What changed in this filing

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Item 1. Business

2022-02-17 compared with 2021-02-18 · 565 added, 528 removed, 889 unchanged (55% of the section changed)

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Overview of Our Company

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

We were originally founded in 1986 and were reincorporated in 1996 as a Delaware corporation.

We provide healthcare services through the hospitals that we own and operate and affiliated businesses in generally larger non-urban markets and selected urban markets throughout the United States.

As of December 31, 2020, we owned or leased 89 hospitals with an aggregate of 14,110 licensed beds, comprised of 87 general acute care hospitals and two stand-alone rehabilitation or psychiatric hospitals.

These hospitals are geographically diversified across 16 states, with the majority of our hospitals located in regional networks or in close geographic proximity to one or more of our other hospitals.

We are one of the largest publicly-traded providers of healthcare services in the United States and a leading operator of general acute care hospitals and outpatient facilities in communities across the country.

We provide healthcare services through the hospitals and outpatient facilities that we own and operate in generally larger non-urban markets and selected urban markets throughout the United States.

As of December 31, 2021, we owned or leased 83 hospitals with an aggregate of approximately 13,289 licensed beds, comprised of 81 general acute care hospitals and two stand-alone rehabilitation or psychiatric hospitals.

Healthcare services are also provided in more than 1,000 outpatient facilities including affiliated physician practices, urgent care centers, freestanding emergency departments, occupational medicine clinics, imaging centers, cancer centers and ambulatory surgery centers.

These hospitals and outpatient facilities are geographically diversified across 16 states, with the majority located in regional networks or in close geographic proximity to one or more of our other hospitals.

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.

Services provided through our hospitals and affiliated businesses include general acute care, emergency room, general and specialty surgery, critical care, internal medicine, obstetrics, diagnostic, psychiatric and rehabilitation services.

We also provide additional outpatient services at primary care practices, urgent care centers, free-standing emergency departments, ambulatory surgery centers, imaging and diagnostic centers, retail clinics and via direct-to-consumer virtual health visits.

Services provided through our hospitals and outpatient facilities include general acute care, emergency room, general and specialty surgery, critical care, internal medicine, obstetrics, diagnostic, psychiatric and rehabilitation services.

An integral part of providing these services is our network of affiliated physicians at our hospitals and affiliated businesses.

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implementation of patient safety and quality of care improvement programs and assistance in the recruitment of additional physicians and licensed healthcare practitioners to the markets in which our hospitals are located.

In a number of our markets, we have partnered with local physicians or not-for-profit providers, or both, in the ownership of our facilities.

Since 2017, we have implemented a portfolio rationalization and deleveraging strategy by divesting hospitals and non-hospital businesses that are attractive to strategic and other buyers.

This portfolio rationalization and deleveraging strategy was completed at the end of 2020, inclusive of definitive agreements with respect to sales of five hospitals entered into in 2020 which have closed or are expected to close 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 if we consider any such disposition to be in our best interests.

During 2020, we completed the divestiture of 13 hospitals, including three hospitals the divestitures of which closed effective January 1, 2020 (for these hospitals, we received the net proceeds at a preliminary closing on December 31, 2019).

Including the net proceeds for the 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.

Moreover, as of December 31, 2020, we had entered into definitive agreements to divest five additional hospitals.

We completed the divestiture of four of those hospitals during 2021, and anticipate completing the divestiture of the fifth during 2021, the proceeds for which are not expected to be material.

During 2019, we completed the divestiture of 12 hospitals, including two which closed effective January 1, 2019 (for these hospitals, we received the net proceeds at a preliminary closing on December 31, 2018).

Excluding the net proceeds for the two hospitals that preliminarily closed on December 31, 2018 and the three hospitals that preliminarily closed on December 31, 2019, we received total net proceeds of approximately $335 million in connection with the disposition of these hospitals.

During 2018, we completed the divestiture of 11 hospitals.

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

In a number of our markets, we have partnered with local physicians, for-profit entities and/or not-for-profit providers in the ownership of our facilities.

Throughout this Form 10-K, we refer to Community Health Systems, Inc., or the Parent Company, and its consolidated subsidiaries in a simplified manner and on a collective basis, using words like “we,” “our,” “us” and the “Company.” This drafting style is suggested by the Securities and Exchange Commission, or SEC, and is not meant to indicate that the publicly-traded Parent Company or any particular subsidiary of the Parent Company owns or operates any asset, business or property.

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We make available free of charge, through the investor relations section of our website, annual reports on Form 10-K, quarterly reports on Form 10-Q and current reports on Form 8-K as well as amendments to those reports, as soon as reasonably practical after they are filed with, or furnished to, the SEC.

The SEC maintains an Internet site

that contains our reports, proxy and information statements, and other information that we file electronically with the SEC at www.sec.gov.

The SEC maintains a website that contains our reports, proxy and information statements, and other information that we file electronically with the SEC at www.sec.gov.

We also make available free of charge, through the investor relations section of our website, our By-laws, our Governance Guidelines, our Code of Conduct and the charters of our Audit and Compliance Committee, Compensation Committee and Governance and Nominating Committee.

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We believe opportunities exist in select markets to create healthcare networks consisting of multiple hospitals and corresponding outpatient services.

Regional networks are able to expand the breadth of services provided for our patients, develop centers of excellence for key services, deliver care in an organized and efficient way across the network, improve alignment with physicians and other providers, and make services more attractive to managed care and other payers.

Currently, 48 of our hospitals operate in 13 unique regional networks.

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While we continue to provide health services across a broad spectrum, we have focused our attention and resources on service lines we believe have the greatest potential for growth, including primary care, emergency medicine, orthopedics, neuroscience, cardiovascular care, surgical services and behavioral health.

Significant investments have been made in existing markets to expand the scale of inpatient offerings, including through increasing bed capacity and constructing new surgical and procedural suites.

As the shift to delivering health services in outpatient settings accelerates, we continue to expand our care offerings beyond hospital walls to include more outpatient access through primary care practices, urgent care centers, free-standing emergency departments, ambulatory surgery centers, imaging and diagnostic centers, retail clinics and direct-to-consumer virtual health visits.

We endeavor to advance the scale and breadth of inpatient and outpatient capabilities through both direct investments and strategic partnerships.

We believe expanding our patient access footprint can attract new patients and increase patient retention, as well as our ability to connect patients from one episode of care to the next appropriate care setting.

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Recruiting and/or Employing Additional Primary Care Physicians and Specialists .

The physician-patient relationship is the foundation on which all healthcare services are built.

The physician-patient relationship is the foundation on which healthcare services are built.

Understanding this, we continuously assess our communities to identify service gaps and practice opportunities in order to recruit an optimal mix of primary care physicians and specialists.

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We currently participate in 15 Medicare Shared Savings Program Accountable Care Organizations which include approximately 4,000 employed and independent physicians in our communities.

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

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

Developing a More Consumer-Centric Experience and Facilitating Connections between Episodes of Care.

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Patient navigation and next appointment scheduling from existing points of care;

Availability of virtual health for certain services provided in the hospital and for direct-to-consumer, on-demand virtual visits with physicians;

Availability of virtual health for certain services provided in the hospital and for direct-to-consumer, on-demand virtual visits with physicians and other healthcare practitioners;

Digital marketing and consumer engagement campaigns;

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We have automated various components of the collection cycle, including statements and collection letters, to help facilitate timely and accurate progression of our accounts through the collection cycle.

We have consolidated local billing and collection functions into five centralized business offices and have completed the transition of our hospital billing departments to this new infrastructure.

We are now realizing the benefits of lower patient claim denials, higher underpayment recoveries and reduced operating expenses.

We have consolidated local hospital billing and collection functions into five centralized business offices and have completed the transition of our hospital billing departments to this new infrastructure.

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

Physician Support .

We support newly recruited physicians to facilitate a smooth and effective transition into our communities.

Newly recruited physicians participate in orientation that covers matters related to starting up a new practice or joining an established practice.

For employed physicians, we utilize software solutions that monitor and help optimize their practice performance against industry standard benchmarks and best practices.

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Reducing unnecessary utilization;

D eveloping and implementing operational best practices;

Developing and implementing operational best practices;

Discharge planning;

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

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

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

We have operated a Patient Safety Organization, or PSO, since 2011.

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We believe our PSO has assisted, and will continue to assist us, in improving patient safety at our hospitals.

The PSO has been recertified through 2024.

The PSO has been recertified by the Agency for Healthcare Research and Quality through 2024.

Industry Overview

According to the Centers for Medicare & Medicaid Services, or CMS, national healthcare expenditures grew 4.6% in 2019 to $3.8 trillion and are projected to have grown 5.2% in 2020 to nearly $4.0 trillion.

The CMS projections, published in March of 2020, indicate that total U.S.

healthcare spending is expected to grow by 5.1% in 2021 and 5.7% in 2022, and at an average annual rate of 5.4% for 2019 through 2028.

According to the Centers for Medicare & Medicaid Services, or CMS, national healthcare expenditures grew 9.7% in 2020 to $4.1 trillion, primarily due to a 36.0% increase in federal expenditures for healthcare that occurred largely in response to the COVID-19 pandemic.

Much of the spending growth was driven by federal financial assistance to healthcare providers through the Public Health and Social Services Emergency Fund, or PHSSEF, and Paycheck Protection Program loans, increased federal public health activity, and increased federal Medicaid funding.

When spending associated with federal public health and other federal programs (including the PHSSEF and Paycheck Protection Program loans) is excluded, total national health expenditures increased 1.9% in 2020, a smaller increase than the projected 5.2%, largely due to decreased use of medical goods and services.

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

The most recent projections were published in March 2020, and therefore do not take into account the impacts of COVID-19 or the actual expenditures in 2020 or 2021.

These projections indicate that total U.S.

healthcare spending is expected to grow at an average annual rate of 5.6% for 2022 through 2028.

CMS anticipates that total U.S.

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gross domestic product.

Healthcare spending is expected to be largely influenced by changes in economic conditions and demographics, as well as by increasing prices for medical goods and services.

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

They are typically published once per year and are not updated to reflect interim changes.

For example, the projections do not take into account the COVID-19 pandemic and its impact or the possibility of further modifications to, or repeal of, the Patient Protection and Affordable Care Act, as amended by the Health Care and Education Reconciliation Act of 2010, collectively, the Affordable Care Act.

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

In 2020, hospital care expenditures are projected to have grown 5.1%, amounting to approximately $1.3

CMS estimates that the hospital services c ategory will amount to over $1.4 trillion in 2021 and projects growth in this category at an average of 5.9% annually from 2021 through 2028.

In 2020, hospital care expenditures increased 6.4%, similar to the growth rate of 6.3% in 2019, and totaled nearly $1.3 trillion.

The growth in 2020 reflected a substantial amount of funding from federal programs (including COVID-19 relief) and larger increases in Medicaid spending compared to prior years.

CMS projects that the hospital services category will grow at an average of 6.0% annually from 2022 through 2028, reaching nearly $2.1 trillion by 2028.

Hospital Industry.

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facility payor mix;

the terms of contracts with third-party payors, including managed care plans;

the extent of Medicaid expansion.

Patients needing the most complex care are more often served by the larger and/or more specialized urban hospitals.

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

We have been working with federal, state and local health authorities to respond to COVID-19 cases in the communities we serve and have been taking or supporting measures to try to limit the spread of the virus and to mitigate the burden on the healthcare system, including, at times, rescheduling or cancelling elective procedures at our hospitals and other healthcare facilities.

For additional information regarding the ongoing impact of the COVID-19 pandemic on the Company, see the discussion below under “COVID-19 Pandemic” included in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Part II, Item 7 of this Form 10-K.

Our hospitals, medical clinics, medical personnel and employees have been actively caring for COVID-19 patients, and we have been working with federal, state and local health authorities to respond to COVID-19 cases in the communities we serve, including taking or supporting measures intended to limit the spread of the virus, protect our employees, and mitigate the burden on the healthcare system.

For additional information regarding the ongoing impact of the COVID-19 pandemic on the Company, as well as information regarding legislation enacted and other governmental actions taken by federal and state governments to assist healthcare providers in providing care during the pandemic and to provide financial relief to healthcare providers, see the discussion below under “COVID-19 Pandemic” and “Overview of Legislative Developments” included in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Part II, Item 7 of this Form 10-K.

Hospital Industry Trends

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Trends in Payment for Healthcare Services.

As discussed in more detail in the Government Regulation section of this Form 10-K, the impact of healthcare reform legislation, combined with the growing financial and economic pressures on the healthcare industry, has resulted in challenges to traditional reimbursement models.

For example, the Affordable Care Act has encouraged the adoption of new payment models that emphasize cost-effective delivery of care and quality of outcomes.

Although the number of patients with health insurance coverage has expanded since 2010, the year the Affordable Care Act was enacted, patients may face higher deductibles and increased co-payment requirements, which may result in greater write-offs of uncollectible amounts from those patients.

As discussed in more detail in the Government Regulation section of this Form 10-K, growing financial and economic pressures on the healthcare industry have resulted in challenges to traditional reimbursement models.

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

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

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

Shift to Outpatient Services.

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This trend has contributed to an increase in outpatient services while inhibiting the growth of inpatient admissions.

Recent changes to Medicare policy affecting the reimbursement methodology for certain items and services provided by off-campus provider-based hospital departments have generally resulted in reduced payment rates for these hospital outpatient settings.

In December 2020, CMS finalized a rule that will begin phasing out over three years the Inpatient Only List, which is a list of procedures eligible to be reimbursed by Medicare only if performed in an inpatient setting.

As a result, these procedures will also be eligible to be reimbursed by Medicare if performed in outpatient settings, which may further increase the demand for outpatient services and decrease the demand for inpatient services.

Changes to Medicare policy affecting the reimbursement methodology for certain items and services provided by off-campus provider-based hospital departments have generally resulted in reduced payment rates for these hospital outpatient settings.

In addition, CMS recently finalized a rule setting forth criteria for determining whether services or procedures should be removed from the Inpatient Only List, which is a list of procedures eligible to be reimbursed by Medicare only if performed in an inpatient setting.

To the extent procedures become eligible to be reimbursed by Medicare if performed in outpatient settings, demand for outpatient services may increase in comparison to demand for inpatient services.

Selected Operating Data

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

Statistics for 2020 include a full year of operations for 88 hospitals and partial periods for 13 hospitals that were divested, one hospital that was closed and one hospital that was opened during the year reflecting the operations of these hospitals prior to divestiture or closure or after commencing operations, as applicable.

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

Statistics for 2020 include a full year of operations for 88 hospitals and partial periods for 13 hospitals divested, one hospital that was closed and one hospital that was opened during the year reflecting the operations of these hospitals prior to divestiture or closure or after commencing operations, as applicable.

Statistics for 2019 include a full year of operations for 101 hospitals and partial periods for 12 hospitals divested and one hospital that was acquired during the year, reflecting the operations of these hospitals prior to divestiture or after acquisition, as applicable .

Statistics for 2018 include a full year of operations for 113 hospitals and partial periods for 11 hospitals

divested during the year and three hospitals that ceased operations during the year reflecting the operations of these hospitals prior to divestiture or closure.

Year Ended December 31,

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Liquidity Data

Net cash flows provided by operating activities

Net cash flows provided by operating activities as a % of net operating

Net cash flows provided by (used in) investing activities

Net cash flows (used in) provided by operating activities

Net cash flows (used in) provided by operating activities as a % of net operating revenues

Net cash flows (used in) provided by investing activities

Net cash flows used in financing activities

Year Ended December 31,

(Decrease) Increase

(Dollars in millions)

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before interest, income taxes, and depreciation and amortization.

Adjusted EBITDA, also a non-GAAP financial measure, is EBITDA adjusted to add back net income attributable to noncontrolling interests and to exclude (gain) loss from early extinguishment of debt, impairment and (gain) loss on sale of businesses, (income) expense related to government and other legal settlements and related costs, expense incurred in the fourth quarter of 2020 related to the settlement of certain professional liability claims for which the third-party insurers’ obligation to insure the Company against the underlying loss is being litigated, expense related to employee termination benefits and other restructuring charges, expense from settlement and fair value adjustments on the CVR agreement liability related to the Health Management Associates, Inc., or HMA, legal proceedings and related legal expenses, the impact of changes in estimate to increase the professional liability claims accrual recorded during the second quarter of 2019 (which estimate was further revised in the third quarter of 2019 based on updated actuarial analysis) with respect to claims incurred in 2016 and prior years, and expense related to the valuation allowance recorded in the second quarter of 2019 to reserve the outstanding balance of a promissory note received from the buyer in connection with the sale of two of the Company’s hospitals in 2017, as well as income from a reduction of the valuation allowance on the outstanding balance of a promissory note from the buyer of another hospital.

During the three months ended December 31, 2020, the Company incurred expenses in the amount of approximately $50 million related to the settlement of a professional liability claim for which the Company’s third-party insurers’ obligation to provide coverage to the Company in connection with the underlying loss is being litigated.

In the ordinary course of business, the Company’s expense with respect to professional liability claims is limited to amounts not covered by third-party insurance policies, which typically provide coverage for professional liability claims.

The subject of the litigation for the recovery of the full amount of the $50 million settlement is whether the claim is covered under the subject policies.

The Company believes it is owed reimbursement of the full amount of the settlement by its insurers with respect to this matter.

The Company has included this adjustment in the calculation of Adjusted EBITDA because the Company believes that this expense, absent the dispute as to whether it relates to a covered loss as defined in our insurance policies, would have been mitigated by insurance recoveries and is therefore outside of the ordinary course of the Company’s operations and not reflective of the Company’s underlying results of operations in light of the intended purpose of Adjusted EBITDA in assessing the Company’s operational performance and comparing the Company’s performance between periods.

Adjusted EBITDA, also a non-GAAP financial measure, is EBITDA adjusted to add back net income attributable to noncontrolling interests and to exclude loss (gain) from early extinguishment of debt, impairment and (gain) loss on sale of businesses, gain on sale of equity interests in Macon Healthcare, LLC, (income) expense related to government and other legal settlements and related costs, expense incurred in the fourth quarter of 2020 related to the settlement of certain professional liability claims for which the third-party insurers’ obligation to insure the Company against the underlying loss was being litigated along with income during the fourth quarter of 2021 associated with the settlement of such litigation for the recovery of amounts covered by such third-party insurance policies, expense related to employee termination benefits and other restructuring charges, expense from settlement and fair value adjustments on the contingent value right agreement liability related to the Health Management Associates, Inc., legal proceedings and related legal expenses, the impact of changes in estimate to increase the professional liability claims accrual recorded during the second quarter of 2019 (which estimate was further revised in the third quarter of 2019 based on updated actuarial analysis) with respect to claims incurred in 2016 and prior years, and expense related to the valuation allowance recorded in the second quarter of 2019 to reserve the outstanding balance of a promissory note received from the buyer in connection with the sale of two of the Company’s hospitals in 2017, as well as income from a reduction of the valuation allowance on the outstanding balance of a promissory note from the buyer of another hospital.

As previously disclosed, during the three months ended December 31, 2020, the Company incurred expenses in the amount of approximately $50 million related to the settlement of a professional liability claim for which the Company’s third-party insurer’s obligation to provide coverage to the Company in connection with the underlying loss was being litigated.

Moreover, during the three months ended December 31, 2021, as referenced above, the Company recognized income in the amount of approximately $19 million, net of related legal fees, from the settlement of the aforementioned litigation with third-party insurers.

The Company has included this adjustment in the calculation of Adjusted EBITDA during the year ended December 31, 2021, because the Company believes the income associated with such settlement is not reflective of the Company’s underlying results of operations in light of the intended purpose of Adjusted EBITDA in assessing the Company’s operational performance and comparing the Company’s performance between periods.

The Company has from time to time sold noncontrolling interests in certain of its subsidiaries or acquired subsidiaries with existing noncontrolling interest ownership positions.

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The Company believes it is useful to provide investors and other users of the Company’s financial statements this performance measure to align with how management assesses the Company’s results of operations.

Adjusted EBITDA also is comparable to a similar metric called Consolidated EBITDA, as defined in the Company’s asset-based loan facility, or ABL Facility, which is a key component in the determination of our compliance with certain covenants under the ABL Facility (including our ability to service debt and incur capital expenditures), and is used to determine the interest rate and commitment fee payable under the ABL Facility (although Adjusted EBITDA does not include all of the adjustments described in the ABL Facility).

Adjusted EBITDA also is comparable to a similar metric called Consolidated EBITDA, as defined in the Company’s asset-based loan facility, or the ABL Facility, and the Company’s existing note indentures, which is a key component in the determination of the Company’s compliance with certain covenants under the ABL Facility and such note indentures (including the Company’s ability to service debt and incur capital expenditures), and is used to determine the interest rate and commitment fee payable under the ABL Facility (although Adjusted EBITDA does not include all of the adjustments described in the ABL Facility).

Adjusted EBITDA includes the Adjusted EBITDA attributable to hospitals that were divested during the course of such year, but in each case solely to the extent relating to the period prior to the consummation of the applicable divestiture.

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The items excluded from Adjusted EBITDA are significant components in understanding and evaluating financial performance.

The Company believes such adjustments are appropriate as the magnitude and frequency of such items can vary significantly and are not related to the assessment of normal operating performance.

Additionally, this calculation of Adjusted EBITDA may not be comparable to similarly titled measures reported by other companies.

The Company believes such adjustments are appropriate as the magnitude and frequency of such items can vary significantly

and are not related to the assessment of normal operating performance.

Additionally, this calculation of Adjusted EBITDA may not be comparable to si milarly titled measures disclosed by other companies.

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

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

(Benefit from) provision for income taxes

Provision for (benefit from) income taxes

Depreciation and amortization

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Interest expense, net

(Gain) loss from early extinguishment of debt

Loss (gain) from early extinguishment of debt

Impairment and (gain) loss on sale of businesses, net

(Income) expense from government and other legal settlements and

Expense from government and other legal settlements and

related costs

Expense from the settlement of professional liability claims

(Income) expense from the settlement of professional liability claims

for which the third-party insurers' obligation to insure the

Company for the underlying loss is being litigated

Expense from settlement and fair value adjustments and legal expenses

Company for the underlying loss has been settled

Expense from settlement and legal expenses

related to cases covered by the CVR

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restructuring charges

Gain on sale of equity interests in Macon Healthcare, LLC

Change in valuation allowances recorded for promissory notes

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Adjusted EBITDA

Same-store data excludes the results of a hospital acquired in 2019, a hospital opened in 2020 and the hospitals divested or closed in the periods presented.

Same-store data excludes the results of a hospital acquired in 2019 and businesses divested or closed in the periods presented.

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

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Included in Managed Care and other third-party payors is operating revenues from insurance companies with which we have insurance provider contracts, Medicare managed care, insurance companies for which we do not have insurance provider contracts, workers’ compensation carriers and non-patient service revenue, such as rental income and cafeteria sales.

In the future, we generally expect the portion of revenues received from the Medicare and Medicaid programs to increase over the long-term due to the general aging of the population and the impact of the Affordable Care Act.

The Affordable Care Act has increased the number of insured patients in states that have expanded Medicaid, which in turn, has reduced the percentage of revenues from self-pay patients.

However, it is unclear whether the trend of increased coverage will continue, due in part to the impact of the COVID-19 pandemic and the elimination of the financial penalty associated with the individual mandate, effective January 1, 2019.

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

Moreover, the trend toward increased enrollment in Medicare and Medicaid managed care may adversely affect our operating revenue.

An executive order issued in October 2019 seeks to accelerate

this shift away from traditional fee-for-service Medicare to Medicare managed care.

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

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

We may also be impacted by regulatory requirements imposed on

insurers, such as minimum medical-loss ratios and specific benefit requirements.

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

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

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.

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 took effect January 1, 2022 and is discussed further below .

There can be no assurance that we will retain our existing re imbursement arrangements or that third-party payors will not attempt to further reduce the rates they pay for our services.

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

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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 years ended December 31, 2021, 2020 and 2019.

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.

The payment rates under the Medicare program for hospital inpatient and outpatient acute care services are based on prospective payment systems, which depend upon a patient’s diagnosis or the clinical complexity of services provided to a patient, among other factors.

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

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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 payment is reasonably assured.

Reimbursement under these programs is reflected in net operating revenues and included as Medicaid revenue in the table above, and fees, taxes or other program related costs are reflected in other operating expenses.

As of December 31, 2020, Indiana, Florida and Texas represented our only areas of significant geographic concentration.

As of December 31, 2021, Indiana, Florida, Texas and Alabama represented our only areas of significant geographic concentration.

Net operating revenues generated by our hospitals in Indiana, as a percentage of consolidated net operating revenues, were 16.4% in 2021, 15.0% in 2020 and 13.7% in 2019.

Net operating revenues generated by our hospitals in Florida, as a percentage of consolidated net operating revenues, were 13.0% in 2020 and 14.3% in 2019 and 2018.

Net operating revenues generated by our hospitals in Texas, as a percentage of consolidated net operating revenues, were 12.2% in both 2020 and 2019 and 11.7% in 2018.

Net operating revenues generated by our hospitals in Florida, as a percentage of consolidated net operating revenues, were 12.2% in 2021 and 13.0% in 2020 and 14.3% in 2019.

Net operating revenues generated by our hospitals in Texas, as a percentage of consolidated net operating revenues, were 11.0% in 2021 and 12.2% in both 2020 and 2019.

Net operating revenues generated by our hospitals in Alabama, as a percentage of consolidated net operating revenues, were 13.0% in 2021, 12.1% in 2020 and 10.6% in 2019.

Hospital revenues depend upon inpatient occupancy levels, the volume of outpatient procedures and the charges or negotiated payment rates for hospital services provided.

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Government Regulation

The healthcare industry is required to comply with extensive government regulation at the federal, state and local levels.

Participants in the healthcare industry are required to comply with extensive government regulation at the federal, state and local levels.

If we fail to comply with applicable laws and regulations, we may be subject to criminal penalties and civil sanctions, our hospitals could lose their licenses and we could lose our ability to participate in Medicare, Medicaid and other government programs.

Hospitals must meet requirements to be certified as hospitals and qualified to participate in government programs, including those relating to the adequacy of medical care, equipment, personnel, operating policies and procedures;

These legal and regulatory standards address, among other issues, licensure, certification, and enrollment with government programs;

the necessity and adequacy of medical care;

quality of medical equipment and services;

qualifications of medical and support personnel;

operating policies and procedures;

screening, stabilization and transfer of individuals who have emergency medical conditions;

billing and coding for services;

properly handling overpayments;

handling overpayments;

classifications of levels of care provided;

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rate-setting;

compliance with building codes;

building codes;

environmental protection;

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debt collection;

balance billing and billing for out-of-network services;

and communications with patients and consumers.

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Healthcare Reform .

Over the last decade, the U.S.

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 intended to increase access to health insurance.

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

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

citizens maintain health insurance coverage.

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

The law has been subject to legislative and regulatory changes and court challenges, and certain members of Congress have stated their intent to repeal or make additional significant changes to, the Affordable Care Act, its implementation or its interpretation.

Effective January 1, 2019, the financial penalty enforcing the individual mandate was eliminated.

In December 2018, as a result of this change, a federal judge in Texas found the individual mandate unconstitutional and determined the rest of the Affordable Care Act was therefore invalid.

In December 2019, the Fifth Circuit Court of Appeals upheld this decision with respect to the individual mandate, but remanded for further consideration of how this affects the rest of the law.

On November 10, 2020, the Supreme Court heard oral arguments regarding this case, and the law remains in place pending the appeals process .

The elimination of the individual mandate penalty and other changes may impact the number of individuals that elect to obtain public or private health insurance or the scope of such coverage, if purchased.

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

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

However, other provisions of the Affordable Care Act, such as requirements related to employee health insurance coverage, have increased our operating costs.

In addition, the Affordable Care Act has made changes to Medicare and Medicaid reimbursement that could adversely impact the reimbursement we receive under these programs.

These changes include a productivity offset to the Medicare market basket update and reductions to the Medicare and Medicaid disproportionate share hospital, or DSH, payments.

However, reductions to DSH payments have been delayed through 2023 by the Consolidated Appropriations Act, 2021, or the CAA .

Substantial uncertainty remains regarding the ongoing net effect of the Affordable Care Act due to the possibility of repeal or significant additional changes to the law, clarifications and modifications resulting from executive orders, the rule-making process, the ultimate outcome of court challenges and the development of agency guidance, whether and how many states ultimately decide to expand Medicaid coverage and on what terms, the number of individuals who elect to purchase health insurance coverage and budgetary issues at federal and state levels.

However, President Biden has indicated through executive orders that his administration intends to protect and strengthen the Affordable Care Act and Medicaid programs.

The impact on the healthcare industry and timing of any potential additional reforms or further changes to the Affordable Care Act is unknown.

For example, members of Congress have proposed measures that would expand government-sponsored coverage, including single-payor proposals, which could also significantly affect healthcare providers.

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

It is difficult to predict the nature and success of future financial or delivery system reforms.

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

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

The Affordable Care Act also made a number of changes to Medicare and Medicaid reimbursement, such as a productivity offset to the Medicare market basket update and reductions to the Medicare and Medicaid disproportionate share hospital, or DSH, payments.

However, reductions to Medicaid DSH payments have been delayed by the Consolidated Appropriations Act, 2021, or the CAA, through 2023 (to begin in federal fiscal year 2024).

The Affordable Care Act has been subject to legislative and regulatory changes.

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

This change resulted in legal challenges to the constitutionality of the individual mandate and validity of the Affordable Care Act as a whole.

However, in June 2021, the U.S.

Supreme Court determined that the plaintiffs lacked standing, allowing the law to remain in place.

Nonetheless, the elimination of the individual mandate penalty and other changes may impact the number of individuals that elect to obtain public or private health insurance or the scope of such coverage, if purchased.

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

The current presidential administration has indicated that it generally intends to protect and strengthen the Affordable Care Act and Medicaid programs.

For example, in January 2021, President Biden issued an executive order that instructed certain governmental agencies to review and reconsider their existing policies and rules that limit access to health insurance coverage.

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

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

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

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 operated hospitals as of December 31, 2021, nine states have taken action to expand their Medicaid programs.

At this time, the other seven states have not, including Florida, Alabama, Tennessee, Mississippi and Texas, where we operated a significant number of hospitals as of December 31, 2021.

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

There is uncertainty regarding the ongoing net effect of the Affordable Care Act due to the potential for continued changes to the law’s implementation and its interpretation by government agencies and courts.

There is also uncertainty regarding the potential

impact of other health reform efforts at the federal and state levels.

Some reforms may have a positive impact on our business, while other s may increase our operating costs, adversely impact the reimbursement we receive, or require us to modify certain aspects of our operations.

For example, some members of Congress have proposed measures that would expand government-sponsored health insurance coverage, including single-payor models, and some states have implemented or are considering public health insurance options.

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

Some current initiatives, requirements and proposals, including requirements aimed at price transparency and out-of-network charges, may impact prices , our competitive position , and our relationships with insurers and patients.

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

HHS is deferring enforcement of this requirement until it issues additional regulations.

Fraud and Abuse Laws.

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A section of the Social Security Act known as the “Anti-Kickback Statute” prohibits some business practices and relationships under Medicare, Medicaid and other federal healthcare programs.

These practices include the payment, receipt, offer, or solicitation of remuneration of any kind in exchange for items or services that are reimbursed under most federal or state healthcare programs.

These practices include the payment, receipt, offer, or solicitation of remuneration of any kind in exchange for items or services that are reimbursed under a federal healthcare program.

Courts have interpreted this statute broadly and have held that there is a violation of the Anti-Kickback Statute if just one purpose of the remuneration is to generate referrals.

The Office of Inspector General of the Department of Health and Human Services, or OIG, is responsible for identifying and investigating fraud and abuse activities in federal healthcare programs.

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Although we strive to comply with the Anti-Kickback Statute, taking into account available guidance including the “safe harbor” regulations, including revised regulations issued in November 2020, we cannot assure you that regulatory authorities will not determine otherwise.

If that happens,

we could be subject to criminal and civil penalties and/or exclusion from participating in Medicare, Medicaid, or other government healthcare progra ms.

If that happens, we could be subject to criminal and civil penalties and/or exclusion from participating in Medicare, Medicaid, or other government healthcare programs.

Civil monetary penalties increase annually based on updates to the consumer price index.

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From time to time, CMS has issued regulations that interpret the Stark Law.

Most recently, in November 2020, CMS finalized changes to the Stark Law implementing regulations intended to modernize and clarify the requirements for complying with the Stark Law.

In November 2020 and November 2021, CMS finalized changes to the Stark Law implementing regulations intended to modernize and clarify the requirements for complying with the Stark Law.

Another exception to the Stark Law, known as the “whole hospital” exception, allows a physician to make a referral to a hospital if the physician owns an interest in the entire hospital, as opposed to an ownership interest in a department of the hospital, and the hospital meets certain “grandfathering” requirements imposed by the Affordable Care Act.

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Another significant enforcement mechanism used within the healthcare industry is the federal False Claims Act, or FCA, which can be used to prosecute Medicare and other government program fraud involving issues such as coding errors, billing for service not provided and submitting false cost reports.

The FCA covers payments involving

federal funds in connection with the health insurance exchanges created under the Affordable Care Act, if those payments involve any federal funds.

The FCA covers payments involving federal funds in connection with the health insurance exchanges created under the Affordable Care Act, if those payments involve any federal funds.

Liability under the FCA often arises when an entity knowingly submits a false claim for reimbursement to the federal government.

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If these activities are widespread, they could limit our ability to acquire hospitals.

Antitrust Laws .

The federal government and most states have enacted antitrust laws that prohibit certain types of conduct deemed to be anti-competitive.

These laws prohibit price fixing, market allocation, bid-rigging, concerted refusal to deal, market monopolization, price discrimination, tying arrangements, acquisitions of competitors and other practices that have, or may have, an adverse effect on competition.

Violations of federal or state antitrust laws can result in various sanctions, including criminal and civil penalties.

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

Department of Justice.

We believe we are in compliance with such federal and state laws, but courts or regulatory authorities may reach a determination in the future that could adversely affect our operations.

Certificates of Need.

The construction of new facilities, the acquisition of existing facilities, significant capital expenditures and the addition of new services at our facilities may be subject to state laws that require prior approval by state regulatory agencies.

certificate of need, or CON, laws generally require that a state agency determine the public need and give approval prior to the construction or acquisition of facilities, significant capital expenditure or the addition of new services.

These certificate of need, or CON, laws generally require that a state agency determine the public need and give approval prior to the construction or acquisition of facilities, significant capital expenditure or the addition of new services.

As of December 31, 2021, we operated 65 hospitals in 12 states that have adopted CON laws.

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These provisions are intended to encourage electronic commerce in the healthcare industry.

HHS has established electronic data transmission standards and code sets that all healthcare providers must use when submitting or receiving certain healthcare transactions electronically.

In addition, HIPAA requires that each provider use a National Provider Identifier.

The Affordable Care Act requires the HHS to adopt standards for additional electronic transactions and to establish operating rules to promote uniformity in the implementation of each standardized electronic transaction.

HHS has established electronic data transmission standards and code sets that all healthcare providers must use when submitting or receiving certain healthcare transactions electronically and has issued operating rules to promote uniformity in the implementation of each standardized electronic transaction.

HIPAA also requires that each provider use a National Provider Identifier.

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

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HHS may resolve HIPAA violations through informal means, such as allowing a covered entity to implement a corrective action plan, but HHS has the discretion to move directly to impose monetary penalties and is required to impose penalties for violations resulting from willful neglect.

Our facilities also are subject to any federal or state privacy-related laws that are more restrictive than the privacy regulations issued under HIPAA.

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

These laws vary and could impose additional penalties and subject us to additional privacy and security restrictions.

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

In addition, various states, including California, Nevada and Massachusetts, recently have enacted, and other states are considering, new laws and regulations concerning the privacy and security of consumer and other personal information.

For example, the Federal Trade Commission uses its consumer protection authority to initiate enforcement

actions in response to data breaches.

In addition, various states have enacted, and other states are considering, new laws and regulations concerning the privacy and security of consumer and other personal information.

To the extent we are subject to such requirements, these laws and regulations often have far-reaching effects, are subject to amendments and changing requirements and updates to regulators’ enforcement priorities, may require us to modify our data processing practices and policies, may require us to incur substantial costs and expenses to comply and may subject our business to a risk of increased potential liability.

These laws and regulations often provide for civil penalties for violations, as well as a private right of action for data breaches, which may increase the likelihood or impact of data breach litigation.

Under the Medicare program, we are paid for inpatient and outpatient services performed by our hospitals.

Payments for inpatient acute services are generally made pursuant to a prospective payment system, commonly known as “PPS.” Under PPS, our hospitals are paid a predetermined amount for each hospital discharge based on the patient’s diagnosis.

Specifically, each discharge is assigned to a diagnosis-related group, commonly known as a “DRG,” based upon the patient’s condition and treatment during the relevant inpatient stay.

Each DRG has a payment weight assigned to it that is based on the average resources used to treat Medicare patients in that DRG.

DRG payments are based on national averages and not on charges or costs specific to a hospital.

To better account for severity of illness and resource consumption, CMS uses the Medicare Severity DRG system.

Medicare sets discharge base rates (standardization payment amounts), which are adjusted according to the DRG relative weights and

geographic factors.

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

Payments for inpatient acute hospital services are generally made pursuant to a prospective payment system, or PPS.

Under the inpatient PPS, our hospitals are paid a predetermined amount for each hospital discharge based on the patient’s diagnosis.

Specifically, each discharge is assigned to a Medicare severity diagnosis-related group, commonly known as an “MS-DRG,” based upon the patient’s condition and treatment during the relevant inpatient stay.

The MS-DRGs are severity-adjusted to account for the severity of each patient’s condition and expected resource consumption.

Each MS-DRG has a payment weight assigned to it that is based on the average resources used to treat Medicare patients in that MS-DRG.

MS-DRG payments are based on national averages and not on charges or costs specific to a hospital.

Medicare sets discharge base rates (standardization payment amounts), which are adjusted according to the MS-DRG relative weights and geographic factors.

In addition, hospitals may qualify for an “outlier” payment when a patient’s treatment costs are extraordinarily high and exceed a specified regulatory threshold.

The DRG payment rates for inpatient acute services are adjusted by an update factor on October 1 of each year, the beginning of the federal fiscal year.

The index used to adjust the DRG payment rates, known as the “market basket index,” gives consideration to the inflation experienced by hospitals in purchasing goods and services.

DRG payment rates were increased by the “market basket index” update of 3.0% and 2.4%for each of federal fiscal years 2020 and 2021, respectively, subject to certain reductions.

The MS-DRG payment rates for inpatient acute services are adjusted by an update factor on October 1 of each year, the beginning of the federal fiscal year.

The index used to adjust the MS-DRG payment rates, known as the “market basket index,” gives consideration to the inflation experienced by hospitals in purchasing goods and services.

MS-DRG payment rates were increased by the “market basket index” update of 2.4% and 2.7% for each of federal fiscal years 2021 and 2022, respectively, subject to certain adjustments.

For federal fiscal year 2021, the market basket update was adjusted by the following percentage points:

a positive 0.5 adjustment in accordance with the Medicare Access and CHIP Reauthorization Act of 2015, or MACRA, and a 0.4 reduction for the multifactor productivity adjustment.

a positive 0.5 adjustment in accordance with the Medicare Access and CHIP Reauthorization Act of 2015, or MACRA, and a 0.0 productivity adjustment.

For federal fiscal year 2022, the market basket was adjusted by the following percentage points:

a positive 0.5 adjustment in accordance with MACRA and a 0.0 multifactor productivity adjustment.

A 25% reduction to the market basket index occurs if patient quality data is not submitted, and a reduction of 75% of the market basket index update occurs for hospitals that fail to demonstrate meaningful use of certified electronic health records, or EHR, technology without receiving a hardship exception.

Future legislation may decrease the rate of increase for DRG payments or even decrease such payment rates, but we are unable to predict the amount of any reduction or the effect that any reduction will have on us.

The DRG payment rates are also adjusted to promote value-based purchasing, linking payments to quality and efficiency.

First, hospitals that meet or exceed certain quality performance standards receive greater reimbursement under CMS’s value-based purchasing program, while hospitals that do not satisfy certain quality performance standards receive reduced Medicare inpatient hospital payments.

The amount collected from the reductions is pooled and used to fund the payments that reward hospitals based on a set of quality measures that have been linked to improved clinical processes of care and patient satisfaction.

a positive 0.5 adjustment in accordance with MACRA and a 0.7 reduction for the productivity adjustment.

A reduction of 25% of the market basket update occurs if patient quality data is not submitted, and a reduction of 75% of the market basket update occurs for hospitals that fail to demonstrate meaningful use of certified electronic health records, or EHR, technology without receiving a hardship exception.

Additional adjustments may apply, depending on patient-specific or hospital-specific factors.

The MS-DRG payment rates are also adjusted to promote value-based purchasing, linking payments to quality and efficiency.

First, hospitals that meet or exceed certain quality performance standards receive greater reimbursement under CMS’s Hospital Value-Based Purchasing Program, while hospitals that do not satisfy certain quality performance standards receive reduced Medicare inpatient hospital payments.

CMS withholds 2% of participating hospitals’ Medicare payments and uses the total amount collected to fund payments that reward hospitals based on a set of quality and resource use measures.

CMS scores each hospital on its achievement relative to other hospitals and improvement relative to that hospital’s own past performance.

Second, hospitals experiencing “excess readmissions” for conditions designated by CMS within 30 days from the patient’s date of discharge receive inpatient payments reduced by an amount determined by comparing that hospital’s readmission performance to a risk-adjusted national average.

Third, the 25% of hospitals with the worst national risk-adjusted hospital acquired condition, or HAC, rates in the previous year have their total inpatient operating Medicare payments reduced by 1%.

Second, hospitals experiencing “excess readmissions” within 30 days from the patient’s date of discharge following treatment for conditions or procedures designated by CMS receive reduced payments for all inpatient discharges, not just discharges relating to the conditions or procedures subject to the readmission standard.

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

Third, the bottom quartile of hospitals based on the national risk-adjusted hospital acquired condition, or HAC, rates in the previous year have their total inpatient operating Medicare payments reduced by 1%.

HHS has indicated that it will increase its efforts to promote, develop and use alternative payment models such as Accountable Care Organizations, or ACOs, and bundled payment arrangements.

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The Medicare DSH adjustments and uncompensated care payments as a percentage of net operating revenues were 0.91% and 1.11% for the years ended December 31, 2021 and 2020, respectively.

Hospitals may also qualify for Medicaid DSH payments when they qualify under the state established guidelines.

These Medicaid DSH payments as a percentage of net operating revenues were 0.65 % and 0.54% for the years ended December 31, 2020 and 2019, respectively.

The Affordable Care Act provides for reductions to the Medicaid DSH payments, but Congress has delayed the implementation of those reductions through 2023.

We also receive Medicare reimbursement for hospital outpatient services through a PPS.

Services paid under the hospital outpatient PPS are grouped into ambulatory payment classifications, or APCs.

Services for each APC are similar clinically and in terms of the resources they require.

APC payment rates are generally determined by applying a conversion factor, which CMS updates annually using a market basket.

For calendar year 2021, CMS estimated an increase in hospital outpatient PPS payments of 2.4%.

This reflected a market basket increase of 3.0%, with a 0.4 percentage point downward productivity adjustment.

For calendar year 2021, CMS estimated an increase in hospital outpatient PPS payments of 2.4%, reflecting a market basket increase of 2.4%, with a 0.0 percentage point adjustment for multi-factor productivity.

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

This reflected

a market basket increa se of 2.4%, with a 0.0 percentage point productivity adjustment .

For calendar year 202 2 , CMS estimated an increase in hospital outpatient PPS payments of 2.0 %, reflecting a market basket increase of 2.7%, with a negative 0.7 percentage point productivity adjustment .

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

We are complying with this data submission requirement.

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Under the policy, all off-campus provider-based departments are paid the Medicare Physician Fee Schedule, or MPFS, -equivalent rate for clinic visits, which is generally lower than the outpatient PPS rate.

The MPFS-equivalent rate for calendar year 2020 is 40% of the proposed outpatient PPS rate.

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

However, in September 2019, a federal judge invalidated the expansion of the site-neutral payment policy for calendar year 2019.

In September 2019, a federal judge invalidated the expansion of the site-neutral payment policy for calendar year 2019.

CMS appealed this decision and prevailed.

However, pending its appeal, CMS began reprocessing the 2019 claims paid at the lower rates.

However, pending its appeal, CMS had begun reprocessing the 2019 claims paid at the lower rates.

As a result of its successful appeal, CMS indicated it would begin, by November 1, 2021, to reprocess the 2019 claims provided at excepted provider-based departments so that they are paid at the same rate as non-excepted provider-based departments for those services under the MPFS.

For calendar year 2020, CMS issued a final rule implementing year two of the policy phase-in.

For calendar year 2021 and beyond, CMS is continuing the payment policy.

CMS is considering how to address claims that were reprocessed at the lower rate while this litigation was pending.

Beginning in 2013, t he Medicare reimbursement discussed above has been reduced due to the Budget Control Act of 2011 , which requires across-the-board spending cuts to the federal budget, also known as sequestration.

T hese sequestration cuts include reductions in payments for Medicare and other federally funded healthcare programs, including TRICARE.

The Coronavirus Aid, Relief and Economic Security Act, or the CARES Act , and related legislation have temporarily suspended these reductions through March 31, 2021 , but also extended the reductions through 2030.

Payment under the Medicare program for physician services is based upon the MPFS, under which CMS has assigned a national relative value unit, or RVU, to most medical procedures and services that reflects the resources required to provide the services relative to all other services.

The MPFS-equivalent rate for calendar year 2022 is approximately 40% of the outpatient PPS rate.

CMS uses fee schedules to pay for physician services, physical, occupational and speech therapies, durable medical equipment, clinical diagnostic laboratory services, freestanding surgery center services, and certain other items and services.

Under the MPFS, CMS has assigned a national relative value unit, or RVU, to most medical procedures and services that reflects the resources required to provide the services relative to all other services.

Each RVU is calculated based on a combination of the time and intensity of work required, overhead expense attributable to the service, and malpractice insurance expense.

These elements are each modified by a geographic adjustment factor to account for local practice costs and are then aggregated.

To determine the payment rate for a particular service, the sum of the geographically adjusted RVUs is multiplied by a conversio n factor.

For calendar year 2021 , CMS updated the conversion factor by a budget neutrality adjustment of negative 10.2 %.

However, the CAA provides for a 3.75% payment increase under the MPFS , which will partially offset this reduction .

In federal fiscal year 2017, CMS implemented the Quality Payment Program, or QPP, a payment methodology intended to reward high-quality patient care.

Physicians and certain other healthcare clinicians must participate in one of two QPP tracks.

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

To determine the payment rate for a particular service, the sum of the geographically adjusted RVUs is multiplied by a conversion factor.

For calendar year 2022, CMS decreased the conversion factor by approximately 3.71%, reflecting a budget neutrality adjustment to account for changes in RVUs and the expiration of a 3.75% temporary payment increase that Congress approved for calendar year 2021 through the CAA.

However, Congress approved a 3.0% payment increase for calendar year 2022, which will partially offset this reduction.

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

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

CMS expects to transition increasing financial risk to providers as QPP evolves.

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Providers may earn a Medicare incentive payment and will be exempt from the reporting requirements and payment adjustments imposed under the Merit-Based Incentive Payment System, or MIPS, if the provider has sufficient participation in an Advanced APM.

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

MIPS consolidates components of certain previously established physician incentive programs.

Medicaid is funded jointly by state and federal government.

Medicaid is a program funded jointly by state and federal governments, and administered by the states, that provides hospital and medical benefits to qualifying low-income individuals.

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

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

In addition to the base payment rates for specific claims for services rendered to Medicaid enrollees, states utilize supplemental reimbursement programs to make separate payments that are not specifically tied to an individual’s care.

Supplemental payments may be in the form of Medicaid DSH payments, which are intended to offset a portion of the costs to providers associated with providing care to Medicaid and indigent patients , or non-DSH payments, such as upper payment limit payments, which are intended to address the difference between Medicaid fee-for-service payments and Medicare reimbursement rates .

These supplemental reimbursement programs are designed with input from CMS and may be funded with a combination of state and federal resources, including, in certain instances, fees or taxes levied on the healthcare providers.

Supplemental payments may be in the form of Medicaid DSH payments, which are intended to offset hospitals’ uncompensated care costs.

Medicaid DSH payments as a percentage of our net operating revenues were 0.54% and 0.65% for the years ended December 31, 2021 and 2020, respectively.

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

Under current law, Medicaid DSH payments will be reduced by $8 billion per year in each of federal fiscal years 2024 through 2027.

Supplemental payments may also be in the form of non-DSH payments, such as upper payment limit payments, which are intended to address the difference between Medicaid fee-for-service payments and Medicare reimbursement rates.

These supplemental reimbursement programs are designed with input from CMS.

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

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

The federal government and many states are considering various strategies to reduce Medicaid expenditures.

Many states currently operate, or have applied to CMS to operate, Medicaid programs under waivers to standard Medicaid program requirements.

CMS has indicated that it intends to increase state flexibility in the administration of Medicaid programs, including allowing states to condition enrollment on work or other community engagement or to use a block grant funding structure.

We can provide no assurance that changes to Medicaid programs or reductions to Medicaid funding will not have a material adverse effect on our consolidated results of operations.

The federal government and many states are using or considering various strategies to reduce Medicaid expenditures, outside of the pandemic response.

In response to budgetary pressures, certain states in which we operate have adopted broad taxes on healthcare providers to fund the non-federal share of Medicaid programs.

In addition, many states currently operate, or have applied to CMS to operate, Medicaid programs under waivers to standard Medicaid program requirements.

For example, the Texas Transformation and Quality Improvement Program, or the Texas Waiver Program, is operated under a waiver granted under Section 1115 of the Social

Security Act.

The program provides funding for uncompensated care and supports several delivery system reform initiatives.

However, there is currently uncertainty regarding the duration of the Texas Waiver Program.

Although the previous presidential administration approved a 10-year extension of the program, through September 2030, CMS rescinded this extension in April 2021.

The Texas Attorney General filed a lawsuit challenging the rescission and, in August 2021, a federal district judge granted a preliminary injunction temporarily reinstating the extension.

While the lawsuit is pending, the Texas Health and Human Services Commission has re-submitted its application to extend the Texas Waiver Program.

There is uncertainty in other states as well.

The prior presidential administration increased state flexibility in the administration of Medicaid programs, including by allowing states to condition enrollment on work or other community engagement or to use a block grant funding structure.

However, the current presidential administration issued an executive order directing agencies to re-examine measures that reduce health insurance coverage or undermine Medicaid programs, and the administration has rescinded approvals of waivers for work and community engagement requirements.

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

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

DRG outlier payments have been and continue to be the subject of CMS audit and adjustment.

The OIG is also actively engaged in audits and investigations into alleged abuses of the DRG outlier payment system.

Commercial Insurance and Managed Care Companies .

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These payors pay our hospitals or in some cases reimburse their policyholders based upon the hospital’s established charges and the coverage provided in the insurance policy.

Payors try to limit

their costs by negotiating with hospitals and other healthcare providers for discounts to established charges.

Payors try to limit their costs by negotiating with hospitals and other healthcare providers for discounts to established charges.

Commercial insurers and managed care companies also seek to reduce payments to hospitals by establishing payment rules that in effect re-characterize the services ordered by physicians.

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MAC transition periods can impact claims processing functions and the resulting cash flow.

Medicare Integrity.

Medicare and Medicaid Integrity.

CMS contracts with third parties to promote the integrity of the Medicare program through review of quality concerns and detection of improper payments.

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States may coordinate with Medicaid RACs regarding recoupment of overpayments and refer suspected fraud and abuse to appropriate law enforcement agencies.

Under the Medicaid Integrity Program, CMS employs private contractors, referred to as Medicaid Integrity Contractors, or MICs, to perform reviews and post-payment audits of Medicaid claims and identify overpayments.

MICs are assigned to five geographic jurisdictions.

Besides MICs, several other contractors and state Medicaid agencies have increased their review activities.

CMS is transitioning some of its other integrity programs to a consolidated model by engaging Unified Program Integrity Contractors, or UPICs, to perform audits, investigations and other integrity activities.

Under the Medicaid Integrity Program, CMS contracts with Unified Program Integrity Contractors, or UPICs, to perform audits, investigations and other integrity activities.

Working across five geographic jurisdictions, UPICs collaborate w ith states and coordinate provid er investigations across the Medicare and Medicaid programs.

We maintain policies and procedures to respond to the RAC requests and payment denials.

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According to the Office of Medicare Hearings and Appeals, the average processing time in fiscal year 2020 was nearly four years.

HHS has finalized rules intended to streamline the process and improve efficiency but has also stressed the need for additional funding.

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

To ease the backlog of appeals, CMS has announced various settlement initiatives.

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

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

Depending upon the growth of RAC programs and our success in appealing claims in future periods, our cash flows and results of operations could be negatively impacted.

Accountable Care Organizations .

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

An ACO is a network of providers and suppliers (including hospitals, physicians and other designated professionals) which work together to invest in infrastructure and redesign delivery processes to achieve high quality and efficient delivery of services.

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

An ACO is a network of providers and suppliers (including hospitals, physicians and other designated professionals) that work together to invest in infrastructure and redesign delivery processes to achieve high quality and efficient delivery of services.

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

Pursuant to the Affordable Care Act, HHS established a Medicare Shared Savings Program that seeks to promote accountability and coordination of care through the creation of ACOs.

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

Medicare-approved ACOs that achieve quality performance standards established by HHS are eligible to share in a portion of the amounts saved by the Medicare program.

HHS has significant discretion to determine key elements of ACO programs.

Certain waivers are available from fraud and abuse laws for ACOs.

Certain waivers and exceptions are available from fraud and abuse laws for ACOs.

The Center for Medicare and Medicaid Innovation , or CMS Innovation Center, is responsible for establishing demonstration projects and other initiatives in order to identify, develop, test and encourage the adoption of new methods of delivering and paying for healthcare that create savings under the Medicare and Medicaid programs, while maintaining or improving quality of care.

In October 2021, the CMS Innovation Center published an outline of its strategy for the next decade, noting the need to accelerate the movement to value-based care and drive broader system transformation.

By 2030, the CMS Innovation Center aims to have all fee-for-service Medicare beneficiaries and most Medicaid beneficiaries in a care relationship with accountability for quality and total cost of care.

CMS also indicated it will streamline its payment model portfolio and consider how to ensure broad provider participation, including by implementing more mandatory models.

Bundled Payment Initiatives.

The CMS Innovation Center is responsible for establishing demonstration projects and other initiatives in order to identify, develop, test and encourage the adoption of new methods of delivering and paying for healthcare that create savings under the Medicare and Medicaid programs, while maintaining or improving quality of care.

For example, providers

participating in bundled payment initiatives accept accountability for costs and quality of care by agreeing to receive one payment for services provided to Medicare patients for certain medical conditions or episodes of care.

Providers participating in bundled payment initiatives accept accountability for costs and quality of care by agreeing to receive one payment for services provided to Medicare patients for certain medical conditions or episodes of care.

By rewarding providers for increasing quality and reducing costs and penalizing providers if costs exceed a certain amount, bundled payment models are intended to lead to higher quality, more coordinated care at a lower cost to the Medicare program.

The CMS Innovation Center has implemented bundled payment models, including the Bundled Payment for Care Improvement Advanced, or BPCI Advanced, initiative, which is expected to run through December 2023.

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

Participation in bundled payment programs is generally voluntary .

However, CMS has require d hospitals located in certain geographic areas to participate in a bundled payment program for specified orthopedic procedures, which is scheduled to run through September 30, 2021.

CMS is requiring certain hospitals to participate in new mandatory bundled payment initiatives for end-stage renal disease treatment, which began on January 1, 2021, and radiation oncology, beginning as early as January 1, 2022 .

CMS has indicated that it is developing more bundled payment models, some of which may be mandatory.

We are participating in BPCI Advanced initiatives in five of our markets.

Generally, participation in bundled payment programs is voluntary, but CMS currently requires hospitals in selected markets to participate in bundled payment initiatives for specific orthopedic procedures and end-stage renal disease treatment, and a mandatory radiation oncology bundled payment model is expected to begin January 1, 2023.

In its 2021 strategy refresh, the CMS Innovation Center signaled its intent to increase provider participation through implementation of more mandatory models.

We expect value-based purchasing programs, including models that condition reimbursement on patient outcome measures, to become more common with both governmental and non-governmental payors.

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We purchase items, primarily medical supplies, medical equipment and pharmaceuticals, under an agreement with HealthTrust, a GPO in which we are a noncontrolling partner.

The current term of this agreement expires in December 2022, with automatic renewal terms of one year unless either party terminates by giving notice of non-renewal.

As of December 31, 2021, we had a 17.5% ownership interest in HealthTrust.

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The hospital industry is highly competitive.

The competition among hospitals and other healthcare providers for patients has intensified as patients have become more conscious of rising costs and quality of care in their healthcare decision-making process.

The majority of our hospitals are located in generally larger non-urban service areas in which we believe we are the sole provider of general acute care health services.

Those hospitals in non-urban service areas face no direct competition because there are no other hospitals in their primary service areas.

The competition among hospitals and other healthcare providers, including urgent care centers and other outpatient providers, for patients has intensified as patients have become more conscious of rising costs and quality of care in their healthcare decision-making process.

The majority of our hospitals are located in generally larger non-urban service areas in which we believe we are the primary, if not the sole, provider of general acute care health services.

Those hospitals in non-

urban service areas may face limited or no direct competition because there are no other hospitals in their primary service areas.

However, these hospitals face competition from hospitals outside of their primary service area, including hospitals in urban areas that provide more complex services.

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We believe that we will continue to face increased competition in outpatient service models that become more integrated through acquisitions or partnerships between physicians, specialized care providers, and managed care payors.

In most markets in which we are not the sole provider of general acute care health services, our primary competitor is a not-for-profit hospital.

In most markets in which we are not the sole provider of general acute care health services, our primary competitor is a municipal or not-for-profit hospital.

These hospitals are owned by tax-supported governmental agencies or not-for-profit entities supported by endowments and charitable contributions.

These hospitals are exempt from sales, property and income taxes.

Such exemptions and support are not available to our hospitals and may provide the tax-supported or not-for-profit entities an advantage in funding general and capital expenditures.

Such exemptions and support are not available to our hospitals and may provide the tax-supported or not-for-profit entities an advantage in funding general and capital expenditures and offering services more specialized than those available at our hospitals.

The number and quality of the physicians on a hospital’s staff is an important factor in a hospital’s competitive position.

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We attempt to attract our physicians’ patients to our hospitals by offering quality services and facilities, convenient locations and state-of-the-art equipment.

Trends towards transparency may have a potential impact on our competitive position in ways that we are unable to predict.

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

Federal law provides for the future expansion of the number of quality measures that must be reported.

Currently, hospitals are required to publish online a list of their standard charges for items and services.

Beginning in 2021, hospitals are required to publish additional types of standard charges for all items and services, including discounted cash prices and payor-specific and de-identified negotiated charges, in a publicly accessible online file.

Hospitals are also required to publish a consumer-friendly list of charges for certain “shoppable” services (i.e., services that can be scheduled by a patient in advance) and any associated ancillary services.

In addition, effective January 1, 2022, the No Surprises Act will require

providers to send to an insured patient’s health plan good faith estimates of the expected charges for furnishing scheduled items or services, including any item or service that is reasonably expected to be provided in conjunction with the scheduled item or service or that is reasonably expected to be delivered by another provider, before the services are delivered.

Trends towards transparency and value-based purchasing may impact our competitive position and patient volumes.

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

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

In addition, hospitals are required to publish online a list of their standard charges for all items and services, including gross charges, discounted cash prices and payor-specific and de-identified negotiated charges, in a publicly accessible online file.

Hospitals are also required to publish a consumer-friendly list of standard charges for certain “shoppable” services (i.e., services that can be scheduled by a patient in advance) and any associated ancillary services or, alternatively, maintain an online price estimator tool.

In addition, the No Surprises Act, which took effect January 1, 2022, requires providers to send to an insured patient’s health plan good faith estimates of the expected charges for scheduled items or services, including billing and diagnostic codes, prior to the scheduled date of the items or services.

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

If a patient is uninsured, the notice must go to the patient.

If the actual charges are substantially higher than the estimate, the law includes a dispute resolution process to challenge the higher amount.

The No Surprises Act will also prohibit providers from charging patients an amount beyond the in-network cost sharing amount for services rendered by out-of-network providers, subject to limited exceptions.

If the actual charges to an uninsured (or self-pay) patient are substantially higher than the estimate, the patient may invoke a dispute resolution process established by regulation to challenge the higher amount.

HHS is deferring enforcement of certain requirements of the No Surprises Act related to estimates for insured patients.

Among other consumer protections, the No Surprises Act also prohibits providers from charging patients an amount beyond the in-network cost sharing amount for emergency services rendered by out-of-network providers and certain non-emergency services rendered by out-of-network providers at certain in-network facilities, including hospitals.

HHS has established a dispute resolution process for out-of-network providers and health plans to resolve payment disagreements when surprise billing protections apply.

Compliance Program

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Department of Justice, other federal agencies and identified relators that concluded previously announced investigations and litigation related to short stay admissions through emergency departments at certain of our affiliated hospitals.

See the “Legal Proceedings” discussion in Part II, Item 1 of our Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2014 for further discussion of the background of this matter and details of the settlement.

In addition to the amounts paid in the settlement, we executed a five-year Corporate Integrity Agreement, or CIA, with the OIG that has been incorporated into our existing and comprehensive compliance program.

On September 25, 2018, we announced a global resolution and settlement agreements ending the U.S.

Department of Justice investigation into certain conduct of HMA and its affiliated entities and settling certain qui tam lawsuits that were initiated and pending, and known to us, before our acquisition by merger of HMA in 2014.

Department of Justice investigation into certain conduct of Health Management Associates, Inc., or HMA, and its affiliated entities and settling certain qui tam lawsuits that were initiated and pending, and known to us, before our acquisition by merger of HMA in 2014.

Under this settlement, we made payments totaling $266 million, including interest, in the fourth quarter of 2018.

See the “Legal Proceedings” discussion in Part II, Item 1 of our Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2018 and the press release filed therewith on September 25, 2018 for further discussion of this matter and the details of the settlement.

Additionally, under the terms of the global settlement, our existing CIA was amended and extended.

The extension began immediately and effectively added two years to the existing CIA, with the amended CIA running through September 2021.

The compliance measures and reporting and auditing requirements contained in the CIA include:

continuing the duties and activities of our Corporate Compliance Officer, Corporate Compliance Work Group, and Facility Compliance Officers and committees;

maintaining our written Code of Conduct, which sets forth our commitment to full compliance with all statutes, regulations, and guidelines applicable to federal healthcare programs;

maintaining our written policies and procedures addressing the operation of our Compliance Program, including adherence to medical necessity and admissions standards for inpatient hospital stays;

continuing our general compliance training;

providing specific training for appropriate personnel on billing, case management and clinical documentation;

engaging an independent third party to perform an annual review of our compliance with the CIA;

continuing our Confidential Disclosure Program and hotline to enable employees or others to disclose issues or questions regarding possible inappropriate policies or behavior;

maintaining our screening program to ensure that we do not hire or engage employees or contractors who are ineligible persons for federal healthcare programs;

notifying the OIG of any government investigations;

reporting any material deficiency which resulted in an overpayment to us by a federal healthcare program;

submitting annual reports to the OIG which describe in detail the operations of our corporate Compliance Program for the past year.

Material, uncorrected violations of the CIA could lead to our suspension or disbarment from participation in Medicare, Medicaid and other federal and state healthcare programs and repayment obligations.

In addition, we are subject to possible civil penalties for failure to substantially comply with the terms of the CIA, including stipulated penalties ranging from $1,000 to $2,500 per day.

We are also subject to a stipulated penalty of $50,000 for each false certification made by us or on our behalf in connection with reports required under the CIA.

The CIA increases the amount of information we must provide to the federal government regarding our healthcare practices and our compliance with federal regulations.

The reports we provide in connection with the CIA could result in greater scrutiny by regulatory authorities.

We believe our existing Compliance Program addresses compliance with the operational terms of the CIA.

For additional information regarding the terms of the CIA, as amended, see pages 20 through 21 of our Annual Report on Form 10-K for the year ended December 31, 2020, filed on February 18, 2021.

The amended CIA 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 OIG which could include the imposition of civil monetary penalties and/or the extension of the term of the CIA.

Human Capital

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We are subject to various state and federal laws that regulate wages, hours, benefits and other terms and conditions relating to employment.

At December 31, 2020, certain employees at seven of our hospitals are represented by various labor unions.

At December 31, 2021, certain employees at six of our hospitals are represented by various labor unions.

It is possible that union organizing efforts will take place at additional hospitals in the future.

We consider our employee relations to be good and have not experienced work stoppages that have materially, adversely affected our business or results of operations.

In some markets, nurse and medical support personnel availability has become a significant operating issue to healthcare providers.

Our industry is facing unprecedented workforce challenges and this has become a significant operating issue for healthcare providers.

To address this challenge, we have implemented several initiatives to improve retention, recruiting, compensation programs and productivity.

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

Some physicians provide services in our hospitals under contracts, which generally describe a term of service, provide and establish the duties and obligations of such physicians, require the maintenance of certain performance criteria and fix compensation for such services.

Any licensed physician may apply to be accepted to the medical staff of any of our hospitals, but the hospital’s medical staff and the appropriate governing board of the hospital, in accordance with established credentialing criteria, must approve acceptance to the staff.

Members of the medical staffs of our hospitals often also serve on the medical staffs of other hospitals and may terminate their affiliation with one of our hospitals at any time.

Our hospitals, like most hospitals, have experienced rising labor costs.

An area that has been particularly challenging for providers is registered nurse, or RN, recruitment and retention.

We have had a centralized clinical recruiting function in place for a limited number of our markets since 2018.

In early 2021, we made the decision to expand this focused recruiting resource and expect that this will be in place for all of our affiliated hospitals by early 2022.

For those hospitals already supported by this internal centralized RN recruiting team, we have seen an increase in clinical position hires and a decreased time-to-fill for those key patient care roles.

We have also engaged with a recruitment process outsource vendor in certain markets having additional staffing needs while we have been building our internal centralized RN recruiting team.

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

We believe that these efforts will aid in our ability to take patient transfer requests, shorten emergency department wait times and lessen dependency on high cost contract labor.

Due to the challenges above and other factors , our hospitals and other healthcare facilities, like many other healthcare providers , have experienced rising labor costs.

We may be required to continue to enhance wages and benefits to recruit and retain nurses and other medical support personnel or to hire more expensive temporary or contract personnel.

As a result, our labor costs could continue to increase.

We also depend on the available labor pool of semi-skilled and unskilled employees in each of the markets in which we operate.

A newly instituted freeze and review of certain labor regulations, proposed changes to federal labor laws, and other labor-related developments arising from the recent change in presidential administration in the United States could increase the likelihood of employee unionization activity and the ability of employees to unionize.

The extent of

unionization may affect labor costs in the future.

In some of our markets, employers across various industries have increased their minimum wage , which has created more competition for this sector of employees.

As a result of these and other factors , our labor costs could continue to increase.

Moreover, potential changes to federal labor laws and regulations, including those supported by the current presidential administration , could increase the likelihood of employee unionization activity and the ability of employees to unionize.

The extent of unionization may affect labor costs in the future.

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

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

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

Members of the medical staffs of our hospitals often also serve on the medical staffs of other hospitals and may terminate their affiliation with one of our hospitals at any time.

We believe that our employees are vital contributors to our success, and we devote significant resources to recruit, retain and develop our workforce.

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Diversity, Equity and Inclusion

We strive to recruit and retain a diverse population of employees with respect to their experiences, education, socioeconomic statuses, races, ethnicities, cultures and genders that are reflective of the communities we serve.

We believe that a diverse workforce is a catalyst for positive and consistent patient outcomes and high quality care.

By fostering a culture of inclusion, we believe that we are able to retain the best and brightest talent by making all employees feel valued by members of their respective team.

Moreover, expansion of our diversity, equity and inclusion efforts is a key initiative in 2021.

As evidence of this commitment, we have recently hired a new vice president and a new senior director of diversity, equity and inclusion.

With inclusion as our strategy, diversity and equity are the outcomes we expect.

Our objective is to recruit and retain a diverse population of employees with respect to their experiences, education, socioeconomic status, race, color, ethnicity, religion, national origin, disability, culture, sexual orientation and gender identity or expression that are reflective of the communities we serve.

As of December 31, 2021, approximately 80% of our employees were women and approximately 25% were people of color.

As we strive to deepen our culture of inclusion, our goal is to strengthen our individual and collective cultural competence through both formal training and development programs and by informally sharing lived experiences and relating to one another.

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

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

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

Training and Talent Development

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We provide a wide range of development programs and resources to support our employees, including temporary and contract personnel.

In this regard, o ur talent development strategy is facilitated through our Advanced Learning Center (ALC) platform, a web-based portal, which provides employees and contractors access to computer based training courses as well as instructor led classes.

In this regard, our talent development strategy is facilitated through our Advanced Learning Center platform, or ALC, a web-based portal, which provides employees and contractors access to computer based training courses as well as instructor-led classes.

Our ALC provides training in many areas, including clinical, compliance, information technology, employee development, health information management, human resources, workplace safety and security, as well as hands-on resuscitation skills training.

We offer continuing education credits for many of these disciplines.

Moreover, in 2020, we completed a transition from the Laerdal resuscitation courses, to the new American Red Cross courses companywide.

We are committed to continue to offer a quality library of training courses, which, at present, consists of almost 2,700 courses published companywide, with a significant number of additional courses published at local facility levels.

We are committed to continue to offer a quality library of training courses, which, at present, consists of approximately 2,700 courses published companywide, with a significant number of additional courses published at local facility levels.

The quality of our training is assured through a robust annual course review process.

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The vast majority of the library is available for self-enrollment by our employees at no additional cost to the learner.

We also provide a wide range of other development programs and resources, including a tuition reimbursement program;

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

an executive development program, which identifies and develops qualified personnel for leadership-level positions at our healthcare facilities;

our Community Leadership Excel lence and Development Series, or LEADS, which is a proprietary training program for directors, managers and supervisors at our hospitals;

an d residency training programs.

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

Employee Safety

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(1) a look back at any significant safety or quality issues in the past 24 hours, (2) a look ahead to any anticipated safety or quality issues in the next 24 hours, and (3) a follow-up on safety critical issues requiring a rapid response.

Environmental Matters

We are subject to a number of federal, state and local environmental laws, rules and regulations that govern, among other things, our disposal of medical waste, as well as our use, storage, transportation and disposal of hazardous and toxic materials.

In addition, we could be affected by climate change to the extent that climate change results in severe weather conditions or other disruptions impacting the communities in which our facilities are located or adversely impacts general economic conditions, including in communities in which our facilities are located.

At the current time, our compliance with environmental legal requirements, including legal requirements relating to climate change, does not have a material effect on our capital expenditures, financial results or operations.

However, it is possible that developments may arise in the future as a result of climate change or other environmental developments that we are unable to currently predict.

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

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

For additional information about our ongoing environmental sustainability actions and practices, refer to our 2021 Environmental Sustainability Report, which is available in the Company Overview-Sustainability section of our website.

Notwithstanding the foregoing, the information on our website, including our 2021 Environmental Sustainability Report, is not incorporated by reference into this Form 10-K.

Professional Liability Claims

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If any of the events or circumstances described in any of the following risk factors occurs, our business, results of operations or financial condition could be materially and adversely affected, and our actual results may differ materially from those predicted in any forward-looking statements we make in any public disclosures.

The considerations and risks that follow are organized within relevant headings but may be relevant to other headings as well.

Additional factors that could affect our business, results of operations and financial condition are discussed elsewhere in this Report (including in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Part II, Item 7 of this Form 10-K).

Additional risks or uncertainties not presently known to us, or that we currently deem immaterial, also may adversely affect our business, results of operations and financial condition.

Moreover, risks or uncertainties not presently known to us, or that we currently deem immaterial, also may adversely affect our business, results of operations and financial condition.

Summary of Risk Factors

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Risks Related to the COVID-19 Pandemic

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

There can be no assurance regarding the impact of assistance received or recognized pursuant to the CARES Act and other stimulus legislation.

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

We are unable to predict the ultimate impact of the CARES Act and other stimulus legislation.

Risks Related to Our Business

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

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

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

Our performance depends on our ability to recruit and retain quality physicians.

Our labor costs could be adversely affected by various developments.

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

Our labor costs have been, and may continue to be, adversely affected by competitive labor market conditions and the shortage of experienced nurses.

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

Our revenues are somewhat concentrated in a small number of states.

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We could be subject to substantial uninsured liabilities or increased insurance costs as a result of significant legal actions.

We could be subject to increased monetary penalties and/or other sanctions if we fail to comply with the terms of our CIA.

In conne c tion with the final auditing and reporting requirements to which we are subject under the CIA, we could become subject to further action by the OIG.

Risks Related to Government Regulation

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

Any failure to comply with legal requirements governing the privacy and security of health information could adversely affect us.

If our adoption and utilization of EHR systems fails to satisfy HHS standards, our financial results could be adversely affected.

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

We may incur additional tax liabilities.

Risks Related to Impairment

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A significant decline in operating results at one or more of our facilities could result in an impairment in the fair value of our long-lived assets.

Risks Related to Technology

Risks Related to Cybersecurity and Technology

Our operations could be significantly impacted by interruptions or restrictions in access to our information systems.

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

A cyber-attack or security breach could harm our business and patients and expose us to liability.

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

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

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We have a significant amount of indebtedness, which is more fully described in the Liquidity and Capital Resources section of “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Part II, Item 7 of this Form 10-K and Note 6 of the Notes to Consolidated Financial Statements included under Part II, Item 8 of this Form 10-K.

As of December 31, 2020, we had approximately $11.3 billion aggregate principal amount of secured indebtedness outstanding and approximately $910 million of unsecured indebtedness outstanding, and an additional approximately $529 million of borrowing capacity under the ABL Facility (after taking into account borrowing base limitations and approximately $150 million of outstanding letters of credit).

As of December 31, 2021, we had approximately $11.3 billion aggregate principal amount of secured indebtedness outstanding and approximately $796 million of unsecured indebtedness outstanding, and an additional approximately $897 million of borrowing capacity under the ABL Facility (after taking into account approximately $103 million of outstanding letters of credit).

Our substantial leverage could have important consequences, including the following:

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it may limit our ability to adjust to changing market conditions and place us at a competitive disadvantage compared to our competitors that are less highly leveraged;

it may increase our vulnerability in connection with adverse changes in general economic, industry or competitive conditions, government regulations or other adverse developments, including pandemics, epidemics or the outbreak of infectious diseases.

it may increase our vulnerability in connection with adverse changes in general economic, indus try or competitive conditions, or government regulations or other adverse developments .

Despite current indebtedness levels, we may still be able to incur substantially more debt.

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The ABL Facility provides for commitments and borrowings of up to approximately $1.0 billion in the aggregate, none of which was drawn on December 31, 2021 The aggregate amount we may draw under the ABL Facility may not exceed the “borrowing base” (as calculated thereunder) less outstanding letters of credit thereunder, which fluctuates from time to time.

As of December 31, 2020, we had an additional approximately $529 million (after taking into account borrowing base limitations and approximately $150 million of outstanding letters of credit) available for borrowing under the ABL Facility.

As of December 31, 2021, we had an additional approximately $897 million (after taking into account approximately $103 million of outstanding letters of credit) available for borrowing under the ABL Facility.

Aside from the ABL Facility, our ability to incur other additional secured debt (other than secured debt used to refinance existing secured debt) is highly limited by certain of the indentures governing our outstanding notes.

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We may not be able to consummate those dispositions and any proceeds we receive may not be adequate to meet any debt service obligations then due.

We have a substantial amount of indebtedness with certain series of our outstanding notes and other debt scheduled to mature in close proximity to each other.

As further described in the Liquidity and Capital Resources section of “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Part II, Item 7 of this Form 10-K and Note 6 of the Notes to Consolidated Financial Statements included under Part II, Item 8 of this Form 10-K, we have a substantial amount of indebtedness with certain series of our outstanding notes and other debt scheduled to mature in close proximity to each other.

As a result, we may not have sufficient cash to repay all amounts owing under such indebtedness and there can be no assurance that we will have the ability to borrow or otherwise raise the amounts necessary to repay all such amounts.

We have a substantial amount of indebtedness under certain series of our outstanding notes and other debt scheduled to mature in close proximity to each other.

As further described in the Liquidity and Capital Resources section of “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Part II, Item 7 of this Form 10-K and Note 6 of the Notes to Consolidated Financial Statements included under Part II, Item 8 of this Form 10-K, we have a substantial amount of indebtedness under certain series of our outstanding notes and other debt scheduled to mature in close proximity to each other.

As a result, we may not have sufficient cash to repay all amounts owing under such indebtedness and there can be no assurance that we will have the ability to borrow or otherwise

raise the amounts nece ssary to repay all such amounts .

Our ability to refinance our indebtedness on favorable terms, or at all, is dependent on (among other things) conditions in the credit and capital markets which are beyond our control.

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If interest rates increase, our debt service obligations on the variable rate indebtedness would increase even though the amount borrowed remained the same, and our net income would decrease.

As of December 31, 2020, there are no borrowings under the ABL Facility.

In addition, certain of our variable rate indebtedness uses London Interbank Offered Rate, or LIBOR, as a benchmark for establishing the rate of interest and may be hedged with LIBOR-based interest rate derivatives.

LIBOR is the subject of national, international and other regulatory guidance and proposals for reform.

These reforms and other pressures may cause LIBOR to be replaced with a new benchmark or to perform differently than in the past.

The consequences of these developments cannot be entirely predicted, but could include an increase in the cost of our variable rate indebtedness.

If we default on our obligations to pay our indebtedness, we could be in default under the terms of the agreements governing our indebtedness.

As of December 31, 2021, there were no borrowings under the ABL Facility.

If we default on our obligations to pay our indebtedness, or if we otherwise fail to comply with the various covenants in the instruments governing our indebtedness, we could be in default under the terms of the agreements governing our indebtedness.

If we are unable to generate sufficient cash flow and are otherwise unable to obtain funds necessary to meet required payments of principal, premium, if any, and interest on our indebtedness, or if we otherwise fail to comply with the various covenants, including financial and operating covenants, in the instruments governing our indebtedness, including covenants in the ABL Facility and the indentures governing our outstanding notes, we could be in default under the terms of the agreements governing such indebtedness.

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and we could be forced into bankruptcy or liquidation.

If our operating performance declines, we may in the future need to

obtain waivers from the required lenders under the ABL Facility to avoid being in default.

If our operating performance declines, we may in the future need to obtain waivers from the required lenders under the ABL Facility to avoid being in default.

If we breach our covenants under the ABL Facility and seek a waiver, we may not be able to obtain a waiver from the required lenders.

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Risks Related to the COVID-19 Pandemic

We expect the COVID-19 pandemic to continue to materially affect our financial performance, and such pandemic may otherwise have material adverse effects on our results of operations, financial condition, and/or our cash flows.

COVID-19 was first identified in Wuhan, China in December 2019, and has spread throughout the world, including across the United States.

In January 2020, the Secretary of HHS declared a national public health emergency due to the novel coronavirus.

In March 2020, the World Health Organization declared the COVID-19 outbreak a pandemic.

In an attempt to contain the spread and impact of COVID-19, authorities throughout the United States and the world have implemented measures 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.

This pandemic has resulted in a significant economic downturn in the United States and globally, and has also led to significant disruptions and volatility in capital and financial markets.

Moreover, while vaccines have been developed and have begun to be distributed in the United States, COVID-19 cases have significantly increased in the United States in recent months compared to earlier levels.

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

We have been working with federal, state and local health authorities to respond to COVID-19 cases in the communities we serve and have been taking or supporting measures to try to limit the spread of the virus, protect our employees and mitigate the burden on the healthcare system, including, at times, rescheduling or cancelling elective procedures at our hospitals and other healthcare facilities.

In addition, some states have been requiring hospitals to maintain a reserve of personal protective equipment and mandating COVID-19 screening for new patients and certain hospital staff.

Beginning in March 2020, we experienced a substantial reduction in the number of elective surgeries, physician office visits and emergency room volumes at our hospitals and other healthcare facilities due to restrictions on elective procedures, quarantines, stay-at-home and shelter-in-place orders, the promotion of social distancing, as well as general concerns related to the risk of contracting COVID-19 from interacting with the healthcare system.

While our patient volumes have recovered in comparison to patient volume levels experienced in March and April 2020 in the immediate aftermath of the pandemic, our patient volumes have not recovered to the pre-COVID-19 levels as the result of the factors noted above.

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

One or more of our hospitals could be subject to such conditions in the future if a major COVID-19 outbreak occurs in a geographic region where any of our hospitals are located.

In addition, some states have been limiting hospital volume by requiring a minimum percentage of vacant beds in case of a surge in COVID-19 patients.

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

As a provider of healthcare services, we have been and continue to be significantly affected by the public health and economic effects of the COVID-19 pandemic, which HHS first declared to be a public health emergency in January 2020.

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

We have been working with federal, state and local health authorities to respond to COVID-19 cases in the communities we serve, and our hospitals, medical clinics, medical personnel and employees have been actively caring for COVID-19 patients.

Although we have implemented considerable safety measures, treatment of COVID-19 has associated risks, which may include the manner in which patients, physicians, nurses and other medical personnel perceive and respond to such risks.

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

Moreover, during the pandemic, we believe that some individuals have elected to postpone medical care for an undetermined period of time in a manner that has adversely impacted our patient volumes in comparison to pre-pandemic levels.

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

In certain locations, government authorities and healthcare providers have re-imposed restrictions on elective medical procedures, have activated crisis standards of care, have deployed military medical personnel, and have taken other measures affecting treatment capacity and care in response to COVID-19 developments.

These measures could affect one or more of our hospitals or outpatient or other facilities.

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

We have incurred, and may continue to incur, certain increased expenses arising from the COVID-19 pandemic, including additional labor, supply chain, capital and other expenditures.

We have been implementing considerable safety measures at our hospitals and healthcare facilities, and we have instituted a work-from-home policy for certain of our corporate and administrative offices.

Nevertheless, exposure to COVID-19 patients has increased risks to our physicians, nurses and other medical staff, which may further reduce our operating capacity.

All of these developments could result in reduced employee morale, labor unrest, work stoppages or other workforce disruptions.

Broad economic factors resulting from the COVID-19 pandemic, including elevated unemployment and underemployment levels and reduced consumer spending and confidence, have also adversely affected, and may continue to adversely affect, our service mix, revenue mix, payor mix and/or patient volumes, as well as our ability to collect outstanding receivables.

Business closures and layoffs in the geographic areas in which we operate have led to increases in the uninsured and underinsured populations, which may continue to adversely affect demand for our services, as well as the ability of patients and other payors to pay for services rendered.

Moreover, we have observed deterioration in the collectability of patient accounts receivable for uninsured persons in comparison to pre-pandemic levels which, if sustained, may continue to adversely affect our financial results and require an increased level of working capital.

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

healthcare system, which have resulted in and may continue to result in direct or indirect restrictions with respect to our business.

We may also be subject to lawsuits from

patients, employees and others exposed to COVID-19 at our facilities.

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

Moreover, in recent months, the U.S.

economy has experienced general inflationary pressures and significant disruptions to global supply networks.

In this regard, we have experienced disruptions in connection with the provision of equipment, pharmaceuticals and medical supplies, including protective personal equipment, to us, as well as inflationary pressures in connection with labor, supply chain, capital and other expenditures.

While we have implemented cost containment and other measures to try to counteract these developments, we may be unable to fully offset these increases in our costs and otherwise effectively respond to supply disruptions.

To the extent we continue to experience increased expenses and supply chain disruptions, our operations may be adversely impacted.

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

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

On January 13, 2022, the U.S.

Supreme Court granted the U.S.

government’s request for a stay of lower court injunctions of the CMS regulation, finding that the CMS rule fell within the authority granted to the HHS Secretary by Congress with respect to imposing conditions on the receipt of Medicaid and Medicare funds.

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

Moreover, it is possible that the Occupational Safety and Health Administration will in the future adopt permanent safety standards requiring vaccines in certain employment-related settings after withdrawing an emergency temporary standard effective January 26, 2022 (following an earlier adverse ruling by the U.S.

Supreme Court) that would have required all employers with 100 or more employees to require their workforce to be fully vaccinated (or provide negative COVID-19 test results on a weekly basis).

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

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

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.

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.

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

healthcare system in connection with the pandemic.

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

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

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

Developments related to COVID-19 materially affected our financial performance during 2020.

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

Moreover, the COVID-19 pandemic may have material adverse effects on our results of operations, financial position, and/or our cash flows, particularly if negative economic and/or public health conditions in the United States continue to deteriorate or persist for a significant period of time.

The ultimate impact of the pandemic on our financial results will depend on, among other factors, the duration and severity of the pandemic and negative economic conditions arising from 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 and availability of effective medical treatments and vaccines, the timing and effectiveness of the ongoing rollout of currently available vaccines, the spread of potentially more contagious and/or virulent forms of the virus and the impact of government actions and administrative regulation on the hospital industry and broader economy, including through existing and any future stimulus efforts.

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

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

The ongoing impact of the pandemic on our financial results will depend on, among other factors, the duration and severity of the pandemic, the impact of the pandemic on economic conditions, the volume of canceled or rescheduled procedures at our facilities, the volume of COVID-19 patients cared for across our health systems, the timing, availability, and acceptance of effective medical treatments, the availability, acceptance of and need for vaccines (including additional dosages of vaccines), the spread of potentially more contagious and/or virulent forms of the virus , including any variants of the virus for which currently available vaccines, treatments, and tests may not be effective or authorized, the availability of and processing times for tests, and the impact of government actions on the hospital industry and broader economy, including through existing and any future stimulus efforts as well as vaccine and testing requirements.

COVID-19 developments continue to evolve quickly, and additional developments may occur which we are unable to predict.

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

Finally, the pandemic could heighten the level of risk in certain of the other risk factors described in this Form 10-K.

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

There can be no assurance as to the total amount and types of assistance we will recognize or receive or that we will be able to benefit from provisions intended to increase access to resources and ease regulatory burdens for healthcare providers.

The CARES Act is a $2 trillion economic stimulus package that was signed into law on March 27, 2020, in response to the COVID-19 pandemic.

The Paycheck Protection Program and Health Care Enhancement Act, or 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.

In total, the CARES Act, PPPHCE Act, and the CAA authorize $178 billion in funding to be distributed to hospitals and other healthcare providers through the PHSSEF.

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

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

In response to the COVID-19 pandemic , federal and state governments have passed legislation, promulgated regulations and taken other administrative actions intended to assist healthcare providers in providing care to COVID-19 and other patients during the public health emergency and to provide financial relief.

Together, the 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 CAA, and the American Rescue Plan Act of 2021, or the ARPA, authorize over $186 billion in funding to be distributed to eligible healthcare providers.

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

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

HHS has paid or allocated a portion of the total PHSSEF funding, but has not yet announced the precise method by which all future payments from the PHSSEF will be determined or allocated.

The CARES Act also makes other forms of financial assistance available to healthcare providers, including through Medicare and Medicaid payments adjustments and an expansion of the Medicare Accelerated and Advance Payment Program, which makes available accelerated payments of Medicare funds in order to increase cash flow to providers.

As noted above, we have received accelerated payments under this program.

However, effective October 8, 2020, CMS is no longer accepting new applications from Medicare Part A providers, such as hospitals, for accelerated payments and it has suspended the advance payment program for physicians and other Medicare Part B health care providers.

In addition to financial assistance, the CARES Act and related legislation include provisions intended to increase access to medical supplies and equipment and ease legal and regulatory burdens on healthcare providers.

For example, the CARES Act and related legislation suspend the Medicare sequestration payment adjustment from May 1, 2020 through March 31, 2021 (but extend sequestration through 2030), provide for a 20% add-on payment under the hospital inpatient prospective payment system for care provided to patients with COVID-19, expand access to and payment for telehealth services under Medicare, prioritize review of drug applications to help with shortages of emergency drugs, and delay Medicaid disproportionate share hospital reductions.

Due to the recent enactment of the CARES Act and other legislation, there is still a high degree of uncertainty surrounding the implementation of such legislation.

In this regard, PHSSEF payments to us are recognized as a reduction to operating costs and expenses only to the extent that we are reasonably assured that the underlying terms and conditions of such payments are met.

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

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

Further, we are subject to reporting and audit requirements for funds received and recognized.

Failure to comply with reporting requirements or adverse results of audits of amounts received and recognized may require us to return such amounts as may be determined by HHS.

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 HHS declaration will be extended.

The current declaration expires April 21, 2021.

The CARES Act also makes other forms of financial assistance available to healthcare providers, including through Medicare and Medicaid payments adjustments , including a 20% add-on payment for hospital inpatient care provided to patients with COVID-19 and delays of Medicaid DSH reductions.

It also expanded the Medicare Accelerated and Advance Payment Program, which makes available accelerated payments of Medicare funds in order to increase cash flow to providers.

CMS is no longer accepting applications from hospitals and other Medicare Part A providers for accelerated payments, and it has suspended the advance payment program for physicians and other Medicare Part B healthcare providers.

Providers are required to repay accelerated payments beginning one year after the payment was issued.

After such one-year period, Medicare payments owed to providers will be recouped according to the repayment terms.

We received accelerated payments under this program in April 2020, and by the end of 2021, all payments received by us had been recouped or repaid to CMS or assumed by buyers in connection with hospitals we have divested.

The CARES Act and related legislation suspended the Medicare sequestration payment adjustment from May 1, 2020 through March 31, 2022 , which would have otherwise reduced payments to Medicare providers by 2% as required by the Budget Control Act of 2011, but extended sequestration through 2030.

Congress reduced the sequestration adjustment to 1% from April 1 through June 30, 2022, and the adjustment will return to 2% on July 1, 2022.

For the first six months of fiscal year 2030, the adjustment will increase to 2.25%, and for the last six months of fiscal year 2030, the adjustment will increase to 3%.

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

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

However, Congress has delayed implementation of this payment reduction until 2023.

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

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

There is still a high degree of uncertainty surrounding the implementation of the CARES Act and subsequent legislation passed in response to the COVID-19 pandemic.

For example, PHSSEF payments to us are recognized as a reduction to operating costs and expenses only to the extent that we are reasonably assured that the underlying terms and conditions of such payments are met.

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

In June 2021, HHS issued guidance that set forth deadlines for using and reporting on the use of PHSSEF funds, depending on the dates on

which the funds were received.

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

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

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

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

Many states have ended their state-level emergency declarations, and it is unclear whether or for how long the HHS declaration will be extended.

The current HHS declaration expires April 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 the Secretary determines that the public health emergency no longer exists.

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

We are unable to assess the extent to which anticipated 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 other stimulus legislation or any future stimulus measures.

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

We are unable to assess the extent to which anticipated ongoing 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 other stimulus legislation or any future stimulus measures.

Further, there can be no assurance that the terms of provider relief funding or other programs will not change in ways that affect our funding or eligibility to participate.

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If we are unable to complete divestitures as we may deem advisable, our results of operations and financial condition could be adversely affected.

Since 2017, we implemented a portfolio rationalization and deleveraging strategy, by divesting hospitals and non-hospital businesses that are attractive to strategic and other buyers.

We completed this initiative at the end of 2020.

However, 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.

Generally, the businesses that we have been divesting are not in one of our strategically beneficial service areas, are less complementary to our business strategy and/or have lower operating margins.

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

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

We previously implemented a portfolio rationalization and deleveraging strategy by divesting hospitals and non-hospital businesses.

This program concluded at the end of 2020.

Since the conclusion of this program, we have continued 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 certain businesses, if we consider any such disposition to be in our best interests.

However, there is no assurance that potential divestitures will be completed or, if they are completed, the aggregate amount of proceeds we will receive, that potential divestitures will be completed within our targeted timeframe, or that potential divestitures will be completed on terms favorable to us.

Additionally, the results of operations for these hospitals and non-hospital businesses that we may divest and the potential gains or losses on the sales of those businesses may adversely affect our profitability.

Moreover, we may incur asset impairment charges related to potential or completed divestitures that reduce our profitability.

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The impact of past acquisitions, as well as potential future acquisitions, could have a negative effect on our operations.

Our business strategy has historically included growth by acquisitions.

However, not-for-profit hospital systems and other for-profit hospital companies generally attempt to acquire the same type of hospitals as we do.

Our business strategy has historically included growth by acquisitions, and we may complete additional acquisitions in the future.

However, not-for-profit hospital systems and other for-profit hospital companies generally attempt to acquire the same type of hospitals as we may desire to acquire.

Some of the competitors for our acquisitions have greater financial resources than we have.

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Therefore, we may not be able to acquire additional hospitals on terms favorable to us.

In addition, many of the hospitals we have acquired have had lower operating margins than we do and operating losses incurred prior to the time we acquired them.

In addition, many of the hospitals we have previously acquired have had lower operating margins than we do and operating losses incurred prior to the time we acquired them.

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

In the past, we have experienced delays in improving the operating margins or effectively integrating the operations of certain acquired hospitals, including some hospitals acquired in connection with the HMA merger.

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

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

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The healthcare industry is highly competitive among hospitals and other healthcare providers, such as urgent care centers and other outpatient providers and other industry participants, for patients, affiliations with physicians and acquisitions.

Changes in licensure or other regulations and industry consolidation could negatively impact our competitive position.

For example, in states with CON or similar prior approval requirements, removal of these requirements could remove barriers to entry and increase competition in our service areas.

Changes in licensure or other regulations, recognition of new provider types or payment models, and industry consolidation could negatively impact our competitive position.

For example, in states with certificate of need or similar prior approval requirements, removal of these requirements could remove barriers to entry and increase competition in our service areas.

Our hospitals, our competitors, and other healthcare industry participants are increasingly implementing physician alignment strategies, such as acquiring physician practice groups, employing physicians and participating in ACOs or other clinical integration models.

Increasing consolidation within the payor industry, vertical integration efforts involving payors and healthcare providers, and cost-reduction strategies by payors, large employer groups and their affiliates may impact our ability to contract with payors on favorable terms and otherwise affect our competitive position.

The majority of our hospitals are located in generally larger non-urban service areas where we believe we are the sole provider of general acute care health services.

As a result, the most significant competition from providers of general acute care services comes from hospitals outside of our primary service areas, typically hospitals in larger urban areas that provide more complex services.

The majority of our hospitals are located in generally larger non-urban service areas in which we believe we are the primary, if not the sole, provider of general acute care health services.

As a result, the most significant competition for providers of general acute care services are hospitals outside of our primary service areas, typically hospitals in larger urban areas that provide more complex services.

Patients in our primary service areas may travel to other hospitals because of physician referrals, payor networks that exclude our providers or the need for services we do not offer, among other reasons.

Patients who receive services from these other hospitals may subsequently shift their preferences to those hospitals for the services we provide.

Our other hospitals, in selected urban service areas, may face competition from hospitals that are more established than our hospitals.

Some of our competitors offer services, including extensive medical research and medical education programs, that are not offered by our facilities.

In addition, in certain markets where we operate, there are large teaching hospitals that provide highly specialized facilities, equipment and services that may not be available at our hospitals.

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

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

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

At December 31, 2021, 30 of our hospitals competed with more than one other non-affiliated hospital in their respective primary service areas.

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

Further, every hospital must establish and update annually a public, online listing of the hospital’s standard charges for items and services.

As of January 2021, hospitals are required to publish additional types of standard charges for all items and services, including discounted cash prices and payor-specific charges, along with a consumer-friendly list of charges for certain “shoppable” services.

Further, every hospital must establish and update annually a public, online listing of the hospital’s standard charges for all items and services, including discounted cash prices and payor-specific charges, and must also publish a consumer-friendly list of standard charges for certain “shoppable” services or, alternatively, maintain an online price estimator tool for the shoppable services.

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

The No Surprises Act creates additional price transparency requirements beginning January 1, 2022, including requiring providers to send health plans of insured patients and uninsured patients a good faith estimate of the expected charges and diagnostic codes prior to the scheduled date of the service or item.

It is unclear how price transparency requirements and similar initiatives will affect consumer behavior, our relationships with payors, or our ability to set and negotiate practices.

The No Surprises Act, which took effect January 1, 2022, creates additional price transparency requirements, including requiring providers to send health plans of insured patients and uninsured patients a good faith estimate of the expected charges and diagnostic codes prior to the scheduled date of the service or item.

HHS is deferring enforcement of certain requirements of the No Surprises Act applicable to providing estimates to insured individuals.

It is unclear how price transparency requirements and similar initiatives will affect consumer behavior, our relationships with payors, or our ability to set and negotiate prices.

We expect these competitive trends to continue.

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We have a participation agreement with HealthTrust, a GPO.

The current term of this agreement expires in January 2022, with automatic renewal terms of one year unless either party terminates by giving notice of non-renewal.

GPOs attempt to obtain favorable pricing on medical supplies with manufacturers and vendors, sometimes by negotiating exclusive supply arrangements in exchange for

The current term of this agreement extends through December 2022, with automatic renewal terms of one year unless either party terminates by giving notice of non-renewal.

GPOs attempt to obtain favorable pricing on medical supplies with manufacturers and vendors, sometimes by negotiating exclusive supply arrangements in exchange for discounts.

To the extent these exclusive supply arrangements are challenged or deemed unenforceable, we could incur higher costs for our medical supplies obtained through HealthTrust.

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

The COVID-19 pandemic is causing increased demand for personal protective equipment and other medical supplies, resulting in higher costs and supply shortages.

Higher costs could continue to adversely impact our operating results.

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

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

If reimbursement rates paid by federal or state healthcare programs or commercial payors are reduced, if we are unable to maintain favorable contract terms with payors or comply with our payor contract obligations, if insured individuals move to insurance plans with greater coverage exclusions or narrower networks, or if insurance coverage is otherwise restricted or reduced, our net operating revenues may decline.

In 2020, 37.3% of our net operating revenues, came from the Medicare and Medicaid programs.

During the year ended December 31, 2021, 34.9% of our net operating revenues came from the Medicare and Medicaid programs.

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

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

In January 2020, CMS announced a demonstration project allowing for a block grant funding model.

Some of these changes have decreased, or could decrease, the amount of money we receive for our services relating to these programs.

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

For example, effective January 1, 2022, t he No Surprises Act, will prohibit providers from charging patients an amount beyond the in-network cost sharing amount for services rendered by out-of-network providers, subject to limited exceptions .

For example, t he No Surprises Act, which took effect January 1, 2022, prohibits providers from charging patients an amount beyond the in-network cost sharing amount for services rendered by out-of-network providers, subject to limited exceptions .

For services for which balance billing is prohibited, the No Surprises Act establishes an independent dispute resolution, or IDR, process for providers and payors to handle payment disputes that cannot be resolved through direct negotiation.

On October 7, 2021, HHS, together with other government agencies, issued an interim final rule to implement the IDR provisions of the No Surprises Act.

The interim final rule provides that, when making a payment determination, the IDR entity must begin with the presumption that the payor’s median contracted rate for the same or similar service in an area (the qualifying payment amount, or QPA) is the appropriate out-of-network rate for the service at issue.

The IDR entity must select the offer closest to the QPA unless the provider or payor submits credible evidence that clearly demonstrates the QPA is materially different from the appropriate out-of-network rate.

However, the additional factors that may be considered by the IDR entity are secondary to the QPA.

The interim final rule is currently subject to several legal challenges, and it is difficult to predict the outcome of efforts to challenge or modify the rule.

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

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

Further, beginning in 2022, providers will be required to send an insured patient’s health plans a good faith estimate of expected charges and diagnostic codes prior to when the patient is scheduled to receive an item or service .

In 2020, 62.9% of our net operating revenues came from commercial payors.

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

HHS is deferring enforcement of this requirement until it issues additional regulations.

During the year ended December 31, 2021, 64.2 % of our net operating revenues came from commercial payors.

Our contracts with payors require us to comply with a number of terms related to the provision of services and billing for services.

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Also, we are increasingly involved in disputes with payors and experience payment denials, both prospectively and retroactively.

In addition, individuals have been increasingly enrolling in high-deductible health plans, which tend to have lower reimbursement rates for providers along with higher co-pays and deductibles due from the patient in comparison to traditional health plans.

These higher co-pays and deductibles due from patients are subject to increased collection cost and risk.

These high-deductible health plans, sometimes referred to as consumer-directed plans, may even exclude our hospitals and employed physicians from coverage.

If we experience growth in self-pay volume and revenues or if we experience continued deterioration in the collectability of patient responsibility accounts, our financial condition or results of operations could be adversely affected.

In addition, enrollment of individuals in high-deductible health plans, sometimes referred to as consumer-directed plans, has increased over the last decade.

In comparison to traditional health plans , these plans tend to have lower reimbursement rates for providers along with higher co-pays and deductibles due from the patient, which subjects us to increased collection cost and risk.

Further, high-deductible health plans may exclude our hospitals and employed physicians from coverage.

If we experience continued growth in self-pay volume and revenues or if we experience continued deterioration in the collectability of patient responsibility accounts, our financial condition or results of operations could be adversely affected.

Our primary collection risks relate to uninsured patients and outstanding patient balances for which the primary insurance payor has paid some but not all of the outstanding balance, with the remaining outstanding balance (generally deductibles and co-payments) owed by the patient.

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Significant changes in payor mix, business office operations, economic conditions or trends in federal and state governmental healthcare coverage may affect our collection of accounts receivable and are considered in our estimates of accounts receivable collectability.

Moreover, as noted above, we have observed deterioration in the collectability of patient accounts receivable for uninsured patients in comparison to pre-pandemic levels as the result of adverse economic conditions arising from the COVID-19 pandemic, which deterioration, if sustained, may continue to adversely affect our financial results and require an increased level of working capital.

Efforts to repeal or revise the Affordable Care Act have cast considerable uncertainty on the future of the law and its effects on the size of the uninsured population.

For example, effective January 1, 2019, Congress eliminated the financial penalty associated with the Affordable Care Act’s mandate that individuals enroll in an insurance plan.

In December 2018, as a result of this change, a federal judge in Texas found the individual mandate unconstitutional and determined that the rest of the Affordable Care Act was therefore

In December 2019, the Fifth Circuit Court of Appeals upheld this decision with respect to the individual mandate, but remanded for further consideration of how this affects the rest of the law.

On November 10, 2020, the Supreme Court heard oral argument s , and it remains unclear how or when the Supreme Court will rule.

Pending the appeals process, the law remains in place.

In addition, the Medicaid program continues to evolve, both as a result of the Affordable Care Act and subsequent legislation and agency initiatives.

Changes include the number and identity of states that choose to expand or otherwise modify Medicaid programs and the terms of expansion and other program modifications.

Some of these program changes, such as requirements that Medicaid recipients meet certain work requirements, have reduced and may continue to reduce the number of program participants in certain states, although President Biden has issued executive orders directing agencies to re-examine measures that reduce coverage or undermine Medicaid programs, including work requirements.

Moreover, we have observed deterioration in the collectability of patient accounts receivable for uninsured patients in comparison to pre-pandemic levels as the result of adverse economic conditions arising from the COVID-19 pandemic, which deterioration, if sustained, may continue to adversely affect our financial results and require an increased level of working capital.

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

The number and identity of states that choose to expand or otherwise modify Medicaid programs and the terms of expansion and other program modifications continue to evolve.

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

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

Other states have explored or offer public health insurance options.

These variables, among others, make it difficult to predict the number of uninsured individuals and what percentage of our total revenue will be comprised of self-pay revenues.

We may be adversely affected by the growth in patient responsibility accounts as a result of increases in the adoption of plan structures, including health savings accounts, narrow networks and tiered networks, which shift greater responsibility for care to individuals through greater exclusions and copayment and deductible amounts.

We may be adversely affected by the growth in patient responsibility accounts as a result of the adoption of plan structures, including health savings accounts, narrow networks and tiered networks, that shift greater responsibility for care to individuals through greater exclusions and copayment and deductible amounts.

Further, our ability to collect patient responsibility accounts may be limited by statutory, regulatory and investigatory initiatives, including private lawsuits directed at hospital charges and collection practices for uninsured and underinsured patients and regulatory restrictions on charges for out-of-network services.

In addition, a further deterioration of economic conditions in the United States could potentially lead to higher levels of uninsured patients, result in higher levels of patients covered by lower paying government programs, result in fiscal uncertainties at both government payors and private insurers and/or limit the economic ability of patients to make payments for which they are responsible.

For example, the No Surprises Act, which took effect January 1, 2022, requires providers to send uninsured and self-pay patients a good faith estimate of expected charges for items and services.

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

If the patient receives a bill that is substantially greater than the expected charges in the good faith estimate, they may initiate a dispute resolution process established by HHS.

In addition, a deterioration of economic conditions in the United States could potentially lead to higher levels of uninsured patients, result in higher levels of patients covered by lower paying government programs, result in fiscal uncertainties at both government payors and private insurers and/or limit the economic ability of patients to make payments for which they are responsible.

If we experience growth in self-pay volume or continued deterioration in collectability of patient responsibility accounts, our financial condition or results of operations could be adversely affected.

Some of the non-urban communities in which we operate continue to face challenging economic conditions, and the failure of certain employers, or the closure of certain manufacturing and other facilities in our markets, could have a disproportionate impact on our hospitals.

In addition to the impacts arising from the general economic downturn in the United States in 2020 arising from the COVID-19 pandemic as noted above, some of the non-urban communities in which we operate have been facing challenging economic conditions which predate the pandemic, including higher levels of unemployment than other regions of the United States.

Some of the non-urban communities in which we operate face challenging economic conditions, and the failure of certain employers, or the closure of certain manufacturing and other facilities in our markets, could have a disproportionate impact on our hospitals.

Some of the non-urban communities in which we operate have been facing challenging economic conditions which predate, and extend beyond the macroeconomic challenges arising from, the COVID-19 pandemic.

In addition, the economies in the non-urban communities in which our hospitals primarily operate are often dependent on a small number of large employers, especially manufacturing or similar facilities.

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The failure of one or more large employers, or the closure or substantial reduction in the number of individuals employed at manufacturing or other facilities located in or near many of the non-urban communities in which our hospitals primarily operate, could cause affected employees to move elsewhere for employment or lose insurance coverage that was otherwise available to them.

When patients are experiencing personal financial difficulties or have concerns about general economic conditions, they may:

• delay or forgo elective procedures;

purchase a high-deductible insurance plan or no insurance at all, which increases a hospital’s dependence on self-pay revenue;

• choose to seek care in emergency rooms.

The occurrence of these events may cause a reduction in our revenues and adversely impact our results of operations.

When patients are experiencing personal financial difficulties or have concerns about general economic conditions, they may delay or forgo elective procedures, choose to seek care in emergency rooms and purchase high-deductible insurance plans or no insurance at all, which increases a hospital’s dependence on self-pay revenue and may adversely affect our results of operations.

The demand for services provided by our hospitals and affiliated providers can be impacted by factors beyond our control.

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For example, seasonal fluctuations in the severity of influenza and other critical illnesses, such as COVID-19, unplanned shutdowns or unavailability of our facilities due to weather or other unforeseen events, decreases in trends in high acuity service offerings, changes in competition from other service providers, turnover in physicians affiliated with our hospitals, or changes in medical technology can have an impact on the demand for services at our hospitals and affiliated providers.

In addition, certain of our facilities are located in hurricane-prone coastal regions in Florida and other states, and our operations may be adversely impacted by hurricanes, tornadoes, winter storms, and other severe weather conditions, which adverse weather conditions may be more frequent and/or severe as the result of climate change.

Moreover, we could be affected by climate change and other environmental issues to the extent such issues adversely affect the general economy, adversely impact our supply chain or increase the costs of supplies needed for our operations, or otherwise result in disruptions impacting the communities in which our facilities are located.

The impact of these or other factors beyond our control could have an adverse effect on our business, financial position and results of operations.

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

In addition to the adverse impacts of the COVID-19 pandemic discussed above, if another pandemic, epidemic, or outbreak of an infectious disease or other public health crisis were to affect our markets, our business could be adversely affected.

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

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

Any such crisis could diminish the public trust in healthcare facilities, especially hospitals that fail to accurately or timely diagnose, or that are treating (or have treated) patients affected by contagious diseases.

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

Although we have disaster plans in place and operate pursuant to infectious disease protocols, the potential impact, as well as the public’s and government’s response to, of any such pandemic, epidemic or outbreak of an infectious disease with respect to our markets or our facilities is difficult to predict and could adversely impact our business.

Although we have disaster plans in place and operate pursuant to infectious disease protocols, the potential impact, as well as the public’s and government’s response to, of any such future pandemic, epidemic or outbreak of an infectious disease with respect to our markets or our facilities is difficult to predict and could adversely impact our business.

Our performance depends on our ability to recruit and retain quality physicians.

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Such physicians may terminate their affiliation with or employment by our healthcare facilities at any time.

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

Moreover, if we are unable to provide adequate support personnel or technologically advanced equipment and facilities that meet the needs of those physicians and their patients, they may be discouraged from referring patients to our facilities, admissions may decrease and our operating performance may decline.

Our labor costs could be adversely affected by competition for staffing, the shortage of experienced nurses and labor union activity.

In addition to our physicians, the operations of our healthcare facilities are dependent on the efforts, abilities and experience of our facility management and medical support personnel, such as nurses, pharmacists and lab technicians.

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

In some markets, the availability of nurses and other medical support personnel has been a significant operating issue to healthcare providers.

We may be required to continue to enhance wages and benefits to recruit and retain nurses and other medical support personnel or to hire more expensive temporary or contract personnel.

Moreover, we expect to face increased competition from health insurers and private equity-back companies seeking to acquire or affiliate with physicians or physician practices.

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

In some markets,

physician recruitment and retention may be affected by a shortage of physicians in certain specialties or the difficulties physicians may experience in obtaining malpractice insurance.

The types, amount and duration of compensation and assistance we can provide when recruiting physicians are limited by the federal Physician Self-Referral Law (commonly known as the Stark Law ) , the federal Anti-Kickb ack Statute , similar state laws and implementing regulations.

If we are unable to provide adequate support personnel or technologically advanced equipment and facilities that meet the needs of those physicians and their patients, our ability to recruit and retain quality physicians may be negatively impacted .

Our performance and labor costs have been, and may continue to be, adversely affected by competitive labor market conditions and the shortage of qualified nurses.

The operations of our healthcare facilities are dependent on the efforts, abilities and experience of our facility management, healthcare professionals, such as nurses, pharmacists, lab technicians, and medical support personnel.

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

The healthcare industry has been experiencing an extremely competitive labor market arising out of current economic conditions and the COVID-19 pandemic.

In some markets in which we operate, the availability of nurses, other healthcare professionals and medical support personnel has been a significant operating issue for healthcare providers, which has been exacerbated by the current competitive labor market.

These developments have compelled, and may continue to compel , us to enhance wages and benefits to recruit and retain nurses, other healthcare professions and medical support personnel, or to hire more expensive temporary or contract personnel.

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

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

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

Moreover, a newly instituted freeze and review of certain labor regulations, proposed changes to federal labor laws, and other labor-related developments arising from the recent change in presidential administration in the United States could increase the likelihood of employee unionization activity and the ability of employees to unionize.

Increased or ongoing labor union activity could also adversely affect our labor costs or otherwise adversely impact us.

At December 31, 2021, certain employees at six of our hospitals were represented by various labor unions.

While we have not experienced work stoppages to date that have material and adversely affected our business or results of operations, increased or ongoing labor union activity could adversely affect our labor costs or otherwise adversely impact us.

In addition, when negotiating collective bargaining agreements with unions, whether such agreements are renewals or first contracts, there is the possibility that strikes could occur during the negotiation process, and our continued operation during any strikes could increase our labor costs and otherwise adversely impact us.

Finally, potential changes to federal labor laws and regulations, including those supported by the current presidential administration, could increase the likelihood of employee unionization activity and the ability of employees to unionize.

If our labor costs continue to increase, we may not be able to raise rates to offset these increased costs.

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In the event we are not entirely effective at recruiting and retaining qualified facility management, nurses and other medical support personnel, or in controlling labor costs, this could have an adverse effect on our results of operations.

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

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

There is a trend toward value-based purchasing of healthcare services across the healthcare industry among both government and commercial payors.

Generally, value-based purchasing initiatives tie payment to the quality and efficiency of care.

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

The 25% of hospitals with the worst national risk-adjusted HAC rates for all hospitals in the previous year receive a 1% reduction in their total Medicare payments.

Medicare does not reimburse for care related to HACs.

In addition, federal funds may not be used under the Medicaid

program to reimburse providers for services provided to treat HACs.

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

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

In addition, federal funds may not be used under the Medicaid program to reimburse providers for services provided to treat HACs.

Hospitals that experience excess readmissions for designated conditions receive reduced payments for all inpatient discharges.

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Providers may receive supplemental Medicare payments or owe repayments to CMS depending on whether spending exceeds or falls below a specified spending target and whether certain quality standards are met.

Currently, participation in Medicare bundled payment programs is voluntary, except for some mandatory programs in selected markets.

CMS has required hospitals located in certain geographic areas to participate in a bundled payment program for specified orthopedic procedures, which is scheduled to run through September 30, 2021.

CMS is requiring certain hospitals to participate in new mandatory bundled payment initiatives for end-stage renal disease treatment, which began January 1, 2021, and radiation oncology, beginning as early as January 1, 2022.

CMS has indicated that it is developing more voluntary and mandatory bundled payment models.

Several of the nation’s largest commercial payors have also expressed an intent to increase reliance on value-based reimbursement arrangements.

Further, many large commercial payors require hospitals to report quality data, and several commercial payors do not reimburse hospitals for certain preventable adverse events.

Generally, participation in Medicare bundled payment programs is voluntary, but CMS currently requires hospitals in selected markets to participate in bundled payment initiatives for specific

orthopedic procedures and end-stage renal disease treatment, and a mandatory radiation oncology bundled payment model is expected to begin January 1, 2023.

In October 2021, the CMS Innovation Center released an outline of its strategy for the next decade, noting the need to accelerate the movement to value-based care and drive broader system transformation.

By 2030, the CMS Innovation Center aims to have all fee-for-service Medicare beneficiaries and the vast majority of Medicaid beneficiaries in an accountable care relationship with providers who are responsible for quality and total medical costs.

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

There are also several state-driven value-based care initiatives.

For example, some states have aligned quality metrics across payors through legislation or regulation.

Commercial payors are transitioning toward value-based reimbursement arrangements as well.

Further, many commercial payors require hospitals to report quality data and restrict reimbursement for certain preventable adverse events.

We expect value-based purchasing programs, including programs that condition reimbursement on patient outcome measures, to become more common and to involve a higher percentage of reimbursement amounts.

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Our revenues are somewhat concentrated in a small number of states which will make us particularly sensitive to regulatory and economic changes in those states.

Our revenues are particularly sensitive to regulatory and economic changes in states in which we generate a significant portion of our revenues, including Indiana, Florida and Texas.

Our revenues are particularly sensitive to regulatory and economic changes in states in which we generate a significant portion of our revenues, including Indiana, Florida, Texas and Alabama.

Accordingly, any change in the current demographic, economic, competitive, or regulatory conditions in these states could have an adverse effect on our business, financial condition, or results of operations.

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

The Texas Healthcare Transformation and Quality Improvement Program, or the Texas Waiver Program, which provides funding for uncompensated care and delivery system reform initiatives, is operated under a waiver granted pursuant to Section 1115 of the Social Security Act.

In December 2017, CMS approved an extension of this waiver through September 30, 2022.

In accordance with this extension, Texas has submitted a plan to CMS for approval that outlines the state’s transition away from funding for its Delivery System Reform Incentive payment program, which currently provides support to hospitals and other providers to reform healthcare delivery systems.

We cannot guarantee that revenues recognized from the program will not decrease or predict whether the Texas Waiver Program will be further extended or changed.

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

The current waiver continues through September 30, 2022.

Although the previous presidential administration approved a 10-year extension of the Texas Waiver Program, through September 2030, CMS rescinded this extension in April 2021.

The Texas Attorney General filed a lawsuit challenging the rescission and, in August 2021, a federal district judge granted a preliminary injunction temporarily reinstating the extension.

While the lawsuit is pending, the Texas Health and Human Services Commission has re-submitted its application to extend the waiver program.

It is difficult to predict whether all or part of the Texas Waiver Program will be eliminated, further extended or changed, any of which could negatively impact our revenues.

Risks Related to Legal Proceedings

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In that case, or if payments of claims exceed our estimates or are not covered by our insurance, it could have an adverse effect on our business, financial condition or results of operations.

We could be subject to increased monetary penalties and/or other sanctions, including exclusion from federal healthcare programs, if we fail to comply with the terms of our CIA.

In connection with the final auditing and reporting requirements to which we are subject under the terms of the CIA, we could become subject to further action by the OIG, which could include the imposition of civil monetary penalties and/or the extension of the term of the CIA.

On August 4, 2014, we announced that we had entered into a civil settlement with the U.S.

In addition to the amounts paid in the settlement, we executed the CIA with the OIG that has been incorporated into our existing and comprehensive compliance program.

On September 25, 2018, the CIA was amended and extended in connection with the settlement of certain qui tam lawsuits related to certain conduct of HMA and its affiliated entities that were initiated and pending, and known to us, before HMA was acquired by merger in January 2014.

See our discussion of these matters under the section “Business of Community Health Systems, Inc.” in Part I, Item 1 of this Form 10-K and “Legal Proceedings” in Part II, Item 1 of our Quarterly Reports on Form 10-Q for the quarterly periods ended September 30, 2014 and September 30, 2018 for further discussion of the background of these matters and details of the settlements.

In addition, we are subject to possible civil penalties for failure to substantially comply with the terms of the CIA, including stipulated penalties ranging between $1,000 to $2,500 per day.

We are also subject to a stipulated penalty of $50,000 for each false certification made by us or on our behalf, pursuant to the reporting provisions of the CIA.

The CIA increases the amount of information we must provide to the federal government regarding our healthcare practices and our compliance with federal regulations.

The reports we provide in connection with the CIA could result in greater scrutiny by regulatory authorities.

In addition to the amounts paid in the settlement, we executed the CIA with the OIG that has been incorporated into our existing and comprehensive compliance program, which CIA was subsequently amended in September 2018.

Although the CIA expired in September 2021, 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 OIG, which could include the imposition of civil monetary penalties and/or the extension of the term of the CIA.

Risks Related to Government Regulation

We are unable to predict the ultimate impact of health reform initiatives, including the Affordable Care Act, and our business may be adversely affected if the Affordable Care Act is repealed entirely or found to be unconstitutional or if provisions benefitting our operations are significantly modified.

We are unable to predict the ultimate impact of health reform initiatives, including efforts to significantly change the Affordable Care Act, or the effect that health reform efforts may have on our business.

In recent years, the U.S.

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The Affordable Care Act is the most prominent of these reform efforts.

The law expands health insurance coverage through a combination of public program expansion and private sector health insurance reforms, mandates that substantially all U.S.

citizens maintain health insurance coverage, reduces Medicare reimbursement to hospitals, and promotes value-based purchasing.

Court challenges and efforts by the previous presidential administration and certain members of Congress to repeal or make significant changes to the Affordable Care Act, its implementation and/or its interpretation have cast considerable uncertainty on the future of the law.

For example, in June 2018, the Department of Labor issued a final rule expanding availability of association health plans, which are not required to adhere to specific Affordable Care Act coverage mandates.

It remains unclear what executive and regulatory actions the Biden administration will implement and propose with respect to the Affordable Care Act and how such actions will impact our business.

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

In December 2018, as a result of this change, a federal judge in Texas found the individual mandate unconstitutional and determined the rest of the Affordable Care Act was therefore invalid.

In December 2019, the Fifth Circuit Court of Appeals upheld this decision with respect to the individual mandate, but remanded for further consideration of how this affects the rest of the law.

On January 29, 2020, the Fifth Circuit denied a rehearing en banc.

On March 2, 2020, the Supreme Court announced that it would consolidate two cases on the constitutionality of the Affordable Care Act.

On November 10, 2020, the Supreme Court heard oral arguments, and it remains unclear how or when the Supreme Court will rule.

The law remains in place pending the appeals process.

The effective elimination of the individual mandate and other changes may impact the number of individuals that elect to obtain public or private health insurance or the scope of such coverage, if purchased.

There is uncertainty regarding whether, when, and how the Affordable Care Act will be further changed, the ultimate outcome of court challenges and how the Affordable Care Act will be interpreted and implemented.

Court challenges and changes by Congress or government agencies could eliminate or alter provisions beneficial to us while leaving in place provisions reducing our reimbursement.

The repeal or invalidation of or changes to the Affordable Care Act may have an adverse effect on our business, results of operations, cash flow, capital resources and/or liquidity.

There is also uncertainty regarding whether other health reform measures will be adopted, what alternative provisions, if any, will be enacted, the timing and implementation of alternative provisions, and the impact of alternative provisions on providers as well as other healthcare industry participants.

For example, CMS administrators have indicated that they intend to grant states additional flexibility in the administration of state Medicaid programs, including expanding the scope of waivers under which states may impose different eligibility or enrollment restrictions or otherwise implementing programs that vary from federal standards.

CMS administrators have also signaled interest in changing Medicaid payment models, including allowing states to obtain funding through a block grant program and adopting value-based care models.

The law expanded health insurance coverage through a combination of public program expansion and private sector health insurance reforms, reduces growth in Medicare reimbursement to hospitals, and promotes value-based purchasing.

However, the Affordable Care Act has been the subject of efforts by the previous presidential administration and certain members of Congress to repeal or make significant changes to its scope, its implementation and/or its interpretation.

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

This change resulted in legal challenges to the constitutionality of the individual mandate and validity of the Affordable Care Act as a whole.

However, in June 2021, the U.S.

Supreme Court determined that the plaintiffs lacked standing and dismissed the challenge to the Affordable Care Act without specifically ruling on the constitutionality of the Affordable Care Act, allowing the law to remain in place.

There is uncertainty regarding whether, when, and how the Affordable Care Act will be further changed and how the Affordable Care Act will be interpreted and implemented, although the Biden administration has generally indicated its intent to protect and strengthen the Affordable Care Act and Medicaid programs.

Changes by Congress or government agencies to the interpretation or implementation of the Affordable Care Act could eliminate or alter provisions beneficial to us while leaving in place provisions reducing our reimbursement, and thereby have an adverse effect on our business.

There is also uncertainty regarding whether, when, and what other health reform measures will be adopted, the timing and implementation of alternative provisions, and the impact of alternative provisions on providers as well as other healthcare industry participants.

For example, some members of Congress have proposed measures that would expand government-funded coverage, and some states are considering or have implemented public health insurance options.

CMS administrators may grant states various

flexibilities in the administration of state Medicaid programs and make changes to Medicaid payment models, including adopting value-based care models.

Other health reform initiatives and proposals , such as the limitations and prohibitions on surprise billing enacted under the No Surprises Act and price transparency requirements, may impact prices, our competitive position and our relationships with patients, insurers, and ancillary providers (such as anesthesiologists, radiologists, and pathologists ).

Further, the potential impact on health reform effects from the outcome of the 2020 federal election is unknown, although President Biden has indicated through executive orders that his administration intends to protect and strengthen the Affordable Care Act and Medicaid programs.

M embers of Congress have proposed measures that would expand government-sponsored coverage, including single-payor proposals, and some states are considering similar measures.

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

We are unable to predict the nature and success of such initiatives, but they may have an adverse impact on our business.

We are unable to predict the nature and success of such initiatives.

Healthcare reform initiatives, including changes to the Affordable Care Act, may have an adverse impact on our business.

If we fail to comply with extensive laws and government regulations, including fraud and abuse laws, we could suffer penalties or be required to make significant changes to our operations.

The healthcare industry is governed by laws and regulations at the federal, state and local government levels.

These laws and regulations include standards addressing, among other issues, the adequacy of medical care, equipment, personnel, operating policies and procedures;

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

the necessity and adequacy of medical care;

quality of medical equipment and services;

qualifications of medical and support personnel;

operating policies and procedures;

screening, stabilization and transfer of individuals who have emergency medical conditions;

billing and coding for services;

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rate-setting;

compliance with building codes;

building codes;

environmental protection;

privacy and security;

interoperability and refraining from

information blocking;

interoperability and refraining from information blocking;

debt collection;

limits or prohibitions on balance billing and billing for out-of-network services;

and communications with patients and consumers.

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

If we fail to comply with applicable laws and regulations we could suffer civil sanctions and criminal penalties, including the loss of our operating licenses and our ability to participate in the Medicare, Medicaid and other federal and state healthcare programs.

In addition, there are heightened coordinated civil and criminal enforcement efforts by both federal and state government agencies relating to the healthcare industry, including the hospital segment.

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

There are heightened coordinated civil and criminal enforcement efforts by both federal and state government agencies relating to the healthcare industry, including the hospital segment.

Enforcement actions have focused on financial arrangements between hospitals and physicians, billing for services without adequately documenting medical necessity and billing for services outside the coverage guidelines for such services.

Specific to our hospitals, we have received inquiries and subpoenas from various governmental agencies regarding these and other matters, and we are also subject to various claims and lawsuits relating to such matters.

For a further discussion of these matters, see “Legal Proceedings” in Part I, Item 3 of this Form 10-K.

In the future, evolving interpretations or enforcement of these laws and regulations could subject our current practices to allegations of impropriety or illegality or could require us to make changes in our facilities, equipment, personnel, services, capital expenditure programs and operating expenses.

Moreover, HIPAA, as amended by the Health Information Technology for Economic and Clinical Health Act, or HITECH, and implementing regulations establish national privacy and security standards for the protection of PHI by health plans, healthcare clearinghouses and certain healthcare providers, referred to as covered entities, and the business associates with whom such covered entities contract for services.

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

HIPAA also requires covered entities to use standard transaction code sets and standard identifiers when submitting or receiving certain electronic healthcare transactions, including activities associated with the billing and collection of healthcare claims.

Violations of HIPAA may result in significant civil and criminal penalties.

A single breach incident can result in violations of multiple standards.

HIPAA also authorizes state attorneys general to file suit on behalf of their residents.

Courts may award damages, costs and attorneys’ fees related to violations of HIPAA in such cases.

Although HIPAA does not create a private right of action allowing individuals to sue in civil court for violations, the laws and regulations have been used as the basis for duty of care in state civil suits such as those for negligence or recklessness in the misuse or breach of PHI.

In addition, HIPAA requires the Secretary of HHS to conduct periodic compliance audits of covered entities or business associates.

From time to time, we must respond to investigations by OCR with respect to alleged HIPAA violations.

We believe our potential liability with respect to such investigations currently pending is not material to our financial position.

HIPAA requires covered entities to notify individuals of any unauthorized acquisition, access, use, or disclosure of their unsecured PHI that compromises the privacy or security of such information, with certain exceptions related to unintentional or inadvertent use or disclosure by employees or authorized individuals.

Such notifications must be made without unreasonable delay not to exceed 60 calendar days after discovery of the breach.

If a breach affects 500 patients or more, it must be reported to HHS without unreasonable delay, and HHS will post the name of the breaching entity on its public web site.

Breaches affecting more than 500 patients in the same state or jurisdiction must also be reported to the media.

If a breach involves fewer than 500 people, the covered entity must record it in a log and notify HHS at least annually.

Many states in which we operate also have state laws that protect the privacy and security of PHI and other personal information and regulate the collection, use, retention, disclosure, transfer and other processing as well.

These laws may be similar to or even more protective than HIPAA, including requiring breach notifications to be provided within shorter time frames.

Where state laws are more protective than HIPAA, we have to comply with their stricter provisions.

Not only may some of these state laws impose fines and penalties upon violators, but some may afford private rights of action to individuals who believe their personal information has been misused.

The interplay of federal and state laws may be subject to varying interpretations by courts and government agencies, creating complex compliance issues for us and potentially exposing us to additional expense, adverse publicity and liability.

We may not remain in compliance with diverse privacy and security requirements in all of the jurisdictions in which we do business, particularly to the extent they are inconsistent, rapidly changing and/or ambiguous and uncertain as to their applicability to our business practices.

In addition to HIPAA, the Federal Trade Act, state consumer protection laws, and privacy laws regulating the collection, use, retention, disclosure, transfer and processing of consumer information, our marketing and patient engagement activities are also subject to communications privacy laws such as the Telephone Consumer Protection Act, or the TCPA.

In addition, commercial email messages we send (or that vendors send on our behalf) are regulated under the Controlling the Assault of Non-Solicited Pornography and Marketing Act, or CAN-SPAM.

While we strive to adhere to strict policies and procedures that comply with the TCPA and, CAN-SPAM, the Federal Communications Commission, as the agency that implements and enforces the TCPA, and the Federal Trade Commission, which enforces CAN-SPAM, may disagree with our interpretation of these laws, TCPA and subject us to penalties and other consequences for noncompliance.

Determination by a court or regulatory agency that our calling, texting or email practices violate the TCPA or CAN-SPAM could subject us to civil penalties and could require us to change some portions of our business.

Even an unsuccessful challenge by patients or regulatory authorities of our activities could result in adverse publicity and could require a costly response from and defense by us.

If we fail to comply with these or other applicable laws and regulations, which are subject to change, we could be subject to liabilities, including civil penalties, money damages, the loss of our licenses to operate one or more facilities, exclusion of one or more facilities from participation in the Medicare, Medicaid and other federal and state health care programs, civil lawsuits and criminal penalties.

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

If we fail to comply with applicable laws and regulations, which are subject to change, we could be subject to liabilities, including civil penalties, money damages, the loss of our licenses to operate one or more facilities, exclusion of one or more facilities from participation in the Medicare, Medicaid and other federal and state healthcare programs, civil lawsuits and criminal penalties.

The costs of compliance with, and the other burdens imposed by, these and other laws or regulatory actions may increase our operational costs, result in interruptions or delays in the availability of systems and/or result in a patient volume decline.

We may also face audits or investigations by one or more domestic or foreign government agencies relating to our compliance with these regulations.

We may also face audits or investigations by government agencies relating to our compliance with these regulations.

An adverse outcome under any such investigation or audit could result in liability, result in adverse publicity, and adversely affect our business.

In the future, evolving interpretations or enforcement of applicable laws or regulations could subject our current practices to allegations of impropriety or illegality or could require us to make changes in our facilities or operations.

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

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

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

Security breaches, loss of data, and actual or perceived failures to comply with legal requirements regarding the privacy and security of health information or other regulated, sensitive or confidential information, or legal requirements regarding data privacy or data protection, and other cybersecurity incidents, could adversely affect our business, results of operations and financial condition.

The data protection landscape is rapidly evolving, and we are or may become subject to numerous state and federal laws, requirements and regulations governing the collection, use, storage, processing, disclosure, retention, privacy and security of health-related and other regulated, sensitive or confidential information.

For example, the Health Insurance Portability and Accountability

Act of 1996, the Health Information Technology for Economic and Clinical Health Act of 2009, each as amended, and the privacy and security regulations that implement these laws (collectively, “HIPAA”), establish national privacy and security standards for the protection of protected health information, or PHI , by health plans, healthcare clearinghouses and certain healthcare providers, referred to as covered entities, and the business associates with whom such covered entities contract for services.

Covered entities must notify affected individuals without unreasonable delay of breaches of unsecured PHI, the HHS Office for Civil Rights, or OCR , which enforces HIPAA, and, in the case of larger breaches, the media.

Failure to comply with the HIPA A privacy and security standards can result in civil monetary penalties , resolution agreements, monitoring agreements, and, in certain circumstances, criminal penalties including fines and/or imprisonment.

A covered entity may be subject to penalties as a result of a bus iness associate violating HIPAA .

In addition, state attorneys general may enforce the HIPAA privacy and security regulations in response to violations that threaten the privacy of state residents .

There are numerous other laws and legislative and regulatory initiatives at the federal and state levels governing the confidentiality, privacy, availability, integrity and security of PHI and other types of personal information.

Certain state laws may be more stringent, broader in scope or offer greater individual rights with respect to PHI than HIPAA, state laws may differ from each other, and the interplay of federal and state laws may be subject to varying interpretations by courts and government agencies, all of which may complicate compliance efforts.

Where state laws are more protective than HIPAA, we have to comply with their stricter provisions.

Not only do some of these state laws impose fines and other penalties upon violators, but some may afford private rights of action to individuals who believe their personal information has been misused.

In addition, we are subject to more general consumer protection laws and regulations in connection with our business activities.

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

Our marketing and patient engagement activities are subject to communications laws such as the Telephone Consumer Protection Act, or the TCPA, and the Controlling the Assault of Non-Solicited Pornography and Marketing Act, or CAN-SPAM.

Even an unsuccessful challenge by patients or regulatory authorities of our activities could result in adverse publicity and could require a costly response from and defense by us.

Although we strive to comply with applicable laws and regulations, the requirements related to the collection, use, storage, processing, disclosure, retention, privacy and security of health and other regulated, sensitive or confidential information are evolving rapidly and may be interpreted or applied in an inconsistent manner across jurisdictions.

The cost of compliance with these laws and regulations is high and is likely to increase in the future.

Any failure or perceived failure by us to comply with applicable data privacy and security laws or regulations, our internal policies and procedures or our contracts governing our processing of health and other regulated, sensitive or confidential information, or to otherwise adequately address privacy and security concerns, could result in negative publicity, government investigations and enforcement actions, claims by third parties and damage to our reputation, any of which could have a material adverse effect on our operations, financial performance and business.

If our adoption and utilization of electronic health record systems fails to satisfy HHS standards, our consolidated results of operations could be adversely affected, and we may be adversely affected by changing and more burdensome interoperability requirements.

Under HITECH and other laws, eligible hospitals that fail to demonstrate meaningful use of certified EHR technology and have not applied and qualified for a hardship exception are subject to reduced reimbursement from Medicare.

Under the Health Information Technology for Economic and Clinical Health Act, or HITECH, and other laws, eligible hospitals that fail to demonstrate meaningful use of certified EHR technology and have not applied and qualified for a hardship exception are subject to reduced reimbursement from Medicare.

Eligible healthcare professionals are also subject to positive or negative payment adjustments based, in part, on their use of EHR technology.

Thus, if our hospitals and employed professionals are unable to properly adopt, maintain, and utilize certified EHR systems, we could be subject to penalties and lawsuits that may have an adverse effect on our consolidated financial position and consolidated results of operations.

The federal government is also promoting the efficient exchange of health care information to improve health care.

The 21 st Century Cures Act and implementing regulations prohibit information blocking by health care providers and certain other entities, which is defined as engaging in activities that are likely to interfere with the access, exchange or use of electronic health information, subject to limited exceptions.

Initiatives related to health care technology and interoperability may require changes to our operations, impose new and complex obligations on us, affect our relationships with providers, vendors and other third parties and require investments in infrastructure.

As EH R technologies have become widespread, the federal government is also promoting interoperability and increasing patient access to electronic health information.

The 21st Century Cures Act and implementing regulations prohibit information blocking by health care providers and certain other entities.

Information blocking is defined as engaging in activities that are likely to interfere with the access, exchange or use of electronic health information, subject to limited exceptions.

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

Current and futur e initiatives related to health care technology and interoperability may require changes to our operations, impose new and complex obligations on us, affect our relationships with providers, vendors , healthcare information exchanges and other third parties and require investments in infrastructure.

It is difficult to predict the impact of these initiatives.

State efforts to regulate the construction, acquisition or expansion of healthcare facilities could limit our ability to build or acquire additional healthcare facilities, renovate our facilities or expand the breadth of services we offer.

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These legislative and administrative efforts focus primarily on the appropriate valuation of the assets divested and the use of the proceeds of the sale by the non-profit seller.

While these review and, in some instances, approval processes can add additional time to the closing of a hospital acquisition, we have not had any significant

difficulties or delays in completing acquisitions.

While these review and, in some instances, approval processes can add additional time to the closing of a hospital acquisition, we have not had any significant difficulties or delays in completing acquisitions.

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

We may incur additional tax liabilities.

We are subject to tax in the United States as well as those states in which we do business.

Changes in tax laws, including increased rates, or interpretations of tax laws by taxing authorities or other standard setting bodies, could increase our tax obligations and materially and adversely impact our results of operations.

Risks Related to Impairment

If the fair value of our reporting unit declines, a material non-cash charge to earnings from impairment of our goodwill could result.

At December 31, 2020, we had approximately $4.2 billion of goodwill.

We expect to recover the carrying value of this goodwill through our future cash flows.

On an ongoing basis, under GAAP, we evaluate, based on the fair value of our reporting unit, whether the carrying value of our goodwill is impaired when events or changes in circumstances indicate that such carrying value may not be recoverable.

GAAP requires us to test goodwill for impairment at least annually.

A detailed evaluation of potential impairment indicators was performed as of December 31, 2020, which specifically considered the volatility of the fair market value of our outstanding senior secured and unsecured notes and common stock during the year ended December 31, 2020, as well as declines in patient volumes and net operating revenues resulting from the COVID-19 pandemic.

On the basis of available evidence as of December 31, 2020, no impairment indicators were identified.

In addition, our most recent annual goodwill evaluations were performed during the fourth quarter of 2020, with an October 31, 2020 measurement date .

While no impairment was indicated in our most recent annual goodwill evaluations as of the October 31, 2020 (or in our 2019 and 2018 goodwill impairment evaluations), we recorded material non-cash impairment charges during 2016 and 2017 which reduced the carrying value of our hospital operations reporting unit to an amount equal to our estimated fair values as of such prior year measurement dates.

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

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

Some of those inputs include, but are not limited to, the most recent price of our common stock or fair value of our long-term debt, estimates of future revenue and expense growth, estimated market multiples, expected capital expenditures, income tax rates, and costs of invested capital.

Future estimates of fair value could be adversely affected if the actual outcome of one or more of these assumptions changes materially in the future, including any decline in our stock price or fair value of our long-term debt, increased volatility of our stock price or the fair value of our long-term debt, lower than expected net operating revenues or patient volumes, higher market interest rates or increased operating costs, including in any such case as the result of conditions related to the COVID-19 pandemic.

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

In assessing the fair value of this reporting unit, we consider, among other things, the most recent price of our common stock or fair value of our long-term debt, estimates of future revenue and expense growth, estimated market multiples, expected capital expenditures, income tax rates, and costs of invested capital.

We recorded material non-cash impairment charges with respect to our hospital operations reporting unit in 2016 and 2017, and could record material impairment charges in the future if our estimates or assumptions with respect to such fair value determination change in the future.

A significant decline in operating results or other indicators of impairment at one or more of our facilities could result in a material, non-cash charge to earnings to impair the value of long-lived assets.

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On an ongoing basis, we evaluate whether changes in future undiscounted cash flows reflect an impairment in the fair value of our long-lived assets.

Additionally, as we continue to rationalize our portfolio of hospitals, we evaluate whether a hospital or a group of hospitals is impaired based on an analysis of the selling price from a definitive agreement compared to the carrying value of the net assets being sold.

Additionally, if we decide to sell a business, we evaluate whether a business or a group of businesses is impaired based on an analysis of the selling price from a definitive agreement compared to the carrying value of

the net assets being sold.

If the carrying value of our long-lived assets is impaired, we may incur a material non-cash charge to earnings.

Risks Related to Technology

Risks Related to Cybersecurity and Technology

Our operations could be significantly impacted by interruptions or restrictions in access to our information systems.

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Information systems require an ongoing commitment of significant resources to maintain and enhance existing systems and to develop new systems in order to keep pace with continual changes in information technology.

We also sometimes rely on third-party providers of financial, clinical, patient accounting and network information services and, as a result, we face operational challenges in maintaining multiple provider platforms and facilitating the interface of such systems with one another.

We also rely on third-party providers of financial, clinical, patient accounting and network information services, including those that interface with our own systems, and, as a result, we face operational challenges in maintaining multiple provider platforms and facilitating the interface of such systems with one another.

We rely on these third-party providers to have appropriate controls to protect confidential information and other sensitive or regulated data.

We do not control the information systems of third-party providers, and in some cases we may have difficulty accessing information archived on third-party systems.

Our networks and information systems are also subject to disruption due to events such as a major earthquake, fire, telecommunications failure, power outages, new system implementations, computer viruses, ransomware or other malware, security breaches, cyber-attacks, employee usage errors, acts of war, terrorist or criminal activities or other catastrophic events.

If the information systems on which we rely fail or are interrupted or if our access to these systems is limited in the future, it could have an adverse effect on our business, financial condition or results of operations.

Our networks and information systems are also subject to disruption due to events such as a major earthquake, natural disaster, fire, telecommunications failure, power outages, new system implementations, computer viruses, ransomware or other malware, security breaches, cyber-attacks, employee usage errors, acts of war, terrorist or criminal activities or other catastrophic events.

If the information systems on which we rely fail or are interrupted or if our access to these systems is limited in the future, or we experience data loss or manipulation, it could result in unauthorized disclosure, misuse, loss or alteration of such data, interruptions and delays in our normal business operations, potential liability under applicable laws, regulatory penalties, and damage to our reputation.

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

A cyber-attack or security breach could result in the compromise of our facilities, confidential data or critical data systems and give rise to potential harm to patients, remediation and other expenses, expose us to liability under HIPAA, privacy and data protection laws and regulations, consumer protection laws, common law or other theories, subject us to litigation and federal and state governmental inquiries, damage our reputation, and otherwise be disruptive to our business.

We rely extensively on information technology systems to manage clinical and financial data, to communicate with our patients, payors, vendors and other third parties, to summarize and analyze operating results, and for a number of other critical operational functions.

We have made significant investments in technology to protect our systems, equipment and medical devices and information from cybersecurity risks.

Although we monitor and routinely test our security systems and processes and have redundancies as well as other proactive measures designed to protect the integrity, security and availability of the systems and data we manage and control, there can be no assurance that we, or our third party vendors and providers, will not be subject to security breaches and other cybersecurity threats, including those related to the use of ransomware and other malicious software or other attempts by third parties to access, acquire, use, disclose, misappropriate or manipulate our information or disrupt our operations.

In spite of our security measures, our information technology and infrastructure have been subject to cyber-attacks and security breaches from time to time.

In particular, as previously disclosed, during the second quarter of 2014, our computer network was the target of an external, criminal cyber-attack in which the attacker successfully copied and transferred certain data outside the Company.

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

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

The preventive actions we take to reduce the risk of such incidents and protect our systems and data may not be sufficient in the future.

Furthermore, because the techniques used in cyber-attacks change frequently and may not be immediately recognized, we may experience security or data breaches that remain undetected for an extended time.

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

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

As cybersecurity threats continue to evolve, we may be required to expend significant additional resources to continue to modify or enhance our protective measures or to investigate and remediate any information security vulnerabilities, but we still might not be able to anticipate or prevent certain attack methods.

Further, cybersecurity threats, including those that result in a data or security breach, could impact the integrity, availability or security of PHI and other data subject to privacy laws and regulations, disrupt our information technology systems, equipment, medical devices or business, and threaten the access and utilization of critical information technology and data.

Our ability to provide various healthcare services could be affected, particularly given the increasing use of telehealth services.

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

We may be at increased risk because we outsource certain services or functions to, or have systems that interface with, third parties.

Some of these third parties’ information systems are also subject to the risks outlined above and may store or have access to our data and may not have effective controls, processes, or practices to protect our information from attack, damage, or unauthorized access, acquisition, use or disclosure.

A breach or attack affecting any of these third parties could harm our business.

In addition, the definitive agreements we enter into in connection with the divestiture of hospitals routinely obligate us to provide transition services to the buyer, including access to our legacy information systems, for a defined transition period.

By providing access to our information systems to non-employees, we may be exposed to cyber-attacks, ransomware or security or data breaches that originate outside of our internal processes and practices designed to prevent such threats from occurring.

Further, consumer confidence in the integrity, availability and confidentiality of information systems and information, including patient information and operations data, in the healthcare industry generally could be impacted to the extent there are successful cyber-attacks at other healthcare services companies, which could have a material adverse effect on our business, financial position, or results of operations.

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

business and operational interruptions and delays;

the loss, misappropriation, corruption or unauthorized access, acquisition, use or disclosure of data or inability to access data;

litigation and potential liability under privacy, security, breach notification and consumer protection laws or other applicable laws, including HIPAA;

reputational damage, federal and state governmental inquiries, civil monetary penalties, settlement agreements, corrective action plans and monitoring requirements, any of which could have an adverse effect on our business, financial condition or results of operations.

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

If we fail to comply with our obligations under license or technology agreements with third parties, we may be required to pay damages and we could lose license rights that are critical to our business.

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

A cyber-attack or security breach could result in the compromise of our facilities, confidential data or critical data systems and give rise to potential harm to patients, remediation and other expenses, expose us to liability under HIPAA, HITECH, privacy and data protection laws and regulations, consumer protection laws, common law or other theories, subject us to litigation and federal and state governmental inquiries, damage our reputation, and otherwise be disruptive to our business.

We rely extensively on computer systems to manage clinical and financial data, communicate with our patients, payors, vendors and other third parties and summarize and analyze operating results.

We have made significant investments in technology to protect our systems, equipment and medical devices and information from cybersecurity risks.

During the second quarter of 2014, our computer network was the target of an external, criminal cyber-attack in which the attacker successfully copied and transferred certain data outside the Company.

This data included certain non-medical patient identification data (such as patient names, addresses, birthdates, telephone numbers and social security numbers) considered protected health information, or PHI, under HIPAA, but did not include patient credit card, medical or clinical information.

The remediation efforts in response to the attack have been substantial, including continued development and enhancement of our controls, processes and practices designed to protect our systems, computers, software, data and networks from attack, damage or unauthorized access.

In connection with the cyber-attack, we were subject to multiple purported class action lawsuits and government investigations by various State Attorneys General and the U.S.

Department of Health and Human Services Office for Civil Rights, or OCR, which resulted in settlement agreements, a corrective action plan, a two-year monitoring period, and additional requirements, including obligations related to our security measures, risk analysis, risk management plan, training, internal reporting, and policies and procedures.

In spite of our security measures, there can be no assurance that we, or our third-party vendors and providers, will not be subject to additional cyber-attacks, ransomware or security breaches in the future.

In the definitive agreements we enter into in connection with the divestiture of hospitals, we routinely agree to provide transition services to the buyer, including access to our legacy information systems, for a defined transition period.

By providing access to our information systems to non-employees, we may be exposed to cyber-attacks, ransomware or security breaches that originate outside of our internal processes and practices designed to prevent such threats from occurring.

In addition, we may be at increased risk because we outsource certain services or functions to, or have systems that interface with, third parties.

Some of these third parties may store or have access to our data and may not have effective controls, processes, or practices to protect our information from attack, damage, or unauthorized access.

A breach or attack affecting any of these third parties could harm our business.

Cyber-attacks, ransomware or security breaches could impact the integrity, availability or privacy of PHI and other data subject to privacy laws and regulations or disrupt our information technology systems, devices or business, including our ability to provide various healthcare services.

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

Additionally, growing cyber-security threats related to the use of ransomware and other malicious software threaten the access and utilization of critical information technology and data.

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

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

As cyber-threats continue to evolve, we may be required to expend significant additional resources to continue to modify or enhance our protective measures or to investigate and remediate any information security vulnerabilities, but we still might not be able to anticipate or prevent certain attack methods.

If we are subject to cyber-attacks or security breaches in the future, this could result in harm to

business interruptions and delays;

the loss, misappropriation, corruption or unauthorized access of data or inability to access data ;

litigation and potential liability under privacy, security, breach notification and consumer protection laws or other applicable laws , including HIPAA ;

reputational damage , federal and state governmental inquiries, civil monetary penalties, settlement agreements, corrective action plans and monitoring requirements, any of which could have an adverse effect on our business, financial condition or results of operations.

Unresolved Staff Comments

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

What changed 10-K

Item 1. Business