable inputs that are classified within Levels 1 and 2 of the hierarchy) and the reporting
entity’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.
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 or liabilities. Level 3
includes values determined using pricing models, discounted cash flow methodologies, or similar techniques reflecting 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
level in 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 value
measurement in its entirety. The Company’s assessment of the significance of a particular input to the fair value measurement in its entirety requires
judgment 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
the change in circumstances that requires such transfer. There were no transfers between levels during the years ended December 31, 2024 or 2023.
The following table sets forth, by level within the fair value hierarchy, the financial assets recorded at fair value on a recurring basis at December 31,
2024 and 2023 (in millions):
December 31,
2024
Level 1
Level 2
Level 3
Investments in equity securities
$
69 $
69 $
— $
—
Available-for-sale debt securities
192
—
192
—
Trading securities
5
—
5
—
Total assets
$
266 $
69 $
197 $
—
COMMUNITY HEALTH SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
106
December 31,
2023
Level 1
Level 2
Level 3
Investments in equity securities
$
69 $
69 $
— $
—
Available-for-sale debt securities
182
—
182
—
Trading securities
5
—
5
—
Total assets
$
256 $
69 $
187 $
—
Investments in Equity Securities, Available-for-Sale Debt Securities and Trading Securities
Investments in equity securities classified as Level 1 are measured using quoted market prices. Level 2 available-for-sale debt securities and trading
securities primarily consist 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 that incorporates
standard observable inputs and assumptions such as benchmark yields, reported trades, broker/dealer quotes, issuer spreads, benchmark securities,
bids/offers and other pertinent reference data.
Supplemental information regarding the Company’s available-for-sale debt securities (all of which had no withdrawal restrictions) is set forth in the
table below (in millions):
Gross
Gross
Estimated
Amortized
Unrealized
Unrealized
Fair
Cost
Gains
Losses
Values
At December 31, 2024:
Government
$
125 $
— $
(11 ) $
114
Corporate
72
—
(5 )
67
Mortgage and asset-backed securities
11
—
—
11
Total available-for-sale debt securities
$
208 $
— $
(16 ) $
192
Gross
Gross
Estimated
Amortized
Unrealized
Unrealized
Fair
Cost
Gains
Losses
Values
At December 31, 2023:
Government
$
118 $
— $
(10 ) $
108
Corporate
65
—
(6 )
59
Mortgage and asset-backed securities
16
—
(1 )
15
Total available-for-sale debt securities
$
199 $
— $
(17 ) $
182
At December 31, 2024 and 2023, investments with aggregate estimated fair values of approximately $141 million (274 investments) and $145 million
(306 investments), respectively, generated the gross unrealized losses disclosed in the above table. At each reporting date, the Company performs an
evaluation of impaired securities to determine if the unrealized losses are other-than-temporary. This evaluation considers a number of factors including,
but not 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
until fair value recovers. Based on the results of this evaluation, management concluded that at December 31, 2024, there were no other-than-temporary
losses related to available-for-sale debt securities. The recent declines in value of the securities and/or length of time they have been below cost, as well as
the Company’s ability and intent to hold the securities for a reasonable period of time sufficient for a projected recovery of fair value, have caused
management to conclude that the securities, that have generated gross unrealized losses, were not other-than-temporarily impaired. Management will
continue to monitor and evaluate the recoverability of the Company’s available-for-sale debt securities.
COMMUNITY HEALTH SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
107
The contractual maturities of debt-based securities held by the Company at December 31, 2024 and 2023, excluding mutual fund holdings, are set forth
in the table below (in millions). Expected maturities will differ from contractual maturities because the issuers of the debt securities may have the right to
prepay their obligations without prepayment penalties.
December 31, 2024
December 31, 2023
Amortized
Estimated
Amortized
Estimated
Cost
Fair Values
Cost
Fair Values
Within 1 year
$
19 $
19 $
19 $
19
After 1 year and through year 5
82
80
63
62
After 5 years and through year 10
58
54
63
57
After 10 years
49
39
54
44
Gross realized gains and losses on sales of available-for-sale debt securities are summarized in the table below (in millions):
Year Ended December 31,
2024
2023
2022
Realized gains
$
— $
— $
—
Realized losses
(1 )
(2 )
(2 )
Other investment income, which includes interest and dividends, related to all investment securities was $8 million, $7 million and $6 million for the
years ended December 31, 2024, 2023 and 2022, respectively.
Net losses and gains recognized during the years ended December 31, 2024, 2023 and 2022 for investments in equity securities, which are broken out
between investments sold during the year and investments held at the end of the year, are summarized in the table below (in millions):
Year Ended December 31,
2024
2023
2022
Net gains and (losses) recognized during the year on equity securities
$
8 $
11 $
(28 )
Less: Net gains and (losses) recognized during the year on equity
securities sold during the year
2
(5 )
(2 )
Unrealized gains and (losses) recognized during the year on equity
securities held at the end of year
$
6 $
16 $
(26 )
9. LEASES
The Company utilizes operating and finance leases for the use of certain hospitals, medical office buildings, and medical equipment. All lease
agreements generally require the Company to pay maintenance, repairs, property taxes and insurance costs, which are variable amounts based on actual
costs incurred during each applicable period. Such costs are not included in the determination of the ROU asset or lease liability. Variable lease cost also
includes escalating rent payments that are not fixed at commencement but are based on an index that is determined in future periods over the lease term
based on changes in the Consumer Price Index or other measures of cost inflation. Most leases include one or more options to renew the lease at the end of
the initial term, with renewal terms that generally extend the lease at the then market rate of rental payment. Certain leases also include an option to buy the
underlying asset at or a short time prior to the termination of the lease. All such options are at the Company’s discretion and are evaluated at the
commencement of the lease, with only those that are reasonably certain of exercise included in determining the appropriate lease term.
COMMUNITY HEALTH SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
108
The components of lease cost and rent expense for the years ended December 31, 2024, 2023 and 2022 are as follows (in millions):
Year Ended December 31,
Lease Cost
2024
2023
2022
Operating lease cost:
Operating lease cost
$
185 $
211 $
211
Short-term rent expense
90
90
87
Variable lease cost
29
23
24
Sublease income
(5 )
(5 )
(5 )
Total operating lease cost
$
299 $
319 $
317
Finance lease cost:
Amortization of ROU assets
$
10 $
13 $
13
Interest on finance lease liabilities
14
13
15
Total finance lease cost
$
24 $
26 $
28
Supplemental balance sheet information related to leases was as follows (in millions):
Balance Sheet Classification
December 31,
2024
December 31,
2023
Operating Leases:
Operating Lease ROU Assets
Other assets, net
$
623 $
665
Finance Leases:
Finance Lease ROU Assets
Property and equipment
Land and improvements
$
— $
—
Buildings and improvements
235
246
Equipment and fixtures
9
10
Property and equipment
244
256
Less: accumulated depreciation and
amortization
(63 )
(55 )
Property and equipment, net
$
181 $
201
Current finance lease liabilities
Current maturities of long-term debt
$
2 $
2
Long-term finance lease liabilities
Long-term debt
193
214
Supplemental cash flow information related to leases for the years ended December 31, 2024, 2023 and 2022 are as follows (in millions):
Year Ended December 31,
Cash flow information
2024
2023
2022
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases
$
179
$
200
$
204
Operating cash flows from finance leases
14
13
15
Financing cash flows from finance leases
2
3
9
ROU assets obtained in exchange for new finance lease liabilities
3
1
42
ROU assets obtained in exchange for new operating lease liabilities
101
102
195
Weighted-average remaining lease term:
Operating leases
9 years
9 years
8 years
Finance leases
30 years
30 years
31 years
Weighted-average discount rate:
Operating leases
8.9 %
8.8 %
8.0 %
Finance leases
6.1 %
6.2 %
6.4 %
(1)
Included in the change in other operating assets and liabilities in the consolidated statements of cash flows.
(1)
COMMUNITY HEALTH SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
109
Commitments relating to noncancellable operating and finance leases and financing obligations for each of the next five years and thereafter are as
follows (in millions):
Financing
Year Ending December 31,
Operating
Finance
Obligations
2025
$
171 $
15 $
13
2026
138
16
13
2027
111
16
13
2028
90
16
14
2029
64
15
14
Thereafter
458
463
45
Total minimum future payments
1,032
541
112
Less: Imputed interest
(382 )
(346 )
36
Total liabilities
650
195
148
Less: Current portion
(115 )
(2 )
(3 )
Long-term liabilities
$
535 $
193 $
145
As of December 31, 2024, there were approximately $43 million of assets underlying approved but pending leases that have not yet commenced,
primarily for leases of various real estate and medical equipment.
10. EMPLOYEE BENEFIT PLANS
The Company maintains various benefit plans, including defined contribution plans, defined benefit plans and deferred compensation plans, for which
certain of the Company’s subsidiaries are the plan sponsors. The CHS/Community Health Systems, Inc. Retirement Savings Plan is a defined contribution
plan that covers the majority of the Company’s employees. Employees at locations whose employment is covered by collective bargaining agreements are
generally eligible to participate in the CHS/Community Health Systems, Inc. Standard 401(k) Plan. Total expense to the Company under the 401(k) plans
was $73 million, $64 million and $70 million for the years ended December 31, 2024, 2023 and 2022, respectively, and is recorded in salaries and benefits
expense in the consolidated statements of (loss) income.
The Company maintains unfunded deferred compensation plans that allow participants to defer receipt of a portion of their compensation. The liability
for the deferred compensation plans was $129 million and $123 million at December 31, 2024 and 2023, respectively, and is included in other long-term
liabilities in the consolidated balance sheets. Assets designated to pay benefits under these plans are discussed below.
The Company provides an unfunded Supplemental Executive Retirement Plan (“SERP”) for certain members of its executive management. 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 SERP.
Variances from actuarially assumed rates will result in increases or decreases in benefit obligations and net periodic cost in future periods. Benefits expense
under the SERP was $7 million, $8 million and $11 million for the years ended December 31, 2024, 2023 and 2022, respectively. The accrued benefit
liability for the SERP totaled $43 million and $42 million at December 31, 2024 and 2023, respectively. The weighted-average assumptions used in
determining net periodic cost for the year ended December 31, 2024 were a discount rate of 4.9% and an annual salary increase of 3.0%. The weighted-
average assumptions used in determining net periodic cost for the year ended December 31, 2023 were a discount rate of 5.1% and an annual salary
increase of 3.0%.
During 2023, certain members of executive management of the Company that were participants in the SERP retired and met the requirements for
payout of their SERP retirement benefit. The SERP payout provisions require payment to the participant in an actuarially determined lump sum amount six
months after the participant retires from the Company. There were no material settlement losses during the years ended December 31, 2024, 2023 and
2022.
At December 31, 2024, the Company had assets of $129 million in a non-qualified plan trust generally designated to pay benefits of the deferred
compensation plans and the SERP, consisting of equity securities of $11 million and company-owned life insurance contracts of $118 million. At
December 31, 2023, the Company had assets of $126 million in a non-qualified plan trust generally designated to pay benefits of the deferred compensation
plans and the SERP, consisting of equity securities of $15 million and company-owned life insurance contracts of $111 million.
COMMUNITY HEALTH SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
110
The Company previously maintained the CHS/Community Health Systems, Inc. Retirement Income Plan (“Pension Plan”), which was a defined
benefit, non-contributory pension plan that covered certain employees at three of its formerly owned hospitals. The Pension Plan was terminated in 2024
upon transfer of the remaining lifetime obligation of the Pension Plan to a third-party via an irrevocable annuity contract. Settlement of the Pension Plan
resulted in recognition of a $3 million charge during the year ended December 31, 2024. Benefits expense under the Pension Plan was $4 million for the
year ended December 31, 2024, inclusive of the aforementioned settlement charge. Benefits expense under the Pension Plan was less than $1 million for
each of the years ended December 31, 2023 and 2022.
11. STOCKHOLDERS’ DEFICIT
Authorized capital shares of the Company include 400,000,000 shares of capital stock consisting of 300,000,000 shares of common stock and
100,000,000 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 of which were outstanding at December 31, 2024, may be issued in one or more series having such rights, preferences and other provisions as
determined by the Board of Directors without approval by the holders of common stock.
The Company is a holding company, which operates through its subsidiaries. The ABL Facility and the indentures governing each series of the
Company’s 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.
The ABL Facility and the indentures governing each series of the Company’s outstanding notes restrict the Company’s subsidiaries from, among other
matters, paying dividends and making distributions to the Company, which thereby limits the Company’s ability to pay dividends and/or repurchase stock.
At December 31, 2024, under the most restrictive test in these agreements (and subject to certain exceptions), the Company has approximately $300 million
of capacity to pay permitted dividends and/or repurchase shares of stock or make other restricted payments.
The following schedule discloses the effects of changes in the Company’s ownership interest in its less-than-wholly-owned subsidiaries on Community
Health Systems, Inc. stockholders’ deficit (in millions):
Year Ended December 31,
2024
2023
2022
Net (loss) income attributable to Community Health Systems,
Inc. stockholders
$
(516 ) $
(133 ) $
46
Transfers to the noncontrolling interests:
Net (decrease) increase in Community Health Systems, Inc.
paid-in-capital for purchase of subsidiary partnership interests
(28 )
5
(6 )
Net transfers to the noncontrolling interests
(28 )
5
(6 )
Change to Community Health Systems, Inc. stockholders’ deficit
from net (loss) income attributable to Community Health Systems,
Inc. stockholders and transfers to noncontrolling interests
$
(544 ) $
(128 ) $
40
12. EARNINGS PER SHARE
The following table sets forth the components of the denominator for the computation of basic and diluted (loss) earnings per share for net (loss)
income attributable to Community Health Systems, Inc. stockholders:
Year Ended December 31,
2024
2023
2022
Weighted-average number of shares outstanding — basic
132,101,768
130,445,677
128,808,387
Effect of dilutive securities:
Restricted stock awards
—
—
842,055
Employee stock options
—
—
278,057
Other equity-based awards
—
—
131,820
Weighted-average number of shares outstanding — diluted
132,101,768
130,445,677
130,060,319
COMMUNITY HEALTH SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
111
The Company generated a net loss attributable to Community Health Systems, Inc. stockholders for the years ended December 31, 2024 and 2023, so
the effect of dilutive securities is not considered because their effect would be antidilutive. If the Company had generated net income, the effect of stock
awards and options on the diluted shares calculation would have been an increase of 1,333,424 shares and 422,487 shares during the years ended December
31, 2024 and 2023, respectively.
Year Ended December 31,
2024
2023
2022
Dilutive securities outstanding not included in the computation of earnings
per share because their effect is antidilutive:
Employee stock options and restricted stock awards
4,702,416
6,210,811
4,406,764
13. EQUITY INVESTMENTS
In March 2005, the Company began purchasing items, primarily medical supplies, medical equipment and pharmaceuticals, under an agreement with
HealthTrust Purchasing Group, L.P. (“HealthTrust”), a group purchasing organization in which the Company is a noncontrolling partner. Effective October
1, 2022, HealthTrust completed the sale of a majority interest in CoreTrust Holdings, LLC (“CoreTrust”) to a third party. Proceeds for the sale of interest in
CoreTrust were distributed to members of HealthTrust and the Company received approximately $121 million in connection with such distribution during
the year ended December 31, 2022. A gain of approximately $119 million was recognized associated with this transaction as included in the line item
“Gain from CoreTrust Transaction” within the consolidated statements of (loss) income. As of December 31, 2024, the Company had a 12.6% ownership
interest in HealthTrust.
The Company’s investment in all of its unconsolidated affiliates was $152 million and $170 million at December 31, 2024 and 2023, respectively, and
is included in other assets, net in the accompanying consolidated balance sheets. Included in the Company’s results of operations is the Company’s equity
in pre-tax earnings from its investments in unconsolidated affiliates, which was $10 million, $8 million and $14 million for the years ended December 31,
2024, 2023 and 2022, respectively.
14. SEGMENT INFORMATION
The Company is principally engaged in the provision of healthcare services, including a broad range of general and specialized hospital healthcare
services and outpatient services. Services are delivered within hospitals that the Company owns or operates as well as related healthcare entities that exist
to support and supplement services provided in their associated hospital, including, for example, physician practices, urgent care centers, freestanding
emergency departments, occupations medicine clinics, imaging centers, cancer centers and ambulatory surgery centers.
The Company has a single reportable segment represented by hospital operations which includes its general acute care hospitals and related healthcare
entities that provide inpatient and outpatient healthcare services. The Company defined its single reportable segment consistent with the manner in which
internally reported financial information is regularly reviewed by the Company’s chief executive officer who is the Company’s chief operating decision
maker (“CODM”). Resources are allocated and financial performance is assessed on a consolidated basis.
The CODM does not review assets at a different level or category than the amounts disclosed in the consolidated balance sheets.
COMMUNITY HEALTH SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
112
The Company’s CODM uses net (loss) income, as presented in the consolidated statements of (loss) income, to assess performance and allocate
resources. Net (loss) income is used in the annual budgeting process as well as throughout the period when projecting or forecasting quarterly and full-year
performance. The CODM considers budget-to-actual and actual versus prior period (prior month, prior year, etc.) variances on a periodic basis as a means
of assessing performance. The following segment information, including significant segment expenses, is presented in millions:
Year Ended December 31,
2024
2023
2022
Net operating revenues
$
12,634 $
12,490 $
12,211
Less:
Salaries and benefits
5,418
5,415
5,330
Supplies
1,946
1,993
1,975
Contract labor
170
266
526
Medical specialist fees
640
606
480
Other segment items
3,131
2,835
2,474
Depreciation and amortization
486
505
534
Interest expense
863
832
860
Interest income
(3 )
(2 )
(2 )
Impairment and (gain) loss on sale of businesses, net
301
(87 )
71
Gain from early extinguishment of debt
(25 )
(72 )
(253 )
Gain from CoreTrust Transaction
—
—
(119 )
Equity in earnings of unconsolidated affiliates
(10 )
(8 )
(14 )
Provision for income taxes
79
191
170
Net (loss) income
$
(362 ) $
16 $
179
Other segment items include various purchased services and other operating expenses including, for example, lease cost and rent expense, repairs and
maintenance, utilities, professional liability claims expense and software maintenance fees.
15. COMPREHENSIVE LOSS
The following tables present information about items reclassified out of accumulated other comprehensive loss (“AOCL”) by component for the years
ended December 31, 2024 and 2023 (in millions, net of tax):
Change in
Fair Value of
Change in
Available-for-Sale
Unrecognized
Debt
Pension Cost
Securities
Components
AOCL
Balance at December 31, 2023
$
(13 )
$
(1 )
$
(14 )
Other comprehensive income
before reclassifications
—
2
2
Amounts reclassified from
AOCL
—
2
2
Net current-period other
comprehensive income
—
4
4
Balance at December 31, 2024
$
(13 )
$
3
$
(10 )
COMMUNITY HEALTH SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
113
Change in
Fair Value of
Change in
Available-for-Sale
Unrecognized
Debt
Pension Cost
Securities
Components
AOCL
Balance at December 31, 2022
$
(19 )
$
(2 )
$
(21 )
Other comprehensive (loss)
income before reclassifications
6
1
7
Amounts reclassified from
AOCL
—
—
-
Net current-period other
comprehensive (loss) income
6
1
7
Balance at December 31, 2023
$
(13 )
$
(1 )
$
(14 )
There were no significant reclassifications to net (loss) income out of AOCL for the years ended December 31, 2024 and 2023.
16. COMMITMENTS AND CONTINGENCIES
Construction and Other Capital Commitments. Pursuant to a hospital purchase agreement from the Company’s March 1, 2016 acquisition of
Northwest Health – Starke, formerly known as Starke Hospital, the Company is committed to make an investment of up to $15 million toward the
construction of a replacement facility in Knox, Indiana. Under the terms of such agreement, the construction of the replacement facility for Northwest
Health - Starke is required to be completed within five years of the date the Company entered into a new lease with Starke County, Indiana, the hospital
lessor, or in the event the Company does not enter into a new lease with Starke County, construction shall be completed by September 30, 2026. The
Company has not entered into a new lease with the lessor for Northwest Health - Starke.
Physician Recruiting Commitments. As part of its physician recruitment strategy, the Company provides income guarantee agreements to certain
physicians who agree to relocate to its communities and commit to remain in practice there. Under such agreements, the Company is required to make
payments to the physicians in excess of the amounts they earned in their practice up to the amount of the income guarantee. These income guarantee
periods are typically for 12 months. Such payments are recoverable by the Company from physicians who do not fulfill their commitment period, which is
typically three years, to the respective community. At December 31, 2024, the maximum potential amount of future payments under these guarantees in
excess of the liability recorded is $9 million.
Professional Liability Claims. As part of the Company’s business of providing healthcare services, it is subject to legal actions alleging liability on its
part. The Company accrues for losses resulting from such liability claims, as well as loss adjustment expenses that are out-of-pocket and directly related to
such 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
of corporate overhead, such as the costs of in-house legal and risk management departments. The losses resulting from professional liability claims
primarily consist of estimates for known claims, as well as estimates for incurred but not reported claims. The estimates are based on specific claim facts,
historical claim reporting and payment patterns, the nature and level of hospital operations, and actuarially determined projections. The actuarially
determined projections are based on the Company’s actual claim data, including historic reporting and payment patterns, which have been gathered over
the life of the Company. As discussed below, since the Company purchases excess insurance on a claims-made basis that transfers risk to third-party
insurers, the estimated liability for professional and general liability claims includes an amount for the losses covered by excess insurance. The Company
also records a receivable for the expected reimbursement of losses covered by this excess insurance. Since the Company believes that the amount and
timing of its future claims payments are reliably determinable, it discounts the amount that is accrued for losses resulting from professional liability claims.
The net present value of the projected payments was discounted using a weighted-average risk-free rate of approximately 3.7% in both 2024 and 2023,
and 3.8% in 2022. This liability is adjusted for new claims information in the period such information becomes known. The Company’s estimated liability
for professional and general liability claims was $573 million and $443 million at December 31, 2024 and 2023, respectively. The estimated undiscounted
claims liability was $635 million and $498 million at December 31, 2024 and 2023, respectively. The current portion of the liability for professional and
general liability claims was $145 million and $119 million at December 31, 2024 and 2023, respectively, and is included in other accrued liabilities in the
accompanying consolidated balance sheets, with the long-term portion recorded in other long-term liabilities. Professional liability
COMMUNITY HEALTH SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
114
expense includes the losses resulting from professional liability claims and loss adjustment expense, as well as excess insurance premiums, and is presented
within other operating expenses in the accompanying consolidated statements of (loss) income.
The Company’s processes for obtaining and analyzing claims and incident data are standardized across all of its businesses and have been consistent for
many years. The Company monitors the outcomes of the medical care services that it provides and for each reported claim, the Company obtains various
information concerning the facts and circumstances related to that claim. In addition, the Company routinely monitors current key statistics and volume
indicators in its assessment of utilizing historical trends. The average lag period between claim occurrence and payment of a final settlement is between
three and four years, although the facts and circumstances of individual claims could result in the timing of such payments being different from this
average. Since claims are paid promptly after settlement with the claimant is reached, settled claims represent approximately 4% or less of the total liability
at the end of any period.
For purposes of estimating its individual claim accruals, the Company utilizes specific claim information, including the nature of the claim, the
expected claim 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 are determined, information is stratified by loss layers and retentions, accident years, reported years and geography. Several actuarial methods are
used against this data to produce estimates of ultimate paid losses and reserves for incurred but not reported claims. Each of these methods uses company-
specific historical claims data and other information. This company-specific data includes information regarding the Company’s business, including
historical paid losses and loss adjustment expenses, historical and current 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,
including the preparation of the reserve analysis that supports such estimate, involves subjective judgment of management. Changes in reserve data or the
trends and factors that influence reserve 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 the Company’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 cannot quantify the precise impact of such factors on its estimates of the liability. Due to the Company’s standardized and consistent processes for
handling claims and the long history and depth of company-specific data, the Company’s methodologies have historically produced reliably determinable
estimates of ultimate paid losses. Management considers any changes in the amount and pattern of its historical paid losses up through the most recent
reporting period to identify any fundamental shifts or trends in claim development experience in determining the estimate of professional liability claims.
However, due to the subjective nature of this estimate and the impact that previously unforeseen shifts in actual claim experience can have, future estimates
of professional liability could be adversely impacted when actual paid losses develop unexpectedly based on assumptions and settlement events that were
not previously known or anticipated.
During the year ended December 31, 2022, the Company experienced an increase in the amounts paid or expected to be paid to settle outstanding
professional liability claims related to divested locations, compared to the same period in the prior year and to previous actuarially determined estimates.
This resulted in a change in estimate of $15 million during the year ended December 31, 2022. During the year ended December 31, 2023, the Company
experienced an increase in the amounts paid or expected to be paid to settle outstanding professional liability claims, compared to the same period in the
prior year and to previous actuarially determined estimates due to adverse claim developments. During the year ended December 31, 2024, in connection
with the Company’s periodic review of the professional liability claims accrual, the Company, with input from the Company’s third-party actuary,
considered recent increases in the amounts paid to resolve outstanding professional liability claims arising in prior periods as well as recent increases in
individual claim accruals for unresolved prior period claims. The emergence in the period of adverse developments, including from social inflationary
pressures, impacted the actuarially determined estimate for the resolution of professional liability claims and resulted in an upward revision to the
professional liability claims accrual estimate in the amount of $149 million during the year ended December 31, 2024, the majority of which increase in
estimate related to divested locations. There were no other significant changes in the Company’s estimate of the reserve for professional liability claims
during the years ended December 31, 2024, 2023 and 2022.
COMMUNITY HEALTH SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
115
The Company is primarily self-insured for professional liability claims; however, the Company obtains excess insurance that transfers the risk of loss to
a third-party insurer for claims in excess of the Company’s self-insured retentions. The Company’s excess insurance is underwritten on a claims-made
basis. For claims reported prior 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. 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 the insured risk at certain hospitals based upon insurance pricing and other
factors and may continue that practice in the future.
Excess insurance for all hospitals has been purchased through commercial insurance companies and generally covers the Company for liabilities 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 per occurrence
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 or after
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 at least $215 million per
occurrence and in the aggregate for claims reported on or after June 1, 2015. In addition, for integrated occurrence professional liability 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 after June 1, 2015 through June 1, 2020. The $75 million in integrated occurrence coverage will also apply to claims reported between June 1, 2020
and June 1, 2025 for events that occurred prior to June 1, 2020 but which were not previously known or reported. For certain policy years prior to June 1,
2014, if the first aggregate layer of excess coverage becomes fully utilized, then the 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.
Legal Matters. The Company is a party to various legal, regulatory and governmental proceedings incidental to its business. Based on current
knowledge, management does not believe that loss contingencies arising from pending legal, regulatory and governmental matters will have a material
adverse effect on the consolidated financial position or liquidity of the Company. However, in light of the inherent uncertainties involved in pending legal,
regulatory and governmental matters, some of which are beyond the Company’s control, 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 to the Company’s results of operations 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 Company
determines the likelihood of a negative outcome with respect to any such matter is probable and the amount of the loss can be reasonably estimated, the
Company records an accrual for the estimated loss for the expected outcome of the matter. If the likelihood of a negative outcome with respect to material
matters 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
accrued liability 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 to estimate 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.
COMMUNITY HEALTH SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
116
Summary of Recorded Amounts
The table below presents a reconciliation of the beginning and ending liability balances (in millions) during the years ended December 31, 2024 and
2023, with respect to the Company’s determination of the contingencies of the Company in respect of which an accrual has been recorded. The liability at
December 31, 2024 is comprised of individually insignificant amounts for various matters.
Probable
Contingencies
Balance at December 31, 2022
$
11
Expense
38
Reserve for insured claim
5
Cash payments
(47 )
Balance at December 31, 2023
7
Expense
4
Reserve for insured claim
9
Cash payments
(4 )
Balance at December 31, 2024
$
16
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 reasonably
estimable. For all such matters (whether or not discussed in this contingencies footnote), such amounts have been recorded in other accrued liabilities in the
consolidated balance sheets and are included in the table above. Due to the uncertainties and difficulty in predicting the ultimate resolution of these
contingencies, the actual amount could differ from the estimated amount reflected as a liability in the consolidated balance sheets.
17. SUBSEQUENT EVENTS
The Company has evaluated all material events occurring subsequent to the balance sheet date for events requiring disclosure or recognition in the
consolidated financial statements.
On January 29, 2025, subsidiaries of the Company entered into a definitive agreement for the sale of its 50% interest in Merit Health Madison (67
licensed beds) in Canton, Mississippi, to an affiliate of the University of Mississippi Medical Center, which currently has a 50% ownership interest in Merit
Health Madison.
On February 1, 2025, a subsidiary of the Company completed the sale of its 50% interest in Merit Health Biloxi (153 licensed beds) in Biloxi,
Mississippi, to an affiliate of Memorial Hospital of Gulfport, which had a preexisting 50% ownership interest in Merit Health Biloxi, pursuant to a
definitive agreement entered into on November 7, 2024. The net proceeds from this sale of approximately $17 million, were received at a preliminary
closing on January 31, 2025.
COMMUNITY HEALTH SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
117
18. CONDENSED FINANCIAL INFORMATION OF PARENT COMPANY
Parent Company Only
Condensed Balance Sheets
(In millions)
December 31,
2024
2023
ASSETS
Prepaid income taxes
$
53 $
77
Total current assets
53
77
Deferred income taxes
13
29
Other assets, net
—
—
Total assets
$
66 $
106
LIABILITIES AND STOCKHOLDERS’ DEFICIT
Intercompany payable
$
1,705 $
1,083
Deferred income taxes
231
369
Other long-term liabilities
44
46
Total liabilities
1,980
1,498
Community Health Systems, Inc. stockholders’ deficit:
Preferred stock
—
—
Common stock
1
1
Additional paid-in capital
2,175
2,185
Accumulated other comprehensive loss
(10 )
(14 )
Accumulated deficit
(4,080 )
(3,564 )
Total Community Health Systems, Inc. stockholders’ deficit
(1,914 )
(1,392 )
Total liabilities and stockholders’ deficit
$
66 $
106
See note to condensed financial statements of Parent Company.
COMMUNITY HEALTH SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
118
Parent Company Only
Condensed Statements of (Loss) Income
(In millions)
Year Ended December 31,
2024
2023
2022
Net operating revenues
$
— $
— $
—
Operating expenses:
Salaries and benefits
—
—
—
Supplies
—
—
—
Other operating expenses
—
—
—
Lease cost and rent
—
—
—
Pandemic relief funds
—
—
—
Depreciation and amortization
—
—
—
Impairment and (gain) loss on sale of businesses, net
—
—
—
Total operating expenses
—
—
—
Income from operations
—
—
—
Interest expense, net
—
—
—
(Gain) loss from early extinguishment of debt
—
—
—
Equity in loss (earnings) of unconsolidated affiliates
516
133
(46 )
(Loss) income before income taxes
(516 )
(133 )
46
Provision for (benefit from) income taxes
—
—
—
Net (loss) income
(516 )
(133 )
46
Less: Net income attributable to noncontrolling interests
—
—
—
Net (loss) income attributable to Community Health Systems, Inc.
stockholders
$
(516 ) $
(133 ) $
46
See note to condensed financial statements of Parent Company.
COMMUNITY HEALTH SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
119
Parent Company Only
Condensed Statements of Comprehensive (Loss) Income
(In millions)
Year Ended December 31,
2024
2023
2022
(In millions)
Net (loss) income
$
(516 ) $
(133 ) $
46
Equity in other comprehensive (loss) income of affiliates,
net of income taxes:
Net change in fair value of available-for-sale debt securities, net of tax
—
6
(17 )
Amortization and recognition of unrecognized pension cost
components, net of tax
4
1
10
Other comprehensive income (loss)
4
7
(7 )
Comprehensive (loss) income
(512 )
(126 )
39
Less: Comprehensive income attributable to noncontrolling interests
—
—
—
Comprehensive (loss) income attributable to Community Health Systems,
Inc. stockholders
$
(512 ) $
(126 ) $
39
See note to condensed financial statements of Parent Company.
Parent Company Only
Condensed Statements of Cash Flows
(In millions)
Year Ended December 31,
2024
2023
2022
Cash flows from operating activities:
Net cash used in operating activities
$
(167 ) $
(85 ) $
(13 )
Cash flows from investing activities:
Net cash provided by (used in) investing activities
—
—
—
Cash flows from financing activities:
Repurchase of restricted stock shares for payroll tax withholding
requirements
(2 )
(4 )
(8 )
Changes in intercompany balances with affiliates, net
169
89
21
Net cash provided by financing activities
167
85
13
Net change in cash and cash equivalents
—
—
—
Cash and cash equivalents at beginning of period
—
—
—
Cash and cash equivalents at end of period
$
— $
— $
—
See note to condensed financial statements of Parent Company.
1.
Basis of Presentation
The Parent Company is a holding company and operates no business in its own name; all of the Company’s business operations are conducted
through subsidiaries of the Parent Company. The Company’s outstanding indebtedness restricts the ability of subsidiaries to dividend or otherwise
provide funds to the Parent Company. Accordingly, these financial statements have been presented on a “parent-only” basis. Under parent-only
presentation, the Parent Company’s investments in its consolidated subsidiaries are presented under the equity method of accounting. These
parent-only financial statements should be read in conjunction with consolidated financial statements of Community Health Systems, Inc.
120
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
None.
Item 9A. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
Our Chief Executive Officer and Chief Financial Officer, with the participation of other members of management, have evaluated the effectiveness of
our disclosure 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 of the period covered by this report. Based on such evaluations, our Chief Executive Officer and Chief Financial Officer concluded that, as of such
date, our disclosure controls and procedures were effective (at the reasonable assurance level) to ensure that the information required to be included in this
report has been recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms and to ensure that the
information required to be included in this report was accumulated and communicated to management, including our Chief Executive Officer and Chief
Financial Officer, to allow timely decisions regarding required disclosure.
Changes in Internal Control Over Financial Reporting
As previously disclosed, we have undertaken a multi-year, transformative process of redesigning numerous workflows that is intended to modernize and
consolidate our technology platforms and associated processes across our organization. As part of this process, we have created shared business operations
to carry out certain financial and operational functions and have been implementing a new enterprise resource planning system, or ERP. In connection with
the human capital management module of the ERP becoming operational during the fourth quarter of 2024, new internal controls have been implemented
and certain existing internal controls have been replaced or modified. Other than changes related to implementation of the human capital management
module of the new ERP, there have been no changes in internal control over financial reporting that occurred during this three-month period that have
materially affected or are reasonably likely to materially affect our internal controls over financial reporting.
Management’s report on internal control over financial reporting is included herein at page 121.
The attestation report from Deloitte & Touche LLP, our independent registered public accounting firm, on our internal control over financial reporting
is included herein at page 122.
Item 9B. Other Information
None. Without limiting the generality of the foregoing, during the three months ended December 31, 2024, no director or officer of the Company
adopted or terminated any “Rule 10b5-1 trading arrangement,” or any “non-Rule 10b-5 trading arrangement,” as such terms are defined in Item 408(a) of
Regulation S-K.
Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections.
None.
121
Management’s Report on Internal Control over Financial Reporting
We are responsible for the preparation and integrity of the consolidated financial statements appearing in our Annual Report on Form 10-K. The
consolidated financial statements were prepared in conformity with accounting principles generally accepted in the United States of America and include
amounts based on management’s estimates and judgments. All other financial information in this report has been presented on a basis consistent with the
information 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 the
Securities and Exchange Act of 1934, as amended). We maintain a system of internal controls that is designed to provide reasonable assurance as to the fair
and 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 the
tone of our organization and includes factors such as integrity and ethical values. Our internal control over financial reporting is supported by formal
policies and 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 of
management, the internal auditors and the independent registered public accounting firm to review and discuss internal control over financial reporting and
accounting and financial reporting matters. The independent registered public accounting firm and internal auditors report to the Audit and Compliance
Committee 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 - Integrated
Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. This evaluation included review of the
documentation of controls, evaluation of the design effectiveness of controls, testing of the operating effectiveness of controls and a conclusion on this
evaluation. We have concluded that our internal control over financial reporting was effective as of December 31, 2024, 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
how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design
of a control system must reflect the fact there are resource constraints and the benefits of controls must be considered relative to their costs. Because of the
inherent 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.
122
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the stockholders and the Board of Directors of
Community Health Systems, Inc.
Opinion on Internal Control over Financial Reporting
We have audited the internal control over financial reporting of Community Health Systems, Inc., and subsidiaries (the “Company”) as of December 31,
2024, based on criteria established in Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the
Treadway Commission (COSO). In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of
December 31, 2024, 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 consolidated
financial statements as of and for the year ended December 31, 2024, of the Company and our report dated February 19, 2025, expressed an unqualified
opinion on those financial statements.
Basis for Opinion
The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of
internal control over financial reporting, included in the accompanying Management’s report on Internal Control over Financial Reporting. Our
responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm
registered with the PCAOB and are required to be independent with respect to the Company in 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 audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an
understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating
effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We
believe that our audit provides a reasonable basis for our opinion.
Definition and Limitations of Internal Control over Financial Reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting
and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control
over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly
reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit
preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are
being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding
prevention or timely 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 of
effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of
compliance with the policies or procedures may deteriorate.
/s/ Deloitte & Touche LLP
Nashville, Tennessee
February 19, 2025
123
PART III
Item 10. Directors, Executive Officers and Corporate Governance
The 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 our
subsidiaries. A copy of the current version of our Code of Conduct is available in the Company-Overview — Corporate Governance section of our internet
website 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
stockholder who requests it by writing to Community Health Systems, Inc., Investor Relations, at 4000 Meridian Boulevard, Franklin, TN 37067. The
Company intends to 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 would otherwise require the filing of a Current Report on Form 8-K pursuant to Item 5.05 thereof.
Information required by Item 10 of Part III is incorporated herein by reference to the Company’s definitive proxy statement to be filed under Regulation
14A in connection with the Annual Meeting of the Stockholders of the Company scheduled to be held on May 13, 2025.
Item 11. Executive Compensation
Information required by Item 11 of Part III is incorporated herein by reference to the Company’s definitive proxy statement to be filed under Regulation
14A in connection with the Annual Meeting of the Stockholders of the Company scheduled to be held on May 13, 2025.
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
Information required by Item 12 of Part III is incorporated herein by reference to the Company’s definitive proxy statement to be filed under Regulation
14A in connection with the Annual Meeting of the Stockholders of the Company scheduled to be held on May 13, 2025.
Item 13. Certain Relationships and Related Transactions, and Director Independence
Information required by Item 13 of Part III is incorporated herein by reference to the Company’s definitive proxy statement to be filed under Regulation
14A in connection with the Annual Meeting of the Stockholders of the Company scheduled to be held on May 13, 2025.
Item 14. Principal Accounting Fees and Services
Information required by Item 14 of Part III is incorporated herein by reference to the Company’s definitive proxy statement to be filed under Regulation
14A in connection with the Annual Meeting of the Stockholders of the Company scheduled to be held on May 13, 2025.
124
PART IV
Item 15. Exhibits and Financial Statement Schedules
Item 15(a) 1. Financial Statements
Reference is made to the index of financial statements and supplementary data under Item 8 in Part II.
Item 15(a) 2. Financial Statement Schedules
The following financial statement schedule is included within the notes to the consolidated financial statements at page 117 hereof:
Schedule I – Condensed Financial Information of Registrant
All other schedules are omitted since the required information is not present or is not present in amounts sufficient to require submission of the
schedule.
125
Item 15(a) 3. Exhibits
The following exhibits are either filed with this Report or incorporated herein by reference.
No.
Description
2.1
Separation and Distribution Agreement, dated April 29, 2016, by and between Community Health Systems, Inc. and Quorum Health
Corporation (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))
2.2
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))
2.3
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))
2.4
Amendment to the Employee Matters Agreement, effective as of April 29, 2016, by and between Community Health Systems, Inc. and
Quorum Health Corporation (incorporated by reference to Exhibit 2.1 to Community Health Systems, Inc.’s Quarterly Report on Form
10-Q for the quarter ended September 30, 2016 filed November 2, 2016 (No. 001-15925))
2.5
Asset Purchase Agreement, dated as of September 14, 2022, by and among CHS/Community Health Systems, Inc., as Seller, CAMC
Greenbrier Valley Medical Center, Inc., as Buyer, and Vandalia Health, Inc., as amended (incorporated by reference to Exhibit 2.1 to
Community Health Systems, Inc.’s Current Report on Form 8-K filed January 3, 2023 (No. 001-15925))
2.6
Asset Purchase Agreement, as amended, dated as of December 30, 2022, by and between CHS/Community Health Systems, Inc., CAMC
Plateau Medical Center, Inc. and Vandalia Health, Inc. (incorporated by reference to Exhibit 2.1 to Community Health Systems, Inc.’s
Current Report on Form 8-K filed April 3, 2023 (No. 001-15925))
2.7
Asset Purchase Agreement, dated as of July 24, 2023, as amended, by and among subsidiaries of CHS/Community Health Systems, Inc.
and Florida Health Sciences Center, Inc. d/b/a Tampa General Hospital and certain of its subsidiaries named therein (incorporated by
reference to Exhibit 2.1 to Community Health Systems, Inc.’s Current Report on Form 8-K filed December 1, 2023 (No. 001-15925))
2.8
Asset Purchase Agreement, dated as of April 18, 2024, by and among CHS/Community Health Systems, Inc., certain subsidiaries of
CHS/Community Health Systems, Inc. and Hamilton Health Care System, Inc. and certain of its affiliates as amended (incorporated by
reference to Exhibit 2.1 to Community Health Systems, Inc.’s Current Report on Form 8-K filed August 1, 2024 (No. 001-15925))
2.9
Asset Purchase Agreement, dated as of November 22, 2024, by and among CHS/Community Health Systems, Inc., certain subsidiaries
of CHS/Community Health Systems, Inc., and Adventist Health System Sunbelt Healthcare Corporation and certain of its affiliates
(incorporated by reference to Exhibit 2.1 to Community Health Systems, Inc.’s Current Report on Form 8-K filed November 22, 2024
(No. 001-15925))
2.10
Asset Purchase Agreement, dated as of December 11, 2024, by and between CHS/Community Health Systems, Inc. and Duke University
Health System, Inc. (incorporated by reference to Exhibit 2.1 to Community Health Systems, Inc.’s Current Report on Form 8-K filed
December 11, 2024 (No. 001-15925))
3.1
Form of Restated Certificate of Incorporation of Community Health Systems, Inc. (incorporated by reference to Exhibit 3.1 to
Amendment No. 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))
3.3
Amended and Restated By-laws of Community Health Systems, Inc. (as of September 13, 2023) (incorporated by reference to Exhibit
3.1 to Community Health Systems, Inc.’s Current Report on Form 8-K filed September 13, 2023 (No. 001-15925))
126
No.
Description
4.1
Description of Community Health System, Inc.’s Common Stock (incorporated by reference to Exhibit 4.2 to Community Health
Systems, Inc.’s Annual Report on Form 10-K for the year ended December 31, 2019 filed February 20, 2020 (No. 001-15925))
4.2
Indenture, dated as of March 6, 2019, 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, relating to the 8.000% Senior Secured Notes due
2026 (incorporated by reference to Exhibit 4.1 to Community Health Systems, Inc.’s Current Report on Form 8-K filed March 6, 2019
(No. 001-15925))
4.3
Form of 8.000% Senior Secured Note due 2026 (included in Exhibit 4.2)
4.4
First Supplemental Indenture relating to CHS/Community Health Systems, Inc.’s 8.000% Senior Secured Notes due 2026, dated as of
March 31, 2019, by and among CHS/Community Health Systems, Inc., the guarantors party thereto and Regions Bank, as Trustee and
U.S. Bank Trust Company, National Association (as successor-in-interest to Credit Suisse AG), as Collateral Agent (incorporated by
reference to Exhibit 4.10 to Community Health Systems, Inc.’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2019
filed May 1, 2019 (No. 001-15925))
4.5
Second Supplemental Indenture relating to CHS/Community Health Systems, Inc.’s 8.000% Senior Secured Notes due 2026, dated as of
July 1, 2019, by and among CHS/Community Health Systems, Inc., the guarantors party thereto and Regions Bank, as Trustee and U.S.
Bank Trust Company, National Association (as successor-in-interest to Credit Suisse AG), as Collateral Agent (incorporated by
reference to Exhibit 4.9 to Community Health Systems, Inc.’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2019
filed October 30, 2019 (No. 001-15925))
4.6
Third Supplemental Indenture relating to CHS/Community Health Systems, Inc.’s 8.000% Senior Secured Notes due 2026, dated as of
September 27, 2019, by and among CHS/Community Health Systems, Inc., the guarantors party thereto and Regions Bank, as Trustee
and U.S. Bank Trust Company, National Association (as successor-in-interest to Credit Suisse AG), as Collateral Agent (incorporated by
reference to Exhibit 4.18 to Community Health Systems, Inc.’s Quarterly Report on Form 10-Q for the quarter ended September 30,
2019 filed October 30, 2019 (No. 001-15925))
4.7
Supplemental Indenture relating to CHS/Community Health Systems, Inc.’s 8.000% Senior Secured Notes due 2026, dated as of
November 19, 2019, by and among CHS/Community Health Systems, Inc., Community Health Systems, Inc., the guarantors party
thereto and Regions Bank, as Trustee and U.S. Bank Trust Company, National Association (as successor-in-interest to Credit Suisse
AG), as Collateral Agent (incorporated by reference to Exhibit 4.4 to Community Health Systems, Inc.’s Current Report on Form 8-K
filed November 19, 2019 (No. 001-15925))
4.8
Fifth Supplemental Indenture relating to CHS/Community Health Systems, Inc.’s 8.000% Senior Secured Notes due 2026, dated as of
March 27, 2020, by and among CHS/Community Health Systems, Inc., the guarantors party thereto and Regions Bank, as Trustee and
U.S. Bank Trust Company, National Association (as successor-in-interest to Credit Suisse AG), as Collateral Agent (incorporated by
reference to Exhibit 4.8 to Community Health Systems, Inc.’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2020
filed April 29, 2020 (No. 001-15925))
4.9
Sixth Supplemental Indenture relating to CHS/Community Health Systems, Inc.’s 8.000% Senior Secured Notes due 2026, dated as of
December 11, 2020, by and among CHS/Community Health Systems, Inc., the guarantors party thereto and Regions Bank, as Trustee
and U.S. Bank Trust Company, National Association (as successor-in-interest to Credit Suisse AG), as Collateral Agent (incorporated by
reference to Exhibit 4.65 to Community Health Systems, Inc.’s Annual Report on Form 10-K for the year ended December 31, 2020
filed February 18, 2021 (No. 001-15925))
4.10
Seventh Supplemental Indenture relating to CHS/Community Health Systems, Inc.’s 8.000% Senior Secured Notes due 2026, dated as of
November 13, 2023, by and among CHS/Community Health Systems, Inc., the guarantors party thereto and Regions Bank, as Trustee
and U.S. Bank Trust Company, National Association (as successor-in-interest to Credit Suisse AG), as Collateral Agent (incorporated by
reference to Exhibit 4.10 to Community Health Systems Inc.’s Annual Report on Form 10-K filed February 21, 2024 (No. 001-15925))
4.11
Indenture, dated as of November 19, 2019, among CHS/Community Health Systems, Inc., Community Health Systems, Inc., the
guarantors party thereto, Regions Bank, as Trustee, and U.S. Bank Trust Company, National Association (as successor-in-interest to
Credit Suisse AG), as Collateral Agent, relating to the 8.000% Senior Secured Notes due 2027 (incorporated by reference to Exhibit 4.1
to Community Health Systems, Inc.’s Current Report on Form 8-K filed November 19, 2019 (No. 001-15925))
127
No.
Description
4.12
Form of 8.000% Senior Secured Note due 2027 (included in Exhibit 4.11)
4.13
First Supplemental Indenture relating to CHS/Community Health Systems, Inc.’s 8.000% Senior Secured Notes due 2027, dated as of
March 27, 2020, by and among CHS/Community Health Systems, Inc., the guarantors party thereto and Regions Bank, as Trustee and
U.S. Bank Trust Company, National Association (as successor-in-interest to Credit Suisse AG), as Collateral Agent (incorporated by
reference to Exhibit 4.9 to Community Health Systems, Inc.’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2020
filed April 29, 2020 (No. 001-15925))
4.14
Second Supplemental Indenture relating to CHS/Community Health Systems, Inc.’s 8.000% Senior Secured Notes due 2027, dated as of
December 11, 2020, by and among CHS/Community Health Systems, Inc., the guarantors party thereto and Regions Bank, as Trustee
and U.S. Bank Trust Company, National Association (as successor-in-interest to Credit Suisse AG), as Collateral Agent (incorporated by
reference to Exhibit 4.69 to Community Health Systems, Inc.’s Annual Report on Form 10-K for the year ended December 31, 2020
filed February 18, 2021 (No. 001-15925))
4.15
Third Supplemental Indenture relating to CHS/Community Health Systems, Inc.’s 8.000% Senior Secured Notes due 2027, dated as of
November 13, 2023, by and among CHS/Community Health Systems, Inc., the guarantors party thereto and Regions Bank, as Trustee
and U.S. Bank Trust Company, National Association (as successor-in-interest to Credit Suisse AG), as Collateral Agent (incorporated by
reference to Exhibit 4.15 to Community Health Systems Inc.’s Annual Report on Form 10-K filed February 21, 2024 (No. 001-15925))
4.16
Indenture, dated as of November 19, 2019, among CHS/Community Health Systems, Inc., Community Health Systems, Inc., the
guarantors party thereto, and Regions Bank, as Trustee, relating to the 6.875% Senior Unsecured Notes due 2028 (incorporated by
reference to Exhibit 4.2 to Community Health Systems, Inc.’s Current Report on Form 8-K filed November 19, 2019 (No. 001-15925))
4.17
Form of 6.875% Senior Unsecured Note due 2028 (included in Exhibit 4.16)
4.18
First Supplemental Indenture relating to CHS/Community Health Systems, Inc.’s 6.875% Senior Unsecured Notes due 2028, dated as of
March 27, 2020, by and among CHS/Community Health Systems, Inc., the guarantors party thereto and Regions Bank, as Trustee
(incorporated by reference to Exhibit 4.10 to Community Health Systems, Inc.’s Quarterly Report on Form 10-Q for the quarter ended
March 31, 2020 filed April 29, 2020 (No. 001-15925))
4.19
Second Supplemental Indenture relating to CHS/Community Health Systems, Inc.’s 6.875% Senior Unsecured Notes due 2028, dated as
of December 11, 2020, by and among CHS/Community Health Systems, Inc., the guarantors party thereto and Regions Bank, as Trustee
(incorporated by reference to Exhibit 4.73 to Community Health Systems, Inc.’s Annual Report on Form 10-K for the year ended
December 31, 2020 filed February 18, 2021 (No. 001-15925))
4.20
Third Supplemental Indenture relating to CHS/Community Health Systems, Inc.’s 6.875% Senior Unsecured Notes due 2028, dated as of
November 13, 2023, by and among CHS/Community Health Systems, Inc., the guarantors party thereto and Regions Bank, as Trustee
(incorporated by reference to Exhibit 4.20 to Community Health Systems Inc.’s Annual Report on Form 10-K filed February 21, 2024
(No. 001-15925))
4.21
Indenture, dated as of December 28, 2020, among CHS/Community Health Systems, Inc., Community Health Systems, Inc., the
guarantors party thereto, Regions Bank, as Trustee, and U.S. Bank Trust Company, National Association (as successor-in-interest to
Credit Suisse AG), as Collateral Agent, relating to the 5.625% Senior Secured Notes due 2027 (incorporated by reference to Exhibit 4.1
to Community Health Systems, Inc.’s Current Report on Form 8-K filed December 28, 2020 (No. 001-15925))
4.22
Form of 5.625% Senior Secured Note due 2027 (included in Exhibit 4.21)
4.23
First Supplemental Indenture relating to CHS/Community Health Systems, Inc.’s 5.625% Senior Secured Notes due 2027, dated as of
November 13, 2023, by and among CHS/Community Health Systems, Inc., the guarantors party thereto, Regions Bank, as Trustee, and
U.S. Bank Trust Company, National Association (as successor-in-interest to Credit Suisse AG), as Collateral Agent (incorporated by
reference to Exhibit 4.23 to Community Health Systems Inc.’s Annual Report on Form 10-K filed February 21, 2024 (No. 001-15925))
4.24
Indenture, dated as of December 28, 2020, among CHS/Community Health Systems, Inc., Community Health Systems, Inc., the
guarantors party thereto, Regions Bank, as Trustee, and U.S. Bank Trust Company, National Association (as successor-in-interest to
Credit Suisse AG), as Collateral Agent, relating to the 6.000% Senior Secured
128
No.
Description
Notes due 2029 (incorporated by reference to Exhibit 4.2 to Community Health Systems, Inc.’s Current Report on Form 8-K filed
December 28, 2020 (No. 001-15925))
4.25
Form of 6.000% Senior Secured Note due 2029 (included in Exhibit 4.24)
4.26
First Supplemental Indenture relating to CHS/Community Health Systems, Inc.’s 6.000% Senior Secured Notes due 2029, dated as of
November 13, 2023, by and among CHS/Community Health Systems, Inc., the guarantors party thereto, Regions Bank, as Trustee, and
U.S. Bank Trust Company, National Association (as successor-in-interest to Credit Suisse AG), as Collateral Agent (incorporated by
reference to Exhibit 4.26 to Community Health Systems Inc.’s Annual Report on Form 10-K filed February 21, 2024 (No. 001-15925))
4.27
Indenture, dated as of February 2, 2021, among CHS/Community Health Systems, Inc., Community Health Systems, Inc., the guarantors
party thereto, and Regions Bank, as Trustee and Collateral Agent, relating to the 6.875% Junior-Priority Secured Notes due 2029
(incorporated by reference to Exhibit 4.1 to Community Health Systems, Inc.’s Current Report on Form 8-K filed February 2, 2021 (No.
001-15925))
4.28
Form of 6.875% Junior-Priority Secured Note due 2029 (included in Exhibit 4.27)
4.29
First Supplemental Indenture relating to CHS/Community Health Systems, Inc.’s 6.875% Junior-Priority Secured Notes due 2029, dated
as of November 13, 2023, by and among CHS/Community Health Systems, Inc., the guarantors party thereto, and Regions Bank, as
Trustee and Collateral Agent (incorporated by reference to Exhibit 4.29 to Community Health Systems Inc.’s Annual Report on Form
10-K filed February 21, 2024 (No. 001-15925))
4.30
Indenture, dated as of February 9, 2021, among CHS/Community Health Systems, Inc., Community Health Systems, Inc., the guarantors
party thereto, Regions Bank, as Trustee, and U.S. Bank Trust Company, National Association (as successor-in-interest to Credit Suisse
AG), as Collateral Agent, relating to the 4.750% Senior Secured Notes due 2031 (incorporated by reference to Exhibit 4.1 to Community
Health Systems, Inc.’s Current Report on Form 8-K filed February 9, 2021 (No. 001-15925))
4.31
Form of 4.750% Senior Secured Note due 2031 (included in Exhibit 4.30)
4.32
First Supplemental Indenture relating to CHS/Community Health Systems, Inc.’s 4.750% Senior Secured Notes due 2031, dated as of
November 13, 2023, by and among CHS/Community Health Systems, Inc., the guarantors party thereto, Regions Bank, as Trustee, and
U.S. Bank Trust Company, National Association (as successor-in-interest to Credit Suisse AG), as Collateral Agent (incorporated by
reference to Exhibit 4.32 to Community Health Systems Inc.’s Annual Report on Form 10-K filed February 21, 2024 (No. 001-15925))
4.33
Indenture, dated as of May 19, 2021, among CHS/Community Health Systems, Inc., Community Health Systems, Inc., the guarantors
party thereto, and Regions Bank, as Trustee and Collateral Agent, relating to the 6.125% Junior-Priority Secured Notes due 2030
(incorporated by reference to Exhibit 4.1 to Community Health Systems, Inc.’s Current Report on Form 8-K filed May 20, 2021 (No.
001-15925))
4.34
Form of 6.125% Junior-Priority Secured Note due 2030 (included in Exhibit 4.33)
4.35
First Supplemental Indenture relating to CHS/Community Health Systems, Inc.’s 6.125% Junior-Priority Secured Notes due 2030, dated
as of November 13, 2023, by and among CHS/Community Health Systems, Inc., the guarantors party thereto, and Regions Bank, as
Trustee and Collateral Agent (incorporated by reference to Exhibit 4.35 to Community Health Systems Inc.’s Annual Report on Form
10-K filed February 21, 2024 (No. 001-15925))
4.36
Indenture, dated as of February 4, 2022, among CHS/Community Health Systems, Inc., Community Health Systems, Inc., the guarantors
party thereto, Regions Bank, as Trustee, and U.S. Bank Trust Company, National Association (as successor-in-interest to Credit Suisse
AG), as Collateral Agent, relating to the 5.250% Senior Secured Notes due 2030 (incorporated by reference to Exhibit 4.1 to Community
Health Systems, Inc.’s Current Report on Form 8-K filed February 4, 2022 (No. 001-15925))
4.37
Form of 5.250% Senior Secured Note due 2030 (included in Exhibit 4.36)
4.38
First Supplemental Indenture relating to CHS/Community Health Systems, Inc.’s 5.250% Senior Secured Notes due 2030, dated as of
November 13, 2023, by and among CHS/Community Health Systems, Inc., the guarantors party thereto, Regions Bank, as Trustee, and
U.S. Bank Trust Company, National Association (as successor-in-interest to
129
No.
Description
Credit Suisse AG), as Collateral Agent (incorporated by reference to Exhibit 4.38 to Community Health Systems Inc.’s Annual Report
on Form 10-K filed February 21, 2024 (No. 001-15925))
4.39
Indenture, dated as of December 22, 2023, among CHS/Community Health Systems, Inc., Community Health Systems, Inc., the
guarantors party thereto, Regions Bank, as Trustee, and U.S. Bank Trust Company, National Association (as successor-in-interest to
Credit Suisse AG), as Collateral Agent, relating to the 10.875% Senior Secured Notes due 2032 (incorporated by reference to Exhibit 4.1
to Community Health Systems, Inc.’s Current Report on Form 8-K filed December 26, 2023 (No. 001-15925))
4.40
Form of 10.875% Senior Secured Note due 2032 (included in Exhibit 4.39)
4.41
First Supplemental Indenture relating to CHS/Community Health Systems, Inc.’s 10.875% Senior Secured Notes due 2032, dated as of
June 5, 2024, among CHS/Community Health Systems, Inc., Community Health Systems, Inc., the guarantors party thereto, Regions
Bank, as trustee, and U.S. Bank Trust Company, National Association, as collateral agent (incorporated by reference to Exhibit 4.2 to
Community Health Systems, Inc.’s Current Report on Form 8-K filed on June 5, 2024 (No. 001-15925))
4.42
Collateral Agency Transfer Agreement, dated as of April 30, 2024, among Credit Suisse AG and Credit Suisse AG, Cayman Islands
Branch, together as Predecessor Collateral Agent, Regions Bank, as Trustee and Authorized Representative, U.S. Bank Trust Company,
National Association, as Successor Collateral Agent, CHS/Community Health Systems, Inc., Community Health Systems, Inc. and the
guarantors party thereto (incorporated by reference to Exhibit 4.1 to Community Health Systems, Inc.’s Quarterly Report on Form 10-Q
for the quarter ended June 30, 2024 filed on July 25, 2024 (No. 001-15925))
4.43
First Lien Intercreditor Agreement, dated as of August 17, 2012, among U.S. Bank Trust Company, National Association (as successor-
in-interest to Credit Suisse AG), as Collateral Agent, Credit Suisse AG, as authorized representative, Regions Bank, as Trustee and
authorized representative, and the additional authorized representatives party thereto (incorporated by reference to Exhibit 4.2 to
Community Health Systems, Inc.’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2012 filed November 1, 2012
(No. 001-15925))
4.44
Second Amended and Restated ABL Intercreditor Agreement, dated as of February 4, 2022, among JPMorgan Chase Bank, N.A., as
ABL Agent, U.S. Bank Trust Company, National Association (as successor-in-interest to Credit Suisse AG), as Senior-Priority
Collateral Agent, Regions Bank, as 2025 Secured Notes Trustee, 2026 Secured Notes Trustee, March 2027 Secured Notes Trustee,
December 2027 Secured Notes Trustee, 2029 Secured Notes Trustee, 2030 Secured Notes Trustee, 2031 Secured Noted Trustee, Junior-
Priority Collateral Agent, 2029 Junior-Priority Secured Notes Trustee and 2030 Junior-Priority Secured Notes Trustee, CHS/Community
Health Systems, Inc., Community Health Systems, Inc., the subsidiary guarantors party thereto and each additional agent from time to
time party thereto (incorporated by reference to Exhibit 4.2 to Community Health Systems, Inc.’s Current Report on Form 8-K filed
February 4, 2022 (No. 001-15925))
4.45
Amended and Restated Junior-Priority Collateral Agreement, dated as of February 2, 2021, among CHS/Community Health Systems,
Inc., Community Health Systems, Inc., the grantors named therein and Regions Bank, as Collateral Agent (incorporated by reference to
Exhibit 4.2 to Community Health Systems, Inc.’s Current Report on Form 8-K filed February 2, 2021 (No. 001-15925))
4.46
Amended and Restated Senior-Junior Lien Intercreditor Agreement, dated as of February 4, 2022, among CHS/Community Health
Systems, Inc., Community Health Systems, Inc., the subsidiaries party thereto, U.S. Bank Trust Company, National Association (as
successor-in-interest to Credit Suisse AG, Cayman Islands Branch) as Initial Senior-Priority Collateral Agent, Regions Bank, as Initial
Junior-Priority Collateral Agent and each additional agent from time to time party thereto (incorporated by reference to Exhibit 4.3 to
Community Health Systems, Inc.’s Current Report on Form 8-K filed February 4, 2022 (No. 001-15925))
4.47
Junior-Priority Lien Pari Passu Intercreditor Agreement, dated as of June 22, 2018, among Regions Bank, as Collateral Agent, Regions
Bank, in its capacity as Trustee under the 2023 Notes Indenture, Regions Bank, in its capacity as Trustee under the 2024 Notes Indenture
and each additional authorized representative from time to time party thereto (incorporated by reference to Exhibit 4.06 to Community
Health Systems, Inc.’s Current Report on Form 8-K filed June 25, 2018 (No. 001-15925))
130
No.
Description
10.1
Second Amended and Restated Guarantee and Collateral Agreement, dated as of July 25, 2007, as amended and restated as of November
5, 2010, as further amended as of August 17, 2012, and as further amended and restated as of November 19, 2019, among
CHS/Community Health Systems, Inc., Community Health Systems, Inc., the subsidiary guarantors party thereto and U.S. Bank Trust
Company, National Association (as successor-in-interest to Credit Suisse AG) as Collateral Agent (incorporated by reference to Exhibit
4.5 to Community Health Systems, Inc.’s Current Report on Form 8-K filed November 19, 2019 (No. 001-15925))
10.2
Second Amendment and Restatement Agreement to the Amended and Restated ABL Credit Agreement, dated as of June 5, 2024, among
CHS/Community Health Systems, Inc., as Borrower, Community Health Systems, Inc., as the Parent, the subsidiaries of the Borrower
party thereto, the lenders party thereto, and JPMorgan Chase Bank, N.A., as Administrative Agent and Collateral Agent (incorporated by
reference to Exhibit 10.1 to Community Health Systems, Inc.’s Current Report on Form 8-K filed on June 5, 2024 (No. 001-15925))
10.3
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-Q for the quarter ended March 31, 2018 filed May 2, 2018 (No. 001-15925))
10.4†
Form of Indemnification Agreement between Community Health Systems, Inc. and its directors and executive officers (incorporated by
reference 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))
10.5†
CHS/Community Health Systems, Inc. Amended and Restated Supplemental Executive Retirement Plan, as amended and restated as of
January 1, 2009 (incorporated by reference to Exhibit 10.13 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))
10.6†
Amendment No. 1, dated as of September 13, 2011, to the CHS/Community Health Systems, Inc. Amended and Restated Supplemental
Executive Retirement Plan, as amended and restated as of January 1, 2009 (incorporated by reference to Exhibit 10.1 to Community
Health Systems, Inc.’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2011 filed October 28, 2011 (No. 001-
15925))
10.7†
Amendment No. 2, dated as of January 1, 2014, to the CHS/Community Health Systems, Inc. Amended and Restated Supplemental
Executive Retirement Plan, as amended and restated as of January 1, 2009 (incorporated by reference to Exhibit 10.1 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))
10.8†
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
ended June 30, 2018 filed July 27, 2018 (No. 001-15925))
10.9†
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
on Form 8-K filed June 1, 2005 (No. 001-15925))
10.10†
Community Health Systems Supplemental Executive Benefits, dated December 31, 2008, as amended and restated as of February 15,
2023 (incorporated by reference to Exhibit 10.2 to Community Health Systems, Inc.’s Quarterly Report on Form 10-Q for the quarter
ended March 31, 2023 filed May 2, 2023 (No. 001-15925))
10.11†
CHS/Community Health Systems, Inc. Deferred Compensation Plan, amended and restated effective January 1, 2014 (incorporated by
reference to Exhibit 10.25 to Community Health Systems, Inc.’s Annual Report on Form 10-K for the year ended December 31, 2013
filed February 26, 2014 (No. 001-15925))
10.12†
Community Health Systems Deferred Compensation Plan Trust, amended and restated effective February 26, 1999 (incorporated by
reference to Exhibit 10.18 to Community Health Systems, Inc.’s Annual Report on Form 10-K for the year ended December 31, 2002
filed March 27, 2003 (No. 001-15925))
10.13†
CHS NQDCP, effective as of September 1, 2009 (incorporated by reference to Exhibit 4.2 to Community Health Systems, Inc.’s
Registration Statement on Form S-8 filed December 11, 2009 (No. 333-163691))
131
No.
Description
10.14†
CHS NQDCP Adoption Agreement, executed as of August 11, 2009 (incorporated by reference to Exhibit 4.3 to Community Health
Systems, Inc.’s Registration Statement on Form S-8 filed December 11, 2009 (No. 333-163691))
10.15†
Guarantee, dated December 9, 2009, made by Community Health Systems, Inc. in favor of CHS/Community Health Systems, Inc. with
respect to CHS/Community Health Systems, Inc.’s payment obligations under the CHS/Community Health Systems, Inc. Deferred
Compensation Plan and the NQDCP (incorporated by reference to Exhibit 4.4 to Community Health Systems, Inc.’s Registration
Statement on Form S-8 filed December 11, 2009 (No. 333-163691))
10.16†
Community Health Systems, Inc. 2019 Employee Performance Incentive Plan, as amended and restated September 13, 2023
(incorporated by reference to Exhibit 10.1 to Community Health Systems, Inc.’s Current Report on Form 10-Q for the quarter ended
September 30, 2023 filed October 26, 2023 (No. 001-15925))
10.17†
Community Health Systems, Inc. Directors’ Fees Deferral Plan, as amended and restated on May 11, 2021 (incorporated by reference to
Exhibit 10.2 to Community Health Systems, Inc.’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2021 filed July 29,
2021 (No. 001-15925))
10.18†
Community Health Systems, Inc. 2009 Stock Option and Award Plan, as amended and restated as of March 22, 2023 (incorporated by
reference to Exhibit 10.1 to Community Health Systems, Inc.’s Current Report on Form 8-K filed on May 10, 2023 (No. 001-15925))
10.19†
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 ended
December 31, 2013 filed February 26, 2014 (No. 001-15925))
10.20†
Form of Restricted Stock Award Agreement for Community Health Systems, Inc. 2009 Stock Option and Award Plan (incorporated by
reference to Exhibit 10.3 to Community Health Systems, Inc.’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2013 filed
July 31, 2013 (No. 001-15925))
10.21†
Form of Performance Based Restricted Stock Award Agreement (Senior Officers) for Community Health Systems, Inc. 2009 Stock
Option and Award Plan (for awards granted on or after March 1, 2023) (incorporated by reference to Exhibit 10.1 to Community Health
Systems, Inc.’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2023 filed May 2, 2022 (No. 001-15925))
10.22†
Form of Performance Based Restricted Stock Award Agreement (Senior Officers) for Community Health Systems, Inc. 2009 Stock
Option and Award Plan (for awards granted on or after March 1, 2024) (incorporated by reference to Exhibit 10.1 to Community Health
Systems, Inc.’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2024 filed April 25, 2024 (No. 001-15925))
10.23†
Form of Director Restricted Stock Unit Award Agreement for Community Health Systems, Inc. 2009 Stock Option and Award Plan
(incorporated by reference to Exhibit 10.1 to Community Health Systems, Inc.’s Quarterly Report on Form 10-Q for the quarter ended
September 30, 2019 filed October 30, 2019 (No. 001-15925))
10.24†
Amendment of Certain Agreements under the Community Health Systems, Inc. 2009 Stock Option and Award Plan, dated as of
December 7, 2022, between Community Health Systems, Inc. and Wayne T. Smith, as Grantee (incorporated by reference to Exhibit
10.1 to Community Health Systems, Inc.’s Current Report on Form 8-K filed December 8, 2022 (No. 001-15925))
10.25†
Form of Change in Control Severance Agreement (incorporated by reference to Exhibit 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))
10.26
Participation Agreement entered into as of January 1, 2005, by and between Community Health Systems Professional Services
Corporation and HealthTrust Purchasing Group, L.P. (incorporated by reference to Exhibit 10.1 to Community Health Systems, Inc.’s
Current Report on Form 8-K filed January 7, 2005 (No. 001-15925))
10.27
Amendment effective as of January 1, 2015, by and between CHSPSC, LLC and HealthTrust Purchasing Group, L.P., to Participation
Agreement entered into as of January 1, 2005, by and between Community Health Systems Professional Services Corporation and
HealthTrust Purchasing Group, L.P. (incorporated by reference to Exhibit 10.36 to Community Health Systems, Inc.’s Annual Report on
Form 10-K for the year ended December 31, 2014 filed February 25, 2015 (No. 001-15925))
132
No.
Description
10.28
Executive Retention Cash Award between Chad Campbell and CHSPSC, LLC, dated March 19, 2024 (incorporated by reference to
Exhibit 10.2 to Community Health Systems, Inc.’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2024 filed April 25,
2024 (No. 001-15925))
10.29
Executive Retention Cash Award between Kevin Stockton and CHSPSC, LLC, dated March 11, 2024 (incorporated by reference to
Exhibit 10.3 to Community Health Systems, Inc.’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2024 filed April 25,
2024 (No. 001-15925))
10.30
Consultancy Agreement, dated December 31, 2024, by and between CHSPSC, LLC and Lynn T. Simon, M.D. (incorporated by
reference to Exhibit 10.1 to Community Health Systems, Inc.’s Current Report on Form 8-K filed December 31, 2024 (No. 001-15925))
19.1*
Community Health Systems, Inc. Insider Trading Policy
19.2*
Insider Trading Policy Memorandum
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
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
of 2002
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
of 2002
97†*
Community Health Systems, Inc. Amended and Restated Clawback Policy, dated September 13, 2023
99.1
Notice of (I) Pendency and Proposed Settlement of Stockholder Derivative Action; (II) Settlement Fairness Hearing; and (III) Motion for
an Award of Attorney’s Fees and Litigation Expenses, dated December 8, 2023, and Stipulation and Agreement of Settlement, dated
November 13, 2023 (incorporated by reference to Exhibit 99.1 to Community Health Systems, Inc.’s Current Report on Form 8-K filed
December 8, 2023 (No. 001-15925))
101*
The following financial information from our annual report on Form 10-K for the year ended December 31, 2024, filed with the SEC on
February 19, 2025, formatted in Inline Extensible Business Reporting Language: (i) the consolidated statements of (loss) income for the
years ended December 31, 2024, 2023 and 2022, (ii) the consolidated statements of comprehensive (loss) income for the years ended
December 31, 2024, 2023 and 2022, (iii) the consolidated balance sheets at December 31, 2024 and December 31, 2023, (iv) the
consolidated statements of stockholders’ deficit for the years ended December 31, 2024, 2023 and 2022, (v) the consolidated statements
of cash flows for the years ended December 31, 2024, 2023 and 2022, and (vi) the notes to the consolidated financial statements. The
instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.
104*
Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)
* Filed herewith.
** Furnished herewith.
† Indicates a management contract or compensatory plan or arrangement.
Item 16. Form 10-K Summary
None.
133
SIGNATURES
Pursuant 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 its
behalf by the undersigned, thereunto duly authorized.
Community Health Systems, Inc.
By:
/s/ Tim L. Hingtgen
Tim L. Hingtgen
Director and
Chief Executive Officer
Date: February 19, 2025
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
Name
Title
Date
/s/ Tim L. Hingtgen
Director and
February 19, 2025
Tim L. Hingtgen
Chief Executive Officer
/s/ Kevin J. Hammons
President and
February 19, 2025
Kevin J. Hammons
Chief Financial Officer
/s/ Jason K. Johnson
Senior Vice President and
February 19, 2025
Jason K. Johnson
Chief Accounting Officer
/s/ Wayne T. Smith
Chairman of the
February 19, 2025
Wayne T. Smith
Board of Directors
/s/ Susan W. Brooks
Director
February 19, 2025
Susan W. Brooks
/s/ Ronald L. Burgess, Jr.
Director
February 19, 2025
Ronald L. Burgess, Jr.
/s/ John A. Clerico
Director
February 19, 2025
John A. Clerico
/s/ Michael Dinkins
Director
February 19, 2025
Michael Dinkins
/s/ James S. Ely III
Director
February 19, 2025
James S. Ely III
/s/ John A. Fry
Director
February 19, 2025
John A. Fry
/s/ Joseph A. Hastings, D.M.D
Director
February 19, 2025
Joseph A. Hastings, D.M.D
/s/ Elizabeth T. Hirsch
Director
February 19, 2025
Elizabeth T. Hirsch
/s/ William Norris Jennings, M.D.
Director
February 19, 2025
William Norris Jennings, M.D.
/s/ K. Ranga Krishnan, MBBS
Director
February 19, 2025
K. Ranga Krishnan, MBBS
/s/ Fawn D. Lopez
Director
February 19, 2025
Fawn D. Lopez
/s/ H. James Williams, Ph.D.
Director
February 19, 2025
H. James Williams, Ph.D.
Exhibit 19.1
Original Effective Date: 8/1/2000
Revision Date: 2/12/2025
Community Health Systems, Inc.
Page 1 of 6
Policy Title: Insider Trading Policy
Audience:
Board of Directors and Officers of Community Health Systems, Inc. and All Employees of CHSPSC, LLC
(and other affiliates)
References and Citations: Replaces Insider Trading Policy (9/13/23; 3/1/2022; 2/23/21; 2/22/17; 2/25/16) and Statement of
Policy to the Board of Directors, Officers and Designated Employees of Community Health Systems, Inc. (and Affiliates)
Concerning Securities Trading (10/1/14; 10/1/08; 12/10/02; 08/01/00)
1.
PURPOSE
The purchase or sale of securities while aware of material nonpublic information, or the disclosure of material nonpublic
information to others who then trade in Community Health Systems, Inc. (the “Company”) securities, is prohibited by the federal
securities laws. Insider trading violations are pursued vigorously by the SEC, U.S. Attorneys, and state enforcement authorities,
and are punished severely. While the regulatory authorities concentrate their efforts on the individuals who trade, or who tip
inside information to others who trade, the federal securities laws also impose potential liability on companies and other
"controlling persons" if they fail to take reasonable steps to prevent insider trading by company personnel.
The Company's Board of Directors has adopted this Insider Trading Policy (“Policy”), the implementation and
enforcement of which is overseen by a “Trading Compliance Committee” consisting of the Company’s Chief Financial Officer
and Chief Legal Officer, both to satisfy the Company's obligation to prevent insider trading and to help Company (and its
affiliates’) personnel avoid the severe consequences associated with violations of the insider trading laws. The Policy also is
intended to prevent even the appearance of improper conduct on the part of anyone employed by or associated with the
Company (not just so-called insiders).
2.
THE CONSEQUENCES
General. Violation of the prohibition on insider trading can result in a lengthy prison sentence and severe civil and
criminal fines for the individuals who commit the violation. In addition, individuals who violate insider trading laws may become
subject to an injunction and may be forced to disgorge any profits gained or losses avoided. Moreover, persons who traded
contemporaneously with, and on the other side of, the insider trading violator may sue the violator and the controlling persons of
the violator to recover the profit gained or loss avoided by the violator.
Entities that violate insider trading laws may also be subject to severe criminal and civil penalties. Moreover, an entity
such as the Company can be subject to a civil monetary penalty even if the directors, officers or employees who committed the
violation concealed their activities from the Company.
Whistleblower Awards. The SEC offers whistleblower awards to persons who provide information leading to the
imposition of the civil monetary penalty.
Company-Imposed Sanctions. An individual’s failure to comply with this Policy may subject that person to Company-
imposed sanctions, including dismissal for cause, whether or not the individual's failure to comply results in a violation of law.
Policy Title: Insider Trading Policy
Page 2 of 6 6NUMPAGES 6
Original Effective Date: 8/1/2000
Revision Date: 2/12/2025
3.
PERSONS SUBJECT TO THE POLICY
This Policy applies to all members of the Company’s Board of Directors (each a “Director” and, collectively, the
“Directors”), all officers of the Company (each an “Officer” and, collectively, the “Officers”), and all employees of CHSPSC, LLC
or any other affiliate of the Company (each an “Employee” and, collectively, the “Employees”). The Company may also
determine that other persons should be subject to this Policy, such as contractors or consultants of the Company or its affiliates
who have access to material nonpublic information. This Policy also applies to Related Individuals (as defined in Section 4
below) and Controlled Entities (as defined in Section 4 below) of any person covered by this Policy, as described below. In
addition, the Company will not engage in transactions in the Company’s securities, except in compliance with applicable
securities laws.
4.
POLICY
Statement of Policy. No Director, Officer or Employee who is aware of material nonpublic information about the
Company may, directly or through any Related Individuals or Controlled Entities, (a) buy or sell, or (except as may otherwise be
expressly provided herein) otherwise engage in any transactions involving, securities of the Company (other than pursuant to
any pre-approved trading plan approved in accordance with the Insider Trading Policy Memorandum (as defined in Section 9
below) that complies with SEC Rule 10b5-1), or engage in any other action to take personal advantage of that information, or (b)
pass that information on to others outside the Company, including family and friends. In addition, no Director, Officer or
Employee who, in the course of working for the Company (or its affiliates), learns of material nonpublic information about a
company with which the Company (or its affiliates) does business, including a customer or supplier of the Company (or its
affiliates), may trade in that company's securities, whether directly or through any Related Individuals or Controlled Entities, until
the information becomes public or is no longer material. “Securities of the Company” includes any securities of the Company,
including publicly traded equity and debt securities of any type or nature, as well as derivative securities that may be issued by
third parties.
Transactions that may be necessary or justifiable for independent reasons (such as the need to raise money for an
emergency expenditure) are not excepted from the Policy. The securities laws do not recognize such mitigating circumstances,
and, in any event, even the appearance of an improper transaction must be avoided to preserve the Company's reputation for
adhering to the highest standards of conduct.
Disclosure Of Information To Others. The Company is required under Regulation FD of the federal securities laws to
avoid the selective disclosure of material nonpublic information. The Company has established procedures for disclosing
material information in a manner that is designed to achieve broad public dissemination of the information immediately upon its
disclosure. You may not, therefore, disclose information to anyone outside the Company, including family members and friends,
other than in accordance with those procedures. You also may not discuss the Company or its business in an internet "chat
room," blog, or similar internet-based forum.
Material Information. Material information is any information that a reasonable investor would consider important in
making a decision to buy, hold, or sell securities. Any information that could be expected to affect the Company's stock price,
whether it is positive or negative, should be considered material. Some examples of information that ordinarily would be
regarded as material are:
Policy Title: Insider Trading Policy
Page 3 of 6 6NUMPAGES 6
Original Effective Date: 8/1/2000
Revision Date: 2/12/2025
•
Projections of future earnings or losses, indebtedness amounts or ratios, or other earnings guidance;
•
Changes to earnings that are inconsistent with the consensus expectations of the investment community, or any decision to
suspend earnings guidance;
•
A pending or proposed merger, acquisition or tender offer;
•
A pending or proposed acquisition or disposition of a significant asset;
•
A change in dividend policy, the declaration of a stock split, or an offering of additional securities;
•
A change in management;
•
Development of a significant new product or process;
•
Any financing transaction outside of the ordinary course;
•
Any pending or threatened significant litigation or governmental matters, including the resolution of any such litigation or
governmental matters;
•
Impending bankruptcy or the existence of liquidity problems;
•
The gain or loss of a significant customer or supplier; and
•
A significant cybersecurity breach or other significant cybersecurity incident.
Twenty-Twenty Hindsight. Anyone scrutinizing your transactions will be doing so after the fact, with the benefit of
hindsight. As a practical matter, before engaging in any transaction, you should carefully consider how enforcement authorities
and others might view the transaction in hindsight.
When Information is "Public." If you are aware of material nonpublic information, you may not engage in any
transactions subject to this Policy until the information has been disclosed broadly to the marketplace (such as by press release
or an SEC filing) and the investing public has had time to absorb the information fully. To avoid the appearance of impropriety,
as a general rule, information should not be considered fully absorbed by the marketplace until after the second business day
after the information is released. If, for example, the Company were to make an announcement at the close of business on a
Monday, you should not engage in any transactions in the Company's securities subject to this Policy until Thursday. If an
announcement were made at the close of business on a Friday, Wednesday generally would be the first eligible trading day.
Transactions by Family Members. This Policy also applies to your family members who reside with you, anyone else
who lives in your household, and any family members who do not live in your household but whose transactions in the
Company’s securities are directed by you or are subject to your influence or control (such as parents or children who consult
with you before they engage in transactions in the Company’s securities) (any such individuals referred to above, collectively,
the “Related Individuals”). You are responsible for the transactions of your Related Individuals and therefore should make them
aware of the need to confer with you before they engage in transactions in the Company's securities.
Transactions by Entities that You Influence or Control. This Policy applies to any entities that you influence or control,
including any corporations, partnerships or trusts (collectively referred to as “Controlled Entities”), and transactions by these
Controlled Entities should be treated for the purposes of this Policy and applicable securities laws as if they were for your own
account.
Transactions Under Company Stock Option and Award Plans.
a.
Stock Option Exercises. This Policy applies to any sale of stock as part of a broker-assisted cashless
exercise of an option, or any other market sale for the purpose of generating
Policy Title: Insider Trading Policy
Page 4 of 6 6NUMPAGES 6
Original Effective Date: 8/1/2000
Revision Date: 2/12/2025
the cash needed to pay the exercise price of an option. Except to the extent provided in the pre-clearance procedures set forth
in the Insider Trading Policy Memorandum, this Policy does not apply to the exercise of an employee stock option wherein you
pay the exercise price of the option and retain the underlying stock received or to the exercise of a tax withholding right pursuant
to which you elect to have the Company withhold shares subject to an option to satisfy tax withholding requirements.
b.
Restricted Stock/Restricted Stock Units Vesting. This Policy does not apply to the release of restrictions
upon the vesting of restricted stock, performance based restricted stock or restricted stock units and the issuance of unrestricted
shares in your name in connection therewith. The Policy also does not apply to the withholding or forfeiture of a portion of those
shares to satisfy tax withholding requirements.
c.
Subsequent Sales. The Policy does apply to any sale of the stock you receive through an option exercise
or the vesting of restricted stock, performance based restricted stock or restricted stock units, whether through the plan
administrator’s brokerage services or through your separate brokerage firm.
Gifts. Bona fide gifts of securities are transactions subject to this Policy.
Mutual Funds Transactions. Transactions in mutual funds that are invested in securities of the Company are not
transactions subject to this Policy.
5.
ADDITIONAL PROHIBITED TRANSACTIONS
The Company considers it improper and inappropriate for individuals subject to this Policy to engage in certain types of
short-term or speculative transactions in the Company's securities as provided below. Therefore, the individuals set forth below
may not engage in the following transactions:
Short Sales. Short sales of the Company's securities evidence an expectation on the part of the seller that the
securities will decline in value, and therefore signal to the market that the seller has no confidence in the Company or its short-
term prospects. In addition, short sales may reduce the seller's incentive to improve the Company's performance. For these
reasons, short sales of the Company's securities by any person subject to this Policy are prohibited. In addition, Section 16(c)
of the Exchange Act prohibits Section 16 Officers (as defined in this Section 5) and directors from engaging in short sales.
Publicly Traded Options. A transaction in options is, in effect, a bet on the short-term movement of the Company's
stock and therefore creates the appearance that the person is trading based on inside information. Transactions in options also
may focus the person's attention on short-term performance at the expense of the Company's long-term objectives.
Accordingly, transactions in puts, calls or other derivative securities, on an exchange or in any other organized market, by any
person subject to this Policy are prohibited. (Option positions arising from certain types of hedging transactions are governed by
the section below captioned "Hedging Transactions.")
Short-Term Trading. Short-term trading in securities of the Company may be distracting to the individual and may
unduly focus the person on the Company's short-term stock market performance instead of the Company's long-term business
objectives. For these reasons, any Director, Officer or Designated Employee (as defined in Section 9 below) (including the
Related Individuals and Affiliated
Policy Title: Insider Trading Policy
Page 5 of 6 6NUMPAGES 6
Original Effective Date: 8/1/2000
Revision Date: 2/12/2025
Entities thereof) who purchases Company securities in the open market may not sell any company securities of the same class
during the six months following the purchase. In addition, Section 16(b) of the Securities Exchange Act of 1934, as amended
(the “Exchange Act”), provides that any "profit" realized by any officer (as defined under Exchange Act Rule 16a-1(f)) (a “Section
16 Officer”) or director from any non-exempt purchase and sale or non-exempt sale and purchase of any equity security of any
public company (“opposite-way transactions”) within any period of less than six months shall be reimbursed to the company.
Unlike other provisions relating to insider trading, intent to take unfair advantage of material nonpublic information is not required
for recovery under Section 16(b). In other words, opposite-way transactions in equity securities within six months of one another
can lead to disgorgement of any profits irrespective of the reasons for or purposes of the transaction or whether any such
person is aware of any material nonpublic information.
Hedging Transactions Hedging or monetization transactions can be accomplished through a number of possible
mechanisms, including through the use of financial instruments such as prepaid variable forwards, equity swaps, collars and
exchange funds. Such hedging transactions may permit a person to continue to own securities of the Company obtained
through employee benefit plans or otherwise but without the full risks and rewards of ownership. When that occurs, the person
may no longer have the same objectives as the Company's other shareholders. Therefore, Directors, Officers and Designated
Employees (including the Related Individuals and Affiliated Entities thereof) are prohibited from engaging in any such hedging
transactions.
Margin Accounts and Pledges. Securities held in a margin account may be sold by the broker without the customer's
consent if the customer fails to meet a margin call. Similarly, securities pledged (or hypothecated) as collateral for a loan may
be sold in foreclosure if the borrower defaults on the loan. Because a margin sale or foreclosure sale may occur at a time when
the pledgor is aware of material nonpublic information or otherwise is not permitted to trade in Company securities, Directors,
Officers and Designated Employees (including the Related Individuals and Affiliated Entities thereof) are prohibited from holding
Company securities in a margin account or pledging Company securities as collateral for a loan.
6.
POST-TERMINATION TRANSACTIONS
The Policy continues to apply to your transactions in Company securities even after you have terminated employment
or service (as applicable). If you are in possession of material nonpublic information when your employment or service
terminates, you may not engage in transactions subject to this Policy until that information has become public or is no longer
material. Directors, Officers and Designated Employees may be subject to additional post-termination limitations as set forth in
the Insider Trading Policy Memorandum.
7.
COMPANY ASSISTANCE
Any person who has a question about this Policy or its application to any proposed transaction may obtain additional
guidance from Justin Pitt, President and Chief Legal and Administrative Officer (the “Chief Legal Officer”), at (615) 465-7000.
Ultimately, however, the responsibility for adhering to this Policy and avoiding unlawful transactions rests with the individual.
8.
REPORTS OF VIOLATIONS
Policy Title: Insider Trading Policy
Page 6 of 6 6NUMPAGES 6
Original Effective Date: 8/1/2000
Revision Date: 2/12/2025
If any person subject to this Policy has reason to believe that material nonpublic information about the Company has been
disclosed to an outside party without authorization, that person should report it to the Chief Legal Officer immediately.
If any person subject to this Policy has reason to believe that an insider of the Company or someone outside of the
Company has acted, or intends to act, on material nonpublic information, that person should report it to the Chief Legal Officer
immediately.
The Chief Legal Officer will be responsible for conducting any investigations of alleged violations of this Policy. Any
reporting or recoupment action will be taken by the Company in its sole discretion; any internal disciplinary action against any
employee will be taken at the sole discretion of the employer of that employee.
9.
ADDITIONAL PROCEDURES FOR MEMBERS OF THE BOARD OF DIRECTORS AND OFFICERS OF COMMUNITY
HEALTH SYSTEMS, INC. AND DESIGNATED EMPLOYEES OF CHSPSC, LLC (AND OTHER AFFILIATES)
The Company has established additional procedures in order to assist the Company in the administration of this Policy,
to facilitate compliance with laws prohibiting insider trading while in possession of material nonpublic information, and to avoid
the appearance of any impropriety. These additional procedures are applicable to all Directors and Officers as well as to any
Employee who is determined by the Trading Compliance Committee to be in a position to regularly become aware of nonpublic
earnings information or other material nonpublic information about the Company (each a “Designated Employee” and,
collectively, the “Designated Employees”). These additional procedures are set forth in a separate memorandum addressed to
the Directors, the Officers and the Designated Employees (the “Insider Trading Policy Memorandum”). Each Director, Officer
and Designated Employee will be provided with a copy of the Policy and the Insider Trading Policy Memorandum and must
certify that he/she has read and understands the Policy and the Insider Trading Policy Memorandum and has complied and will
continue to comply therewith.
Exhibit 19.2
Page 1
M E M O R A N D U M
TO: Members of the Board of Directors and Officers of Community Health Systems, Inc. and Designated Employees of
CHSPSC, LLC (and other affiliates)
FROM:
Justin Pitt, President and Chief Legal and Administrative Officer (“Chief Legal Officer”)
RE: Insider Trading Policy – Transactions Involving Company Securities – Pre-Clearance and Blackout Period Procedures
This memorandum describes Community Health Systems, Inc.’s (the “Company”) trading pre-clearance and black-out period
procedures applicable to members of the Company’s Board of Directors (the “Directors”), officers of the Company (the
“Officers”), and employees of CHSPSC, LLC (and other affiliates of the Company) determined by the Chief Legal Officer and the
Chief Financial Officer of the Company (the “Trading Compliance Committee”) to be in a position to regularly become aware of
nonpublic earnings information or other material nonpublic information about the Company (collectively, the “Designated
Employees”), This memorandum accompanies and supplements the Insider Trading Policy adopted by the Board of Directors of
Community Health Systems, Inc., as last revised on February 12, 2025 (the “Insider Trading Policy”).
1.
PRE-CLEARANCE PROCEDURES
To help prevent inadvertent violations of the federal securities laws and to avoid even the appearance of trading on inside
information, you – as a Director, an Officer or a Designated Employee, together with your Related Individuals and Controlled
Entities (both, as defined in Section 5 of the Insider Trading Policy) – may not engage in any transaction involving the
Company's securities (including an open market or private purchase or sale, a stock plan transaction such as an option
exercise, gift, contribution to a trust or other Controlled Entity, or any other transaction) without first obtaining pre-clearance of
the transaction from the Trading Compliance Committee. A request for pre-clearance must be submitted to the Chief Legal
Officer and the Chief Financial Officer in advance of the proposed transaction. An email describing the transaction with an
affirmative reply from the Chief Legal Officer and the Chief Financial Officer can serve to document the approval, although the
attached “Investment Inquiry and Approval Form” may also be used. The Chief Legal Officer and the Chief Financial Officer are
under no obligation to approve any transaction submitted for pre-clearance, and may determine not to permit the transaction.
Transaction clearance is valid for two trading days; if the transaction is not completed within the two trading day period, the
transaction must be resubmitted to the Chief Legal Officer and the Chief Financial Officer for pre-clearance. In addition, without
limiting the foregoing provisions of this paragraph, any transaction made by any entity or individual that may require a Section 16
filing by any Director or Section 16 Officer (as defined in Section 5 of the Insider Trading Policy) in his/her capacity as such as
the result of such Director and/or Section 16 Officer having a reportable interest in the Company’s common
Page 2
stock held by such entity or individual must be pre-cleared by the Trading Compliance Committee.
Any person subject to the pre-clearance requirements who wishes to implement a trading plan under SEC Rule 10b5-1,
must pre-clear the plan with the Trading Compliance Committee. The Trading Compliance Committee is under no obligation to
approve any trading plan, and may determine not to approve the trading plan. In addition, any person subject to the pre-
clearance requirements who has implemented a trading plan under SEC Rule 10b5-1 may not amend or terminate the plan
without the approval of the Trading Compliance Committee. As required by Rule 10b5-1, you may not enter into or (to the
extent provided in Rule 10b5-1) amend a Rule 10b5-1 trading plan when you are in possession of material nonpublic
information. In addition, you may not enter into a Rule 10b5-1 trading plan during a blackout period (as described below).
Moreover, Rule 10b5-1 requires a cooling off period for Directors, Section 16 Officers and other employees between the time at
which any Rule 10b5-1 trading plan is adopted or (to the extent provided in Rule 10b5-1) amended and the time at which any
transactions may be initiated under such plan. Transactions effected pursuant to a pre-cleared Rule 10b5-1 trading plan will not
require further pre-clearance at the time of the transaction so long as the plan has been adopted and operated in compliance
with all of the requirements of Rule 10b5-1. Notwithstanding the foregoing, Directors and Section 16 Officers must still comply
with the notification requirements set forth below in connection with any purchases and sales made pursuant to any Rule 10b5-1
trading plan because such purchases and sales will still be subject to applicable requirements under Section 16 of the Exchange
Act (as defined in the Insider Trading Policy), as well as (in the case of sales involving Directors and Section 16 Officers) to
applicable requirements under Rule 144.
In addition, when the Company is engaged in an offering of securities, whether or not registered under the Securities Act of
1933, certain persons subject to the pre-clearance procedures set forth herein may be restricted from purchasing any Company
securities, whether or not such person is aware of material nonpublic information, under Regulation M until such offering has
been completed.
2.
BLACKOUT PERIODS
2.1 Quarterly Blackout Periods. The Company's announcement of its quarterly financial results almost always has the
potential to have a material effect on the market for the Company's securities. Therefore, you can anticipate that, to avoid even
the appearance of trading while aware of material nonpublic information, you (as well as your Related Individuals and Controlled
Entities) generally will not be pre-cleared to engage in any transactions subject to the Insider Trading Policy involving the
Company's securities during the period beginning on the 15th day of the last month of the Company's fiscal quarter and ending
after the second full business day following the Company's issuance of its quarterly earnings release. Persons subject to these
quarterly blackout periods include all Directors, all Officers, all Designated Employees and any other persons who are informed
by the Trading Compliance Committee that they are subject to the quarterly blackout periods.
The Company may on occasion issue interim earnings guidance or other potentially material information by means of a
press release, SEC filing on Form 8-K or other means designed to achieve widespread dissemination of the information. You
should anticipate that transactions are unlikely to be pre-cleared while the Company is in the process of assembling the
information to be released and until the information has been released and fully absorbed by the market.
Page 3
2.2 Event-Specific Blackout Periods. From time to time, an event may occur that is material to the Company and is
known by only a few Directors or Section 16 Officers. So long as the event remains material and nonpublic, Directors, Section
16 Officers, and such other persons as are designated by the Trading Compliance Committee (including, in any such case, the
Related Individuals and Controlled Entities of such persons) may not engage in any transactions subject to the Insider Trading
Policy involving the Company’s securities. The existence of an event-specific blackout will not be announced, other than to
those who are aware of the event giving rise to the blackout. Any person made aware of the existence of an event-specific
blackout should not disclose the existence of the blackout to any other person and also may not engage in any transactions
subject to the Insider Trading Policy involving the Company’s securities, even if they do not know the nature of the material
nonpublic event. The failure of the Trading Compliance Committee to designate a person as being subject to an event-specific
blackout will not relieve that person of the obligation not to engage in any transactions subject to the Insider Trading Policy
involving the Company’s securities while aware of material nonpublic information.
2.3 Hardship Exceptions. A person who is subject to a quarterly earnings blackout period and who has an unexpected
and urgent need to sell Company stock in order to generate cash may, in appropriate circumstances, be permitted to sell
Company stock even during the blackout period. Hardship exceptions may be granted only by the Trading Compliance
Committee and must be in advance of the proposed trade. A hardship exception may be granted only if the Trading Compliance
Committee concludes that the Company's earnings and other information for the applicable quarter does not constitute material
nonpublic information. Under no circumstance will a hardship exception be granted with respect to a person who is in
possession of material nonpublic information or has knowledge of a material nonpublic event.
3.
POST-TERMINATION TRANSACTIONS
If you are aware of material nonpublic information when you terminate service as a Director, Officer or other employee of
CHSPSC, LLC (or any other affiliate of the Company), you may not engage in any transactions subject to the Insider Trading
Policy involving the Company’s securities until that information has become public or is no longer material. In all other respects,
the preclearance, notification and blackout period procedures set forth in this memorandum will cease to apply to your
transactions in Company securities upon the expiration of the quarterly blackout period related to the Company’s announcement
of its quarterly financial results for the quarter in which your employment or service terminates (whether or not such blackout
period has commenced at the time that your employment or service terminates), provided, that, in the case of any individual who
is a Director or Section 16 Officer, (i) such transaction also must not be subject to short-swing liability under Section 16(b) of the
Exchange Act, and (ii) in order to ensure compliance with Rule 144 as described below, such individual must notify the
Company prior to making any sales of the Company’s common stock during the three months following such time that such
individual ceases serving as a Director or a Section 16 Officer, as applicable.
Any Director, Officer or Designated Employee who enters into a consulting agreement or similar arrangement with the
Company (or any of its affiliates) in conjunction with the termination of his/her employment or service (a “Post-Employment
Arrangement”), will remain subject to the provisions of this memorandum until the expiration of the quarterly blackout period
related to the Company’s announcement of its quarterly financial results for the quarter in which such Post-Employment
Arrangement terminates (whether or not such blackout period has commenced at the time that such Post-Employment
Arrangement terminates).
Page 4
4.
COMPANY ASSISTANCE
If you have a question about this memorandum or its application to any proposed transaction, you may obtain additional
guidance from the Chief Legal Officer.
5.
BOARD OF DIRECTORS AND SECTION 16 OFFICERS (PROXY STATEMENT LISTED) ONLY – BROKER
INTERFACE AND NOTIFICATION PROCEDURES AND POWER OF ATTORNEY
Section 16 of the Exchange Act generally requires Directors and Section 16 Officers to file Forms 4 with the SEC not later
than the end of the second business day following any reportable transaction (including any transactions made under a Rule
10b5-1 trading plan). For example, if you sell stock (having been pre-cleared to do so) on Tuesday, you are required to file your
Form 4 with the SEC by 10:00 p.m. ET on Thursday. The Legal Department prepares and files these forms on behalf of the
Directors and Section 16 Officers, but the expedited requirements of the SEC necessitate expedited procedures in order to meet
these requirements. Attached are two items:
•
Broker Instruction/Representation. A form letter for you to send to your broker(s) instructing them to provide same-day
notice to the Chief Legal Officer of any trades executed, the number of shares included in the trade, and the execution price.
If you have more than one brokerage account, please send this form to each brokerage firm, as well as to any other
person’s (e.g., spouse) brokerage firms if you are required to report their trades. Please review your brokerage
relationships and be sure that your broker(s) are aware that you are an insider (i.e., a Director/Section 16 Officer) and that
each broker completes the form and returns it to the Chief Legal Officer. NOTE: If you execute a trade (having been pre-
cleared to do so) through an electronic trading platform without the assistance of a broker, you are responsible for providing
same-day notice to the Chief Legal Officer of any trades executed, the number of shares included in the trade, and the
execution price.
•
Power of Attorney. This document authorizes the Company to file your Forms 4 and other similar filings with the SEC.
Given travel schedules and directors’ office locations, it is almost impossible for the Legal Department to otherwise assist
you in meeting the two business day filing requirements under Section 16 of the Exchange Act. We are happy to provide
you with copies of any documents that we file on your behalf.
In addition, Rule 144 provides that any “affiliate” (which generally includes all directors and Section 16 Officers, and
may include 10% or more shareholders) of a public company may not publicly sell securities of a public company unless such
sale is covered by an effective registration statement or is being made pursuant to Rule 144 (unless another exemption from
registration is available). If a Director or Section 16 Officer (or any Related Individual or Controlled Entity) is permitted to make a
public sale pursuant to this Memorandum and the Insider Trading Policy, this individual (prior to making any such sale) should
advise the Chief Legal Officer and the Chief Financial Officer as well as his or her broker to ensure compliance with Rule 144
(which imposes certain limitations in connection with any such sale, including volume, manner of sale and current public
information requirements), and he/she may be obligated to file a Form 144 with the SEC (which form must be filed concurrently
with placing an order to sell securities with the broker in reliance on Rule 144).
6.
CERTIFICATIONS
All Directors, Officers and Designated Employees must certify their understanding of, and intent to comply with, the
Company's Insider Trading Policy, including the procedures set forth in
Page 5
this memorandum. Please return the enclosed Certification promptly upon receipt of this memorandum.
Community Health Systems, Inc.
SUBSIDIARY LISTING
Exhibit 21
as of 12/31/24
(*) Majority position held in an entity with physicians, non-profit entities or both
(#) Minority position held in a non-consolidating entity
Page 1 of 23
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 Center
Affinity Orthopaedic ASC, LLC* (DE)
Affinity Orthopedic Specialists, LLC (DE)
Affinity Physician Services, LLC (DE)
Affinity Radiation Therapy Services, LLC (DE)
Affinity Skilled Nursing, LLC (DE)
Affinity Urology ASC, LLC* (DE)
Alabama HMA Physician Management, LLC (AL)
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)
Angelo Community Healthcare Services, Inc. (TX)
Anniston HMA, LLC (AL)
Arizona ASC Management, Inc. (AZ)
Arizona Medco, LLC (DE)
Arkansas HMA Regional Service Center, LLC (AR)
Arkansas Medical Imaging JV, LLC (DE)
ARMC, L.P. (DE)
Bartow HMA, LLC (FL)
Batesville HMA Medical Group, LLC (MS)
Bayfront Ambulatory Surgical Center, LLC (DE)
Bayfront Health Imaging Center, LLC (DE)
Bayfront HMA Convenient Care, LLC (FL)
Bayfront HMA Healthcare Holdings, LLC (FL)
Bayfront HMA Medical Center, LLC (FL)
Bayfront HMA Physician Management, LLC (FL)
Bayfront HMA Real Estate Holdings, LLC (FL)
Community Health Systems, Inc.
SUBSIDIARY LISTING
Exhibit 21
as of 12/31/24
(*) Majority position held in an entity with physicians, non-profit entities or both
(#) Minority position held in a non-consolidating entity
Page 2 of 23
Bayfront HMA Wellness Center, LLC (FL)
BH Trans Company, LLC (DE)
Biloxi Health System, LLC# (DE)
Biloxi H.M.A., LLC# (MS)
d/b/a Merit Health Biloxi
Biloxi 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)
Bluefield Holdings, LLC (DE)
Bluffton Health System LLC (DE)
d/b/a Bluffton Regional Medical Center
Bluffton Physician Services, LLC (DE)
Brandon HB Medical Services, LLC (DE)
Brandon HMA, LLC (MS)
d/b/a Merit Health Rankin
Brandon Physician Management, LLC (DE)
Brandywine Hospital Malpractice Assistance Fund, Inc. (PA)
Bravera Urgent Care, LLC (DE)
Brevard HMA Holdings, LLC (FL)
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)
Brownwood Medical Center, LLC (DE)
Bullhead City Clinic Corp. (AZ)
Bullhead City Hospital Corporation (AZ)
d/b/a Western Arizona Regional Medical
Center
Bullhead City Hospital Investment Corporation (DE)
Bullhead City Imaging Corporation (AZ)
Cadence Solutions, Inc.# (DE)
Cahaba Orthopedics, LLC (DE)
Campbell County HMA, LLC (TN)
d/b/a LaFollette Medical Center
Carlisle HMA Physician Management, LLC (PA)
Carlisle HMA Surgery Center, LLC (PA)
Carlisle HMA, LLC (PA)
Carlisle Medical Group, LLC (PA)
Community Health Systems, Inc.
SUBSIDIARY LISTING
Exhibit 21
as of 12/31/24
(*) Majority position held in an entity with physicians, non-profit entities or both
(#) Minority position held in a non-consolidating entity
Page 3 of 23
Carlsbad Medical Center, LLC (DE)
d/b/a Carlsbad Medical Center
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)
Cedar Park Clinic Asset Holding Company, LLC (DE)
Cedar Park Health System, L.P.* (DE)
d/b/a Cedar Park Regional Medical
Center
Cedar Park Surgery Center, LLC# (TX)
Cedar Park Surgery Center, L.L.P.# (TX)
Center for Adult Healthcare, LLC (DE)
Center for Pain Management, LLC# (DE)
Central Florida HMA Holdings, LLC (DE)
Central States HMA Holdings, LLC (DE)
Champion Sports Medicine Birmingham, LLC# (DE)
Chester HMA Physician Management, LLC (SC)
Chester HMA, LLC (SC)
Chester Medical Group, LLC (SC)
Chesterton Surgery Center, LLC* (DE)
CHHS Development Company, LLC (DE)
CHHS Hospital Company, LLC (DE)
CHS Data Science Services, LLC (DE)
CHS PSO, LLC (DE)
CHS Realty Holdings I, LLC (TN)
CHS Realty Holdings II, LLC (TN)
CHS Realty Holdings III, LLC (DE)
CHS Realty Holdings Joint Venture (TN)
CHS Receivables Funding, LLC (DE)
CHS Shared Business Operations, 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)
Community Health Systems, Inc.
SUBSIDIARY LISTING
Exhibit 21
as of 12/31/24
(*) Majority position held in an entity with physicians, non-profit entities or both
(#) Minority position held in a non-consolidating entity
Page 4 of 23
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)
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)
Clarksdale HMA Physician Management, LLC (MS)
Clarksdale HMA, LLC (MS)
Clarksville Endoscopy Center, LLC* (DE)
Community Health Systems, Inc.
SUBSIDIARY LISTING
Exhibit 21
as of 12/31/24
(*) Majority position held in an entity with physicians, non-profit entities or both
(#) Minority position held in a non-consolidating entity
Page 5 of 23
Clarksville Health System, G.P.* (DE)
d/b/a Tennova Healthcare - Clarksville
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 Hospital Company, LLC (TN)
Cleveland Medical Clinic, Inc. (TN)
Cleveland PHO, Inc. (TN)
Cleveland Tennessee Hospital Company, LLC (DE)
Clinical Provider Resources, LLC (DE)
Clinton HMA, LLC (OK)
Clinton HMPN, LLC (OK)
Coast Imaging, LLC# (MS)
Coatesville Hospital Corporation (PA)
Cocke County HMA, LLC (TN)
d/b/a Newport Medical Center
Coffee Hospital Management Associates, Inc. (TN)
College Station Hospital, L.P. (DE)
College 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 Neurological Vascular Medical Group, LLC (FL)
Collier HMA Physician Management, LLC (FL)
Commonwealth Health Clinically Integrated Network, LLC (DE)
Commonwealth Health IDTF, LLC (DE)
Commonwealth Physician Network, LLC (DE)
Community GP Corp. (DE)
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 Health Systems, Inc.
SUBSIDIARY LISTING
Exhibit 21
as of 12/31/24
(*) Majority position held in an entity with physicians, non-profit entities or both
(#) Minority position held in a non-consolidating entity
Page 6 of 23
Community Insurance Group SPC, LTD. (Cayman Islands)
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 Company, LLC (FL)
d/b/a North Okaloosa Medical Center
Crestview Professional Condominiums Association, Inc.* (FL)
Crestview Surgery Center, L.P. (TN)
Crestwood HB Medical Services, LLC (DE)
Crestwood Healthcare, L.P. (DE)
d/b/a Crestwood Medical Center
Crestwood Hospital LP, LLC (DE)
Crestwood Hospital, LLC (DE)
Crestwood Occupational Medicine/Convenient Care, LLC (DE)
Crestwood Physician Services, LLC (DE)
Crestwood Surgery Center, LLC (DE)
Crossgates HMA Medical Group, LLC (MS)
Crystal River HMA Physician Management, LLC (FL)
CSMC, LLC (DE)
Dallas Phy Service, LLC (DE)
Dallas Physician Practice, L.P. (DE)
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)
Dedicated Surgery Center, LLC (DE)
Deming Home Care Services, LLC# (DE)
Desert Hospital Holdings, LLC (DE)
Detar Hospital, LLC (DE)
Detar/USP Surgery Center, LLC# (TX)
DFW Physerv, LLC (DE)
DH Cardiology, LLC (DE)
DHFW Holdings, LLC (DE)
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 Hospital
Community Health Systems, Inc.
SUBSIDIARY LISTING
Exhibit 21
as of 12/31/24
(*) Majority position held in an entity with physicians, non-profit entities or both
(#) Minority position held in a non-consolidating entity
Page 7 of 23
Dukes Physician Services, LLC (DE)
Dupont Business and Medical Park Association, Inc.# (IN)
Dupont Hospital, LLC* (DE)
d/b/a Dupont Hospital
Durant H.M.A., LLC* (OK)
d/b/a AllianceHealth Durant
Durant HMA Physician Management, LLC (OK)
Dyersburg Clinic Corp. (TN)
Dyersburg HBP Medical Group, LLC (DE)
Dyersburg Hospital Company, LLC (TN)
East Georgia HMA Physician Management, LLC (GA)
East Georgia Regional Medical Center, LLC* (GA)
d/b/a East Georgia Regional Medical Center
East Tennessee Clinic Corp. (TN)
Easton Hospital Malpractice Assistance Fund, Inc. (PA)
EGF, LLC (DE)
El Dorado Surgery Center, L.P.* (DE)
EL MED, LLC (DE)
Eligibility Screening Services, LLC (DE)
Emporia Clinic Corp. (VA)
Emporia Hospital Corporation (VA)
Enterprise Clinic, LLC (DE)
Fallbrook Hospital Corporation (DE)
First Choice Health Plan of Mississippi, LLC# (MS)
Florida HMA Holdings, LLC (DE)
Florida HMA Regional Service Center, LLC (FL)
Florida West Coast Health Alliance, LLC (DE)
Flowers HB Medical Services, LLC (DE)
Flowood HB Medical Services, LLC (DE)
Flowood Mississippi Imaging, LLC (DE)
Flowood River Oaks HMA Medical Group, LLC (MS)
FMG PrimeCare, LLC (DE)
Foley ASC, LLC* (DE)
Foley Clinic Corp. (AL)
Foley Hospital Company, LLC (AL)
d/b/a Baldwin Health
Fort Smith HMA PBC Management, LLC (AR)
Fort Smith HMA Physician Management, LLC (AR)
Community Health Systems, Inc.
SUBSIDIARY LISTING
Exhibit 21
as of 12/31/24
(*) Majority position held in an entity with physicians, non-profit entities or both
(#) Minority position held in a non-consolidating entity
Page 8 of 23
Fort Smith HMA, LLC (AR)
Frankfort Health Partner, Inc. (IN)
Franklin Clinic Corp. (VA)
Franklin Hospital Corporation (VA)
FSED Management of Northwest Arkansas, LLC (DE)
FSED Management of West Florida, LLC (DE)
FWBH, LLC# (DE)
Gadsden HB Medical Services, LLC (DE)
Gadsden Home Care Services, LLC# (DE)
Gadsden Regional Medical Center, LLC (DE)
d/b/a Gadsden Regional Medical Center
Gadsden Regional Physician Group Practice, LLC (DE)
Gadsden Regional Primary Care, LLC (AL)
Gadsden Surgery Center, Ltd.* (AL)
Gaffney Clinic Company, LLC (DE)
Gaffney H.M.A., LLC (SC)
Granbury Clinic Asset Holding Company, LLC (DE)
Granbury Hospital Corporation (DE)
d/b/a Lake Granbury Medical Center
Granbury Mammography JV, LLC# (DE)
Grandview Medical Group Research, LLC (DE)
Granger Surgery Center, LLC* (IN)
GRB Real Estate, LLC (DE)
Greenbrier Valley Anesthesia, LLC (DE)
Greenbrier Valley Emergency Physicians, LLC (DE)
Greenbrier VMC, LLC (DE)
GRMC Holdings, LLC (DE)
Gulf Coast HMA Physician Management, LLC (FL)
Gulf South Surgery Center, LLC# (MS)
Haines City HMA Physician Management, LLC (FL)
Haines City HMA Urgent Care, LLC (FL)
Haines City HMA, LLC (FL)
Hallmark Healthcare Company, LLC (DE)
Harrison HMA, LLC (MS)
Harton Clinic Company, LLC (DE)
Hattiesburg HB Medical Services, LLC (DE)
Hattiesburg Home Care Services, LLC# (DE)
Health Education Services, LLC (DE)
Health Management Associates, LLC (DE)
Community Health Systems, Inc.
SUBSIDIARY LISTING
Exhibit 21
as of 12/31/24
(*) Majority position held in an entity with physicians, non-profit entities or both
(#) Minority position held in a non-consolidating entity
Page 9 of 23
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)
Heritage Healthcare Innovation Fund II, LP# (DE)
Heritage Healthcare Innovation Fund III, LP# (DE)
Hernando HMA, LLC (FL)
Highland Health Systems, Inc. (TX)
Highway 90 Development, LLC (FL)
Hill Country ASC Partners, L.L.C.# (TX)
Hill Regional Clinic Corp. (TX)
HIM Central Services, LLC (DE)
HMA Bayflite Services, LLC (FL)
HMA CAT, LLC (TX)
HMA Fentress County General Hospital, LLC (TN)
HMA Hospital Holdings, LP (DE)
HMA Lake Shore, Inc. (FL)
HMA MRI, LLC (TX)
HMA Professional Services Group, LP (DE)
HMA Santa Rosa Medical Center, LLC (FL)
d/b/a Santa Rosa Medical Center
HMA Services GP, LLC (DE)
HMA/Solantic Joint Venture, LLC# (DE)
HMA-TRI Holdings, LLC (DE)
Hobbs Medco, LLC (DE)
HOF ASC Holdings, 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)
Community Health Systems, Inc.
SUBSIDIARY LISTING
Exhibit 21
as of 12/31/24
(*) Majority position held in an entity with physicians, non-profit entities or both
(#) Minority position held in a non-consolidating entity
Page 10 of 23
Hospital of Morristown, LLC (TN)
Hot Springs Outpatient Surgery Center, G.P. (AR)
HP LRHS Land, LLC# (IN)
HTI Tucson Rehabilitation, Inc. (AZ)
Imaging JV Holdings, LLC (DE)
INACTCO, Inc. (DE)
Intermountain Medical Group, Inc. (PA)
IOM Health System, L.P.* (IN)
d/b/a Lutheran Hospital of Indiana
Jackson County Heart ASC#, LLC (DE)
Jackson HB Medical Services, LLC (DE)
Jackson HMA North Medical Office Building, LLC (MS)
Jackson HMA, LLC (MS)
d/b/a Merit Health Central
Jackson Home Care Services, LLC# (DE)
Jackson Hospital Corporation (TN)
Jackson, Tennessee Hospital Company, LLC (TN)
Jamestown HMA Physician Management, LLC (TN)
Jefferson ASC, LLC* (DE)
Jefferson ASC Holdings, LLC* (DE)
Jefferson County HMA, LLC (TN)
d/b/a Jefferson Memorial Hospital
Jennersville Regional Hospital Malpractice Assistance Fund, Inc. (PA)
Jourdanton Hospital Corporation (TX)
Kay County Clinic Company, LLC (OK)
Kay County Hospital Corporation (OK)
Kay County Oklahoma Hospital Company, LLC (OK)
Kennett 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 Center
Key West Home Health, LLC# (FL)
Key West Private Care, LLC# (FL)
Keystone HMA Property Management, LLC (PA)
Kirksville Clinic Corp. (MO)
Kirksville Home Care Services, LLC# (MO)
Community Health Systems, Inc.
SUBSIDIARY LISTING
Exhibit 21
as of 12/31/24
(*) Majority position held in an entity with physicians, non-profit entities or both
(#) Minority position held in a non-consolidating entity
Page 11 of 23
Kirksville Hospital Company, LLC (DE)
Kirksville Missouri Hospital Company, LLC* (MO)
d/b/a Northeast Regional Medical
Center
Kirksville Physical Therapy Services, LLC (DE)
Knox Hospital Company, LLC (DE)
d/b/a Northwest Health – Starke
Knoxville Center for Behavioral Medicine, LLC# (DE)
Knoxville HB Medical Services, LLC (DE)
Knoxville HMA Cardiology PPM, LLC (TN)
Knoxville HMA Development, 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 Rehabilitation Hospital, 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)
La Porte Health System, LLC (DE)
La Porte Home Care Services, LLC# (DE)
La Porte Hospital Company, LLC (DE)
d/b/a Northwest Health – La Porte
La Porte Occupational Health Services, LLC (DE)
Lake Granbury HB Medical Services, LLC (DE)
Lake Granbury Hospital-Based Professional Services (TX)
Lake Shore HMA Medical Group, LLC (FL)
Lake Shore HMA, LLC (FL)
Lake Wales Clinic Corp. (FL)
Lake Wales Hospital Corporation (FL)
Lakeway Hospital Company, LLC (TN)
Lancaster Clinic Corp. (SC)
Lancaster HMA Physician Management, LLC (PA)
Lancaster HMA, LLC (PA)
Lancaster Hospital Corporation (DE)
Community Health Systems, Inc.
SUBSIDIARY LISTING
Exhibit 21
as of 12/31/24
(*) Majority position held in an entity with physicians, non-profit entities or both
(#) Minority position held in a non-consolidating entity
Page 12 of 23
Lancaster 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)
Laredo Digestive Health Center, L.L.C.* (TX)
Laredo Texas Hospital Company, L.P. (TX)
d/b/a Laredo Medical Center
Las Cruces ASC-GP, LLC (DE)
Las Cruces HB Medical Services, LLC (DE)
Las Cruces Home Care Services, LLC# (DE)
Las Cruces Medical Center, LLC (DE)
d/b/a Mountain View Regional Medical
Center
Las Cruces Physician Services, LLC (DE)
Las Cruces Surgery Center – Telshor, LLC (DE)
Las Cruces Surgery Center, L.P.* (DE)
Lea Regional Hospital, LLC (DE)
Lebanon HMA Physician Management, LLC (TN)
Lebanon HMA Surgery Center, LLC (TN)
Lebanon HMA, LLC (TN)
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)
Lone Star HMA, L.P. (DE)
Longview Clinic Operations Company, LLC (DE)
Longview Medical Center, L.P. (DE)
d/b/a Longview Regional Medical
Center
Longview Merger, LLC (DE)
Longview Regional Hospital-Based Professional Services (TX)
Louisburg HMA Physician Management, LLC (NC)
Lower Florida Keys Physician/Hospital Organization, Inc.# (FL)
LRH, LLC (DE)
Lutheran HBP Services, LLC (DE)
Lutheran Health Imaging, 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)
Community Health Systems, Inc.
SUBSIDIARY LISTING
Exhibit 21
as of 12/31/24
(*) Majority position held in an entity with physicians, non-profit entities or both
(#) Minority position held in a non-consolidating entity
Page 13 of 23
Lutheran Medical Office Park Property Owners Association, Inc.# (IN)
Lutheran Musculoskeletal Center, LLC* (DE)
d/b/a The Orthopaedic Hospital of Lutheran
Health Network
Lutheran/TRMA Network, LLC# (IN)
Madison Clinic Corp. (TN)
Madison Health System, LLC# (DE)
Madison HMA Physician Management, LLC# (MS)
Madison HMA, LLC# (MS)
d/b/a Merit Health Madison
Marion Physician Services, LLC (DE)
Marshall County HMA, LLC (OK)
d/b/a AllianceHealth Madill
Marshall County HMPN, LLC (OK)
Martin Clinic Corp. (TN)
Martin Hospital Company, LLC (TN)
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 Valley III, LLC* (AK)
Mat-Su Valley Medical Center, LLC* (AK)
d/b/a Mat-Su Regional Medical Center
Mayes County HMA, LLC (OK)
Mayes County HMPN, LLC (OK)
MBBG, LLC* (AL)
MBDD, LLC (DE)
McKenna Court Homes, LLC (DE)
McNairy Clinic Corp. (TN)
McNairy Hospital Corporation (TN)
MCSA, L.L.C. (AR)
Medical Center of Brownwood, LLC (DE)
MEDSTAT, LLC (IN)
Melbourne HMA, LLC (FL)
Mercy Cardiovascular Cath Lab, LLC# (PA)
Mesquite HMA General, LLC (DE)
Metro Knoxville HMA, LLC (TN)
d/b/a Turkey Creek Medical Center; North Knoxville
Medical Center
Middlebrook ASC, LLC* (DE)
Middlebrook Property Partners, LLC# (DE)
Midwest City HMA Physician Management, LLC* (OK)
Community Health Systems, Inc.
SUBSIDIARY LISTING
Exhibit 21
as of 12/31/24
(*) Majority position held in an entity with physicians, non-profit entities or both
(#) Minority position held in a non-consolidating entity
Page 14 of 23
Midwest Regional Medical Center, LLC* (OK)
Mississippi HMA Holdings I, LLC (DE)
Mississippi HMA Holdings II, LLC (DE)
Mississippi HMA Hospitalists, LLC (MS)
Missouri HB Medical Services, LLC (DE)
Moberly Hospital Company, LLC (DE)
d/b/a Moberly Regional Medical Center
Moberly Medical Clinics, Inc. (MO)
Mooresville HMA Investors, LLC* (NC)
Mooresville HMA Physician Management, LLC (NC)
Mooresville Hospital Management Associates, LLC (NC)
d/b/a Lake Norman Regional Medical Center
Mooresville PPM, LLC (NC)
Morristown Clinic Corp. (TN)
Morristown Surgery Center, LLC (TN)
Munroe HMA HMPN, LLC (FL)
Munroe HMA Holdings, LLC (FL)
Munroe HMA Hospital, LLC (FL)
Naples HB Anesthesia Services, LLC (DE)
Naples HMA, LLC (FL)
d/b/a Physicians Regional Medical Center – Pine
Ridge; Physicians Regional Medical Center –
Collier
Natchez Clinic Company, LLC (DE)
Natchez HB Medical Services, LLC (DE)
Natchez HBP Services, LLC (DE)
Natchez Hospital Company, LLC (DE)
d/b/a Merit Health Natchez
National Healthcare of Leesville, Inc. (DE)
National Healthcare of Newport, Inc. (DE)
Navarro Hospital, L.P. (DE)
d/b/a Navarro Regional Hospital
Navarro Regional, LLC (DE)
NC-DSH, LLC (DE)
New Cedar Lake Surgery Center, LLC# (MS)
Newport Physician Clinics, Inc. (AR)
North Okaloosa Clinic Corp. (FL)
North Okaloosa Home Health, LLC# (FL)
North Okaloosa Medical Company, LLC (FL)
Community Health Systems, Inc.
SUBSIDIARY LISTING
Exhibit 21
as of 12/31/24
(*) Majority position held in an entity with physicians, non-profit entities or both
(#) Minority position held in a non-consolidating entity
Page 15 of 23
North Okaloosa Surgery Venture Corp. (FL)
Northampton Cardiology Clinic, LLC (DE)
Northampton Clinic Company, LLC (DE)
Northampton Hospital Company, LLC (DE)
Northampton Physician Services Corp. (PA)
Northampton Urgent Care, LLC (DE)
Northern Indiana Oncology Center of Porter Memorial Hospital, LLC* (IN)
Northwest Allied Physicians, LLC (DE)
Northwest Arkansas Employees, LLC (DE)
Northwest Arkansas HBP Services, LLC (DE)
Northwest Arkansas Hospitals, LLC (DE)
d/b/a Northwest Medical Center – Bentonville; Northwest
Medical Center – Springdale; Willow Creek Women’s
Hospital
Northwest 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 Center
Northwest Imaging Associates, LLC (DE)
Northwest Indiana Health System, LLC* (DE)
Northwest Physicians, LLC (AR)
Northwest Sahuarita Hospital, LLC (DE)
d/b/a Northwest Medical Center Sahuarita; Northwest
Medical Center Houghton
Northwest Therapy Holdings, LLC (DE)
Northwest Urgent Care, LLC (DE)
Northwest Women’s Health, 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)
Oklahoma City ASC-GP, 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)
OPS Dupont, LLC (DE)
Oro Valley Hospital, LLC (DE)
d/b/a Oro Valley Hospital
Community Health Systems, Inc.
SUBSIDIARY LISTING
Exhibit 21
as of 12/31/24
(*) Majority position held in an entity with physicians, non-profit entities or both
(#) Minority position held in a non-consolidating entity
Page 16 of 23
Pacific Group ASC Division, Inc. (AZ)
Pacific Physicians Services, LLC (DE)
Palmer-Wasilla Health System, LLC (DE)
Palmetto Tri-County Medical Specialists, LLC (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)
Peckville Hospital Company, LLC (DE)
Pecos Valley of New Mexico, LLC (DE)
Petersburg Hospital Company, LLC (VA)
Pflugerville Surgery Center, LLC# (TX)
Phoenixville Hospital Company, LLC (DE)
Phoenixville Hospital Malpractice Assistance Fund, Inc. (PA)
Physician Practice Support, LLC (TN)
Piedmont Surgical Center of Excellence, LLC (DE)
Piney Woods Healthcare System, L.P.* (DE)
d/b/a Woodland Heights Medical Center
Poplar Bluff HMA Physician Management, LLC (MO)
Poplar Bluff Regional Medical Center, LLC (MO)
d/b/a Poplar Bluff Regional Medical
Center
Port Charlotte HBP Services, LLC (DE)
Port Charlotte HMA Physician Management, LLC (FL)
Port Charlotte HMA, LLC (FL)
d/b/a ShorePoint Health Port Charlotte
Porter Health Services, LLC (DE)
Porter Hospital, LLC* (DE)
d/b/a Northwest Health - Porter
Porter Physician Services, LLC (DE)
Pottstown Hospital Company, LLC (DE)
Pottstown Hospital Corporation (PA)
Pottstown Memorial Malpractice Assistance Fund, Inc. (PA)
PremierCare of Northwest Arkansas, LLC (AR)
PremierCare Super PHO, LLC (DE)
Professional Account Services Inc. (TN)
Punta Gorda HB Medical Services, LLC (DE)
Punta Gorda HMA Physician Management, LLC (FL)
Community Health Systems, Inc.
SUBSIDIARY LISTING
Exhibit 21
as of 12/31/24
(*) Majority position held in an entity with physicians, non-profit entities or both
(#) Minority position held in a non-consolidating entity
Page 17 of 23
Punta Gorda HMA, LLC (FL)
d/b/a ShorePoint Health Punta Gorda
Punta 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 Enterprise
QHG of Forrest County, Inc. (MS)
QHG of Fort Wayne Company, LLC (DE)
QHG of Hattiesburg, Inc. (MS)
QHG of Ohio, Inc. (OH)
QHG of South Carolina, Inc. (SC)
QHG of Spartanburg, Inc. (SC)
QHG of Springdale, Inc. (AR)
QHG of Texas, Inc. (TX)
QHG of Warsaw Company, LLC (DE)
Regional Cardiology Group, LLC (DE)
Regional Clinics of Longview (TX)
Regional Employee Assistance Program (TX)
Regional Hospital of Longview, LLC (DE)
Rehab Hospital of Fort Wayne, LLC# (DE)
Revenue Cycle Service Center, LLC (DE)
RHFW Holdings, LLC (DE)
River Oaks Hospital, LLC (MS)
d/b/a Merit Health River Oaks
River Oaks Management Company, LLC (MS)
River Oaks Medical Office Building, LLC (MS)
River Region Medical Corporation (MS)
Riverpark ASC, LLC# (LA)
Rockledge HMA Convenient Care, LLC (FL)
Rockledge HMA Medical Group, LLC (FL)
Rockledge HMA Urgent Care, LLC (FL)
Rockledge HMA, LLC (FL)
ROH, LLC (MS)
d/b/a Merit Health Woman’s Hospital
Ronceverte Physician Group, LLC (DE)
Rose City HMA Medical Group, LLC (PA)
Community Health Systems, Inc.
SUBSIDIARY LISTING
Exhibit 21
as of 12/31/24
(*) Majority position held in an entity with physicians, non-profit entities or both
(#) Minority position held in a non-consolidating entity
Page 18 of 23
Rose City HMA, LLC (PA)
Roswell Clinic Corp. (NM)
Roswell Hospital Corporation (NM)
d/b/a Eastern New Mexico Medical
Center
Ruston Hospital Corporation (DE)
Ruston Louisiana Hospital Company, LLC (DE)
SACMC, LLC (DE)
Salem Clinic Corp. (NJ)
Salem Home Care Services, LLC (DE)
Salem Hospital Corporation (NJ)
Salem Medical Professionals, Inc. (NJ)
Samaritan Surgicenters of Arizona II, LLC (AZ)
San Angelo Community Medical Center, LLC (DE)
San Angelo Hospital, L.P. (DE)
San Angelo Medical, LLC (DE)
Santa Rosa HB Medical Services, LLC (DE)
Santa Rosa HMA Physician Management, 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 Scranton; Moses
Taylor Hospital
Scranton Hospitalist Physician Services, LLC (DE)
Scranton Quincy Ambulance, LLC (DE)
Scranton Quincy Clinic Company, LLC (DE)
Scranton 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)
Select Specialty Hospital - Tucson, LLC# (DE)
Select Tucson Holdings, LLC# (DE)
Seminole HMA, LLC (OK)
Community Health Systems, Inc.
SUBSIDIARY LISTING
Exhibit 21
as of 12/31/24
(*) Majority position held in an entity with physicians, non-profit entities or both
(#) Minority position held in a non-consolidating entity
Page 19 of 23
Seminole HMPN, LLC (OK)
Sharon Clinic Company, LLC (DE)
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)
Siloam Springs Arkansas Hospital Company, LLC (DE)
d/b/a Siloam Springs Regional Hospital;
Northwest Health Physicians’ Specialty
Hospital, a campus of Siloam Springs
Regional Hospital
Siloam 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)
Solis Mammography at Navarro Regional Hospital, LLC# (DE)
Solis Mammography at Northwest Medical Center, LLC# (DE)
Solis Mammography at Northwest Medical Center Houghton, LLC# (DE)
Solis Mammography at Oro Valley Hospital, LLC# (DE)
South Abilene Radiology, LLC (DE)
South Arkansas Physician Services, LLC (DE)
SouthCrest, L.L.C. (OK)
Southeast HMA Holdings, LLC (DE)
Southern Arizona Urgent Care, LLC (AZ)
Southern Health Network, Inc.# (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 Valley Washington Hospital Company, LLC (DE)
Spokane Washington Hospital Company, LLC (DE)
Spring Hill HMA Medical Group, LLC (FL)
Community Health Systems, Inc.
SUBSIDIARY LISTING
Exhibit 21
as of 12/31/24
(*) Majority position held in an entity with physicians, non-profit entities or both
(#) Minority position held in a non-consolidating entity
Page 20 of 23
Springdale-Bentonville HBP Services, LLC (DE)
Sprocket Medical Management, LLC (TX)
SS ParentCo., LLC (DE)
St. Joseph Health System, LLC* (DE)
d/b/a Lutheran Downtown Hospital
Starke HMA Medical Group, LLC (FL)
Starke HMA, LLC (FL)
Statesboro HMA Medical Group, LLC (GA)
Statesboro HMA Physician Management, LLC (GA)
Statesville HMA Medical Group, LLC (NC)
Statesville HMA, LLC (NC)
Summit Surgical Suites, LLC# (IN)
Supply Chain Shared Service Center, LLC (DE)
Surgery Center of Key West, LLC* (FL)
Surgical Center of Carlsbad, LLC (DE)
Surgicare of Clarksville, LLC# (TN)
Surgicare of San Leandro, Inc. (CA)
Surgicare of Sherman, Inc. (TX)
Surgicare Outpatient Center of Lake Charles, Inc. (LA)
Surgicenters of America, Inc. (AZ)
Susitna ASC Holdings, LLC* (DE)
Susitna Surgery Center, LLC* (DE)
Tendo Systems, Inc.# (DE)
Tennessee HMA Holdings, LP (DE)
Tennova Medical Park Property Owner’s Association, Inc.* (TN)
Tennyson Holdings, LLC (DE)
Texas Bay Area Clinical Services, Inc.# (TX)
The Orthopaedic Hospital of Lutheran Health Network Medical Group, LLC (DE)
The Sleep Disorder Center of Wyoming Valley, LLC (PA)
The Surgeon’s Point Surgery Center, LLC# (TX)
The Surgery Center, LLC# (MS)
The Vicksburg Clinic, LLC (DE)
Timberland Medical Group (TX)
Tomball Ambulatory Surgery Center, L.P. (TX)
Tomball Texas Hospital Company, LLC (DE)
Triad Healthcare, LLC (DE)
Triad Holdings III, LLC (DE)
Triad Holdings IV, LLC (DE)
Community Health Systems, Inc.
SUBSIDIARY LISTING
Exhibit 21
as of 12/31/24
(*) Majority position held in an entity with physicians, non-profit entities or both
(#) Minority position held in a non-consolidating entity
Page 21 of 23
Triad Holdings V, LLC (DE)
Triad Indiana Holdings, LLC* (DE)
Triad Nevada Holdings, LLC (DE)
Triad of Alabama, LLC (DE)
d/b/a Flowers Hospital
Triad of Arizona (L.P.), Inc. (AZ)
Triad of Phoenix, Inc. (AZ)
Triad-Arizona I, Inc. (AZ)
Triad-ARMC, LLC (DE)
Triad-El Dorado, Inc. (AR)
Triad-Navarro Regional Hospital Subsidiary, LLC (DE)
Triad-South Tulsa Hospital Company, Inc. (OK)
Tucson ASC Holdings, LLC# (DE)
Tucson Desert ASC, LLC (DE)
Tucson Home Care Services, LLC# (DE)
Tug Valley Healthcare Alliance, Inc. (WV)
Tullahoma HMA Physician Management, LLC (TN)
Tullahoma HMA, LLC (TN)
United Vascular of Huntsville*, LLC (DE)
Utilization Review Services, LLC (DE)
Valparaiso Home Care Services, LLC# (DE)
Van Buren H.M.A., LLC (AR)
Van Buren HMA Central Business Office, LLC (AR)
Vanderbilt-Ingram Cancer Center at Tennova Healthcare-Clarksville# (DE)
Venice HMA, LLC (FL)
Venice Home Care Services, LLC# (DE)
Vero Beach Florida ASC, LLC* (DE)
VHC Medical, LLC (DE)
Vicksburg HB Medical Services, LLC (DE)
Vicksburg Healthcare, LLC (DE)
d/b/a Merit Health River Region
Victoria Ambulatory Surgery Center, L.P.# (DE)
Victoria Hospital, LLC (DE)
Victoria of Texas, L.P. (DE)
d/b/a DeTar Hospital Navarro; DeTar
Hospital North
Victoria Texas Home Care Services, LLC# (DE)
Virginia Hospital Company, LLC (VA)
Virtual Nursing Services, LLC (DE)
VirtualHealthConnect, LLC (DE)
Warren Ohio Hospital Company, LLC (DE)
Warren Ohio Rehab Hospital Company, LLC (DE)
Community Health Systems, Inc.
SUBSIDIARY LISTING
Exhibit 21
as of 12/31/24
(*) Majority position held in an entity with physicians, non-profit entities or both
(#) Minority position held in a non-consolidating entity
Page 22 of 23
Warsaw Health System, LLC (DE)
d/b/a Lutheran Kosciusko Hospital
Washington Clinic Corp. (MS)
Washington Hospital Corporation (MS)
Washington Physician Corp. (MS)
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 Wesley
Wesley Physician Services, LLC (DE)
West Grove Hospital Company, LLC (DE)
Western Arizona Regional Home Health and Hospice, LLC# (AZ)
Whitestone Holdco, LLC (DE)
WHMC, LLC (DE)
Wilkes-Barre Academic Medicine, LLC (DE)
Wilkes-Barre Behavioral Hospital Company, LLC (DE)
Wilkes-Barre Clinic Company, LLC (DE)
Wilkes-Barre Community Residential Unit, LLC (DE)
Wilkes-Barre Holdings, LLC (DE)
Wilkes-Barre Hospital Company, LLC (DE)
d/b/a Wilkes-Barre General Hospital
Wilkes-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)
Yakima HMA Physician Management, LLC (WA)
Yakima HMA, LLC (WA)
York Anesthesiology Physician Services, LLC (DE)
York Clinic Company, LLC (DE)
York Pathology Physician Services, LLC (DE)
York Pennsylvania Hospital Company, LLC (DE)
Community Health Systems, Inc.
SUBSIDIARY LISTING
Exhibit 21
as of 12/31/24
(*) Majority position held in an entity with physicians, non-profit entities or both
(#) Minority position held in a non-consolidating entity
Page 23 of 23
Youngstown Ohio Hospital Company, LLC (DE)
Exhibit 23.1
CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
We consent to the incorporation by reference in Registration Statement Nos. 333-121282, 333-163689, 333-163691, 333-176893, 333-188343, 333-
190260, 333-197813, 333-207772, 333-212874, 333-214389, 333-226455, 333-240174, 333-258268, 333-258269, and 333-273663 on Form S-8 of our
reports dated February 19, 2025, relating to the consolidated financial statements of Community Health Systems, Inc. and subsidiaries (the “Company”),
and the effectiveness of the Company’s internal control over financial reporting, appearing in this Annual Report on Form 10-K of the Company for the
year ended December 31, 2024.
/s/ Deloitte & Touche LLP
Nashville, Tennessee
February 19, 2025
Exhibit 31.1
CERTIFICATION PURSUANT TO SECTION 302 OF THE
SARBANES-OXLEY ACT OF 2002
I, Tim L. Hingtgen, 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 the
statements 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 the
financial 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 in
Exchange 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
the registrant and have:
a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to
ensure that 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 our
supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external
purposes 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
effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d) disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent
fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially
affect, the registrant’s internal control over financial reporting; and
5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the
registrant’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 reasonably
likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control
over financial reporting.
/s/ Tim L. Hingtgen
Tim L. Hingtgen
Chief Executive Officer
Date: February 19, 2025
Exhibit 31.2
CERTIFICATION PURSUANT TO SECTION 302 OF THE
SARBANES-OXLEY ACT OF 2002
I, Kevin J. Hammons, 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 the
statements 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 the
financial 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 in
Exchange 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
the registrant and have:
a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to
ensure that 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 our
supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external
purposes 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
effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d) disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent
fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially
affect, the registrant’s internal control over financial reporting; and
5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the
registrant’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 reasonably
likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control
over financial reporting.
/s/ Kevin J. Hammons
Kevin J. Hammons
President and Chief Financial Officer
Date: February 19, 2025
Exhibit 32.1
CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT
TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Annual Report of Community Health Systems, Inc. (the “Company”) on Form 10-K for the period ended December 31, 2024, as
filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Tim L. Hingtgen, Chief Executive Officer 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/ Tim L. Hingtgen
Tim L. Hingtgen
Chief Executive Officer
February 19, 2025
Exhibit 32.2
CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT
TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Annual Report of Community Health Systems, Inc. (the “Company”) on Form 10-K for the period ended December 31, 2024, as
filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Kevin J. Hammons, President and Chief Financial Officer 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/ Kevin J. Hammons
Kevin J. Hammons
President and Chief Financial Officer
February 19, 2025
Exhibit 97
Community Health Systems, Inc.
Amended and Restated Clawback Policy
Section 1.
Overview. The purpose of this Amended and Restated Clawback Policy of the Company (as amended from time to
time, the “Policy”), dated as of September 13, 2023 (the “Adoption Date”) is to set forth (i) recoupment terms applicable to current and
former Executive Officers (as defined below) pursuant to Section 954 of the Dodd-Frank Wall Street Reform and Consumer Protection Act
of 2010, as codified by Section 10D of the Exchange Act, and the rules and requirements of the NYSE (including Section 303A.14 of the
NYSE Listed Company Manual) (such legal requirements, and rules and requirements of the NYSE, collectively, the “SEC/NYSE Clawback
Rules”), as provided in Section 3 of this Policy and the other applicable provisions set forth herein (such recoupment terms, the “NYSE
Clawback Provisions”), and (ii) recoupment terms applicable to Discretionary Clawback Participants as provided in Section 4 of this Policy
and the other applicable provisions set forth herein (such recoupment terms, the “Discretionary Clawback Provisions”).
Section 2.
Definitions. For purposes of this Policy, the following capitalized terms shall have the meanings set forth below:
(a) “Accounting Restatement” shall mean an accounting restatement due to the material noncompliance of the Company with any
financial reporting requirement under the securities laws, including any required accounting restatement (i) to correct an error in previously
issued consolidated financial statements that is material to the previously issued consolidated financial statements (a “Big R” restatement), or
(ii) that would result in a material misstatement if the error were corrected in the current period or left uncorrected in the current period (a
“little r” restatement).
(b) “Board” shall mean the Board of Directors of the Company.
(c) “Clawback Policy Individual” means, as applicable, any (i) current or former Executive Officer, and (ii) any Discretionary
Clawback Participant (whether or not still employed by the Company Group).
(d) “Clawback Period” shall mean, with respect to any Accounting Restatement, the three completed fiscal years of the Company
immediately preceding the Restatement Date and any transition period (that results from a change in the Company’s fiscal year) of less than
nine months within or immediately following those three completed fiscal years.
(e) “Committee” shall mean the Compensation Committee of the Board.
(f) “Common Stock” shall mean the common stock, par value $.01 per share, of the Company.
(g) “Company” shall mean Community Health Systems, Inc., a Delaware corporation.
(h) “Company Group” shall mean the Company, together with each of its direct and indirect subsidiaries.
(i)
“Discretionary Clawback Eligible Incentive Compensation” shall mean all Incentive-Based Compensation Received by any
current or former Discretionary Clawback Participant on or after the Effective Date, provided that:
2
(i)
such individual served as an employee of the Company Group at any time during the performance period for such
Incentive-Based Compensation; and
(ii)
such Incentive-Based Compensation is received during the applicable Clawback Period.
(j)
“Discretionary Clawback Participant” means (i) any employee of the Company Group receiving equity awards from the
Company pursuant to (x) the Community Health Systems, Inc. 2009 Stock Option and Award Plan, as amended and restated or otherwise
amended from time to time, or (y) any other equity incentive plan of the Company adopted following the Adoption Date, (ii) any employee
of the Company Group receiving any short-term cash incentive award from the Company pursuant to (a) the Community Health Systems,
Inc. 2019 Employee Performance Incentive Plan, as amended from time to time (the “2019 Plan”), or (b) any other short-term cash incentive
plan of the Company adopted following the Adoption Date, and (iii) any other employee of the Company Group hereafter designated as a
“Discretionary Clawback Participant” by the Committee.
(k) “Effective Date” shall mean October 2, 2023 (which is the effective date of the final NYSE listing standards).
(l)
“Erroneously Awarded Compensation” shall mean:
(i)
with respect to any current or former Executive Officer in connection with any Accounting Restatement, the
amount of NYSE Clawback Eligible Incentive Compensation Received by such current or former Executive Officer that exceeds the amount
of NYSE Clawback Eligible Incentive Compensation that otherwise would have been Received by such current or former Executive Officer
had such NYSE Clawback Eligible Incentive Compensation been determined based on the restated amounts as reflected in such Accounting
Restatements, computed without regard to any taxes paid; and
(ii)
in connection with any Bad Act Accounting Restatement with respect to which any Discretionary Clawback
Participant is a Bad Actor Discretionary Clawback Participant, the amount of Discretionary Clawback Eligible Incentive Compensation
Received by such Bad Actor Discretionary Clawback Participant that exceeds the amount of Discretionary Clawback Eligible Incentive
Compensation that otherwise would have been Received by such Bad Actor Discretionary Clawback Participant had such Discretionary
Clawback Eligible Incentive Compensation been determined based on the restated amounts as reflected in connection with such Bad Act
Accounting Restatement, computed without regard to any taxes paid.
(m) “Exchange Act” means the Securities Exchange Act of 1934, as amended.
(n) “Executive Officer” shall mean any officer of the Company as defined in Rule 10D-1(d) (or any successor provision thereof)
under the Exchange Act.
(o) “Financial Reporting Measures” shall mean measures that are determined and presented in accordance with the accounting
principles used in preparing the Company’s consolidated financial statements, and any other measures that are derived wholly or in part from
such measures. For purposes of this Policy, stock price and total shareholder return (and any measures that are derived wholly or in part from
stock price or total shareholder return) shall be considered Financial Reporting Measures. For the avoidance of doubt, a Financial Reporting
Measure need not be presented within the Company’s consolidated financial statements or included in a filing with the SEC.
3
(p) “Incentive-Based Compensation” shall mean any compensation that is granted, earned or vested based wholly or in part upon
the attainment of a Financial Reporting Measure.
(q) “NYSE” shall mean the New York Stock Exchange.
(r) “NYSE Clawback Eligible Incentive Compensation” shall mean all Incentive-Based Compensation Received by any current or
former Executive Officer on or after the Effective Date, provided that:
(i)
such Incentive-Based Compensation is Received after such individual began serving as an Executive Officer;
(ii)
such individual served as an Executive Officer at any time during the performance period for such Incentive-
Based Compensation;
(iii)
such Incentive-Based Compensation is Received while the Company has a class of securities listed on the
NYSE; and
(iv)
such Incentive-Based Compensation is Received during the applicable Clawback Period.
(s) “Received” shall mean when Incentive-Based Compensation is received, and Incentive-Based Compensation shall be deemed
received in the Company’s fiscal period during which the Financial Reporting Measure specified in the Incentive-Based Compensation award
is attained, even if payment or grant of the Incentive-Based Compensation occurs after the end of that period.
(t) “Restatement Date” shall mean the earlier to occur of (i) the date the Board, a committee of the Board or the officers of the
Company authorized to take such action if Board action is not required, concludes, or reasonably should have concluded, that the Company is
required to prepare an Accounting Restatement, or (ii) the date a court, regulator or other legally authorized body directs the Company to
prepare an Accounting Restatement.
(u) “SEC” shall mean the U.S. Securities and Exchange Commission.
Section 3.
NYSE Clawback Provisions.
3.1. Recoupment of Erroneously Awarded Compensation from Executive Officers. In the event that the Company is required
to prepare an Accounting Restatement, (i) the Committee shall determine the amount of any Erroneously Awarded Compensation for each
applicable current or former Executive Officer (whether or not such individual is serving as an Executive Officer at such time) (the
“Applicable Executives”) in connection with such Accounting Restatement, and (ii) the Company will reasonably promptly require the
recoupment of the amount of such Erroneously Awarded Compensation from any such Applicable Executive, and any such Applicable
Executive shall surrender such Erroneously Awarded Compensation to the Company, at such time(s), and via such method(s), as determined
by the Committee in accordance with the terms of this Policy.
3.2 Impracticability Exceptions. Notwithstanding anything herein to the contrary, the Company shall not be required to recover
Erroneously Awarded Compensation from any Applicable Executive pursuant to the terms of this Policy if (1) the Committee determines that
such recovery would be impracticable, and (2) any of the following conditions is met:
4
(a) the direct expenses paid to a third party to assist in enforcing the Policy would exceed the amount to be recovered, provided
that, before concluding that it would be impracticable to recover any amount of Erroneously Awarded Compensation based on expense of
enforcement pursuant to this clause (a), the Company has (x) made a reasonable attempt to recover such Erroneously Awarded
Compensation, (y) documented such reasonable attempt(s) to recover, and (z) provided such documentation to the NYSE;
(b) recovery would violate home country law where that law was adopted prior to November 28, 2022, provided that, before
determining that it would be impracticable to recover any amount of Erroneously Awarded Compensation based on violation of home
country law, the Company has obtained an opinion of home country counsel, acceptable to the NYSE, that recovery would result in such a
violation, has provided copy of the opinion is provided to the NYSE; or
(c) recovery would likely cause an otherwise tax-qualified retirement plan, under which benefits are broadly available to
employees of the Company Group, to fail to meet the requirements of 26 U.S.C. 401(a)(13) or 26 U.S.C. 411(a) and regulations thereunder.
3.3 Acknowledgment. Each Executive Officer shall be required to sign and return to the Company the form of acknowledgment
to this Policy in the form attached hereto as Exhibit A pursuant to which such Executive Officer will agree to be bound by the terms and
comply with this Policy.
Section 4.
Discretionary Clawback Provisions.
4.1 Recoupment of Erroneously Awarded Compensation from Bad Actor Discretionary Clawback Participants. In the
event that the Company is required to prepare an Accounting Restatement (the “Bad Act Accounting Restatement”) as a result of the fraud
and/or willful misconduct of any Discretionary Clawback Participant(s) (any such Discretionary Clawback Participant(s) committing such
fraud and/or willful misconduct, the “Bad Actor Discretionary Clawback Participant”), the Committee may, in its discretion, elect to cause
the Company to require the recoupment of any Erroneously Awarded Compensation from any such Bad Actor Discretionary Clawback
Participant (whether or not such individual is still employed by the Company Group at the time of such recovery). In the event that the
Committee makes such determination, the Committee may, in its discretion, elect to cause the Company to recover some or all of the
Erroneously Awarded Compensation from such Bad Actor Discretionary Clawback Participant (the amount that the Committee elects to
cause the Company to recover, the “Discretionary Recoupment Amount”), and any such Bad Actor Discretionary Clawback Participant shall
surrender such Discretionary Recoupment Amount to the Company, at such time(s), and via such method(s), as determined by the Committee
in accordance with the terms of this Policy.
4.2 Interaction with NYSE Clawback Provisions. Notwithstanding the foregoing or anything contained herein to the contrary,
in order to prevent duplicative recovery, the Discretionary Clawback Provisions will not apply to any Bad Actor Discretionary Clawback
Participant to the extent that any such Bad Actor Discretionary Clawback Participant is required to surrender Erroneously Awarded
Compensation pursuant to the NYSE Clawback Provisions.
Section 5.
General Terms.
5.1. Administration. This Policy shall be administered by the Committee. The Committee is authorized to interpret and construe
this Policy and to make all determinations necessary, appropriate, or advisable for the administration of this Policy, and any such
determinations made by the Committee shall be in the Committee’s sole discretion, and shall be final and binding on all affected individuals.
Except as otherwise required by applicable legal requirements or the rules and regulations of the NYSE, any determinations of the
Committee hereunder need not be uniform with respect to one or more Clawback
5
Policy Individuals. Subject to the SEC/NYSE Clawback Rules and any other applicable legal requirements, the Committee may authorize
and empower any officer or employee of the Company to take any and all actions necessary or appropriate to carry out the purpose and intent
of this Policy.
5.2 Stock Price/TSR. Notwithstanding anything contained herein to the contrary, for Incentive-Based Compensation based on (or
derived from) stock price or total shareholder return where the amount of Erroneously Awarded Compensation is not subject to mathematical
recalculation directly from the information in the applicable Accounting Restatement, (i) such amount shall be determined by the Committee
based on a reasonable estimate of the effect of the Accounting Restatement on the stock price or total shareholder return upon which the
Incentive-Based Compensation was Received, and (ii) in the case of any Erroneously Awarded Compensation subject to the NYSE Clawback
Provisions, the Company will maintain documentation of the determination of that reasonable estimate and provide such documentation to
the NYSE.
5.3 Method of Recovery. In the event that (i) recoupment is required pursuant to the NYSE Clawback Provisions, and/or (ii) the
Committee has elected to require recoupment pursuant to the Discretionary Clawback Provisions, the Committee shall determine, in its sole
discretion, the method(s) for recouping any Erroneously Awarded Compensation from any Clawback Policy Individual subject to such
recoupment, which may include:
(i)
requiring one or more cash payments to the Company Group from such Clawback Policy Individual, including, but
not limited to, the repayment of cash Incentive-Based Compensation previously paid by the Company Group to such Clawback
Policy Individual;
(ii) seeking recovery of any gain realized on the vesting, exercise, settlement, sale, transfer or other disposition of any
equity-based awards previously made by the Company to such Clawback Policy Individual and/or otherwise requiring the delivery
to the Company of shares of Common Stock held by such Clawback Policy Individual;
(iii) reducing or eliminating, or offsetting against, future cash compensation (including cash incentive payments), future
equity awards or other future compensation or payments otherwise to be made by the Company Group to such Clawback Policy
Individual;
(iv) cancelling, adjusting or offsetting against some or all outstanding vested or unvested equity awards of the Company
held by such Clawback Policy Individual; and/or
(v) taking any other remedial and recovery actions with respect to such Clawback Policy Individual permitted by
applicable legal requirements and the rules and regulations of the NYSE, as determined by the Committee.
5.4. Supersedure. This Policy will supersede any provisions in (x) any agreement, plan or other arrangement applicable to any
Clawback Policy Individual, and (y) any organizational documents of any entity that is part of the Company Group, in any such case that (a)
exempt any Incentive-Based Compensation from the application of this Policy, (b) prohibit or restrict the Company Group’s right to recover
any Erroneously Awarded Compensation from any Clawback Policy Individual, including, without limitation, in connection with exercising
any right of setoff of the Company Group as provided in Section 5.3 above, and/or (c) require or provide for indemnification to the extent
that such indemnification is prohibited under Section 5.7 below.
5.5. Amendment; Termination; Interpretation. The Committee may amend or terminate this Policy at any time, subject to
compliance with all applicable legal requirements, and the rules and
6
requirements of the NYSE. It is intended that the NYSE Clawback Provisions be interpreted in a manner that is consistent with the
SEC/NYSE Clawback Rules. This Policy (i) amends and restates in its entirety, and supersedes, the clawback policy of the Company
originally adopted on February 25, 2009, as previously amended and in effect prior to the adoption of this Policy (the “Prior Policy”), and (ii)
supersedes the clawback provisions set forth in Section 6.14(b) of the 2019 Plan in effect prior to the adoption of this Policy (the “2019 Plan
Clawback Provisons”; the Prior Policy and 2019 Plan Clawback Provisions, collectively, the “Preexisting Clawback Provisons”), each of
which Preexisting Clawback Provisions will be of no further force and effect except as set forth in the proviso in this Section 5.5 below;
provided, however, that to the extent that (i) there is any recoupment event arising from a restatement (as referenced in Section (1) of the
Prior Policy) within the scope of Section (1) of the Prior Policy that (x) is not within the scope of this Policy, and (y) relates to compensation
associated with a performance period of the Company ending prior to the Effective Date (or, if such compensation is not associated with a
performance period, relates to compensation received prior to the Effective Date), the terms of Section (1) of the Prior Policy will continue in
effect in accordance with the terms thereof in connection therewith, and (ii) there is a recoupment event subject to the discretionary clawback
provisions set forth in Section (2) of the Prior Policy and/or in the 2019 Clawback Plan Provisions that (x) is not within the scope of this
Policy, and (y) relates to compensation associated with a performance period of the Company ending prior to the Effective Date (or, if such
compensation is not associated with a performance period, relates to compensation received prior to the Effective Date), the discretionary
recoupment terms of Section (2) of the Prior Policy and/or the 2019 Clawback Plan Provisions will continue in effect in accordance with the
terms thereof in connection therewith (provided that, in any such case pursuant to this clause (ii), the terms of Section (2) of the Prior Policy
and/or the 2019 Clawback Plan Provisions will only continue in effect with respect to compensation received in relation to the three
completed fiscal years of the Company immediately preceding the Restatement Date (as defined herein, but in reference to any Preexisting
Clawback Provision Restatement (as defined below)) with respect to any restatement within the scope of Section (2) of the Prior Policy
and/or the 2019 Clawback Plan Provisions, as applicable (a “Preexisting Clawback Provision Restatement”).
5.6. Other Recoupment Rights; No Additional Payments.
(a) Any right of recoupment under this Policy is in addition to, and not in lieu of, any other remedies or rights of recoupment that
may be available to the Company Group pursuant to (i) the terms of any recoupment provisions in any cash incentive or equity compensation
plan or award agreement, or any other agreement or plan, (ii) any other legal requirements, including, but not limited to, Section 304 of
Sarbanes-Oxley Act of 2002 (subject to Section 5.6(b) below), and (iii) any other legal rights or remedies available to the Company.
(b) Notwithstanding anything herein to the contrary, to the extent that any Erroneously Awarded Compensation includes any amounts
that have been actually reimbursed to the Company Group from any Clawback Policy Individual pursuant to Section 304 of the Sarbanes-
Oxley Act (any such amounts that have been reimbursed to the Company Group, the “Applicable SOX Recoupment Amount”), in order to
prevent duplicative recovery, the amount of any Erroneously Awarded Compensation to be recovered from any such Clawback Policy
Individual shall be reduced by the Applicable SOX Recoupment Amount.
5.7 No Indemnification, Etc. No entity that is part of the Company Group shall (x) indemnify any Clawback Policy Individual
against (i) the loss of any Erroneously Awarded Compensation that is repaid, returned or recovered pursuant to the terms of this Policy, or (ii)
any claims by any such Clawback Policy Individual relating to the Company Group’s enforcement of its rights under this Policy (and any
Clawback Policy Individual waives any right to such indemnification pursuant to this
7
clause (x)) or (y) pay or reimburse any Clawback Policy Individual for insurance premiums to recover losses incurred under this Policy.
5.8. Cost of Recovery. To the extent so determined by the Committee, the Company shall be entitled to recover from any
Applicable Executive and/or Bad Actor Discretionary Clawback Participant all fees and expenses incurred by the Company Group in
connection with enforcing its rights under this Policy against any Applicable Executive and/or Bad Actor Discretionary Clawback
Participant, as applicable.
5.9 Successors. This Policy shall be binding and enforceable against all Clawback Policy Individuals and (and, if so determined
by the Committee or in any event (in the case of Applicable Executives) to the extent required by the SEC/NYSE Clawback Rules) their
beneficiaries, heirs, executors, administrators or other legal representatives.
5.10 Severability. If any provision of this Policy or the application of any such provision to any Clawback Policy Individual shall
be adjudicated to be invalid, illegal or unenforceable in any respect, such invalidity, illegality or unenforceability shall not affect any other
provisions of this Policy, and the invalid, illegal or unenforceable provisions shall be deemed amended to the minimum extent necessary to
render any such provision (or the application of such provision) valid, legal or enforceable.
Adopted by the Compensation Committee of the Board of Directors of Community Health Systems, Inc. on September 12, 2023, and
ratified by the Board of Directors on September 13, 2023.
FILENAME \p \* MERGEFORMAT S:\CHS, Inc. Corporate Secretary\Policies\Clawback Policy\CHS A&R Clawback Policy (2023.0913).docx
Exhibit A
Form of Acknowledgment
By signing below, the undersigned acknowledges and confirms that the undersigned has received and reviewed a copy of the
Community Health Systems, Inc. Amended and Restated Clawback Policy (as amended from time to time, the “Policy”). Capitalized terms
used but not otherwise defined in this acknowledgment shall have the meanings ascribed to such terms in the Policy.
By signing this acknowledgment, the undersigned acknowledges and agrees that the undersigned is and will continue to be subject
to the Policy and that the Policy will apply both during and after the undersigned’s employment with the Company Group. Further, by
signing below, the undersigned agrees to abide by the terms of the Policy, including, without limitation, by returning the amount of any
Erroneously Awarded Compensation to the Company Group to the extent required by the Policy.
______________________________
Signature
______________________________
Print Name
______________________________
Date