What changed in this filing

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Item 2. Management’s Discussion and Analysis

2021-10-28 compared with 2021-07-29 · 245 added, 233 removed, 479 unchanged (50% of the section changed)

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You should read this discussion together with our condensed consolidated financial statements and the accompanying notes included herein.

Throughout this Quarterly Report on Form 10-Q, we refer to Community Health Systems, Inc., or the Parent Company, and its consolidated subsidiaries in a simplified manner and on a collective basis, using words like “we,” “our,” “us” and the “Company”.

Throughout this Form 10-Q, we refer to Community Health Systems, Inc., or the Parent Company, and its consolidated subsidiaries in a simplified manner and on a collective basis, using words like “we,” “our,” “us” and the “Company”.

This drafting style is suggested by the Securities and Exchange Commission, or SEC, and is not meant to indicate that the publicly traded Parent Company or any particular subsidiary of the Parent Company owns or operates any asset, business or property.

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We generate revenues by providing a broad range of general and specialized hospital healthcare services and outpatient services to patients in the communities in which we are located.

As of June 30, 2021, we owned or leased 84 hospitals, comprised of 82 general acute care hospitals and two stand-alone rehabilitation or psychiatric hospitals.

As of September 30, 2021, we owned or leased 84 hospitals, comprised of 82 general acute care hospitals and two stand-alone rehabilitation or psychiatric hospitals.

As described in the Notes to Condensed Consolidated Financial Statements (Unaudited) in Part I, Item 1 of this Form 10-Q under the heading “Subsequent Events”, we owned or leased 83 hospitals effective October 1, 2021 after giving effect to the hospital consolidation described therein.

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

We previously implemented a portfolio rationalization and deleveraging strategy involving the divestiture of hospitals and non-hospital businesses which concluded on December 31, 2020 (inclusive of definitive agreements with respect to the sale of five hospitals entered into in 2020 which have closed in 2021).

We previously disclosed that our portfolio rationalization and deleveraging strategy involving the divestiture of hospitals and non-hospital businesses had concluded.

However, we continue to receive interest from potential acquirers for certain of our hospitals, and may, from time to time, consider selling additional hospitals or our unconsolidated equity interests in hospitals if we consider any such disposition to be in our best interests.

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Department of Health and Human Services, or HHS, has renewed the agency’s declaration of a national public health emergency, which was originally declared in January 2020, due to the continued consequences of the COVID-19 pandemic.

In an attempt to contain the spread and impact of COVID-19, authorities throughout the United States and the world have recommended and mandated precautions such as travel bans and restrictions, quarantines, stay-at-home and shelter-in-place orders, the promotion of social distancing, and limitations on business activity.

However, in the United States, the number of COVID-19 cases has declined in comparison to earlier levels at the height of the pandemic as vaccines have become widely available, and most restrictions related to the COVID-19 pandemic have been relaxed.

During the third quarter of 2021, the number of COVID-19 cases and hospitalizations increased in the United States in comparison to earlier levels, and restrictive measures, including mask and vaccine requirements, were implemented or reinstituted by various government authorities and private businesses.

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

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Negative economic conditions and other factors resulting from the COVID-19 pandemic have affected, and may continue to affect, our service mix, revenue mix, payor mix and/or patient volumes, as well as our ability to collect outstanding receivables.

These factors may continue to adversely affect demand for our services, as well as the ability of patients and other payors to pay for services rendered.

Pandemic-related factors may continue to adversely affect demand for our services, as well as the ability of patients and other payors to pay for services rendered.

We have observed deterioration in the collectability of patient accounts receivable from uninsured patients compared to pre-pandemic levels which, if sustained, may adversely affect our financial results and require an increased level of working capital.

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Moreover, the COVID-19 pandemic may otherwise have material adverse effects on our results of operations, financial position, and/or our cash flows if economic and/or public health conditions i n the United States deteriorate.

The ultimate impact of the pandemic on our financial results will depend on, among other factors, the durati on and severity of the pandemic, the volume of canceled or rescheduled procedures at our facilities, the volume of COVID-19 patients cared for across our health systems, the timing, availability and adoption of effective medical treatments and vaccines, the spread of potentially more contagious and/or virulent forms of the virus , including any possible variants of the virus that may be resistant to currently available vaccines, and the i m pact of governmen t actions and administrative regulation on the hospital industry and broader economy, including through existing and any future stimulus efforts.

As discussed below und er “L egislative Overview”, we have received, and may continue to receive, payments and advances made available under the Coronavirus Aid, Relief, and Economic Security act, or the CARES Act , the Paycheck Protection Program and Health Care Enhancement Act, or the PPPHCE Act, the Consolidated Appropriations Act, 2021, or the CAA, and other stimulus laws, which have been beneficial in partially mitigating the impact of the COVID-19 pandemic on our results of operation and financial position to date.

The American Rescue Plan Act of 2021, or ARPA, is another relief package with a number provisions that affect healthcare providers.

The ultimate impact of the pandemic on our financial results will depend on, among other factors, the durati on and severity of the pandemic, the volume of canceled or rescheduled procedures at our facilities, the volume of COVID-19 patients cared for across our health systems, the timing, availability and acceptance of effective medical treatments and vaccines, the spread of potentially more contagious and/or virulent forms of the virus , including any possible variants of the virus that may be resistant to currently available vaccines, and the i m pact of governmen t actions and administrative regulation on the hospital industry and broader economy, including through existing and any future stimulus efforts as well as vaccine requirements .

As discussed below und er “ Overview of L egislative Developments ”, we have received, and may continue to receive, payments and advances made available under the Coronavirus Aid, Relief, and Economic Security act, or the CARES Act , the Paycheck Protection Program and Health Care Enhancement Act, or the PPPHCE Act, the Consolidated Appropriations Act, 2021, or the CAA, the American Rescue Plan Act of 2021, or the ARPA, and other stimulus laws, which have been beneficial in partially mitigating the impact of the COVID-19 pandemic on our results of operation and financial position to date.

The federal government may consider additional stimulus and relief efforts but we are unable to predict whether any additio nal stimulus measures will be en acted or their impact, if any.

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Completed Divestiture and Acquisition Activity

During the six months ended June 30, 2021, we completed the divestiture of five hospitals, including three which closed effective January 1, 2021 (for these hospitals we received net proceeds at a preliminary closing on December 31, 2020).

During the nine months ended September 30, 2021, we completed the divestiture of five hospitals, including three which closed effective January 1, 2021 (for these hospitals we received net proceeds at a preliminary closing on December 31, 2020).

These five hospitals represented annual net operating revenues in 2020 of approximately $275 million and, including the net proceeds for the three hospital divestitures that preliminarily closed on December 31, 2020, we received total net proceeds of approximately $28 million in connection with the disposition of these hospitals.

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These 13 hospitals represented annual net operating revenues in 2019 of approximately $1.2 billion and, including the net proceeds for the divestiture of three hospitals that preliminarily closed on December 31, 2019, we received total net proceeds of approximately $845 million in connection with the disposition of these hospitals.

The following table provides a summary of hospitals that we divested during the six months ended June 30, 2021 and the year ended December 31, 2020:

The following table provides a summary of hospitals that we divested during the nine months ended September 30, 2021 and the year ended December 31, 2020:

Effective Date

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January 1, 2020

While the Company’s formal portfolio rationalization program concluded as of December 31, 2020 (inclusive of definitive agreements entered into in 2020 for the sale of five hospitals which have been completed in 2021), we continue to receive interest from potential acquirers for certain of our hospitals, and may, from time to time, consider selling additional hospitals or our unconsolidated equity interest in hospitals if we consider any such disposition to be in our best interests.

While we previously disclosed that our formal portfolio rationalization program had concluded, we continue to receive interest from potential acquirers for certain of our hospitals, and may, from time to time, consider selling additional hospitals if we consider any such disposition to be in our best interests.

We expect proceeds from any such divestitures to be used for general corporate purposes and capital expenditures.

During the six months ended June 30, 2021, we paid approximately $4 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.

During the nine months ended September 30, 2021, we paid approximately $3 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.

We allocated the purchase price to property and equipment, working capital, noncontrolling interests and goodwill.

As described in the Notes to Condensed Consolidated Financial Statements (Unaudited) in Part I, Item 1 of this Form 10-Q under the heading “Acquisitions and Divestitures”, a purchase agreement was entered into on May 1, 2021 among certain subsidiaries of the Company and HCA for the sale of the Company’s unconsolidated minority equity interest in Macon Healthcare, LLC.

Macon Healthcare, LLC is a joint venture with certain subsidiaries of HCA representing two hospitals in Macon, Georgia, in which the Company holds a 38% interest.

The sale, which is scheduled to be completed in the third quarter of 2021, is expected to result in cash proceeds to the Company of approximately $110 million.

There can be no assurance that this sale will be completed, or if this sale is completed, the ultimate timing of the completion of this sale.

As described in the Notes to Condensed Consolidated Financial Statements (Unaudited) in Part I, Item 1 of this Form 10-Q under the heading “Acquisitions and Divestitures”, o n July 30, 2021, we sold our unconsolidated minority equity interests in Macon Healthcare, LLC, a joint venture with certain subsidiaries of HCA representing two hospitals in Macon, Georgia, in which we owned a 38% interest.

We received $110 million in cash in connection with the sale of these equity interests and recognized a pre-tax gain of approximately $26 million on the sale of our investments in unconsolidated affiliates during the three and nine months ended September 30, 2021.

Overview of Operating Results

Our net operating revenues for the three months ended June 30, 2021 increased $488 million to approximately $3.0 billion compared to approximately $2.5 billion for the three months ended June 30, 2020.

On a same-store basis, net operating revenues for the three months ended June 30, 2021 increased $697 million.

Increases in net operating revenues, both on a consolidated and same-store basis, for the three months ended June 30, 2021 compared to 2020, reflect recovery from COVID-19 pandemic-induced reductions in volume in 2020.

We had net income of $37 million during the three months ended June 30, 2021, compared to $93 million for the three months ended June 30, 2020.

Net income for the three months ended June 30, 2021 included the following:

an after-tax charge of $23 million for loss from early extinguishment of debt, and

an after-tax charge of $1 million for the impairment of goodwill and long-lived assets of divested businesses based on their estimated fair values.

Net income for the three months ended June 30, 2020 included the following:

an after-tax charge of $2 million for government and other legal settlements and related costs,

an after-tax charge of $22 million for the impairment of goodwill and long-lived assets of divested businesses based on their estimated fair values, and

Net operating revenues remained consistent at $3.1 billion for the three month periods ended September 30, 2021 and 2020.

On a same-store basis, net operating revenues for the three months ended September 30, 2021 increased $205 million.

We had net income of $144 million during the three months ended September 30, 2021, compared to $128 million for the three months ended September 30, 2020.

Net income for the three months ended September 30, 2021 included the following:

an after-tax charge of $1 million for the impairment of long-lived assets of divested businesses based on their estimated fair values, and

an after-tax benefit of $21 million for gain on the sale of investments in unconsolidated affiliates.

Net income for the three months ended September 30, 2020 included the following:

an after-tax benefit of $100 million for gain from early extinguishment of debt,

an after-tax charge of $1 million for the impairment of goodwill and long-lived assets of divested businesses based on their estimated fair values, net of gains recognized upon the sale of certain facilities, and

an after-tax charge of $8 million for employee termination benefits and other restructuring costs.

Consolidated inpatient admissions for the three months ended June 30, 2021, increased 4.8%, compared to the three months ended June 30, 2020.

Consolidated adjusted admissions for the three months ended June 30, 2021, increased 15.7%, compared to the three months ended June 30, 2020.

Same-store inpatient admissions for the three months ended June 30, 2021, increased 17.0%, compared to the three months ended June 30, 2020, and same-store adjusted admissions for the three months ended June 30, 2021, increased 28.5%, compared to the three months ended June 30, 2020.

These increases reflect recovery from COVID-19 pandemic-induced reductions in volume in 2020.

Our net operating revenues for the six months ended June 30, 2021 increased $476 million to approximately $6.0 billion compared to approximately $5.5 billion for the six months ended June 31, 2020.

On a same-store basis, net operating revenues for the six months ended June 30, 2021 increased $966 million.

Increases in net operating revenues, both on a consolidated and same-store basis, for the six months ended June 30, 2021 compared to 2020, reflect recovery from COVID-19 pandemic-induced reductions in volume in 2020.

We had net income of $2 million during the six months ended June 30, 2021, compared to $126 million for the six months ended June 30, 2020.

Net income for the six months ended June 30, 2021 included the following:

an after-tax charge of $116 million for loss from early extinguishment of debt, and

an after-tax charge of $18 million for the impairment of goodwill and long-lived assets of divested businesses based on their estimated fair values.

Net income for the six months ended June 30, 2020 included the following:

an after-tax charge of $3 million for government and other legal settlements and related costs,

Consolidated inpatient admissions for the three months ended September 30, 2021, decreased 5.5%, compared to the three months ended September 30, 2020.

Consolidated adjusted admissions for the three months ended September 30, 2021, decreased 3.4%, compared to the three months ended September 30, 2020.

Same-store inpatient admissions for the three months ended September 30, 2021, increased 2.8%, compared to the three months ended September 30, 2020, and same-store adjusted admissions for the three months ended September 30, 2021, increased 4.7%, compared to the three months ended September 30, 2020.

Our net operating revenues for the nine months ended September 30, 2021 increased $465 million to approximately $9.1 billion compared to approximately $8.7 billion for the nine months ended September 30, 2020.

On a same-store basis, net operating revenues for the nine months ended September 30, 2021 increased $1.2 billion.

We had net income of $146 million during the nine months ended September 30, 2021, compared to $254 million for the nine months ended September 30, 2020.

Net income for the nine months ended September 30, 2021 included the following:

an after-tax charge of $116 million for loss from early extinguishment of debt,

an after-tax charge of $57 million for the impairment of goodwill and long-lived assets of divested businesses based on their estimated fair values,

an after-tax charge of $19 million for the impairment of long-lived assets of divested businesses based on their estimated fair values, net of gains recognized upon the sale of certain businesses, and

an after-tax benefit of $21 million for gain on the sale of investments in unconsolidated affiliates.

Net income for the nine months ended September 30, 2020 included the following:

an after-tax charge of $3 million for government and other legal settlements and related costs,

an after-tax benefit of $97 million for gain from early extinguishment of debt,

an after-tax charge of $58 million for the impairment of goodwill and long-lived assets of divested businesses based on their estimated fair values, net of gains recognized upon the sale of certain facilities,

an after-tax charge of $12 million for employee termination benefits and other restructuring costs,

an after-tax charge of $1 million for legal expenses related to the settlement of the HMA Legal Matters, and

income of approximately $240 million due to discrete tax benefits related to the release of federal and state valuation allowances on IRC Section 163(j) interest carryforwards as a result of an increase to the deductible interest expense allowed for 2019 and 2020 under the CARES Act that was enacted during the six months ended June 30, 2020.

Consolidated inpatient admissions for the six months ended June 30, 2021, decreased 5.5%, compared to the six months ended June 30, 2020.

Consolidated adjusted admissions for the six months ended June 30, 2021, decreased 2.0%, compared to the six months ended June 30, 2020.

Same-store inpatient admissions for the six months ended June 30, 2021, increased 5.1%, compared to the six months ended June 30, 2020, and same-store adjusted admissions for the six months ended June 30, 2021, increased 8.7%, compared to the six months ended June 30, 2020.

These same-store increases primarily resulted from lower volumes during the prior year period due to the impact of the COVID-19 pandemic.

Self-pay revenues represented approximately 0.9% and (2.2)% of net operating revenues for the three months ended June 30, 2021 and 2020, respectively, and 0.7% and (0.5)% for the six months ended June 30, 2021 and 2020, respectively.

The amount of foregone revenue related to providing charity care services as a percentage of net operating revenues was approximately 7.1% and 5.5% for the three months ended June 30, 2021 and 2020, respectively, and 7.4% and 5.5% for the six months ended June 30, 2021 and 2020, respectively.

Direct and indirect costs incurred in providing charity care services as a percentage of net operating revenues was approximately 0.9% and 0.7% for the three months ended June 30, 2021 and 2020, respectively, and 0.9% and 0.7% for the six months ended June 30, 2021 and 2020, respectively.

Legislative Overview

an after-tax charge of $1 million for legal expenses related to the settlement of certain litigation matters related to Health Management Associates, or HMA, which existed on or prior to July 29, 2013, and

Consolidated inpatient admissions for the nine months ended September 30, 2021, decreased 5.5%, compared to the nine months ended September 30, 2020.

Consolidated adjusted admissions for the nine months ended September 30, 2021, decreased 2.4%, compared to the nine months ended September 30, 2020.

Same-store inpatient admissions for the nine months ended September 30, 2021, increased 4.3%, compared to the nine months ended September 30, 2020, and same-store adjusted admissions for the nine months ended September 30, 2021, increased 7.3%, compared to the nine months ended September 30, 2020.

Self-pay revenues represented approximately 1.3% and 0.5% of net operating revenues for the three months ended September 30, 2021 and 2020, respectively, and 0.9% and (0.1)% for the nine months ended September 30, 2021 and 2020, respectively.

The amount of foregone revenue related to providing charity care services as a percentage of net operating revenues was approximately 6.9% and 9.1% for the three months ended September 30, 2021 and 2020, respectively, and 7.2% and 8.7% for the nine months ended September 30, 2021 and 2020, respectively.

Direct and indirect costs incurred in providing charity care services as a percentage of net operating revenues was approximately 0.8% and 1.1% for the three months ended September 30, 2021 and 2020, respectively, and 0.8% and 1.0% for the nine months ended September 30, 2021 and 2020, respectively.

Overview of Legislative Developments

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 impacted access to health insurance.

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

Historically, the states with the

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

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

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 16 states in which we o perated hospitals as of June 30 , 2021, nine states have taken action to expand their Medicaid programs.

At this time, the other seven states have not, including Florida, Alabama, Tennessee and Texas, where we operated a significant number o f hospitals as of June 30, 202 1 .

Of the 16 states in which we operated hospitals as of September 30, 2021, nine states have taken action to expand their Medicaid programs.

At this time, the other seven states have not, including Florida, Alabama, Tennessee and Texas, where we operated a significant number of hospitals as of September 30, 2021.

Some states use, or have applied to use, waivers granted by the Centers for Medicare and Medicaid Services, or CMS, to implement expansion, impose different eligibility or enrollment conditions, or otherwise implement programs that vary from federal standards.

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Legislative and executive branch efforts related to healthcare reform could result in increased prices for consumers purchasing health insurance coverage, or destabilize insurance markets.

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

Some current initiatives, requirement s and proposals, including requirements 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 , and some states have implemented or are considering public health insurance options.

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However, the COVID-19 pandemic may impact provider performance and data reporting under these initiatives.

CMS has temporarily modified requirements of certain programs by, for example, extending reporting deadlines.

CMS has temporarily modified requirements of certain programs by, for example, implementing special scoring and payment policies intended to mitigate negative impacts of the public health emergency on hospitals participating in the Hospital Value-Based Purchasing Program.

As a result of the COVID-19 pandemic, federal and state governments have passed legislation, promulgated regulations, and taken other administrative actions intended to assist healthcare providers in providing care to COVID-19 and other patients during the public health emergency.

These measures include temporary relief from Medicare conditions of participation requirements for healthcare providers, temporary relaxation of licensure requirements for healthcare professionals, temporary relaxation of privacy restrictions for telehealth remote communications, promoting use of telehealth by temporarily expanding the scope of services for which Medicare reimbursement is available, and limited waivers of fraud and abuse laws for activities related to COVID-19 during the emergency period.

One of the primary sources of relief for healthcare providers is the CARES Act, an economic stimulus package signed into law on March 27, 2020.

The PPPHCE Act and the CAA, both expansions of the CARES Act that include additional emergency appropriations, were signed into law on April 24, 2020 and December 27, 2020, respectively.

The ARPA, another relief package with numerous provisions that affect healthcare providers, was enacted on March 11, 2021.

Sources of COVID-19 relief include the CARES Act, which was enacted on March 27, 2020, the PPPHCE Act, which was enacted on April 24, 2020, the CAA, which was enacted on December 27, 2020, and the ARPA, which was enacted on March 11, 2021.

In total, these stimulus laws authorize over $178 billion in funding to be distributed through the PHSSEF to eligible providers, including public entities and Medicare- and/or Medicaid-enrolled providers.

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At the end of the six months (or 29 months from the receipt of the initial accelerated payment), Medicare will issue a letter for full repayment of any remaining balance, as applicable.

In such event, if payment is not received within 30 days, interest will accrue at

the annual percentage rate of four percent (4%) from the date the letter was issued, and will be assessed for each full 30-day period that the balance remains unpaid.

In such event, if payment is not received within 30 days, interest will accrue at the annual percentage rate of 4% from the date the letter was issued, and will be assessed for each full 30-day period that the balance remains unpaid.

The CARES Act and related legislation include other provisions offering financial relief, for example suspending the Medicare sequestration payment adjustment from May 1, 2020 through December 31, 2021, which would have otherwise reduced payments to Medicare providers by 2% as required by the Budget Control Act of 2011 (but also extending sequestration through 2030).

These laws also delay scheduled reductions to Medicaid DSH payments, provide a 20% add-on to the inpatient PPS DRG rate for COVID-19 patients for the duration of the public health emergency, and permit the deferral of payment of the employer portion of social security taxes between March 27, 2020 and December 31, 2020, with 50% of the deferred amount due December 31, 2021 and the remaining 50% due December 31, 2022.

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

As a result, absent congressional action, Medicare spending will be reduced by up to 4% in fiscal year 2022, in addition to the existing sequestration requirements of the Budget Control Act of 2011.

Through June 30, 2021, we received approximately $712 million in payments through the PHSSEF and various state and local programs on a cumulative basis since their enactment of which approximately $705 million was received during the year ended December 31, 2020 and the balance of which was received during the six months ended June 30, 2021.

The estimate of the amount of payments received through the PHSSEF or state and local programs for which we are reasonably assured of meeting the underlying terms and conditions is based on, among other things, the CARES Act, the CAA, various Post-Payment Notice of Reporting Requirements issued by HHS during the period, responses to frequently asked questions as published by HHS, expenses incurred attributable to coronavirus and our results of operations during such period as compared to our 2020 budget.

taxes between March 27, 2020 and December 31, 2020, with 50% of the deferred amount due December 31, 2021 and the remaining 50% due December 31, 2022.

As a result, absent congressional action, Medicare spe nding will be reduced by up to 4% in fiscal year 2022, to begin to take effect in January 2022, in addition to the existing sequestration requirements of the Budget Control Act of 2011.

Through September 30, 2021, net of amounts that have been repaid to the respective federal, state, and local agency, we received approximately $709 million in payments through the PHSSEF and various state and local programs on a cumulative basis since their enactment.

Of the net amount received to-date, approximately $705 million was received during the year ended December 31, 2020 and the remainder was received during the nine months ended September 30, 2021.

During October 2021, we submitted a combined application for Phase 4 of the CARES Act, or PRF Phase 4, and amounts appropriated by the ARPA for providers serving rural healthcare patients, or ARP Rural.

No amounts have been received by us for the PRF Phase 4 or ARP Rural programs as of the date of this Form 10-Q and we are not able to predict the extent to which we may receive amounts pursuant to such programs, if any.

The estimate of the amount of payments received through the PHSSEF or state and local programs for which we are reasonably assured of meeting the underlying terms and conditions is updated each reporting period and is based on, among other things, the CARES Act and subsequent relief legislation, various Post-Payment Notice of Reporting Requirements issued by HHS during the period, responses to all applicable frequently asked questions and other interpretative guidance as published by HHS, expenses incurred attributable to coronavirus, our results of operations during such period as compared to our 2020 budget and the allocation of general and targeted fund distribution payments among subsidiaries during such period.

The PHSSEF and state and local program payments recognized to-date did not impact net operating revenues, and had a positive impact on net income attributable to Community Health Systems, Inc.

common stockholders during the three and six months ended June 30, 2021, in the amount of less than $1 million and $63 million, respectively, and $333 million during both the three and six months ended June 30, 2020.

Amounts received through the PHSSEF or state and local programs that have not yet been recognized as a reduction in operating costs and expenses or otherwise have not been refunded to HHS are included within accrued liabilities-other in the condensed consolidated balance sheet, and such unrecognized amounts may be returned to HHS or may be recognized as a reduction in operating costs and expenses in future periods if the underlying conditions for recognition are reasonably assured of being met.

common stockholders during the three and nine months ended September 30, 2021, in the amount of $14 million and $77 million, respectively, and $337 million during the nine months ended September 30, 2020.

No pandemic relief funds were recognized during the three months ended September 30, 2020.

Amounts received through the PHSSEF or state and local programs that have not yet been recognized or otherwise have not been refunded to HHS are included within accrued liabilities-other in the condensed consolidated balance sheet, and such unrecognized amounts may be returned to HHS or the respective state or local agency, as applicable, or may be recognized in future periods if the underlying conditions for recognition are reasonably assured of being met.

HHS’ interpretation of the underlying terms and conditions of such PHSSEF payments, including auditing and reporting requirements, continues to evolve.

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No additional Medicare accelerated payments have been received by us since such time and because CMS is no longer accepting new applications for accelerated payments, we do not expect to receive additional Medicare accelerated payments.

CMS began recouping Medicare accelerated payments in April 2021, and as of June 30, 2021, approximately $116 million of accelerated payments previously received by us have been recouped by CMS.

Additionally, approximately $18 million and $77 million of amounts previously received were repaid to CMS or assumed by buyers related to hospitals we divested during the six months ended June 30, 2021 and the year ended December 31, 2020, respectively.

As of June 30, 2021 approximately $680 million of Medicare accelerated payments are reflected within accrued liabilities-other in the condensed consolidated balance sheet while the remaining approximately $267 million is included within other long-term liabilities.

CMS began recouping Medicare accelerated payments in April 2021, and as of September 30, 2021, approximately $249 million of accelerated payments previously received by us have been recouped by CMS.

Additionally, approximately $18 million and $77 million of amounts previously received were repaid to CMS or assumed by buyers related to hospitals we divested during the nine months ended September 30, 2021 and the year ended December 31, 2020, respectively.

As of September 30, 2021, approximately $814 million of Medicare accelerated payments are reflected within accrued liabilities-other in the condensed consolidated balance sheet.

As described in the Notes to Condensed Consolidated Financial Statements (Unaudited) in Part I, Item 1 of this Form 10-Q under the heading “Subsequent Events”, the outstanding balance of Medicare accelerated payments of $814 million as of September 30, 2021 was repaid in full to CMS in October 2021.

There is still a high degree of uncertainty surrounding the implementation of the CARES Act and other stimulus legislation.

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Some of the measures allowing for flexibility in delivery of care and various financial supports for health care providers are available only for the duration of the public health emergency, and it is unclear whether or for how long the public health emergency declaration will be extended.

The current declaration expires October 18, 2021.

The HHS Secretary may choose to renew the declaration for successive 90-day periods for as long as the emergency continues to exist and may terminate the declaration whenever he determines that the public health emergency no longer exists, but has indicated that the public health emergency will likely extend through 2021 and that HHS will provide states with 60 days’ notice prior to termination of the declaration.

The current declaration expires January 16, 2022.

The HHS Secretary may choose to renew the declaration for successive 90-day periods for as long as the emergency continues to exist and may terminate the declaration whenever he determines that the public health emergency no longer exists, but has indicated that HHS will provide states with 60 days’ notice prior to termination of the declaration.

The federal government may consider additional stimulus and relief efforts, but we are unable to predict whether additional stimulus measures will be enacted or their impact on us.

There can be no assurance as to the total amount of financial and other types of assistance we will receive under the CARES Act, other enacted stimulus legislation, or future measures, if any, and it is difficult to predict the impact of such measures on our operations or how they will affect operations of our competitors.

Further, there

can be no assurance that the terms of provider relief funding or other programs will not change or be interpreted in ways that affect our funding or eligibility to participate or our ability to comply with applicable requirements and retain amounts received.

There can be no assurance as to the total amount of financial and other types of assistance that we will receive under the CARES Act,

other enacted stimulus legislation, or future measures, if any, and it is difficult to predict the impact of such measures on our operations or how they will affect operations of our competitors.

Further, there can be no assurance that the terms of provider relief funding or other programs will not change or be interpreted in ways that affect our funding or eligibility to participate or our ability to comply with applicable requirements and retain amounts received.

We continue to assess the potential impact of the CARES Act and other enacted stimulus legislation, the potential impact of future stimulus measures, if any, and the impact of other laws, regulations, and guidance related to COVID-19 on our business, results of operations, financial condition and cash flows .

In September 2021, as part of its plan for responding to the COVID-19 pandemic, the current presidential administration directed the Occupational Safety and Health Administration, or OSHA, to draft a rule which would require all employers with 100 or more employees to require their workforce to be fully vaccinated or, alternatively, to provide a negative COVID test result on a weekly basis.

OSHA has drafted a rule (in the form of an emergency temporary standard) to implement this mandate, which is currently subject to review.

In addition, CMS is in the process of preparing an interim final rule requiring COVID-19 vaccinations for workers in most health care settings that receive Medicare or Medicaid reimbursement, including clinical staff, individuals providing services under arrangements, volunteers, and staff who are not involved in direct patient care.

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

It is currently not possible to predict the impact that these rules may have on us.

However, these rules, if or when they become effective, could result in the loss of personnel who are unvaccinated, including at our hospitals and other healthcare facilities, in a manner that adversely affects us.

In June 2019, the U.S.

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Supreme Court as the basis in their decision.

CMS’ action has introduced uncertainty regarding the potential outcomes from the Supreme Court ruling, and the proposed rule has resulted in further litigation.

CMS’s action has introduced uncertainty regarding the potential outcomes from the Supreme Court ruling, and the proposed rule has resulted in further litigation.

If HHS or CMS are unsuccessful in their attempt to assert the proposed rule or another legal basis for their policy, one potential outcome is the federal government could be required to reimburse hospitals, including our affiliated hospitals, for Medicare DSH payments which otherwise would have been payable over certain prior time periods absent the enactment of this policy.

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We anticipate that if it is ultimately determined that our affiliated hospitals are entitled to receive such Medicare DSH 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.

The Corporate Integrity Agreement, or CIA, to which we have been subject, expired in September 2021.

However, we are still subject to final audit and reporting requirements under the terms of the CIA.

In connection with these final audit and reporting requirements, it remains possible that we will become subject to further action by the Office of Inspector General, or OIG, which could include the imposition of civil monetary penalties and/or the extension of the term of the CIA.

For additional information regarding the terms of the CIA, see pages 20-21 of the 2020 Form 10-K.

As a result of our current levels of cash, funds we have received and may in the future receive under the CARES Act, other enacted stimulus legislation and any future stimulus measures, available borrowing capacity, long-term outlook on our debt repayments, the refinancing of certain of our notes, proceeds from the sale of hospitals and the 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.

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Three Months Ended

Six Months Ended

Nine Months Ended

September 30,

Managed Care and other third-party payors

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

Our relationships with payors may be impacted by price transparency initiatives and out-of-network billing restrictions.

Our relationships with payors may be impacted by price transparency initiatives and out-of-network billing restrictions, including those in the No Surprises Act, which takes effect January 1, 2022.

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.

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

Contractual allowance adjustments related to final settlements and previous program reimbursement estimates impacted net operating revenues and net income (loss) by an insignificant amount in each of the three and six -month periods ended June 30 , 2021 and 2020.

Contractual allowance adjustments related to final settlements and previous program reimbursement estimates impacted net operating revenues and net income by an insignificant amount in each of the three and nine-month periods ended September 30, 2021 and 2020.

The payment rates under the Medicare program for hospital inpatient and outpatient acute care services are based on a prospective payment system, depending upon the diagnosis of a patient’s condition.

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

On September 18, 2020, CMS issued the final rule to increase this index by 2.4% for hospital inpatient acute care services that are reimbursed under the prospective payment system, beginning October 1, 2020.

The final rule also provides for a 0.5 percentage point increase 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.

On August 13, 2021, CMS published the final rule to increase this index by 2.7% for hospital inpatient acute care services that are reimbursed under the prospective payment system, beginning October 1, 2021.

Together with other changes to payment policies, the CMS final rule is expected to yield an average 2.5% increase in reimbursement for hospital inpatient acute care services.

Hospitals that do not submit required patient quality data are subject to a reduction in payments.

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We are unable to predict whether or on what terms CMS will extend the supplemental programs in the states in which we operate.

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

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

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Three Months Ended

Six Months Ended

Nine Months Ended

September 30,

Operating results, as a percentage of net operating revenues:

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Interest expense, net

Loss from early extinguishment of debt

(Loss) gain from early extinguishment of debt

Gain on sale of investments in unconsolidated affiliates

Equity in earnings of unconsolidated affiliates

Income (loss) before income taxes

Income before income taxes

(Provision for) benefit from income taxes

Net income attributable to noncontrolling interests

Net income (loss) attributable to Community Health

Net income attributable to Community Health

Systems, Inc.

Three Months Ended June 30,

Six Months Ended June 30,

Percentage increase (decrease) from prior year:

Three Months Ended September 30,

Nine Months Ended September 30,

Percentage (decrease) increase from prior year:

Net operating revenues

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Average length of stay (d)

Net income (loss) attributable to Community Health

Net income attributable to Community Health

Systems, Inc.

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Adjusted admissions (c)

Operating expenses include salaries and benefits, supplies, other operating expenses, government and other legal settlements and related costs, lease cost and rent, net of the reduction in operating expenses through June 30, 2021 and 2020, resulting from the recognition of pandemic relief funds.

Operating expenses include salaries and benefits, supplies, other operating expenses, government and other legal settlements and related costs, lease cost and rent, net of the reduction in operating expenses through September 30, 2021 and 2020, resulting from the recognition of pandemic relief funds.

Admissions represents the number of patients admitted for inpatient treatment.

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Average length of stay represents the average number of days inpatients stay in our hospitals.

Excludes information for businesses sold or closed during 2020 and the six months ended June 30, 2021.

Excludes information for businesses sold or closed during 2020 and the nine months ended September 30, 2021.

Items (b) – (e) are metrics used to manage our performance.

These metrics provide useful insight to investors about the volume and acuity of services we provide, which aid in evaluating our financial results.

Three Months Ended June 3 0 , 2021 Compared to Three Months Ended June 30 , 2020

Net operating revenues increased by 19.4% to approximately $3.0 billion for the three months ended June 30, 2021, from approximately $2.5 billion for the three months ended June 30, 2020.

Net operating revenues on a same-store basis from hospitals that were operated throughout both periods increased $697 million, or 30.2%, during the three months ended June 30, 2021, as compared to the three months ended June 30, 2020.

Non-same-store net operating revenues decreased $209 million during the three months ended June 30, 2021, in comparison to the prior year period, with the decrease attributable primarily to the divestiture of hospitals during 2020 and 2021.

On a consolidated basis, inpatient admissions increased by 4.8% during the three months ended June 30, 2021 as compared to the three months ended June 30, 2020.

Also on a consolidated basis, adjusted admissions increased by 15.7% during the three months ended June 30, 2021 as compared to the three months ended June 30, 2020.

On a same-store basis, net operating revenues per adjusted admission increased 1.3%, while inpatient admissions increased by 17.0% and adjusted admissions increased by 28.5% for the three months ended June 30, 2021, compared to the three months ended June 30, 2020.

Operating costs and expenses, as a percentage of net operating revenues, increased from 88.2% during the three months ended June 30, 2020 to 89.6% during the three months ended June 30, 2021.

Operating costs and expenses, excluding depreciation and amortization and impairment and (gain) loss on sale of businesses, as a percentage of net operating revenues, increased from 82.2% for the three months ended June 30, 2020 to 85.1% for the three months ended June 30, 2021.

Salaries and benefits, as a percentage of net operating revenues, decreased from 50.9% for the three months ended June 30, 2020 to 42.1% for the three months ended June 30, 2021.

Supplies, as a percentage of net operating revenues, remained consistent at 16.6% for both of the three-month periods ended June 30, 2021 and 2020.

Other operating expenses, as a percentage of net operating revenues, decreased from 29.1% for the three months ended June 30, 2020 to 23.8% for the three months ended June 30, 2021.

Expense related to government and other legal settlements and related costs, as a percentage of net operating revenues, decreased from 0.1% for the three months ended June 30, 2020 to 0.0% during the three months ended June 30, 2021.

Lease cost and rent, as a percentage of net operating revenues, decreased from 3.3% for the three months ended June 30, 2020 to 2.6% for the three months ended June 30, 2021.

Pandemic relief funds, as a percentage of net operating revenues, was less than (0.1)% for the three months ended June 30, 2021, compared to (17.8%) for the three months ended June 30, 2020.

The decrease in salaries and benefits, as a percentage of net operating revenues, during the three months ended June 30, 2021 compared to June 30, 2020 is primarily due to the reduction in personnel associated with divestitures.

Depreciation and amortization, as a percentage of net operating revenues, decreased from 5.6% for the three months ended June 30, 2020 to 4.4% for the three months ended June 30, 2021, primarily due to ceasing depreciation on property and equipment at hospitals sold or held for sale.

Impairment and (gain) loss on sale of businesses, net was $2 million for the three months ended June 30, 2021, compared to $10 million for the three months ended June 30, 2020, related primarily to divestitures in each respective period.

Interest expense, net, decreased by $ 41 million to $ 219 million for the three months ended June 30, 2021 compared to $260 million for the three months ended June 30, 2020.

Three Months Ended September 30, 2021 Compared to Three Months Ended September 30, 2020

Net operating revenues remained consistent at $3.1 billion for the three month periods ended September 30, 2021 and 2020.

Net operating revenues on a same-store basis from hospitals that were operated throughout both periods increased $205 million, or 7.1%, during the three months ended September 30, 2021, as compared to the three months ended September 30, 2020.

Increases in net operating revenues, on a same-store basis, for the three months ended September 30, 2021 compared to 2020, primarily reflect increased volumes and higher acuity during the 2021 period.

Non-same-store net operating revenues decreased $216 million during the three months ended September 30, 2021, in comparison to the prior year period, with the decrease attributable primarily to the divestiture of hospitals during 2020 and 2021.

On a consolidated basis, inpatient admissions decreased by 5.5% during the three months ended September 30, 2021 as compared to the three months ended September 30, 2020.

Also on a consolidated basis, adjusted admissions decreased by 3.4% during the three months ended September 30, 2021 as compared to the three months ended September 30, 2020.

On a same-store basis, net operating revenues per adjusted admission increased 2.3%, while inpatient admissions increased by 2.8% and adjusted admissions increased by 4.7% for the three months ended September 30, 2021, compared to the three months ended September 30, 2020.

All operating expense calculations, as a percentage of net operating revenues, were impacted by the net effect of divestitures and the aforementioned increase in same-store net operating revenues.

Operating costs and expenses, as a percentage of net operating revenues, decreased from 90.9% during the three months ended September 30, 2020 to 89.1% during the three months ended September 30, 2021.

Operating costs and expenses, excluding depreciation and amortization and impairment and (gain) loss on sale of businesses, as a percentage of net operating revenues, decreased from 86.7% for the three months ended September 30, 2020 to 84.7% for the three months ended September 30, 2021.

Salaries and benefits, as a percentage of net operating revenues, decreased from 43.7% for the three months ended September 30, 2020 to 42.9% for the three months ended September 30, 2021.

Supplies, as a percentage of net operating revenues, increased from 16.7% for the three months ended September 30, 2020 to 17.0% for the three months ended September 30, 2021, primarily due to an increase in our expenses associated with COVID-19 related pharmaceuticals.

Other operating expenses, as a percentage of net operating revenues, decreased from 23.6% for the three months ended September 30, 2020 to 23.0% for the three months ended September 30, 2021.

Lease cost and rent, as a percentage of net operating revenues, decreased from 2.7% for the three months ended September 30, 2020 to 2.4% for the three months ended September 30, 2021.

Pandemic relief funds, as a percentage of net operating revenues, was (0.6)% for the three months ended September 30, 2021, compared to 0.0% for the three months ended September 30, 2020.

Depreciation and amortization, as a percentage of net operating revenues, remained consistent at 4.4% for both of the three-month periods ended September 30, 2021 and 2020.

Impairment and (gain) loss on sale of businesses, net was expense of $1 million for the three months ended September 30, 2021, compared to a gain of $(7) million for the three months ended September 30, 2020, related primarily to divestitures in each respective period.

Interest expense, net, decreased by $ 41 million to $ 216 million for the three months ended September 30, 2021 compared to $257 million for the three months ended September 30, 2020.

This was primarily due to our debt refinancing activities in 2020 and 2021 as discussed further in Capital Resources.

Loss from early extinguishment of debt of $8 million was recognized during the three months ended June 30, 2021, as a result of the refinancing of certain of our outstanding notes as discussed further in Capital Resources.

No loss from early extinguishment of debt was recognized during the three months ended June 30, 2020.

Equity in earnings of unconsolidated affiliates, as a percentage of net operating revenues, increased from less than 0.1% for the three months ended June 30, 2020 to (0.1)% for the three months ended June 30, 2021.

The net results of the above-mentioned changes resulted in income before income taxes increasing $56 million from $35 million for the three months ended June 30, 2020 to $91 million for the three months ended June 30, 2021.

Our provision for income taxes for the three months ended June 30, 2021 was $54 million compared to a benefit from income taxes of $58 million for the three months ended June 30, 2020.

Our effective tax rates were 59.3% and (165.7)% for the three months ended June 30, 2021 and 2020, respectively.

The difference in our effective tax rate for the three months ended June 30, 2021, compared to the three months ended June 30, 2020, was primarily due to an increase in the valuation allowance recognized on IRC Section 163(j) interest carryforwards created as a result of financing transactions completed during the three months ended June 30, 2021.

The tax benefit of $58 million during the three months ended June 30, 2020 is primarily attributable to a change in our projected tax benefit for the annual period ending December 31, 2020.

Net income , as a percentage o f net operating revenues, was 3.7 % for the three months ended June 30 , 2020 compared to 1.2 % for the three months ended June 30 , 2021 .

Net income attributable to noncontrolling interests as a percentage of net operating revenues was 0.9% for the three months ended June 30, 2020, compared to 1.0% for the three months ended June 30, 2021.

No (gain) loss from early extinguishment of debt was recognized during the three months ended September 30, 2021.

Gain from early extinguishment of debt of $115 million was recognized during the three months ended September 30, 2020, as a result of extinguishment of a portion of certain series of our outstanding notes through open market repurchases.

The pre-tax gain on sale of investments in unconsolidated affiliates of $26 million was recognized during the three months ended September 30, 2021, resulting from the sale of our minority equity interests in Macon Healthcare, LLC, a joint venture with certain subsidiaries of HCA representing two hospitals in Macon, Georgia, in which we owned a 38% interest.

Equity in earnings of unconsolidated affiliates, as a percentage of net operating revenues, remained consistent at (0.1)% for both of the three-month periods ended September 30, 2021 and 2020.

The net results of the above-mentioned changes resulted in income before income taxes increasing $6 million to $154 million for the three months ended September 30, 2021 from $148 million for the three months ended September 30, 2020.

Our provision for income taxes for the three months ended September 30 , 2021 was $ 10 million compared to $ 20 million for the three months ended September 30 , 2020 .

Our effective tax rates were 6.5 % and 13.5 % for the three months ended September 30 , 2021 and 2020, respectively.

The difference in our effective tax rate for the three months ended September 30 , 2021 , compared to the three months ended September 30 , 2020, was primarily due to an increase in the valuation allowance recognized on IRC Section 163(j) interest carryforwards created as a result of financing transactions completed during the three months ended September 30, 2020 .

Net income, as a percentage of net operating revenues, was 4.6% for the three months ended September 30, 2021 compared to 4.1% for the three months ended September 30, 2020.

Net income attributable to noncontrolling interests as a percentage of net operating revenues was 1.0% for the three months ended September 30, 2021, compared to 0.5% for the three months ended September 30, 2020.

Net income attributable to Community Health Systems, Inc.

stockholders was $6 million for the three months ended June 30, 2021, compared to $70 million for the three months ended June 30, 2020.

Six Months Ended June 30, 2021 Compared to Six Months Ended June 30, 2020

Net operating revenues increased by 8.6% to approximately $6.0 billion for the six months ended June 30, 2021, from approximately $5.5 billion for the six months ended June 30, 2020.

Net operating revenues on a same-store basis from hospitals that were operated throughout both periods increased $966 million, or 19.2%, during the six months ended June 30, 2021, as compared to the six months ended June 30, 2020.

Non-same-store net operating revenues decreased $489 million during the six months ended June 30, 2021, in comparison to the prior year period, with the decrease attributable primarily to the divestiture of hospitals during 2020 and 2021.

On a consolidated basis, inpatient admissions decreased by 5.5% during the six months ended June 30, 2021 as compared to the six months ended June 30, 2020.

Also on a consolidated basis, adjusted admissions decreased by 2.0% during the six months ended June 30, 2021 as compared to the six months ended June 30, 2020.

On a same-store basis, net operating revenues per adjusted admission increased 9.6%, while inpatient admissions increased by 5.1% and adjusted admissions increased by 8.7% for the six months ended June 30, 2021, compared to the six months ended June 30, 2020.

Operating expenses, as a percentage of net operating revenues, decreased from 92.7% during the six months ended June 30, 2020 to 89.4% during the six months ended June 30, 2021.

Operating expenses, excluding depreciation and amortization and impairment and loss on sale of businesses, as a percentage of net operating revenues, decreased from 86.6% for the six months ended June 30, 2020 to 84.5% for the six months ended June 30, 2021.

Salaries and benefits, as a percentage of net operating revenues, decreased from 48.5% for the six months ended June 30, 2020 to 42.7% for the six months ended June 30, 2021.

Supplies, as a percentage of net operating revenues, remained consistent at 16.5% for both of the six-month periods ended June 30, 2021 and 2020.

Other operating expenses, as a percentage of net operating revenues, decreased from 26.7% for the six months ended June 30, 2020 to 24.1% for the six months ended June 30, 2021.

Expense related to government and other legal settlements and related costs, as a percentage of net operating revenues, decreased from 0.1% for the six months ended June 30, 2020 to less than 0.1% during the six months ended June 30, 2021.

Lease cost and rent, as a percentage of net operating revenues, decreased from 2.9% for the six months ended June 30, 2020 to 2.6% for the six months ended June 30, 2021.

Pandemic relief funds, as a percentage of net operating revenues, was (1.4)% for the six months ended June 30, 2021, compared to (8.1) for the six months ended June 30, 2020.

Depreciation and amortization, as a percentage of net operating revenues, decreased from 5.1% for the six months ended June 30, 2020 to 4.5% for the six months ended June 30, 2021, primarily due to the decrease in net operating revenues during the six months ended June 30, 2020, as a result of the COVID-19 pandemic.

Impairment and (gain) loss on sale of businesses was $23 million for the six months ended June 30, 2021, compared to $56 million for the six months ended June 30, 2020, 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, decreased by $74 million to $449 million for the six months ended June 30, 2021 compared to $523 million for the six months ended June 30, 2020.

stockholders was $111 million for the three months ended September 30, 2021, compared to $112 million for the three months ended September 30, 2020.

Nine months Ended September 30, 2021 Compared to Nine months Ended September 30, 2020

Net operating revenues increased by 5.4% to approximately $9.1 billion for the nine months ended September 30, 2021, from approximately $8.7 billion for the nine months ended September 30, 2020.

Net operating revenues on a same-store basis from hospitals that were operated throughout both periods increased $1.2 billion, or 14.8%, during the nine months ended September 30, 2021, as compared to the nine months ended September 30, 2020.

Increases in net operating revenues, both on a consolidated and same-store basis, for the nine months ended September 30, 2021 compared to 2020, resulted from increased volumes and higher acuity during the 2021 period.

Non-same-store net operating revenues decreased $705 million during the nine months ended September 30, 2021, in comparison to the prior year period, with the decrease attributable primarily to the divestiture of hospitals during 2020 and 2021.

On a consolidated basis, inpatient admissions decreased by 5.5% during the nine months ended September 30, 2021 as compared to the nine months ended September 30, 2020.

Also on a consolidated basis, adjusted admissions decreased by 2.4% during the nine months ended September 30, 2021 as compared to the nine months ended September 30, 2020.

On a same-store basis, net operating revenues per adjusted admission increased 6.9%, while inpatient admissions increased by 4.3% and adjusted admissions increased by 7.3% for the nine months ended September 30, 2021, compared to the nine months ended September 30, 2020.

All operating expense calculations, as a percentage of net operating revenues, were impacted by the net effect of divestitures and the aforementioned increase in same-store net operating revenues.

Operating expenses, as a percentage of net operating revenues, decreased from 92.0% during the nine months ended September 30, 2020 to 89.3% during the nine months ended September 30, 2021.

Operating expenses, excluding depreciation and amortization and impairment and loss on sale of businesses, as a percentage of net operating revenues, decreased from 86.5% for the nine months ended September 30, 2020 to 84.5% for the nine months ended September 30, 2021.

Salaries and benefits, as a percentage of net operating revenues, decreased from 46.8% for the nine months ended September 30, 2020 to 42.7% for the nine months ended September 30, 2021.

Supplies, as a percentage of net operating revenues, increased from 16.6% for the nine months ended September 30, 2020 to 16.7% for the nine months ended September 30, 2021, primarily due to an increase in our expenses associated with COVID-19 related pharmaceuticals.

Other operating expenses, as a percentage of net operating revenues, decreased from 25.4% for the nine months ended September 30, 2020 to 23.7% for the nine months ended September 30, 2021.

Lease cost and rent, as a percentage of net operating revenues, decreased from 2.9% for the nine months ended September 30, 2020 to 2.5% for the nine months ended September 30, 2021.

Pandemic relief funds, as a percentage of net operating revenues, was (1.1)% for the nine months ended September 30, 2021, compared to (5.2)% for the nine months ended September 30, 2020.

Depreciation and amortization, as a percentage of net operating revenues, decreased to 4.5% for the nine months ended September 30, 2021 from 4.9% for the nine months ended September 30, 2020, primarily due to the decrease in net operating revenues during the nine months ended September 30, 2020, as a result of the COVID-19 pandemic.

Impairment and (gain) loss on sale of businesses was $24 million for the nine months ended September 30, 2021, compared to $48 million for the nine months ended September 30, 2020, 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, decreased by $113 million to $666 million for the nine months ended September 30, 2021 compared to $779 million for the nine months ended September 30, 2020.

This was primarily due to our debt refinancing activity during 2020 and 2021 as discussed further in Capital Resources.

Loss from early extinguishment of debt of $79 million was recognized during the six months ended June 30, 2021, as a result of the refinancing of certain of our outstanding notes as discussed further in Capital Resources.

Loss from early extinguishment of debt of $4 million was recognized during the six months ended June 30, 2020, as a result of the refinancing of certain of our outstanding notes.

Equity in earnings of unconsolidated affiliates, as a percentage of net operating revenues, increased from (0.1)% for the six months ended June 30, 2020 to (0.2)% for the six months ended June 30, 2021.

The net results of the above-mentioned changes resulted in income (loss) before income taxes increasing $240 million from loss of $115 million for the six months ended June 30, 2020 to income of $125 million for the six months ended June 30, 2021.

Our provision for income taxes for th e six months ended June 30, 2021 was $ 123 mil lion compared to a benefit from income taxes of $241 million for th e six months ended June 30, 2020 .

Our effective tax rates were 98.4 % and 209.6 % for th e six months ended June 30, 2021 and 2020 , respectively.

The difference in our effective tax rate for th e six months ended June 30, 2021 , when compared to th e six months ended June 30, 2020 , was primarily due to an increase in the valuation allowance recognized on IRC Section 163(j) interest carryforwards created as a result of the financing transactions completed during the six months ended June 30, 2021 .

The Company’s effective tax rate for the six months ended June 30, 2020 reflects changes in tax benefits as a result of an increase to the deductible interest expense allowed for 2019 and 2020 under the CARES Act that was enacted during the three months ended March 31, 2020 .

Net income, as a percentage of net operating revenues, was 2.3% for the six months ended June 30, 2020 compared to less than 0.1% for the six months ended June 30, 2021.

Net income attributable to noncontrolling interests, as a percentage of net operating revenues, increased from 0.7% for the six months ended June 30, 2020 to 1.0% for the six months ended June 30, 2021.

Net loss attributable to Community Health Systems, Inc.

stockholders was $(58) million for the six months ended June 30, 2021, compared to net income attributable to Community Health Systems, Inc.

stockholders of $87 million for the six months ended June 30, 2020.

Loss from early extinguishment of debt of $ 79 million was recognized during the nine months ended September 30 , 2021 , as a result of the refinancing of certain of our outstanding notes as discussed further in Capital Resources.

Gain from ear ly extinguishment of debt of $111 million was recognized during th e nine months ended September 30 , 2020 , as a result of extinguishment of a portion of certain series of our outstanding notes through open market repurchases .

The pre-tax gain on sale of investments in unconsolidated affiliates of $26 million was recognized during the nine months ended September 30, 2021, resulting from the sale of our minority equity interests in Macon Healthcare, LLC, a joint venture with certain subsidiaries of HCA representing two hospitals in Macon, Georgia, in which we owned a 38% interest.

Equity in earnings of unconsolidated affiliates, as a percentage of net operating revenues, increased to (0.2)% for the nine months ended September 30, 2021 from (0.1)% for the nine months ended September 30, 2020.

The net results of the above-mentioned changes resulted in income before income taxes increasing $245 million to $278 million for the nine months ended September 30, 2021 from $33 million for the nine months ended September 30, 2020.

Our provision for income taxes for the nine months ended September 30, 2021 was $132 million compared to a benefit from income taxes of $221 million for the nine months ended September 30, 2020.

Our effective tax rates were 47.5% and (669.7)% for the nine months ended September 30, 2021 and 2020, respectively.

The difference in our effective tax rate for the nine months ended September 30, 2021, when compared to the nine months ended September 30, 2020, was primarily due to the changes in tax benefits as a result of an increase to the deductible interest expense allowed for 2019 and 2020 under the CARES Act that was enacted during the three months ended March 31, 2020.

Net income, as a percentage of net operating revenues, was 1.6% for the nine months ended September 30, 2021 compared to 2.9% for the nine months ended September 30, 2020.

Net income attributable to noncontrolling interests, as a percentage of net operating revenues, increased to 1.0% for the nine months ended September 30, 2021 from 0.6% for the nine months ended September 30, 2020.

Net income attributable to Community Health Systems, Inc.

stockholders was $52 million for the nine months ended September 30, 2021, compared to $200 million for the nine months ended September 30, 2020.

Liquidity and Capital Resources

Net cash provided by operating activities decreased $1.430 billion, from approximately $1.710 billion for the six months ended June 30, 2020, to approximately $280 million for the six months ended June 30, 2021.

The decrease was primarily attributable to the receipt of Medicare accelerated payments as well as PHSSEF funds under the CARES Act and PPPHCE Act during the six months ended June 30, 2020.

Cash paid for interest was $304 million during the six months ended June 30, 2021 compared to $486 million for the six months ended June 30, 2020.

Cash paid for income taxes, net of refunds received, resulted in a net payment of $1 million, and a net refund of approximately $2 million during the six months ended June 30, 2021 and 2020, respectively.

Our net cash used in investing activities was approximately $255 million for the six months ended June 30, 2021, compared to approximately $53 million for the six months ended June 30, 2020, an increase of approximately $202 million.

The cash used in investing activities during the six months ended June 30, 2021 was primarily impacted by a decrease of $145 million in cash proceeds from dispositions of hospitals and other ancillary operations, an increase in cash used in the purchase of property and equipment of $20 million, an increase of $4 million in cash used for acquisition of facilities and other related businesses, an increase in cash used in the net impact of the purchase and sale of available-for-sale and equity securities of $19 million and an increase in cash used to purchase other investments of $15 million.

The increase in cash used in investing activities was partially offset by a $1 million increase in cash proceeds from the sale of property and equipment.

Our net cash used in financing activities was approximately $451 million for the six months ended June 30, 2021, compared to approximately $321 million for the six months ended June 30, 2020, an increase in cash used in financing activities of approximately $130 million.

This was primarily due to the net effect of our debt repayments, refinancing activities, and cash paid for deferred financing costs and other debt-related costs during the six months ended June 30, 2021.

Amounts received through the PHSSEF or state and local programs that had not yet been recognized as a reduction in operating costs and expenses or otherwise refunded to HHS as of June 30, 2021 totaled approximately $28 million.

Such amount is included within accrued liabilities-other in the condensed consolidated balance sheet, and such unrecognized amounts may either be returned to HHS or may be recognized as a reduction in operating costs and expenses in future periods if the underlying conditions for recognition are met.

Net cash provided by operating activities decreased $1.7 billion, from approximately $2.1 billion for the nine months ended September 30, 2020, to approximately $400 million for the nine months ended September 30, 2021.

The decrease was primarily attributable to the receipt of Medicare accelerated payments as well as PHSSEF funds under the CARES Act and PPPHCE Act during the nine months ended September 30, 2020.

Cash paid for interest was $572 million during the nine months ended September 30, 2021 compared to $765 million for the nine months ended September 30, 2020.

Cash paid for income taxes, net of refunds received, resulted in a net payment of $3 million, and a net payment of approximately $2 million during the nine months ended September 30, 2021 and 2020, respectively.

Our net cash used in investing activities was approximately $313 million for the nine months ended September 30, 2021, compared to net cash provided by investing activities of approximately $9 million for the nine months ended September 30, 2020, a decrease of approximately $322 million.

The cash used in investing activities during the nine months ended September 30, 2021 was primarily impacted by a decrease of $330 million in cash proceeds from dispositions of hospitals and other ancillary operations, an increase in cash used in the purchase of property and equipment of $17 million, an increase of $2 million in cash used for acquisition of facilities and other related businesses, an increase in cash used in the net impact of the purchase and sale of available-for-sale and equity securities of $61 million, an increase in cash from the sale of investments in unconsolidated affiliates of $110 million and an increase in cash used to purchase other investments of $25 million.

The decrease in cash used in investing activities was partially offset by a $3 million increase in cash proceeds from the sale of property and equipment.

Our net cash used in financing activities was approximately $469 million for the nine months ended September 30, 2021, compared to approximately $504 million for the nine months ended September 30, 2020, a decrease in cash used in financing activities of approximately $35 million.

This was primarily due to the net effect of our debt repayments, refinancing activities, and cash paid for deferred financing costs and other debt-related costs during the nine months ended September 30, 2021.

Amounts received through the PHSSEF or state and local programs that had not yet been recognized or otherwise refunded to HHS as of September 30, 2021 totaled approximately $6 million.

Such amount is included within accrued liabilities-other in the condensed consolidated balance sheet, and such unrecognized amounts may either be returned to HHS or the respective state or local agency or may be recognized in future periods if the underlying conditions for recognition are met.

As noted above, we received Medicare accelerated payments of approximately $1.2 billion in April 2020 under the Medicare Accelerated and Advanced Payments Program.

No additional Medicare accelerated payments have been received by us since such time .

CMS began recouping Medicare accelerated payments in April 2021 and as of June 30, 2021, approximately $116 million of accelerated payments previously received by us has been recouped by CMS.

As of June 30, 2021, approximately $680 million of Medicare accelerated payments are reflected within accrued liabilities-other in the condensed consolidated balance sheet while the remaining approximately $267 million are included within other long-term liabilities.

The CARES Ac t provided for deferred payment of the employer portion of social security taxes between March 27, 2020 and December 31, 2020, with 50% of the deferred amount due December 31, 2021 and the remaining 50% due December 31, 2022.

We began deferring the employer portion of social security taxes in mid-April 2020 and, as of June 30, 2021 , we had deferred approximately $146 million .

O f this amount, approximately $ 73 million is included within accrued liabilities employee compensation and approximately $ 73 million is included within other long-term liabilities in the condensed consolidated balance sheet.

Macon Healthcare, LLC is a joint venture with certain subsidiaries of HCA representing two hospitals in Macon, Georgia, in which the Company holds a 38% interest.

The sale, which is scheduled to be completed in the third quarter of 2021, is expected to result in cash proceeds to the Company of approximately $110 million.

There have been no material changes outside of the ordinary course of business to our upcoming cash obligations during the six months ended June 30, 2021 from those disclosed in the table on page 64 of our Annual Report on Form 10-K for the year ended December 31, 2020 filed with the Securities and Exchange Commission, or SEC, on February 18, 2021, or 2020 Form 10-K, except as discussed below related to debt refinancing activity during 2021.

CMS began recouping Medicare accelerated payments in April 2021 and as of September 30 , 2021, approximately $249 million of accelerated payments previously received by us has been recouped by CMS .

Additionally, a pproximately $ 18 million and $77 million of amounts previously received were repaid to CMS or assumed by buyers related to hospitals we divested during the nine months ended September 30 , 2021 and year ended December 31, 2020, respectively.

As of September 30 , 2021, ap proximately $814 million of Medicare accelerated payments are reflected within accrued liabilities-other in the condensed consolidated balance sheet .

The CARES Act provided for deferred payment of the employer portion of social security taxes between March 27, 2020 and December 31, 2020, with 50% of the deferred amount due December 31, 2021 and the remaining 50% due December 31, 2022.

We began deferring the employer portion of social security taxes in mid-April 2020 and, as of September 30, 2021, we had deferred approximately $146 million.

Of this amount, approximately $73 million is included within accrued liabilities employee compensation and approximately $73 million is included within other long-term liabilities in the condensed consolidated balance sheet.

We received $110 million in cash in connection with the sale of these equity interests during the three months ended September 30, 2021.

There have been no material changes outside of the ordinary course of business to our upcoming cash obligations during the nine months ended September 30, 2021 from those disclosed in the table on page 64 of our 2020 Form 10-K, except as discussed below related to debt refinancing activity during 2021.

Capital Expenditures

Cash expenditures for purchases of facilities and other related businesses were approximately $4 million for the six months ended June 30, 2021, compared to less than $1 million for the six months ended June 30, 2020.

Our expenditures for the six months ended June 30, 2021 and 2020 were primarily related to physician practices and other ancillary services.

Excluding the cost to construct replacement and de novo hospitals, our cash expenditures for routine capital for the six months ended June 30, 2021 totaled $149 million compared to $119 million for the six months ended June 30, 2020.

Cash expenditures for purchases of facilities and other related businesses were approximately $3 million for the nine months ended September 30, 2021, compared to $1 million for the nine months ended September 30, 2020.

Our expenditures for the nine months ended September 30, 2021 and 2020 were primarily related to physician practices and other ancillary services.

Excluding the cost to construct replacement and de novo hospitals, our cash expenditures for routine capital for the nine months ended September 30, 2021 totaled $237 million compared to $186 million for the nine months ended September 30, 2020.

These capital expenditures related primarily to the purchase of additional equipment, minor renovations and information systems infrastructure.

Costs to construct replacement hospitals totaled $34 million for the six months ended June 30, 2021, primarily related to the construction of a replacement facility in Fort Wayne, Indiana.

Costs to construct replacement hospitals for the six months ended June 30, 2020 totaled $59 million, primarily related to the construction of a replacement facility in La Porte, Indiana.

During the six months ended June 30, 2021 and 2020, we also had cash expenditures of $29 million and $14 million, respectively, that represent both planning and construction costs for two de novo hospitals in the Tucson, Arizona market.

We commenced operations for an 18-bed micro-hospital in that market during the fourth quarter of 2020, while the other de novo hospital is expected to be completed by the first quarter of 2022 and have 52 beds.

Costs to construct replacement hospitals totaled $47 million for the nine months ended September 30, 2021, primarily related to the construction of a replacement facility in Fort Wayne, Indiana, which is expected to be completed during the fourth quarter of 2021.

Costs to construct replacement hospitals for the nine months ended September 30, 2020 totaled $97 million, primarily related to the construction of a replacement facility in La Porte, Indiana.

During the nine months ended September 30, 2021 and 2020, we also had cash expenditures of $50 million and $34 million, respectively, that represent both planning and construction costs for two de novo hospitals in the Tucson, Arizona market.

In the Tucson, Arizona market, we commenced operations for an 18-bed micro-hospital during the fourth quarter of 2020, while the other de novo hospital is expected to be completed in the first half of 2022 and have 52 beds.

Pursuant to a hospital purchase agreement from our March 1, 2016 acquisition of Northwest Health - La Porte, formerly known as La Porte Hospital, and Northwest Health – Starke, formerly known as Starke Hospital, we committed to build replacement facilities in both La Porte, Indiana and Knox, Indiana.

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Capital Resources

Net working capital was approximately $1.2 billion at June 30, 2021, compared to $1.7 billion at December 31, 2020.

Net working capital decreased by approximately $511 million between December 31, 2020 and June 30, 2021.

The decrease is primarily due to the decrease in cash, as a result of debt repayments, repayment of Medicare accelerated payments, refinancing activities and cash paid for deferred financing costs during the six months ended June 30, 2021, partially offset by a decrease in current maturities of long-term debt.

Net working capital was approximately $1.1 billion at September 30, 2021, compared to $1.7 billion at December 31, 2020.

Net working capital decreased by approximately $608 million between December 31, 2020 and September 30, 2021.

The decrease is primarily due to the decrease in cash, as a result of debt repayments, repayment of Medicare accelerated payments and classification of the remaining liability for Medicare accelerated payments as current, refinancing activities and cash paid for deferred financing costs during the nine months ended September 30, 2021, partially offset by a decrease in current maturities of long-term debt.

In addition to cash flows from operations, available sources of capital include amounts available under the asset-based loan (ABL) credit agreement, or the ABL Credit Agreement, which we entered into on April 3, 2018, as well as anticipated access to public and private debt markets.

Pursuant to the ABL Credit Agreement, the lenders have extended to CHS/Community Health Systems Inc., or 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.

At June 30, 2021, the available borrowing base under the ABL Facility was $762 million, of which $120 million was

reserved for outstanding letters of credit and $ 642 million represented excess availability.

W e had no outstanding borrowings as of June 30, 2021 .

Letters of cred it were reduced during the six m onths ended June 30, 2021 by $30 million in relation to a professional liability claim that was settled and funded dur in g the three months ended December 31, 2020.

At September 30, 2021, the available borrowing base under the ABL Facility was $836 million, of which $108 million was reserved for outstanding letters of credit and $728 million represented excess availability.

We had no outstanding borrowings as of September 30, 2021.

Letters of credit were reduced during the nine months ended September 30, 2021 by $42 million, primarily in relation to a professional liability claim that was settled and funded during the three months ended December 31, 2020.

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

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Upon the occurrence of an event of default under the ABL Facility or indentures that govern our outstanding notes, all amounts outstanding under the ABL Facility and the indentures that govern our outstanding notes may become immediately due and payable and all commitments under the ABL Facility to extend further credit may be terminated.

As of June 30, 2021, approximately $27 million of our outstanding debt of $11.9 billion is due within the next 12 months.

Through June 30, 2021, we received approximately $1.2 billion of accelerated payments pursuant to the Medicare Accelerated and Advance Payment Program, of which approximately $947 million remained outstanding as of June 30, 2021.

Recoupment of these funds by CMS began in April 2021 under the repayment framework more specifically described above under “Legislation Overview” of this “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” Additionally, the CARES Act permitted the deferral of payment of the employer portion of social security taxes between March 27, 2020 and December 31, 2020, with 50% of the deferred amount due December 31, 2021 and the remaining 50% due December 31, 2022.

Through June 30, 2021, we had deferred approximately $146 million of which, approximately $73 million is included within accrued liabilities employee compensation and approximately $73 million is included within other long-term liabilities in the condensed consolidated balance sheets.

As of September 30, 2021, approximately $35 million of our outstanding debt of $12.0 billion is due within the next 12 months.

Through September 30, 2021, we received approximately $1.2 billion of accelerated payments pursuant to the Medicare Accelerated and Advance Payment Program.

As of September 30, 2021, approximately $814 million of Medicare accelerated payments remained outstanding and are reflected within accrued liabilities-other in the condensed consolidated balance sheet.

Recoupment of these funds by CMS began in April 2021 under the repayment framework more specifically described above under “Overview of Legislative Developments” of this “Management’s Discussion and Analysis of Financial Condition and Results of

Operations.” As described in the Notes to Condensed Consolidated Financial Statements (Unaudited) in Part I, Item 1 of this Form 10-Q under the heading “Subsequent Events”, the outstanding balance of Medicare accelerated payments of $814 million as of September 30, 2021 was repaid in full to CMS in October 2021 .

Additionally, the CARES Act permitted the deferral of payment of the employer portion of social security taxes between March 27, 2020 and December 31, 2020, with 50% of the deferred amount due December 31, 2021 and the remaining 50% due December 31, 2022.

Through September 30 , 2021 , we had deferred approximately $14 6 million of which, approximately $ 7 3 million is included within accrued liabilities employee compensation and approximately $ 7 3 million is included within other long-term liabilities in the condensed consolidated balance sheets.

The deferral of the employer portion of social security taxes along with the repayment of Medicare accelerated payments are expected to negatively impact our cash flows from operations during 2021.

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PHSSEF funds that we have received and may continue to receive under the CARES Act and related legislation will be used according to their terms and conditions as reimbursement for lost revenues and incremental expenses attributable to COVID-19, including working capital requirements and capital expenditures.

As noted above, the COVID-19 pandemic has resulted in, and may continue to result in, significant disruptions of financial and capital markets, which could reduce our ability to access capital and negatively affect our liquidity in the future.

The COVID-19 pandemic has resulted in, and may continue to result in, significant disruptions of financial and capital markets, which could reduce our ability to access capital and negatively affect our liquidity in the future.

Additionally, while we have received PHSSEF payments and accelerated Medicare payments under the CARES Act and related legislation and may continue to receive and be able to utilize PHSSEF payments which have been received, as noted above, there is no assurance regarding the extent to which potential ongoing negative impacts on us arising from the COVID-19 pandemic will be offset by benefits which we may recognize or receive in the future under the CARES Act and related legislation or any future stimulus measures.

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Off-balance Sheet Arrangements

Off-balance sheet arrangements consist of letters of credit of $120 million issued on the ABL Facility, primarily in support of potential insurance-related claims and certain bonds, as well as approximately $13 million representing the maximum potential amount of future payments under physician recruiting guarantee commitments in excess of the liability recorded at June 30, 2021.

Off-balance sheet arrangements consist of letters of credit of $108 million issued on the ABL Facility, primarily in support of potential insurance-related claims and certain bonds, as well as approximately $13 million representing the maximum potential amount of future payments under physician recruiting guarantee commitments in excess of the liability recorded at September 30, 2021.

As previously discussed, we have a commitment to build one replacement facility.

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

As of June 30, 2021, we have hospitals in eight of the markets we serve, with noncontrolling physician ownership interests ranging from less than 1% to 40%.

In addition, as of June 30, 2021, we have five other hospitals with noncontrolling interests owned by non-profit entities or a for-profit subsidiary of a non-profit entity.

Redeemable noncontrolling interests in equity of consolidated subsidiaries was $498 million and $484 million at June 30, 2021 and December 31, 2020, respectively, and noncontrolling interests in equity of consolidated subsidiaries was $79 million and $87 million at June 30, 2021 and December 31, 2020, respectively.

The amount of net income attributable to noncontrolling interests was $31 million and $23 million for the three month periods ended June 30, 2021 and 2020, respectively, and $60 million and $39 million for the six month periods ended June 30 2021 and 2020, respectively.

As of September 30, 2021, we have hospitals in eight of the markets we serve, with noncontrolling physician ownership interests ranging from less than 1% to 40%.

In addition, as of September 30, 2021, we have five other hospitals with noncontrolling interests owned by non-profit entities or a for-profit subsidiary of a non-profit entity.

Redeemable noncontrolling interests in equity of consolidated subsidiaries was $493 million and $484 million at September 30, 2021 and December 31, 2020, respectively, and noncontrolling interests in equity of consolidated subsidiaries was $83 million and $87 million at September 30, 2021 and December 31, 2020, respectively.

The amount of net income attributable to noncontrolling interests was $33 million and $16 million for the three month periods ended September 30, 2021 and 2020, respectively, and $94 million and $54 million for the nine months ended September 30, 2021 and 2020, 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.

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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 each of the three and six-month periods ended June 30, 2021 and 2020, the impact of changes to the inputs used to determine the transaction price was considered immaterial to the current period.

During each of the three and nine-month periods ended September 30, 2021 and 2020, the impact of changes to the inputs used to determine the transaction price was considered immaterial to the current period.

Currently, several states utilize supplemental reimbursement programs for the purpose of providing reimbursement to providers to offset a portion of the cost of providing care to Medicaid and indigent patients.

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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.

All hospital contractual allowance calculations are subjected to

monthly review by management to ensure reasonableness and accuracy.

We account for the differences between the estimated program reimbursement rates and the standard billing rates as contractual allowance adjustments, which is one component of the deductions from gross revenues to arrive at net operating revenues.

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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 June 30, 2021 from our estimated reimbursement percentage, net loss for the six months ended June 30, 2021 would have changed by approximately $83 million, and net accounts receivable at June 30, 2021 would have changed by $107 million.

If the actual contractual reimbursement percentage under government programs and managed care contracts differed by 1% at September 30, 2021 from our estimated reimbursement percentage, net income for the nine months ended September 30, 2021 would have changed by approximately $88 million, and net accounts receivable at September 30, 2021 would have changed by $113 million.

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

We account for adjustments to previous program reimbursement estimates as contractual allowance adjustments and report them in the

periods that such adjustments become known.

Contractual allowance adjustments related to final settlements and previous program reimbursement estimates impacted net operating revenues and net income (loss) by an insignificant amount for each of the three and six-month periods ended June 30 , 2021 and 2020.

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

Contractual allowance adjustments related to final settlements and previous program reimbursement estimates impacted net operating revenues and net income by an insignificant amount for each of the three and nine-month periods ended September 30, 2021 and 2020.

Patient Accounts Receivable

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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, days revenue outstanding, the composition of self-pay receivables between pure self-pay patients and the patient responsibility portion of third-party insured receivables, the impact of recent acquisitions and dispositions and the impact of current economic and other events.

If the actual collection percentage differed by 1% at June 30, 2021 from our estimated collection percentage as a result of a change in expected recoveries, net loss for the six months ended June 30, 2021 would have changed by $40 million, and net accounts receivable at June 30, 2021 would have changed by $51 million.

If the actual collection percentage differed by 1% at September 30, 2021 from our estimated collection percentage as a result of a change in expected recoveries, net income for the nine months ended September 30, 2021 would have changed by $42 million, and net accounts receivable at September 30, 2021 would have changed by $54 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 $2.8 billion at June 30, 2021, and $3.3 billion at December 31, 2020, being pursued by various outside collection agencies.

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

We had approximately $ 2.4 billion at September 30 , 2021, an d $3.3 billion at December 31, 2020 , 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.

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

Days revenue outstanding, adjusted for the impact of receivables for state Medicaid supplemental payment programs and divested facilities, was 54 days and 52 days at June 30, 2021 and December 31, 2020, respectively.

Total gross accounts receivable (prior to allowance for contractual adjustments and implicit price concessions) was approximately $ 15.5 billion as of June 30, 2021 and approximately $14.8 billion as of December 31, 2020 .

Days revenue outstanding, adjusted for the impact of receivables for state Medicaid supplemental payment programs and divested facilities, was 56 days and 52 days at September 30, 2021 and December 31, 2020, respectively.

Total gross accounts receivable (prior to allowance for contractual adjustments and implicit price concessions) was approximately $16.4 billion as of September 30, 2021 and approximately $14.8 billion as of December 31, 2020.

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 June 30, 2021:

As of September 30, 2021:

% of Gross Receivables

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The approximate percentage of total gross accounts receivable (prior to allowances for contractual adjustments and implicit price concessions) summarized by payor is as follows:

September 30,

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 91% at both June 30, 2021 and December 31, 2020.

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 June 30, 2021 and December 31, 2020.

Goodwill and Other Intangibles

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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.

During 2017, we early adopted Accounting Standards Update 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.

We performed our last annual goodwill impairment evaluation during the fourth quarter of 2020 using the October 31, 2020 measurement date, which indicated no impairment.

At June 30, 2021, we had approximately $4.2 billion of goodwill recorded, all of which resides at our hospital operations reporting unit.

A detailed evaluation of potential impairment indicators was performed as of June 30, 2021.

On the basis of available evidence as of June 30, 2021, no impairment indicators were identified.

At September 30, 2021, we had approximately $4.2 billion of goodwill recorded, all of which resides at our hospital operations reporting unit.

A detailed evaluation of potential impairment indicators was performed as of September 30, 2021.

On the basis of available evidence as of September 30, 2021, no impairment indicators were identified.

The determination of fair value in our goodwill impairment analysis is based on an estimate of fair value for the hospital operations reporting unit utilizing known and estimated inputs at the evaluation date.

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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 of approximately 1.8% at both June 30, 2021 and December 31, 2020.

The net present value of the projected payments was discounted using a weighted-average risk-free rate of approximately 1.9% and 1.8% at September 30, 2021 and December 31, 2020, 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 condensed consolidated statements of income (loss).

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

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

There were no significant changes in our estimate of the reserve for professional liability claims during the six months ended June 30 , 2021 .

There were no significant changes in our estimate of the reserve for professional liability claims during the nine months ended September 30, 2021.

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

We believe that future income will enable us to realize certain deferred tax assets, subject to the valuation allowance we have established.

The total amount of unrecognized benefit that would impact the effective tax rate, if recognized, was less than $1 million as of June 30, 2021.

A total of less than $1 million of interest and penalties is included in the amount of liability for uncertain tax positions at June 30, 2021.

It is our policy to recognize interest and penalties related to unrecognized benefits in our condensed consolidated statements of income (loss) as income tax expense.

The total amount of unrecognized benefit that would impact the effective tax rate, if recognized, was less than $1 million as of September 30, 2021.

A total of less than $1 million of interest and penalties is included in the amount of liability for uncertain tax positions at September 30, 2021.

It is our policy to recognize interest and penalties related to unrecognized benefits in our condensed consolidated statements of income as income tax expense.

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

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the volume of COVID-19 patients cared for across our health systems;

the timing, availability and adoption of effective medical treatments and vaccines;

the timing, availability and acceptance of effective medical treatments and vaccines;

the spread of potentially more contagious and/or virulent forms of the virus, including any possible variants of the virus that may be resistant to currently available vaccines;

measures we are taking to respond to the COVID-19 pandemic;

the impact of government and administrative regulation on us;

the impact of government actions and administrative regulation on us, including with respect to vaccine mandates;

changes in net revenue due to patient volumes, payor mix and negative macroeconomic conditions;

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changes in, or the failure to comply with, federal, state or local laws or governmental regulations affecting our business, including any such laws or governmental regulations which are adopted in connection with the COVID-19 pandemic;

potential adverse impact of known and unknown government investigations, audits, and federal and state false claims act litigation and other legal proceedings;

potential adverse impact of known and unknown legal, regulatory and governmental proceedings and other loss contingencies, including governmental investigations and audits, and federal and state false claims act litigation;

our ability, 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;

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the impact of cyber-attacks or security breaches;

any failure to comply with the terms of the Corporate Integrity Agreement;

any developments with respect to the Corporate Integrity Agreement;

the concentration of our revenue in a small number of states;

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Quantitative and Qualitative Disclosures about Market Risk

During the six months ended June 30, 2021, there have been no material changes in the quantitative and qualitative disclosures set forth in Item 7A.

During the three months ended September 30, 2021, there have been no material changes in the quantitative and qualitative disclosures set forth in Item 7A.

Quantitative and Qualitative Disclosures about Market Risk in our 2020 Form 10-K.

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

What changed 10-Q

Item 2. Management’s Discussion and Analysis