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Item 5. Market for Registrant’s Common Equity

2021-02-18 compared with 2020-02-20 · 11 added, 1439 removed, 14 unchanged (99% of the section changed)

1 unchanged sentence

We completed an initial public offering of our common stock on June 14, 2000.

Our common stock began trading on June 9,

2000 and is listed on the New York Stock Exchange under the symbol CYH.

Our common stock began trading on June 9, 2000 and is listed on the New York Stock Exchange under the symbol CYH.

As of February 15, 2021, there were approximately 189 holders of record of our common stock.

Stock Performance Graph

The following

graph sets forth the cumulative return of our common stock during the five year period ended December 31, 2019, as compared to the cumulative return of the Standard & Poors 500 Stock Index (S&P 500) and the cumulative return

of the Dow Jones Healthcare Index.

The following graph sets forth the cumulative return of our common stock during the five year period ended December 31, 2020, as compared to the cumulative return of the Standard & Poor’s 500 Stock Index (S&P 500) and the cumulative return of the Dow Jones Healthcare Index.

The graph assumes an initial investment of $100 in our common stock and in each of the foregoing indices and the reinvestment of dividends where applicable.

The comparisons in the graph below are based on

historical data and are not indicative of, or intended to forecast, future performance of our common stock.

The market price of our common stock used to calculate the cumulative return has been adjusted in prior periods for the impact of the April

2016 QHC spin-off and related distribution of QHC common stock to our stockholders.

OF 5 YEAR CUMULATIVE TOTAL RETURN

The comparisons in the graph below are based on historical data and are not indicative of, or intended to forecast, future performance of our common stock.

The market price of our common stock used to calculate the cumulative return has been adjusted in prior periods for the impact of the April 2016 QHC spin-off and related distribution of QHC common stock to our stockholders.

COMPARISON OF 5 YEAR CUMULATIVE TOTAL RETURN

Among Community Health Systems, Inc., the S&P 500 Index, and the Dow Jones US Health Care Index

We are a holding company which operates through our subsidiaries.

The ABL Facility and the indentures

governing the senior and senior secured notes contain various covenants under which the assets of our subsidiaries are subject to certain restrictions relating to, among other matters, dividends and distributions, as referenced in the paragraph

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 December 31, 2019, under the most restrictive test in these agreements (and subject to certain exceptions), we have

approximately $200 million of capacity to pay permitted dividends and/or repurchase shares of stock or make other restricted payments.

The ABL Facility and the indentures governing the senior and senior secured notes contain various covenants under which the assets of our subsidiaries are subject to certain restrictions relating to, among other matters, dividends and distributions, as referenced in the paragraph below.

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 December 31, 2020, under the most restrictive test in these agreements (and subject to certain exceptions), we have approximately $200 million of capacity to pay permitted dividends and/or repurchase shares of stock or make other restricted payments.

The following table contains information about our purchases of common stock during the three months ended December 31, 2020.

Total Number of Shares

Purchased (a)

Average Price Paid

Total Number of Shares

Purchased as Part of Publicly

Announced Plans or

Maximum Number of Shares

That May Yet Be Purchased

Under the Plans or

October 1, 2019 - October 31, 2019

November 1, 2019 - November 30, 2019

December 1, 2019 - December 31, 2019

Includes 40,508 shares were withheld by us to satisfy the payment of tax obligations related to the vesting of

restricted stock awards.

We had no publicly announced plans or open market repurchase programs for shares of our common stock during the

three months ended December 31, 2019.

Selected Financial Data

The following table summarizes specified selected financial data and should be read in conjunction with our related Consolidated Financial

Statements and accompanying Notes to Consolidated Financial Statements.

Community Health Systems, Inc.

Five Year Summary of Selected Financial Data

Year Ended December 31,

(in millions, except share and per share data)

Consolidated Statement of (Loss) Income Data

Net operating revenues

Income (loss) from operations

(Loss) income from continuing operations

Net (loss) income

Net income attributable to noncontrolling interests

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

Basic (loss) earnings per share attributable to Community Health Systems, Inc.

stockholders (1):

Continuing operations

Discontinued operations

Net (loss) income

Diluted (loss) earnings per share attributable to Community Health Systems, Inc.

stockholders (1):

Continuing operations

Discontinued operations

Net (loss) income

Weighted-average number of shares outstanding:

Consolidated Balance Sheet Data

Cash and cash equivalents

Total assets (3)

Long-term obligations (3)

Redeemable noncontrolling interests in equity of consolidated subsidiaries

Community Health Systems, Inc.

stockholders (deficit) equity

Noncontrolling interests in equity of consolidated subsidiaries

Total per share amounts may not add due to rounding.

See Note 12 of the Notes to Consolidated Financial Statements included under Part II, Item 8 of this Form 10-K.

See Note 9 of the Notes to Consolidated Financial Statements included under Part II, Item 8 of this Form 10-K regarding the adoption of Accounting Standards Codification Topic 842, or ASC 842, effective January 1, 2019.

Managements Discussion and Analysis of Financial Condition and

Results of Operations

You should read this discussion together with our Consolidated Financial Statements and the accompanying Notes

to Consolidated Financial Statements and Selected Financial Data included elsewhere in this Form 10-K.

Executive Overview

We are one of the

largest publicly traded hospital companies in the United States and a leading operator of general acute care hospitals and outpatient facilities in communities across the country.

We provide healthcare services through the hospitals that we own and

operate and affiliated businesses in non-urban and selected urban markets throughout the United States.

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.

As of December 31, 2019, we owned or leased 102 hospitals, comprised of 100 general acute care hospitals and two stand-alone rehabilitation or psychiatric

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.

We have been implementing a portfolio rationalization and deleveraging strategy by divesting hospitals and

non-hospital businesses that are attractive to strategic and other buyers.

Generally, these businesses are not in one of our strategically beneficial service areas, are less complementary to our business

strategy and/or have lower operating margins.

In connection with our announced divestiture initiative, we have received offers from strategic buyers to buy certain of our assets.

After considering these offers, we have divested and expect to

continue to divest, hospitals and non-hospital businesses when we find such offers to be attractive and in line with our operating strategy.

Completed Divestiture and Acquisition Activity

During 2019, we completed the divestiture of 12 hospitals, including two hospitals the divestitures of which closed effective January 1,

2019 (for these hospitals, we received the net proceeds at a preliminary closing on December 31, 2018).

These 12 hospitals represented annual net operating revenues in 2018 of approximately $1.1 billion and, excluding the net proceeds for

the two hospitals that preliminarily closed on December 31, 2018, we received total net proceeds of approximately $335 million in connection with the disposition of these hospitals.

In addition, we completed the divestiture of three

hospitals on January 1, 2020 (discussed below) for which we received net proceeds of approximately $240 million at a preliminary closing on December 31, 2019.

During 2018, we completed the divestiture of 11 hospitals.

These 11 hospitals represented annual net operating revenues in 2017 of

approximately $950 million and, including the net proceeds for the two additional hospitals that preliminarily closed on December 31, 2018 noted above, we received total net proceeds of approximately $405 million in connection with

the disposition of these hospitals.

During 2017, we completed the divestiture of 30 hospitals included in continuing operations.

hospitals represented annual net operating revenues in 2016 of approximately $3.4 billion, and we received total net proceeds of approximately $1.7 billion in connection with the disposition of these hospitals.

The following table provides a summary of hospitals included in continuing operations that we divested during the years ended

December 31, 2019, 2018 and 2017:

Effective Date

2019 Divestitures:

Bluefield Regional Medical Center

Princeton Community Hospital Association

Bluefield, WV

October 1, 2020 -

Lake Wales Medical Center

Adventist Health System

Lake Wales, FL

September 1, 2019

Heart of Florida Regional Medical Center

Adventist Health System

Davenport, FL

September 1, 2019

Effective Date

College Station Medical Center

Joseph Regional Health Center

College Station, TX

August 1, 2019

Tennova Healthcare Lebanon

Vanderbilt University Medical Center

August 1, 2019

Chester Regional Medical Center

Medical University Hospital Authority

March 1, 2019

Carolinas Hospital System Florence

Medical University Hospital Authority

March 1, 2019

Springs Memorial Hospital

Medical University Hospital Authority

Lancaster, SC

March 1, 2019

Carolinas Hospital System Marion

Medical University Hospital Authority

March 1, 2019

Memorial Hospital of Salem County

Community Healthcare Associates, LLC

January 31, 2019

Mary Black Health System Spartanburg

Spartanburg Regional Healthcare System

Spartanburg, SC

January 1, 2019

Mary Black Health System Gaffney

Spartanburg Regional Healthcare System

January 1, 2019

2018 Divestitures:

Sparks Regional Medical Center

Baptist Health

Fort Smith, AR

November 1, 2018

Sparks Medical Center Van Buren

Baptist Health

Van Buren, AR

November 1, 2018

AllianceHealth Deaconess

INTEGRIS Health

Oklahoma City, OK

October 31, 2020

Munroe Regional Medical Center

Adventist Health System

August 1, 2018

Tennova Healthcare Dyersburg Regional

West Tennessee Healthcare

Dyersburg, TN

Tennova Healthcare Regional Jackson

West Tennessee Healthcare

Tennova Healthcare Volunteer Martin

West Tennessee Healthcare

Williamson Memorial Hospital

Mingo Health Partners, LLC

Williamson, WV

Byrd Regional Hospital

Allegiance Health Management

Leesville, LA

Tennova Healthcare Jamestown

Rennova Health, Inc.

Jamestown, TN

Bayfront Health Dade City

Adventist Health System

Dade City, FL

April 1, 2018

2017 Divestitures:

Highlands Regional Medical Center

November 1, 2020 -

Merit Health Northwest Mississippi

Curae Health, Inc.

Clarksdale, MS

November 30, 2020

Weatherford Regional Medical Center

Weatherford, TX

October 1, 2017

Brandywine Hospital

Reading Health System

Coatesville, PA

October 1, 2017

Chestnut Hill Hospital

Reading Health System

Philadelphia, PA

October 1, 2017

Effective Date

Jennersville Hospital

Reading Health System

West Grove, PA

October 1, 2017

Phoenixville Hospital

Reading Health System

Phoenixville, PA

October 1, 2017

Pottstown Memorial Medical Center

Reading Health System

Pottstown, PA

October 1, 2017

Yakima Regional Medical and Cardiac Center

Regional Health

September 1, 2017

Toppenish Community Hospital

Regional Health

Toppenish, WA

September 1, 2017

Memorial Hospital of York

PinnacleHealth System

Lancaster Regional Medical Center

PinnacleHealth System

Lancaster, PA

Heart of Lancaster Regional Medical Center

PinnacleHealth System

Carlisle Regional Medical Center

PinnacleHealth System

Tomball Regional Medical Center

South Texas Regional Medical Center

Jourdanton, TX

Deaconess Hospital

MultiCare Health System

Valley Hospital

MultiCare Health System

Spokane Valley, WA

Lake Area Medical Center

CHRISTUS Health

Lake Charles, LA

June 30, 2017

Easton Hospital

Steward Health, Inc.

Sharon Regional Health System

Steward Health, Inc.

Northside Medical Center

Steward Health, Inc.

Youngstown, OH

Trumbull Memorial Hospital

Steward Health, Inc.

Hillside Rehabilitation Hospital

Steward Health, Inc.

Wuesthoff Health System Rockledge

Steward Health, Inc.

Rockledge, FL

Wuesthoff Health System Melbourne

Steward Health, Inc.

Melbourne, FL

Sebastian River Medical Center

Steward Health, Inc.

Sebastian, FL

Stringfellow Memorial Hospital

The Health Care Authority of the City of Anniston

Merit Health Gilmore Memorial

Curae Health, Inc.

Merit Health Batesville

Curae Health, Inc.

Batesville, MS

On January 1, 2020, we completed the sale of Southside Regional Medical Center (300 licensed beds) in

Petersburg, Virginia, Southampton Memorial Hospital (105 licensed beds) in Franklin, Virginia and Southern Virginia Regional Medical Center (80 licensed beds) in Emporia, Virginia and their associated assets to Bon Secours Mercy Health System

pursuant to the terms of a definitive agreement which was entered into October 28, 2019.

The net proceeds from this sale were received at a preliminary closing on December 31, 2019.

On January 30, 2020, we entered into definitive agreements for the sale of substantially all of the assets of each of Shands Live Oak

Regional Medical Center (25 licensed beds) in Live Oak, Florida and Shands Starke Regional Medical Center (49 licensed beds) in Starke, Florida to affiliates of HCA.

In addition to the divestiture of these hospitals in 2017, 2018 and 2019 as noted above, we

continue to receive interest from potential buyers for certain of our hospitals.

We intend to continue our portfolio rationalization strategy through at least mid-2020 and are pursuing additional sale transactions, which are currently in various

stages of negotiation with potential buyers.

There can be no assurance that any or all of the potential divestitures that we are currently targeting (or the potential divestitures currently subject to definitive agreements) will be completed, or if

they are completed, the ultimate timing of the completion of these divestitures or the aggregate amount of proceeds we will receive from the divestitures.

We expect to use proceeds from divestitures to reduce debt and/or reinvest in our facilities

to strengthen our regional networks and local market operations.

On June 1, 2019, we completed the acquisition of Northwest

Mississippi Medical Center in Clarksdale, Mississippi.

This healthcare system includes 181 licensed beds and other outpatient and ancillary services.

The total cash consideration paid for operating assets was approximately $2 million, with

additional consideration of $9 million in assumed liabilities, for a total consideration of $11 million.

This hospital was acquired in conjunction with the bankruptcy proceedings of the previous owner that acquired the hospital from us in

2017 as part of an agreement with the local county government associated with its lease of the hospital building.

Based on our final purchase price allocation relating to this acquisition as of September 30, 2019, no goodwill has been recorded.

Prior to the completion of the acquisition, we initiated a plan to sell this hospital and as such have classified this hospital as held for sale at December 31, 2019.

On September 19, 2019, we completed the sale and leaseback of four medical office buildings for net proceeds of $56 million to

Carter Validus Mission Critical REIT II, Inc.

The buildings, with a combined total of 285,337 square feet, are located in three states and support a wide array of diagnostic, medical and surgical services in an outpatient setting for the respective

nearby hospitals.

Based on our assessment of the control transfer principle in these leased buildings, the transaction does not qualify for sale treatment and the related leases have been recorded as financing obligations in long-term debt in the

accompanying consolidated balance sheet at December 31, 2019.

In addition, on December 18, 2019, we completed the sale and leaseback of one medical office building for net proceeds of approximately $4 million to an affiliate

of Catalyst Healthcare Real Estate.

The 30,000 square foot building is located in Arkansas and supports a wide array of diagnostic, medical and surgical services in an outpatient setting for the nearby hospital.

Based on our assessment of the

control transfer principle in this leased building, the transaction does not qualify for sale treatment and the related lease has been recorded as a financing obligation in long-term debt in the accompanying consolidated balance sheet

at December 31, 2019.

During the year ended December 31, 2019, we paid approximately $8 million to acquire the

operating assets and related businesses of certain physician practices, clinics and other ancillary businesses that operate within the communities served by our hospitals.

Overview of Operating Results

operating revenues for the year ended December 31, 2019 decreased $945 million to approximately $13.2 billion compared to approximately $14.2 billion for the year ended December 31, 2018, primarily as a result of hospitals

divested during 2018 and 2019.

On a same-store basis, net operating revenues for the year ended December 31, 2019 increased $518 million.

We had a loss from continuing operations of $590 million during the year ended December 31, 2019, compared to loss from continuing

operations of $704 million for the year ended December 31, 2018.

Loss from continuing operations for the year ended December 31, 2019 included the following:

an after-tax charge of $73 million for government and other legal

settlements and related costs,

an after-tax charge of $1 million for employee termination benefits

and other restructuring costs,

an after-tax charge of $16 million to reserve the outstanding

balance of a promissory note outstanding that was received as part of the purchase price from the sale of two hospitals in 2017, net of income from

a reduction of the valuation allowance on the outstanding balance of a promissory note from the buyer of another hospital,

an after-tax charge of $42 million for loss from early

extinguishment of debt,

an after-tax charge of $71 million for a change in estimate for

professional liability claims accrual, which charge resulted from a revision to the estimate for professional liability claims accrual related to claims incurred in 2016 and prior years,

an after-tax charge of $101 million for the impairment of goodwill

and long-lived assets of hospitals sold or held for sale based on their estimated fair values,

an after-tax charge of $9 million for legal expenses related to the

final global resolution and settlement of certain HMA legal proceedings entered into with the U.S.

Department of Justice in the three months ended September 30, 2018, or the HMA Legal Matters,

a discrete tax expense of approximately $275 million due to an increase in the valuation allowance

recognized on (i) IRC Section 163(j) interest carryforwards and (ii) original issue discount deferred tax asset generated with the 2019 Exchange Offer, and

a discrete tax benefit of $15 million for tax credits claimed in lieu of deductions for the HMA Legal

Loss from continuing operations for the year ended December 31, 2018 included the following:

an after-tax charge of $8 million for government and other legal

settlements and related costs

an after-tax charge of $526 million for the impairment of goodwill

and long-lived assets of hospitals sold or held for sale based on their estimated fair values,

an after-tax charge of $15 million for employee termination benefits

and other restructuring costs,

after-tax income of $23 million for gain from early extinguishment

an after-tax charge of $10 million from fair value adjustments on

the CVR agreement liability accounted for at fair value related to the HMA Legal Matters, and related legal expenses, and

a deferred tax provision of $34 million related to the write-off of

deferred tax assets due to the nondeductible components of the HMA Legal Matters.

Consolidated inpatient admissions for

the year ended December 31, 2019, decreased 11.1%, compared to the year ended December 31, 2018, and consolidated adjusted admissions for the year ended December 31, 2019, decreased 10.6%, compared to the year ended December 31,

Same-store inpatient admissions for the year ended December 31, 2019, increased 1.3%, compared to the year ended December 31, 2018, and same-store adjusted admissions for the year ended December 31, 2019, increased 2.2%,

compared to the year ended December 31, 2018.

Self-pay revenues represented approximately

1.0% and 1.4% of net operating revenues for the years ended December 31, 2019 and 2018, respectively.

The amount of foregone revenue related to providing charity care services as a percentage of net operating revenues was approximately 4.1% and

3.5% for the years ended December 31, 2019 and 2018, respectively.

Direct and indirect costs incurred in providing charity care services as a percentage of net operating revenues was approximately 0.5% and 0.4% for the years ended

December 31, 2019 and 2018, respectively.

Legislative Overview

Congress and certain state legislatures have introduced and passed a large number of proposals and legislation designed to make major

changes in the healthcare system, including changes that have increased access to health insurance.

The most prominent of these recent efforts, the Affordable Care Act, affected how healthcare services are covered, delivered and reimbursed.

Affordable Care Act increased health insurance coverage through a combination of public program expansion and private sector health insurance reforms and mandated that substantially all U.S.

citizens maintain health insurance.

The Affordable Care

Act also made a number of changes to Medicare and Medicaid, such as a productivity offset to the Medicare market basket update and reductions to the Medicare and Medicaid DSH payments.

However, the future of the Affordable Care Act is uncertain.

Since the 2016 presidential election, significant changes have been made to the

Affordable Care Act, its implementation, and its interpretation, and the current presidential administration and certain members of Congress have stated their intent to repeal or make additional significant changes to the law.

For example, final

rules issued in 2018 expand availability of association health plans and allow the sale of short-term, limited-duration health plans, neither of which are required to cover all of the essential health benefits mandated by the Affordable Care Act.

Additionally, effective January 1, 2019, the financial penalty associated with the individual mandate was eliminated as part of the tax reform legislation that was enacted in December 2017.

In December 2018, as a result of this change, a

federal judge in Texas found the individual mandate unconstitutional and determined the rest of the Affordable Care Act was therefore invalid.

In December 2019, the Fifth Circuit Court of Appeals upheld this decision with respect to the individual

mandate, but remanded for further consideration of how this affects the rest of the law.

Pending the appeals process, the law remains in effect.

The elimination of the individual mandate penalty and other changes 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 will be

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

Historically, the states with the greatest

reductions in the number of uninsured adult residents have expanded Medicaid.

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 18 states in

which we operated hospitals as of December 31, 2019, nine states have taken action to expand their Medicaid programs.

At this time, the other nine states have not, including Florida, Alabama, Tennessee and Texas, where we operated a significant

number of hospitals as of December 31, 2019.

Some states use, or have applied to use, waivers granted by CMS to implement expansion, impose different eligibility or enrollment restrictions, or otherwise implement programs that vary from federal

CMS administrators have indicated that they are increasing state flexibility in the administration of Medicaid programs.

For example, CMS has granted a limited number of state applications for waivers that allow a state to condition

Medicaid enrollment on work or other community engagement.

Several states have similar applications pending.

We believe that the

Affordable Care Act has had a positive impact on net operating revenues and income as the result of the expansion of private sector and Medicaid coverage that has occurred.

However, other provisions of the Affordable Care Act, such as requirements

related to employee health insurance coverage and changes to Medicare and Medicaid reimbursement, have increased our operating costs or adversely impacted the reimbursement we receive.

Legislative and executive branch efforts related to healthcare

reform could result in increased prices for consumers purchasing health insurance coverage or the sale of insurance plans that contain gaps in coverage, which could destabilize insurance markets and impact the rates of uninsured or underinsured

Some current initiatives and proposals, including those aimed at price transparency and out-of-network charges, may impact prices and the relationships between

hospitals and insurers.

In addition, members of Congress have proposed measures that would expand government-sponsored coverage, including single-payor models.

It is difficult to predict the ongoing effect of the Affordable Care Act due to executive orders,

changes to the laws implementation, clarifications and modifications resulting from the rule-making process, judicial interpretations resulting from court challenges to its constitutionality and interpretation, whether and how many states

ultimately decide to expand Medicaid coverage, the number of uninsured who elect to purchase health insurance coverage, budgetary issues at federal and state levels, and efforts to change or repeal the statute.

We may not be able to fully realize

the positive impact the Affordable Care Act may otherwise have on our business, results of operations, cash flow, capital resources and liquidity.

We cannot predict whether we will be able to modify certain aspects of our operations to offset any

potential adverse consequences from the Affordable Care Act or the impact of any alternative provisions that may be adopted.

years, a number of laws, including the Affordable Care Act and Medicare Access and CHIP Reauthorization Act of 2015, or MACRA, have promoted shifting from traditional

fee-for-service reimbursement models to alternative payment models that tie reimbursement to quality and cost of care.

CMS currently administers various ACOs and bundled

payment demonstration projects and has indicated that it will continue to pursue similar initiatives.

In June 2019, the U.S.

Court ruled in Azar v.

Allina Health Services that the U.S.

Department of Health and Human Services failed to comply with statutory notice and comment rulemaking procedures before announcing an earlier policy related to DSH payments made

under Medicare to hospitals.

Following this ruling, unless the U.S.

Department of Health and Human Services is able to successfully assert another legal basis for this policy, one potential outcome is the federal government could be required to

reimburse hospitals, including us, for DSH Medicare payments which otherwise would have been payable over certain prior time periods absent the enactment of this policy.

While the ruling in this case was specific to the DSH payments calculated for

federal fiscal year 2012 for the plaintiff hospitals, we believe that prior time periods with the potential for higher DSH payments because of the precedent of this ruling could include federal fiscal years 2005 to 2013.

There continues to be

uncertainty regarding the extent to which, if any, DSH Medicare payments will be remitted to us as the result of this ruling, and if so the timing of any such payments.

However, we anticipate that if it is ultimately determined that we are

entitled to receive such DSH Medicare payments for these prior time periods, these payments could have a material positive impact on a non-recurring basis in any future period in which net income is recognized

in respect thereof as well as on our cash flows from operations in any future period in which these payments are received.

As a result of

our current levels of cash, available borrowing capacity, long-term outlook on our debt repayments, the refinancing of our term loans and our continued projection of our ability to generate cash flows, we anticipate that we will be able to invest

the necessary capital in our business over the next twelve months.

We believe there continues to be ample opportunity to strengthen our market share in substantially all of our markets by decreasing the need for patients to travel outside their

communities for healthcare.

Furthermore, we will continue to strive to improve operating efficiencies and procedures in order to improve the performance of our hospitals.

Sources of Revenue

The following table presents the approximate percentages of net operating revenues by payor source for the periods indicated.

The data for the

periods presented are not strictly comparable due to the effect that hospital acquisitions and divestitures have had on these statistics.

The percentages of net operating revenues for 2017 also include the overall impact of the change in estimate

recorded in the fourth quarter of 2017 to increase contractual allowances and record additional provision for bad debts.

Year Ended December 31,

Managed Care and other third-party payors

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

Included in Managed Care and other third-party payors is operating revenues from insurance companies with which we have insurance provider contracts, Medicare managed care, insurance 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 and

Medicaid programs to increase over the long-term due to the general aging of the population and the impacts of the Affordable Care Act.

The Affordable Care Act has increased the number of insured patients in states that have expanded Medicaid, which

in turn, has reduced the percentage of revenues from self-pay patients.

However, it is unclear whether the trend of increased coverage will continue, due in part to the elimination of the financial penalty

associated with the individual mandate, effective January 1, 2019.

Further, the Affordable Care Act imposes significant reductions in amounts the government pays Medicare managed care plans.

The trend toward increased enrollment in Medicare and

Medicaid managed care may adversely affect our operating revenue.

An executive order issued in October 2019 seeks to accelerate this shift away from traditional

fee-for-service Medicare to Medicare managed care.

We may also be impacted by regulatory requirements imposed on insurers, such as minimum medical-loss ratios and

specific benefit requirements.

Furthermore, in the normal course of business, managed care programs, insurance companies and employers actively negotiate the amounts paid to hospitals.

Our relationships with payors may be impacted by price

transparency initiatives and out-of-network billing proposals.

There can be no assurance that we will retain our existing reimbursement arrangements or that these

third-party payors will not attempt to further reduce the rates they pay for our services.

Net operating revenues include amounts

estimated by management to be reimbursable by Medicare and Medicaid under prospective payment systems and provisions of cost-based reimbursement and other payment methods.

In addition, we are reimbursed by

non-governmental payors using a variety of payment methodologies.

Amounts we receive for the treatment of patients covered by Medicare, Medicaid and non-governmental

payors are generally less than our standard billing rates.

We account for the differences between the estimated program reimbursement rates and our standard billing rates as contractual allowance adjustments, which we deduct from gross revenues to

arrive at net operating revenues.

Final settlements under some of these programs are subject to adjustment based on administrative review and audit by third parties.

We account for adjustments to previous program reimbursement estimates as

contractual allowance adjustments and report them in the periods that such adjustments become known.

Contractual allowance adjustments related to final settlements and previous program reimbursement estimates impacted net operating revenues and net

loss by an insignificant amount in each of the years ended December 31, 2019, 2018 and 2017.

The payment rates under the Medicare

program for hospital inpatient and outpatient acute care services are based on a prospective payment system, depending upon the diagnosis of a patients condition.

These rates are

indexed for inflation annually, although increases have historically been less than actual inflation.

On August 16, 2019, CMS issued the final rule to increase this index by 3.0% for

hospital inpatient acute care services that are reimbursed under the prospective payment system, beginning October 1, 2019.

The final rule provides for a 0.4 percentage point multifactor productivity reduction and a positive 0.5 percentage

point adjustment in accordance with MACRA, which, together with other changes to payment policies is expected to yield an average 2.9% increase in reimbursement for hospital inpatient acute care services.

An additional reduction applies to hospitals

that do not submit required patient quality data.

We are complying with this data submission requirement.

Payments may also be affected by various other adjustments, such as admission and medical review criteria for inpatient services commonly known

as the two midnight rule. This rule limits when services to Medicare beneficiaries are payable as inpatient hospital services.

Reductions in the rate of increase or overall reductions in Medicare reimbursement may cause a decline in the

growth of our net operating revenues.

Payment rates under the Medicaid program vary by state.

In addition to the base payment rates for

specific claims for services rendered to Medicaid enrollees, states utilize supplemental reimbursement programs to make separate payments that are not specifically tied to an individuals 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.

are generally authorized for a specified period of time and require CMSs 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.

supplemental programs, we recognize revenue and related expenses in the period in which amounts are estimable and collection is reasonably assured.

Reimbursement under these programs is reflected in net operating revenues and included as Medicaid

revenue in the table above, and fees, taxes or other program related costs are reflected in other operating expenses.

Results of Operations

Our hospitals offer a variety of services involving a broad range of inpatient and outpatient medical and surgical services.

These include

general acute care, emergency room, general and specialty surgery, critical care, internal medicine, obstetrics, diagnostic services, psychiatric and rehabilitation services.

The strongest demand for hospital services generally occurs during January

through April and the weakest demand for these services generally occurs during the summer months.

Accordingly, eliminating the effects of new acquisitions and/or divestitures, our net operating revenues and earnings are historically highest during

the first quarter and lowest during the third quarter.

The following tables summarize, for the periods indicated, selected operating data.

Year Ended December 31,

Operating results, as a percentage of net operating revenues:

Net operating revenues

Operating expenses (a)

Depreciation and amortization

Impairment and loss on sale of businesses, net

Income (loss) from operations

Interest expense, net

(Loss) gain from early extinguishment of debt

Equity in earnings of unconsolidated affiliates

Loss before income taxes

(Provision for) benefit from income taxes

Loss from continuing operations

Loss from discontinued operations, net of taxes

Net income attributable to noncontrolling interests

Net loss attributable to Community Health Systems, Inc.

Year Ended December 31,

Percentage (decrease) increase from prior year:

Net operating revenues

Adjusted admissions (b)

Average length of stay

Net loss attributable to Community Health Systems, Inc.

Same-store percentage increase (decrease) from prior year (c):

Net operating revenues

Adjusted admissions (b)

Operating expenses include salaries and benefits, supplies, other operating expenses, government and other

legal settlements and related costs, electronic health records incentive reimbursement and rent.

Adjusted admissions is a general measure of combined inpatient and outpatient volume.

We computed adjusted

admissions by multiplying admissions by gross patient revenues and then dividing that number by gross inpatient revenues.

Includes acquired hospitals to the extent we operated them in both periods and excludes our hospitals that have

previously been classified as discontinued operations for accounting purposes.

In addition, also excludes information for the hospitals sold or closed during 2018 and 2019.

Year Ended December 31, 2019 Compared to Year Ended December 31, 2018

Net operating revenues decreased by 6.7% to approximately $13.2 billion for the year ended December 31, 2019, from approximately

$14.2 billion for the year ended December 31, 2018.

Net operating revenues on a same-store basis from hospitals that were operated throughout both periods increased $518 million or 4.2%

during the year ended December 31, 2019, as compared to the year ended December 31, 2018.

The increase in same-store net operating revenues was attributable to improved pricing due to

higher acuity, and an increase in inpatient admissions.

Non-same-store net operating revenues decreased $1.5 billion during the year ended December 31, 2019, in comparison to the prior year period,

with the decrease attributable primarily to the divestiture of hospitals during 2018 and 2019.

On a consolidated basis, inpatient admissions decreased by 11.1% during the year ended December 31, 2019 as compared to the year ended

December 1, 2020 -

Also on a consolidated basis, adjusted admissions decreased by 10.6% during the year ended December 31, 2019 as compared to the year ended December 31, 2018.

On a same-store basis, net operating revenues per

adjusted admissions increased 1.9%, while inpatient admissions increased by 1.3% and adjusted admissions increased by 2.2% for the year ended December 31, 2019, compared to the year ended December 31, 2018.

Operating expenses, as a percentage of net operating revenues, decreased from 98.5% during the year ended December 31, 2018 to 95.1%

during the year ended December 31, 2019.

Operating expenses, excluding depreciation and amortization and impairment and loss on sale of businesses, as a percentage of net operating revenues, increased from 88.9% for the year ended

December 31, 2018 to 89.5% for the year ended December 31, 2019.

Salaries and benefits, as a percentage of net operating revenues, decreased from 45.1% for the year ended December 31, 2018 to 45.0% for the year ended December 31,

This decrease in salaries and benefits, as a percentage of net operating revenues, was primarily due to improved staffing and benefit expense management.

Supplies, as a percentage of net operating revenues, decreased from 16.6% for the year

ended December 31, 2018 to 16.3% for the year ended December 31, 2019.

Other operating expenses, as a percentage of net operating revenues, increased from 24.7% for the year ended December 31, 2018 to 25.1% for the year ended

December 31, 2020

Expense related to government and other legal settlements and related costs, as a percentage of net operating revenues, increased from 0.1% for the year ended December 31, 2018 to 0.7% for the year ended

December 31, 2019, primarily due to the net impact of lawsuits settled in principle and related legal expenses.

Lease cost and rent, as a percentage of net operating revenues, was 2.4% for both of the years ended December 31, 2019 and

Depreciation and amortization, as a percentage of net operating revenues, decreased from 4.9% for the year ended December 31,

2018 to 4.6% for the year ended December 31, 2019, primarily due to ceasing depreciation on property and equipment at hospitals sold or held for sale and a reduction in the purchase of property and equipment for the year ended December 31,

2019 compared to the same period in 2018.

Impairment and loss on sale of businesses was $138 million for the year ended

December 31, 2019, compared to $668 million for the year ended December 31, 2018, related to impairment of the long-lived assets and reporting unit goodwill allocated to hospitals classified as held for sale or sold during the

respective periods.

Interest expense, net, increased by $65 million to $1.0 billion for the year ended December 31, 2019

compared to $976 million for the year ended December 31, 2018, which was driven by an increase in interest rates due to the refinancing activity during the year ended December 31, 2019, compared to the same period in 2018, which

resulted in an increase in interest expense of $86 million.

This increase was partially offset by a decrease in our average outstanding debt during the year ended December 31, 2019, which resulted in a decrease in interest expense of

$15 million, and an increase in major construction projects during the year ended December 31, 2019, which resulted in $6 million more interest being capitalized, compared to the same period in 2018.

Loss from early extinguishment of debt of $54 million was recognized during the year ended December 31, 2019, as a result of the

Credit Facility amendment, repayment of the term loans under the Credit Facility, termination of the Revolving Facility, and the refinancing and exchange of certain of our outstanding notes as discussed further in Capital Resources.

Gain from early

extinguishment of debt of $31 million was recognized during the year ended December 31, 2018, which resulted primarily from the refinancing and exchange of certain of our outstanding notes and repayment of a portion of our term loans under

the Credit Facility as discussed further in Capital Resources.

Equity in earnings of unconsolidated affiliates, as a percentage of net

operating revenues, decreased from 0.2% for the year ended December 31, 2018 to 0.1% for the year ended December 31, 2019.

The net results of the above-mentioned changes resulted in loss before income taxes decreasing

$285 million from $715 million for the year ended December 31, 2018 to $430 million for the year ended December 31, 2019.

Our provision for income taxes for the year ended December 31, 2019 was $160 million compared to a benefit from income taxes of

$11 million for the year ended December 31, 2018.

Our effective tax rates were (37.2%) and 1.5% for the year ended December 31, 2019 and 2018, respectively.

The difference in our effective tax rate for the year ended December 31,

2019, when compared to the year ended December 31, 2018, was primarily due to an increase in the valuation allowance recognized on (i) IRC Section 163(j) interest carryforwards and (ii) original issue discount deferred tax asset

generated with the 2019 Exchange Offer.

Net loss, as a percentage of net operating revenues, decreased from 5.0% for the year ended

December 31, 2018 to 4.5% for the year ended December 31, 2019.

Net income attributable to noncontrolling interests, as a

percentage of net operating revenues, was 0.6% for both of the years ended December 31, 2019 and 2018.

Net loss attributable to

Community Health Systems, Inc.

was $675 million for the year ended December 31, 2019, compared to $788 million for the year ended December 31, 2018.

Year Ended December 31, 2018 Compared to Year Ended December 31, 2017

Net operating revenues decreased by 7.8% to approximately $14.2 billion for the year ended December 31, 2018, from approximately

$15.4 billion for the year ended December 31, 2017.

Net operating revenues on a same-store basis from hospitals that were operated throughout both periods increased $362 million or 2.8% during the year ended December 31, 2018, as

compared to the year ended December 31, 2017.

The increase in same-store net operating revenues was attributable to improved pricing due to higher acuity, partially offset by a decline in inpatient admissions and adjusted admissions.

Non-same-store net operating revenues decreased $1.6 billion during the year ended December 31, 2018, in comparison to the prior year period, with the decrease attributable primarily to the divestiture of

hospitals during 2017 and 2018.

On a consolidated basis, inpatient admissions decreased by 15.0% during the year ended December 31, 2018 as compared to the year ended December 31, 2017.

Also on a consolidated basis, adjusted admissions

decreased by 15.3% during the year ended December 31, 2018 as compared to the year ended December 31, 2017.

On a same-store basis, net operating revenues per adjusted admissions increased 3.2%, while inpatient admissions decreased by 1.3%

and adjusted admissions decreased by 0.4% for the year ended December 31, 2018, compared to the year ended December 31, 2017.

All operating expenses calculations, as a percentage of net operating revenues, were impacted during the year ended December 31, 2017 due

to the overall impact of the change in estimate related to net patient receivables recorded in the fourth quarter of 2017.

Total operating costs and expenses, as a percentage of net operating revenues, decreased from 112.2% during the year ended

December 31, 2017 to 98.5% during the year ended December 31, 2018.

Operating expenses, excluding depreciation and amortization and impairment and loss on sale of businesses, as a percentage of net operating revenues, decreased from 92.8%

for the year ended December 31, 2017 to 88.9% for the year ended December 31, 2018.

Salaries and benefits, as a percentage of net operating revenues, decreased from 48.0% for the year ended December 31, 2017 to 45.1% for the year

ended December 31, 2018.

This decrease in salaries and benefits, as a percentage of net operating revenues, was primarily due to improved staffing and benefit expense management.

Supplies, as a percentage of net operating revenues, decreased

from 17.4% for the year ended December 31, 2017 to 16.6% for the year ended December 31, 2018.

Other operating expenses, as a percentage of net operating revenues, decreased from 25.2% for the year ended December 31, 2017 to 24.7% for

the year ended December 31, 2018.

Government and other legal settlements and related costs, as a percentage of net operating revenues, decreased from income of 0.2% for the year ended December 31, 2017 to expense of 0.1% for the year ended

December 31, 2018 primarily as a result of the gain recorded from the previously announced settlement of the shareholder derivative action in January 2017.

Rent, as a percentage of net operating revenues, decreased from 2.6% for the year ended

December 31, 2017 to 2.4% for the year ended December 31, 2018.

Depreciation and amortization, as a percentage of net operating revenues, decreased from 5.6% for

the year ended December 31, 2017 to 4.9% for the year ended December 31, 2018, primarily due to a decrease in depreciable basis of property and equipment that has been impaired and from ceasing depreciation on property and equipment at

hospitals sold or held for sale.

Impairment and loss on sale of businesses was $668 million for the year ended December 31,

2018, compared to $2.1 billion for the year ended December 31, 2017.

Impairment of goodwill and long-lived assets for the year ended December 31, 2018 included (i) impairment of approximately $423 million related to

impairment of the long-lived assets and reporting unit goodwill allocated to hospitals that have been sold or deemed held for sale during the year ended December 31, 2018, (ii) approximately $29 million recorded to write-off the value of a promissory note received as consideration for the sale of three hospitals in 2017 where the buyer entered into bankruptcy proceedings, and (iii) approximately $216 million recorded

primarily to adjust the carrying value of other long-lived assets at several underperforming hospitals that have ceased operations or where we are in discussions with potential buyers for divestiture at a sales price that indicates a fair value

below carrying value.

Impairment of goodwill and long-lived assets for the year ended December 31, 2017 included impairment of approximately $388 million related to impairment of the long-lived assets and reporting unit goodwill allocated

to hospitals classified as held for sale during the year ended December 31, 2017, impairment of approximately $316 million for several underperforming hospitals as well as for the hospitals where we have received offers or executed non-binding letters of intent to sell the hospital, and impairment of $1.419 billion related to goodwill for our hospital reporting unit.

Interest expense, net, increased by $45 million to $976 million for the year ended December 31, 2018 compared to

$931 million for the year ended December 31, 2017, primarily due to an increase in interest rates during the year ended December 31, 2018 of $114 million.

This increase was partially offset by a decrease in our average

outstanding debt during the year ended December 31, 2018, which resulted in a decrease in interest expense of $65 million.

Additionally, an increase in major construction projects during the year ended December 31, 2018 resulted in

more interest being capitalized, and a decrease in interest expense of $4 million, compared to the same period in 2017.

early extinguishment of debt of $31 million was recognized during the year ended December 31, 2018 which resulted primarily from the refinancing and exchange of certain of our outstanding notes and repayment of a portion of our term loans

under the Credit Facility as discussed further in Capital Resources.

Loss from early extinguishment of debt of $40 million was recognized during the year ended December 31, 2017, which resulted from the repayment of certain outstanding

notes and term loans under the Credit Facility.

Equity in earnings of unconsolidated affiliates, as a percentage of net operating

revenues, increased from 0.1% for the year ended December 31, 2017 to 0.2% for the year ended December 31, 2018.

results of the above-mentioned changes resulted in loss from continuing operations before income taxes decreasing $2.1 billion from loss of $2.8 billion for the year ended December 31, 2017 to loss of $715 million for the year

ended December 31, 2018.

Our benefit from income taxes on loss from continuing operations decreased from $449 million for the

year ended December 31, 2017 to $11 million for the year ended December 31, 2018.

Our effective tax rates were 1.5% and 15.8% for the year ended December 31, 2018 and 2017, respectively.

The decrease in our effective tax rate for

the year ended December 31, 2018, when compared to the year ended December 31, 2017, was primarily due to the increase in valuation allowance recognized on IRC Section 163(j) interest carryforwards partially offset by the release of

certain state valuation allowances on net operating loss carryforwards in certain jurisdictions.

Loss from continuing operations, as a

percentage of net operating revenues, decreased from 15.5% for the year ended December 31, 2017 to 5.0% for the year ended December 31, 2018.

No discontinued operations were separately reported for the year ended December 31, 2018.

Discontinued operations for the year ended December 31, 2017, include the results of operations of certain hospitals owned or leased by us as of December 31, 2017, which were classified as being held for sale or sold.

The operation of

these hospitals resulted in a loss, net of taxes, of $6 million for the year ended December 31, 2017.

An after-tax impairment charge of $6 million was recorded during the year ended

December 31, 2017, based on the difference between the estimated fair value and the carrying value of the assets held for sale.

Overall, discontinued operations consisted of a loss, net of taxes, of $12 million for the year ended

December 31, 2017.

Net loss, as a percentage of net operating revenues, decreased from 15.6% for the year ended December 31,

2017 to 5.0% for the year ended December 31, 2018.

Net income attributable to noncontrolling interests, as a percentage of net

operating revenues increased from 0.4% for the year ended December 31, 2017 to 0.6% for the year ended December 31, 2018.

loss attributable to Community Health Systems, Inc.

was $788 million for the year ended December 31, 2018, compared to $2.5 billion for the year ended December 31, 2017.

The decrease in net loss attributable to Community Health

Systems, Inc.

was primarily due to the change in estimate recorded as a reduction of the net operating revenues and the impairment of goodwill and certain long-lived assets based on their estimated fair values for hospitals sold or held for sale in

Liquidity and Capital Resources

Compared to 2018

Net cash provided by operating activities increased $111 million, from approximately $274 million for

the year ended December 31, 2018, to approximately $385 million for the year ended December 31, 2019.

The increase in cash provided by operating activities was primarily the result of $266 million paid during the fourth quarter

of 2018 related to the global resolution and settlement of litigation and government investigation of HMA, partially offset by higher interest payments due to the refinancing activity during the year ended December 31, 2019, and higher

malpractice claim payments compared to the same period in 2018.

Total cash paid for interest during the year ended December 31, 2019 increased to approximately $1.0 billion compared to $936 million for the year ended December 31,

Cash paid for income taxes, net of refunds received, resulted in a net refund of $3 million and $19 million during the year ended December 31, 2019 and 2018, respectively.

Our net cash used in investing activities was approximately $2 million for the year ended December 31, 2019, compared to

approximately $245 million for the year ended December 31, 2018, a decrease of approximately $243 million.

The cash used in investing activities during the year ended December 31, 2019, was primarily impacted by an increase in

proceeds from the divestitures of hospitals and other ancillary operations of $199 million, a decrease in the cash used in the purchase of property and equipment of $89 million for the year ended December 31, 2019 compared to the same

period in 2018, and a decrease in the cash used in the acquisition of facilities and other related equipment of $13 million as a result of a reduction in cash used to purchase physician practices, clinics and other ancillary businesses for the

year ended December 31, 2019 compared to the same period in 2018, partially offset by the acquisition of one hospital during the year ended December 31, 2019.

The decreases in cash used in investing activities were also impacted by a

decrease in cash provided by the net impact of the purchases and sales of available-for-sale debt securities and equity securities of $24 million, a decrease in the

proceeds from sale of property and equipment of $5 million for the year ended December 31, 2019 compared to the same period in 2018 and an increase in cash used for other investments (primarily from

internal-use software expenditures and physician recruiting costs) of $29 million.

cash used in financing activities was $363 million for the year ended December 31, 2019, compared to approximately $396 million for the year ended December 31, 2018, a decrease of approximately $33 million.

The decrease in

cash used in financing activities, in comparison to the prior year period, was primarily due to the net effect of our debt repayment, refinancing activity, and cash paid for deferred financing costs and other debt-related costs.

As described in Notes 6, 9 and 5 of the Notes to Consolidated Financial Statements, at

December 31, 2019, we had certain cash obligations, which are due as follows (in millions):

and thereafter

5 1 ⁄ 8 % Senior

Secured Notes due 2021

6 7 ⁄ 8 % Senior

Notes due 2022

6 1 ⁄ 4 % Senior

Secured Notes due 2023

8 5 ⁄ 8 % Senior

Secured Notes due 2024

8% Senior Secured Notes due 2026

8% Senior Secured Notes due 2027

6 7 ⁄ 8 % Senior

Notes due 2028

Junior-Priority Secured Notes due 2023

Junior-Priority Secured Notes due 2024

Total long-term debt (1)

Interest on ABL Facility and notes (2)

Finance lease and financing obligations, including interest

Operating leases

Replacement facilities and other capital commitments (3)

Open purchase orders (4)

Liability for uncertain tax positions, including interest and penalties

Total long-term debt is exclusive of unamortized deferred debt issuance costs and note premium of approximately

$147 million.

Estimate of interest payments assumes the interest rates at December 31, 2019 remain constant during the

period presented for the ABL Facility, which is variable rate debt.

The 5 1 ⁄ 8 % Senior Secured Notes due 2021, 6 7 ⁄ 8 % Senior Notes due 2022, 6 1 ⁄ 4 % Senior Secured Notes due 2023, 8 5 ⁄ 8 % Senior Secured Notes due 2024, 9 7 ⁄ 8 % Junior-Priority Secured Notes due 2023, 8 1 ⁄ 8 % Junior-Priority Secured Notes due 2024, 8% Senior Secured Notes due 2026, 8% Senior Secured Notes due 2027 and 6 7 ⁄ 8 % Senior

Notes due 2028 have fixed rates of interest.

Pursuant to hospital purchase agreements in effect as of December 31, 2019, we have commitments to build

two replacement facilities and the following capital commitments.

As part of an acquisition in 2016, we agreed to build replacement facilities in La Porte and Knox, Indiana.

The estimated construction costs, including equipment costs, are currently

estimated to be approximately $128 million and $15 million, respectively, of which approximately $58 million has been incurred to date for the construction of the replacement facility in La Porte.

In addition, under other purchase

agreements, we have committed to spend approximately $2 million for costs such as capital improvements, equipment, selected leases and physician

These commitments are required to be fulfilled generally over a five to seven-year period after acquisition.

Through December 31, 2019, we have incurred approximately

$2 million related to these commitments.

Open purchase orders represent our commitment for items or services ordered but not yet received.

At December 31, 2019, we had issued letters of credit primarily in support of potential insurance related claims

and specified outstanding bonds of approximately $145 million.

Our debt as a percentage of total capitalization increased from 112%

for the year ended December 31, 2018 to 119% for the year ended December 31, 2019, due to an increase in accumulated deficit, offset by an overall decrease in long-term debt.

2018 Compared to 2017

provided by operating activities decreased $499 million, from approximately $773 million for the year ended December 31, 2017, to approximately $274 million for the year ended December 31, 2018.

The decrease in cash provided

by operating activities was primarily impacted by the $266 million paid during the fourth quarter related to the global resolution and settlement of litigation and government investigation of HMA and higher interest payments due to the timing

of payments and higher interest rates resulting from the refinancing activity during the year ended December 31, 2018, as well as from a decline in cash flow from patient accounts receivable collections that was impacted as the magnitude of

collections on receivables at divested hospitals decreased.

Other contributors to the lower cash provided by operating activities include the loss of operating cash flow contributed from previously divested hospitals and a decrease in cash received

from HITECH incentive reimbursement.

Such decreases were offset by improvements in cash flow from supplies, prepaid expenses and other current assets and lower malpractice claim payments compared to the same period in 2017.

Total cash paid for

interest during the year ended December 31, 2018, increased to approximately $936 million compared to $852 million for the year ended December 31, 2017.

Cash paid for income taxes, net of refunds received, resulted in a net

refund of $19 million for the year ended December 31, 2018, compared to $4 million paid for income taxes for the year ended December 31, 2017.

Our net cash used in investing activities was approximately $245 million for the year ended December 31, 2018, compared to net cash

provided by investing activities of approximately $1.1 billion for the year ended December 31, 2017, a decrease of approximately $1.3 billion.

The cash used in investing activities was primarily impacted by a decrease in proceeds from

the disposition of hospitals and other ancillary operations of $1.3 billion as a result of fewer hospital dispositions during the year ended December 31, 2018 compared to the same period in 2017, a decrease in cash provided by the net

impact of the purchases and sales of available-for-sale debt securities and equity securities of $47 million and an increase of $20 million in the cash used in

the acquisition of facilities and other related equipment (for physician practices, clinics and other ancillary businesses as there were no hospital acquisitions during either the year ended December 31, 2018 or 2017).

These increases in cash

outflows were offset by a decrease in the cash used in the purchase of property and equipment of $37 million, an increase in the proceeds from the sale of property and equipment of $1 million, and a decrease in cash used for other

investments (primarily from internal-use software expenditures and physician recruiting costs) of $2 million for the year ended December 31, 2018 compared to the same period in 2017.

Our net cash used in financing activities was $396 million for the year ended December 31, 2018, compared to approximately

$1.5 billion for the year ended December 31, 2017, a decrease of approximately $1.1 billion.

The decrease in cash used in financing activities, in comparison to the prior year period, was primarily due to the net effect of our debt

repayment, refinancing activity, and cash paid for deferred financing costs and other debt-related costs.

Capital Expenditures

Cash expenditures for purchases of facilities and other related businesses were $13 million in 2019, $26 million in 2018 and

$6 million in 2017.

Our expenditures for the year ended December 31, 2019 were

primarily related to the purchase of one hospital in Mississippi, physician practices and other ancillary services.

Our expenditures for the years ended December 31, 2018 and 2017 were

related to the purchase of physician practices and other ancillary services.

Excluding the cost to construct replacement hospitals, our

cash expenditures for routine capital for the year ended December 31, 2019 totaled $386 million, compared to $521 million in 2018 and $558 million in 2017.

These capital expenditures related primarily to the purchase of

additional equipment, minor renovations and information systems infrastructure.

Costs to construct replacement hospitals totaled $52 million in 2019 and $6 million in both 2018 and 2017.

The costs to construct replacement hospitals for

both of the years ended December 31, 2019 and 2018 represent both planning and construction costs for the replacement facility at La Porte, Indiana.

The costs to construct replacement hospitals for the year ended December 31, 2017

represent both planning and construction costs for the replacement hospital we previously committed to build in York, Pennsylvania.

In conjunction with the sale of Memorial Hospital of York on July 1, 2017, we no longer have a commitment to

construct this replacement hospital or have planned costs in connection therewith.

Pursuant to a hospital purchase agreement from our

March 1, 2016 acquisition of La Porte Hospital and Starke Hospital, we committed to build replacement facilities in both La Porte, Indiana and Knox, Indiana.

Under the terms of such agreement, construction of the replacement hospital for

LaPorte Hospital is required to be completed within five years of the date of acquisition, or March 2021.

In addition, construction of the replacement facility for Starke Hospital is required to be completed within five years of the date we enter

into a new lease with Starke County, Indiana, the hospital lessor, or in the event we do not enter into a new lease with Starke County, construction shall be completed by September 30, 2026.

We have not entered into a new lease with the lessor

for Starke Hospital and currently anticipate completing construction of the Starke Hospital replacement facility in 2026.

Construction costs, including equipment costs, for the La Porte and Starke replacement facilities are currently estimated to be

approximately $128 million and $15 million, respectively.

We expect total capital expenditures of approximately $400 million to $500 million in 2020 (which includes amounts that are required to be expended pursuant to the terms

of the hospital purchase agreements), including approximately $335 million to $435 million for renovation and equipment cost and approximately $65 million for construction costs of the replacement hospital in La Porte, Indiana.

Capital Resources

capital was approximately $1.1 billion at December 31, 2019, compared to $1.2 billion at December 31, 2018.

Net working capital decreased by approximately $12 million between December 31, 2018 and December 31,

This decrease is primarily due to the increase in current operating lease liabilities, partially offset by an increase in cash and cash equivalents during the year ended December 31, 2019.

We had senior secured financing under a credit facility with a syndicate of financial institutions led by Credit Suisse, as administrative

agent and collateral agent, which at December 31, 2018 included (i) the Revolving Facility and (ii) a Term H facility due 2021, or the Term H Facility.

The Revolving Facility included a subfacility for letters of credit.

The Revolving

Credit Facility was repaid in full and terminated in connection with the completion of the sale of the Additional 2026 Notes on November 19, 2019 as discussed further in Capital Resources.

The loans under the Credit Facility bore interest on the outstanding unpaid principal amount at a rate equal to an applicable percentage plus,

at our option, either (a) an Alternate Base Rate (as defined) determined by reference to the greater of (1) the Prime Rate (as defined) announced by Credit Suisse or (2) the NYFRB Rate (as defined) plus 0.50% or (3) the adjusted

LIBOR on such day for a three-month interest period commencing on the second business day after such day plus 1% or (b) LIBOR.

In addition, the margin in respect of the Revolving Facility was subject to adjustment determined by reference to a

leverage-based pricing grid.

Prior to the refinancing discussed below, loans in respect of the Revolving Facility accrued interest at a rate per annum equal to LIBOR plus 2.75%, in the case of LIBOR borrowings, and Alternate Base Rate plus 1.75%, in

the case of Alternate Base Rate borrowings.

Prior to the refinancing discussed below, the Term H Loan accrued interest at a

rate per annum equal to LIBOR plus 3.25%, in the case of LIBOR borrowings, and Alternate Base Rate plus 2.25%, in the case of Alternate Base Rate borrowings.

The Term H Loan was subject to a

1.00% LIBOR floor and a 2.00% Alternate Base Rate floor.

The term loan facility was required to be prepaid in an amount equal to (1) 100%

of the net cash proceeds of certain asset sales and dispositions by the Company and its subsidiaries, subject to certain exceptions and reinvestment rights, (2) 100% of the net cash proceeds of issuances of certain debt obligations or

receivables-based financing by the Company and its subsidiaries, subject to certain exceptions, and (3) 75%, subject to reduction to a lower percentage based on the Companys first lien net leverage ratio (as defined in the Credit Facility

generally as the ratio of first lien net debt on the date of determination to the Companys consolidated EBITDA, as defined, for the four quarters most recently ended prior to such date), of excess cash flow (as defined) for any year, subject

to certain exceptions.

Voluntary prepayments and commitment reductions were permitted in whole or in part, without any premium or penalty, subject to minimum prepayment or reduction requirements.

There were no scheduled principal amortization

payments on the Term H Facility after December 31, 2018.

The borrower under the Credit Facility was our wholly-owned subsidiary

CHS/Community Health Systems, Inc., or CHS.

All of the obligations under the Credit Facility were unconditionally guaranteed by the Company and certain of its existing and subsequently acquired or organized domestic subsidiaries.

All obligations

under the Credit Facility and the related guarantees were secured by a perfected first priority lien or security interest in substantially all of the assets of the Company, CHS and each subsidiary guarantor, including equity interests held by the

Company, CHS or any subsidiary guarantor, but excluding, among others, the equity interests of non-significant subsidiaries, syndication subsidiaries, securitization subsidiaries and joint venture

subsidiaries, and subject to the ABL Facility.

Such assets constituted substantially the same assets, subject to certain exceptions, that secured (i) on a first lien basis CHS obligations under the

5 1 ⁄ 8 % Senior Secured Notes due 2021, the 6 1 ⁄ 4 % Senior Secured Notes due 2023,

the 8 5 ⁄ 8 % Senior Secured Notes due 2024 and the 8% Senior Secured Notes due 2026 (in each case, as defined below) and (ii) on a junior-priority basis the 9 7 ⁄ 8 % Junior-Priority Secured Notes due 2023 and the 8 1 ⁄ 8 % Junior-Priority Secured

Notes due 2024 (in each case, as defined below).

CHS agreed to pay letter of credit fees equal to the applicable percentage then in

effect with respect to LIBOR borrowings under the Revolving Facility times the maximum aggregate amount available to be drawn under all letters of credit outstanding under the subfacility for letters of credit.

The issuer of any letter of credit

issued under the subfacility for letters of credit also received a customary fronting fee and other customary processing charges.

CHS was obligated to pay commitment fees of 0.50% per annum (subject to adjustment based upon our leverage ratio) on

the unused portion of the Revolving Facility.

On February 15, 2019, the Company and CHS entered into Amendment No.

Agreement, among the Company, CHS, the subsidiary guarantors party thereto, the lenders party thereto and Credit Suisse AG, Cayman Islands Branch, as administrative agent and collateral agent, to the Credit Facility.

The Credit Facility was amended

by the Agreement, with requisite covenant lender approval, to amend the first lien net debt to EBITDA ratio financial covenant and to reduce the extended revolving credit commitments to $385 million.

The amended financial covenant provided for

a maximum first lien net debt to EBITDA ratio of 5.00 to 1.00 from July 1, 2018 through December 31, 2018, 5.25 to 1.00 from January 1, 2019 through December 31, 2019, 5.00 to 1.00 from January 1, 2020 through June 30,

2020, 4.50 to 1.00 from July 1, 2020 through September 30, 2020, and 4.25 to 1.00 thereafter.

In addition, CHS agreed pursuant to the Agreement to further restrict its ability to make restricted payments.

The revolving credit commitments

terminated on November 19, 2019.

On April 3, 2018, we entered into an asset-based loan (ABL) credit agreement, or the ABL

Credit Agreement, with JPMorgan Chase Bank, N.A., as administrative agent, and the lenders and other agents party thereto.

Pursuant to the ABL Credit Agreement, the lenders have extended to CHS a revolving asset-based loan facility, or the ABL

Facility, in the maximum aggregate principal amount of $1.0 billion, subject to borrowing base capacity.

On November 12, 2019, we and CHS entered into Amendment No.

2 to the ABL Facility, resulting in

an increase of the portion of the commitments under the ABL Facility that are available in the form of letters of credit from $50 million to $200 million.

CHS and all domestic

subsidiaries of CHS that guarantee CHS other outstanding senior and senior secured indebtedness guarantee the obligations of CHS under the ABL Facility.

Subject to certain exceptions, all obligations under the ABL Facility and the related

guarantees are secured by a perfected first-priority security interest in substantially all of the receivables, deposit, collection and other accounts and contract rights, books, records and other instruments related to the foregoing of the Company,

CHS and the guarantors, as well as a perfected junior-priority security interest in substantially all of the other assets of the Company, CHS and the guarantors, subject to customary exceptions and intercreditor arrangements.

In connection with

entering into the ABL Credit Agreement and the ABL Facility, we repaid in full and terminated our accounts receivable loan agreement with a group of lenders and banks.

At December 31, 2019, the available borrowing base under the ABL Facility

was $860 million, of which we had outstanding borrowings of $273 million and letters of credit issued of $145 million.

The issued letters of credit were primarily in support of potential insurance-related claims and certain bonds.

Borrowings under the ABL Facility bear interest at a rate per annum equal to an applicable percentage, plus, at the Borrowers

option, either (a) an Alternative base rate or (b) a LIBOR rate.

From and after December 31, 2018, the applicable percentage under the ABL Facility is determined based on excess availability as a percentage of the maximum commitment

amount under the ABL Facility at a rate per annum of 1.25%, 1.50% and 1.75% for loans based on the Alternative base rate and 2.25%, 2.50% and 2.75% for loans based on the LIBOR rate.

From and after September 30, 2018, the applicable commitment

fee rate under the ABL Facility is determined based on average utilization as a percentage of the maximum commitment amount under the ABL Facility at a rate per annum of either 0.50% or 0.625% times the unused portion of the ABL Facility.

Principal amounts outstanding under the ABL Facility will be due and payable in full on April 3, 2023.

The ABL Facility includes a 91-day springing maturity applicable if more than $250 million in the aggregate principal amount of the 5 1 ⁄ 8 % Senior Secured

Notes due 2021, 6 7 ⁄ 8 % Senior Notes due 2022 or 6 1 ⁄ 4 % Senior Secured Notes due

2023 or any indebtedness incurred to refinance the foregoing are scheduled to mature or similarly become due on a date prior to April 3, 2023.

In such event, principal amounts outstanding under the ABL Facility will be accelerated and all

amounts outstanding under the ABL Facility will become immediately due and payable.

The ABL Facility contains customary representations

and warranties, subject to limitations and exceptions, and customary covenants restricting our ability, subject to certain exceptions, to, among other things (1) declare dividends, make distributions or redeem or repurchase capital stock,

(2) prepay, redeem or repurchase other debt, (3) incur liens or grant negative pledges, (4) make loans and investments and enter into acquisitions and joint ventures, (5) incur additional indebtedness or provide certain

guarantees, (6) engage in mergers, acquisitions and asset sales, (7) conduct transactions with affiliates, (8) alter the nature of our, CHS or the guarantors businesses, (9) grant certain guarantees with respect to

physician practices, (10) engage in sale and leaseback transactions or (11) change our fiscal year.

We are also required to comply with a consolidated fixed coverage ratio, upon certain triggering events described below, and various

affirmative covenants.

The consolidated fixed coverage ratio is calculated as the ratio of (x) consolidated EBITDA (as defined in the ABL Facility) less capital expenditures to (y) the sum of consolidated interest expense (as defined in

the ABL Facility), scheduled principal payments, income taxes and restricted payments made in cash or in permitted investments.

For purposes of calculating the consolidated fixed charge coverage ratio, the calculation of consolidated EBITDA as

defined in the ABL Facility is a trailing 12-month calculation that begins with our consolidated net income, with certain adjustments for interest, taxes, depreciation and amortization, net income attributable

to noncontrolling interests, stock compensation expense, restructuring costs, and the financial impact of other non-cash or non-recurring items recorded during any such 12-month period.

The consolidated fixed charge coverage ratio is a required covenant only in periods where the total borrowings outstanding under the ABL Facility reduce the amount available in the facility to less

than the greater of (i) $95 million and (ii) 10% of the calculated borrowing base.

As a result, in the event we have less than $95 million available under the ABL Facility, we would need to comply with the consolidated fixed charge

coverage ratio.

At December 31, 2019, we were not subject to the

consolidated fixed charge coverage ratio as such triggering event had not occurred during the last twelve months ended December 31, 2019.

In addition, in the event the amount of borrowings and letters of credit outstanding at any time under the ABL Facility exceeds the borrowing

base at such time, we will be required to, first, repay outstanding borrowings and, second, replace or cash collateralize outstanding letters of credit, in an aggregate amount sufficient to eliminate such excess.

Events of default under the ABL Facility include, but are not limited to, (1) CHS failure to pay principal, interest, fees or other

amounts under the ABL Credit Agreement when due (taking into account any applicable grace period), (2) any representation or warranty proving to have been materially incorrect when made, (3) covenant defaults subject, with respect to certain

covenants, to an available cure and applicable grace periods, (4) bankruptcy and insolvency events, (5) a cross default to certain other debt, (6) certain undischarged judgments (not paid within an applicable grace period), (7) a

change of control (as defined), (8) certain ERISA-related defaults and (9) the invalidity or impairment of specified security interests, guarantees or subordination provisions in favor of the ABL Agent or lenders under the ABL Facility.

On June 22, 2018, CHS completed offers to exchange, or the 2018 Exchange Offers, (i) up to $1.925 billion aggregate principal

amount of its new 9 7 ⁄ 8 % Junior-Priority Secured Notes due 2023, or the 9 7 ⁄ 8 %

Junior-Priority Secured Notes due 2023, in exchange for any and all of its $1.925 billion aggregate principal amount of outstanding 8% Senior Notes due 2019, or the 8% Senior Notes due 2019, (ii) up to $1.200 billion aggregate principal

amount of its new 8 1 ⁄ 8 % Junior-Priority Secured Notes due 2024, or the 8 1 ⁄ 8 %

Junior-Priority Secured Notes due 2024, in exchange for any and all of its $1.200 billion aggregate principal amount of outstanding 7 1 ⁄ 8 % Senior Notes due

2020, or the 7 1 ⁄ 8 % Senior Notes due 2020, and (iii) to the extent that less than all of the outstanding 8% Senior Notes due 2019 and 7 1 ⁄ 8 % Senior Notes due 2020 were tendered in the 2018 Exchange Offers, up to an aggregate principal amount of 8 1 ⁄ 8 % Junior-Priority Secured Notes due 2024 equal to, when taken together with the total notes issued in exchange for the validly tendered and accepted 8% Senior Notes due 2019 and

7 1 ⁄ 8 % Senior Notes due 2020, $3.125 billion, in exchange for its outstanding

6 7 ⁄ 8 % Senior Notes due 2022, or the 6 7 ⁄ 8 % Senior Notes due 2022.

completion of the 2018 Exchange Offers, CHS issued (i) approximately $1.770 billion aggregate principal amount of the 9 7 ⁄ 8 % Junior-Priority Secured Notes

due 2023 in exchange for the same amount of 8% Senior Notes due 2019, (ii) approximately $1.079 billion aggregate principal amount of the 8 1 ⁄ 8 % Junior-Priority

Secured Notes due 2024 in exchange for the same amount of 7 1 ⁄ 8 % Senior Notes due 2020 and (iii) approximately $276 million aggregate principal amount of

the 8 1 ⁄ 8 % Junior-Priority Secured Notes due 2024 in exchange for approximately $368 million of 6 7 ⁄ 8 % Senior Notes due 2022.

On July 6, 2018, CHS completed an offering of $1.033 billion

aggregate principal amount of 8 5 ⁄ 8 % Senior Secured Notes due 2024, or the 8 5 ⁄ 8 %

Senior Secured Notes due 2024.

We used the proceeds from this offering to repay the outstanding balance owed under the Term G Loan and pay fees and expenses related to the offering.

The 8 5 ⁄ 8 % Senior Secured Notes due 2024 bear interest at a rate of 8.625% per annum payable semi-annually in arrears on January 15 and July 15 of each year.

The 8 5 ⁄ 8 % Senior Secured Notes due 2024 are scheduled to mature on January 15, 2024.

The 8 5 ⁄ 8 % Senior Secured Notes due 2024 are

unconditionally guaranteed on a senior-priority secured basis by us and each of the CHS current and future domestic subsidiaries that provide guarantees under CHS ABL Facility, any capital market debt securities of CHS (including CHS

outstanding senior notes) and certain other long-term debt of CHS.

The 8 5 ⁄ 8 % Senior Secured Notes due 2024 are secured by a shared first-priority lien on the

collateral, or the Non-ABL Priority Collateral, that also secures on a first-priority basis CHS senior-priority secured notes and a shared second-priority lien on the collateral, or the ABL-Priority Collateral, that secures on a first-priority basis the ABL Facility, in each case subject to certain exceptions.

On March 6, 2019, CHS completed a private offering of $1.601 billion aggregate principal amount of the 8% Senior Secured Notes due

2026, or the 8% Senior Secured Notes due 2026.

The net proceeds from this issuance were used to finance the repayment of approximately $1.557 billion aggregate principal amount of CHS then outstanding Term H Facility and related fees and

On November 19, 2019, CHS completed a tack-on

offering of $500 million aggregate principal amount of additional 8% Senior Secured Notes due 2026, or the Additional 2026 Notes, increasing the total aggregate principal of the 8% Senior

Secured Notes due 2026 to $2.101 billion.

CHS used the proceeds from the Additional 2026 Notes to repay amounts outstanding under the Revolving Facility, redeem all $121 million aggregate principal amount of CHS then outstanding 7 1 ⁄ 8 % Senior Notes due 2020 and repay borrowings outstanding under the ABL Facility.

The additional 2026 Notes have identical terms, other than issue date, issue price

and the date from which interest initially accrued, as the 8% Senior Secured Notes due 2026 issued on March 6, 2019.

The 8% Senior Secured Notes due 2026 bear interest at a rate of 8.000% per annum, payable semi-annually in arrears on

March 15 and September 15 of each year.

The 8% Senior Secured Notes due 2026 are scheduled to mature on March 15, 2026.

The 8% Senior Secured Notes due 2026 are unconditionally guaranteed on a senior-priority secured basis by us and

each of the CHS current and future domestic subsidiaries that provide guarantees under CHS ABL Facility, any capital market debt securities of CHS (including CHS outstanding senior notes) and certain other long-term debt of CHS.

Senior Secured Notes due 2026 are secured by a shared first-priority lien on the Non-ABL Priority Collateral and a shared second-priority lien on the ABL Priority Collateral, in each case subject to certain

CHS terminated the Revolving Facility upon consummation of the Additional 2026 Notes offering and the outstanding letters of credit were moved under the ABL Facility.

On November 19, 2019, we issued approximately $700 million aggregate principal amount of the 8% Senior Secured Notes due 2027, or

the 8% Senior Secured Notes due 2027, and approximately $1.7 billion aggregate principal amount of 6 7 ⁄ 8 % Senior Notes due 2028, or the 6 7 ⁄ 8 % Senior Notes due 2028, in exchange for approximately $2.4 billion of 6 7 ⁄ 8 %

Senior Notes due 2022, or the 2019 Exchange Offer.

No cash proceeds were received from the 2019 Exchange Offer.

The 8% Senior Secured Notes due 2027 bear interest at a rate of 8.000% per annum, payable semi-annually in arrears on June 15 and

December 15 of each year, commencing on June 15, 2020.

The 8% Senior Secured Notes due 2027 are scheduled to mature on December 15, 2027.

The 8% Senior Secured Notes due 2027 are unconditionally guaranteed on a senior-priority secured

basis by us and each of the CHS current and future domestic subsidiaries that provide guarantees under CHS ABL Facility, any capital market debt securities of CHS (including CHS outstanding senior notes) and certain other long-term debt

The 8% Senior Secured Notes due 2027 are secured by shared first-priority liens on the Non-ABL Priority Collateral and shared second-priority liens on the ABL Priority Collateral, in each case subject

to certain exceptions.

The 6 7 ⁄ 8 % Senior Notes due

2028 bear interest at a rate of 6.875% per annum, payable semi-annually in arrears on April 1 and October 1 of each year, commencing on April 1, 2020.

6 7 ⁄ 8 % Senior Notes due 2028 are scheduled to mature on April 1, 2028.

6 7 ⁄ 8 % Senior Notes due 2028 are unconditionally guaranteed on a senior-priority unsecured basis by us and each of the CHS current and future domestic subsidiaries

that provide guarantees under CHS ABL Facility, any capital market debt securities of CHS (including CHS outstanding senior notes) and certain other long-term debt of CHS.

On January 23, 2020, we announced that CHS commenced a cash tender offer for any and all of the outstanding 5 1 ⁄ 8 % Senior Secured Notes due 2021.

As of the early tender deadline on February 5, 2020, approximately $632 million aggregate principal amount of 5 1 ⁄ 8 % Senior Secured Notes due 2021, or approximately 63.25% of the outstanding 5 1 ⁄ 8 %

Senior Secured Notes due 2021, had been validly tendered and not validly withdrawn.

In connection with the commencement of the cash tender offer, CHS issued to holders of the 5 1 ⁄ 8 % Senior Secured Notes due 2021 a conditional notice of redemption to redeem all of the 5 1 ⁄ 8 % Senior Secured Notes due 2021 not

purchased by CHS in the tender offer at a redemption price of 100.000% of the principal amount thereof plus accrued interest to, but not including, February 22, 2020.

On February 6, 2020, CHS completed a private offering of $1.462 billion aggregate principal amount of

6 5 ⁄ 8 % Senior Secured Notes due 2025, or the 6 5 ⁄ 8 % Senior Secured Notes due

CHS used the net proceeds of the offering of the 6 5 ⁄ 8 % Senior Secured Notes due 2025 to (i) purchase any and all of its

5 1 ⁄ 8 % Senior Secured Notes due 2021 validly tendered and not validly withdrawn in the cash tender offer announced on January 23, 2020, (ii) redeem all of the 5 1 ⁄ 8 % Senior Secured Notes due 2021 that were not purchased pursuant to such

tender offer, (iii) purchase in one or more privately negotiated transactions or redeem approximately $426 million aggregate principal amount of its

6 1 ⁄ 4 % Senior Secured Notes due 2023 and (iv) pay related fees and expenses.

6 5 ⁄ 8 % Senior Secured Notes due 2025 bear interest at a rate of 6.625% per annum, payable semi-annually in arrears on February 15 and August 15 of each

year, commencing on August 15, 2020.

The 6 5 ⁄ 8 % Senior Secured Notes due 2025 are scheduled to mature on February 15, 2025.

The 6 5 ⁄ 8 % Senior Secured Notes due 2025 are unconditionally guaranteed on a senior-priority secured basis by us and each of the CHS current and future domestic subsidiaries

that provide guarantees under CHS ABL Facility, any capital market debt securities of CHS (including CHS outstanding senior notes) and certain other long-term debt of CHS.

The 6 5 ⁄ 8 % Senior Secured Notes due 2025 are secured by shared first-priority liens on the Non-ABL Priority Collateral and shared second-priority liens on the ABL Priority

Collateral, in each case subject to certain exceptions.

As of December 31, 2019, we are currently a party to one interest rate swap

agreement to limit the effect of changes in interest rates on all of our variable rate debt.

We receive a variable rate of interest on this swap based on the three-month LIBOR, in exchange for the payment by us of a fixed rate of interest.

The ABL Facility and the indentures that govern our outstanding notes contain various covenants that limit our ability to take certain

actions, including our ability to:

incur, assume or guarantee additional indebtedness;

issue redeemable stock and preferred stock;

repurchase capital stock;

make restricted payments, including paying dividends and making certain loans, acquisitions and investments;

redeem debt that is subordinated in right of payment to our outstanding notes;

create liens;

sell or otherwise dispose of assets, including capital stock of subsidiaries;

impair the security interests;

enter into agreements that restrict dividends and certain other payments from subsidiaries;

merge, consolidate, sell or otherwise dispose of substantially all of our assets;

enter into transactions with affiliates;

guarantee certain obligations.

Our ability to meet the restricted covenants and financial ratios and tests in the ABL Facility and the indentures governing our outstanding

notes can be affected by events beyond our control, and we cannot assure you that we will meet those tests.

A breach of any of these covenants could result in a default under the ABL Facility and/or the indentures that govern our outstanding notes.

Upon the occurrence of an event of default under the ABL Facility or indentures that govern our outstanding notes, all amounts outstanding under the ABL Facility and the indentures that govern our outstanding notes may become immediately due and

payable and all commitments under the ABL Facility to extend further credit may be terminated.

We believe that internally generated cash

flows and current levels of availability for additional borrowing under the ABL Facility, as well as our continued access to the capital markets, will be sufficient to finance acquisitions, capital expenditures, working capital requirements, and any

debt repurchases or other debt repayments we may elect to make or be required to make through the next 12 months.

We may elect from time to time to purchase our outstanding debt in open market purchases,

privately negotiated transactions or otherwise.

Any such debt repurchases will depend upon prevailing market conditions, our liquidity requirements, contractual restrictions, applicable securities laws requirements, and other factors.

Off-balance Sheet Arrangements

Off-balance sheet arrangements consist of letters of credit of $145 million issued on the ABL

Facility, primarily in support of potential insurance-related claims and certain bonds, as well as approximately $19 million representing the maximum potential amount of future payments under physician recruiting guarantee commitments in excess

of the liability recorded at December 31, 2019.

As described more fully in Note 15 of the Notes to Consolidated Financial Statements

included under Part II, Item 8 of this Form 10-K, at December 31, 2019, we have certain cash obligations for replacement facilities and other construction commitments of $85 million.

Noncontrolling Interests

noncontrolling interests in certain of our subsidiaries or acquired subsidiaries with existing noncontrolling interest ownership positions.

As of December 31, 2019, we have hospitals in 10 of the markets we serve, with noncontrolling physician

ownership interests ranging from 1% to 40%.

In addition, as of December 31, 2019 we have nine other hospitals with noncontrolling interests owned by non-profit entities.

On August 15, 2018, we

completed the acquisition of the 20% ownership interest held by the non-profit entity that was the noncontrolling interest owner of two of our hospitals in Indiana for approximately $20 million.

Redeemable noncontrolling interests in equity of consolidated subsidiaries was $502 million and $504 million as of December 31, 2019 and 2018, respectively, and noncontrolling interests in equity of consolidated subsidiaries was

$77 million and $72 million as of December 31, 2019 and 2018, respectively.

The amount of net income attributable to noncontrolling interests was $85 million, $84 million and $63 million for the years ended

December 31, 2019, 2018 and 2017, respectively.

As a result of the change in the Stark Law whole hospital exception included in the Affordable Care Act, we are not permitted to introduce physician ownership at any of our hospital

facilities that did not have physician ownership at the time of the adoption of the Affordable Care Act, or increase the aggregate percentage of physician ownership in any of our former or existing hospital joint ventures in excess of the aggregate

physician ownership level held at the time of the adoption of the Affordable Care Act.

Reimbursement, Legislative and Regulatory Changes

Ongoing legislative and regulatory efforts could reduce or otherwise adversely affect the payments we receive from Medicare and Medicaid and

other payors.

Within the statutory framework of the Medicare and Medicaid programs, there are substantial areas subject to agency regulations, administrative rulings, interpretations and discretion which may further affect payments made under those

programs, and the federal and state governments might, in the future, reduce the funds available under those programs or require more stringent utilization and quality reviews of hospital facilities.

Additionally, there may be a continued rise in

managed care programs and additional restructuring of the financing and delivery of healthcare in the United States.

These events could cause our future financial results to be adversely impacted.

We cannot estimate the impact of Medicare and

Medicaid reimbursement changes that have been enacted or are under consideration.

We cannot predict whether additional reimbursement reductions will be made or whether any such changes or other restructuring of the financing and delivery of

healthcare would have a material adverse effect on our business, financial conditions, results of operations, cash flow, capital resources and liquidity.

The healthcare industry is

labor intensive.

Wages and other expenses increase during periods of inflation and when labor shortages occur in the marketplace.

In addition, our suppliers pass along rising costs to us in the form

of higher prices.

We have implemented cost control measures, including our case and resource management program, to curb increases in operating costs and expenses.

We have generally offset

increases in operating costs by increasing reimbursement for services, expanding services and reducing costs in other areas.

However, we cannot predict our ability to cover or offset future cost increases, particularly any increases in our cost of

providing health insurance benefits to our employees.

Critical Accounting Policies

The discussion and analysis of our financial condition and results of operations are based upon our consolidated financial statements, which

have been prepared in accordance with U.S.

The preparation of these financial statements requires us to make estimates and judgments that affect the reported amount of assets and liabilities, revenues and expenses, and related disclosure of

contingent assets and liabilities at the date of our consolidated financial statements.

Actual results may differ from these estimates under different assumptions or conditions.

Critical accounting policies are defined as those that are reflective of significant judgments and uncertainties, and potentially result in

materially different results under different assumptions and conditions.

We believe that our critical accounting policies are limited to those described below.

Revenue Recognition

adoption of the new revenue recognition standard in the Financial Accounting Standards Board, or FASB, Accounting Standards Codification Topic 606, or ASC 606, we record net operating revenues at the transaction price estimated to reflect the total

consideration due from patients and third-party payors in exchange for providing goods and services in patient care.

These services are considered to be a single performance obligation and have a duration of less than one year.

are recorded as these goods and services are provided.

The transaction price, which involves significant estimates, is determined based on our standard charges for the goods and services provided, with a reduction recorded for price concessions

related to third party contractual arrangements as well as patient discounts and patient price concessions.

During the year ended December 31, 2019, the impact of changes to the inputs used to determine the transaction price was considered

immaterial to the current period.

States utilize supplemental reimbursement programs for the purpose of providing reimbursement to

providers that is not specifically tied to an individuals care, some of which offsets a portion of the cost of providing care to Medicaid and indigent patients.

These programs are designed with input from the CMS and are funded with a

combination of state and federal resources, including, in certain instances, fees or taxes levied on the providers.

Under these supplemental programs, we recognize revenue and related expenses in the period in which amounts are estimable and

collection is reasonably assured.

Reimbursement under these programs is reflected in net operating revenues and fees, taxes or other program-related costs are reflected in other operating expenses.

Net operating revenues include amounts estimated by management to be reimbursable by Medicare and Medicaid under prospective payment systems

and provisions of cost-reimbursement and other payment methods.

In addition, we are reimbursed by non-governmental payors using a variety of payment methodologies.

Amounts we receive for treatment of patients

covered by these programs are generally less than our standard billing rates.

Explicit price concessions are recorded for contractual allowances that are calculated and recorded through internally-developed data collection and analysis tools to

automate the monthly estimation of required contractual allowances.

Within this automated system, payors historical paid claims data are utilized to calculate the contractual allowances.

This data is automatically updated on a monthly basis.

All hospital contractual allowance calculations are subjected to monthly review by management to ensure reasonableness and accuracy.

We account for the differences between the estimated program reimbursement rates and our standard billing rates as

contractual allowance adjustments, which is one component of the deductions from gross revenues to arrive at net operating revenues.

The process of estimating contractual allowances requires us to estimate the amount expected to be received based on

payor contract provisions.

The key assumption in this process is the estimated

contractual reimbursement percentage, which is based on payor classification, historical paid claims data and, when applicable, application of the expected managed care plan reimbursement based

on contract terms.

Due to the complexities involved in these estimates, actual payments we receive could be different from the amounts we

estimate and record.

If the actual contractual reimbursement percentage under government programs and managed care contracts differed by 1% at December 31, 2019 from our estimated reimbursement percentage, net loss for the year ended

December 31, 2019 would have changed by approximately $80 million, and net accounts receivable at December 31, 2019 would have changed by $102 million.

Final settlements under some of these programs are subject to adjustment

based on administrative review and audit by third parties.

We account for adjustments to previous program reimbursement estimates as contractual allowance adjustments and report them in the periods that such adjustments become known.

allowance adjustments related to final settlements and previous program reimbursement estimates impacted net operating revenues and net loss by an insignificant amount for each of the years ended December 31, 2019, 2018 and 2017.

Patient Accounts Receivable

Substantially all of our accounts receivable are related to providing healthcare services to patients at our hospitals and affiliated

Collection of these accounts receivable is our primary source of cash and is critical to our operating performance.

Our primary collection risks relate to uninsured patients and outstanding patient balances for which the primary

insurance payor has paid some but not all of the outstanding balance, with the remaining outstanding balance (generally deductibles and co-payments) owed by the patient.

For all procedures scheduled in

advance, our policy is to verify insurance coverage prior to the date of the procedure.

Insurance coverage is not verified in advance of procedures for walk-in and emergency room patients.

We estimate any adjustments to the transaction price for implicit price concessions by reserving a percentage of all self-pay accounts receivable without regard to aging category, based on collection history, adjusted for expected recoveries and any anticipated changes in trends.

Our ability to estimate the transaction price and

any implicit price concessions is not impacted by not utilizing an aging of our net accounts receivable as we believe that substantially all of the risk exists at the point in time such accounts are identified as

The percentage used to reserve for all self-pay accounts is based on our collection history.

We believe that we collect substantially all of our third-party

insured receivables, which include receivables from governmental agencies.

Patient accounts receivable are recorded at net realizable

value based on certain assumptions determined by each payor.

For third-party payors including Medicare, Medicaid, and Managed Care, the net realizable value is based on the estimated contractual reimbursement percentage, which is based on current

contract prices or historical paid claims data by payor.

For self-pay accounts receivable, which includes patients who are uninsured and the patient responsibility portion for patients with insurance, the net

realizable value is determined using estimates of historical collection experience without regard to aging category.

These estimates are adjusted for estimated conversions of patient responsibility portions, expected recoveries and any

anticipated changes in trends.

Patient accounts receivable can be impacted by the effectiveness of our collection efforts.

Additionally,

significant changes in payor mix, business office operations, economic conditions or trends in federal and state governmental healthcare coverage could affect the net realizable value of accounts receivable.

We also continually review the net

realizable value of accounts receivable by monitoring historical cash collections as a percentage of trailing net operating revenues, as well as by analyzing current period net revenue and admissions by payor classification, aged accounts receivable

by payor, days revenue outstanding, the composition of self-pay receivables between pure self-pay patients and the patient responsibility portion of third-party insured

receivables and the impact of recent acquisitions and dispositions.

If the actual collection percentage differed by 1% at December 31, 2019 from our estimated collection percentage as a result of a change in expected recoveries, net loss for

the year ended December 31, 2019 would have changed by $53 million, and net accounts receivable at December 31, 2019 would have changed by $68 million.

We also continually review our overall reserve adequacy by monitoring

historical cash collections as a percentage of trailing net operating revenues, as well as

by analyzing current period net revenue and admissions by payor classification, days revenue outstanding, the composition of self-pay receivables between

pure self-pay patients and the patient responsibility portion of third-party insured receivables and the impact of recent acquisitions and dispositions.

Our policy is to write-off gross accounts receivable if the balance is under $10.00 or when such

amounts are placed with outside collection agencies.

We believe this policy accurately reflects our ongoing collection efforts and is consistent with industry practices.

We had approximately $3.8 billion at December 31, 2019 and

$4.7 billion December 31, 2018, being pursued by various outside collection agencies.

We expect to collect less than 3%, net of estimated collection fees, of the amounts being pursued by outside collection agencies.

As these amounts have

been written-off, they are not included in our accounts receivable.

Collections on amounts previously written-off are recognized as a recovery of net operating revenues

when received.

However, we take into consideration estimated collections of these future amounts written-off in determining the implicit price concessions used to measure the transaction price for the

applicable portfolio of patient accounts receivable.

All of the following information is derived from our hospitals, excluding clinics,

unless otherwise noted.

Patient accounts receivable from our hospitals represent approximately 98% of our total consolidated accounts

Days revenue outstanding, adjusted for the impact of receivables for state Medicaid supplemental payment programs, was 58

days at both December 31, 2019 and 2018.

Total gross accounts receivable (prior to allowance for contractual adjustments and

implicit price concessions) was approximately $16.6 billion as of December 31, 2019 and approximately $17.2 billion as of December 31, 2018.

The approximate percentage of total gross accounts receivable (prior to allowance for

contractual adjustments and implicit price concessions) summarized by aging categories is as follows:

As of December 31, 2019:

% of Gross Receivables

90 - 180 Days

180 - 365 Days

Over 365 Days

Managed Care and Other

As of December 31, 2018:

% of Gross Receivables

90 - 180 Days

180 - 365 Days

Over 365 Days

Managed Care and Other

The approximate percentage of total gross accounts receivable (prior to allowances for contractual

adjustments and implicit price concessions) summarized by payor is as follows:

Insured receivables

Self-pay receivables

The combined total at our hospitals and clinics for the estimated implicit price concessions for self-pay accounts receivable and allowances for other self-pay discounts and contractuals, as a percentage of gross self-pay

receivables, was approximately 90% at both December 31, 2019 and December 31, 2018.

If the receivables that have been written-off, but where collections are still being pursued by outside collection

agencies, were included in both the allowances and gross self-pay receivables specified above, the percentage of combined allowances to total self-pay receivables would

have been 94% at both December 31, 2019 and December 31, 2018.

Goodwill and Other Intangibles

Goodwill represents the excess of the fair value of the consideration conveyed in the acquisition over the fair value of net assets acquired.

Goodwill is evaluated for impairment annually and when an event occurs or circumstances change that, more likely than not, reduce the fair value of the reporting unit below its carrying value.

During 2017, we early adopted Accounting Standards

Update, or ASU 2017-04, which allows a company to record a goodwill impairment when the reporting units carrying value exceeds the fair value determined in step one.

Our most recent goodwill evaluation was

performed during the fourth quarter of 2019 with an October 31, 2019 measurement date, which indicated no impairment.

December 31, 2019, we had approximately $4.3 billion of goodwill recorded, all of which resides at our hospital operations reporting unit.

While no impairment was indicated in our annual goodwill evaluation as of the October 31, 2019 and October 31, 2018 measurement

dates, the reduction in our fair value and the resulting goodwill impairment charges recorded in 2016 and 2017 reduced the carrying value of our hospital operations reporting unit to an amount equal to our estimated fair values as of such prior year

measurement dates.

This increases the risk that future declines in fair value could result in goodwill impairment.

The determination of fair value in step one of our goodwill impairment analysis is based on an estimate of fair value for the hospital

operations reporting unit utilizing known and estimated inputs at the evaluation date.

Some of those inputs include, but are not limited to, the most recent price of our common stock or fair value of our long-term debt, estimates of future revenue

and expense growth, estimated market multiples, expected capital expenditures, income tax rates, and costs of invested capital.

Future estimates of fair value could be adversely affected if the actual outcome of one or more of these assumptions

changes materially in the future, including further decline in our stock price or fair value of our long-term debt, lower than expected hospital volumes, higher market interest rates or increased operating costs.

Such changes impacting the

calculation of our fair value could result in a material impairment charge in the future.

Impairment or Disposal of Long-Lived Assets

Whenever events or changes in circumstances indicate that the carrying values of certain long-lived assets may be impaired, we project the

undiscounted cash flows expected to be generated by these assets.

If the projections indicate that the reported amounts are not expected to be recovered, such amounts are reduced to their estimated fair value based on a quoted market price, if

available, or an estimate based on valuation techniques available in the circumstances.

Professional Liability Claims

As part of our business of owning and operating hospitals, we are subject to legal actions alleging liability on our part.

We accrue for

losses resulting from such liability claims, as well as loss adjustment expenses that are out-of-pocket and directly related to such liability claims.

These direct out-of-pocket expenses include fees of outside counsel and experts.

We do not accrue for costs that are part of our corporate overhead, such as the costs of our in-house legal and risk management departments.

The losses resulting from professional liability claims primarily consist of estimates for known claims, as well as estimates for incurred but not reported claims.

estimates are based on specific claim facts, our historical claim reporting and payment patterns, the nature and

level of our hospital operations, and actuarially determined projections.

The actuarially determined projections are based on our actual claim data, including historic reporting and payment

patterns which have been gathered over an approximately 20-year period.

As discussed below, since we purchase excess insurance on a claims-made basis that transfers risk to third-party insurers, the liability

we accrue does include an amount for the losses covered by our excess insurance.

We also record a receivable for the expected reimbursement of losses covered by our excess insurance.

Since we believe that the amount and timing of our future claims

payments are reliably determinable, we discount the amount we accrue for losses resulting from professional liability claims using the risk-free interest rate corresponding to the timing of our expected payments.

The net present value of the projected payments was discounted using a weighted-average risk-free rate 2.6%, 3.1%, and 2.2% in 2019, 2018 and

2017, respectively.

This liability is adjusted for new claims information in the period such information becomes known to us.

Professional malpractice expense includes the losses resulting from professional liability claims and loss adjustment

expense, as well as paid excess insurance premiums, and is presented within other operating expenses in the accompanying consolidated statements of loss.

Our processes for obtaining and analyzing claims and incident data are standardized across all of our hospitals and have been consistent for

We monitor the outcomes of the medical care services that we provide and for each reported claim, we obtain various information concerning the facts and circumstances related to that claim.

In addition, we routinely monitor current key

statistics and volume indicators in our assessment of utilizing historical trends.

The average lag period between claim occurrence and payment of a final settlement is between three and four years, although the facts and circumstances of individual

claims could result in the timing of such payments being different from this average.

Since claims are paid promptly after settlement with the claimant is reached, settled claims represent approximately 1.0% of the total liability at the end of any

For purposes of estimating our individual claim accruals, we utilize specific claim information, including the nature of the

claim, the expected claim amount, the year in which the claim occurred and the laws of the jurisdiction in which the claim occurred.

Once the case accruals for known claims are determined, information is stratified by loss layers and retentions,

accident years, reported years, geography, and claims relating to the acquired HMA hospitals versus claims relating to our other hospitals.

Several actuarial methods are used against this data to produce estimates of ultimate paid losses and

reserves for incurred but not reported claims.

Each of these methods uses our company-specific historical claims data and other information.

This company-specific data includes information regarding our business, including historical paid losses and

loss adjustment expenses, historical and current case loss reserves, actual and projected hospital statistical data, a variety of hospital census information, employed physician information, professional liability retentions for each policy year,

geographic information and other data.

Based on these analyses, we determine our estimate of the professional liability claims.

determination of managements estimate, including the preparation of the reserve analysis that supports such estimate, involves subjective judgment of management.

Changes in reserving data or the trends and factors that influence reserving data

may signal fundamental shifts in our future claim development patterns or may simply reflect single-period anomalies.

Even if a change reflects a fundamental shift, the full extent of the change may not become evident until years later.

since our methods and models use different types of data and we select our liability from the results of all of these methods, we typically cannot quantify the precise impact of such factors on our estimates of the liability.

Due to our standardized

and consistent processes for handling claims and the long history and depth of our company-specific data, our methodologies have historically produced reliably determinable estimates of ultimate paid losses.

Management considers any changes in the

amount and pattern of its historical paid losses up through the most recent reporting period to identify any fundamental shifts or trends in claim development experience in determining the estimate of professional liability claims.

However, due to

the subjective nature of this estimate and the impact that previously unforeseen shifts in actual claim experience can have, future estimates of professional liability could be adversely impacted when actual paid losses develop unexpectedly based on

assumptions and settlement events that were not previously known or anticipated.

Year Ended December 31,

Accrual for professional liability claims, beginning of year

Liability for insured claims (1)

Expense (income) related to:

Current accident year

Prior accident years

Expense (income) from discounting

Total incurred loss and loss expense (2)

Paid claims and expenses related to:

Current accident year

Prior accident years

Total paid claims and expenses

Accrual for professional liability claims, end of year

The liability for insured claims is recorded on the consolidated balance sheet with a corresponding insurance

recovery receivable.

Total expense, including premiums for insured coverage, was $298 million in 2019, $199 million in

2018 and $184 million in 2017.

During the year ended December 31, 2019, we experienced a significant increase

in the amounts paid to settle outstanding professional liability claims, compared to the same period in the prior year and to previous actuarially determined estimates.

This increase in claims paid related to claims incurred in 2016 and prior years

and was primarily related to divested hospitals.

The settlement of these claims at amounts greater than the previously determined actuarial estimates resulted in us recording a $70 million change in estimate during the three months ended

June 30, 2019, and an additional $20 million change in estimate during the three months ended September 30, 2019 based on updated actuarial estimates.

No additional change in estimate related to these claims was recorded during the

three months ended December 31, 2019.

We are primarily self-insured for these claims;

however, we obtain excess insurance that

transfers the risk of loss to a third-party insurer for claims in excess of our self-insured retentions.

Our excess insurance is underwritten on a claims-made basis.

For claims reported prior to June 1, 2002, substantially all of our

professional and general liability risks were subject to a less than $1 million per occurrence self-insured retention and for claims reported from June 1, 2002 through June 1, 2003, these self-insured retentions were $2 million

Substantially all claims reported after June 1, 2003 and before June 1, 2005 are self-insured up to $4 million per claim.

Substantially all claims reported on or after

June 1, 2005 and before June 1, 2014 are self-insured up to $5 million per claim.

Substantially all claims reported on or after June 1, 2014 and before June 1, 2018 are self-insured up to $10 million per claim.

Substantially all claims reported on or after June 1, 2018 are self-insured up to $15 million per claim.

Management, on occasion, has selectively increased the insured risk at certain hospitals based upon insurance pricing and other

factors and may continue that practice in the future.

Excess insurance for all hospitals has been purchased through commercial insurance companies and generally covers us for liabilities in excess of the self-insured retentions.

The excess coverage

consists of multiple layers of insurance, the sum of which totals up to $95 million per occurrence and in the aggregate for claims reported on or after June 1, 2003, up to $145 million per occurrence and in the aggregate for claims

reported on or after January 1, 2008, up to $195 million per occurrence and in the aggregate for claims reported on or after June 1, 2010, and up to at least $215 million per occurrence and in the aggregate for claims reported on

or after June 1, 2015.

In addition, for integrated occurrence malpractice claims, there is an additional $50 million of excess coverage for claims reported on or after June 1, 2014 and an additional $75 million of excess coverage

for claims reported on or after June 1, 2015.

For certain policy years prior to June 1, 2014, if the first aggregate layer of excess coverage becomes fully utilized, then the self-insured retention will increase to $10 million per

claim for any subsequent claims in that policy year until our total aggregate coverage is met.

Beginning June 1, 2018, this drop-down provision in the excess policies attaches over the $15 million per claim self-insured retention.

Effective June 1, 2014, the hospitals acquired from HMA were insured on a claims-made basis as described above and through commercial

insurance companies as described above for substantially all claims reported on or after June 1, 2014 except for physician-related claims with an occurrence date prior to June 1, 2014.

Prior to June 1, 2014, the former HMA hospitals

obtained insurance coverage through a wholly-owned captive insurance subsidiary and a risk retention group subsidiary which are domiciled in the Cayman Islands and South Carolina, respectively.

Those insurance subsidiaries, which are collectively

referred to as the Insurance Subsidiaries, provided (i) claims-made coverage to all of the former HMA hospitals and (ii) occurrence-basis coverage to most of the physicians employed by the former HMA hospitals.

physicians not covered by the Insurance Subsidiaries generally maintained claims-made policies with unrelated third party insurance companies.

To mitigate the exposure of the program covering the former HMA hospitals and other healthcare facilities,

the Insurance Subsidiaries bought claims-made reinsurance policies from unrelated third parties for claims above self-retention levels of $10 million or $15 million per claim, depending on the policy year.

Effective January 1, 2008, the former Triad hospitals were insured on a claims-made basis as described above and through commercial

insurance companies as described above for substantially all claims occurring on or after January 1, 2002 and reported on or after January 1, 2008.

Substantially all losses for the former Triad hospitals in periods prior to May 1,

1999 were insured through a wholly-owned insurance subsidiary of HCA, Triads owner prior to that time, and excess loss policies maintained by HCA.

HCA has agreed to indemnify the former Triad hospitals in respect of claims covered by such

insurance policies arising prior to May 1, 1999.

From May 1, 1999 through December 31, 2006, the former Triad hospitals obtained insurance coverage on a claims incurred basis from HCAs wholly-owned insurance subsidiary with

excess coverage obtained from other carriers that is subject to certain deductibles.

Effective for claims incurred after December 31, 2006, Triad began insuring its claims from $1 million to $5 million through its wholly-owned captive

insurance company, replacing the coverage provided by HCA.

Substantially all claims occurring during 2007 were self-insured up to $10 million per claim.

estimates in recording provision for income taxes, including determination of deferred tax assets and deferred tax liabilities and any valuation allowances that might be required against the deferred tax assets.

We believe that future income will

enable us to realize certain deferred tax assets, subject to the valuation allowance we have established.

The total amount of unrecognized benefit that would impact the effective tax rate, if recognized,

was approximately $1 million as of December 31, 2019.

A total of approximately $1 million of interest and penalties is included in the amount of liability for uncertain tax positions at December 31, 2019.

It is our policy to

recognize interest and penalties related to unrecognized benefits in our consolidated statements of loss as income tax expense.

possible the amount of unrecognized tax benefit could change in the next 12 months as a result of a lapse of the statute of limitations and settlements with taxing authorities;

however, we do not anticipate the change will have a material impact on

our consolidated results of operations or consolidated financial position.

Our federal income tax returns for the 2009 and 2010 tax years

have been settled with the Internal Revenue Service.

The results of these examinations were not material to our consolidated results of operations or consolidated financial position.

Our federal income tax returns for the 2014 and 2015 tax years

remain under examination by the Internal Revenue Service.

We believe the results of these examinations will not be material to our consolidated results of operations or consolidated financial position.

We have extended the federal statute of

limitations through December 31, 2020 for Community Health Systems, Inc.

for the tax periods ended December 31, 2014 and 2015.

We have accounted for the effects of the Tax Act using reasonable estimates based on currently available information and our interpretations

thereof, and the estimated impact of the Tax Act during the years ended December 31, 2019 and 2018.

We finalized our accounting for the Tax Act in the fourth quarter of 2018 in accordance with the prescribed measurement period under SAB 118.

See Note 5 of the Notes to Consolidated Financial Statements included under Part II, Item 8 of this Form 10-K for additional information.

Recent Accounting Pronouncements

August 2018, the FASB issued ASU 2018-15 to provide guidance on the accounting for implementation costs incurred in a cloud computing arrangement (CCA) that is a service contract.

This ASU requires entities to

account for such costs consistent with the guidance on capitalizing costs associated with developing or obtaining internal-use software.

The ASU is effective for all entities for fiscal years beginning after

December 15, 2019, and interim periods within those fiscal years, with early adoption permitted.

We adopted this ASU on January 1, 2020, and do not expect the adoption of this ASU will have a material impact on our consolidated financial

position and results of operations.

In June 2016, the FASB issued ASU 2016-13, which introduced a

new model for recognizing credit losses on financial instruments based on an estimate of the current expected credit losses.

The new current expected credit losses, or CECL, model generally calls for the immediate recognition of all

expected credit losses and applies to financial instruments and other assets, including accounts receivable and other financial assets measured at amortized cost, debt securities and other financial assets.

This guidance replaces the current

incurred loss model for measuring expected credit losses, requires expected losses on available-for-sale debt securities to be recognized through an allowance for credit

losses rather than as reductions in the amortized cost of the securities, and provides for additional disclosure requirements.

This ASU is effective for fiscal years beginning after December 15, 2019, and interim periods within those

fiscal years, with early adoption permitted.

We adopted this ASU on January 1, 2020, and do not expect the adoption of this ASU will have a material impact on our consolidated financial position and results of operations.

FORWARD-LOOKING STATEMENTS

matters discussed in this Report include forward-looking statements within the meaning of the federal securities laws, which involve risks, assumptions and uncertainties.

Statements that are predictive in nature, that depend upon or

refer to future events or conditions or that include words such as expects, anticipates, intends, plans, believes, estimates, thinks, and similar expressions are

forward-looking statements.

These statements involve known and unknown risks, uncertainties, and other factors that may cause

our actual results and performance to be materially different from any future results or performance expressed or implied by these forward-looking statements.

These factors include, among other

general economic and business conditions, both nationally and in the regions in which we operate;

the impact of current or future federal and state health reform initiatives, including, without limitation, the

Affordable Care Act, and the potential for the Affordable Care Act to be repealed, or found unconstitutional or otherwise invalidated, or for additional changes to the law, its implementation or its interpretation (including through executive orders

and court challenges);

the extent to and manner in which states support increases, decreases or changes in Medicaid programs, implement

health insurance exchanges or alter the provision of healthcare to state residents through regulation or otherwise;

the future and long-term viability of health insurance exchanges and potential changes to the beneficiary

enrollment process;

risks associated with our substantial indebtedness, leverage and debt service obligations, and the fact that a

substantial portion of our indebtedness will mature and become due in the near future, including our ability to refinance such indebtedness on acceptable terms or to incur additional indebtedness, and our ability to remain in compliance with debt

demographic changes;

changes in, or the failure to comply with, federal, state or local laws or governmental regulations affecting our

potential adverse impact of known and unknown government investigations, audits, and federal and state false

claims act litigation and other legal proceedings;

our ability, where appropriate, to enter into and maintain provider arrangements with payors and the terms of

these arrangements, which may be further affected by the increasing consolidation of health insurers and managed care companies and vertical integration efforts involving payors and healthcare providers;

changes in, or the failure to comply with, contract terms with payors and changes in reimbursement policies or

rates paid by federal or state healthcare programs or commercial payors;

any potential additional impairments in the carrying value of goodwill, other intangible assets, or other

long-lived assets, or changes in the useful lives of other intangible assets;

changes in inpatient or outpatient Medicare and Medicaid payment levels and methodologies;

the effects related to the continued implementation of the sequestration spending reductions and the potential

for future deficit reduction legislation;

increases in the amount and risk of collectability of patient accounts receivable, including decreases in

collectability which may result from, among other things, self-pay growth and difficulties in recovering payments for which patients are responsible, including co-pays

and deductibles;

the efforts of insurers, healthcare providers, large employer groups and others to contain healthcare costs,

including the trend toward value-based purchasing;

increases in wages as a result of inflation or competition for highly technical positions and rising supply and

drug costs due to market pressure from pharmaceutical companies and new product releases;

liabilities and other claims asserted against us, including self-insured malpractice claims;

our ability to attract and retain, at reasonable employment costs, qualified personnel, key management,

physicians, nurses and other healthcare workers;

trends toward treatment of patients in less acute or specialty healthcare settings, including ambulatory surgery

centers or specialty hospitals;

changes in medical or other technology;

changes in U.S.

the availability and terms of capital to fund any additional acquisitions or replacement facilities or other

capital expenditures;

our ability to successfully make acquisitions or complete divestitures, including the disposition of hospitals

and non-hospital businesses pursuant to our portfolio rationalization and deleveraging strategy, our ability to complete any such acquisitions or divestitures on desired terms or at all, the timing of the

completion of any such acquisitions or divestitures, and our ability to realize the intended benefits from any such acquisitions or divestitures;

the impact that changes in our relationships with joint venture or syndication partners could have on effectively

operating our hospitals or ancillary services or in advancing strategic opportunities;

our ability to successfully integrate any acquired hospitals, or to recognize expected synergies from

acquisitions;

the impact of seasonal severe weather conditions, including the timing and amount of insurance recoveries in

relation to severe weather events;

our ability to obtain adequate levels of insurance, including general liability, professional liability, and

directors and officers liability insurance;

timeliness of reimbursement payments received under government programs;

effects related to pandemics, epidemics, or outbreaks of infectious diseases, including the coronavirus known as COVID-19;

the impact of prior or potential future cyber-attacks or security breaches;

any failure to comply with the terms of the Corporate Integrity Agreement;

the concentration of our revenue in a small number of states;

our ability to realize anticipated cost savings and other benefits from our current strategic and operational

cost savings initiatives;

changes in interpretations, assumptions and expectations regarding the Tax Cuts and Jobs Act;

the other risk factors set forth in this Form 10-K for the year ended

December 31, 2019 and our other public filings with the SEC.

Although we believe that these forward-looking statements are based upon reasonable assumptions,

these assumptions are inherently subject to significant regulatory, economic and competitive uncertainties and contingencies, which are difficult or impossible to predict accurately and may be beyond our control.

Accordingly, we cannot give any

assurance that our expectations will in fact occur, and we caution that actual results may differ materially from those in the forward-looking statements.

Given these uncertainties, prospective investors are cautioned not to place undue reliance on

these forward-looking statements.

These forward-looking statements are made as of the date of this filing.

We undertake no obligation to revise or update any forward-looking statements, or to make any other forward-looking statements, whether as a

result of new information, future events or otherwise.

Includes 6,768 shares were withheld by us to satisfy the payment of tax obligations related to the vesting of restricted stock awards.

We had no publicly announced plans or open market repurchase programs for shares of our common stock during the three months ended December 31, 2020.

Selected Financial Data

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 5. Market for Registrant’s Common Equity