What changed in this filing

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Item 8. Financial Statements and Supplementary Data

2023-02-17 compared with 2022-02-17 · 338 added, 477 removed, 1195 unchanged (41% of the section changed)

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Report of Independent Registered Public Accounting Firm (PCAOB ID No.

Consolidated Statements of Income (Loss) for the Years Ended December 31, 2021, 2020 and 2019

Consolidated Statements of Comprehensive Income (Loss) for the Years Ended December 31, 2021, 2020 and 2019

Consolidated Statements of Income for the Years Ended December 31, 2022, 2021 and 2020

Consolidated Statements of Comprehensive Income for the Years Ended December 31, 2022, 2021 and 2020

Consolidated Balance Sheets as of December 31, 2022 and 2021

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Community Health Systems, Inc.

Franklin, Tennessee

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheets of Community Health Systems, Inc.

and subsidiaries (the “ Companyˮ) as of December 31, 2021 and 2020, the related consolidated statements of income (loss), comprehensive income (loss), stockholders’ deficit, and cash flows, for each of the three years in the period ended December 31, 2021, and the related notes (collectively referred to as the “ financial statementsˮ).

and subsidiaries (the “ Companyˮ) as of December 31, 2022 and 2021, the related consolidated statements of income, comprehensive income, stockholders’ deficit, and cash flows, for each of the three years in the period ended December 31, 2022, and the related notes (collectively referred to as the “ financial statementsˮ).

In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2022 and 2021, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2022, in conformity with accounting principles generally accepted in the United States of America.

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Implicit price concessions related to self-pay patients require more extensive judgment and subjective assumptions.

Self-pay price concessions relate primarily to amounts due directly from patients and are based upon management’s assessment of historical write-offs and expected net collections, business and economic conditions, trends in federal, state, and private employer health care coverage, and other collection indicators.

Auditing management’s estimate of self-pay price concessions was complex and judgmental due to the significant data inputs and subjective assumptions utilized in determining related amounts.

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The self-insurance reserves are estimated based on the Company’s historical claims experience, supplemented with industry experience, as necessary, and is established using actuarial methods followed in the insurance industry.

Auditing management’s professional liability reserves was complex and judgmental due to the significant estimations required in determining the projected settlement value of reported and unreported claims.

Auditing management’s professional liability reserves was complex, judgmental and required the need to involve our actuarial specialists due to the significant estimations required in determining the projected settlement value of reported and unreported claims.

How the Critical Audit Matter Was Addressed in the Audit

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With the assistance of our actuarial specialists, we developed independent estimates of the professional liability claims, including loss data and industry claim development factors, and compared our estimates to management’s estimates.

Goodwill Impairment – Refer to Notes 1 and 4 to the financial statements

Critical Audit Matter Description

The Company’s evaluation of goodwill for impairment involves the comparison of the fair value of the hospital reporting unit to its carrying value.

A Step 1 analysis is prepared at the annual testing date of October 31st or when impairment indicators are present.

The Company determines the fair value of the hospital reporting unit in the Step 1 analysis using the income approach and the market approach.

The determination of fair value using the income approach requires management to make significant estimates and assumptions related to forecasts of revenue and expense growth rates and a discount rate.

The determination of fair value using comparable market multiples requires management to make significant assumptions related to revenue and EBITDA multiples.

The goodwill balance was $4.2 billion as of December 31, 2022.

The fair value of the Company’s hospital reporting unit exceeded the carrying value as of the measurement date and, therefore, no impairment was recognized.

We identified goodwill as a critical audit matter because of the significant estimates and assumptions management makes to estimate the fair value of the reporting unit.

This required a high degree of auditor judgment and an increased extent of effort, including the need to involve our fair value specialists.

How the Critical Audit Matter Was Addressed in the Audit

Our audit procedures related to the fair value of the hospital reporting unit included the following, among others:

We tested management’s internal controls that address the risks of material misstatement related to the Company’s determination of the fair value of the reporting unit.

We evaluated the reasonableness of revenue and expense growth in management's forecasts by evaluating historical forecasts to actual results and comparing the forecasts used in the income approach to (1) historical results, (2) internal communications to management and the Board of Directors, and (3) forecasted information included in Company’s press releases as well as in analyst and industry reports of the Company and companies in its peer group.

With the assistance of our fair value specialists, we evaluated the discount rate, including developing a range of independent estimates, and comparing those to the discount rate selected by management.

With the assistance of fair value specialists, we evaluated the revenue and EBITDA multiples in the market approach and performed the following:

We evaluated the valuation methodology and calculations in the market approach.

We independently calculated the revenue and EBITDA multiples of the Company and compared them to the multiples selected by management.

We evaluated the weighting of the revenue and EBITDA multiples in determining the fair value calculated in the market approach.

/s/ Deloitte & Touche LLP

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AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME (LOSS)

CONSOLIDATED STATEMENTS OF INCOME

Year Ended December 31,

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Other operating expenses

Government and other legal settlements and related costs

Electronic health records incentive reimbursement

Lease cost and rent

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Income from operations

Interest expense, net of interest income of $ 3 in 2021, 2020 and 2019

Loss (gain) from early extinguishment of debt

Interest expense, net of interest income of $ 2 in 2022 and $ 3 in both 2021 and 2020

(Gain) loss from early extinguishment of debt

Gain on sale of equity interests in Macon Healthcare, LLC

Gain from CoreTrust transaction

Equity in earnings of unconsolidated affiliates

Income (loss) before income taxes

Income before income taxes

Provision for (benefit from) income taxes

Net income (loss)

Net income attributable to noncontrolling interests

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

Earnings (loss) per share attributable to Community Health Systems,

Net income attributable to Community Health Systems, Inc.

Earnings per share attributable to Community Health Systems,

stockholders:

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AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

Year Ended December 31,

(In millions)

Net income (loss)

Other comprehensive (loss) income, net of income taxes:

Net change in fair value of interest rate swaps, net of tax of $ 0

for the years ended December 31, 2021 and 2020 and $ 1 for the year

ended December 31, 2019

Net change in fair value of available-for-sale debt securities, net of tax

for the years ended December 31, 2022, 2021 and 2020

Net change in fair value of available-for-sale debt securities, net

of tax of $ 5 for the year ended December 31, 2022 and $ 1 for the

years ended December 31, 2021 and 2020

Amortization and recognition of unrecognized pension cost

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December 31, 2022, 2021 and 2020, respectively

Other comprehensive (loss) income

Comprehensive income (loss)

Other comprehensive loss

Comprehensive income

Comprehensive income attributable to noncontrolling interests

Comprehensive income (loss) attributable to Community Health Systems,

Comprehensive income attributable to Community Health Systems,

See accompanying notes to the consolidated financial statements.

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Cash and cash equivalents

Patient accounts receivable (see Note 1)

Patient accounts receivable (Note 1)

Prepaid income taxes

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Stockholders’

Income (Loss)

(In millions, except share data)

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Other reclassifications of noncontrolling interests

Disposition of less-than-wholly owned hospital

Adjustment to redemption value of redeemable noncontrolling interests

Cancellation of restricted stock for tax withholdings on vested shares

Issuance of common stock in connection with the exercise of stock options

Income tax payable increase from vesting of restricted shares

Section 3(a)(9) exchange

Stock-based compensation

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Disposition of less-than-wholly owned hospital

Noncontrolling interests in acquired entity

Adjustment to redemption value of redeemable noncontrolling interests

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Issuance of common stock in connection with the exercise of stock options

Income tax payable increase from vesting of restricted shares

Section 3(a)(9) exchange

Stock-based compensation

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Purchase of subsidiary shares from noncontrolling interests

Other reclassifications of noncontrolling interests

Disposition of less-than-wholly owned hospital

Noncontrolling interests in acquired entity

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Cash flows from operating activities:

Net income (loss)

Adjustments to reconcile net income (loss) to net cash (used in) provided

by operating activities:

Adjustments to reconcile net income to net cash provided by

(used in) operating activities:

Depreciation and amortization

Deferred income taxes

Government and other legal settlements and related costs

Stock-based compensation expense

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

Loss (gain) from early extinguishment of debt

(Gain) loss from early extinguishment of debt

Gain on sale of equity interests in Macon Healthcare, LLC

Gain from CoreTrust transaction

Other non-cash expenses, net

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Accounts payable, accrued liabilities and income taxes

Net cash (used in) provided by operating activities

Net cash provided by (used in) operating activities

Cash flows from investing activities:

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Proceeds from sale of equity interests in Macon Healthcare, LLC

Distribution of CoreTrust proceeds

Increase in other investments

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Distributions to noncontrolling investors in joint ventures

Proceeds from sale-lease back

Proceeds from sale-leaseback

Other borrowings

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and its subsidiaries (collectively the “Company”) own, lease and operate general acute care hospitals as well as outpatient facilities in communities across the country.

As of December 31, 2021, the Company owned or leased 83 hospitals, including two stand-alone rehabilitation or psychiatric hospitals, licensed for 13,289 beds in 16 states.

As of December 31, 2022, the Company’s 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.

Throughout these notes to the consolidated financial statements, Community Health Systems, Inc.

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The hospitals, operations and businesses described in this filing are owned and operated, and management services provided, by distinct and indirect subsidiaries of Community Health Systems, Inc .

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

As of December 31, 2022, Indiana, Alabama, Texas and Florida represent the only areas of significant geographic concentration.

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

Net operating revenues generated by the Company’s 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 the Company’s 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.

Net operating revenues generated by the Company’s 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 the Company’s 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.

Use of Estimates .

The preparation of financial statements in conformity with U.S.

generally accepted accounting principles (“GAAP”) requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements.

generally accepted accounting principles (“U.S.

GAAP”) requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements.

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

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Noncontrolling interests in less-than-wholly-owned consolidated subsidiaries of the Parent are presented as a component of total equity to distinguish between the interests of the Parent and the interests of the noncontrolling owners.

Revenues, expenses and income from these subsidiaries are included in the consolidated amounts as presented on the consolidated statements of income (loss), along with a net income measure that separately presents the amounts attributable to the controlling interests and the amounts attributable to the noncontrolling interests for each of the periods presented.

Noncontrolling interests that are redeemable or may become redeemable at a fixed or determinable price at the option of the holder or upon the occurrence of an event outside of the control of the Company are presented in mezzanine equity on the consolidated balance sheets.

Reclassifications .

Certain prior period amounts have been reclassified to conform to the current period presentation within the consolidated statements of cash flows.

Revenues, expenses and income from these subsidiaries are included in the consolidated amounts as presented in the consolidated statements of income, along with a net income measure that separately presents the amounts attributable to the controlling interests and the amounts attributable to the noncontrolling interests for each of the periods presented.

Cost of Revenue .

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Included in these corporate office costs is stock-based compensation of $ 20 million, $ 25 million and $ 13 million for the years ended December 31, 2022, 2021 and 2020, respectively.

Operating costs for the year ended December 31, 2021 reflect increased stock compensation expense and annual cash incentive compensation expense compared to the years ended December 31, 2020 and 2019.

Operating costs for the years ended December 31, 2022 and 2021 reflect increased stock compensation expense and annual cash incentive compensation expense compared to the year ended December 31, 2020.

Cash Equivalents .

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Trading securities are reported at fair value with unrealized gains and losses included in earnings.

Other comprehensive loss, net of tax, included an unrealized loss of $ 5 million during the year ended December 31, 2021, and an unrealized gain of $ 4 million for both of the years ended December 31, 2020 and 2019 related to these available-for-sale debt securities.

COMMUNITY HEALTH SYSTEMS, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

Other comprehensive loss, net of tax, included an unrealized loss of $ 17 million and $ 5 million during the years ended December 31, 2022 and 2021, respectively, and an unrealized gain of $ 4 million for the year ended December 31, 2020 related to these available-for-sale debt securities.

Property and Equipment .

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Purchases of property and equipment and internal-use software accrued in accounts payable and not yet paid were $ 87 million and $ 105 million at December 31, 2022 and 2021, respectively.

COMMUNITY HEALTH SYSTEMS, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

The Company also leases certain facilities and equipment under finance leases (see Note 9).

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Other Assets.

Other assets consist of the insurance recovery receivable from excess insurance carriers related to the Company’s self-insured malpractice general liability and workers’ compensation insurance liability;

Other assets consist of the insurance recovery receivable from excess insurance carriers related to the Company’s self-insured professional liability and workers’ compensation insurance liability;

costs to recruit physicians to the Company’s markets, which are deferred and expensed over the term of the respective physician recruitment contract, generally three years , and included in amortization expense;

equity method investments;

right-of-use (“ROU”) assets for operating leases;

and capitalized internal-use software costs, which are expensed over the expected useful life, which is generally three years for routine software, and included in amortization expense.

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Under these supplemental programs, the Company recognizes revenue and related expenses in the period in which amounts are estimable and payment is reasonably assured.

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

Reimbursement under these programs is reflected in net operating revenues.

Taxes or other program-related costs are reflected in other operating expenses.

COMMUNITY HEALTH SYSTEMS, INC.

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Year Ended December 31,

Managed Care and other third-party payors

Medicare Managed Care

Other third-party payors

Patient Accounts Receivable

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

The Company also continually reviews the net realizable value of accounts receivable by monitoring historical cash collections as a percentage of trailing net operating revenues, as well as by analyzing current period net revenue and admissions by payor classification, days revenue outstanding, the composition of self-pay receivables between pure self-pay patients and the patient responsibility portion of third-party insured receivables, the impact of recent acquisitions and dispositions and the impact of current economic and other events.

The Company also continually reviews the net realizable value of accounts receivable by monitoring historical cash collections as a percentage of trailing net operating revenues, as well as by analyzing current period net operating revenues and admissions by payor classification, days revenue outstanding, the composition of self-pay receivables between pure self-pay patients and the patient responsibility portion of third-party insured receivables, the impact of recent acquisitions and dispositions and the impact of current macroeconomic conditions and other events.

Final settlements for some payors and programs are subject to adjustment based on administrative review and audit by third parties.

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The Company determines amounts that qualify for charity care based on the patient’s household income relative to the federal poverty level guidelines, as established by the federal government.

These charity care services are estimated to be $ 1.1 billion, $ 1.0 billion and $ 540 million for the years ended December 31, 2021, 2020 and 2019, respectively, representing the value (at the Company’s standard charges) of these charity care services that are excluded from net operating revenues.

These charity care services are estimated to be $ 1.4 billion, $ 1.1 billion and $ 1.0 billion for the years ended December 31, 2022, 2021 and 2020, respectively, representing the value (at the Company’s standard charges) of these charity care services that are excluded from net operating revenues.

The estimated cost incurred by the Company to provide these charity care services to patients who are unable to pay was approximately $ 166 million, $ 123 million and $ 122 million for the years ended December 31, 2022, 2021 and 2020, respectively.

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The Company determines amounts that qualify for charity care based on the patient’s household income relative to the federal poverty level guidelines, as established by the federal government.

The Company updated its policy during the year ended December 31, 2020 in a manner which increased the number of accounts qualifying for charity care.

This resulted in an increase in charity care services during the years ended December 31, 2020 and 2021 compared to 2019 and previous years.

The right-of-use (“ROU”) asset recorded at commencement of the lease represents the right to use the underlying asset over the lease term in exchange for the lease payments.

Leases with an initial term of 12 months or less that do not have an option to

The Company updated its policy during the three months ended March 31, 2022 in a manner which increased the number of accounts qualifying for charity care.

This resulted in an increase in charity care services during the year ended December 31, 2022, compared to the same period in 2021.

COMMUNITY HEALTH SYSTEMS, INC.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

purchase the underlying asset that is deemed reasonably certain to be exercised are not recorded on the balance sheet;

Leases are recorded in the consolidated balance sheets through recognition of a liability for the discounted present value of future fixed lease payments and a corresponding ROU asset.

The ROU asset recorded at commencement of the lease represents the right to use the underlying asset over the lease term in exchange for the lease payments.

Leases with an initial term of 12 months or less that do not have an option to purchase the underlying asset that is deemed reasonably certain to be exercised are not recorded in the consolidated balance sheets;

rather, rent expense for these leases is recognized on a straight-line basis over the lease term, or when incurred if a month-to-month lease.

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Accounting for the Impairment or Disposal of Long-Lived Assets.

During the year ended December 31, 2022, the Company recorded an impairment charge of approximately $ 71 million, of which (i) approximately $ 7 million was recorded to adjust the carrying value of long-lived assets at hospitals and related businesses that were sold at a sales price below carrying value, (ii) approximately $ 44 million was recorded to reduce the carrying value of closed hospitals to estimated fair value less costs to sell, (iii) approximately $ 9 million was recorded related to the expiration or planned non-renewal of leases to operate certain hospitals, and (iv) approximately $ 11 million was recorded to reduce the carrying value of several assets that were either idled, disposed or held-for-sale.

During the year ended December 31, 2021, the Company recorded a net loss on disposal of approximately $ 24 million, of which (i) approximately $ 29 million was recorded to adjust the carrying value of long-lived assets at several hospitals that were sold at a sales price below carrying value, (ii) approximately $ 3 million was recorded related to divestiture related expenses, and (iii) approximately $ 8 million of gain was recorded related to the disposal of the Company’s majority interest in a surgery center that was sold on January 1, 2021.

Approximately $ 5 million of goodwill was allocated to facilities disposed of during the year ended December 31, 2021.

During the year ended December 31, 2020, the Company recorded a total combined net impairment charge and loss on disposal of approximately $ 48 million, of which (i) approximately $ 59 million was recorded to reduce the carrying value of closed hospitals and certain hospitals that have been sold or deemed held for sale based on the difference between the carrying value of the hospital disposal groups compared to estimated fair value less costs to sell , (ii) approximately $ 74 million was recorded primarily to adjust the carrying value of other long-lived assets at several underperforming hospitals or where the Company was in discussions with potential buyers for divestiture at a sales price that indicated a fair value below carrying value , (iii) approximately $ 3 million was recorded related to a hospital that closed on September 30, 2020, and (iv) approximately $ 1 million was recorded related to a shared service center that closed on July 31, 2020.

The impairment charge was partially offset by a gain of approximately $ 89 million related primarily to three hospitals sold on January 1, 2020, one hospital sold on July 1, 2020 and two hospitals sold on October 27, 2020.

During the year ended December 31, 2020, a net allocation of approximately $ 110 million of goodwill was allocated from the hospital operations reporting unit based on a calculation of each disposal groups’ relative fair value compared to the total reporting unit.

The Company will continue to evaluate the potential for further impairment of the long-lived assets of underperforming hospitals as well as evaluate offers for potential sales.

Based on such analysis, additional impairment charges may be recorded in the future.

Income Taxes.

The Company accounts for income taxes under the asset and liability method, in which deferred income tax assets and liabilities are recognized for the tax consequences of “temporary differences” by applying enacted statutory tax rates applicable to future years to differences between the financial statement carrying amounts and the tax bases of existing assets and liabilities.

The effect on deferred taxes of a change in tax rates is recognized in the consolidated statements of income (loss) during the period in which the tax rate change becomes law.

Comprehensive Loss .

Comprehensive loss is the change in equity of a business enterprise during a period from transactions and other events and circumstances from non-owner sources.

The effect on deferred taxes of a change in tax rates is recognized in the consolidated statements of income during the period in which the tax rate change becomes law.

Other Comprehensive Loss .

Other comprehensive loss is the change in equity of a business enterprise during a period from transactions and other events and circumstances from non-owner sources.

Segment Reporting .

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Aggregation of similar operating segments into a single reportable operating segment is permitted if the businesses have similar economic characteristics and meet the criteria established by U.S.

The Company operates a single

The Company operates a single operating segment represented by hospital operations (which includes the Company's acute care hospitals and related healthcare entities that provide inpatient and outpatient healthcare services).

COMMUNITY HEALTH SYSTEMS, INC.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

operating segment represented by hospital operations (which includes the Company's acute care hospitals and related healthcare entities that provide inpatient and outpatient healthcare services).

COVID-19 Pandemic.

COVID-19, a disease caused by a novel strain of coronavirus, materially affected the Company’s results of operations during 2020 and continued to affect the Company’s results of operations during the year ended December 31, 2021.

COVID-19, a disease caused by a novel strain of coronavirus, materially affected the Company’s results of operations during 2020, and continued to affect the Company’s results of operations during the years ended December 31, 2022 and 2021.

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.

Sources of relief include the Coronavirus Aid, Relief and Economic Security Act (the “CARES Act”), the Paycheck Protection Program and Health Care Enhancement Act (the “PPPHCE Act”), the Consolidated Appropriations Act, 2021 (the “CAA”), and the American Rescue Plan Act of 2021 (the “ARPA”).

Together, these stimulus laws authorize over $ 186 billion in funding to be distributed to hospitals and other healthcare providers through the Public Health and Social Services Emergency Fund (the “PHSSEF” or “Provider Relief Fund”).

In addition to the relief funding, the CARES Act provided for an expansion of the Medicare Accelerated and Advance Payment Program whereby inpatient acute care hospitals and other eligible providers were able to request accelerated payment of up to 100 % of their Medicare payment amount for a six-month period.

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

Repayments occur through withholding of future Medicare fee-for-service payments.

Providers are required to repay accelerated payments .

Various state and local programs also exist to provide relief, either independently or through distribution of monies received via the CARES Act and other enacted federal legislation.

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Pandemic Relief Funds

Through December 31, 2021, net of amounts that have been repaid to the respective federal, state, or local agency, the Company received approximately $ 763 million in payments through the PHSSEF and various state and local programs on a cumulative basis since their enactment.

Of the net amount received through December 31, 2021, approximately $ 705 million was received during the year ended December 31, 2020 and the remainder was received during the year ended December 31, 2021.

The Company received pandemic relief fund payments through various federal, state and local programs of approximately $ 161 million, $ 58 million and $ 705 million during the years ended December 31, 2022, 2021 and 2020, respectively.

The recognition of amounts received is conditioned upon the provision of care for individuals with possible or actual cases of COVID-19 after January 31, 2020, certification that payment will be used to prevent, prepare for and respond to coronavirus (such amounts shall reimburse the recipient only for healthcare-related expenses or lost revenues, as defined by the U.S.

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Amounts are recognized as a reduction to operating costs and expenses only to the extent the Company is reasonably assured that underlying conditions have been met.

Amounts recognized are denoted by the caption “pandemic relief funds” within the consolidated statements of income (loss).

Amounts recognized are denoted by the caption “pandemic relief funds” within the consolidated statements of income.

The Company’s assessment of whether the terms and conditions for amounts received are reasonably assured of having been met is updated each reporting period and considers, among other things, the requirements set forth in the CARES Act and subsequent relief legislation, responses to all applicable frequently asked questions and other interpretive guidance issued by HHS, including the various Post-Payment Notices of Reporting Requirements, the Company’s expenses incurred attributable to the coronavirus, the Company’s results of operations during such period as compared to the Company’s 2020 budget, and the allocation of general and targeted fund distribution payments among subsidiaries of the Company during such period.

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The deadlines for using and required timelines for reporting on the use of funds depend on the dates of receipt of the funds.

Pandemic relief funds of approximately $ 148 million and $ 601 million were recognized during the years ended December 31, 2021 and 2020, respectively.

Approximately $ 173 million, $ 148 million and $ 601 million during the years ended December 31, 2022, 2021 and 2020, respectively, was recognized as pandemic relief funds within the consolidated statements of income.

Amounts received through the PHSSEF or state and local programs that have not yet been recognized or otherwise have not been refunded to HHS or the various state and local agencies as of December 31, 2022, total approximately $ 2 million and are reflected within accrued liabilities-other in the consolidated balance sheets.

Such unrecognized amounts may either be returned to HHS or the respective state or local agency, as applicable, or may be recognized in future periods if the underlying conditions for recognition are reasonably assured of having been met.

Such unrecognized amounts may either be returned or may be recognized in future periods if the underlying conditions for recognition are reasonably assured of having been met.

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

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Additionally, any such changes may result in the Company’s inability to recognize additional PHSSEF payments or may result in the derecognition of amounts previously recognized, which (in any such case) may be material.

COMMUNITY HEALTH SYSTEMS, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

Medicare Acceler ated Payments

Medicare Accelerated Payments

With respect to the Medicare Accelerated and Advanced Payment Program, the Company received Medicare accelerated payments of approximately $ 1.2 billion in April 2020.

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CMS began recouping Medicare accelerated payments in April 2021.

As of December 31, 2021, all Medicare accelerated payments received by the Company have been recouped or repaid to CMS or assumed by buyers related to hospitals the Company divested.

Approximately $ 1.1 billion and $ 77 million of Medicare accelerated payments received by the Company were recouped or repaid to CMS or assumed by buyers related to hospitals the Company divested during the years ended December 31, 2021 and 2020, respectively .

As of December 31, 2021, all Medicare accelerated payments received by the Company was recouped or repaid to CMS or assumed by buyers related to hospitals the Company divested.

Approximately $ 1.1 billion and $ 77 million of Medicare accelerated payments

COMMUNITY HEALTH SYSTEMS, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

received by the Company were recouped or repaid to CMS or assumed by buyers related to hospitals the Company divested during t he years ended December 31, 2021 an d 2020 , respectively .

New Accounting Pronouncements .

In November 2021, the Financial Accounting Standards Board issued Accounting Standards Update (“ASU”) 2021-10, “Government Assistance (Topic 832), Disclosures by Business Entities about Government Assistance.” This ASU provides specific authoritative guidance for the disclosure of government assistance including the nature of assistance received, the accounting for and presentation of assistance received and the significant terms and conditions, including commitments and contingences.

This ASU is effective for all entities for financial statements issued for annual periods beginning after December 15, 2021 and may be early adopted.

The Company early adopted this ASU beginning with this Annual Report on Form 10-K (“Form 10-K”) for the year ended December 31, 2021.

In September 2022, the Financial Accounting Standards Board issued Accounting Standards Update (“ASU”) 2022-04, “Liabilities – Supplier Finance Programs (Subtopic 405-50), Disclosure of Supplier Finance Program Obligations.” This ASU provides specific authoritative guidance for disclosure of supplier finance programs including key terms of such programs, amounts outstanding, and where the obligations are presented in the statement of financial position.

This ASU is effective for all entities for financial statements issued for annual periods beginning after December 15, 2022, including interim periods, except for the disclosure of rollforward information, which is effective for annual periods beginning after December 15, 2023.

Certain components of this guidance must be applied retrospectively while others may be applied prospectively.

Early adoption is permitted.

The Company is currently evaluating the impact that adoption of this ASU will have on its consolidated financial statements.

The Company has evaluated all other recently issued, but not yet effective, ASUs and does not expect the eventual adoption of these ASUs to have a material impact on its consolidated financial position or results of operations.

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Stock-based compensation awards have been granted under the Community Health Systems, Inc.

Amended and Restated 2009 Stock Option and Award Plan, which was amended and restated as of March 17, 2021 and approved by the Company’s stockholders at the annual meeting of stockholders held on May 11, 2021 (the “2009 Plan”).

The 2009 Plan provides for the grant of incentive stock options intended to qualify under Section 422 of the Internal Revenue Code (“IRC”) and for the grant of stock options which do not so qualify, stock appreciation rights, restricted stock, restricted stock units, performance-based shares or units and other share awards.

Amended and Restated 2009 Stock Option and Award Plan (the “2009 Plan”), which was amended and restated as of March 17, 2021 and approved by the Company’s stockholders at the annual meeting of stockholders held on May 11, 2021.

The 2009 Plan provides for the grant of incentive stock options intended to qualify under Section 422 of the Internal Revenue Code (“IRC”) and for the grant of stock options which do not so qualify, stock appreciation rights, restricted stock, restricted stock units (“RSUs” ), performance-based shares or units and other share awards.

Persons eligible to receive grants under the 2009 Plan include the Company’s directors, officers, employees and consultants.

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Year Ended December 31,

Effect on income (loss) before income taxes

Effect on net income (loss)

At December 31, 2021, $ 27 million of unrecognized stock-based compensation expense related to outstanding unvested stock options, restricted stock and restricted stock units (the terms of which are summarized below) was expected to be recognized over a weighted-average period of 22 months.

Of that amount, $ 4 million related to outstanding unvested stock options was expected to be recognized over a weighted-average period of 22 months and $ 23 million related to outstanding unvested restricted stock and restricted stock units was expected to be recognized over a weighted-average period of 22 months.

Effect on income before income taxes

Effect on net income

At December 31, 2022, $ 34 million of unrecognized stock-based compensation expense related to outstanding unvested stock options, restricted stock and RSUs (the terms of which are summarized below) was expected to be recognized over a weighted-average period of 22 months.

Of that amount, $ 6 million related to outstanding unvested stock options was expected to be recognized over a weighted-average period of 22 months and $ 28 million related to outstanding unvested restricted stock and RSUs was expected to be recognized over a weighted-average period of 22 months.

There were no modifications to awards during the years ended December 31, 2022, 2021 and 2020.

COMMUNITY HEALTH SYSTEMS, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

The fair value of stock options was estimated using the Black Scholes option pricing model with the following assumptions and weighted-average fair values during the years ended December 31, 2022, 2021 and 2020:

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84.3% - 87.5%

84.3% - 88.9%

Expected dividends

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3.0 - 6.0 years

Risk-free interest rate

COMMUNITY HEALTH SYSTEMS, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

In determining the expected term, the Company examined concentrations of option holdings and historical patterns of option exercises and forfeitures, as well as forward-looking factors, in an effort to determine if there were any discernable employee populations.

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Exercisable at December 31, 2022

The weighted-average grant date fair value of stock options granted during the years ended December 31, 2021, 2020 and 2019, respectively, was $ 6.22 , $ 3.17 and $ 3.05 .

The weighted-average grant date fair value of stock options granted during the years ended December 31, 2022, 2021 and 2020, was $ 7.25 , $ 6.22 and $ 3.17 , respectively.

The aggregate intrinsic value (calculated as the number of in-the-money stock options multiplied by the difference between the Company’s closing stock price on the last trading day of the reporting period ($ 4.32 ) and the exercise price of the respective stock options) in the table above represents the amount that would have been received by the option holders had all option holders exercised their options on December 31, 2022.

This amount changes based on the market value of the Company’s common stock.

The aggregate intrinsic value of options exercised during the years ended December 31, 2021 and 2020 was less than $ 1 million for both years.

There were no options exercised during the year ended December 31, 2019.

The aggregate intrinsic value of options exercised during the years ended December 31, 2022, 2021 and 2020 was less than $ 1 million for all three years.

The aggregate intrinsic value of options vested and expected to vest approximates that of the outstanding options.

COMMUNITY HEALTH SYSTEMS, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

The Company has also awarded restricted stock under the 2009 Plan to employees of certain subsidiaries.

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If the applicable target performance objective is met at the end of the three-year period, then the restricted stock award subject to such performance objective will vest in full on the third anniversary of the award date.

Additionally, for these performance-based awards, based on the level of achievement for the applicable performance objective within the parameters specified in the award agreement, the number of shares to be issued in connection with the vesting of the award may be adjusted to decrease or increase the number of shares specified in the original award.

Additionally, for these performance-based awards, based on the level of

COMMUNITY HEALTH SYSTEMS, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

achievement for the applicable performance objective within the parameters specified in the award agreement, the number of shares to be issued in connection with the vesting of the award may be adjusted to decrease or increase the number of shares specified in the original award.

Notwithstanding the above-mentioned performance objectives and vesting requirements, the restrictions with respect to restricted stock granted under the 2009 Plan may lapse earlier in the event of death, disability or termination of employment by the Company for any reason other than for cause of the holder of the restricted stock, or change in control of the Company.

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Unvested at December 31, 2022

Restricted stock units (“RSUs”) have been granted to the Company’s non-management directors under the 2009 Plan.

Each of the Company’s then serving non-management directors received grants under the 2009 Plan of 34,068 RSUs, 34,483 RSUs and 19,296 RSUs on March 1, 2019, 2020 and 2021, respectively, except for the non-management director who was newly appointed in September 2021 who will begin receiving RSUs effective March 1, 2022.

Each of the 2019, 2020 and 2021 grants had a grant date fair value of approximately $ 170,000 .

RSUs have been granted to the Company’s non-management directors under the 2009 Plan.

Each of the Company’s then serving non-management directors received grants under the 2009 Plan of 17,682 RSUs, 19,296 RSUs and 34,483 RSUs on March 1, 2022, 2021 and 2020, respectively.

The March 1, 2022, 2021 and 2020 grants had a fair value of approximately $ 180,000 , $ 170,000 and $ 170,000 , respectively.

On June 1, 2022, a new non-management director received a grant of 17,682 RSUs with a grant date fair value of approximately $ 88,000 .

Vesting of these RSUs occurs in one-third increments on each of the first three anniversaries of the award date or upon the director’s earlier cessation of service on the board, other than for cause.

Beginning with the 2020 grant, each non-management director may elect, prior to the beginning of the calendar year in which the award is granted, to defer the receipt of shares of the Company’s common stock issuable upon vesting until either his or her (i) separation from service with the Company or (ii) attainment of an age specified in advance by the non-management director.

A total of four directors elected to defer the receipt of RSUs granted on March 1, 2021 to a future date, and a total of five directors elected to defer the receipt of RSUs granted on March 1, 2020 to a future date.

A total of three directors elected to defer the receipt of RSUs granted on March 1, 2022 to a future date, a total of four directors elected to defer the receipt of RSUs granted on March 1, 2021 to a future date, and a total of five directors elected to defer the receipt of RSUs granted on March 1, 2020 to a future date.

COMMUNITY HEALTH SYSTEMS, INC.

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Unvested at December 31, 2022

ACQUISITIONS AND DIVESTITURES

ACQUISITIONS, DIVESTITURES AND CLOSURES

The Company accounts for all transactions that represent business combinations using the acquisition method of accounting, where the identifiable assets acquired, the liabilities assumed and any noncontrolling interest in the acquired entity are recognized and measured at their fair values on the date the Company obtains control in the acquiree.

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Goodwill is determined as the excess of the fair value of the consideration conveyed in the acquisition over the fair value of the net assets acquired.

Effective June 1, 2019, one or more subsidiaries of the Company completed the acquisition of Northwest Mississippi Medical Center in Clarksdale, Mississippi.

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

The total cash consideration paid for operating assets was approximately $ 2 million with additional consideration of $ 9 million in assumed liabilities, for a total consideration of $ 11 million.

This hospital was acquired in conjunction with the bankruptcy proceedings for the previous owner that acquired the hospital from the Company in 2017 as part of an agreement with the local county government associated with its lease of the hospital building.

Based on the Company’s final purchase price allocation relating to this acquisition as of December 31, 2019, no goodwill has been recorded.

Prior to the completion of the acquisition, the Company initiated a plan to sell this hospital and as such the hospital was classified as held for sale at December 31, 2019 and 2020.

This disposition was completed on February 1, 2021.

Other Acquisitions

During the years ended December 31, 2021, 2020 and 2019, one or more subsidiaries of the Company paid approximately $ 3 million, $ 1 million and $ 8 million, respectively, to acquire the operating assets and related businesses of certain physician practices, clinics and other ancillary businesses that operate within the communities served by the Company’s affiliated hospitals.

In connection with these acquisitions, during the year ended December 31, 2021, the Company allocated the purchase price to property and equipment, working capital, noncontrolling interests and goodwill, and d uring the year ended December 31, 2020, t he Company allocated the majority of the purchase price to goodwill.

In connection with these acquisitions, during the year ended December 31, 2019, the Company allocated approximately $ 4 million of the consideration paid to property and equipment and net working capital and the remainder, approximately $ 4 million consisting of intangible assets that do not qualify for separate recognition, to goodwill.

During the years ended December 31, 2022, 2021 and 2020, one or more subsidiaries of the Company paid approximately $ 9 million, $ 3 million and $ 1 million, respectively, to acquire the operating assets and related businesses of certain physician practices, clinics, ambulatory surgery centers and other ancillary businesses that operate within the communities served by the Company’s affiliated hospitals.

In connection with these acquisitions, during the years ended December 31, 2022 and 2021, the Company allocated the purchase price to property and equipment, working capital, noncontrolling interests and goodwill.

D uring the year ended December 31, 2020, t he Company allocated the majority of the purchase price to goodwill.

COMMUNITY HEALTH SYSTEMS, INC.

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2022 Divestitures:

AllianceHealth Seminole

SSM Heath Care of Oklahoma, Inc.

2021 Divestitures:

Lea Regional Medical Center

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Shands Live Oak Regional Medical Center

HCA Healthcare, Inc.

Shands Starke Regional Medical Center

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January 1, 2020

2019 Divestitures:

Bluefield Regional Medical Center

Princeton Community Hospital Association

Bluefield, WV

October 1, 2019

Lake Wales Medical Center

Adventist Health System

Lake Wales, FL

September 1, 2019

Heart of Florida Regional Medical Center

Adventist Health System

Davenport, FL

September 1, 2019

College Station Medical Center

Joseph Regional Health Center

College Station, TX

August 1, 2019

Tennova Healthcare - Lebanon

Vanderbilt University Medical Center

August 1, 2019

Chester Regional Medical Center

Medical University Hospital Authority

March 1, 2019

Carolinas Hospital System - Florence

Medical University Hospital Authority

March 1, 2019

Springs Memorial Hospital

Medical University Hospital Authority

Lancaster, SC

March 1, 2019

Carolinas Hospital System - Marion

Medical University Hospital Authority

March 1, 2019

Memorial Hospital of Salem County

Community Healthcare Associates, LLC

January 31, 2019

Mary Black Health System - Spartanburg

Spartanburg Regional Healthcare System

Spartanburg, SC

January 1, 2019

Mary Black Health System - Gaffney

Spartanburg Regional Healthcare System

January 1, 2019

The following table discloses amounts included in the consolidated balance sheets for the hospitals classified as held for sale as of December 31, 2020 (in millions).

Other assets, net primarily includes the net property and equipment for hospitals held for sale.

On September 14, 2022, one or more affiliates of the Company entered into a definitive agreement for the sale of substantially all of the assets of Greenbrier Valley Medical Center ( 122 licensed beds) in Ronceverte, West Virginia, to a subsidiary of Vandalia Health, Inc.

This disposition was completed on January 1, 2023, as further described in Note 16 below.

On December 30, 2022, one or more affiliates of the Company entered into a definitive agreement for the sale of substantially all of the assets of Plateau Medical Center ( 25 licensed beds) in Oak Hill, West Virginia, to a subsidiary of Vandalia Health, Inc.

This hospital is classified as held-for-sale as of December 31, 2022.

The following table discloses amounts included in the consolidated balance sheet for hospitals and other assets classified as held-for-sale as of December 31, 2022 (in millions).

Other assets, net primarily includes goodwill and the net property and equipment for hospitals held-for-sale.

No hospitals were classified as held-for-sale as of December 31, 2021 and no divestitures or potential divestitures meet the criteria for reporting as a discontinued operation as of December 31, 2022, 2021, or 2020.

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Accrued liabilities

On November 30, 2020, one or more subsidiaries of the Company completed the sale of 50 % ownership interest in Merit Health Biloxi ( 153 licensed beds) and its associated healthcare businesses in Biloxi, Mississippi to Memorial Properties, Inc., an affiliate of Memorial Hospital of Gulfport pursuant to the terms of a definitive agreement which was entered into on October 12, 2020 .

Merit Health Biloxi and its associated healthcare businesses remain consolidated entities of the Company.

COMMUNITY HEALTH SYSTEMS, INC.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

Financial and statistical data reported in th is Form 10-K includes operating results for the hospitals that were divested during 20 21, 2020 and 201 9 through the effective date of each respective transaction .

Summary financial results of these hospitals for the periods included in the accompanying consolidated statements of income (loss) are as follows (in millions):

Year Ended December 31,

(Loss) income before income taxes

Loss attributable to noncontrolling interests

(Loss) income from operations before income taxes attributable

to Community Health Systems, Inc.

The operating results for these divested hospitals included net impairment charges and (gain) loss on disposal of approximately $ 29 million, $( 80 ) million and $( 5 ) million during the years ended December 31, 2021, 2020 and 2019, respectively.

Merit Health Biloxi and its associated healthcare businesses remain consolidated entities of the Company.

Other Hospital Closures

During the three months ended September 30, 2022, the Company completed the closure of Shorepoint Health Venice hospital ( 312 licensed beds) in Venice, Florida.

The Company recorded an impairment charge of approximately $ 29 million during the year ended December 31, 2022, to adjust the fair value of the long-lived assets of this hospital, including property and equipment and capitalized software costs, based on their estimated fair value.

During the three months ended September 30, 2022, the provision of inpatient services and substantially all outpatient services ceased at First Hospital Wyoming Valley (psychiatric hospital) ( 149 licensed beds) in Wilkes-Barre, Pennsylvania, resulting in the closure of this facility being substantially complete as of September 30, 2022.

The Company completed the closure of First Hospital Wyoming Valley during the three months ended December 31, 2022.

The Company recorded an impairment charge of approximately $ 15 million during the year ended December 31, 2022, to adjust the fair value of the long-lived assets of this hospital, including property and equipment and capitalized software costs, based on their estimated fair value.

Effective September 30, 2020, one or more affiliates of the Company finalized an agreement to terminate the lease and cease operations of Shands Lake Shore Regional Medical Center ( 99 licensed beds) in Lake City, Florida, including transferring leased assets back to the landlord, the Lake Shore Hospital Authority.

The Company recorded an impairment charge of approximately $ 3 million during the year ended December 31, 2020 in conjunction with exiting the lease to operate this hospital .

On December 31, 2022, the lease for AllianceHealth Clinton ( 56 licensed beds) in Clinton, Oklahoma, expired and was not renewed.

The Company recorded an impairment charge of approximately $ 1 million during the year ended December 31, 2022 in conjunction with exiting the lease to operate this hospital.

During the three months ended December 31, 2022, the Company notified the lessor of AllianceHealth Woodward ( 87 licensed beds) in Woodward, Oklahoma that the lease will not be renewed and will therefore expire effective December 1, 2023.

The Company recorded an impairment charge of approximately $ 8 million in conjunction with the determination to exit this lease.

GOODWILL AND OTHER INTANGIBLE ASSETS

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Management has determined that the Company’s operating segment meets the criteria to be classified as a reporting unit.

At December 31, 2021, after giving effect to 2021 acquisition and divestiture activity, the Company had approximately $ 4.2 billion of goodwill recorded.

At December 31, 2022, after giving effect to the 2022 acquisition and divestiture activity, the Company had approximately $ 4.2 billion of goodwill recorded.

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.

The Company performed its last annual goodwill impairment evaluation during the fourth quarter of 2022 using an October 31, 2022 measurement date, which indicated no impairment.

The Company estimates the fair value of the reporting unit using both a discounted cash flow model as well as a market multiple model.

The cash flow forecasts are adjusted by an appropriate discount rate based on the Company’s estimate of a market participant’s weighted-average cost of capital.

These models are both based on the Company’s best estimate of future revenues and operating costs

COMMUNITY HEALTH SYSTEMS, INC.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

and are reconciled to the Company’s consolidated market capitalization, with consideration of the amount a potential acquirer would be required to pay, in the form of a control premium, in order to gain sufficient ownership to set policies, direct operations and control management decisions.

The Company estimates the fair value of the reporting unit using both a discounted cash flow model as well as a market multiple model.

The cash flow forecasts are adjusted by an appropriate discount rate based on the Company’s estimate of a market participant’s weighted-average cost of capital.

These models are both based on the Company’s best estimate of future revenues and operating costs and are reconciled to the Company’s consolidated market capitalization, with consideration of the amount a potential acquirer would be required to pay, in the form of a control premium, in order to gain sufficient ownership to set policies, direct operations and control management decisions.

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

Some of those inputs include, but are not limited to, the most recent price of the Company’s common stock and fair value of long-term debt, estimates of future revenue and expense growth, estimated market multiples, expected capital expenditures, income tax rates, and costs of invested capital.

A detailed evaluation of potential impairment indicators was performed as of December 31, 2021, which specifically considered the volatility of the fair market value of the Company’s outstanding senior secured and unsecured notes and common stock during the year ended December 31, 2021.

On the basis of available evidence as of December 31, 2021, no indicators of impairment were identified.

Future estimates of fair value could be adversely affected if the actual outcome of one or more of the assumptions described above changes materially in the future, including a decline in the Company’s stock price and the fair value of its long-term debt, an increase in the volatility of the Company’s stock price and the fair value of its long-term debt, lower than expected hospital volumes and/or net operating revenues, higher market interest rates or increased operating costs.

Such changes impacting the calculation of fair value, the risks of which may be amplified by the COVID-19 pandemic, could result in a material impairment charge in the future.

Some of those inputs include, but are not limited to, the most recent price of the Company’s common stock and fair value of long-term debt, the Company’s 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.

Future estimates of fair value could be adversely affected if the actual outcome of one or more of the assumptions described above changes materially in the future, including as a result of any decline in the Company’s stock price and the fair value of its long-term debt, an increase in the volatility of the Company’s stock price and the fair value of its long-term debt, lower-than-expected hospital volumes and/or net operating revenues, higher market interest rates, increased operating costs or other adverse impacts on the Company’s financial results.

Such changes impacting the calculation of fair value could result in a material impairment charge in the future.

The determination of fair value of the Company’s hospital operations reporting unit as part of its goodwill impairment measurement represents a Level 3 fair value measurement in the fair value hierarchy due to its use of internal projections and unobservable measurement inputs.

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No intangible assets other than goodwill were acquired during the years ended December 31, 2022 and 2021.

The gross carrying amount of the Company’s other intangible assets subject to amortization was $ 1 million at both December 31, 2021 and 2020, and the net carrying amount was less than $ 1 million at both December 31, 2021 and 2020.

The gross carrying amount of the Company’s other intangible assets subject to amortization was $ 4 million and $ 1 million at December 31, 2022 and 2021, respectively, and the net carrying amount was $ 2 million and less than $ 1 million at December 31, 2022 and 2021, respectively.

The carrying amount of the Company’s other intangible assets not subject to amortization was $ 50 million and $ 54 million at December 31, 2022 and 2021, respectively.

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There are no expected residual values related to these intangible assets.

Amortization expense on these intangible assets was less than $ 1 million, less than $ 1 million and $ 1 million during the years ended December 31, 2021, 2020 and 2019, respectively.

Amortization expense on intangible assets is estimated to be less than $ 1 million in 2022.

The gross carrying amount of capitalized software for internal use was approximately $ 992 million and $ 1.1 billion at December 31, 2021 and 2020, respectively, and the net carrying amount was approximately $ 215 million and $ 251 million at December 31, 2021 and 2020, respectively.

Amortization expense on these intangible assets was $ 1 million during the year ended December 31, 2022, and less than $ 1 million during both of the years ended December 31, 2021 and 2020.

Amortization expense on intangible assets is estimated to be less than $ 1 million in 2023, 2024 and 2025.

The gross carrying amount of capitalized software for internal use was approximately $ 968 million and $ 992 million at December 31, 2022 and 2021, respectively, and the net carrying amount was approximately $ 170 million and $ 215 million at December 31, 2022 and 2021, respectively.

The estimated amortization period for capitalized internal-use software is generally three years .

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Year Ended December 31,

Total provision for (benefit from) income taxes for income (loss)

Total provision for (benefit from) income taxes for income

The following table reconciles the differences between the statutory federal income tax rate and the effective tax rate (dollars in millions):

Year Ended December 31,

Provision for (benefit from) income taxes at statutory federal rate

Provision for (benefit from) income taxes at statutory

State income taxes, net of federal income tax benefit

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Nondeductible loss on divestiture

Provision for (benefit from) income taxes and effective tax rate for income (loss)

Provision for (benefit from) income taxes and

effective tax rate for income

The Company’s effective tax rates were 48.7 %, 26.3 % and ( 43.8 )% for the years ended December 31, 2022, 2021 and 2020, respectively.

The increase in the Company’s effective tax rate for the year ended December 31, 2022, when compared to the year ended December 31, 2021, was primarily due to an increase in non-deductible interest for 2022 compared to 2021, compounded by an adverse change in the IRC Section 163(j) limit for deductible interest expense beginning in 2022.

The increase in the Company’s effective tax rate for the year ended December 31, 2021, when compared to the year ended December 31, 2020, was primarily due to a decrease in the valuation allowance in 2020 as a result of an increase to the deductible interest expense allowed for 2019 and 2020 under the CARES Act;

the CARES Act related benefits for deductibility of interest recognized in 2020 did not reoccur in 2021.

The decrease in the Company’s effective tax rate for the year ended December 31, 2020, when compared to the year ended December 31, 2019, was primarily due to a decrease in the valuation allowance recognized on IRC Section 163(j) interest carryforwards and original issue discount deferred tax asset as a result of (i) an increase to the deductible interest expense allowed for 2019 and 2020 under the CARES Act and (ii) tax impacts of 2020 financing activity .

COMMUNITY HEALTH SYSTEMS, INC.

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Other liabilities

IRC Section 481(a) - mixed service cost

Long-term debt and interest

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Its conclusion is based on its estimate of future taxable income and the expected timing of temporary difference reversals.

The Company has gross federal net operating loss carryforwards of approximately $ 763 million and state net operating loss carryforwards of approximately $ 9.4 billion, which expire from 2022 to 2041.

The Company has gross federal net operating loss carryforwards of approximately $ 68 million and state net operating loss carryforwards of approximately $ 9.6 billion, which expire from 2023 through 2042.

The Company’s tax affected federal and state net operating loss and credit carryforwards are approximately $ 21 million and $ 532 million, respectively.

A valuation allowance of approximately $ 814 million has been recognized for state net operating loss carryforwards, state credit carryforwards and federal and state deferred tax assets that the Company does not expect to be able to utilize prior to the expiration of the carryforward period.

A valuation allowance of approximately $ 829 million has been recognized for state net operating loss carryforwards, state credit carryforwards and federal and state deferred tax assets that the Company does not expect to be able to realize.

With respect to the deferred tax liability pertaining to intangibles, as included above, goodwill purchased in connection with certain of the Company’s business acquisitions is amortizable for income tax reporting purposes.

However, for financial reporting purposes, there is no corresponding amortization allowed with respect to such purchased goodwill.

The valuation allowance for federal and state jurisdictions where the Company concluded that the associated deferred tax assets would not be realized increased by $ 64 million and decreased by $ 31 million, respectively, for the year ended December 31, 2021, and decreased by $ 265 million and $ 2 million, respectively, for the year ended December 31, 2020.

The total amount of unrecognized benefit that would affect the effective tax rate, if recognized, was less than $ 1 million as of December 31, 2021.

The valuation allowance for federal and state jurisdictions where the Company concluded that the associated deferred tax assets would not be realized increased by $ 122 million and decreased by $ 108 million, respectively, for the year ended December 31, 2022, and increased by $ 64 million and decreased by $ 31 million, respectively, for the year ended December 31, 2021.

The total amount of unrecognized benefit that would affect the effective tax rate, if recognized, was $ 2 million as of December 31, 2022.

A total of less than $ 1 million of interest and penalties is included in the amount of the liability for uncertain tax positions at December 31, 2022.

It is the Company’s policy to recognize interest and penalties related to unrecognized benefits in its consolidated statements of income (loss) as income tax expense.

It is the Company’s policy to recognize interest and penalties related to unrecognized benefits in its consolidated statements of income as income tax expense.

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

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Unrecognized tax benefit, end of year

The Company’s income tax return for the 2018 tax year remains under examination by the Internal Revenue Service.

The Company’s income tax return for the 2014, 2015 and 2018 tax years remain under examination by the Internal Revenue Service.

The Company believes the result of this examination will not be material to its consolidated results of operations or consolidated financial position.

The Company has extended the federal statute of limitations through June 30, 2022 for Community Health Systems, Inc.

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

In addition, the Company has extended the federal statute of limitations through December 31, 2023 for the tax period ended December 31, 2018.

Cash paid for income taxes, net of refunds received, resulted in net cash paid of $ 4 million, net cash paid of $ 2 million and net cash refund of $ 3 million during the years ended December 31, 2021, 2020 and 2019, respectively.

The Company has extended the federal statute of limitations through December 31, 2023 for Community Health Systems, Inc.

for the tax period ended December 31, 2018.

Cash paid for income taxes, net of refunds received, was $ 6 million, $ 4 million and $ 2 million during the years ended December 31, 2022, 2021 and 2020, respectively.

LONG-TERM DEBT

Long-term debt, net of unamortized debt issuance costs and discounts or premiums, consists of the following (in millions):

6⅞ % Senior Notes due 2022

6⅝% Senior Secured Notes due 2025

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5⅝% Senior Secured Notes due 2027

8 % Senior Secured Notes due 2027

5⅝ % Senior Secured Notes due 2027

6⅞% Senior Notes due 2028

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5¼% Senior Secured Notes due 2030

9⅞ % Junior-Priority Secured Notes due 2023

8⅛ % Junior-Priority Secured Notes due 2024

4¾% Senior Secured Notes due 2031

6⅞% Junior-Priority Secured Notes due 2029

1 unchanged sentence

Finance lease and financing obligations

Unamortized deferred debt issuance costs and note premium

Unamortized deferred debt issuance costs and note discount

Current maturities

1 unchanged sentence

6⅝% Senior Notes due 2025

On January 27, 2014 , CHS/Community Health Systems, Inc.

(“CHS”) completed a private offering of $ 3.0 billion aggregate principal amount of 6⅞% Senior Notes due February 1, 2022 (the “6⅞% Senior Notes due 2022”).

The net proceeds from this issuance were used to finance the Company’s acquisition by merger of Health Management Associates, Inc.

The 6⅞% Senior Notes due 2022 bore interest at a rate of 6.875 % per annum, payable semiannually in arrears on February 1 and August 1 of each year.

Interest on the 6⅞% Senior Notes due 2022 accrued from the date of original issuance.

Interest was calculated on the basis

COMMUNITY HEALTH SYSTEMS, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

of a 360-day year comprised of twelve 30-day months.

T he 6⅞% Senior Notes due 2022 were unconditionally guaranteed on a senior-priority unsecured basis by the Company and each of the CHS current and future domestic subsidiaries that provide guarantees under the revolving asset-based loan facility (the “ ABL Facility ”) , any capital market debt securities of CHS (including CHS᾿ outstanding senior notes) and certain other long-term debt of CHS.

CHS was entitled, at its option, to redeem all or a portion of the 6⅞% Senior Notes due 2022 upon not less than 30 nor more than 60 days’ notice, at a redemption price of 100 % (expressed as a percentage of principal amount on the redemption date), plus accrued and unpaid interest, if any, to the redemption date (subject to the right of holders of record on the relevant record date to receive interest due on the relevant interest payment date), if redeemed prior to the maturity date.

Pursuant to a registration rights agreement entered into at the time of the issuance of the 6⅞% Senior Notes due 2022, as a result of an exchange offer made by CHS, all of the 6⅞% Senior Notes due 2022 issued in January 2014 were exchanged in October 2014 for new notes (the “6⅞% Exchange Notes”) having terms substantially identical in all material respects to the 6⅞% Senior Notes due 2022 (except that the exchange notes were issued under a registration statement pursuant to the 1933 Act).

References to the 6⅞% Senior Notes due 2022 shall be deemed to be the 6⅞% Exchange Notes unless the context provides otherwise.

On June 22, 2018, CHS issued approximately $ 276 million aggregate principal amount of the 8⅛% Junior-Priority Secured Notes due 2024 in exchange for approximately $ 368 million of 6⅞% Senior Notes due 2022.

On November 19, 2019, CHS issued approximately $ 700 million aggregate principal amount of 8 % Senior Secured Notes due December 15, 2027 and approximately $ 1.7 billion aggregate principal amount of 6⅞% Senior Notes due April 1, 2028 in exchange for approximately $ 2.4 billion of 6⅞% Senior Notes due 2022 (the “2019 Exchange Offer”).

Following the 2019 Exchange Offer, CHS had approximately $ 231 million aggregate principal amount of 6⅞% Senior Notes due 2022 outstanding.

During the year ended December 31, 2020, the Company extinguished $ 34 million in principal related to the 6⅞% Senior Notes due 2022 through open market repurchases and approximately $ 72 million via a tender offer which commenced on October 30, 2020 , and expired on November 30, 2020 .

On March 1, 2021, the Company redeemed the remaining principal amount of the 6⅞% Senior Notes due 2022 using cash on hand.

6¼% Senior Secured Notes due 2023

On March 16, 2017 , CHS completed a public offering of $ 2.2 billion aggregate principal amount of 6¼% Senior Secured Notes due March 31, 2023 (the “6¼% Senior Secured Notes due 2023”).

The net proceeds from this issuance were used to finance the purchase or redemption of $ 700 million aggregate principal amount of CHS’ then outstanding 5⅛% Senior Secured Notes due 2018 and related fees and expenses, and the repayment of $ 1.445 billion of the then outstanding Term F Facility.

On May 12, 2017, CHS completed a tack-on offering of $ 900 million aggregate principal amount of 6¼% Senior Secured Notes due 2023, increasing the total aggregate principal amount of 6¼% Senior Secured Notes due 2023 to $ 3.1 billion.

A portion of the net proceeds from this issuance were used to finance the repayment of approximately $ 713 million aggregate principal amount of CHS’ then outstanding Term A Facility and related fees and expenses.

The tack-on notes had identical terms, other than issue date and issue price, as the 6¼% Senior Secured Notes due 2023 issued on March 16, 2017.

The 6¼% Senior Secured Notes due 2023 bore interest at a rate of 6.250 % per annum, payable semiannually in arrears on March 31 and September 30 of each year.

Interest on the 6¼% Senior Secured Notes due 2023 accrued from the date of original issuance.

Interest was calculated on the basis of a 360-day year comprised of twelve 30-day months.

The 6¼% Senior Secured Notes due 2023 are scheduled to mature on March 31, 2023.

The 6¼% Senior Secured Notes due 2023 were unconditionally guaranteed on a senior-priority secured basis by the Company and each of the CHS current and future domestic subsidiaries that provide guarantees under the ABL Facility, any capital market debt securities of CHS (including CHS᾿ outstanding senior notes) and certain other long-term debt of CHS.

The 6¼% Senior Secured Notes due 2023 and the related guarantees were secured by shared (i) first-priority liens on the collateral (the “Non-ABL Priority Collateral”) that also secures on a first-priority basis CHS’s senior-priority secured notes and (ii) second-priority liens on the collateral (the “ABL-Priority Collateral”), in each case subject to permitted liens described in the indenture governing the 6¼% Senior Secured Notes due 2023.

CHS was entitled, at its option, to redeem all or a portion of the 6¼% Senior Secured Notes due 2023 at any time prior to March 31, 2020, upon not less than 30 nor more than 60 days’ notice, at a price equal to 100 % of the principal amount of the 6¼% Senior Secured Notes due 2023 redeemed plus accrued and unpaid interest, if any, plus a “make-whole” premium, as described in the indenture governing the 6¼% Senior Secured Notes due 2023.

In addition, CHS had the option to redeem up to 40 % of the aggregate principal amount of the 6¼% Senior Secured Notes due 2023 at any time prior to March 31, 2020 using the net proceeds from certain

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

equity offerings at the redemption price of 106.250 % of the principal amount of the 6¼% Senior Secured Notes due 2023 redeemed, plus accrued and unpaid interest, if any.

CHS had the option to redeem some or all of the 6¼% Senior Secured Notes due 2023 at any time on or after March 31, 2020 upon not less than 30 nor more than 60 days’ notice, at the following redemption prices (expressed as a percentage of principal amount on the redemption date), plus accrued and unpaid interest, if any, to the redemption date (subject to the right of holders of record on the relevant record date to receive interest due on the relevant interest payment date), if redeemed during the periods set forth below:

Redemption Price

March 31, 2020 to March 30, 2021

March 31, 2021 to March 30, 2022

March 31, 2022 to March 30, 2023

Approximately $ 426 million aggregate principal amount of 6¼% Senior Secured Notes due 2023 were purchased in one or more privately negotiated transactions on February 6, 2020.

On December 28, 2020, the Company redeemed approximately $ 2.579 billion of the 6¼% Senior Secured Notes due 2023 using proceeds from the issuance of $ 1.9 billion aggregate principal amount of 5⅝% Senior Secured Notes due 2027 and $ 900 million aggregate principal amount of 6% Senior Secured Notes due 2029.

The remaining principal value of 6¼% Senior Secured Notes due 2023 that were not redeemed on December 28, 2020 of approximately $ 95 million were redeemed on January, 28, 2021 using cash on hand.

9⅞% Junior-Priority Secured Notes due 2023

On June 22, 2018 , CHS completed a private offering of $ 1.770 billion aggregate principal amount of the 9⅞% Junior-Priority Secured Notes due June 30, 2023 (the “9⅞% Junior-Priority Secured Notes due 2023”) in exchange for the same amount of 8% Senior Notes due 2019.

The 9⅞% Junior-Priority Secured Notes due 2023 bore interest at a rate of 11.000 % per annum, solely for the period from the issue date of such 9⅞% Junior-Priority Secured Notes due 2023 to, but excluding, June 22, 2019, after which they bore interest at a rate of 9.875 % per annum.

Interest was payable semi-annually in arrears on June 30 and December 31 of each year.

The 9⅞% Junior-Priority Secured Notes due 2023 were scheduled to mature on June 20, 2023.

The 9⅞% Junior-Priority Secured Notes due 2023 were unconditionally guaranteed on a junior-priority secured basis by the Company and each of the CHS current and future domestic subsidiaries that provide guarantees under CHS᾿ ABL Facility, any capital market debt securities of CHS (including CHS᾿ outstanding senior notes) and certain other long-term debt of CHS.

The 9⅞% Junior-Priority Secured Notes due 2023 and the related guarantees were secured by shared (i) second-priority liens on the Non-ABL Priority Collateral that secures on a first-priority basis the CHS’s senior-priority secured notes and (ii) third-priority liens on the ABL-Priority Collateral that secures on a first-priority basis the ABL Facility (and also secures on a second-priority basis CHS’s senior-priority secured notes), in each case subject to permitted liens described in the indenture governing the 9⅞% Junior-Priority Secured Notes due 2023.

Prior to June 30, 2020, CHS may redeem some or all of the 9⅞% Junior-Priority Secured Notes due 2023 at a redemption price equal to 100 % of the principal amount of the notes redeemed plus accrued and unpaid interest, if any, plus a “make-whole” premium, as described in the indenture governing the 9⅞% Junior-Priority Secured Notes due 2023.

In addition, at any time prior to June 30, 2020, CHS had the option to redeem up to 40 % of the aggregate principal amount of the 9⅞% Junior-Priority Secured Notes due 2023 with the proceeds from certain equity offerings at the redemption price of 109.875 %, plus accrued and unpaid interest, if any, to, but excluding, the applicable redemption date.

After June 30, 2020, CHS was entitled, at its option, to redeem all or a portion of the 9⅞% Junior-Priority Secured Notes due 2023 upon not less than 15 nor more than 60 days’ notice, at the following redemption prices (expressed as a percentage of principal amount on the redemption date), plus accrued and unpaid interest, if any, to the redemption date (subject to the right of holders of record on the relevant record date to receive interest due on the relevant interest payment date), if redeemed during the periods set forth below:

Redemption Price

June 30, 2020 to June 29, 2021

June 30, 2021 to June 29, 2022

June 30, 2022 to June 29, 2023

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

The Company redeemed approximately $ 2 million of the 9⅞% Junior-Priority Secured Notes due 2023 via a tender offer which commenced on October 30, 2020 , and expired on November 30, 2020 .

In conjunction with the issuance of $ 1.775 billion aggregate principal amount of 6⅞% Junior-Priority Secured Notes due 2029, all remaining 9⅞% Junior-Priority Secured Notes due 2023 were purchased pursuant to a tender offer on February 2, 2021 or, to the extent not tendered, pursuant to a notice of redemption as completed on February 4, 2021.

8⅛% Junior-Priority Secured Notes due 2024

On June 22, 2018 , CHS completed a private offering of $ 1.355 billion aggregate principal amount of the 8⅛% Junior-Priority Secured Notes due June 30, 2024 (the “8⅛% Junior-Priority Secured Notes due 2024”) in exchange for approximately $ 1.079 billion of 7⅛% Senior Notes due 2020 and approximately $ 368 million of 6⅞% Senior Notes due 2022.

The 8⅛% Junior-Priority Secured Notes due 2024 bore interest at a rate of 8.125 % per annum, payable semi-annually in arrears on June 30 and December 31 of each year.

The 8⅛% Junior-Priority Secured Notes due 2024 were scheduled to mature on June 20, 2024.

The 8⅛% Junior-Priority Secured Notes due 2024 were unconditionally guaranteed on a junior-priority secured basis by the Company and each of the CHS current and future domestic subsidiaries that provide guarantees under CHS᾿ ABL Facility, any capital market debt securities of CHS (including CHS᾿ outstanding senior notes) and certain other long-term debt of CHS.

The 8⅛% Junior-Priority Secured Notes due 2024 and the related guarantees were secured by shared (i) second-priority liens on the Non-ABL Priority Collateral that secures on a first-priority basis the CHS’s senior-priority secured notes and (ii) third-priority liens on the ABL-Priority Collateral that secures on a first-priority basis the ABL Facility (and also secures on a second-priority basis CHS’s senior-priority secured notes), in each case subject to permitted liens described in the indenture governing the 8⅛% Junior-Priority Secured Notes due 2024.

Prior to June 30, 2021, CHS had the option to redeem some or all of the 8⅛% Junior-Priority Secured Notes due 2024 at a redemption price equal to 100 % of the principal amount of the notes redeemed plus accrued and unpaid interest, if any, plus a “make-whole” premium, as described in the indenture governing the 8⅛% Junior-Priority Secured Notes due 2024.

In addition, at any time prior to June 30, 2021, CHS had the option to redeem up to 40 % of the aggregate principal amount of the 8⅛% Junior-Priority Secured Notes due 2024 with the proceeds from certain equity offerings at the redemption price of 108.125 %, plus accrued and unpaid interest, if any, to, but excluding, the applicable redemption date.

After June 30, 2021, CHS was entitled, at its option, to redeem all or a portion of the 8⅛% Junior-Priority Secured Notes due 2024 upon not less than 15 nor more than 60 days’ notice, at the following redemption prices (expressed as a percentage of principal amount on the redemption date), plus accrued and unpaid interest, if any, to the redemption date (subject to the right of holders of record on the relevant record date to receive interest due on the relevant interest payment date), if redeemed during the periods set forth below:

Redemption Price

June 30, 2021 to June 29, 2022

June 30, 2022 to June 29, 2023

June 30, 2023 to June 29, 2024

The indentures governing each of the 9⅞% Junior-Priority Secured Notes due 2023 and 8 ⅛ % Junior-Priority Secured Notes due 2024 also prohibited CHS from purchasing, repurchasing, redeeming, defeasing or otherwise acquiring or retiring any outstanding 7⅛% Senior Notes due 2020 with:

(a) cash or cash equivalents on hand as of the consummation of such 2018 exchange offers;

(b) cash generated from operations;

or (d) proceeds from the issuance of, or in exchange for, secured debt, in each case, prior to May 15, 2020.

CHS received a waiver from requisite holders of each series of the 9⅞% Junior-Priority Secured Notes due 2023 and 8 ⅛ % Junior-Priority Secured Notes due 2024 waiving these restrictions prior to consummating the 2019 Exchange Offer.

During the year ended December 31, 2020, the Company extinguished $ 1 million in principal related to the 8⅛% Junior-Priority Secured Notes due 2024 through open market repurchases and approximately $ 6 million via a tender offer which commenced on October 30, 2020 , and expired on November 30, 2020 .

On May 19, 2021 , CHS redeemed the remaining principal amount of the 8⅛% Junior-Priority Secured Notes due 2024 using proceeds from the issuance of the 6⅛% Junior-Priority Secured Notes due 2030 on May 19, 2021.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

8⅝% Senior Secured Notes due 2024

On July 6, 2018 , CHS completed a private offering of $ 1.033 billion aggregate principal amount of 8⅝% Senior Secured Notes due January 15, 2024 (the “8⅝% Senior Secured Notes due 2024”).

The 8⅝% Senior Secured Notes due 2024 bore interest at a rate of 8.625 % per annum payable semi-annually in arrears on January 15 and July 15 of each year.

The 8⅝% Senior Secured Notes due 2024 were unconditionally guaranteed on a senior-priority secured basis by the Company and each of the CHS current and future domestic subsidiaries that provide guarantees under CHS᾿ ABL Facility, any capital market debt securities of CHS (including CHS᾿ outstanding senior notes) and certain other long-term debt of CHS.

The 8⅝% Senior Secured Notes due 2024 and the related guarantees were secured by shared (i) first-priority liens on the Non-ABL Priority Collateral and (ii) second-priority liens on the ABL Priority Collateral that secures on a first-priority basis the ABL Facility, in each case subject to permitted liens described in the indenture governing the 8⅝% Senior Secured Notes due 2024.

Prior to January 15, 2021, CHS had the option to redeem some or all of the 8⅝% Senior Secured Notes due 2024 at a redemption price equal to 100 % of the principal amount of the notes redeemed plus accrued and unpaid interest, if any, plus a “make-whole” premium, as described in the indenture governing the 8⅝% Senior Secured Notes due 2024.

In addition, at any time prior to January 15, 2021, CHS had the option to redeem up to 40 % of the aggregate principal amount of the 8⅝% Senior Secured Notes due 2024 with the proceeds from certain equity offerings at the redemption price of 108.625 %, plus accrued and unpaid interest, if any, to, but excluding, the applicable redemption date.

After January 15, 2021, CHS was entitled, at its option, to redeem all or a portion of the 8⅝% Senior Secured Notes due 2024 upon not less than 15 nor more than 60 days’ notice, at the following redemption prices (expressed as a percentage of principal amount on the redemption date), plus accrued and unpaid interest, if any, to the redemption date (subject to the right of holders of record on the relevant record date to receive interest due on the relevant interest payment date), if redeemed during the periods set forth below:

Redemption Price

January 15, 2021 to January 14, 2022

January 15, 2022 to January 14, 2023

January 15, 2023 to January 14, 2024

In conjunction with the issuance of $ 1.095 billion aggregate principal amount of 4¾% Senior Secured Notes due February 15, 2031, all remaining 8⅝% Senior Secured Notes due 2024 were redeemed on February 9, 2021.

6⅝% Senior Secured Notes due 2025

On February 6, 2020 , CHS completed a private offering of $ 1.462 billion aggregate principal amount of 6⅝% Senior Secured Notes due February 15, 2025 (the “6⅝% Senior Secured Notes due 2025”).

CHS used the net proceeds of the offering of the 6⅝% Senior Secured Notes due 2025 to (i) purchase any and all of its 5⅛% Senior Secured Notes due 2021 validly tendered and not validly withdrawn in the cash tender offer announced on January 23, 2020, (ii) redeem all of the 5⅛% Senior Secured Notes due 2021 that were not purchased pursuant to such tender offer, (iii) purchase in one or more privately negotiated transactions approximately $ 426 million aggregate principal amount of its 6¼% Senior Secured Notes due 2023 and (iv) pay related fees and expenses.

The 6⅝% Senior Secured Notes due 2025 bear interest at a rate of 6.625 % per annum, payable semi-annually in arrears on February 15 and August 15 of each year, commencing on August 15, 2020.

The 6⅝% Senior Secured Notes are scheduled to mature on February 15, 2025.

The 6⅝% Senior Secured Notes due 2025 are unconditionally guaranteed on a senior-priority secured basis by the Company and each of the CHS current and future domestic subsidiaries that provide guarantees under the ABL Facility, any capital market debt securities of CHS (including CHS’ outstanding senior notes) and certain other long-term debt of CHS.

The 6⅝% Senior Secured Notes due 2025 and the related guarantees are secured by shared (i) first-priority liens on the Non-ABL Priority Collateral and (ii) second-priority liens on the ABL Priority Collateral that secures on a first-priority basis the ABL Facility, in each case subject to permitted liens described in the indenture governing the 6⅝% Senior Secured Notes due 2025.

At any time prior to February 15, 2022, CHS may redeem some or all of the 6⅝% Senior Secured Notes due 2025 at a price equal to 100 % of their principal amount plus accrued and unpaid interest, if any, to, but excluding the applicable redemption date plus a make-whole premium as defined in the indenture agreement dated February 6, 2020.

After February 15, 2022, CHS is entitled, at its option, to redeem some or all of the 6⅝% Senior Secured Notes at a redemption price equal to the percentage of principal amount

On February 4, 2022 , CHS/Community Health Systems, Inc.

(“CHS”) completed a private offering of $ 1.535 billion aggregate principal amount of 5¼% Senior Secured Notes due May 15, 2030 (the “5¼% Senior Secured Notes due 2030”).

The proceeds of the offering were used to redeem the 6⅝% Senior Secured Notes due 2025 on February 4, 2022, and to pay related fees and expenses.

The 6⅝% Senior Secured Notes due 2025 bore interest at a rate of 6.625 % per annum, payable semi-annually in arrears on February 15 and August 15 of each year, commencing on August 15, 2020.

The 6⅝% Senior Secured Notes were scheduled to mature on February 15, 2025.

The 6⅝% Senior Secured Notes due 2025 were unconditionally guaranteed on a senior-priority secured basis by the Company and each of the CHS current and future domestic subsidiaries that provide guarantees under the Company’s asset-based loan facility (“ABL Facility”), any capital market debt securities of CHS (including CHS’ outstanding senior notes) and certain other long-term debt of CHS.

The 6⅝% Senior Secured Notes due 2025 and the related guarantees were secured by shared (i) first-priority liens on the Non-ABL Priority Collateral and (ii) second-priority liens on the ABL Priority Collateral that secured on a first-priority

COMMUNITY HEALTH SYSTEMS, INC.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

below plus accrued and unpaid interest, if any, to, but excluding the applicable redemption date, if redeemed during the twelve-month period beginning on February 15 of the years set forth below:

Redemption Price

February 15, 2022 to February 14, 2023

February 15, 2023 to February 14, 2024

February 15, 2024 to February 14, 2025

As further described in Note 16 and in conjunction with the issuance of $ 1.535 billion aggregate principal amount of 5¼% Senior Secured Notes due May 15, 2030 , all 6⅝% Senior Secured Notes due 2025 were redeemed on February 4, 2022 .

basis the ABL Facility, in each case subject to permitted liens described in the indenture governing the 6⅝% Senior Secured Notes due 2025.

8% Senior Secured Notes due 2026

2 unchanged sentences

On November 19, 2019, CHS completed a tack-on offering of $ 500 million aggregate principal amount of the additional 2026 Notes, increasing the total aggregate principal amount of the 8% Senior Secured Notes due 2026 to $ 2.101 billion.

CHS used the proceeds from the Additional 2026 Notes to repay amounts outstanding under the Revolving Facility, redeem all $ 121 million aggregate principal amount of CHS’ then outstanding 7⅛% Senior Notes due 2020 and repay borrowings outstanding under the ABL Facility.

CHS used the proceeds from the additional 2026 Notes to repay amounts outstanding under the ABL Facility, redeem all $ 121 million aggregate principal amount of CHS’ then outstanding 7⅛% Senior Notes due 2020 and repay borrowings outstanding under the ABL Facility.

The additional 2026 Notes have identical terms, other than issue date, issue price and the date from which interest initially accrued, as the 8% Senior Secured Notes due 2026 issued on March 6, 2019.

1 unchanged sentence

Interest on the 8% Senior Secured Notes due 2026 accrues from the initial issuance date of the 8% Senior Secured Notes due 2026.

Interest is calculated on the basis of a 360-day year comprised of twelve 30-day months.

Interest is calculated on the basis of a 360-day year comprised of 12 30-day months.

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

11 unchanged sentences

No cash proceeds were received from the 2019 Exchange Offer.

The 8% Senior Secured Notes due 2027 bear interest at a rate of 8.000 % per annum, payable

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

semi-annually in arrears on June 15 and December 15 of each year.

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

Interest on the 8% Senior Secured Notes due 2027 accrues from the initial issuance date of the 8% Senior Secured Notes due 2027.

Interest is calculated on the basis of a 360-day year comprised of twelve 30-day months.

Interest is calculated on the basis of a 360-day year comprised of 12 30-day months.

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

The 8% Senior Secured Notes due 2027 are unconditionally guaranteed on a senior-priority secured basis by the Company and each of CHS ’ current and future domestic subsidiaries that provide guarantees under the ABL Facility, any capital market debt se curities of CHS (including CHS᾿ outstanding senior notes) and certain other long-term debt of CHS.

The 8% Senior Secured Notes due 2027 are unconditionally guaranteed on a senior-priority secured basis by the Company and each of CHS’ current and future domestic subsidiaries that provide guarantees under the ABL Facility, any capital market debt securities of CHS (including CHS᾿outstanding senior notes) and certain other long-term debt of CHS.

The 8% Senior Secured Notes due 2027 and the related guarantees are secured by shared (i) first-priority liens on the Non-ABL Priority Collateral and (ii) second-priority liens on the ABL Priority Collateral that secures on a first-priority basis the ABL Facility, in each case subject to permitted liens described in the indenture governing the 8% Senior Secured Notes due 2027.

COMMUNITY HEALTH SYSTEMS, INC.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

CHS is entitled, at its option, to redeem all or a portion of the 8% Senior Secured Notes due 2027 at any time prior to December 15, 2022, upon not less than 15 nor more than 60 days’ notice, at a price equal to 100 % of the principal amount of the 8% Senior Secured Notes due 2027 redeemed plus accrued and unpaid interest, if any, plus a “make-whole” premium, as described in the indenture governing the 8% Senior Secured Notes due 2027.

14 unchanged sentences

In addition, CHS may redeem up to 40 % of the aggregate principal amount of the 5⅝% Senior Secured Notes due 2027 at any time prior to December 15, 2023 using the net proceeds from certain equity offerings at the redemption price of 105.625 % of the principal amount of the 5⅝% Senior Secured Notes due 2027 redeemed, plus accrued and unpaid interest, if any.

At any time and from time to time on or after December 15, 2023, CHS may redeem the 5⅝% Senior Secured Notes due 2027 in whole or in part, upon not less than 15 no more than 60 days’ prior written notice at a redemption price equal to the percentage of principal amount set forth below plus accrued and unpaid interest, if any, on the 5⅝% Senior Secured Notes due 2027 redeemed, to,

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

but excluding, the applicable date of redemption, if redeemed during the twelve-month period beginning on December 15 of the years indicated below:

Redemption Price

2 unchanged sentences

December 15, 2025 to December 14, 2027

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

6⅞% Senior Notes due 2028

3 unchanged sentences

Interest on the 6⅞% Senior 2028 Notes accrues from the initial issuance date of the 6⅞% Senior Notes due 2028.

Interest is calculated on the basis of a 360-day year comprised of twelve 30-day months.

Interest is calculated on the basis of a 360-day year comprised of 12 30-day months.

The 6⅞% Senior Notes due 2028 are scheduled to mature on April 1, 2028 .

7 unchanged sentences

April 1, 2025 to March 31, 2028

On December 7, 2020, CHS entered into a privately negotiated agreement with a multi-asset investment manager who has certain funds and accounts which are holders (the “Holders”) of the 6⅞% Senior Notes due 2028.

On December 7, 2020, CHS entered into a privately negotiated agreement with a multi-asset investment manager who has certain funds and accounts which are holders of the 6⅞% Senior Notes due 2028.

Pursuant to the agreement, the Company exchanged $ 700 million aggregate principal amount of the 6⅞% Senior Notes due 2028 for an aggregate consideration of $ 400 million of cash and 10 million newly issued shares of the Company’s common stock.

1 unchanged sentence

A gain from early extinguishment of debt of approximately $ 205 million was recognized associated with this exchange.

During the year ended December 31, 2020, the Company extinguished $ 226 million in principal of the 6⅞% Senior Notes due 2028 through open market repurchases and approximately $ 7 million via a tender offer which commenced on October 30, 2020 and expired on November 30, 2020 .

During the year ended December 31, 2020, the Company extinguished $ 226 million in principal of the 6⅞% Senior Notes due 2028 through open market repurchases and approximately $ 7 million via a tender offer that commenced on October 30, 2020 and expired on November 30, 2020 .

6% Senior Secured Notes due 2029

1 unchanged sentence

The proceeds of the offering were used, together with proceeds from the 5⅝% Senior Secured Notes due 2027 described above, to repurchase approximately $ 2.579 billion of the outstanding principal amount of 6¼% Senior Secured Notes due 2023 that were validly tendered and accepted for purchase pursuant to the early tender deadline of a tender offer that launched on December 11, 2020, and to pay related fees.

The remaining principal value of 6¼% Senior

The remaining principal value of 6¼% Senior Secured Notes due 2023 that were not validly tendered as of the early tender deadline were redeemed or repurchased via the completion of the tender offer on January 11, 2021 or redemption on January, 28, 2021.

The 6% Senior Secured Notes due 2029 , which mature on January 15, 2029 , bear interest at a rate of 6% per year payable semi-annually in arrears on January 15 and July 15 of each year, commencing on July 15, 2021.

The 6 % Senior Secured Notes due 2029 are unconditionally guaranteed on a senior-priority secured basis by each of CHS’ current and future domestic subsidiaries that provide guarantees under the ABL Facility, any capital market debt securities of CHS (including CHS’ outstanding senior notes) and certain other long-term debt of CHS.

COMMUNITY HEALTH SYSTEMS, INC.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

Secured Notes due 2023 that were not validly tendered as of the early tender deadline were redeemed or repurchased via the completion of the tender offer on January 11, 2021 or redemption on January, 28, 2021.

The 6 % Senior Secured Notes due 2029 are unconditionally guaranteed on a senior-priority secured basis by each of CHS’ current and future domestic subsidiaries that pr ovide guarantees under the ABL F acility, any capital market debt securities of CHS (including CHS’ outstanding senior notes) and certain other long-term debt of CHS.

The 6% Senior Secured Notes due 2029 and the related guarantees are secured by shared ( i ) first-priority liens on the Non-ABL Priority Collateral and (ii) second-priority liens on the ABL Priority Collateral that secures on a first-priority basis the ABL Facility, in each case subject to permitted liens described in the indenture governing the 6% Senior Secured Notes due 2029.

1 unchanged sentence

In addition, CHS may redeem up to 40 % of the aggregate principal amount of the 6% Senior Secured Notes due 2029 at any time prior to January 15, 2024 using the net proceeds from certain equity offerings at the redemption price of 106.000 % of the principal amount of the 6% Senior Secured Notes due 2029 redeemed, plus accrued and unpaid interest, if any.

At any time and from time to time on or after January 15, 2024, CHS may redeem the 6% Senior Secured Notes due 2029 in whole or in part, upon not less than 15 nor more than 60 days’ prior written notice at a redemption price equal to the percentage of principal amount set forth below plus accrued and unpaid interest, if any, on the 6% Senior Secured Notes due 2029 redeemed, to, but excluding, the applicable date of redemption, if redeemed during the twelve-month period beginning on January 15 of the years indicated below:

At any time and from time to time on or after January 15, 2024, CHS may redeem the 6% Senior Secured Notes due 2029 in whole or in part, upon not less than 15 nor more than 60 days’ prior written notice at a redemption price equal to the percentage of principal amount set forth below plus accrued and unpaid interest, if any, on the 6% Senior Secured Notes due 2029 redeemed, to, but excluding, the applicable date of redemption, if redeemed during the 12 month period beginning on January 15 of the years indicated below:

Redemption Price

3 unchanged sentences

5¼% Senior Secured Notes due 2030

On February 4, 2022 , CHS completed a private offering of $ 1.535 billion aggregate principal amount of 5¼% Senior Secured Notes due May 15, 2030 (the “5¼% Senior Secured Notes due 2030”).

The proceeds of the offering were used to redeem the 6⅝% Senior Secured Notes due 2025 on February 4, 2022, and to pay related fees and expenses.

The 5¼% Senior Secured Notes due 2030 bear interest at a rate of 5.250 % per year payable semi-annually in arrears on May 15 and November 15, commencing on November 15, 2022.

The 5¼% Senior Secured Notes due 2030 are unconditionally guaranteed on a senior-priority secured basis by each of CHS’ current and future domestic subsidiaries that provide guarantees under the ABL Facility, any capital market debt securities of CHS (including CHS’ outstanding senior notes) and certain other long-term debt of CHS.

The 5¼% Senior Secured Notes due 2030 and the related guarantees are secured by shared (i) first-priority liens on the Non-ABL Priority Collateral and (ii) second-priority liens on the ABL Priority Collateral that secures on a first-priority basis the ABL Facility, in each case subject to permitted liens described in the indenture governing the 5¼% Senior Secured Notes due 2030.

CHS is entitled, at its option, to redeem all or a portion of the 5¼% Senior Secured Notes due 2030 at any time prior to May 15, 2025, upon not less than 10 nor more than 60 days’ notice, at a price equal to 100 % of the principal amount of the 5¼% Senior Secured Notes due 2030 redeemed plus accrued and unpaid interest, if any, plus a “make-whole” premium, as described in the indenture governing the 5¼% Senior Secured Notes due 2030.

CHS may redeem up to 40 % of the aggregate principal amount of the 5¼ % Senior Secured Notes due 2030 at any time prior to May 15, 2025 using the net proceeds from certain equity offerings at a redemption price of 105.250 % of the principal amount of the 5¼% Senior Secured Notes due 2030 redeemed, plus accrued and unpaid interest, if any.

In addition, any time prior to May 15, 2025, but not more than once during each 12 month period , CHS may redeem up to 10 % of the original aggregate principal amount of the 5¼% Senior Secured Notes due 2030 at a redemption price equal to 103 % of the principal amount of the 5¼% Senior Secured Notes due 2030 to be redeemed, plus accrued and unpaid interest, if any.

At any time and from time to time on or after May 15, 2025 , CHS may redeem the 5¼ % Senior Secured Notes due 2030 in whole or in part, upon not less than 10 nor more than 60 days’ prior written notice at a redemption price equal to the percentage of principal amount set forth below plus accrued and unpaid interest, if any, on the 5¼% Senior Secured Notes due 2030 redeemed, to, but excluding, the applicable date of redemption, if redeemed during the 12 month period beginning on May 15 of the years indicated below:

COMMUNITY HEALTH SYSTEMS, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

Redemption Price

May 15, 2025 to May 14, 2026

May 15, 2026 to May 14, 2027

May 15, 2027 to May 14, 2030

4¾% Senior Secured Notes due 2031

On February 9, 2021 , CHS completed a private offering of $ 1.095 billion aggregate principal amount of 4¾ % Senior Secured Notes due February 15, 2031 (the “4¾% Senior Secured Notes due 2031 ”).

5 unchanged sentences

CHS may redeem up to 40 % of the aggregate principal amount of the 4¾ % Senior Secured Notes due 2031 at any time prior to February 15, 2024 using the net proceeds from certain equity offerings at a redemption price of 104.750 % of the principal amount of the 4¾% Senior Secured Notes due 2031 redeemed, plus accrued and unpaid interest, if any.

In addition, any time prior to February 15, 2026, but not more than once during each twelve-month period , CHS may redeem up to 10 % of the original aggregate principal amount of the 4¾ % Senior Secured Notes due 2031 at a redemption price equal to 103 % of the principal amount of the 4¾ % Senior Secured Notes due 2031 to be redeemed, plus accrued and unpaid interest, if any.

COMMUNITY HEALTH SYSTEMS, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

At any time and from time to time on or after February 15, 2026 , CHS may redeem the 4¾ % Senior Secured Notes due 2031 in whole or in part, upon not less than 15 nor more than 60 days’ prior written notice at a redemption price equal to the percentage of principal amount set forth below plus accrued and unpaid interest, if any, on the 4¾% Senior Secured Notes due 2031 redeemed, to, but excluding, the applicable date of redemption, if redeemed during the twelve-month period beginning on February 15 of the years indicated below:

In addition, any time prior to February 15, 2026, but not more than once during each 12 month period , CHS may redeem up to 10 % of the original aggregate principal amount of the 4¾ % Senior Secured Notes due 2031 at a redemption price equal to 103 % of the principal amount of the 4¾ % Senior Secured Notes due 2031 to be redeemed, plus accrued and unpaid interest, if any.

At any time and from time to time on or after February 15, 2026 , CHS may redeem the 4¾ % Senior Secured Notes due 2031 in whole or in part, upon not less than 15 nor more than 60 days’ prior written notice at a redemption price equal to the percentage of principal amount set forth below plus accrued and unpaid interest, if any, on the 4¾% Senior Secured Notes due 2031 redeemed, to, but excluding, the applicable date of redemption, if redeemed during the 12 month period beginning on February 15 of the years indicated below:

February 15, 2026 to February 14, 2027

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The 6⅞ % Junior-Priority Secured Notes due 2029 are unconditionally guaranteed on a junior-priority secured basis by the Company and each of the current and future domestic subsidiaries of CHS that provide guarantees under CHS’ ABL Facility, any capital market debt securities of CHS (including CHS’ outstanding senior notes) and certain other long-term debt of CHS.

The 6⅞ % Junior-Priority Secured Notes due 2029 and the related guarantees are secured by shared (i) second-priority liens on the Non-ABL Priority Collateral that secures on a first-priority basis CHS’ senior-priority secured notes and (ii) third-priority liens on the ABL-Priority Collateral that secures on a first-priority basis the ABL Facility (and also secures on a second-priority basis CHS’ senior-priority secured notes), in each case subject to permitted liens described in the indenture governing the 6⅞ % Junior-Priority Secured Notes due 2029 .

COMMUNITY HEALTH SYSTEMS, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

ABL-Priority Collateral that secures on a first-priority basis the ABL Facility (and also secures on a second-priority basis CHS’ senior-priority secured notes), in each case subject to permitted liens described in the indenture governing the 6⅞ % Junior-Priority Secured Notes due 2029 .

At any time and from time to time prior to April 15, 2024 , CHS may redeem the 6⅞ % Junior-Priority Secured Notes due 2029 in whole or in part, at its option, upon not less than 15 nor more than 60 days’ prior written notice at a redemption price equal to 100 % of the principal amount of the 6⅞ % Junior-Priority Secured Notes due 2029 to be redeemed plus accrued and unpaid interest, if any, plus a “make-whole” premium, as described in the indenture governing the 6⅞% Junior-Priority Secured Notes due 2029 .

In addition, CHS may redeem up to 40 % of the aggregate principal amount of the 6⅞% Junior-Priority Secured Notes due 2029 at any time prior to April 15, 2024 using the net proceeds from certain equity offerings at a redemption price of 106.875 % of the principal amount of the 6⅞% Junior-Priority Secured Notes due 2029 redeemed, plus accrued and unpaid interest, if any.

At any time and from time to time on or after April 15, 2024 , CHS may redeem the 6⅞ % Junior-Priority Secured Notes due 2029 in whole or in part, upon not less than 15 nor more than 60 days’ prior written notice at a redemption price equal to the percentage of principal amount set forth below plus accrued and unpaid interest, if any, on the 6⅞% Junior-Priority Secured Notes due 2029 redeemed, to, but excluding, the applicable date of redemption, if redeemed during the twelve-month period beginning on April 15 of the years indicated below:

At any time and from time to time on or after April 15, 2024 , CHS may redeem the 6⅞ % Junior-Priority Secured Notes due 2029 in whole or in part, upon not less than 15 nor more than 60 days’ prior written notice at a redemption price equal to the percentage of principal amount set forth below plus accrued and unpaid interest, if any, on the 6⅞% Junior-Priority Secured Notes due 2029 redeemed, to, but excluding, the applicable date of redemption, if redeemed during the 12 month period beginning on April 15 of the years indicated below:

April 15, 2024 to April 14, 2025

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The 6⅛% Junior-Priority Secured Notes due 2030 bear interest at a rate of 6.125% per year payable semi-annually in arrears on April 1 and October 1, commencing on October 1, 2021 .

COMMUNITY HEALTH SYSTEMS, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

F acility, any capital market debt securities of CHS (including CHS’ outstanding senior notes) and certain other long-term debt of CHS.

The 6⅛% Junior-Priority Secured Notes due 2030 are unconditionally guaranteed on a junior-priority secured basis by each of CHS’ current and future domestic subsidiaries that provide guarantees under the ABL Facility, any capital market debt securities of CHS (including CHS’ outstanding senior notes) and certain other long-term debt of CHS.

The 6⅛% Junior-Priority Secured Notes due 2030 and the related guarantees are secured by shared (i) second-priority liens on the Non-ABL Priority Collateral and (ii) third-priority liens on the ABL Priority Collateral that secures on a first-priority basis the ABL Facility, in each case subject to permitted liens described in the indenture governing the 6⅛% Junior-Priority Secured Notes due 2030.

1 unchanged sentence

CHS may redeem up to 40 % of the aggregate principal amount of the 6⅛% Junior-Priority Secured Notes due 2030 at any time prior to May 15, 2024 using the net proceeds from certain equity offerings at a redemption price of 106.125 % of the principal amount of the 6⅛% Junior-Priority Secured Notes due 2030 redeemed, plus accrued and unpaid interest, if any.

At any time and from time to time on or after April 1, 2025 , CHS may redeem the 6⅛% Junior-Priority Secured Notes due 2030 in whole or in part, upon not less than 15 nor more than 60 days’ prior written notice at a redemption price equal to the percentage of principal amount set forth below plus accrued and unpaid interest, if any, on the 6⅛% Junior-Priority Secured Notes due 2030 redeemed, to, but excluding, the applicable date of redemption, if redeemed during the twelve-month period beginning on April 1 of the years indicated below:

At any time and from time to time on or after April 1, 2025 , CHS may redeem the 6⅛% Junior-Priority Secured Notes due 2030 in whole or in part, upon not less than 15 nor more than 60 days’ prior written notice at a redemption price equal to the percentage of principal amount set forth below plus accrued and unpaid interest, if any, on the 6⅛% Junior-Priority Secured Notes due 2030 redeemed, to, but excluding, the applicable date of redemption, if redeemed during the 12 month period beginning on April 1 of the years indicated below:

COMMUNITY HEALTH SYSTEMS, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

April 1, 2025 to March 31, 2026

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April 1, 2027 to March 31, 2030

During the year ended December 31, 2022, the Company extinguished a portion of certain series of its outstanding notes through open market and privately negotiated repurchases, as follows (in millions):

Principal Amount

6⅞ % Senior Notes due 2028

4¾ % Senior Secured Notes due 2031

6⅞ % Junior-Priority Secured Notes due 2029

6⅛ % Junior-Priority Secured Notes due 2030

Total principal amount of debt extinguished

Financing and repayment transactions discussed above resulted in a pre-tax and after-tax gain from early extinguishment of debt of $ 253 million and $ 208 million, respectively, for the year ended December 31, 2022, a pre-tax and after-tax loss from early extinguishment of $ 79 million and $ 116 million, respectively, for the year ended December 31, 2021, and a pre-tax and after-tax gain from early extinguishment of $ 317 million and $ 352 million, respectively, for the year ended December 31, 2020.

On November 22, 2021, the Company and CHS entered into an amendment and restatement agreement (the “Amendment”) to refinance and replace the asset-based loan (ABL) credit agreement (the “ABL Credit Agreement” and, as amended by the Amendment, the “Amended and Restated ABL Credit Agreement”), dated as of April 3, 2018, with JPMorgan Chase Bank, N.A., as administrative agent, and the lenders and other agents party thereto.

3 unchanged sentences

Subject to certain exceptions, all obligations under the ABL Facility and the related guarantees are secured by a perfected first-priority security interest in substantially all of the receivables, deposit, collection and other accounts and contract rights, books, records and other instruments related to the foregoing of the Company, CHS and the guarantors, as well as a perfected junior-priority security interest in substantially all of the other assets of the Company, CHS and the guarantors, subject to customary exceptions and intercreditor arrangements.

At December 31, 2021, the available borrowing base under the ABL Facility was $ 1.0 billion, of which $ 103 million was reserved for outstanding letters of credit and $ 897 million represented excess availability.

The Company had no outstanding borrowings as of December 31, 2021.

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

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

Borrowings under the ABL Facility bear interest at a rate per annum equal to an applicable percentage, plus, at the Borrower’s option, either (a) a base rate or (b) the Federal Reserve’s secured overnight financing rate (the “SOFR” rate).

The applicable margin under the ABL Facility is determined based on excess availability as a percentage of the maximum commitment amount under the ABL Facility at a rate per annum of 0.75 %, 1.00 % and 1.25 % for loans based on the base rate and 1.75 %, 2.00 % and 2.25 % for loans based on the SOFR rate.

Borrowings under the ABL Facility bear interest at a rate per annum equal to an applicable percentage, plus, at the borrower’s option, either (a) a base rate or (b) the Federal Reserve’s secured overnight financing rate (“SOFR”).

The applicable commitment fee rate under the ABL Facility is determined based on average utilization as a percentage of the maximum commitment amount under the ABL Facility at a rate per annum of either 0.25 % or 0.375 % times the unused portion of the ABL Facility.

Principal amounts outstanding under the ABL Facility will be due and payable in full on November 22, 2026.

The ABL Facility includes a 91-day springing maturity applicable if more than $ 350 million in the aggregate principal amount of the 6⅝% Senior Secured Notes due 2025, 8% Senior Secured Notes due 2026 or 5⅝% Senior Secured Notes due 2027 or any indebtedness incurred to

In such event, principal amounts outstanding under the ABL Facility will be accelerated and all amounts outstanding under the ABL Facility will become immediately due and payable.

COMMUNITY HEALTH SYSTEMS, INC.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

refinance the foregoing are scheduled to mature or similarly become due on a date prior to November 22, 2026 .

In such event, principal amounts outstanding under the ABL Facility will be accelerated and all amounts outstanding under the ABL Facility will become immediately due and payable.

The ABL Facility contains customary representations and warranties, subject to limitations and exceptions, and customary covenants restricting the Company’s ability, subject to certain exceptions, to, among other things (1) declare dividends, make distributions or redeem or repurchase capital stock, (2) prepay, redeem or repurchase other debt, (3) incur liens or grant negative pledges, (4) make loans and investments and enter into acquisitions and joint ventures, (5) incur additional indebtedness or provide certain guarantees, (6) engage in mergers, acquisitions and asset sales, (7) conduct transactions with affiliates, (8) alter the nature of the Company’s, CHS’ or the guarantors’ businesses, (9) grant certain guarantees with respect to physician practices, (10) engage in sale and leaseback transactions or (11) change the Company’s fiscal year.

distributions or redeem or repurchase capital stock, (2) prepay, redeem or repurchase other debt, (3) incur liens or grant negative pledges, (4) make loans and investments and enter into acquisitions and joint ventures, (5) incur additional indebtedness or provide certain guarantees, (6) engage in mergers, acquisitions and asset sales, (7) conduct transactions with affiliates, (8) alter the nature of the Company’s, CHS’ or the guarantors’ businesses, (9) grant certain guarantees with respect to physician practices, (10) engage in sale and leaseback transactions or (11) change the Company’s fiscal year.

The Company is also required to comply with a consolidated fixed coverage ratio, upon certain triggering events described below, and various affirmative covenants.

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For purposes of calculating the consolidated fixed charge coverage ratio, the calculation of consolidated EBITDA as defined in the ABL Facility is a trailing 12-month calculation that begins with the Company’s consolidated net income, with certain adjustments for interest, taxes, depreciation and amortization, net income attributable to noncontrolling interests, stock compensation expense, restructuring costs, and the financial impact of other non-cash or non-recurring items recorded during any such 12-month period.

The consolidated fixed charge coverage ratio is a required covenant only in periods where the total borrowings outstanding under the ABL Facility reduce the amount available in the facility to less than the greater of (i) $ 95 million and (ii) 10 % of the calculated borrowing base.

As a result, in the event the Company has less than $ 95 million available under the ABL Facility, the Company would need to comply with the consolidated fixed charge coverage ratio.

At December 31, 2021, the Company is not subject to the consolidated fixed charge coverage ratio as such triggering event had not occurred during the last twelve months ended December 31, 2021.

The consolidated fixed charge coverage ratio is a required covenant only in periods where the total borrowings outstanding under the ABL Facility reduce the amount available in the facility to less than the greater of ( i ) $ 95 million or (ii) 10 % of the calculated borrowing base.

As a result, in the event the Company has less than $ 95 million available under the ABL Facility, the Company would need to comply with the consolidated fixed charge cove rage ratio.

At Dece mber 31, 2022 , the Company is not subject to the consolidated fixed charge coverage ratio as such triggering event had not occurred during the year ended December 31, 2022 .

In addition, in the event the amount of borrowings and letters of credit outstanding at any time under the ABL Facility exceeds the borrowing base at such time, the Company will be required to, first, repay outstanding borrowings and, second , replace or cash collateralize outstanding letters of credit, in an aggregate amount sufficient to eliminate such excess.

Events of default under the ABL Facility include, but are not limited to, (1) CHS’ failure to pay principal, interest, fees or other amounts under the ABL Facility Agreement when due (taking into account any applicable grace period), (2) any representation or warranty proving to have been materially incorrect when made, (3) covenant defaults subject, with respect to certain covenants, to an available cure and applicable grace periods, (4) bankruptcy and insolvency events, (5) a cross default to certain other debt, (6) certain undischarged judgments (not paid within an applicable grace period), (7) a change of control (as defined), (8) certain ERISA-related defaults and (9) the invalidity or impairment of specified security interests, guarantees or subordination provisions in favor of the ABL agent or lenders under the ABL Facility.

Financing and repayment transactions discussed above resulted in a pre-tax and after-tax loss from early extinguishment of debt of $ 79 million and $ 116 million, respectively, for year ended December 31, 2021, a pre-tax and after-tax gain from early extinguishment of $ 317 million and $ 352 million, respectively, for the year ended December 31, 2020, and a pre-tax and after-tax loss from early extinguishment of $ 54 million and $ 42 million, respectively, for the year ended December 31, 2019.

As of December 31, 2022, the scheduled maturities of long-term debt outstanding, including finance lease and financing obligations for each of the next four years and thereafter are as follows (in millions):

2 unchanged sentences

Deferred debt issuance costs

Unamortized note premium

Unamortized note discount

Total long-term debt

The Company paid interest of $ 835 million, $ 778 million and approximately $ 1.0 billion on borrowings during the years ended December 31, 2022, 2021 and 2020, respectively.

COMMUNITY HEALTH SYSTEMS, INC.

1 unchanged sentence

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

The Company paid interest of $ 778 million on borrowings for the year ended December 31, 2021 and approximately $ 1.0 billion on borrowings during both of the years ended December 31, 2020 and 2019.

Various financing transactions were completed subsequent to December 31, 2021 which are set forth in Note 16.

FAIR VALUE OF FINANCIAL INSTRUMENTS

7 unchanged sentences

Trading securities

6⅞% Senior Notes due 2022

6⅝% Senior Secured Notes due 2025

2 unchanged sentences

5⅝% Senior Secured Notes due 2027

8 % Senior Secured Notes due 2027

5⅝% Senior Secured Notes due 2027

6⅞% Senior Notes due 2028

1 unchanged sentence

5¼% Senior Secured Notes due 2030

9⅞% Junior-Priority Secured Notes due 2023

8⅛% Junior-Priority Secured Notes due 2024

4¾% Senior Secured Notes due 2031

6⅞% Junior-Priority Secured Notes due 2029

16 unchanged sentences

Estimated fair value is based on the closing market price for these notes.

COMMUNITY HEALTH SYSTEMS, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

ABL Facility and other debt.

3 unchanged sentences

Therefore, a fair value measurement should be determined based on the assumptions that market participants would use in pricing the asset or liability.

As a basis for considering market participant assumptions in fair value measurements, the Company utilizes the U.S.

As a basis for considering

COMMUNITY HEALTH SYSTEMS, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

market participant assumptions in fair value measurements, the Company utilizes the U.S.

GAAP fair value hierarchy that distinguishes between market participant assumptions based on market data obtained from sources independent of the reporting entity (observable inputs that are classified within Levels 1 and 2 of the hierarchy) and the reporting entity’s own assumption about market participant assumptions (unobservable inputs classified within Level 3 of the hierarchy).

7 unchanged sentences

Transfers between levels within the fair value hierarchy are recognized by the Company on the date of the change in circumstances that requires such transfer.

There were no transfers between levels during the years ending December 31, 2021 or December 31, 2020.

There were no transfers between levels during the years ended December 31, 2022 or 2021.

The following table sets forth, by level within the fair value hierarchy, the financial assets recorded at fair value on a recurring basis as of December 31, 2022 and 2021 (in millions):

6 unchanged sentences

Investments in Equity Securities, Available-for-Sale Debt Securities and Trading Securities

Investments in equity securities and trading securities classified as Level 1 are measured using quoted market prices.

Investments in equity securities classified as Level 1 are measured using quoted market prices.

Level 2 available-for-sale debt securities and trading securities primarily consisted of bonds and notes issued by the United States government and its agencies and domestic and foreign corporations.

28 unchanged sentences

Realized losses

Other investment income, which includes interest and dividends, related to all investment securities were $ 5 million, $ 6 million and $ 7 million for the years ended December 31, 2021, 2020 and 2019, respectively.

Other investment income, which includes interest and dividends, related to all investment securities was $ 6 million, $ 5 million and $ 6 million for the years ended December 31, 2022, 2021 and 2020, respectively.

COMMUNITY HEALTH SYSTEMS, INC.

3 unchanged sentences

Year Ended December 31,

Net gains and (losses), beginning of year

Net gains and (losses) recognized during the year on equity securities sold during the year

Unrealized gains and (losses) recognized during the year on equity securities held, end of year

Net (losses) and gains recognized during the year on equity securities

Net (losses) and gains recognized during the year on equity

securities sold during the year

Unrealized (losses) and gains recognized during the year on equity

securities held at the end of year

The Company utilizes operating and finance leases for the use of certain hospitals, medical office buildings, and medical equipment.

68 unchanged sentences

The CHS/Community Health Systems, Inc.

Retirement Savings Plan is a defined contribution plan which covers the majority of the Company’s employees.

Retirement Savings Plan is a defined contribution plan that covers the majority of the Company’s employees.

Employees at locations whose employment is covered by collective bargaining agreements are generally eligible to participate in the CHS/Community Health Systems, Inc.

Standard 401(k) Plan.

Total expense to the Company under the 401(k) plans was $ 65 million, $ 74 million and $ 85 million for the years ended December 31, 2021, 2020 and 2019, respectively, and is recorded in salaries and benefits expense on the consolidated statements of income (loss).

Total expense to the Company under the 401(k) plans was $ 70 million, $ 65 million and $ 74 million for the years ended December 31, 2022, 2021 and 2020, respectively, and is recorded in salaries and benefits expense in the consolidated statements of income.

The Company maintains unfunded deferred compensation plans that allow participants to defer receipt of a portion of their compensation.

The liability for the deferred compensation plans was $ 175 million and $ 176 million as of December 31, 2021 and 2020, respectively, and is included in other long-term liabilities on the consolidated balance sheets.

Assets designated to pay benefits under this plan are discussed below.

The liability for the deferred compensation plans was $ 127 million and $ 175 million as of December 31, 2022 and 2021, respectively, and is included in other long-term liabilities in the consolidated balance sheets.

Assets designated to pay benefits under these plans are discussed below.

The Company provides an unfunded Supplemental Executive Retirement Plan (“SERP”) for certain members of its executive management.

1 unchanged sentence

Variances from actuarially assumed rates will result in increases or decreases in benefit obligations and net periodic cost in future periods.

Benefits expense under the SERP was $ 11 million for the year ended December 31, 2021 and $ 7 million for both of the years ended December 31, 2020 and 2019.

The accrued benefit liability for the SERP totaled $ 99 million and $ 89 million at December 31, 2021 and 2020, respectively, and is included in other long-term liabilities on the consolidated balance sheets.

The weighted-average assumptions used in determining net periodic cost for the years ended December 31, 2021 and 2020 were discount rates of 2.7 % and 3.1 %, respectively, and an annual salary increase of 3.0 % for both years ended December 31, 2021 and 2020.

Benefits expense under the SERP was $ 11 million for both of the years ended December 31, 2022 and 2021 and $ 7 million for the year ended December 31, 2020.

The accrued benefit liability for the SERP totaled $ 91 million and $ 99 million at December 31, 2022 and 2021, respectively.

The weighted-average assumptions used in determining net periodic cost for both of the years ended December 31, 2022 and 2021 were discount rates of 2.7 % and an annual salary increase of 3.0 %.

During 2021, certain members of executive management of the Company that were participants in the SERP retired and met the requirements for payout of their SERP retirement benefit.

1 unchanged sentence

There were no settlement losses during the years ended December 31, 2022, 2021 and 2020.

The Company had assets of $ 248 million as of December 31, 2021, in a non-qualified plan trust generally designated to pay benefits of the deferred compensation plans and the SERP, consisting of equity securities of $ 81 million as of December 31, 2021, and company-owned life insurance contracts of $ 167 million as of December 31, 2021.

The Company had assets of $ 243 million as of December 31, 2020, in a non-qualified plan trust generally designated to pay benefits of the deferred compensation plans and the SERP, consisting of equity securities of $ 95 million as of December 31, 2020, and company-owned life insurance contracts of $ 148 million as of December 31, 2020 .

COMMUNITY HEALTH SYSTEMS, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

As of December 31, 2022, the Company had assets of $ 181 million in a non-qualified plan trust generally designated to pay benefits of the deferred compensation plans and the SERP, consisting of equity securities of $ 46 million and company-owned life insurance contracts of $ 135 million.

As of December 31, 2021, the Company had assets of $ 248 million in a non-qualified plan trust generally designated to pay benefits of the deferred compensation plans and the SERP, consisting of equity securities of $ 81 million and company-owned life insurance contracts of $ 167 million .

The Company maintains the CHS/Community Health Systems, Inc.

1 unchanged sentence

The Pension Plan provides benefits to covered individuals satisfying certain age and service requirements.

Employer contributions to the Pension Plan are in accordance with the minimum funding requirements of the Employee Retirement Income Security Act of 1974, as amended.

Employer contributions to the Pension Plan

COMMUNITY HEALTH SYSTEMS, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

are in accordance with the minimum funding requirements of the Employee Retirement Income Security Act of 1974, as amended.

The Company does not expect to make contributions to the Pension Plan in 20 2 3 .

4 unchanged sentences

Variances from actuarially assumed rates will result in increases or decreases in benefit obligations, net periodic cost and funding requirements in future periods.

Benefits expense under the Pension Plan was less than $1 million during the year ended December 31, 2021, inclusive of the aforementioned partial plan settlement, and less than $ 1 million for each of the years ended December 31, 2020 and 2019.

The accrued benefit liability for the Pension Plan totaled less than $ 1 million and $ 5 million at December 31, 2021 and 2020, respectively, and is included in other long-term liabilities on the consolidated balance sheets.

Benefits expense under the Pension Plan was less than $ 1 million for each of the years ended December 31, 2022, 2021 and 2020, inclusive of the aforementioned partial plan settlement during the year ended December 31, 2021.

The accrued benefit liability for the Pension Plan totaled $ 2 million and less than $ 1 million at December 31, 2022 and 2021, respectively, and is included in other long-term liabilities in the consolidated balance sheets.

The weighted-average assumptions used for determining the net periodic cost for the years ended December 31, 2022 and 2021 were discount rates of 2.8 % and 2.5 %, respectively, and the expected long-term rates of return on assets of 4.3 % and 5.5 %, respectively.

10 unchanged sentences

Year Ended December 31,

Net income (loss) attributable to Community Health Systems,

Net income attributable to Community Health Systems,

Transfers to the noncontrolling interests:

Net increase in Community Health

Net (decrease) increase in Community Health

Systems, Inc.

3 unchanged sentences

Change to Community Health Systems, Inc.

stockholders’ deficit from net income (loss) attributable to

stockholders’ deficit from net income attributable to

Community Health Systems, Inc.

4 unchanged sentences

EARNINGS PER SHARE

The following table sets forth the components of the denominator for the computation of basic and diluted earnings per share for net income (loss) attributable to Community Health Systems, Inc.

The following table sets forth the components of the denominator for the computation of basic and diluted earnings per share for net income attributable to Community Health Systems, Inc.

stockholders:

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Weighted-average number of shares outstanding — diluted

The Company generated a loss attributable to Community Health Systems, Inc.

stockholders for the year ended December 31, 2019, so the effect of dilutive securities is not considered because their effect would be antidilutive.

If the Company had generated income during the year ended December 31, 2019, the effect of restricted stock awards, employee stock options, and other equity-based awards on the diluted shares calculation would have been an increase in shares of 133,866 .

Year Ended December 31,

3 unchanged sentences

EQUITY INVESTMENTS

On July 30, 2021 , the Company sold its unconsolidated minority equity interests in Macon Healthcare, LLC, a joint venture with certain subsidiaries of HCA representing two hospitals in Macon, Georgia, in which the Company held a 38 % interest.

On July 30, 2021 , the Company sold its unconsolidated equity interests in Macon Healthcare, LLC, a joint venture with certain subsidiaries of HCA representing two hospitals in Macon, Georgia, in which the Company held a 38 % interest.

The Company received $ 110 million in cash in connection with the sale of its equity interests and, as a result, recognized a pre-tax gain of approximately $ 39 million on the sale of equity interests in Macon Healthcare, LLC during the year ended December 31, 2021.

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As part of the divestiture of its controlling interest in the home care agency business, the Company recorded an equity method investment representing its remaining 20 % ownership.

Since December 31, 2016 and primarily in conjunction with the divestiture of hospitals, the Company has divested of its remaining 20% ownership in certain home care agency businesses .

Since December 31, 2016 and primarily in conjunction with the divestiture of hospitals, the Company has divested its remaining 20% ownership in certain home care agency businesses .

In March 2005, the Company began purchasing items, primarily medical supplies, medical equipment and pharmaceuticals, under an agreement with HealthTrust Purchasing Group, L.P.

(“HealthTrust”), a group purchasing organization in which the Company is a noncontrolling partner.

Effective October 1, 2022, HealthTrust completed the sale of a majority interest in CoreTrust Holdings, LLC (“CoreTrust”) to a third party.

Proceeds for the sale of interest in CoreTrust were distributed to members of HealthTrust and the Company received approximately $ 121 million in connection with such distribution during the year ended December 31, 2022.

A gain of approximately $ 119 million was recognized associated with this transaction as included in the line item “Gain from CoreTrust transaction” within the consolidated statements of income.

As of December 31, 2022, the Company had a 13.3 % ownership interest in HealthTrust.

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Fair Value of

Change in Fair

Available-for-Sale

Value of Interest

Rate Swaps (1)

Securities (1)

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(1) Totals may not add due to rounding.

The following tables present a subtotal for each significant reclassification to net income (loss) out of AOCL and the line item affected in the accompanying consolidated statements of income (loss) for the years ended December 31, 2021 and 2020 (in millions):

The following tables present a subtotal for each significant reclassification to net income out of AOCL and the line item affected in the accompanying consolidated statements of income for the years ended December 31, 2022 and 2021 (in millions):

Amount reclassified

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December 31, 2022

(loss) income is presented

income is presented

Amortization of defined benefit pension items

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Salaries and benefits

Settlement losses recognized

Salaries and benefits

Total before tax

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December 31, 2021

income (loss) is presented

income is presented

Amortization of defined benefit pension items

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Salaries and benefits

Settlement losses recognized

Salaries and benefits

Total before tax

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Pursuant to a hospital purchase agreement from the Company’s March 1, 2016 acquisition of Northwest Health – Starke, formerly known as Starke Hospital, the Company is committed to build a replacement facility in Knox, Indiana.

Under the terms of such agreement, the construction of the replacement facility for Northwest Health - Starke is required to be completed within five years of the date the Company entered into a new lease with Starke County, Indiana, the hospital lessor, or in the event the Company does not enter into a new lease with Starke County, or is required to be completed by September 30, 2026 .

The Company has not entered into a new lease with the lessor for Northwest Health - Starke and currently anticipate completing construction of the Northwest Health - Starke replacement facility in 2026.

Construction costs for the Northwest Health - Starke replacement facility are currently estimated to be approximately $ 15 million.

Under the terms of such agreement, the construction of the replacement facility for Northwest Health - Starke is required to be completed within five years of the date the Company entered into a new lease with Starke County, Indiana, the hospital lessor, or in the event the Company does not enter into a new lease with Starke County, construction shall be completed by September 30, 2026 .

The Company has not entered into a new lease with the lessor for Northwest Health - Starke and currently anticipates completing construction of the Northwest Health - Starke replacement facility in 2026.

Physician Recruiting Commitments.

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The estimates are based on specific claim facts, historical claim reporting and payment patterns, the nature and level of hospital operations, and actuarially determined projections.

The actuarially determined projections are based on the Company’s actual claim data, including historic reporting and payment patterns which have been gathered over an approximate 20 -year period.

As discussed below, since the Company purchases excess insurance on a claims-made basis that transfers risk to third-party insurers, the liability it accrues does include an amount for the losses covered by its excess insurance.

The actuarially determined projections are based on the Company’s actual claim data, including historic reporting and payment patterns that have been gathered over the life of the Company.

As discussed below, since the Company purchases excess insurance on a claims-made basis that transfers risk to third-party insurers, the estimated liability for professional and general liability claims does include an amount for the losses covered by this excess insurance.

The Company also records a receivable for the expected reimbursement of losses covered by excess insurance.

Since the Company believes that the amount and timing of its future claims payments are reliably determinable, it discounts the amount accrued for losses resulting from professional liability claims using the risk-free interest rate corresponding to the timing of expected payments.

The net present value of the projected payments was discounted using a weighted-average risk-free rate of 1.8 % in both 2021 and 2020 and 2.6 % in 2019.

Since the Company believes that the amount and timing of its future claims payments are reliably determinable, it discounts the amount accrued for losses resulting from professional liability claims.

The net present value of the projected payments was discounted using weighted-average interest rates of 3.8 % in 2022 and 1.8 % in both 2021 and 2020.

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

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The current portion of the liability for professional and general liability claims was $ 159 million and $ 162 million as of December 31, 2022 and 2021, respectively, and is included in other accrued liabilities in the accompanying consolidated balance sheets, with the long-term portion recorded in other long-term liabilities.

Professional malpractice expense includes the losses resulting from professional liability claims and loss adjustment expense, as well as excess insurance premiums, and is presented within other operating expenses in the accompanying consolidated statements of income (loss).

Professional liability expense includes the losses resulting from professional liability claims and loss adjustment expense, as well as excess insurance premiums, and is presented within other operating expenses in the accompanying consolidated statements of income.

COMMUNITY HEALTH SYSTEMS, INC.

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The average lag period between claim occurrence and payment of a final settlement is between three and four years , although the facts and circumstances of individual claims could result in the timing of such payments being different from this average.

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

Since claims are paid promptly after settlement with the claimant is reached, settled claims represent approximately 7 % or less of the total liability at the end of any period.

For purposes of estimating its individual claim accruals, the Company utilizes specific claim information, including the nature of the claim, the expected claim amount, the year in which the claim occurred and the laws of the jurisdiction in which the claim occurred.

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This litigation was settled during the three months ended December 31, 2021, and in connection with this settlement, approximately $ 22 million was recovered from various third-party insurers related to their obligation to provide coverage for the professional liability claim.

Aside from this matter, there were no significant changes in the Company’s estimate of the reserve for professional liability claims during the years ended December 31, 2021 and 2020.

During the year ended December 31, 2022, the Company experienced an increase in the amounts paid or expected to be paid to settle outstanding professional liability claims related to divested locations, compared to the same period in the prior year and to previous actuarially determined estimates.

This resulted in a change in estimate of $ 15 million during the three months and year ended December 31, 2022.

There were no other significant changes in the Company’s estimate of the reserve for professional liability claims during the years ended December 31, 2022 and 2021.

The Company is primarily self-insured for professional liability claims;

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

The excess coverage consists of multiple layers of insurance, the sum of which

The excess coverage consists of multiple layers of insurance, the sum of which totals up to $ 95 million per occurrence and in the aggregate for claims reported on or after June 1, 2003, up to $ 145 million per occurrence and in the aggregate for claims reported on or after January 1, 2008, up to $ 195 million per occurrence and in the aggregate for claims reported on or after June 1, 2010, and up to at least $ 216 million per occurrence and in the aggregate for claims reported on or after June 1, 2015.

In addition, for integrated professional liability claims, there is an additional $ 50 million of excess coverage for claims reported on or after June 1, 2014 and an additional $ 75 million of excess coverage for claims reported on or after June 1, 2015 through June 1, 2020.

The $ 75 million in integrated occurrence coverage will also apply to claims reported between June 1, 2020 and June 1, 2023 for events that occurred prior to June 1, 2020 but which were not previously known or reported .

For certain policy years prior to June 1, 2014, if the first aggregate layer of excess coverage becomes fully utilized, then the self-insured retention will increase to $ 10 million per claim for any subsequent claims in that policy year until the Company’s total aggregate coverage is met.

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

COMMUNITY HEALTH SYSTEMS, INC.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

totals up to $ 95 million per occurrence and in the aggregate for claims reported on or after June 1, 2003, up to $ 145 million per occurrence and in the aggregate for claims reported on or after January 1, 2008, up to $ 195 million per occurrence and in the aggregate for claims reported on or after June 1, 2010, and up to at least $ 215 million per occurrence and in the aggregate for claims reported on or after June 1, 2015.

In addition, for integrated occurrence malpractice claims, there is an additional $ 50 million of excess coverage for claims reported on or after June 1, 2014 and an additional $ 75 million of excess coverage for claims reported on or after June 1, 2015 through June 1, 2020 .

The $ 75 million in integrated occurrence coverage will also apply to claims reporte d between June 1, 2020 and June 1, 2022 for events that occurred prior to June 1, 2020 but which were not previously known or reported .

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

Effective June 1, 2014, the hospitals acquired from HMA were insured on a claims-made basis as described above and through commercial insurance companies as described above for substantially all claims reported on or after June 1, 2014 except for physician-related claims with an occurrence date prior to June 1, 2014.

Prior to June 1, 2014, the former HMA hospitals obtained insurance coverage through a wholly-owned captive insurance subsidiary and a risk retention group subsidiary which are domiciled in the Cayman Islands and South Carolina, respectively.

Those insurance subsidiaries, which are collectively referred to as the “Insurance Subsidiaries,” provided (i) claims-made coverage to all of the former HMA hospitals and (ii) occurrence-basis coverage to most of the physicians employed by the former HMA hospitals.

Prior to June 1, 2014, the former HMA hospitals obtained insurance coverage through a wholly-owned captive insurance subsidiary and a risk retention group subsidiary (“Insurance Subsidiaries”) that are domiciled in the Cayman Islands and South Carolina, respectively.

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

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

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however, the Office of the Inspector General declined to enter into a separate corporate integrity agreement with QHC.

Summary of Recorded Amounts

The table below presents a reconciliation of the beginning and ending liability balances (in millions) during the years ended December 31, 2021 and 2020, with respect to the Company’s determination of the contingencies of the Company in respect of which

COMMUNITY HEALTH SYSTEMS, INC.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

an accrual has been recorded.

The l iability as of December 31, 2021 is comprised of individually insignificant amounts for various matters.

Summary of Recorded Amounts

The table below presents a reconciliation of the beginning and ending liability balances (in millions) during the years ended December 31, 2022 and 2021, with respect to the Company’s determination of the contingencies of the Company in respect of which an accrual has been recorded.

The liability as of December 31, 2022 is comprised of individually insignificant amounts for various matters.

Contingencies

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Balance as of December 31, 2021

Reserve for insured claim

Cash payments

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In accordance with applicable accounting guidance, the Company establishes a liability for litigation, regulatory and governmental matters for which, based on information currently available, the Company believes that a negative outcome is known or is probable and the amount of the loss is reasonably estimable.

For all such matters (whether or not discussed in this contingencies footnote), such amounts have been recorded in other accrued liabilities on the consolidated balance sheets and are included in the table above.

Due to the uncertainties and difficulty in predicting the ultimate resolution of these contingencies, the actual amount could differ from the estimated amount reflected as a liability on the consolidated balance sheets.

In the aggregate, attorneys’ fees and other costs incurred but not included in the table above related to probable contingencies totaled less than $ 1 million, $ 3 million and $ 21 million during the years ended December 31, 2021, 2020 and 2019, respectively, and are included in other operating expenses in the accompanying consolidated statements of income (loss).

For all such matters (whether or not discussed in this contingencies footnote), such amounts have been recorded in other accrued liabilities in the consolidated balance sheets and are included in the table above.

SUBSEQUENT EVENTS

The Company has evaluated all material events occurring subsequent to the balance sheet date for events requiring disclosure or recognition in the consolidated financial statements.

On February 4, 2022 , CHS completed a private offering of $ 1.535 billion aggregate principal amount of 5¼% Senior Secured Notes due May 15, 2030 (the “5¼% Senior Secured Notes due 2030”).

The proceeds of the offering were used to redeem the 6⅝% Senior Secured Notes due 2025 on February 4, 2022, and to pay related fees and expenses.

The 5¼% Senior Secured Notes due 2030 bear interest at a rate of 5.250 % per year payable semi-annually in arrears on May 15 and November 15, commencing on November 15, 2022.

In addition, any time prior to May 15, 2025, but not more than once during each twelve-month period , CHS may redeem up to 10 % of the original aggregate principal amount of the 5¼% Senior Secured Notes due 2030 at a redemption price equal to 103 % of the principal amount of the 5¼% Senior Secured Notes due 2030 to be redeemed, plus accrued and unpaid interest, if any .

On January 1, 2023, one or more affiliates of the Company completed the sale of substantially all of the assets of Greenbrier Valley Medical Center ( 122 licensed beds) in Ronceverte, West Virginia, to a subsidiary of Vandalia Health, Inc.

pursuant to the terms of a definitive agreement, as amended, which was entered into on September 14, 2022.

The net proceeds from this sale of approximately $ 85 million were received at a preliminary closing on December 30, 2022.

A third-party vendor, Fortra, LLC, who provides a secure file transfer software platform utilized by the Company, experienced a security breach whereby protected health information (as defined by the Health Insurance Portability and Accountability Act) and personal information of certain patients of the Company’s facilities were exposed to Fortra’s attacker.

Upon receiving notification of the security breach, the Company promptly launched an investigation.

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

The Company will ensure that appropriate notification is provided to affected patients and regulatory agencies as required by federal and state law.

Because of the preliminary nature of the investigation into this incident, an estimate of total costs, including remediation expenses and other potential liabilities, cannot be made.

COMMUNITY HEALTH SYSTEMS, INC.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

amount set forth below plus accrued and unpaid interest, if any, on the 5¼% Senior Secured Notes due 2030 redeemed, to, but excluding, the applicable date of redemption, if redeemed during the twelv e-month period beginning on May 15 of the years indicated below :

Redemption Price

May 15, 2025 to May 14, 2026

May 15, 2026 to May 14, 2027

May 15, 2027 to May 14, 2030

CONDENSED FINANCIAL INFORMATION OF PARENT

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Parent Company Only

Condensed Statements of Income (Loss)

Condensed Statements of Income

(In millions)

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Other operating expenses

Government and other legal settlements and related costs

Electronic health records incentive reimbursement

Lease cost and rent

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Interest expense, net

Loss (gain) from early extinguishment of debt

(Gain) loss from early extinguishment of debt

Equity in earnings of unconsolidated affiliates

Income (loss) before income taxes

(Benefit from) provision for income taxes

Net income (loss)

Income before income taxes

Provision for (benefit from) income taxes

Net income attributable to noncontrolling interests

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

Net income attributable to Community Health Systems, Inc.

See note to condensed financial statements of Parent.

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Parent Company Only

Condensed Statements of Comprehensive Income (Loss)

Condensed Statements of Comprehensive Income

(In millions)

1 unchanged sentence

(In millions)

Net income (loss)

Equity in other comprehensive (loss) income of affiliates,

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components, net of tax

Other comprehensive (loss) income

Comprehensive income (loss)

Other comprehensive loss

Comprehensive income

Comprehensive income attributable to noncontrolling interests

Comprehensive income (loss) attributable to Community Health Systems,

Comprehensive income attributable to Community Health Systems,

See note to condensed financial statements of Parent.

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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 8. Financial Statements and Supplementary Data