What changed in this filing

/stocks — the workspaceLOADING

Item 1. Business

2023-02-17 compared with 2022-02-17 · 441 added, 399 removed, 1055 unchanged (44% of the section changed)

1 unchanged sentence

Overview of Our Company

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 are one of the nation’s largest healthcare companies.

Our affiliates are leading providers of healthcare services, developing and operating healthcare delivery systems in 46 distinct markets across 16 states.

As of December 31, 2022, our subsidiaries own or lease 80 affiliated hospitals, with approximately 13,000 beds, and operate more than 1,000 sites of care, including physician practices, urgent care centers, freestanding emergency departments, occupational medicine clinics, imaging centers, cancer centers and ambulatory surgery centers.

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

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

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.

28 unchanged sentences

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 payors.

Regional networks are able to expand the breadth of services provided for our patients, centralize 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 payors.

Currently, 47 of our hospitals operate in 13 unique regional networks.

6 unchanged sentences

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.

5 unchanged sentences

We analyze demographic data and referral trends and employ recruiters at the corporate level to support local hospital administrators in their physician recruitment efforts.

In some markets, we employ physicians, often acquiring their practices at the onset of the arrangement.

In some markets, we directly employ physicians through recruitment or acquisition of their existing practices.

However, most physicians in our communities and on our medical staffs remain in private practice and are not our employees.

We work hard to develop positive, collaborative relationships with physicians.

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

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

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

22 unchanged sentences

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

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

We also have implemented programs to improve physician workflow, reduce physician turnover, optimize staffing at physician clinics and standardize onboarding processes.

We have implemented programs to improve physician workflow, reduce physician turnover, optimize staffing at physician clinics and standardize onboarding processes.

Human Resources.

We have created a centralized nurse recruitment program to support our hospitals in their efforts to recruit the nurses needed for the delivery of high quality care, a priority for all hospitals in the aftermath of the COVID-19 pandemic and due to workforce shortages across the healthcare industry.

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

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

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

Procurement and Materials Management.

We have standardized and centralized supply chain operations to improve procurement of the medical supplies, equipment and pharmaceuticals used in our hospitals.

We have an ownership interest in and participation agreement with HealthTrust Purchasing Group, L.P., or HealthTrust, a group purchasing organization, or GPO, which benefits members through scaled pricing.

We have a noncontrolling ownership interest in and participation agreement with HealthTrust Purchasing Group, L.P., or HealthTrust, a group purchasing organization, or GPO, which benefits members through scaled pricing.

HealthTrust contracts with certain vendors who supply a substantial portion of our medical supplies, equipment and pharmaceuticals.

12 unchanged sentences

When a patient is ready for discharge, a case manager works with the patient’s attending physician to evaluate and coordinate the patient’s needs for continued care in the post-acute setting.

Hospitals have the support of a physician advisor to act as a liaison to the medical staff and assist with all the activities of the program.

Other Initiatives.

Numerous other initiatives have been standardized or centralized and leverage data to reduce costs and increase productivity.

For example, we have improved staff scheduling and efficiency by implementing standardized time keeping systems, and we have implemented initiatives to reduce unnecessary overtime and guide temporary staffing decisions that align with patient admissions and acuity.

We have created a centralized team and implemented standard processes for payroll processing and management of accounts payable.

Likewise, we have leveraged data and expertise to optimize our performance in clinical and operating areas such as emergency room, pharmacy, laboratory, imaging and skilled nursing services and health information management.

Each time we implement a new process initiative, we work to identify and communicate best practices and we monitor progress and performance improvement throughout the organization.

Continuously improve patient safety and quality of care

13 unchanged sentences

Our PSO is listed by the U.S.

Department of Health and Human Services Agency, or HHS, for Healthcare Research and Quality.

Department of Health and Human Services, or HHS, Agency for Healthcare Research and Quality.

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

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

Over the past decade, we have instituted numerous programs to improve safety in our hospitals and other patient care environments.

We are also deploying innovative programs to deliver better outcomes including, for example, remote monitoring for patients with certain chronic conditions, maternal/fetal monitoring using machine learning and artificial intelligence, as well as tele-sitting technology.

Industry Overview

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.

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

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

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

National healthcare expenditures accounted for approximately 18.3% of total U.S.

gross domestic product in 2021.

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.

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

These projections indicate that total U.S.

3 unchanged sentences

gross domestic product.

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

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 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.

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

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

CMS projects that the hospital services category will grow at an average of 5.6% annually from 2023 through 2030, reaching over $2.2 trillion by 2030.

Hospital Industry.

15 unchanged sentences

We believe opportunities exist in selected urban markets to create networks between urban hospitals and non-urban hospitals in order to expand the breadth of services offered in the non-urban hospitals while improving physician alignment in those markets and making them more attractive to managed care organizations.

COVID-19 Pandemic

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

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

4 unchanged sentences

By the year 2030, the number of Americans aged 65 or older is expected to climb to 73 million, or 20.6% of the total population.

Due to the anticipated increasing life expectancy of Americans, the number of people aged 85 and older is also expected to increase from 6 million in 2016 to 9 million by the year 2030.

The number of people aged 85 and older is also expected to increase from 6 million in 2016 to 9 million by the year 2030.

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

11 unchanged sentences

the need and ability to recruit primary care physicians and specialists;

the need to achieve general economies of scale and to gain access to standardized and centralized functions, including favorable supply agreements and access to malpractice coverage;

the need to achieve general economies of scale and to gain access to standardized and centralized functions, including favorable supply agreements and access to professional liability coverage;

changes to healthcare payment models that emphasize cost-effective delivery of service and quality of outcomes for the entire episode of care;

10 unchanged sentences

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.

In addition, CMS makes annual updates to 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.

Economic Conditions and COVID-19 Pandemic

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

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

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

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

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

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

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

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

Selected Operating Data

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

Statistics for 2022 include a full year of operations for 79 hospitals and partial periods for one hospital that was divested, one hospital that opened and three hospitals that were closed during the year, reflecting the operations of these hospitals prior to divestiture, opening, or closure as applicable .

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

Statistics for 2020 include a full year of operations for 88 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 2020 include a full year of operations for 88

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

Year Ended December 31,

12 unchanged sentences

Net outpatient revenues as a % of net operating revenues

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

Net income attributable to Community Health Systems, Inc.

stockholders as a % of net operating revenues

2 unchanged sentences

Liquidity Data

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 provided by (used in) operating activities

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

operating revenues

Net cash flows (used in) provided by investing activities

1 unchanged sentence

Year Ended December 31,

Increase (Decrease)

(Dollars in millions)

10 unchanged sentences

Equity in earnings of unconsolidated affiliates

Licensed beds are the number of beds for which the appropriate state agency licenses a facility regardless of whether the beds are actually available for patient use.

Licensed beds are the number of beds for which the appropriate state agency licenses for a facility regardless of whether the beds are actually available for patient use.

Beds in service are the number of beds that are readily available for patient use.

5 unchanged sentences

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

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

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

before interest, income taxes, and depreciation and amortization.

Adjusted EBITDA, also a non-GAAP financial measure, is EBITDA adjusted to add back net income attributable to noncontrolling interests and to exclude loss (gain) from early extinguishment of debt, impairment and (gain) loss on sale of businesses, gain on sale of equity interests in Macon Healthcare, LLC, (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.

Adjusted EBITDA, also a non-GAAP financial measure, is EBITDA adjusted to add back net income attributable to noncontrolling interests and to exclude loss (gain) from early extinguishment of debt, impairment and (gain) loss on sale of businesses, gain on sale of equity interests in Macon Healthcare, LLC, expense related to government and other legal matters and related costs, expense incurred in the fourth quarter of 2020 related to the settlement of certain professional liability claims for which the third-party insurers’ obligation to insure the Company against the underlying loss was being litigated along with income during the fourth quarter of 2021 associated with the settlement of such litigation for the recovery of amounts covered by such third-party insurance policies, expense related to employee termination benefits and other restructuring charges, the impact of a change in estimate to increase the professional liability claims accrual recorded during the fourth quarter of 2022 with respect to claims incurred in prior years related to divested locations, the gain on sale by HealthTrust of a majority interest in CoreTrust Holdings, LLC, or CoreTrust, as discussed below under the heading “Liquidity and Capital Resources,” and expense from settlement and fair value adjustments on the contingent value right agreement liability related to the Health Management Associates, Inc., or HMA, legal proceedings and related legal expenses.

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

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

11 unchanged sentences

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 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.

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 disclosed by other companies.

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

stockholders as derived directly from our Consolidated Financial Statements for the years ended December 31, 20 22, 2021 and 2020 (in millions):

Year Ended December 31,

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

Net income attributable to Community Health Systems, Inc.

Provision for (benefit from) income taxes

2 unchanged sentences

Interest expense, net

Loss (gain) from early extinguishment of debt

(Gain) loss from early extinguishment of debt

Gain from CoreTrust transaction

Gain on sale of equity interests in Macon Healthcare, LLC

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

Expense from government and other legal settlements and

Expense from government and other legal matters and

related costs

6 unchanged sentences

restructuring charges

Gain on sale of equity interests in Macon Healthcare, LLC

Change in valuation allowances recorded for promissory notes

Change in estimate for professional liability claims accrual

Change in estimate for professional claims liability

related to divested locations

Adjusted EBITDA

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

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

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

1 unchanged sentence

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

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

The data for the periods presented are not strictly comparable due to the effect that businesses acquired, sold, closed or opened during each of the respective periods, as applicable, have had on these statistics.

Year Ended December 31,

Managed Care and other third-party payors

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

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

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

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, including those in the No Surprises Act, which took effect January 1, 2022 and is discussed further below .

Medicare Managed Care

Other third-party payors

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

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

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

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

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, including those in the No Surprises Act .

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

5 unchanged sentences

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

Contractual allowance adjustments related to final settlements and previous program reimbursement estimates impacted net operating revenues and net income (loss) by an insignificant amount in each of the years ended December 31, 2021, 2020 and 2019.

Contractual allowance adjustments related to final settlements and previous program reimbursement estimates impacted net operating revenues and net income by an insignificant amount in each of the years ended December 31, 2022, 2021 and 2020.

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.

7 unchanged sentences

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

As of December 31, 2022, Indiana, Alabama, Texas and Florida 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 17.3% in 2022, 16.4% in 2021 and 15.0% in 2020.

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 13.3% in 2022, 13.0% in 2021 and 12.1% in 2020.

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

Net operating revenues generated by our hospitals in Texas, as a percentage of consolidated net operating revenues, were 11.7% in 2022, 11.0% in 2021 and 12.2% in 2020.

Net operating revenues generated by our hospitals in Florida, as a percentage of consolidated net operating revenues, were 11.6% in 2022, 12.2% in 2021 and 13.0% in 2020.

Hospital revenues depend upon inpatient occupancy levels, the volume of outpatient procedures and the payment rates for hospital services provided, which are a function of amounts charged, rates negotiated with third-party payors and statutorily determined rates for government payors.

Charges and payment rates for routine inpatient services vary significantly depending on the type of service performed and the geographic location of the hospital.

37 unchanged sentences

We cannot be certain that governmental officials responsible for enforcing these laws or whistleblowers will not assert that we are in violation of them or that such statutes or regulations will be interpreted by the courts in a manner consistent with our interpretation.

Healthcare Reform .

Congress and certain state legislatures have introduced and passed a large number of proposals and legislation designed to make major changes in the healthcare system, including changes that have impacted access to health insurance.

Healthcare Reform, including Price Transparency.

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

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

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

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

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

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.

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

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

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.

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

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

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

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

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

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.

1 unchanged sentence

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.

Of the 16 states in which we operated hospitals as of December 31, 2022, nine states have expanded their Medicaid programs.

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

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.

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

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

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

It prohibits providers from charging patients

an amount beyond the in-network cost sharing amount for services rendered by out-of-network provider s (i.e.

prohibits “balance billing”) , subject to limited exceptions .

The No Surprises Act also impacts the payment received by an out-of-network provider from a health plan for items and services to which the balance billing prohibition applies.

For items and services for which balance billing is prohibited (even when no balance billing occurs) , the No Surprises Act establishes an independent dispute resolution, or IDR, process for providers and payors to handle payment disputes that cannot be resolved through direct negotiations.

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

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

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

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

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

HHS is delaying enforcement with regard to good faith estimates that do not include expected charges for co-providers or co-facilities until the agency issues additional regulations.

If the actual charges to an uninsured or self-pay patient are substantially higher than the estimate or the provider furnishes an item or service that was not included in the good faith estimate, the patient may invoke a patient-provider dispute resolution process established by regulation to challenge the higher amount.

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

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

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

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

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

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

Some price transparency obligations apply only to payors.

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

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

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

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

Fraud and Abuse Laws.

14 unchanged sentences

These regulations are known as “safe harbor” regulations.

The failure of a particular activity to comply with the safe harbor regulations does not necessarily mean that the activity violates the Anti-Kickback Statute;

The failure of a particular activity to comply with the safe harbor regulations does not necessarily mean that

the activity violates the Anti-Kickback Statute;

however, such failure may lead to increased scrutiny by government enforcement authorities.

11 unchanged sentences

rental of space in physician offices, at other than fair market value;

physician-owned entities (often referred to as physician-owned distributorships, or PODS) that derive revenue from selling, or arranging for the sale of, implantable medical devices ordered by their physician-owners for use on procedures that physician-owners perform on their own patients at hospitals or ASCs.

physician-owned entities (often referred to as physician-owned distributorships ) that derive revenue from selling, or arranging for the sale of, implantable medical devices ordered by their physician-owners for use on procedures that physician-owners perform on their own patients at hospitals or ASCs.

We have a variety of financial relationships with physicians who refer patients to our hospitals.

4 unchanged sentences

These incentives include relocation, reimbursement for certain direct expenses, income guarantees and, in some cases, loans.

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.

Although we strive to comply with the Anti-Kickback Statute, taking into account available guidance including the “safe harbor” regulations, 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 programs.

3 unchanged sentences

There are ownership and compensation arrangement exceptions to the self-referral prohibition.

CMS has issued regulations that interpret these exceptions and other provisions of the Stark Law.

One exception allows a physician to refer patients to a healthcare entity in which the physician has an ownership interest if the entity is located in a rural area, as defined in the statute.

There are also exceptions for many of the customary financial arrangements between physicians and providers, including employment contracts, leases and recruitment agreements.

From time to time, CMS has issued regulations that interpret 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.

41 unchanged sentences

Fee-Splitting.

Some states have laws that prohibit unlicensed persons or business entities, including corporations, from employing physicians.

Some states also have adopted laws that prohibit direct or indirect payments to, or entering into fee-splitting arrangements with, physicians and unlicensed persons or business entities.

Possible sanctions for violations of these restrictions include loss of a physician’s license, civil and criminal penalties and rescission of business arrangements.

Some states prohibit unlicensed persons or business entities, including corporations, from employing physicians or certain other health professionals .

Some states also prohibit direct or indirect payments to, or entering into fee-splitti ng arrangements with, healthcare providers and unlicensed persons or business entities.

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

These laws vary from state to state, are often vague and have seldom been interpreted by the courts or regulatory agencies.

3 unchanged sentences

Emergency Medical Treatment and Active Labor Act.

The Emergency Medical Treatment and Active Labor Act, or EMTALA, imposes requirements as to the care that must be provided to anyone who comes to facilities providing emergency medical services seeking care before they may be transferred to another facility or otherwise denied care.

The Emergency Medical Treatment and Active Labor Act, or EMTALA, imposes federal requirements as to the care that must be provided to anyone who comes to facilities providing emergency medical services seeking care before they may be transferred to another facility or otherwise denied care.

Sanctions for failing to fulfill these requirements include exclusion from participation in Medicare and Medicaid programs and civil money penalties, which are increased annually based on updates to the consumer price index.

1 unchanged sentence

A medical facility that suffers a financial loss as a direct result of another participating hospital’s violation of the law also has a similar right.

Although we believe that our practices are in compliance with the law, we can give no assurance that governmental officials responsible for enforcing the law will not assert we are in violation of this law.

In particular, hospitals may face conflicting interpretations as to the requirements imposed by EMTALA as interpreted by HHS in relation to state laws that limit access to abortion or other reproductive health services.

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

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

Conversion Legislation.

40 unchanged sentences

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.

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.

14 unchanged sentences

For federal fiscal year 2022, 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 0.0 productivity adjustment.

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

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

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

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

A 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.

6 unchanged sentences

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.

In addition, hospitals may qualify for Medicare DSH payment adjustments when their percentage of low-income patients exceeds specified regulatory thresholds.

In addition, hospitals may qualify for Medicare disproportionate share hospital, or DSH, payment adjustments when their percentage of low-income patients exceeds specified regulatory thresholds.

A majority of our hospitals qualify to receive these adjustments.

7 unchanged sentences

For calendar year 2022, CMS estimated an increase in hospital outpatient PPS payments of 2.0%.

This reflected

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

This reflected a market basket increase of 2.7%, with a negative 0.7 percentage point productivity adjustment.

For calendar year 2023, CMS estimated an increase in hospital outpatient PPS payments of 3.8%, reflecting a market basket increase of 4.1%, with a negative 0.3 percentage point productivity adjustment.

1 unchanged sentence

We are complying with this data submission requirement.

In calendar year 2019, CMS began a two-year phase-in of an expanded site-neutral payment policy for off-campus provider-based departments paid under the outpatient PPS.

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

For example, in recent years, CMS has phased-in an expanded site-neutral payment policy for off-campus provider-based departments paid under the outpatient PPS.

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

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

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 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.

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

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

Supreme Court invalidated past payment cuts for hospitals participating in the 340B Drug Pricing Program.

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

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

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

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

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

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

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.

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

For calendar year 2023, CMS decreased the conversion factor by approximately 4.5%.

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

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

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

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

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

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

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

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 EHRs.

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

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

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

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

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.

6 unchanged sentences

Under current law, Medicaid DSH payments will be reduced by $8.0 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.

4 unchanged sentences

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.

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

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.

However, the current presidential administration has implemented policies intended to strengthen Medicaid programs.

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

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

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

12 unchanged sentences

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.

Commercial insurers and

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

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

9 unchanged sentences

Chain providers had the option of having all hospitals use one home office MAC, and we chose to do so.

However, CMS has not converted all of our hospitals to one MAC and currently does not have an established date to accomplish the conversion.

CMS periodically re-solicits bids, and the MAC servicing a geographic area can change as a result of the bid competition.

10 unchanged sentences

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.

Working across five geographic jurisdictions, UPICs collaborate with states and coordinate provider investigations across the Medicare and Medicaid programs.

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

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

Currently, there are significant delays in the assignment of new Medicare appeals to Administrative Law Judges.

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

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

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

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

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

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

6 unchanged sentences

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.

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

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.

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

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.

1 unchanged sentence

Bundled Payment Initiatives .

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.

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

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 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.

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

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

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

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

7 unchanged sentences

The hospital industry is highly competitive.

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 competition among hospitals and other healthcare providers, including urgent care centers and other outpatient providers, for patients has intensified with the implementation of price transparency initiatives and 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.

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.

16 unchanged sentences

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

Trends towards transparency and value-based purchasing may impact our competitive position, ability to obtain or maintain favorable contract terms, 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.

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.

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

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

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

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 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.

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

For uninsured or self-pay patients, providers must provide a good faith estimate of expected charges for scheduled items or services , in advance of the date of the scheduled item or service or upon request of the individual.

HHS is delaying enforcement with regard to good faith estimates sent to uninsured or self-pay patients that do not include expected charges for co-providers or co-facilities until the agency issues additional regulations.

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

Compliance Program

15 unchanged sentences

Our Code of Conduct is posted on our website at www.chs.net/company-overview/code-of-conduct.

Corporate Integrity Agreement

On August 4, 2014, we announced that we had entered into a civil settlement with the U.S.

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.

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 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.

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.

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

2 unchanged sentences

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

At December 31, 2022, certain employees at five 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.

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.

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.

Our industry has been facing unprecedented workforce challenges, which have given rise to significant operating issues for healthcare providers.

To address this challenge, we have implemented several initiatives to improve retention, recruiting,

compensation programs and productivity.

An area that has been particularly challenging for pr oviders is registered nurse, or RN, recruitment and r etention.

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

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

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

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

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

We have significantly expanded this effort by working with various outside firms specializing in international recruitment , and we are also offering a direct-to-hire model.

We believe that t hese efforts will a id in our ability to take patient transfer request s , shorten emergency department wait times and lessen dependency on high cost contract labor.

Finally, we have expanded our hospital-based nursing programs through our partnership with Jersey College and now have seven campuses open in five states with three more expected to open in the second half of 2023.

Partnerships with other local nursing programs have also been strengthened across the enterprise to expand clinical faculty and increase enrollment.

Due to the challenges noted above and other factors, our hospitals and other healthcare facilities, like many other healthcare providers, have experienced increased 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.

19 unchanged sentences

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.

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

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

11 unchanged sentences

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;

We also provide a wide range of other development programs and resources, several of which were initiated and/or expanded in 2022 as part of our Pathways benefit offering.

Pathways includes an expanded tuition reimbursement program for all staff looking to further their education in any discipline offered by our health systems, a new student loan repayment program for numerous key clinical roles and reimbursement for licenses and certifications that are required for each individual role.

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

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.

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

and residency training programs.

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

8 unchanged sentences

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.

Moreover, legal requirements regulating greenhouse gas emissions and energy inputs or otherwise associated with the transition to a lower carbon economy may increase in the future, which could increase our costs associated with compliance and otherwise disrupt and adversely affect our operations.

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.

However, it is possible that future environmental-related developments may impact us, including as a result of climate change and/or new legal requirements associated with the transition to a lower carbon economy, in a manner that we are currently unable to 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.

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

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

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

Professional Liability Claims

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

To cover claims arising out of the operations of hospitals, we maintain professional malpractice liability insurance and general liability insurance on a claims made basis in excess of those amounts for which we are self-insured, in amounts we believe to be sufficient for our operations.

To cover claims arising out of the operations of hospitals, we maintain professional liability insurance and general liability insurance on a claims-made basis in excess of those amounts for which we are self-insured, in amounts we believe to be sufficient for our operations.

We also maintain umbrella liability coverage for claims which, due to their nature or amount, are not covered by our other insurance policies.

15 unchanged sentences

Restrictive covenants in the agreements governing our indebtedness may adversely affect us.

Our variable rate indebtedness subjects us to interest rate risk.

Higher interest rates could adversely impact us.

If we are unable to make payments on our indebtedness, we could be in default under the terms of our indebtedness agreements.

Risks Related to the COVID-19 Pandemic

Risks Related to Economic Conditions and the COVID-19 Pandemic

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

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

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

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

Risks Related to Our Business

If we are unable to complete divestitures as advisable, our financial performance could be adversely affected.

The impact of acquisitions could have a negative effect on our operations.

If we are unable to complete divestitures as advisable, our performance could be adversely affected.

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

If we are unable to effectively compete, patients could use other hospitals and healthcare providers.

6 unchanged sentences

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 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.

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

Risks Related to Human Capital

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

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

We may be unable to attract, hire and retain a highly qualified and diverse workforce, including key management.

Risks Related to Legal Proceedings

1 unchanged sentence

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

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

We are unable to predict the ultimate impact of health reform initiatives, including the Affordable Care Act.

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

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

1 unchanged sentence

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.

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

State efforts to regulate the construction, acquisition or expansion of healthcare facilities could adversely impact us.

12 unchanged sentences

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, 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).

The maximum aggregate principal amount under the ABL Facility is $1.0 billion, subject to borrowing base capacity.

At December 31, 2022, we had outstanding borrowings of $53 million and approximately $852 million of additional borrowing capacity (after taking into consideration $83 million of outstanding letters of credit) under the ABL Facility.

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

1 unchanged sentence

a substantial portion of our cash flows from operations will be dedicated to the payment of principal and interest on our indebtedness and will not be available for other purposes, including to fund our operations, capital expenditures, financial obligations and future business opportunities;

some of our borrowings, including borrowings under the ABL Facility, accrue interest at variable rates, exposing us to the risk of increased interest rates;

some of our borrowings, including any borrowings under the ABL Facility, accrue interest at variable rates, exposing us to the risk of increased interest rates, which risk is heightened by the current high interest rate environment;

it may limit our ability to make strategic acquisitions or cause us to make nonstrategic divestitures;

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, indus try or competitive conditions, or government regulations or other adverse developments .

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

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

1 unchanged sentence

We and our subsidiaries have the ability to incur substantial additional indebtedness in the future, subject to restrictions contained in the ABL Facility and the indentures governing our outstanding notes.

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, 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.

The maximum aggregate principal amount under the ABL Facility is $1.0 billion, subject to borrowing base capacity.

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.

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.

12 unchanged sentences

If our cash flows and capital resources are insufficient to fund our debt service obligations, we could face substantial liquidity problems and may be forced to reduce or delay capital expenditures, sell assets or operations, seek additional capital or restructure or refinance our indebtedness.

Our ability to refinance our indebtedness on favorable terms, or at all, is directly affected by the then current general economic and financial conditions.

Our ability to refinance our indebtedness on favorable terms, or at all, is directly affected by the then current macroeconomic conditions, financial and capital market conditions as well as the then current interest rate environment.

In addition, our ability to incur additional secured indebtedness (which would generally enable us to achieve better pricing than the incurrence of unsecured indebtedness) depends in part on the value of our assets, which depends, in turn, on the strength of our cash flows and results of operations, and on economic and market conditions and other factors.

5 unchanged sentences

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 .

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.

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.

19 unchanged sentences

If we were unable to repay those amounts, the holders of such indebtedness could, subject to applicable intercreditor agreements, proceed against the collateral granted to them to secure that indebtedness.

Our variable rate indebtedness subjects us to interest rate risk, which could cause our debt service obligations to increase significantly.

Our borrowings under the ABL Facility are at variable rates of interest and expose us to interest rate risk.

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, 2021, there were no borrowings under the ABL Facility.

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

The current high interest rate environment could adversely impact us.

If interest rates remain at their current elevated levels or continue to increase, this could adversely impact our ability to refinance existing indebtedness or obtain additional debt financing on acceptable terms or at all, and otherwise could increase our debt service obligations in connection with future debt refinancings.

In addition, any borrowings under the ABL Facility are at variable rates of interest and expose us to interest rate risk.

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

As of December 31, 2022, we had outstanding borrowings of $53 million 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.

6 unchanged sentences

If this occurs, we would be in default under the ABL Facility, the lenders could exercise their rights, as described above, and we could be forced into bankruptcy or liquidation.

Risks Related to the COVID-19 Pandemic

Risks Related to Economic Conditions and the COVID-19 Pandemic

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

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

Moreover, if economic conditions in the United States significantly deteriorate, any such developments could materially and adversely affect our results of operations, financial position, and/or our cash flows.

Other risks we face during periods of economic weakness include potential declines in the population covered under commercial insurance agreements, increased patient decisions to postpone or cancel elective and nonemergency healthcare procedures (including delaying surgical procedures), which may lead to poorer health and higher acuity interventions, potential increases in the uninsured and underinsured populations, increased adoption of health plan structures that shift financial responsibility to patients, and increased difficulties in collecting patient receivables for copayment and deductible receivables.

In addition, negative macroeconomic conditions in the United States have resulted in, and may continue to result in, increased budget deficits at federal, state and local governmental levels, which may continue to negatively impact spending for health and human service programs, including Medicare, Medicaid and similar programs, which represent significant third-party payor sources for our healthcare facilities.

Moreover, it is difficult to predict whether, when, or what additional deficit reduction initiatives may be proposed by Congress, but future legislation may include additional Medicare spending reductions, which may adversely affect our business and financial results due to our reliance on Medicare payments.

Further, there is ongoing uncertainty regarding the federal budget and federal spending levels, including the possible impacts of a failure to increase the “debt ceiling.” Any U.S.

government default on its debt could have broad macroeconomic effects.

In addition, negative macroeconomic conditions in the United States (including elevated interest rates) have had, and may continue to have, an adverse impact on capital market conditions, which could limit our ability to refinance existing indebtedness or obtain additional debt or equity financing on acceptable terms or at all.

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

As a provider of healthcare services, we have been and 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.

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

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

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

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

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

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

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

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

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.

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.

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

On January 13, 2022, the U.S.

Supreme Court 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.

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

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.

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

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

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

1 unchanged sentence

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.

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

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

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

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.

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

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

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

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

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

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

Together, the 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.

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

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

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

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%.

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

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

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

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

Payment Program.

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

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

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

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

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

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

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

3 unchanged sentences

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.

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 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.

We continue to assess the potential impact of the COVID-19 pandemic and government responses to the pandemic on our business, results of operations, financial position and cash flows.

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

Most states have ended their state-level emergency declarations.

The current HHS declaration expires May 11, 2023.

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

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

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

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

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

Risks Related to Our Business

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

We 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.

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

Generally, these hospitals and non-hospital businesses are not in one of our strategically beneficial service areas, are less complementary to our business strategy and/or have lower operating margins.

In addition, we continue to receive interest from potential acquirers for certain of our hospitals and non-hospital businesses.

As such, we may sell additional hospitals and/or non-hospital 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.

Moreover, the current negative macroeconomic environment may make it more difficult for us to complete divestitures on acceptable terms, or at all.

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 results of operations.

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

We may also incur asset impairment charges related to potential or completed divestitures that reduce our profitability.

In addition, after entering into a definitive agreement, we may be subject to the satisfaction of pre-closing conditions as well as necessary regulatory and governmental approvals, which, if not satisfied or obtained, may prevent us from completing the sale.

18 unchanged sentences

Although we generally seek indemnification from sellers covering these matters, we may nevertheless have material liabilities for past activities of acquired hospitals.

If we are unable to effectively compete, patients could use other hospitals and healthcare providers, and our business may otherwise be adversely impacted.

If we are unable to effectively compete, patients could use other hospitals and healthcare providers, and our business may be adversely impacted.

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.

19 unchanged sentences

If our competitors are better able to attract patients with these offerings, we may experience an overall decline in patient volume.

Trends toward transparency and value-based purchasing may have an impact on our competitive position and patient volumes in ways that we are unable to predict.

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

Trends toward transparency and value-based purchasing may have an impact on our competitive position, ability to obtain and maintain favorable contract terms, and patient volumes in ways that are difficult to predict.

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

data related to quality measures and patient satisfaction surveys.

Further, every hospital must establish and update annually a public, online listing of the hospital’s standard charges for all items and services, including discounted cash prices and payor-specific charges, and must also publish a consumer-friendly list of standard charges for certain “shoppable” services or, alternatively, maintain an online price estimator tool for the shoppable services.

HHS also requires health insurers to publish online charges negotiated with providers for healthcare services, and starting January 1, 2023, health insurers must provide online price comparison tools to help individuals get personalized cost estimates for covered items and services.

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, 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.

The No Surprises Act creates additional price transparency requirements that may impact our competitive position, including requiring providers to send uninsured or self-pay patients (in advance of the date of the scheduled item or service or upon request) and health plans of insured patients a good faith estimate of the expected charges and diagnostic codes prior to the scheduled date of the service or item.

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

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.

14 unchanged sentences

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

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

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

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

5 unchanged sentences

In addition, government and commercial payors as well as other third parties from whom we receive payment for our services attempt to control healthcare costs by, for example, requiring hospitals to discount payments for their services in exchange for exclusive or preferred participation in their benefit plans, restricting coverage through utilization review, reducing coverage of inpatient and emergency room services and shifting care to outpatient settings, requiring prior authorizations, and implementing alternative payment models.

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

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

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

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

For example, t he No Surprises Act, 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, 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.

For example, t he No Surprises Act prohibits providers from charging patients an amount beyond the in-network cost sharing amount for services rendered by out-of-network providers, subject to limited exceptions .

For services for which balance billing is prohibited (even when no balance billing occurs), the No Surprises Act includes provisions that may limit the amounts received by out-of-network providers by health plans, and also establishes an IDR process for providers and payors to handle payment disputes that cannot be resolved through direct negotiation.

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

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

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

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

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

For example, the No Surprises Act requires providers to send health plans of insured patients a good faith estimate of the expected charges and diagnostic codes prior to the scheduled date of the service or item.

HHS is deferring enforcement of certain requirements related to good faith estimates until the agency issues additional regulations.

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

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

During the year ended December 31, 2022, 63.6% of our net operating revenues came from commercial payors.

5 unchanged sentences

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.

If we experience continued growth in self-pay volume and revenues or if we experience 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.

1 unchanged sentence

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, 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.

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

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

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

Furthermore, the number and identity of states that choose to expand or otherwise modify Medicaid programs and the terms of expansion and other program modifications continue to evolve.

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

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.

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

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

Other states have explored or offer public health insurance options.

2 unchanged sentences

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.

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.

For example, the No Surprises Act requires providers to send uninsured and self-pay patients a good faith estimate of expected charges for items and services.

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

If the 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.

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

In addition, a deterioration of economic conditions in the United States could potentially lead to higher levels of uninsured patients, result in higher levels of patients covered by lower paying government programs, r esult in fiscal uncertainties for both government payors and private insurers and/or limit the economic ability of patients to make payments for which they are responsible.

If we experience continued growth in self-pay volume or deterioration in collectability of patient responsibility accounts, our financial condition or results of operations could be adversely affected.

Some of the non-urban communities in which we operate face challenging economic conditions, and the failure of certain employers, or the closure of certain manufacturing and other facilities in our markets, could have a disproportionate impact on our hospitals.

Some of the non-urban communities in which we operate have been facing challenging economic conditions which predate, and extend beyond the macroeconomic challenges arising from, the COVID-19 pandemic.

Some of the non-urban communities in which we operate have been facing particularly challenging economic conditions, which in certain instances predate, and are broader than, the current negative macroeconomic conditions impacting the United States economy.

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.

5 unchanged sentences

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.

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

Moreover, we could be affected by climate change and other environmental issues to the extent such issues adversely affect the general economy, adversely impact our supply chain or increase the costs of supplies needed for our operations, or otherwise result in disruptions impacting the communities in which our facilities are located.

In addition, legal requirements regulating greenhouse gas emissions and energy inputs or otherwise associated with the transition to a lower carbon economy may increase in the future, which could increase our costs associated with compliance and otherwise disrupt and adversely affect our operations.

The impact of these or other factors beyond our control could have an adverse effect on our business, financial position and results of operations.

6 unchanged sentences

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.

The success of our healthcare facilities depends in part on the number and quality of the physicians on the medical staffs of our healthcare facilities, our ability to employ quality physicians, the admitting and utilization practices of employed and independent physicians, maintaining good relations with those physicians and controlling costs related to the employment of physicians.

Although we employ some physicians, physicians are often not employees at our healthcare facilities at which they practice.

In many of the markets we serve, many physicians have admitting privileges at other healthcare facilities in addition to our healthcare facilities.

Such physicians may terminate their affiliation with or employment by our healthcare facilities at any time.

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.

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.

Because a significant percentage of our revenues consists of fixed, prospective payments, our ability to pass along increased labor costs is constrained.

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 business.

12 unchanged sentences

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.

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.

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.

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

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

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.

8 unchanged sentences

If we perform at a level below the outcomes demonstrated by our competitors, are unable to meet or exceed the quality performance standards under any applicable value-based purchasing program, or otherwise fail to effectively provide or coordinate the efficient delivery of quality healthcare services, our reputation in the industry may be negatively impacted, we may receive reduced reimbursement amounts and we may owe repayments to payors, causing our revenues to decline .

Our revenues are somewhat concentrated in a 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, Texas and Alabama.

Our revenues are somewhat concentrated in a relatively sm all number of states , which make s us particularly sensitive to regulatory and economic changes in those states.

Our revenues are particularly sensitive to regulatory and economic changes in states in which we generate a significant portion of our revenues, including Indiana, Alabama, Texas and Florida.

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.

1 unchanged sentence

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.

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

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

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

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

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

Risks Related to Human Capital

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

Although we employ some physicians, physicians are often not employees at our healthcare facilities at which they practice.

In many of the markets we serve, many physicians have admitting privileges at other healthcare facilities in addition to our healthcare facilities.

Such physicians may terminate their affiliation with or employment by our healthcare facilities at any time.

Moreover, we are facing increased competition from health insurers and private equity-back companies seeking to acquire or affiliate with physicians or physician practices.

In some markets, physician recruitment and retention may be affected by a shortage of physicians in certain specialties or the difficulties physicians may experience in obtaining professional liability insurance.

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-Kickback Statute, similar state laws and implementing regulations.

Our performance and labor costs have been, and may continue to be, adversely affected by challenging labor market conditions and the shortage of qualified nurses and other healthcare personnel.

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

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

Due to such challenges and other factors, our hospitals and other healthcare facilities, like other healthcare providers, have experienced increased labor costs.

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

In addition, to the extent we are unable to maintain sufficient staffing levels at our hospitals, we may be required to limit the acute healthcare services provided at certain of our hospitals, which would have a corresponding adverse effect on our net revenues.

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

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

T he impact of labor shortages across the healthcare industry may result in other healthcare facilities, such as nursing homes, limiting admissions, which may constrain our ability to discharge patients to such facilities and further exacerbate the demand on our resources.

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

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

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

We may be unable to attract, hire, and retain a highly qualified and diverse workforce, including key management.

At December 31, 2022, certain employees at five of our hospitals were represented by various labor unions.

If our labor costs continue to increase, we may not be able to raise rates to offset these increased costs.

Because a significant percentage of our revenues consists of fixed, prospective payments, our ability to pass along increased labor costs is constrained.

In the event we are not entirely effective at recruiting and retaining qualified facility management, nurses and other medical support personnel, or in controlling labor costs, this could continue to have an adverse effect on our results of operations.

Risks Related to Legal Proceedings

3 unchanged sentences

In addition, we are and may become subject to other loss contingencies, both known and unknown, which may relate to past, present and future facts, events, circumstances and occurrences.

Should an unfavorable outcome occur in connection with our legal, regulatory or governmental proceedings or other loss contingencies, or if we become subject to any such loss contingencies in the future, there could be an adverse impact on our financial position, results of operations and liquidity.

Should an unfavorable outcome occur in connection with our current or potential future legal, regulatory or governmental proceedings or other loss contingencies, or if we become subject to any such loss contingencies in the future, there could be an adverse impact on our financial position, results of operations and liquidity.

In particular, government investigations, as well as qui tam lawsuits, may lead to significant fines, penalties, damages payments or other sanctions, including exclusion from government healthcare programs.

1 unchanged sentence

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

Physicians, hospitals and other healthcare providers have become subject to an increasing number of legal actions alleging malpractice, product liability, or related legal theories.

Physicians, hospitals and other healthcare providers have become subject to an increasing number of legal actions alleging professional liability, product liability, or related legal theories.

Even in states that have imposed caps on damages, litigants are seeking recoveries under new theories of liability that might not be subject to the caps on damages.

Many of these actions involve large claims and significant defense costs.

To protect us from the cost of these claims, we maintain claims made professional malpractice liability insurance and general liability insurance coverage in excess of those amounts for which we are self-insured.

To protect us from the cost of these claims, we maintain claims-made professional liability insurance and general liability insurance coverage in excess of those amounts for which we are self-insured.

This insurance coverage is in amounts that we believe to be sufficient for our operations;

6 unchanged sentences

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.

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, 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 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.

Congress and certain state legislatures have introduced, considered or 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 Affordable Care Act is the most prominent of these reform efforts.

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.

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

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

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

The Affordable Care Act is the most prominent of these legislative reform efforts.

The law affects how healthcare services are covered, delivered, and reimbursed, and expanded health insurance coverage through a combination of public program expansion and private sector health insurance reforms.

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

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

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 ).

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

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

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

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

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

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

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

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

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

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

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

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.

There is uncertainty regarding whether, when, and how the Affordable Care Act will be further changed and how the Affordable Care Act will be interpreted and implemented.

Changes to the interpretation or implementation of the Affordable Care Act could eliminate or alter provisions beneficial to us while leaving in place provisions reducing our reimbursement, and thereby have an adverse effect on our business.

There is also uncertainty regarding whether, when, and what other health reform measures will be adopted through governmental avenues and/or the private sector, the timing and implementation of any such efforts, and the impact of those efforts on providers as well as other healthcare industry participants.

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

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

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

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.

7 unchanged sentences

billing and coding for services;

properly handling overpayments;

proper handling of overpayments;

classification of levels of care provided;

11 unchanged sentences

and communications with patients and consumers.

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

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

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.

13 unchanged sentences

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.

The data protection landscape is rapidly evolving, and we are subject to numerous state and federal laws, requirements and regulations governing the collection, use, storage, processing, disclosure, retention, privacy and security of health-related and other regulated, sensitive or confidential information, and may become subject to additional legal requirements of this nature in the future.

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.

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.

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 .

Failure to comply with the HIPAA 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 business 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.

7 unchanged sentences

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.

Our marketing and patient engagement activities are subject to communications laws such as the Telephone Consumer

Protection Act, or the TCPA, and the Controlling the Assault of Non-Solicited Pornography and Marketing Act, or CAN-SPAM.

Determination by a court or regulatory agency that our calling, texting or email practices violate the TCPA or CAN-SPAM could subject us to civil penalties and could require us to change some portions of our business.

2 unchanged sentences

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.

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

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.

1 unchanged sentence

Thus, if our hospitals and employed professionals are unable to properly adopt, maintain, and utilize certified EHR systems, we could be subject to penalties and lawsuits that may have an adverse effect on our consolidated financial position and consolidated results of operations.

As 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.

As EHR 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 healthcare providers and certain other entities.

Information blocking is defined as engaging in activities that are likely to interfere with the access, exchange or use of electronic health information, subject to limited exceptions.

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

Current and 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.

Current and future initiatives related to healthcare technology and interoperability may require changes to our operations, impose new and complex obligations on us, affect our relationships with providers, vendors, healthcare information exchanges and other third parties and require investments in infrastructure.

It is difficult to predict the impact of these initiatives.

14 unchanged sentences

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.

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.

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.

If the fair value of our reporting unit declines, a material non-cash charge to earnings from impairment of our goodwill could result and recent developments have increased our risk of future goodwill impairment.

On an ongoing basis, under U.S.

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.

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

In assessing the fair value of this reporting unit, we consider, among other things, the most recent price of our common stock and fair value of our long-term debt, our recent financial results, estimates of future revenue and expense growth, estimated market multiples, expected capital expenditures, income tax rates, costs of invested capital and a discount rate.

We performed our last annual goodwill impairment evaluation during the fourth quarter of 2022 using the October 31, 2022 measurement date, which indicated no impairment.

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

Taking into account these developments, we could record material impairment charges in the future if our estimates or assumptions with respect to such fair value determination change in the future.

In this regard, we recorded material non-cash impairment charges with respect to our hospital operations reporting unit in 2016 and 2017.

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.

2 unchanged sentences

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, 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.

3 unchanged sentences

Information systems require an ongoing commitment of significant resources to maintain and enhance existing systems and to develop new systems in order to keep pace with continual changes in information technology.

Failure to adequately manage implementations of new technology, updates or enhancements of such platforms or interfaces between platforms could place us at a competitive disadvantage, disrupt our operations, and have a material, adverse impact on our business and results of operations.

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

We also rely on third-party providers of financial, clinical, patient accounting and network information services, including those that interface with our own systems, and, as a result, we face operational challenges in maintaining multiple provider platforms and facilitating the interface of such systems with one another.

1 unchanged sentence

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, 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.

Our networks and information systems, and the networks and information systems of third parties that we rely upon, are also subject to disruption due to events such as a major earthquake, natural disaster, fire, telecommunications failure, power outages, new system implementations, computer viruses, ransomware or other malware, security breaches, cyber-attacks (including ransomware), human errors (such as inadvertent misuse by employees), acts of war, terrorist or criminal activities or other catastrophic events.

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

If the information systems on which we rely fail or are interrupted or if our access to these systems is limited in the future, or if we experience data loss or manipulation, it could result in unauthorized disclosure, misuse, loss or alteration

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

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

3 unchanged sentences

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.

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

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

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

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

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

4 unchanged sentences

As cybersecurity threats continue to evolve, we may be required to expend significant additional resources to continue to modify or enhance our protective measures or to investigate and remediate any information security vulnerabilities, but we still might not be able to anticipate or prevent certain attack methods.

As previously disclosed in a Current Report on Form 8-K filed by us on February 13, 2023, a third-party vendor who provides a secure file transfer software platform utilized by our subsidiaries experienced a security breach whereby PHI and personal information, or PI, of certain patients of our healthcare facilities were exposed to the attacker.

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

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

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

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.

Our ability to provide various healthcare services could be affected, particularly with respect to telehealth services.

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

4 unchanged sentences

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;

12 unchanged sentences

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

What changed 10-K

Item 1. Business