What changed in this filing

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Item 1. Legal Proceedings

2024-04-25 compared with 2023-10-26 · 37 added, 89 removed, 52 unchanged (71% of the section changed)

6 unchanged sentences

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.

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.

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The following legal proceedings are described in detail because, although certain legal proceedings may not be required to be disclosed in this Part II, Item 1 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 malpractice, 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 II, Item 1 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 have 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 , 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.

Both cases are currently stayed by court order until the United States District Court for the Middle District of Tennessee rules on the defendants’

motion for summary judgment, which has yet to be filed, in the Padilla action.

We have reached a tentative settlement of these cases, which will be subject to final approval by the District Court.

Qui Tam Litigation

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 II, Item 1 under SEC rules.

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.

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 Florida 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.

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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.

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.

3 unchanged sentences

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.

In addition, on January 11, 2024, we received a CID from the Department of Justice for documents and information relating to a variety of subjects, including practices and procedures related to utilization review, inpatient admissions and inpatient dialysis at our hospitals.

Based upon our review of the CID, the documents we have reviewed and the witnesses we have interviewed, we believe at this time that the CID relates to allegations made by a former employee at one of our hospitals in 2022 and that these allegations were thoroughly and fully investigated to our satisfaction at the time they were originally made.

We continue to cooperate fully with this investigation.

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.

A jury trial in this matter is set to begin on February 5, 2024.

We continue to vigorously defend this case.

Tower Health, f/k/a Reading Health System, et al v.

1 unchanged sentence

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 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 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.

Our motion for attorneys’ fees has been stayed pending the outcome of Tower Health's appeal.

We continue to vigorously defend this case.

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We continue to vigorously defend this case.

Federal Trade Commission v.

Novant Health, Inc.

and Community Health Systems, Inc.

On January 25, 2024, the FTC 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 is scheduled to begin on May 1, 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.

Risk F actors

The following supplements the Company’s risk factors previously disclosed in the 2022 Form 10-K by adding the following risk factors.

Except as set forth below, there have been no material changes with regard to the risk factors previously disclosed in the 2022 Form 10-K.

Risks Related to Human Capital

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 Cybersecurity and Technology

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 begun 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 are creating shared business operations to carry out certain financial and operational functions and are designing and implementing a new ERP system.

We are currently in the design phases of the project and expect implementation of individual modules of the ERP and other aspects of this process 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.

There have been no material changes with regard to the risk factors previously disclosed in the 2023 Form 10-K.

Unregistered Sale of Equi ty Securities and Use of Proceeds

The following table contains information about our purchases of common stock during the three months ended September 30, 2023.

The following table contains information about our purchases of common stock during the three months ended March 31, 2024.

Purchased (a)

July 1, 2023 -

July 31, 2023

August 1, 2023 -

August 31, 2023

September 1, 2023 -

September 30, 2023

January 1, 2024 -

January 31, 2024

February 1, 2024 -

February 29, 2024

March 1, 2024 -

March 31, 2024

(a) 632,906 shares were withheld to satisfy the payment of tax obligations related to the vesting of restricted stock awards.

(b) We had no publicly announced repurchase programs for shares of our common stock during the three months ended September 30, 2023.

(b) We had no publicly announced repurchase programs for shares of our common stock during the three months ended March 31, 2024.

The ABL Facility and the indentures governing each series of our outstanding notes restrict our subsidiaries from, among other matters, paying dividends and making distributions to us, which thereby limits our ability to pay dividends and/or repurchase stock.

As of September 30, 2023, under the most restrictive test in these agreements (and subject to certain exceptions), we have approximately $300 million of capacity to pay permitted dividends and/or repurchase shares of stock or make other restricted payments.

As of March 31, 2024, under the most restrictive test in these agreements (and subject to certain exceptions), we have approximately $300 million of capacity to pay permitted dividends and/or repurchase shares of stock or make other restricted payments.

Defaults Upo n Senior Securities

2 unchanged sentences

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-Q

Item 1. Legal Proceedings