What changed in this filing

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Item 1. Business

2024-02-21 compared with 2023-02-17 · 672 added, 424 removed, 1072 unchanged (51% of the section changed)

Business of Community Health Systems, Inc.

Business of Commun ity Health Systems, Inc.

Overview of Our Company

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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.

We are paid for our services by governmental agencies, private insurers and directly by the patients we serve.

For the hospitals 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.

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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.

As an organization, we also 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.

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:

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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 directly employ physicians through recruitment or acquisition of their existing practices.

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 14 Medicare Shared Savings Program Accountable Care Organizations that include approximately 4,000 employed and independent physicians in our communities.

We currently participate in 11 Medicare Shared Savings Program Accountable Care Organizations, which include approximately 3,500 employed and independent physicians in our communities.

We look forward to continuing to realize the benefits of these organizations, including opportunities to strengthen quality, deepen clinical collaboration and demonstrate performance under a reimbursement system moving toward more value-based incentives and payments.

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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 five centralized business offices and have completed the transition of our hospital billing departments to this new infrastructure.

We have been realizing the benefits of lower patient claim denials, higher underpayment recoveries and reduced operating costs.

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 lower patient claim denials, higher underpayment recoveries and reduced operating costs.

Physician Support .

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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, a priority for all hospitals in the aftermath of the COVID-19 pandemic and due to workforce shortages across the healthcare industry.

We are also developing nursing school programs on some of our hospital campuses and partnering with nursing schools in many of our communities.

We have increased programs aimed at employee retention and satisfaction, including a recently expanded employee benefits program with higher levels of tuition reimbursement and student loan support.

We have also created new leadership development programs and rewards and recognition initiatives.

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.

Procurement and Materials Management.

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• Training programs for hospital management and clinical staff regarding regulatory and reporting requirements;

Implementation of specific leadership methods and error-prevention tools to create safer care environments for patients and staff.

We have also expanded our network of outpatient services to create greater access and more convenience for our patients.

Moreover, as conditions arising from the pandemic accelerated the need for telehealth appointments, we have significantly expanded our ability to provide remote care.

• Specific leadership methods and error-prevention tools to create safer care environments for patients and staff.

We have also expanded our network of outpatient services to create greater access and more convenience for our patients, including through significant expansion of our ability to provide remote patient care.

We have operated a Patient Safety Organization, or PSO, since 2012.

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Industry Overview

According to the Centers for Medicare & Medicaid Services, or CMS, national healthcare expenditures grew 2.7% in 2021 to nearly $4.3 trillion, a decline from the 10.3% increase in 2020.

The slowing growth was primarily due to a decline in federal government spending tied to COVID-19 supplemental funding (e.g., through the Public Health and Social Services Emergency Fund, or PHSSEF) and a decline in federal public health activity, among other factors.

These declines more than offset the impact of greater use of healthcare goods and services and increased insurance coverage in 2021.

According to the Centers for Medicare & Medicaid Services, or CMS, national healthcare expenditures grew 4.1% in 2022 to over $4.4 trillion, an increase from the growth of 3.2% experienced in 2021.

The increase in 2022 reflected strong growth in Medicaid and private health insurance spending that was partially offset by continued declines in federal spending associated with developments regarding the COVID-19 pandemic.

National healthcare expenditures accounted for approximately 17.3% of total U.S.

gross domestic product in 2022.

The CMS projections of healthcare spending are constructed using a current-law framework.

The most recent projections were published in March 2022, and do not take into account the actual expenditures in 2021 or 2022.

These projections indicate that total U.S.

CMS projections indicate that total U.S.

healthcare spending is expected to grow at an average annual rate of 5.5% for 2024 through 2031.

CMS anticipates that total U.S.

healthcare annual expenditures will reach nearly $6.8 trillion by 2030, accounting for approximately 19.6% of the total U.S.

healthcare annual expenditures will exceed $7.1 trillion by 2031, accounting for approximately 19.6% of the total U.S.

gross domestic product.

These projections assume that the impacts of the COVID-19 pandemic will wane through 2024, but CMS has cautioned that there is significant uncertainty about how the pandemic and economic factors will influence the health sector, particularly in the near-term.

The CMS projections of healthcare spending are constructed using a current-law framework.

The most recent historical data was published in December 2023, and the most recent projections for future years were published in June 2023, and do not take into account the actual expenditures in 2023.

Since the health sector has been significantly affected by the COVID-19 pandemic since 2020, CMS expects that the unwinding of various measures related to the COVID-19 public health emergency will affect projected trends.

CMS expects the expiration of pandemic-related provisions, coupled with recent legislation, to impact health insurance enrollment trends.

Going forward, CMS expects changes in spending growth to be influenced more by health-specific factors, such as medical-specific price inflation, the use and intensity of medical care, and demographic impacts associated with the continuing enrollment of the baby-boom generation in Medicare, and less by federal supplemental payments to providers and federal public health spending.

Hospital services, the market within the healthcare industry in which we primarily operate, is the largest single category of healthcare expenditures.

In 2021, hospital care expenditures increased 4.4%, slowing in comparison to the growth rate of 6.2% in 2020, and totaled over $1.3 trillion.

The slower growth rate in 2021 reflected a substantial decrease in federal supplemental funding related to COVID-19, as noted above, and certain other federal programs.

Hospital care expenditures totaled nearly $1.4 trillion in 2022, an increase of 2.2% over 2021, slowing in comparison to the growth rate of 4.5% in 2021.

The slower growth rate in 2022 was driven by slower growth in spending for hospital care by private health insurance, Medicare and Medicaid, and by a decline in other private revenues.

Trends in hospital prices and use of services also contributed to the lower growth in 2022.

CMS projects that the hospital services category will grow at an average of 6.1% annually from 2024 through 2031, reaching over $2.3 trillion by 2031.

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According to the American Hospital Association, there are approximately 5,000 community hospitals in the U.S., which are not-for-profit owned, investor owned, or state or local government owned.

Of these hospitals, approximately 34.9% are located in non-urban communities.

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.

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According to the U.S.

Census Bureau, in 2022, there were nearly 56 million Americans aged 65 or older in the U.S.

comprising approximately 16.8% of the total U.S.

Census Bureau, in 2023, there were nearly 58 million Americans aged 65 or older in the U.S., comprising approximately 17.3% of the total U.S.

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 2022 to 9 million by the year 2030.

This anticipated increase in life expectancy will increase demand for healthcare services and, as importantly, the demand for innovative, more sophisticated means of delivering those services.

These anticipated increases will increase demand for healthcare services and, as importantly, 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.

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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 challenges to traditional reimbursement models.

For example, value-based purchasing initiatives emphasize the cost-effective delivery of care and quality of outcomes.

In addition, health insurance coverage models have evolved, with increased enrollment in Medicare and Medicaid managed care plans and in high-deductible health plans.

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 have evolved, with increased enrollment in Medicare Managed Care and Medicaid managed care programs and in high-deductible health plans.

We may face greater risk of write-offs of uncollectible amounts from patients enrolled in high-deductible health plans.

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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.

Economic Conditions and COVID-19 Pandemic

Economic conditions in the United States continue to be challenging in various respects, and the United States economy continues to experience significant inflationary pressures, elevated interest rates, challenging labor market conditions and disruptions to supply networks.

Taking into account these factors, we have incurred, and may continue to incur, increased expenses arising from factors such as wage inflation for permanent employees and increased rates for and utilization of temporary contract labor (including contract nursing personnel), and during the year ended December 31, 2022, we also experienced unfavorable changes in payor mix, declines in inpatient admissions and lower overall acuity.

These factors had an unfavorable impact on our financial results during the year ended December 31, 2022, and may have an unfavorable impact on our financial results in future periods which could be material.

While we have implemented cost containment and other measures to try to counteract these developments, we may continue to be unable to fully offset the impact of these factors on the operation of our business.

In addition, during the year ended December 31, 2022, our financial results were adversely impacted by Hurricane Ian, which negatively impacted certain of our hospitals and other healthcare facilities located in Florida.

As a provider of healthcare services, we have been and may continue to be affected by the public health and economic effects of the COVID-19 pandemic.

While we are not able to fully quantify the impact that the pandemic will have on our future financial results, developments related to the pandemic may continue to affect our financial performance.

If economic conditions in the United States further significantly deteriorate and/ or public health conditions related to the COVID-19 pandemic significantly worsen, any such developments could materially and adversely affect our results of operations, financial position, and/or our cash flows.

Selected Operating Data

The following table sets forth operating statistics for each of the years presented for our hospitals.

Statistics for 2023 include a full year of operations for 71 hospitals and partial periods for eight hospitals that were divested, 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 79 hospitals and partial periods for one hospital that was divested, 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.

Statistics for 2021 include a full year of operations for 83 hospitals, and partial periods for five hospitals that were divested reflecting the operations of these hospitals prior to divestiture and one hospital that ceased to operate as a stand-alone hospital and began operating as a campus of another hospital offering only emergency room and outpatient services (statistics for 2021 reflect the operations of that hospital prior to being consolidated into another hospital).

Statistics for 2020 include a full year of operations for 88

hosp itals and partial periods for 13 hospitals divested , one hospital that was c losed and one hospital that was opened during the year reflecting the operations of these hospitals prior to divestiture or closure or after commen c ing operations , as applicable.

Year Ended December 31,

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Net outpatient revenues as a % of net operating revenues

Net income attributable to Community Health Systems, Inc.

Net (loss) income attributable to Community Health Systems, Inc.

stockholders as a % of net operating revenues

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operating revenues

Net cash flows (used in) provided by investing activities

Net cash flows used in investing activities

Net cash flows used in financing activities

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(7) We calculated occupancy rate percentages by dividing the average daily number of inpatients by the weighted-average number of beds in service.

EBITDA is a non-GAAP financial measure which consists of net income attributable to Community Health Systems, Inc.

(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, gain on sale of equity interests in Macon Healthcare, LLC, expense related to government and other legal matters and related costs, expense incurred in the fourth quarter of 2020 related to the settlement of certain professional liability claims for which the third-party insurers’ obligation to insure the Company against the underlying loss was being litigated along with income during the fourth quarter of 2021 associated with the settlement of such litigation for the recovery of amounts covered by such third-party insurance policies, 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, the gain on sale by HealthTrust of a majority interest in CoreTrust Holdings, LLC, or CoreTrust, as discussed below under the heading “Liquidity and Capital Resources,” and expense from settlement and fair value adjustments on the contingent value right agreement liability related to the Health Management Associates, Inc., or HMA, legal proceedings and related legal expenses.

The Company has included adjustments to Adjusted EBITDA during the fourth quarter of 2022 in relation to the impact of the change in estimate to increase the professional liability claims accrual with respect to claims incurred in prior years related to divested locations and the gain on sale by HealthTrust of a majority interest in CoreTrust as noted above in light of the fact that the Company believes that the exclusion of these items is consistent with the intended purpose of Adjusted EBITDA in assessing the Company’s operational performance and comparing the Company’s operational performance between periods.

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, gain on sale of equity interests in Macon Healthcare, LLC as completed in the third quarter of 2021, expense related to government and other legal matters and related costs, income during the fourth quarter of 2021 associated with the settlement of litigation for the recovery of amounts of certain professional liability claims settled in 2020 covered by third-party insurance policies, 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 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.

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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.

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.

Adjusted EBITDA is not a measurement of financial performance under U.S.

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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 income attributable to Community Health Systems, Inc.

The following table reflects the reconciliation of Adjusted EBITDA, as defined, to net (loss) income attributable to Community Health Systems, Inc.

stockholders as derived directly from our Consolidated Financial Statements for the years ended December 31, 2023, 2022 and 2021 (in millions):

Year Ended December 31,

Net income attributable to Community Health Systems, Inc.

Provision for (benefit from) income taxes

Net (loss) income attributable to Community Health Systems, Inc.

Provision for income taxes

Depreciation and amortization

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Company for the underlying loss has been settled

Expense from settlement and legal expenses

related to cases covered by the CVR

Expense related to employee termination benefits and other

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related to divested locations

Expense from business transformation costs

Adjusted EBITDA

Same-store data excludes the results of businesses sold or closed in the periods presented, as applicable, and one hospital opened in 2022.

For all hospitals owned throughout both periods, the same-store operating results and statistical data reflects the indicated periods.

(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.

Sources of Revenue

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Medicare Managed Care

Other third-party payors

As shown above, we receive a substantial portion of our revenues from the Medicare, Medicaid and Medicare Managed Care programs.

Included in other third-party payors is 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 rental income and cafeteria sales.

In the future, we generally expect the portion of revenues received from the Medicare, including Medicare Managed Care, and Medicaid programs to increase over the long-term due to the general aging of the population and other factors, including health reform initiatives.

There has been a trend toward increased enrollment in Medicare and Medicare Managed Care, which may adversely affect our operating revenue.

Managed Care and other third-party payors

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, including health reform initiatives.

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.

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 re imbursement arrangements or that third-party payors will not attempt to further reduce the rates they pay for our services.

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.

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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 and net income by an insignificant amount in each of the years ended December 31, 2022, 2021 and 2020.

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, 2023, 2022 and 2021.

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.

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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 designed with input from CMS and 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 for a specified period of time and require CMS’s approval to be extended.

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.

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Net operating revenues generated by our hospitals in Florida, as a percentage of consolidated net operating revenues, were 11.1% in 2023, 11.6% in 2022 and 12.2% in 2021.

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 statutorily determined rates for 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.

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Healthcare facility operations are also subject to certain seasonal fluctuations, including decreases in patient utilization during holiday periods and increases in colder weather months.

However, the COVID-19 pandemic has had, and may continue to have, an impact on patient behaviors and patient volumes that has resulted in, and may continue to result in, temporary changes in typical seasonal fluctuations of our business.

Variations in the prevalence and severity of outbreaks of illnesses, such as COVID-19, have also resulted in, and may continue to result in, similar fluctuations of our business.

Government Regulation

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This accreditation indicates that a hospital satisfies the applicable health and administrative standards to participate in Medicare and Medicaid programs.

Government regulations may change.

If that happens, we may have to make changes to our facilities, equipment, personnel and services so that our hospitals remain certified as hospitals and qualified to participate in these programs.

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 remain certified as hospitals and qualified to participate in these programs.

We believe that our hospitals are in substantial compliance with current federal, state and local regulations and standards.

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The healthcare industry is subject to changing political, regulatory, and economic influences that may affect our business.

In recent years, the healthcare industry has undergone significant changes, many of which have been aimed at reducing costs and government spending.

Congress and certain state legislatures have introduced and passed a large number of proposals and legislation affecting the healthcare system, including laws intended to impact access to health insurance.

The most prominent of these efforts, the Patient Protection and Affordable Care Act, as amended by the Health Care and Education Reconciliation Act of 2010, or the Affordable Care Act, affects how healthcare services are covered, delivered and reimbursed.

The Affordable Care Act increased health insurance coverage through a combination of public program expansion and private sector health insurance reforms.

In recent years, the U.S.

The most prominent of these efforts, 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.

The Affordable Care Act has been, and continues to be, subject to legislative and regulatory changes and court challenges.

For example, effective January 1, 2019, the financial penalty associated with the Affordable Care Act’s mandate that most individuals enroll in a health insurance plan was effectively eliminated.

However, some states have imposed individual health insurance mandates, and other states have explored or offer public health insurance options.

To increase access to health insurance during the COVID-19 pandemic, the American Rescue Plan Act of 2021, or ARPA, enhanced subsidies for individuals eligible to purchase coverage through Affordable Care Act marketplaces.

The Inflation Reduction Act, enacted in August 2022, extends these enhanced subsidies through 2025.

In addition, in a September 2021 final rule, HHS extended the annual open enrollment period for coverage through federal marketplaces and granted state exchanges flexibility to lengthen their open enrollment periods.

These changes and initiatives may impact the number of individuals that elect to obtain public or private health insurance or the scope of such coverage, if purchased.

To increase access to health insurance during the COVID-19 pandemic, the American Rescue Plan Act of 2021, or the ARPA, enhanced subsidies for individuals eligible to purchase coverage through Affordable Care Act marketplaces.

Subsequent legislation extended these enhanced subsidies through 2025.

In addition, Medicaid enrollment increased 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, among other requirements.

However, this “continuous coverage” requirement expired on April 1, 2023, which has led to Medicaid coverage disruptions and dis-enrollments of Medicaid enrollees.

These and other changes and initiatives may impact the number of individuals that elect to obtain public or private health insurance or the scope of such coverage, if purchased.

Of critical importance to us is the potential impact of any changes specific to the Medicaid program, including the funding and expansion provisions of the Affordable Care Act and subsequent legislation or agency initiatives.

Historically, the states with the greatest reductions in the number of uninsured adult residents have expanded Medicaid.

Historically, the states with the greatest reductions in the number of uninsured adult residents have expanded Medicaid under the Affordable Care Act.

A number of states have opted out of the Medicaid coverage expansion provisions, but could ultimately decide to expand their programs at a later date.

Of the 15 states in which we operated hospitals as of December 31, 2023, nine states have expanded their Medicaid programs.

At this time, the other seven states have not, including Florida, Alabama, Tennessee, Mississippi and Texas, where we operated a significant number of hospitals as of December 31, 2022.

At this time, the other six states have not, including Florida, Alabama, Tennessee, Mississippi and Texas, where we operated a significant number of hospitals as of December 31, 2023.

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.

Some of these program changes may reduce the number of Medicaid enrollees in certain states.

Other recent 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, and the relationships between hospitals, insurers, patients, and ancillary providers (such as anesthesiologists, radiologists, and pathologists).

For example, the No Surprises Act imposes various requirements on providers and health plans intended to prevent “surprise” medical bills.

It prohibits providers from charging patients

an amount beyond the in-network cost sharing amount for services rendered by out-of-network provider s (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 balance billing prohibition applies.

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 payors to handle payment disputes that cannot be resolved through direct negotiations.

Regulations implementing the IDR provisions of the No Surprises Act provide that, when making a payment determination, the IDR must consider the qualifying payment amount, or QPA (which is generally the payor’s median contracted rate for the same or similar service in the area), and all additional permissible information submitted by each party.

The IDR entity must select the offer that best represents the value of the item or service under dispute.

However, t he final rule establishing the IDR process is the subject of legal challenges.

On February 6, 2023, a federal judge vacated parts of the rule, including provisions related to considerations of the QPA.

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 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 are substantially higher than the estimate 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.

The No Surprises Act also requires providers to send an insured patient’s health plan a good faith estimate of expected charges, including billing and diagnostic codes, prior to when the patient is scheduled to receive the item or service.

HHS is deferring enforcement of the good faith estimate requirement for insured patients until it issues additional regulations.

A number of states have adopted their own healthcare price transparency requirements.

Other recent reform initiatives and proposals at the federal and state levels include those focused on price transparency and limiting out-of-network charges, which may impact prices, our competitive position and the relationships between hospitals, insurers, patients, and ancillary providers (such as anesthesiologists, radiologists, and pathologists).

For example, the No Surprises Act imposes requirements on providers and health plans intended to prevent “surprise” medical bills.

Among other restrictions and requirements, the law 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 may limit the amounts received by out-of-network providers from health plans and establishes an independent dispute resolution process for providers and payors to handle payment disputes that cannot be resolved through direct negotiations.

The No Surprises Act also requires that providers provide a good faith estimate of expected charges to uninsured or self-pay patients for scheduled items and services, in advance of the date of the scheduled item or service or upon request.

Based on these

estimates, such patients may invoke a patient-provider dispute resolution process to challenge charges in certain circumstances.

The regulations and related guidance implementing the No Surprises Act, including those establishing the provider-payer dispute resolution process, have been and continue to be subject to legal challenges.

Other trends toward transparency and value-based purchasing may impact the competitive position and patient volumes of providers.

For example, the CMS Care Compare website makes available to the public certain data that hospitals submit in connection with Medicare reimbursement claims, including hospital performance data on quality measures and patient satisfaction, and Medicare reimbursement for hospitals is adjusted based on quality and efficiency measures.

In addition, hospitals are required by federal regulation to publish online payor-specific negotiated charges and de-identified minimum and maximum charges.

Some price transparency obligations apply only to payors.

For example, CMS requires health insurers to publish online charges negotiated with providers for healthcare services.

Starting January 1, 2023, health insurers must provide online price comparison tools to help individuals get personalized cost estimates for covered items and services.

Other industry participants, such as private payors and large employer groups and their affiliates, may also introduce financial or delivery system reforms.

For example, in recent years, there have been trends influenced by private and/or public payors toward enrollment in managed care programs, favoring outpatient care over inpatient care, and provider consolidation.

In addition, Medicare reimbursement for hospitals is adjusted based on quality and efficiency measures, and CMS currently administers various accountable care organizations 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.

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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 part of its duties, the OIG provides guidance to healthcare providers by identifying types of activities that could violate the Anti-Kickback Statute.

The OIG also publishes regulations outlining activities and business relationships that would be deemed not to violate the Anti-Kickback Statute.

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;

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.

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:

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• free training for a physician’s office staff, including management and laboratory techniques (but excluding compliance training);

guarantees which provide that, if the physician’s income fails to reach a predetermined level, the hospital will pay any portion of the remainder;

low-interest or interest-free loans or loans which may be forgiven if a physician refers patients to the hospital;

• 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 which require few, if any, substantive duties by the physician, or payment for services in excess of the fair market value of the services rendered;

• 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;

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If a hospital fails to comply with these regulations, the hospital could lose its Medicare provider agreement and be unable to participate in Medicare.

Evolving interpretations of current, or the adoption of new, federal or state laws or regulations could affect many of the arrangements entered into by each of our hospitals.

In addition, 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.

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.

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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, current state laws or other legislation or regulations in these areas adopted in the future.

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.

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.

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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-splitti ng arrangements with, healthcare providers and unlicensed persons or business entities.

Possible sanctions for violations of these restricti ons include loss of a healthcare provider’ s license, civil and criminal penalties and rescission of business arrangements.

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.

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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.

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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 are in compliance 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.

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, in July 2022, CMS provided guidance regarding EMTALA obligations specific to patients who are pregnant or are experiencing pregnancy loss and the preemption of state law, which the agency subsequently revised.

This guidance is the subject of legal challenges, and a federal district court issued a preliminary injunction prohibiting enforcement of the guidance in Texas and as to certain professional groups involved in the litigation.

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, including pending cases in Texas and Ohio that have allowed state restrictions to remain in effect or stayed or have limited application of the guidance as the cases continue.

Conversion Legislation.

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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.

Recently, 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 and the U.S.

Antitrust enforcement in the healthcare industry is currently a priority of the Federal Trade Commission, or FTC, and the U.S.

Department of Justice.

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Violation of these state laws may result in the imposition of civil sanctions or the revocation of a provider’s licenses.

HIPAA Administrative Simplification and Privacy and Security Requirements.

The Health Insurance Portability and Accountability Act of 1996, or HIPAA, requires the use of uniform electronic data transmission standards for healthcare claims and payment transactions submitted or received electronically.

HIPAA Administrative Simplification and Privacy, Security 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 electronic data transmission 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.

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.

As required by HIPAA, HHS has issued privacy and security regulations that extensively regulate the use and disclosure of individually identifiable health-related information and require covered entities, including health plans and most healthcare providers, to implement administrative, physical and technical practices to protect the security of individually identifiable health information that is electronically maintained or transmitted.

Business associates (entities that handle identifiable health-related information on behalf of covered entities) are subject to direct liability for violation of applicable provisions of the regulations.

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.

We have developed and utilize a HIPAA compliance plan as part of our effort to comply with HIPAA privacy and security requirements.

The privacy regulations and security regulations have and will continue to impose significant costs on us in order to comply with these standards.

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.

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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 any federal or state privacy-related laws that are more restrictive than the privacy regulations issued under HIPAA.

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 any 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 Federal Trade Commission 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, new 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, may require us to incur substantial costs and expenses to comply and may subject our business to a risk of increased potential liability.

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, as well as a private right of action for data breaches, which may increase the likelihood or impact of data breach litigation.

Medicare is a federal health insurance program that provides certain hospital and medical insurance benefits to persons age 65 and over, some disabled persons, and persons with end-stage renal disease.

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 21 st 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 November 2023, HHS issued a proposed rule to establish disincentives for certain types of providers.

If finalized, hospitals found to have committed information blocking would not qualify as “meaningful electronic health record users” under the Medicare Promoting Interoperability Program and as a result would lose 75% of the annual market basket increase they would otherwise receive.

Medicare is a federal health insurance program that provides certain hospital and medical insurance benefits to persons age 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.

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For federal fiscal year 2023, the market basket update was adjusted by the following percentage points:

a positive 0.5 adjustment in accordance with the Medicare Access and CHIP Reauthorization Act of 2015, or MACRA, and a 0.7 reduction for the productivity adjustment.

For federal fiscal year 2023, the market basket was adjusted by the following percentage points:

a positive 0.5 adjustment in accordance with MACRA and a 0.3 reduction 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.

a positive 0.5 percentage point adjustment in accordance with the Medicare Access and CHIP Reauthorization Act of 2015, or MACRA, and a 0.3 percentage point reduction for the productivity adjustment.

For federal fiscal year 2024, the market basket update was reduced by 0.2 percentage points 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.

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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 conditions or procedures designated by CMS receive reduced payments for all inpatient discharges, not just discharges relating to the conditions or procedures subject to the readmission standard.

The payment reduction is determined by assessing that hospital’s readmissions relative to hospitals with similar proportions of dual-eligible patients.

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 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.

This change will effectively decrease DSH payments for many hospitals.

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.

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A 2.0 percentage point reduction to the market basket update applies to hospitals that do not submit required patient quality data.

We are complying with this data submission requirement.

The Medicare reimbursement we receive may also be affected by broad shifts in payment policy.

For example, in recent years, CMS has phased-in 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 lower than the outpatient PPS rate.

Before the expanded policy, the MPFS-equivalent rate did not apply to “excepted” provider-based departments.

The MPFS-equivalent rate for calendar year 2023 is approximately 40% of the outpatient PPS rate.

In addition, in June 2022, the U.S.

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.

The 340B program allows certain non-profit healthcare organizations to purchase outpatient drugs from pharmaceutical manufacturers at discounted rates.

Although our hospitals do not participate in the 340B program, the decision could impact our Medicare reimbursement for both past and future periods.

The past payment cuts resulted in increased payments for non-340B hospitals, and it has not yet been determined whether the increased payments to non-340B hospitals may be recouped due to budget neutrality principles.

In addition, depending on future Medicare payment policies, non 340B hospitals may receive decreased reimbursement going forward for outpatient drugs and services.

For calendar year 2023, CMS finalized the payment rate for drugs acquired through the 340B program in light of the U.S.

Supreme Court decision and, as a result of the payment rate change, is implementing a reduction of approximately 3.1% to payment rates for non-drug services under the outpatient PPS for calendar year 2023 to achieve budget neutrality.

In light of the U.S.

Supreme Court decision and to achieve budget neutrality, CMS implemented a reduction of approximately 3.1% to payment rates for non-drug services under the outpatient PPS for calendar year 2023.

HHS directed that $9 billion be paid to affected 340B providers in one-time lump sum payments 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.

This adjustment will start in calendar year 2026 and continue 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 2024 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.

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For calendar year 2024, CMS decreased the conversion factor by approximately 3.4%.

However, Congress approved a partial offset to this reduction, which will result in a payment reduction of approximately 2.0% for calendar year 2023.

The reduction to the physician payment rates is expected to increase in 2024.

CMS requires physicians and certain other healthcare clinicians to participate in one of two tracks under the Quality Payment Program, or QPP, which is a payment methodology intended to reward high-quality patient care.

Under both tracks, performance data collected each performance year affect s Medicare payments two years later.

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.

Under the Advanced Alternative Paymen t Model, or Advanced APM, incentive payments are available based on participation in specific innovative payment models approved by CMS.

P roviders may earn a Medicare incentive payment and will be e xempt 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.

After the 2023 performance year and associated payments in 2025, Advanced APM incentive payments will no longer be available.

Instead, qualifying providers may , in the future, receive positive adjustments to their MPFS payment rates.

Alternatively, providers may participate in the MIPS track, under which physicians will receive performance-based payment incentives or payment reductions based on their performance with respect to clinical quality, resource use, clinical improvement activities, and meaningful use of EHR s.

The Advanced Alternative Payment Model, or Advanced APM, encourages participation in specific innovative payment models approved by CMS through financial incentives.

For performance year 2023 and years prior, providers

were able to earn Medicare incentive payments.

Beginning in the 2024 performance year, qualifying providers will instead receive positive adjustments to their MPFS payment rates (performance year 2024 determines adjustments in payment year 2026).

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 seven months of 2032.

These reductions apply to certain other federally funded healthcare programs, including TRICARE.

As a result of the ARPA, an additional Medicare payment reduction of up to 4% was required to take effect in January 2022, although Congress has delayed implementation of this reduction until 2025.

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 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.

Medicaid enrollment has increased as a result of the COVID-19 pandemic, and the federal government has made available enhanced federal Medicaid funding in response to the pandemic.

Medicaid enrollment increased 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, among other requirements.

The end of the continuous enrollment condition in 2023, including the resumption of redeterminations for Medicaid enrollees, has resulted in significant coverage disruptions and dis-enrollments of enrollees, and Medicaid enrollment is generally expected to decline through fiscal year 2024 (which ends June 30, 2024, in most states).

Most state Medicaid payments are made under a PPS or under programs that negotiate payment levels with individual hospitals.

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The Affordable Care Act and subsequent legislation provide for reductions to the Medicaid DSH program, but Congress has delayed the implementation of these reductions.

Under current law, Medicaid DSH payments will be reduced by $8.0 billion per year in each of federal fiscal years 2024 through 2027.

Under current law, Medicaid DSH payments will be reduced by $8.0 billion for the period from March 9, 2024 through September 30, 2024 and per year in each of federal fiscal years 2025 through 2027.

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 designed with input from CMS.

The programs are generally authorized for a specified period of time and require CMS’s approval to be extended.

These supplemental reimbursement programs are generally authorized by CMS for a specified period of time and require CMS’s approval to be extended.

CMS is considering changes to both types of programs, and we are unable to predict whether or on what terms CMS will extend the supplemental programs in the states in which we operate.

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For example, it has rescinded approvals of waivers for work and community engagement requirements, which have also been rejected by several courts, and is reexamining block grant funding structures.

However, a federal court is permitting Georgia to impose work and community engagement requirements under a Medicaid demonstration program that is expected to launch in mid-2023.

TRICARE is the Department of Defense’s healthcare program for members of the armed forces.

However, a federal court permitted Georgia to impose work and community engagement requirements under a Medicaid demonstration program that launched in mid-2023.

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 DRG system modeled on the Medicare inpatient PPS.

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Providers can appeal any final determination made in connection with an audit.

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.

For example, some payors vigorously review each patient’s length of stay in the hospital and recharacterize as outpatient all inpatient stays of less than a particular duration (e.g., 24 hours).

Similarly, some payors have prior authorization requirements designed to shift certain procedures to outpatient settings, where payment rates are typically lower.

Reductions in payments for services provided by our hospitals to individuals covered by these payors could adversely affect us.

Medicare and Medicaid Managed Care.

Under the Managed Medicare program, also known as Medicare Part C, or Medicare Advantage, the federal government contracts with private health plans to provide members with Medicare benefits.

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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.

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Payment recoveries resulting from RAC reviews and denials are appealable, and we pursue reversal of adverse determinations at appropriate appeal levels.

In recent years, there have been significant delays in the assignment of new Medicare appeals to Administrative Law Judges.

According to the Office of Medicare Hearings and Appeals, the average processing time in fiscal year 2022 was nearly two years.

To ease the backlog of appeals, HHS has taken steps to streamline the process and improve efficiency, such as offering various settlement initiatives.

By the end of fiscal year 2022, it had nearly eliminated the backlog.

In recent years, there have been significant delays in the Medicare appeals process.

However, HHS has taken steps to streamline the appeals process and, as of March 2023, it had nearly eliminated the backlog.

Nevertheless, we may experience significant delays in appealing any RAC payment denials.

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Accountable Care Organizations .

With the aim of reducing healthcare costs by improving quality and operational efficiency, ACOs have gained traction in both the public and private sectors.

Accountable Care Organizations, or ACOs, have gained traction in both the public and private sectors.

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.

ACOs are intended to produce savings as a result of improved quality and operational efficiency.

The Medicare Shared Savings Program seeks to promote accountability and coordination of care for Medicare fee-for-service beneficiaries through the creation of ACOs.

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.

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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, including by implementing more mandatory models.

CMS also indicated it will streamline its payment model portfolio and consider how to ensure broad provider participation.

Bundled Payment Initiatives.

P roviders 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.

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 expec ted to run through December 2025 .

We are participating in BP CI Advanced initiatives in three of our markets.

Generally, participa tion in bundled payment programs is voluntary, but CMS currently requires hospitals in selected markets to participate in bundled payment initiatives for specific orthopedic procedures and en d-stage renal disease treatment.

A mandatory radiation o ncology bundled payment model was expected to begin January 1, 2023 , but CMS has delayed its implementation until a future date to be determined by the agency .

Generally, participation in bundled payment programs is voluntary, but CMS currently requires hospitals in selected markets to participate in bundled payment initiatives for specific orthopedic procedures and end-stage renal disease treatment.

A mandatory radiation oncology bundled payment model was expected to begin January 1, 2023, but CMS has delayed its implementation until a future date to be determined by the agency.

CMS has indicated that it will provide six months’ notice before starting the model.

In its 2021 strategy refresh, 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.

For example, some payors vigorously 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 have prior authorization requirements designed to shift certain procedures to outpatient settings, where payment rates are typically lower.

Reductions in payments for services provided by our hospitals to individuals covered by these payors could adversely affect us.

Supply Contracts

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Some of our competitors offer services, including extensive medical research and medical education programs, that 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.

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.

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CMS publicizes on its Care Compare website data that hospitals submit in connection with Medicare reimbursement claims, including performance data related to quality measures and patient satisfaction surveys.

The quality measures that must be reported by providers, some of which impact reimbursement under value-based purchasing initiatives,

continue to evolve.

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 publicly accessible online file.

The quality measures that must be reported by providers, some of which impact reimbursement under value-based purchasing initiatives, continue to evolve.

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.

Hospitals are also 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 any associated ancillary services or, alternatively, maintain an online price estimator tool.

Further, CMS requires health insurers to publish online charges negotiated with providers for healthcare services.

Starting January 1, 2023, health insurers must also provide online price comparison tools to help individuals get personalized cost estimates for covered items and services.

In addition, the No Surprises Act require s providers to send to an insured patient’s health plan good faith es timates of the expected charges for scheduled items or services , including billing and diagnostic codes , prior to the scheduled date of the items or services.

Further, CMS requires most health insurers to publish online charges negotiated with providers for healthcare services.

Starting January 1, 2024, most health insurers must also provide online price comparison tools to help individuals get personalized cost estimates for all covered items and services.

In addition, the No Surprises Act requires providers to send to an insured patient’s health plan a good faith estimate of the expected charges for scheduled items or services, including billing and diagnostic codes, prior to the scheduled date of the items or services.

The estimate must cover any item or service that is reasonably expected to be provided together with the primary items or services, including those that may be provided by other providers.

HHS is deferring enforcement of the good faith estimate for insured patients until it issues additional regulations.

For uninsured or self-pay patients, providers must provide a good faith estimate of expected charges for 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 sent to uninsured or self-pay patients 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 are substantially higher tha n the estimate, the patient may invoke a patient-provider dispute resolution process established by regulation to challenge the higher amount.

If the actual charges to an uninsured or self-pay patient exceed the estimate by an amount determined by regulation to be substantial (currently $400), the patient may invoke a patient-provider dispute resolution process established by regulation to challenge the higher amount.

HHS is deferring enforcement of portions of the good faith estimate requirements until it issues additional regulations.

Compliance Program

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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, 2022, certain employees at five of our hospitals are represented by various labor unions.

At December 31, 2023, 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.

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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 pr oviders is registered nurse, or RN, recruitment and r etention.

We had a centralized clinical r ecruiting function in place for a limited number of our markets beginning in 2018 , and , by 2022 , this recruiting function had been expanded to cover all of our health systems .

Our team of recruiters and source r s focuses primarily on bedside nursing roles, but they also recruit for licensed practical nurse, case management, and director level positions.

Our next iteration of this function , which is currently being piloted , will include recruiting for difficult-to -fill allied health positions.

Since we have implemented our centralized recruiting function, we have seen an increase in clinical position hires and a decreased time-to-fill for the se key patient care roles , w hich has decreased our level of reliance on higher cost contract labor .

In addition to th ese efforts, we have been working to bring international RNs through the visa process to our hospitals.

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 has now been expanded to cover all of our health systems.

Our team of recruiters and sourcers began focusing primarily on bedside nursing roles, but they also recruit for licensed practical nurse, case management, and director level positions.

Given the success we have had with recruitment of these roles, we have expanded the function to also cover difficult-to-fill allied health positions.

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 decreased our level of reliance on higher cost contract labor.

In addition to these efforts, we have been working to bring international RNs through the visa process to our hospitals.

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 t hese efforts will a id in our ability to take patient transfer request s , 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 now have seven campuses open in five states with three more expected to open in the second half of 2023.

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 eight 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.

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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 minimum wage, which has created more competition for this sector of employees.

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.

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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 reduce mandatory nurse-staffing ratios already in place.

State-mandated nurse-staffing ratios could significantly affect labor costs, and have an adverse impact on revenues if we are required to limit patient admissions in order to meet the required ratios.

In addition, the states in which we operate could adopt mandatory nurse-staffing ratios or could revise mandatory nurse-staffing ratios 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.

Our hospitals are staffed by licensed physicians, including both employed physicians and physicians who are not employees of our hospitals.

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We are committed to building a diverse talent pipeline through a variety of venues and programs such as internships, residencies, mentorship programs and by partnering with diverse professional organizations.

A Diversity Leadership Committee was formed in 2021 and various actions have been taken with respect to diversity, equity and inclusion objectives such as retaining and developing high potential employees, improving patient experience and outcomes and increasing supplier diversity.

We formed the Diversity Leadership Committee in 2021, which has undertaken various actions with respect to diversity, equity and inclusion objectives such as retaining and developing high potential employees, improving patient experience and outcomes and increasing supplier diversity.

We intend to leverage data to inform and measure the effectiveness of our diversity, equity and inclusion efforts over time.

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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, several of which were initiated and/or expanded in 2022 as part of our Pathways benefit offering.

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 new student loan repayment program for numerous key clinical roles and reimbursement for licenses and certifications that are required for each individual role.

We also have nursing partnerships with education institutions which offer educational pathways to those desiring to become professional nurses;

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;

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.

Moreover, we have provided mental health support for our personnel struggling with the significant emotional impact of caring for patients during the pandemic.

Employee Safety

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We recognize the environment is an exhaustible resource and the importance of using the environment and its resources responsibly.

We have taken action with respect to various sustainability matters with a focus on the reduction of our carbon footprint, water and energy usage and material waste.

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 Environmental Sustainability Report, which is available in the Company Overview-Sustainability section of our website.

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• 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 and the COVID-19 Pandemic

Risks Related to Economic Conditions

• Our financial results have been, and may continue to be, adversely impacted by negative macroeconomic conditions.

We expect the COVID-19 pandemic to continue to affect our financial performance.

It is difficult to predict the ultimate impact of the Coronavirus Aid, Relief and Economic Security Act, or the CARES Act, and other stimulus and relief legislation.

Risks Related to Our Business

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• The demand for our services can be impacted by factors beyond our control.

A future pandemic, epidemic or outbreak of an infectious disease could adversely impact our business.

• A deterioration of public health conditions associated with COVID-19, or a future pandemic, epidemic or outbreak of an infectious disease could adversely impact our business.

• The industry trend towards value-based purchasing may negatively impact our business.

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• 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

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Risks Related to Government Regulation

We are unable to predict the ultimate impact of health reform initiatives.

If we fail to comply with laws and regulations, we could suffer penalties or be required to make changes to our operations.

If there are delays in regulatory updates by governmental entities, we may experience volatility in our operating results.

• Our business may be adversely impacted by health reform initiatives.

• 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.

If our adoption and utilization of EHR systems fails to satisfy HHS standards or if we fail to comply with interoperability requirements, our business and financial results could be adversely affected.

• 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.

State efforts to regulate the sale of municipal or not-for-profit hospitals could prevent our acquisition of such hospitals.

• We may incur additional tax liabilities.

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• If we fail to comply with technology agreements, we may be required to pay damages and could lose license rights.

• If the redesign and consolidation of key business functions, including through the implementation of a core enterprise resource planning system does not proceed as expected or is not completed successfully, our business and financial results may be adversely impacted.

For a more complete discussion of these risk factors, see below.

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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.

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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).

Higher interest rates could increase the cost of refinancing our indebtedness and could cause our debt service obligations to increase significantly.

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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 and the COVID-19 Pandemic

Risks Related to Economic Conditions

Our financial results have been, and may continue to be, adversely impacted by negative macroeconomic conditions.

Taking into account these factors, we have incurred, and may continue to incur, increased expenses arising from factors such as wage inflation for permanent employees and increased rates for and utilization of temporary contract labor (including contract nursing personnel), and have also experienced unfavorable changes in payor mix, declines in patient volumes and lower overall acuity of inpatient admissions and surgeries.

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 under commercial insurance agreements, increased patient decisions to postpone or cancel elective and nonemergency 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, negative macroeconomic conditions in the United States have resulted in, and may continue to result in, increased budget deficits at federal, state and local governmental levels, which may continue to negatively impact spending for health and human service programs, including Medicare, Medicaid and similar programs, which represent significant third-party payor sources for our healthcare facilities.

Other risks we face during periods of economic weakness include potential declines in the population covered under commercial insurance agreements, 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, negative macroeconomic conditions in the United States have resulted in, and may continue to result in, increased budget deficits at federal, state and local governmental levels, which may continue to negatively impact spending for health and human services programs, including Medicare, Medicaid and similar programs, which 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 due to our reliance on Medicare payments.

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In addition, negative 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.

We expect the COVID-19 pandemic to continue to affect our financial performance, and such pandemic could have material adverse effects on our results of operations, financial condition, and/or our cash flows if it causes public health and/or economic conditions in the United States to deteriorate.

As a provider of healthcare services, we have been, and may continue to be, affected by the public health and economic effects of the COVID-19 pandemic .

Although vaccines and booster shots for the COVID-19 virus are widely available in the United States, COVID-19 has continued to result in a significant number of hospitalizations, and the future course of the pandemic remains uncertain.

We have implemented considerable safety measures within our hospitals in response to COVID-19.

Nonetheless, treatment of COVID-19 has associated risks, which may include the manner in which patients, physicians, nurses and other medical personnel perceive and respond to such risks.

These risks may result in reduced operating capacity, impaired employee morale, labor unrest and/or other workforce disruptions.

Moreover, during the pandemic, we believe that some individuals have elected to postpone

medical care for an undetermined period of time in a manner that has adversely impacted our patient volumes in comparison to pre-pandemic levels.

Although our hospitals have not generally experienced major capacity constraints to date arising from the treatment of COVID-19 patients, there are hospitals in the United States that have been overwhelmed in caring for COVID-19 patients, which has prevented such hospitals from treating all patients who seek care.

Moreover, due to the concentration of our hospitals in certain states, we are particularly sensitive to the increase in COVID-19 cases in those states, where the pandemic could have a disproportionate effect on our business.

CMS issued an interim final rule in November 2021 that requires COVID-19 vaccinations for workers in most Medicare and Medicaid certified providers and suppliers, including our hospitals.

On January 13, 2022, the U.S.

Supreme Court issued a decision allowing the CMS COVID-19 vaccine mandate to go into effect immediately.

The rule applies to all staff, including clinical staff, individuals providing services under arrangements, volunteers, and staff who are not involved in direct patient care , subject to approved religious and medical exemptions.

Additionally, some states have implemented, or may implement in the future, vaccine mandates with respect to healthcare personnel.

It is difficult to predict the impact that these vaccine mandates may have on us.

However, these vaccine mandates may result in employee attrition and the loss of personnel who are unvaccinated, which could adversely affect our business and results of operations.

In addition, our financial performance may continue to be affected by federal or state laws, regulations, orders, or other governmental or regulatory actions addressing the current COVID-19 pandemic or otherwise affecting the U.S.

healthcare system in connection with the pandemic.

We may also be subject to lawsuits from patients, employees and others exposed to COVID-19 at our facilities.

Such actions may involve large demands, as well as substantial defense costs.

Our professional and general liability insurance may not cover all claims against us.

While we are not able to fully quantify the impact that the COVID-19 pandemic will have on our future financial results, developments related to the pandemic may continue to affect our financial performance.

Moreover, if public health conditions related to the COVID-19 pandemic significantly worsen, any such developments could materially and adversely affect our results of operations, financial position, and/or our cash flows.

The ongoing impact of the pandemic on our financial results will depend on, among other factors, the duration and severity of the pandemic, the impact of the pandemic on economic conditions, the volume of canceled or rescheduled procedures at our facilities, the volume of COVID-19 patients cared for across our health systems, the timing, availability, and acceptance of effective medical treatments, the availability, acceptance of and need for vaccines (including additional dosages of vaccines), the spread of potentially more contagious and/or virulent forms of the virus , including any variants of the virus that may be resistant to currently available vaccines , the availability of and processing times for tests, and the impact of government actions on the hospital industry and broader economy, including through existing and any future stimulus efforts as well as vaccine and testing requirements.

The COVID-19 pandemic continues to evolve, and we may not be able to predict or effectively respond to future developments.

It is difficult to predict the ultimate impact of the CARES Act and other stimulus and relief legislation or the effect that such legislation and other governmental responses intended to assist providers in responding to COVID-19 may have on our business.

In response to the COVID-19 pandemic , federal and state governments have passed legislation, promulgated regulations and taken 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.

Together, the CARES Act, the Paycheck Protection Program and Health Care Enhancement Act, or the PPPHCE Act, the Consolidated Appropriations Act, or the CAA, and the ARPA, authorized over $186 billion in funding to be distributed to eligible healthcare providers.

These funds are intended to reimburse eligible providers, including public entities and Medicare- and/or Medicaid-enrolled providers and suppliers, for lost revenues and healthcare related expenses attributable to COVID-19.

Recipients are not required to repay these funds, provided that they attest to and comply with certain terms and conditions, including limitations on balance billing, not using funds received from the PHSSEF to reimburse expenses or losses that other sources are obligated to reimburse and audit and reporting requirements.

HHS’ interpretation of the underlying terms and conditions may continue to evolve, and additional guidance or new or amended interpretations of existing guidance on such underlying terms and conditions may result in our inability to recognize additional PHSSEF payments or may result in the derecognition of amounts previously recognized, which (in any such case) may be material.

To the extent that any unrecognized PHSSEF payments that have been or may be received by us do not qualify for reimbursement based on our future operations, we may be required to return such unrecognized payments to HHS following the end of the COVID-19 pandemic or other future time as may be determined by HHS guidance.

Further, we may be subject to or incur costs from related government actions including payment recoupment, audits and inquiries by governmental authorities, and criminal, civil or administrative penalties.

The CARES Act and related legislation also have made other forms of financial assistance available to healthcare providers, including through Medicare and Medicaid payments adjustments , such as a 20% add-on payment for hospital inpatient care provided to patients with COVID-19 and delays of Medicaid DSH reductions, and expansion of the Medicare Accelerated and Advance

Payment Program.

Providers indirectly benefit from a temporary increase in federal funds for state Medicaid expenditures for states that maintain cont inuous Medicaid enrollment, amo ng other requirements.

However, the continuous coverage requirement expires as of April 1, 2023, and the increase in federal funding will be phased out through calendar year 2023.

Expiration of the continuous coverage requirement may lead to Medicaid coverage disruptions and dis-enrollments of current Medicaid enrollees.

As another way to offer financial relief to providers, Congress temporarily suspended the Medicare sequestration payment adjustment, which would have otherwise reduced payments to Medicare providers by 2% as required by the Budget Control Act of 2011, or the BCA.

The sequestration adjustment was phased back in with a 1% reduction beginning April 1, 2022, and returned to 2% on July 1, 2022.

The BCA sequestration has been extended through the first six months of 2032.

The ARPA, in addition to providing funding for healthcare providers, increases the federal budget deficit in a manner that triggers an additional statutorily mandated sequestration under the Pay-As-You-Go Act of 2010, or the PAYGO Act.

As a result, an additional payment reduction of up to 4% was required to take effect in January 2022.

However, Congress has delayed implementation of this payment reduction until 2025.

Beyond financial assistance, federal and state governments have enacted legislation and established regulations intended to increase access to medical supplies and equipment and ease legal and regulatory burdens on healthcare providers.

These efforts have included, for example, expanding access to and payment for telehealth services and prioritizing review of drug applications to help with shortages of emergency drugs.

Many of the federal and state legislative and regulatory measures allowing for flexibility in delivery of care and various financial supports for healthcare providers are available only for the duration of the COVID-19 public health emergency.

Most states have ended their state-level emergency declarations.

The current HHS declaration expires May 11, 2023.

The presidential administration has indicated that the public health emergency will not be extended.

Termination of the public health emergency may impact our operations and financial results.

For example, the 20% add-on payment for hospital inpatient care provided to patients diagnosed with COVID-19 will end.

There is still uncertainty regarding the magnitude and timing of any future payments or benefits that we may receive or realize under the CARES Act and other stimulus and relief legislation passed in response to the COVID-19 pandemic.

However, we do not expect to receive or recognize any significant level of payments or benefits under the CARES Act and other existing legislation in future periods, which may adversely impact our business and financial results in comparison to prior periods in which a higher level of payments and benefits were received.

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 may give consideration to divesting certain of our hospitals and non-hospital businesses.

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.

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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 approvals, which, if not satisfied or obtained, may prevent us from completing the sale.

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.

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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 acquired in the future may have similar financial performance issues.

In the past, we have experienced delays in improving the operating margins or effectively integrating the operations of certain acquired hospitals.

In the future, if we are unable to improve the operating margins of acquired hospitals, operate them profitably, or effectively integrate their operations, our results of operations and business may be adversely affected.

Moreover, hospitals that we have acquired, or in the future could acquire, may have unknown or contingent liabilities, including liabilities associated with ongoing legal proceedings or for failure to comply with healthcare laws and regulations.

Hospitals or other businesses acquired in the future may have similar financial performance issues.

In the past, we have experienced 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.

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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, participate in favorable payment tiers or provider networks, and otherwise affect our competitive position.

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, participate in favorable payment tiers or provider networks, and otherwise 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.

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We also face competition from other specialized care providers, including outpatient surgery, orthopedic, oncology and diagnostic centers.

Some competitors are implementing physician alignment strategies, such as employing physicians, acquiring physician practice groups, and participating in ACOs, or other clinical integration models.

Cost-reduction strategies by large employer groups and their affiliates may increase this competition.

At December 31, 2022, 30 of our hospitals competed with more than one other non-affiliated hospital in their respective primary service areas.

At December 31, 2023, 43 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.

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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.

The CMS Care Compare website makes available to the public certain data that hospitals submit in connection with Medicare reimbursement claims, including performance

data related to quality measures and patient satisfaction surveys.

The CMS Care Compare website makes available to the public certain data that hospitals submit in connection with Medicare reimbursement claims, including performance data related to quality measures and patient satisfaction surveys.

Further, every hospital must establish and update annually a public, online listing of the hospital’s standard charges for 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, alternatively, 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 starting January 1, 2023, health insurers must provide online price comparison tools to help individuals get personalized cost estimates for covered items and 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.

If any of our hospitals achieve poor results (or results that are lower than our competitors) on the quality measures or on patient satisfaction surveys, or if our standard charges are higher than our competitors, we may attract fewer patients.

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 (in advance of the date of the scheduled item or service or upon request) 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.

Until HHS issues additional regulations, the agency is deferring enforcement of the good faith estimate requirement for insured patients, and is also deferring enforcement with regard to good faith estimates sent to uninsured or self-pay patients that do not include expected charges for co-providers or co-facilities.

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.

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We have a participation agreement with HealthTrust, a GPO.

The current term of this agreement extends through December 2023, with automatic renewal terms of one year unless either party terminates by giving notice of non-renewal.

The current term of this agreement extends through the end of December 2024, 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 market pressure from pharmaceutical companies and new product releases.

The COVID-19 pandemic continues to cause increased demand for certain medical supplies, which has resulted in, and may continue to result in, higher costs and supply shortages.

Further, costs of supplies and drugs may continue to increase due to market pressure from pharmaceutical companies and new product releases, among other factors.

Also, there can be no assurance that our arrangement with HealthTrust will provide the discounts we expect to achieve.

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However, as federal healthcare expenditures continue to increase and state governments continue to face budgetary shortfalls, federal and state governments have made, and continue to make, significant changes in the Medicare and Medicaid programs, including reductions in reimbursement levels.

For example, as a result of sequestration measures that extend through April 2032, Medicare payments are automatically reduced by 2%.

In addition, as a result of the ARPA, an additional Medicare payment reduction of up to 4% was required to take effect in January 2022;

however, Congress has delayed implementation of this reduction until 2025.

In addition, CMS may implement changes through new or modified demonstration projects authorized pursuant to Medicaid waivers.

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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 to discount payments for their services in exchange for exclusive or preferred participation in their benefit plans, restricting coverage through utilization review, reducing coverage of inpatient and emergency room services and shifting care to outpatient settings, requiring prior authorizations, and implementing alternative payment models.

The ability of commercial payors to control healthcare costs using these measures may be enhanced by

the increasing consolidation of insurance and managed care companies and vertical integration of health insurers with healthcare providers.

The ability of commercial payors to control healthcare costs using these measures may be enhanced by the increasing consolidation of insurance and managed care companies, vertical integration of health insurers with healthcare providers and regulatory changes.

Limitations on balance billing may also reduce the amount that hospitals and other providers are able to collect for out-of-network services.

For example, t he 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 IDR process for providers and payors to handle payment disputes that cannot be resolved through direct negotiation.

In August 2022, HHS, together with other government agencies, issued a final rule to implement the IDR provisions of the No Surprises Act, updating an interim final rule published in 2021.

The regulations provide that, when making a payment determination, the IDR must consider the QPA (which is generally the payor’s median contracted rate for the same or similar service in an area) and all additional permissible information submitted by each party.

The IDR entity must select the offer that best represents the value of the item or service under dispute.

The final rule establishing the IDR process is currently the subject of legal challenges, which many result in delays in claim resolution.

In addition, price transparency initiatives, such as those included in the No Surprises Act and other federal and state laws and regulations, may impact our ability to obtain or maintain favorable contract terms.

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.

In addition, price transparency initiatives may impact our ability to obtain or maintain favorable contract terms.

For example, the No Surprises Act requires providers to send 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.

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Further, hospitals are required to publish online payor-specific negotiated charges and de-identified minimum and maximum charges.

In addition, starting January 1, 2023, health insurers must provide online price comparison tools to help individuals get personalized cost estimates for covered items and services.

In addition, health insurers must provide online price comparison tools to help individuals get personalized cost estimates for covered items and services.

During the year ended December 31, 2023, 64.7% of our net operating revenues came from commercial payors.

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In recent years, federal and state legislatures have considered or passed various proposals impacting or potentially impacting the size of the uninsured population.

For example, early COVID-related legislation authorized a temporary increase in federal funds for state Medicaid expenditures in states that maintain continuous Medicaid enrollment, among other requirements.

However, the continuous coverage requirement expires as of April 1, 2023, and the increase in federal funding will be phased out through calendar year 2023.

Expiration of the continuous coverage requirement may lead to Medicaid coverage disruptions and dis-enrollments of current Medicaid enrollees.

Furthermore, 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.

The ARPA provides additional financial incentives to expand Medicaid for states that have not already done so, temporarily increases the value of premium tax credit subsidies for subsidy-eligible individuals purchasing health insurance coverage through the federal and state-run marketplaces and expands eligibility for the tax credit subsidies to more individuals.

The Inflation Reduction Act, enacted in August 2022, extends the enhanced subsidies through 2025.

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, early COVID-related legislation authorized a temporary increase in federal funds for state Medicaid expenditures in states that maintained continuous Medicaid enrollment, among other requirements.

The resumption of Medicaid eligibility redeterminations following the expiration of this continuous coverage requirement in April 2023 has resulted in significant Medicaid coverage disruptions and dis-enrollments.

Medicaid enrollment is generally expected to decline through fiscal year 2024 (which ends June 30, 2024, in most states).

CMS has required certain states to pause disenrollments due to noncompliant renewal systems.

The ARPA 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 the enhanced subsidies through 2025.

In addition, although the federal financial penalty associated with the Affordable Care Act’s mandate that individuals enroll in an insurance plan has been effectively eliminated, some states have imposed individual health insurance mandates with financial penalties for noncompliance.

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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 cover items and services that are reasonably expected to be provided together with the primary item or services, including those that may be provided by other providers.

If the uninsured or self-pay patient receives a bill that is substantially greater than the expected charges in the good faith estimate or the provider furnishes an item or service that was not included in the good faith estimate , they may initiate a patient-provider dispute resol ution 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, r esult 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.

The estimate must be provided in advance of the scheduled date for the item or service or upon request and cover items and services that are reasonably expected to be provided together with the primary item or services, including those that may be provided by other providers.

If the uninsured or self-pay patient receives a bill that is substantially greater than the expected charges in the good faith estimate 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 are broader than, the current negative macroeconomic conditions impacting the United States economy.

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 negative 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.

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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, or changes in medical technology can have an impact on the demand for services at our hospitals and affiliated providers.

In addition, certain of our facilities are located in hurricane-prone coastal regions in Florida and other states, and our operations may be adversely impacted by hurricanes, tornadoes, winter storms, and other severe weather conditions (such as was the case with Hurricane Ian, which adversely impacted our financial results during the third and fourth quarter of 2022), which 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, 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, certain of our facilities are located in hurricane-prone coastal regions in Florida and other states, and our operations may be adversely impacted by hurricanes, tornadoes, winter storms, and other severe weather conditions, which 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.

A future pandemic, epidemic or outbreak of an infectious disease in the markets in which we operate or that otherwise impacts our facilities could adversely impact our business.

If a future pandemic, epidemic, or outbreak of an infectious disease or other public health crisis were to affect our markets, our business could be adversely affected.

A deterioration of public health conditions associated with COVID-19, or a future pandemic, epidemic or outbreak of an infectious disease in the markets in which we operate or that otherwise impacts our facilities could adversely impact our business.

As a provider of healthcare services, we were significantly impacted by the public health and economic effects of the COVID-19 pandemic.

If public health conditions related to COVID-19 significantly worsen, our business and financial results could be adversely impacted.

Moreover, conditions related to COVID-19 continue to evolve, and we may not be able to predict or effectively respond to future developments.

In response to the COVID-19 pandemic, the federal government authorized financial relief for eligible healthcare providers through the Public Health and Social Services Emergency Fund, or PHSSEF.

Although recipients are not required to repay funding received, provided they attest to and comply with certain terms and conditions, changes to interpretations of guidance on the underlying terms and conditions may result in the derecognition of amounts previously realized.

To the extent that any unrecognized PHSSEF payments that have been received by us do not qualify for reimbursement, we may be required to return such payments.

In addition, if a future pandemic, epidemic, or outbreak of an infectious disease or other public health crisis were to affect our markets, our business 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 were involved in treating patients for such a contagious disease, other patients might cancel elective procedures or fail to seek needed care at our facilities.

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, any such pandemic might adversely impact our business by causing a temporary shutdown or diversion of patients, by disrupting or delaying production and delivery of materials and products in the supply chain or by causing staffing shortages in our facilities.

Although we have disaster plans in place and operate pursuant to infectious disease protocols, the potential impact, as well as the public’s and government’s response to, of 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.

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.

The industry trend towards value-based purchasing may negatively impact our business.

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For example, hospital payments may be negatively impacted by the occurrence of HACs.

Medicare does not reimburse for care related to HACs, and hospitals in the bottom quartile of HAC rates receive a 1% reduction in their total Medicare payments the following year.

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.

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 and Medicaid require hospitals to report certain quality data to receive full reimbursement updates.

HHS has focused on tying Medicare payments to quality or value through alternative payment models, which generally aim to make providers attentive to the quality and cost of care they deliver to patients.

HHS continues to focus on tying Medicare payments to quality or value through alternative payment models, which generally aim to make providers 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 receive one payment for services provided to patients for certain medical conditions or episodes of care, accepting accountability for costs and quality of care.

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A mandatory radiation oncology bundled payment model was expected to begin January 1, 2023, but CMS has indefinitely delayed its implementation.

In a strategic report issued in 2021 and updated in 2022, the CMS Innovation Center highlighted the need to accelerate the movement to value-based care and drive broader system transformation.

The CMS Innovation Center signaled its intent to streamline its payment models and to increase provider participation through implementation of more mandatory models.

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.

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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 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 sm all number of states , which make s us particularly sensitive to regulatory and economic changes in those states.

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.

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Changes to the Medicaid programs in these states could also have an adverse effect on our business, financial condition, results of operations, or cash flows.

For example, the Texas Waiver Program, which provides funding for uncompensated care and delivery system reform initiatives, is operated under a waiver granted pursuant to Section 1115 of the Social Security Act.

The Texas waiver continues through 2030, but a separate directed payment program for hospitals in Texas expires August 31, 2023.

For example, the Texas Healthcare Transformation and Quality Improvement Program, or the Texas Waiver Program, which enables the expansion of Medicaid managed care programs in the state, provides funding for uncompensated care and includes several directed payment programs, is operated under a waiver granted pursuant to Section 1115 of the Social Security Act.

The Texas waiver continues through 2030, but directed payment programs have more limited approval periods, such as the Comprehensive Hospital Increase Reimbursement Program, or CHIRP, which is currently set to expire on August 31, 2024.

If Texas is unable to obtain future extensions or other approvals of the directed payment program or similar programs, our revenues could be negatively impacted.

In recent years, aspects of existing or proposed Medicaid waiver programs have been subject to legal challenge.

The state has submitted an amendment to the Texas Waiver Program addressing postpartum coverage, and may propose other amendments in the future.

It is difficult to predict whether and how Medicaid programs, including their waiver programs, might be modified, extended or eliminated, any of which could negatively impact our revenues.

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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-back companies seeking to acquire or affiliate with physicians or physician practices.

In addition, we may face increased challenges recruiting and retaining quality physicians as the physician population reaches retirement age, especially if there is a shortage of physicians willing and able to provide comparable services.

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, especially 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 or the difficulties physicians may experience in obtaining professional liability insurance.

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We compete with other healthcare providers in recruiting and retaining qualified facility management and personnel responsible for the daily operations of our healthcare facilities, including nurses, other non-physician healthcare professionals and medical support personnel.

The healthcare industry has been experiencing a challenging labor market arising out of current macroeconomic conditions and the COVID-19 pandemic, and our hospitals and other healthcare facilities, like many other healthcare providers, have experienced increased labor costs.

The healthcare industry has been experiencing a challenging labor market arising out of current macroeconomic conditions, and our hospitals and other healthcare facilities, like many other healthcare providers, have experienced increased labor costs.

In some markets in which we operate, a shortage of available nurses, other healthcare professionals and medical support personnel has been a significant operating issue for healthcare providers, which has been exacerbated by current labor market conditions as noted above.

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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 minimum wage, which has created more competition for this sector of employees.

T he 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.

Moreover, labor shortages, including with respect to nurses, may be further exacerbated by the CMS rule regarding vaccine requirements as noted above.

In addition, the states in which we operate could adopt mandatory nurse-staffing ratios or could reduce mandatory nurse-staffing ratios already in place.

State-mandated nurse-staffing ratios could significantly affect labor costs and have an adverse impact on revenues if we are required to limit admissions in order to meet the required ratios.

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, the states in which we operate could adopt mandatory nurse-staffing ratios, could revise mandatory nurse-staffing ratios already in place or adopt other measures aimed at regulating staffing.

State-mandated nurse-staffing ratios and similar measures could significantly affect labor costs and have an adverse impact on revenues if we are required to limit admissions 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, 2022, certain employees at five of our hospitals were represented by various labor unions.

At December 31, 2023, 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.

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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.

We contract with various third parties who provide hospital-based physicians, 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.

The success of our hospitals depends in part on the adequacy of staffing, including through contracts with third parties.

If we are unable to adequately contract with providers, or the providers with whom we contract become unable to fulfill their contracts, our admissions may decrease, and our operating performance, capacity and growth prospects may be adversely affected.

Further, 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.

These developments with respect to providers of outsourced medical specialists, and our inability to effectively respond to and mitigate the potential impact of such developments, may disrupt our ability to provide healthcare services, which may adversely impact our business and financial results.

Risks Related to Legal Proceedings

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Risks Related to Government Regulation

We are unable to predict the ultimate impact of health reform initiatives on our business.

Our business may be adversely impacted by health reform initiatives.

In recent years, the healthcare industry has undergone significant changes, many of which have been aimed at reducing costs and government spending.

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The law 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.

The Affordable Care Act has been, and continues to be, subject to legislative and regulatory changes and court challenges.

For example, effective January 2019, the financial penalty for individuals that fail to maintain insurance coverage associated with the individual mandate was effectively eliminated.

However, some states have imposed individual health insurance mandates, and other states have explored or offer public health insurance options.

To increase access to health insurance during the COVID-19 pandemic, the ARPA enhanced subsidies for individuals eligible to purchase coverage through Affordable Care Act marketplaces as part of the APRA.

The Inflation Reduction Act, enacted in August 2022, extends these enhanced subsidies through 2025.

In addition, some states have imposed individual health insurance mandates, and other states have explored or offer public health insurance options.

To increase access to health insurance during the COVID-19 pandemic, the ARPA enhanced subsidies for individuals eligible to purchase coverage through Affordable Care Act marketplaces.

Subsequent legislation extended these enhanced subsidies through 2025.

These changes and initiatives may impact the number of individuals that elect to obtain public or private health insurance or the scope of such coverage, if purchased.

Other recent 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 and the relationships between hospitals, patients, payors, and ancillary providers (such as anesthesiologists, radiologists, and pathologists).

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.

Other recent 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.

It also establishes an IDR process for providers and payors to handle payment disputes that cannot be resolved through direct negotiations.

Trends toward transparency and value-based pricing may impact our competitive position and patient volumes.

For example, the CMS Care Compare website makes publicly available certain data on hospital performance on quality measures and patient satisfaction.

The CMS Care Compare website makes publicly available certain data on hospital performance on quality measures and patient satisfaction.

Further, Medicare reimbursement for hospitals is adjusted based on quality and efficiency measures.

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 how the Affordable Care Act will be further changed 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, and thereby have an adverse effect on our business.

There is also uncertainty regarding whether, when, and what other health reform measures 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.

For example, some members of Congress have proposed measures that would expand government-funded coverage.

CMS administrators may grant states various flexibilities in the administration of state Medicaid programs and make changes to Medicaid payment models, including adopting value-based care models.

We are unable to predict the nature and success of current and future health reform initiatives, any of which may have an adverse impact on our business.

CMS administrators may make changes to Medicaid payment models and grant states various flexibilities in the administration of state Medicaid programs, including changes encouraging the adoption of value-based care models.

Some of these changes may result in coverage reductions or decreased enrollment.

Reductions in the number of insured individuals or the scope of insurance coverage may have an adverse effect on our business.

Other industry participants, such as private payors and large employer groups and their affiliates, may also introduce financial or delivery system reforms.

It is difficult to predict the nature and/or success of current and future health reform initiatives, 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 laws and regulations at the federal, state and local government levels.

These laws and regulations include standards addressing, among other issues , licensure, certification, and enrollment with government programs;

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, among other issues, licensure, certification, and enrollment with government programs;

the necessity and adequacy of medical care;

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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;

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interoperability and refraining from information blocking;

development and use of artificial intelligence and other predictive algorithms;

debt collection;

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and communications with patients and consumers.

Examples of these laws include, but are not limited to, HIPAA, the Stark Law, the federal Anti-Kickback Statute, the FCA, EMTALA, the No Surprises Act and similar state laws.

Examples of these laws include, but are not limited to, HIPAA, the Stark Law, the federal Anti-Kickback Statute, the federal False Claims Act, the EMTALA and similar state laws.

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.

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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 certain legal matters, see “Legal Proceedings” in Part I, Item 3 of this Form 10-K.

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, money 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, civil lawsuits and criminal penalties.

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In addition, other legislation or regulations may be adopted that could adversely affect our business.

If there are delays in regulatory updates by governmental entities to federal and state healthcare programs, we may experience increased volatility in our operating results as such delays may result in a timing difference between when such program revenues are earned and when they become known or estimable for purposes of accounting recognition.

We derive a significant amount of our net operating revenues from governmental healthcare programs, primarily Medicare and Medicaid.

The reimbursements due to us from those programs are subject to legislative and regulatory changes that can have a significant impact on our operating results.

When delays occur in the implementation of regulations or passage of legislation, there is the potential for material increases or decreases in operating revenues to be recognized in periods subsequent to when such related services were performed, resulting in the potential for an adverse effect on our consolidated financial position and consolidated results of operations.

Security breaches, loss of data, and 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, and other cybersecurity incidents, could adversely affect our business, results of operations and financial condition.

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, and 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.

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HIPAA requires covered entities like us to develop and maintain policies and procedures with respect to the privacy and security of PHI and to adopt administrative, physical and technical safeguards to protect such information.

HIPAA also regulates permissible uses and disclosures of PHI;

for example, HHS issued guidance indicating certain data collected on websites and mobile applications offered by HIPAA-regulated entities may be PHI and warning against the use of third-party tracking technologies such as pixels and cookies on such sites.

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.

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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, we have to comply with their stricter provisions.

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 more general consumer protection laws and regulations in connection with our business activities.

For example, the Federal Trade Commission uses its consumer protection authority to initiate enforcement actions in response to data breaches.

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.

To the extent we use, may use or permit the data we create, receive, maintain, and transmit to be used by any artificial intelligence, or AI, or machine learning, or ML, platforms, we may be subject to additional risks under health privacy and other laws and regulations.

The regulatory framework for AI/ML, particularly in patient care (e.g., through the use of clinical decision support tools), is evolving and remains uncertain.

For example, in December 2023, HHS finalized transparency requirements for AI and other predictive algorithms used in certified health information technology, such as decision support interventions.

New laws, regulations, and policies may be adopted, including as a result of a recent executive order on AI, and existing laws and regulations may be interpreted in new ways that would affect our operations and the ways in which we may use AI technology.

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.

Further, the cost to comply with such 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 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.

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.

Further, any such proceedings and any subsequent adverse outcomes may subject us to significant negative publicity.

While the full impact of regulatory and legal risks associated with AI/ML is unknown, if any of these events were to occur, our business, results of operations and financial condition could be materially adversely affected.

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 recently 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 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.

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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.

If our adoption and utilization of electronic health record systems fails to satisfy HHS standards or if we fail to comply with inoperability requirements, which may be burdensome, our business and results of operations could be adversely affected.

Healthcare technology initiatives, particularly those related to sharing patient data and interoperability, may adversely affect our business and results of operations.

Under the Health Information Technology for Economic and Clinical Health Act, or HITECH, and other laws, 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.

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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 is also promoting interoperability and increasing patient access to electronic health information.

As EHR technologies have become widespread, the federal government’s focus has shifted to increasing patient access to healthcare data and promoting 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.

We may be subject to penalties or other disincentives or experience reputational damage for failure to comply.

Current and future initiatives related to healthcare technology 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.

It is difficult to predict the impact of these initiatives.

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.

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.

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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.

State efforts to regulate the sale of hospitals operated by municipal or not-for-profit entities could prevent us from acquiring these types of hospitals.

Many states have adopted legislation regarding the sale or other disposition of hospitals operated by municipal or not-for-profit entities.

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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.

While these review 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 acquisitions.

However, future state actions could delay or even prevent our ability to acquire hospitals once we return to our acquisition strategy.

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.

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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 and recent developments have increased our risk of future goodwill 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.

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We performed our last annual goodwill impairment evaluation during the fourth quarter of 2023 using the October 31, 2023 measurement date, which indicated no impairment.

However, declines in the fair market value of our senior and unsecured notes and common stock during the year ended December 31, 2022, as well as macroeconomic conditions and our financial results during the year ended December 31, 2022 (including the effect of increased wage and contract labor expense), have increased our risk of future goodwill impairment.

Taking into account these developments, 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.

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.

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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 implementations of new technology, updates or enhancements of such 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.

In addition, our results of operations may be adversely impacted by costs associated with new and expensive technology.

We also 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.

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.

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.

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 major earthquake, natural disaster, fire, telecommunications failure, power outages, new system implementations, computer viruses, ransomware or other malware, security breaches, cyber-attacks (including ransomware), human errors (such as inadvertent misuse by employees), acts of war, terrorist or criminal activities or other catastrophic events.

Our or a third party’s disaster recovery planning cannot account for all eventualities, and may not be sufficient to mitigate against or recover from such events.

of such data, interruptions and delays in our normal business operations, potential liability under applicable laws, regulatory penalties, and damage to our reputation.

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, damage our reputation, and otherwise be disruptive to our business.

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.

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 threats, including those related to the use of ransomware and other malicious software or other attempts by third parties to access, acquire, use, disclose, misappropriate or manipulate our information or disrupt our operations.

In spite of our security measures, our information technology and infrastructure have been subject to cyber-attacks and security breaches from time to time, including the security breach disclosed by us on February 13, 2023, as further discussed below.

Moreover, advanced new attacks against information systems and devices against us or our third-party vendors create risk of cybersecurity incidents, including ransomware, malware and phishing incidents.

For example, recently, remote code execution vulnerabilities in certain applications have presented a new attack vector for potential malicious attackers, including nation-state actors and known ransomware attackers.

In addition, the volume and intensity of cyber-attacks on hospitals and health systems continues to increase.

We are regularly the target of attempted cybersecurity and other threats that could have a security impact, and we expect to continue to experience an increase in cybersecurity threats in the future.

These risks include incidents involving ransomware and other malicious software, phishing, or other attempts by third parties to access, acquire, use, disclose, misappropriate or manipulate our information or disrupt our operations.

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.

Furthermore, 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.

In addition, cybersecurity threats continue to evolve.

For example, remote code execution vulnerabilities in certain applications have presented a new attack vector for potential malicious attackers.

Additionally, the rapid evaluation and increased adoption of artificial intelligence technologies may heighten our cybersecurity risks by making cyber-attacks more difficult to detect, contain and mitigate.

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.

Cybersecurity and the continued development and enhancement of our controls, process and practices designed to protect our information systems from attack, damage or unauthorized access, acquisition, use or disclosure remain a priority for us.

Our ability to recover from a ransomware or other cyber-attack is dependent on these practices, including successful backup systems and other recovery procedures.

As cybersecurity threats continue to evolve, 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, but we still might not be able to anticipate or prevent certain attack methods.

As previously disclosed in a Current Report on Form 8-K filed by us on February 13, 2023, 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, or PI, of certain patients of our healthcare facilities were exposed to the attacker.

We have incurred, and may incur in the future, expenses and losses related to this incident, some of which may not be covered by our cyber/privacy liability insurance policies.

While we are continuing to measure the impact of this security breach, including certain remediation expenses and other potential liabilities, we do not currently believe this incident will have a material adverse effect on our business, operations, or financial results;

however, we remain subject to risks and uncertainties as a result of this security breach, including legal, reputational, and financial risks, the results of our ongoing investigation of this security breach, any potential regulatory inquiries and/or litigation to which we may become subject in connection with this security breach, and the extent of remediation and other additional costs that may be incurred by us in connection with this security breach.

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.

For example, medical devices that connect to hospital networks or the internet may be vulnerable to cybersecurity incidents, which may impact patient safety.

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.

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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.

If we or any of our third-party service providers or certain other third-parties are subject to cyber-attacks or security or data breaches in the future, this could result in harm to patients;

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;

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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.

Additionally, while we have insurance coverage designed to address certain aspects of cybersecurity risks in place, such insurance coverage may be insufficient to cover all losses or all types of claims that may arise.

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.

Moreover, 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.

Additionally, 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.

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Any of the foregoing could have an adverse effect on our business, financial condition or results of operations.

Unresolved Staff Comments

If the redesign and consolidation of key business functions, including through the implementation of a core enterprise resource planning system, or ERP, does not proceed as expected or is not completed successfully, our business and financial results may be adversely impacted.

We have undertaken a 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 and continue to expand shared business operations to carry out certain financial and operational functions, and are implementing a new ERP.

Implementation of individual modules of the ERP and other aspects of this process, which began in the fourth quarter of 2023, are expected to occur over a multi-year period.

The redesign of various business processes and implementation of this ERP and other aspects of this transformative process requires an investment of significant personnel and financial resources, including substantial expenditures for third-party consultants and system hardware and software.

This implementation process could disrupt our operations or otherwise adversely affect us, including as the result of delays, disruptions to business continuity, higher than anticipated expenditures, potential design defects, data migration issues, diversion of management’s attention from other key priorities, increased cybersecurity risks and adverse impacts on the effectiveness of our internal controls over financial reporting.

If we are unable to complete this redesign and consolidation of key business functions, including the implementation of the ERP, effectively, on a timely basis, or at all, our financial position, results of operations and cash flows may be adversely affected.

Moreover, there is no assurance that this new ERP and other aspects of this process, once implemented, will meet our current or future business needs or will operate as intended.

Unresolve d Staff Comments

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, and 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 trainings 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;

• 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 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.

In particular, on February 13, 2023, we disclosed a security breach in which a third-party vendor that provides a secure file transfer software platform utilized by our subsidiaries experienced a security breach whereby personal information of certain patients of our healthcare facilities were exposed to the attacker.

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, 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.

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's 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 Information Security Officer, or the CISO, 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 CISO.

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 CISO 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 CISO.

Our current CISO was appointed as our Vice President and Chief Information Security Officer in 2021.

Our current CISO has expertise in cybersecurity risk management through his more than 25 years of experience in cybersecurity, technology and data privacy roles, including his service with the Company since 2021 and his service as chief information security officer at another large organization prior to being employed by us.

In addition, other individuals on our IT security 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 IT security 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.

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.

For each of our hospitals owned or leased as of December 31, 2023, the following table shows its location, the date of its acquisition or lease inception and the number of licensed beds:

South Baldwin Regional Medical Center

Grandview Medical Center

Flowers Hospital

Medical Center Enterprise

Gadsden Regional Medical Center

Crestwood Medical Center

Mat-Su Regional Medical Center

Western Arizona Regional Medical Center

Bullhead City

Northwest Medical Center

Oro Valley Hospital

Northwest Medical Center Sahuarita

November, 2020

Northwest Medical Center Houghton

Northwest Health System

Northwest Medical Center - Bentonville

Northwest Medical Center - Springdale

Willow Creek Women’s Hospital

Northwest Health Physician’s Specialty Hospital

Siloam Springs Regional Hospital

Siloam Springs

February, 2009

North Okaloosa Medical Center

Shorepoint Health Port Charlotte

Port Charlotte

January, 2014

Shorepoint Health Punta Gorda

January, 2014

Lower Keys Medical Center

January, 2014

Physicians Regional Healthcare System - Collier

January, 2014

Physicians Regional Healthcare System - Pine Ridge

January, 2014

Santa Rosa Medical Center

January, 2014

East Georgia Regional Medical Center

January, 2014

Lutheran Health Network

Bluffton Regional Medical Center

Dupont Hospital

Lutheran Hospital

Lutheran Musculoskeletal Center

Lutheran Downtown Hospital

Dukes Memorial Hospital

Kosciusko Community Hospital

Northwest Health - Porter Hospital

Northwest Health - La Porte Hospital

Northwest Health - Starke Hospital

Merit Health Wesley

Merit Health River Region

Merit Health Biloxi

January, 2014

Merit Health Central

January, 2014

Merit Health Rankin

January, 2014

Merit Health Madison

January, 2014

Merit Health River Oaks

January, 2014

Merit Health Woman's Hospital

January, 2014

Merit Health Natchez

October, 2014

Moberly Regional Medical Center

November, 1993

Northeast Regional Medical Center

December, 2000

Poplar Bluff Regional Medical Center

January, 2014

Eastern New Mexico Medical Center

Carlsbad Medical Center

Mountain View Regional Medical Center

North Carolina

Lake Norman Regional Medical Center

January, 2014

Davis Regional Medical Center

January, 2014

AllianceHealth Madill

January, 2014

AllianceHealth Durant

January, 2014

Commonwealth Health Network

Wilkes-Barre General Hospital

Regional Hospital of Scranton

Moses Taylor Hospital

January, 2012

Tennova Healthcare - Cleveland

October, 2005

Tennova Healthcare - Clarksville

Tennova - Jefferson Memorial Hospital

Jefferson City

January, 2014

Tennova - LaFollette Medical Center

January, 2014

Tennova - Newport Medical Center

January, 2014

Tennova - North Knoxville Medical Center

January, 2014

Tennova - Turkey Creek Medical Center

January, 2014

Lake Granbury Medical Center

January, 1997

Laredo Medical Center

October, 2003

Navarro Regional Hospital

Longview Regional Medical Center

Woodland Heights Medical Center

DeTar Healthcare System

Cedar Park Regional Medical Center

December, 2007

Total Licensed Beds at December 31, 2023

Total Hospitals at December 31, 2023

(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.

Lega l 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.

Shareholder Litigation

Caleb Padilla, individually and on behalf of all others similarly situated v.

Community Health Systems, Inc., Wayne T.

Smith, Larry Cash, and Thomas J.

This purported federal securities class action was filed in the United States District Court for the Middle District of Tennessee on May 30, 2019.

It seeks class certification on behalf of purchasers of our common stock between February 20, 2017 and February 27, 2018 and alleges misleading statements resulted in artificially inflated prices for our common stock.

On November 20, 2019, the District Court appointed Arun Bhattacharya and Michael Gaviria as lead plaintiffs in the case.

The lead plaintiffs filed a consolidated class complaint on January 21, 2020.

The Company filed a motion to dismiss the consolidated class complaint on March 23, 2020, and the District Court denied that motion on August 17, 2022.

We reached a tentative settlement of this matter, which was preliminarily approved by the District Court on May 31, 2023.

The Court granted final approval of the settlement on October 13, 2023.

Padilla Derivative Litigation .

Four purported shareholder derivative cases have been filed in two District Courts relating to the factual allegations in the Padilla litigation;

three of these cases have been consolidated in In re Community Health Systems, Inc.

Shareholder Derivative Litigation and are pending in the United States District Court for the District of Delaware ;

namely, Faisal Hussain v.

Smith, et al, filed August 12, 2019;

Susheel Tanjavoor v.

Smith, et al., filed August 29, 2019;

and Kevin Aronson v.

Smith, et al , filed April 29, 2020.

The fourth case, Roger Trombley v.

Smith, et al, filed August 20, 2019 (now Patrick Ayers v Wayne T.

Smith, et al ) , is pending in the United States District Court for the Middle District of Tennessee.

All four cases seek relief derivatively and on behalf of Community Health Systems, Inc.

against certain Company officers and directors based on alleged breaches of fiduciary duty, unjust enrichment, and other acts related to certain Company disclosures in 2017 and 2018 regarding the Company’s adoption of Accounting Standards Update 2014-09, which the Company adopted effective January 1, 2018.

We have reached a tentative settlement of these cases, which was preliminarily approved by the District Court on December 4, 2023.

The District Court granted final approval of the settlement on January 29, 2024 and ordered dismissal of the case.

Government Investigations and Qui Tam Litigation

ex rel Larry Bomar v.

Bayfront HMA Medical Center, LLC, et al – On September 14, 2017, our former hospital in St.

Petersburg, Florida received a civil investigative demand, or CID, from the United States Department of Justice for information concerning its historic participation in the Florida Low Income Pool Program.

The Low Income Pool Program, or LIP, is a funding pool to support healthcare providers that provide uncompensated care to Florida residents who are uninsured or underinsured.

The CID sought documentation related to agreements between the hospital and Pinellas County.

On June 13, 2019, an additional ten of our

affiliated hospitals in Florida received CIDs related to the same subject matter, along with two CIDs addressed to our affiliated management company and the Parent Company.

We cooperated fully with the investigation.

On September 15, 2021, the United States District Court for the Middle District of Florida ordered the unsealing of this qui tam complaint, which contains allegations related to the information sought in the September 14, 2017 CID.

Specifically, the relator claims our former hospital in St.

Petersburg – Bayfront Medical Center St.

Petersburg – along with other, unaffiliated hospitals violated the False Claims Act by allegedly making certain contributions to a non-profit entity for the purpose of receiving supplemental Medicaid funding.

The United States has declined to intervene in the case.

We filed a motion to dismiss on November 23, 2021, which the District Court granted without prejudice on January 24, 2023.

The relator filed a first amended complaint on February 14, 2023, our response to which was filed on February 28, 2023.

The District Court granted our motion to dismiss with prejudice on August 21, 2023.

The relator has filed a notice of appeal to the United States Court of Appeals for the Eleventh Judicial Circuit.

We have reached a tentative settlement of this matter, which is subject to approval by the Department of Justice.

On January 11, 2024, we received a Civil Investigative Demand 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.

We are cooperating fully with this investigation.

Commercial Litigation and Other Lawsuits

Thomas Mason, MD, Steven Folstad, MD and Mid-Atlantic Emergency Medical Associates, PA v Health Management Associates, LLC f/k/a Health Management Associates, Inc., Mooresville Hospital Management Associates d/b/a Lake Norman Regional Medical Center, Statesville HMA, LLC d/b/a Davis Regional Medical Center, Envision Healthcare Corporation f/k/a Emergency Medical Services Corporation, Emcare Holdings, Inc., and Emergency Medical Services, LP .

This alleged wrongful retaliation case is filed in the United States District Court for the Western District of North Carolina.

The plaintiffs allege their agreements with the defendants were terminated in retaliation for plaintiffs’ alleged refusal to admit patients unnecessarily to the defendant hospitals or otherwise perform unnecessary diagnostic testing.

The allegations of the complaint relate to time periods prior to the hospitals’ affiliation with the Company.

The plaintiffs filed a Third Amended Complaint on April 26, 2019.

The defendants filed motions to dismiss, which were granted in part and denied in part on September 5, 2019.

We have settled this matter, and the District Court ordered dismissal of the case on November 2, 2023.

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 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 has filed a notice of appeal to the United States Court of Appeals for the Third Judicial District.

Our motion for attorneys’ fees is still pending.

We continue to vigorously defend this case.

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 special dividend 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.

Federal Trade Commission v.

Novant Health, Inc.

and Community Health Systems, Inc.

On January 25, 2024, the Federal Trade Commission filed a Complaint for Temporary Restraining Order and Preliminary Injunction in the United States District Court for the Western District of North Carolina seeking to enjoin the consummation of our proposed sale of Lake Norman Regional Medical Center and Davis Regional Medical Center to Novant Health, Inc., or Novant, pursuant to the terms of a definitive agreement dated as of February 28, 2023, as amended, entered into by us with Novant.

The FTC alleges, among other things, that the proposed sale of the two hospitals would violate federal antitrust laws.

The administrative merits hearing on this matter will begin on April 29, 2024.

We will vigorously defend this case and plan to consummate this contemplated transaction with Novant in accordance with the terms of the definitive agreement in the event that we and Novant prevail in this litigation.

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.

Mine Saf ety Disclosures

Not applicable.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 1. Business