Community Health Systems 2014 Annual Report Download

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Providing Healthcare Solutions
for Over 30 Years
2014 Annual Report to Stockholders

Table of contents

  • Page 1
    Providing Healthcare Solutions for 4ver 30 Years 2014 Annual Report to Stockholders

  • Page 2
    ... or operates 203 affiliated hospitals in 29 states with an aggregate of approximately 31,000 licensed beds (as of March 1, 2015). The Company's headquarters are located in Franklin, Tennessee, a suburb south of Nashville. Shares in Community Health Systems, Inc. are traded on the New York Stock...

  • Page 3

  • Page 4
    Joint Commission Top Performers: The Joint Commission named 107 CHS-affiliated hospitals to its prestigious annual list of Top Performers on Key Quality MeasuresTM. Top Performers were recognized for exemplary performance on evidence-based interventions that lead to healthy outcomes for patients ...

  • Page 5
    ... Balance Sheet and Cash Flow Data Working Capital Total Assets Long-term debt Stockholders' equity Net cash provided by operating activities Selected Consolidated Operating Data for Continuing Operations Number of hospitals (at end of period) Licensed beds (at end of period) Beds in service (at end...

  • Page 6
    ... of Health Management Associates, Inc. (HMA) in January added 71 hospitals to our portfolio and has made us one of the largest hospital operators in the nation. Other 2014 acquisitions were just as strategic as we welcomed hospitals that complement existing markets in Pennsylvania, Florida...

  • Page 7
    ... latest medical technologies to the communities we serve. Other tangible benefits in cities and towns across America include jobs for 135,000 people, tens of millions of dollars paid in taxes, and nearly $3.3 billion provided in charity care and discounts for those who can't afford health services...

  • Page 8
    ... Capital Management LLC) OFFICERS Lynn T. Simon, M.D. President, Clinical Services and Chief Quality Officer T. Mark Buford Senior Vice President- Internal Audit Pamela T. Rudisill Senior Vice President and Chief Nursing Officer Larry M. Carlton Senior Vice President- Revenue Management John...

  • Page 9
    ...at no charge. Requests for the Annual Report on Form 10-K and other investor information should be directed to Investor Relations at the Company's corporate office or at www.chs.net. REGISTRAR AND TRANSFER AGENT American Stock Transfer & Trust Co., LLC Operations Center 6201 15th Avenue Brooklyn, NY...

  • Page 10
    4000 Meridian Boulevard Franklin, Tennessee 37067 (615) 465-7000 www.chs.net

  • Page 11
    ... 12b-2 of the Act). YES ¨ NO x The aggregate market value of the voting stock held by non-affiliates of the Registrant was $5,240,969,087. Market value is determined by reference to the closing price on June 30, 2014 of the Registrant's Common Stock as reported by the New York Stock Exchange. The...

  • Page 12
    ... Data Changes in and Disagreements with Accountants on Accounting and Financial Disclosure Controls and Procedures Other Information PTRT III Directors, Executive Officers and Corporate Vovernance Executive Compensation Security Ownership of Certain Beneficial Owners and Management and Related...

  • Page 13
    ... the markets in which our hospitals are located. In a number of our markets, we have partnered with local physicians or not-forprofit providers, or both, in the ownership of our facilities. In addition to our hospitals and related businesses, we also owned and operated 64 licensed home care agencies...

  • Page 14
    .... 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. On January 27, 2014, we completed the acquisition of Health Management Associates, Inc., or HMA, for...

  • Page 15
    ... third-party urgent care and retail service locations, expansion of outside diagnostic and surgery center locations, and advancing tele-health strategies. We spent approximately $166 million on 58 major construction projects that were completed in 2014. The 2014 projects included new emergency rooms...

  • Page 16
    ... cycle. Upon completion of an acquisition, our management information systems team converts the hospital's existing information system to our standardized system. This enables us to quickly implement our business controls and cost containment initiatives. • Physician Support. We support our newly...

  • Page 17
    ..., imaging, home care, skilled nursing, centralized outpatient scheduling and health information management. We have enhanced quality and reduced costs associated with these services by improving contract terms and standardizing information systems. We work to identify and communicate best practices...

  • Page 18
    ... safety and the quality of care provided. We have developed high reliability/safety and quality training programs for all senior hospital management, chief nursing officers, quality directors, physicians and other clinical staff. We share information among our hospital management to implement best...

  • Page 19
    ... not-for-profit hospitals. We believe that our access to capital, ability to recruit physicians and reputation for providing quality care make us an attractive partner for these communities. In addition, we have found that communities located in states where we already operate a hospital are more...

  • Page 20
    ...cases a single hospital is the only provider of general healthcare services in these communities. Factors Affecting Performance. Among the many factors that can influence a hospital's financial and operating performance are: • facility size and location, • facility ownership structure (i.e., tax...

  • Page 21
    ... of service and quality of outcomes for the entire episode of care and • regulatory changes. The healthcare industry is also undergoing consolidation in reaction to efforts to reform the payment system. Hospital systems are acquiring physician practices and other outpatient and sub-acute providers...

  • Page 22
    ... the operations of these hospitals following the completion of the acquisition. Statistics for hospitals which have been sold are excluded from all periods presented. 2014 Year Ended December 31, 2013 (Dollars in millions) 2012 Consolidated Data Number of hospitals (at end of period) Licensed beds...

  • Page 23
    ...-average number of beds in service. EBITDA consists of net income attributable to Community Health Systems, Inc. before interest, income taxes, depreciation and amortization. Adjusted EBITDA is EBITDA adjusted to exclude discontinued operations, loss from early extinguishment of debt, impairment...

  • Page 24
    ... bad debts), by payor source for the periods indicated. The data for the years presented are not strictly comparable due to the effect that hospital acquisitions have had on these statistics. 2014 Year Ended December 31, 2013 2012 Medicare Medicaid Managed Care and other third-party payors Self-pay...

  • Page 25
    ... for bad debts) generated in that state. Operating revenues, net of contractual allowances and discounts (but before the provision for bad debts), generated in Texas, as a percentage of consolidated operating revenues, were 10.9% in 2014, 15.0% in 2013 and 14.7% in 2012. Operating revenues, net...

  • Page 26
    ... bad debts), generated in Indiana, as a percentage of consolidated operating revenues, were 7.6% in 2014, 10.6% in 2013 and 10.7% in 2012. Hospital revenues depend upon inpatient occupancy levels, the volume of outpatient procedures and the charges or negotiated payment rates for hospital services...

  • Page 27
    ... that are included in continuing operations, 13 states are expanding their Medicaid programs. At this time, the other 15 states are not, including Florida, Tennessee and Texas, where we operated a significant number of hospitals as of December 31, 2014. Some states that have opted out are evaluating...

  • Page 28
    ... EHR technology on a facility-by-facility basis since 2011. We recognize incentive reimbursement related to the Medicare or Medicaid incentives as we are able to implement the certified EHR technology and meet the defined "meaningful use criteria," and information from completed cost report periods...

  • Page 29
    ... use of free or significantly discounted office space or equipment for physicians in facilities usually located close to the hospital, • provision of free or significantly discounted billing, nursing, or other staff services, • free training for a physician's office staff, including management...

  • Page 30
    ...holds debt, stock or other types of investment in the hospital or in any owner of the hospital, excluding physician ownership through publicly-traded securities that meet certain conditions. If a hospital fails to comply with these regulations, the hospital could lose its Medicare provider agreement...

  • Page 31
    ... payments must have written policies for all employees, contractors and agents providing detailed information about false claims, false statements and whistleblower protections under certain federal laws, including the FCA, and similar state laws. A number of states, including states in which we...

  • Page 32
    ... of new services. As of December 31, 2014, we operated 112 hospitals in 15 states that have adopted CON laws for acute care facilities. If we fail to obtain necessary state approval, we will not be able to expand our facilities, complete acquisitions or add new services in these states. Violation...

  • Page 33
    ...in certain situations involving large breaches, to the media. HHS is required to publish on its website a list of all covered entities that report a breach involving more than 500 individuals. All non-permitted uses or disclosures of unsecured protected health information are presumed to be breaches...

  • Page 34
    ... Medicare disproportionate share and uncompensated care payments as a percentage of operating revenues, net of contractual allowances and discounts (but before the provision for bad debts), were 1.5% and 1.3% for the years ended December 31, 2014 and 2013, respectively. Hospitals may also qualify...

  • Page 35
    ... not have a material adverse effect on our consolidated results of operations. Further, the Reform Legislation prohibits the use of federal funds under the Medicaid program to reimburse providers for medical services provided to treat HACs. TRICARE. TRICARE is the Department of Defense's healthcare...

  • Page 36
    ...short stay inpatient hospital services. These reviews focus on seven states (Florida, California, Michigan, Texas, New York, Louisiana and Illinois) with high populations of fraud and error-prone providers and four states (Pennsylvania, Ohio, North Carolina, and Missouri) with high claims volumes of...

  • Page 37
    ... state programs will provide one payment for both hospital and physician services provided to Medicaid patients for certain episodes of inpatient care. Supply Contracts In March 2005, we began purchasing items, primarily medical supplies, medical equipment and pharmaceuticals, under an agreement...

  • Page 38
    ..., acquiring physician practice groups, and participating in ACOs, or other clinical integration models. In most markets in which we are not the sole provider of general acute care health services, our primary competitor is a not-for-profit hospital. These hospitals are owned by tax-supported...

  • Page 39
    ..., financial reporting and asset management areas of our Company. Our Code of Conduct is posted on our website at www.chs.net/company-overview/code-of-conduct. Corporate Integrity Agreement On August 4, 2014, we announced that we had entered into a civil settlement with the U.S. Department of Justice...

  • Page 40
    ... our employee relations to be good and have not experienced work stoppages that have materially, adversely affected our business or results of operations. Our hospitals, like most hospitals, have experienced rising labor costs. In some markets, nurse and medical support personnel availability...

  • Page 41
    ... results may differ materially from those predicted in any forward-looking statements we make in any public disclosures. Additional factors that could affect our business, results of operations and financial condition are discussed elsewhere in this Report (including in "Management's Discussion and...

  • Page 42
    .... If our cash flows and capital resources are insufficient to fund our debt service obligations, we may be forced to reduce or delay capital expenditures, including those required for operating our existing hospitals, for integrating our historical acquisitions or for future acquisitions. We also...

  • Page 43
    ... criteria are satisfied. If new debt is added to our current debt levels, the related risks that we now face could be further exacerbated. Failure to continue to achieve expected benefits of the HMA merger and to continue to integrate HMA's operations with ours could adversely affect us. We have...

  • Page 44
    ... have material liabilities for past activities of acquired hospitals. State efforts to regulate the construction, acquisition or expansion of healthcare facilities could limit our ability to build or acquire additional healthcare facilities, renovate our facilities or expand the breadth of services...

  • Page 45
    ... claims, including performance data related to quality measures and patient satisfaction surveys. Federal law provides for the future expansion of the number of quality measures that must be reported. Further, every hospital must establish and update annually a public listing of the hospital...

  • Page 46
    ... that are included in continuing operations, 13 states are expanding their Medicaid programs. At this time, the other 15 states are not, including Florida, Tennessee and Texas, where we operated a significant number of hospitals as of December 31, 2014. Some states that have opted out are evaluating...

  • Page 47
    ... or state healthcare programs or managed care companies reduce the payments we receive as reimbursement for services we provide, or if insured individuals move from traditional private health insurance plans to those with greater coverage exclusions or narrower networks, our net operating revenues...

  • Page 48
    ... we experience growth in self-pay volume and revenues, our financial condition or results of operations could be adversely affected. Like others in the hospital industry, we have experienced an increase in our provision for bad debts as a percentage of net operating revenues due to a growth in self...

  • Page 49
    ... for care. The failure of one or more large employers, or the closure or substantial reduction in the number of individuals employed at manufacturing or other facilities located in or near many of the non-urban communities in which our hospitals primarily operate, could cause affected employees to...

  • Page 50
    ... other healthcare providers in recruiting and retaining qualified management and support personnel responsible for the daily operations of our hospitals, including nurses and other non-physician healthcare professionals. In some markets, the availability of nurses and other medical support personnel...

  • Page 51
    ... of care provided by facilities. Vovernmental programs including Medicare and Medicaid require hospitals to report certain quality data to receive full reimbursement updates, and Medicare does not reimburse for care related to certain preventable adverse events, known as hospital-acquired conditions...

  • Page 52
    ... Comments None Item 2. Properties Corporate Headquarters We own our corporate headquarters building located in Franklin, Tennessee. Hospitals Our hospitals are general care hospitals offering a wide range of inpatient and outpatient medical services. These services generally include general acute...

  • Page 53
    ...Hospital Siloam Springs Regional Hospital Medical Center of South Arkansas Sparks Health System Summit Medical Center California Barstow Community Hospital Fallbrook Hospital Watsonville Community Hospital Florida Lake Wales Medical Center North Okaloosa Medical Center Bartow Regional Medical Center...

  • Page 54
    ... beds) Union County Hospital Indiana Porter Hospital Lutheran Health Network Bluffton Regional Medical Center Dupont Hospital Lutheran Hospital Lutheran Musculoskeletal Center Lutheran Rehabilitation Hospital (rehabilitation) St. Joseph's Hospital Dukes Memorial Hospital Kosciusko Community Hospital...

  • Page 55
    ...Hospital Eastern New Mexico Medical Center Alta Vista Regional Hospital Carlsbad Medical Center Lea Regional Medical Center Mountain View Regional Medical Center North Carolina Martin Veneral Hospital Lake Norman Regional Medical Center Davis Regional Medical Center Sandhills Regional Medical Center...

  • Page 56
    ... Regional Hospital Lock Haven Hospital Pottstown Memorial Medical Center Phoenixville Hospital Sunbury Community Hospital Memorial Hospital Carlisle Regional Medical Center Heart of Lancaster Regional Medical Center Lancaster Regional Medical Center Sharon Regional Health System South Carolina...

  • Page 57
    ... the number of beds for which the appropriate state agency licenses a facility regardless of whether the beds are actually available for patient use. We operate this hospital under a lease-leaseback and operating agreement. We recognize all operating statistics, revenues and expenses associated with...

  • Page 58
    ... owner and manager of each joint venture. A subsidiary of HCA Holdings, Inc. is the majority owner of Macon Healthcare LLC, and a subsidiary of UHS is the majority owner of Summerlin Hospital Medical Center LLC and Valley Health System LLC. Joint Venture Facility Name City State Licensed Beds...

  • Page 59
    ... ex rel. Baker vs. Community Health Systems, Inc. (United States District Court for the District of New Mexico) Our knowledge of this matter originated in early 2006 with correspondence from the Civil Division of the Department of Justice requesting documents in an investigation it was conducting...

  • Page 60
    ..., individually and on behalf of Regional Cardiology Consultants, PC v. Jackson-Madison County General Hospital, an Affiliate of West Tennessee Healthcare, Regional Hospital of Jackson, a Division of Community Health Systems Professional Services Corporation, James Moss, individually, Timothy Puthoff...

  • Page 61
    ...Community Health Systems Professional Services Corporation d/b/a Community Health Systems d/b/a Community Health Systems PSC, Inc. d/b/a Rockwood Clinic P.S. and Rockwood Clinic, P.S. (Superior Court, Spokane, Washington). This suit was filed on February 29, 2012, by a former chief financial officer...

  • Page 62
    ... against the Company (Denise B. Alverson, v. Community Health Systems, Inc., Community Health Systems Professional Services Corporation, Riverview Regional Medical Center, LLC, Vadsden Regional Medical Center, LLC, Foley Hospital Corporation and Anniston HMA, LLC, (USDC, N.D., AL); Mary Martin Vlah...

  • Page 63
    ...remediation, operating and other expenses. Certain Legal Proceedings Related to HMT Medicare/Medicaid Billing Lawsuits On January 11, 2010, HMA and one of its subsidiaries were named in a qui tam lawsuit entitled United States of America ex rel. J. Michael Mastej v. Health Management Associates, Inc...

  • Page 64
    ... service. The DOJ's investigation originated with a False Claims Act lawsuit against Kyphon, Inc., the company that developed the kyphoplasty procedure. The requested information has been provided to the DOJ and we are cooperating with the investigation. Prior to the HMA merger, HMA determined...

  • Page 65
    ... to employees, physicians and therapists who were involved with the IOP services provided by Allegiance at the HMA hospitals; and (v) other documents related to Allegiance, including leases, contracts, policies and procedures, training documents, budgets and financial analyses. The period of time...

  • Page 66
    ... matter. Jeffery D. Hamby, M.D. v. EmCare Physician Providers, Inc., Health Management Associates, Inc., Joni Carmack, M.D. and Michael Wheelis, M.D. Circuit Court Crawford County, Arkansas. Hamby, who worked in the emergency department at HMA affiliate Summit Medical Center (AK) and was employed by...

  • Page 67
    ...II Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities We completed an initial public offering of our common stock on June 14, 2000. Our common stock began trading on June 9, 2000 and is listed on the New York Stock Exchange under the...

  • Page 68
    ...$0.25 per share to holders of our common stock at the close of business as of December 17, 2012, which totaled approximately $23 million. We have not paid any dividends since this time, and we do not anticipate paying any other cash dividends in the foreseeable future. Our Credit Facility limits our...

  • Page 69
    ...of $49.72 per share. The cumulative number of shares repurchased and retired under this program was 881,023 shares at a weighted-average price of $40.64 per share. On December 10, 2014, we adopted a new open market repurchase program for up to 5,000,000 shares of our common stock, not to exceed $150...

  • Page 70
    ... for discontinued operations. Community Health Systems, Inc. Five Year Summary of Selected Financial Data 2014 Year Ended December 31, 2013 2012 2011 (in millions, except share and per share data) 2010 Consolidated Statement of Income Data Net operating revenues Income from operations Income from...

  • Page 71
    ...the largest publicly-traded hospital companies in the United States and a leading operator of general acute care hospitals in communities across the country. We provide healthcare services through the hospitals that we own and operate and affiliated businesses in non-urban and selected urban markets...

  • Page 72
    ...of a regional not-for-profit healthcare system. On November 3, 2014, the Company sold Special Care Hospital (67 licensed beds) located in Nanticoke, Pennsylvania, which is a long-term acute care hospital, to Post Acute Medical, LLC for approximately $3 million in cash. Our net operating revenues for...

  • Page 73
    ... that are included in continuing operations, 13 states are expanding their Medicaid programs. At this time, the other 15 states are not, including Florida, Tennessee and Texas, where we operated a significant number of hospitals as of December 31, 2014. Some states that have opted out are evaluating...

  • Page 74
    ... 31, 2014, 2013 and 2012, respectively, for HITECH incentive reimbursements from Medicare and Medicaid related to certain of our hospitals and for certain of our employed physicians, which are presented as a reduction of operating expenses. As a result of our current levels of cash, available...

  • Page 75
    ... 1, 2014, we completed the acquisition of a 95% interest in Munroe Regional Medical Center (421 licensed beds) in Ocala, Florida and its other outpatient and ancillary services through a joint venture arrangement with an affiliate of a regional not-for-profit healthcare system, which acquired the...

  • Page 76
    ... the government pays Medicare managed care plans. The trend toward increased enrollment in Medicare managed care may adversely affect our operating revenue growth. Other provisions in the Reform Legislation impose minimum medical-loss ratios and require insurers to meet specific benefit requirements...

  • Page 77
    ..., adjusted admissions and net operating revenues had the HMA facilities been owned for the indicated periods. This same-store information for the hospitals acquired in the HMA merger for 2013 is non-VAAP financial information and may not be comparable to the information provided for 2014 due to the...

  • Page 78
    ... dividing that number by gross inpatient revenues. Includes loss from discontinued operations. Includes former HMA hospitals for the months of February through December 2014 and 2013. For all hospitals owned throughout both periods, the same-store operating results and statistical data reflects the...

  • Page 79
    ...related to achieving meaningful use compliance and acquisition and integration-related expenses, primarily related to the HMA merger. Vovernment settlement and related costs, as a percentage of net revenues, decreased from 0.8% in 2013 to 0.5% in 2014. Rent, as a percentage of net operating revenues...

  • Page 80
    ... of net operating revenues, remained consistent at 0.3% for the years ended December 31, 2014 and 2013. In connection with the HMA merger, we further analyzed our intangible assets related to internal-use software used in certain of our hospitals for patient and clinical systems, including software...

  • Page 81
    ...12.833 billion in 2012. Included in 2012 net operating revenues on a non-same store basis is approximately $105 million of net operating revenues from an industry-wide settlement with the United States Department of Health and Human Services and CMS, based on a claim that acute-care hospitals in the...

  • Page 82
    ... million in 2013 compared to $266 million in 2012, a decrease of 46.8%. The decrease in net income attributable to Community Health Systems, Inc. is primarily due to an increase in operating expenses as a percentage of net operating revenues, including the government settlement and related costs and...

  • Page 83
    ... in cash paid for acquisitions of facilities and other related equipment of $3.0 billion as a result of the acquisition of HMA (which owned and operated 71 hospitals at the time of the completion of the HMA merger) and three additional hospitals in 2014 compared to no hospital acquisitions in 2013...

  • Page 84
    ... 6.875% per annum. Pursuant to hospital purchase agreements in effect as of December 31, 2014, we have commitments to build one replacement facility and the following capital commitments. As part of an acquisition in 2012, we agreed to build a replacement hospital in York, Pennsylvania, by July 2017...

  • Page 85
    ... of facilities were $3.1 billion in 2014, $44 million in 2013 and $322 million in 2012. Our expenditures in 2014 were primarily related to the purchase price paid by us in the acquisition of HMA (which owned and operated 71 hospitals at the time of the completion of the HMA merger), the acquisition...

  • Page 86
    ... surgery centers and other physician practices, including a large physician practice in Texas, partially offset by $8 million of cash received for the settlement of working capital items from a prior divestiture and return of a deposit made at acquisition related to building a replacement hospital...

  • Page 87
    ... All of our obligations under the Credit Facility are unconditionally guaranteed by Community Health Systems, Inc. and certain of its existing and subsequently acquired or organized domestic subsidiaries. All obligations under the Credit Facility and the related guarantees are secured by a perfected...

  • Page 88
    ... internally generated cash and continued access to the bank credit and capital markets, will be sufficient to finance future acquisitions, capital expenditures and working capital requirements during 2015. In connection with the consummation of the HMA merger, CHS issued: (i) $1.0 billion aggregate...

  • Page 89
    ... 2014 under the Credit Facility and related fees and expenses. On March 21, 2012, through certain of its subsidiaries, CHS entered into an accounts receivable loan agreement, or the Receivables Facility, with a group of lenders and banks, Credit Agricolé Corporate and Investment Bank, as a managing...

  • Page 90
    ... effective August 28, 2015. The swaps that were in effect prior to the HMA merger remain in effect after the refinancing for the HMA merger and will continue to be used to limit the effects of changes in interest rates on portions of our amended credit facility. The Credit Facility and/or our...

  • Page 91
    ... Facility to provide for one or more tranches of term loans in an aggregate principal amount of $1.5 billion, and our continued access to the bank credit and capital markets will be sufficient to finance acquisitions, capital expenditures and working capital requirements during 2015. On May 24, 2012...

  • Page 92
    ... acquired in the HMA merger are material to our financial position or results of operations. As of December 31, 2014, we have hospitals in 37 of the markets we serve, with noncontrolling physician ownership interests ranging from less than 1% to 40%, including one hospital that also has a non-profit...

  • Page 93
    ... operating revenues and net income by an insignificant amount in each of the years ended December 31, 2014, 2013 and 2012. Allowance for Doubtful Accounts Substantially all of our accounts receivable are related to providing healthcare services to patients at our hospitals and affiliated businesses...

  • Page 94
    ... information is derived from our hospitals, excluding clinics, unless otherwise noted. Patient accounts receivable from our hospitals represent approximately 95% of our total consolidated accounts receivable. Days revenue outstanding was 63 days at December 31, 2014 and 67 days at December 31, 2013...

  • Page 95
    ... claims and incident data are standardized across all of our hospitals and have been consistent for many years. We monitor the outcomes of the medical care services that we provide and for each reported claim, we obtain various information concerning the facts and circumstances related to that claim...

  • Page 96
    ... data, a variety of hospital census information, employed physician information, professional liability retentions for each policy year, geographic information and other data. Based on these analyses, we determine our estimate of the professional liability claims. The determination of management...

  • Page 97
    ... 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...

  • Page 98
    ... believe the adoption will have a material impact on our consolidated financial position, results of operations and cash flows. In May 2014, the Financial Accounting Standards Board issued ASU 2014-09, which outlines a single comprehensive model for recognizing revenue and supersedes most existing...

  • Page 99
    ..., • potential adverse impact of known and unknown government investigations, audits, and Federal and State False Claims Act litigation and other legal proceedings, • our ability, where appropriate, to enter into and maintain managed care provider arrangements and the terms of these arrangements...

  • Page 100
    ... risk management procedures and controls in executing derivative financial instrument transactions. We do not execute transactions or hold derivative financial instruments for trading purposes. Derivative financial instruments related to interest rate sensitivity of debt obligations are used with...

  • Page 101
    ... Item 8. Financial Statements and Supplementary Data Index to Financial Statements Page Community Health Systems, Inc. Consolidated Financial Statements: Report of Independent Registered Public Accounting Firm Consolidated Statements of Income for the Years Ended December 31, 2014, 2013 and 2012...

  • Page 102
    ... the Board of Directors and Stockholders of Community Health Systems, Inc. Franklin, Tennessee We have audited the accompanying consolidated balance sheets of Community Health Systems, Inc. and subsidiaries (the "Company") as of December 31, 2014 and 2013, and the related consolidated statements of...

  • Page 103
    ... and per share data) 2012 Operating revenues (net of contractual allowances and discounts) Provision for bad debts Net operating revenues Operating costs and expenses: Salaries and benefits Supplies Other operating expenses Vovernment settlement and related costs Electronic health records incentive...

  • Page 104
    ... tax (benefit) of $(9), $9 and $(3) for the years ended December 31, 2014, 2013 and 2012, respectively Other comprehensive income Comprehensive income Less: Comprehensive income attributable to noncontrolling interests Comprehensive income attributable to Community Health Systems, Inc. stockholders...

  • Page 105
    ... issued and 95,011,483 shares outstanding at December 31, 2013 Additional paid-in capital Treasury stock, at cost, 975,549 shares at December 31, 2014 and 2013 Accumulated other comprehensive loss Retained earnings Total Community Health Systems, Inc. stockholders' equity Noncontrolling interests...

  • Page 106
    ... CONSOLIDTTED STTTEMENTS OF STOCKHOLDERS' EQUITY Community Health Systems, Inc. Stockholders Tccumulated Treasury Stock Tdditional Other Paid-in Comprehensive Capital Income (Loss) Tmount Shares Tmount $ 1 1,086 - - (21) - 20 (In millions, except share data) (975,549) $ (7) $ (184) - - 39...

  • Page 107
    ... December 31, 2014 2013 2012 (In millions) Cash flows from operating activities: Net income Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization Deferred income taxes Vovernment settlement and related costs Stock-based compensation expense...

  • Page 108
    ... and operated, and management services provided, by distinct and indirect subsidiaries of Community Health Systems, Inc. The results of Health Management Associates, Inc. ("HMA") are included from January 27, 2014, the date of the HMA merger. As of December 31, 2014, Florida, Texas, Pennsylvania...

  • Page 109
    ..., Florida office have decreased significantly with the integration of the HMA corporate functions. Included in these corporate office costs is stock-based compensation of $54 million, $38 million and $41 million for the years ended December 31, 2014, 2013 and 2012, respectively. Cash Equivalents...

  • Page 110
    ... of net operating revenues from an industrywide settlement with the United States Department of Health and Human Services and Centers for Medicare and Medicaid Services, based on a claim that acute-care hospitals in the U.S. were underpaid from the Medicare inpatient prospective payment system in...

  • Page 111
    ... net operating revenues which was $2.8 billion, $1.3 billion and $1.1 billion for the years ended December 31, 2014, 2013 and 2012, respectively. In the ordinary course of business, the Company renders services to patients who are financially unable to pay for hospital care. The Company's policy is...

  • Page 112
    ... 31, 2014, 2013 and 2012, respectively, of incentive reimbursement for HITECH incentives from Medicare and Medicaid related to certain of the Company's hospitals and for certain of the Company's employed physicians that have demonstrated meaningful use of certified EHR technology or have completed...

  • Page 113
    ... fair value. The impairments for 2014, 2013 and 2012 were identified because of declining operating results and projections of future cash flows at these hospitals caused by competitive and operational challenges specific to the markets in which these hospitals operate. Income Taxes. The Company...

  • Page 114
    ... its revenue recognition policies, procedures and control framework and the resulting impact on its consolidated financial position, results of operations and cash flows. 2. TCCOUNTING FOR STOCK-BTSED COMPENSTTION Stock-based compensation awards have been granted under the Community Health Systems...

  • Page 115
    ... table reflects the impact of total compensation expense related to stock-based equity plans on the reported operating results for the respective periods (in millions): 2014 Year Ended December 31, 2013 2012 Effect on income from continuing operations before income taxes Effect on net income...

  • Page 116
    ...2014 and 2013. The weighted-average grant date fair value of stock options granted during the year ended December 31, 2012 was $9.20. The aggregate intrinsic value (the number of in-the-money stock options multiplied by the difference between the Company's closing stock price on the last trading day...

  • Page 117
    ...of the first three anniversaries of the award date. In addition, 835,000 restricted stock awards granted March 1, 2014 have a performance objective that is measured based on the realization of synergies related to the HMA merger over a two-year period. The performance objective may be met in part in...

  • Page 118
    ... related integration costs related to prospective and closed acquisitions were expensed during the years ended December 31, 2014, 2013 and 2012, respectively, and are included in other operating expenses on the consolidated statements of income. HMA Merger On January 27, 2014, the Company completed...

  • Page 119
    ... in the CVR agreement. At the time of the completion of the HMA merger, HMA owned and operated 71 hospitals in 15 states in non-urban communities located primarily in the southeastern United States. In connection with the HMA merger, the Company and CHS/Community Health Systems, Inc. ("CHS") entered...

  • Page 120
    ... of the Company completed the acquisition of a 95% interest in Munroe Regional Medical Center (421 licensed beds) in Ocala, Florida and its other outpatient and ancillary services through a joint venture arrangement with an affiliate of a regional not-forprofit healthcare system, which acquired the...

  • Page 121
    ...allocation relating to this acquisition, approximately $42 million of goodwill has been recorded. Effective March 1, 2012, one or more subsidiaries of the Company completed the acquisition of MetroSouth Medical Center (330 licensed beds) located in Blue Island, Illinois. The total cash consideration...

  • Page 122
    ..., 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, 2014, the...

  • Page 123
    ... Acute Medical, LLC for approximately $3 million in cash. In addition, HMA entered into a definitive agreement to sell Williamson Memorial Hospital (76 licensed beds) located in Williamson, West Virginia prior to the HMA merger. In connection with management's decision to sell these facilities and...

  • Page 124
    ... 31, 2014, the hospital operations reporting unit, the home care agency operations reporting unit, and the hospital management services reporting unit had approximately $8.9 billion, $44 million and $33 million, respectively, of goodwill. At December 31, 2013, the hospital operations reporting unit...

  • Page 125
    ... HMA merger, the Company further analyzed its intangible assets related to internal-use software used in certain of its hospitals for patient and clinical systems, including software required to meet criteria for meaningful use attestation and ICD-10 compliance. This analysis resulted in management...

  • Page 126
    ... COMMUNITY HETLTH SYSTEMS, INC. TND SUBSIDITRIES NOTES TO CONSOLIDTTED FINTNCITL STTTEMENTS - (Continued) 5. INCOME TTXES The provision for income taxes for income from continuing operations consists of the following (in millions): 2014 Year Ended December 31, 2013 2012 Current: Federal State...

  • Page 127
    ...the Company's policy to recognize interest and penalties related to unrecognized benefits in its consolidated statements of income as income tax expense. The liabilities for uncertain tax positions increased by $26 million during the year ended December 31, 2014 as a result of the HMA merger. During...

  • Page 128
    ... Revenue Service ("IRS"). The Company believes the results of these examinations will not be material to its consolidated results of operations or consolidated financial position. During the year ended December 31, 2013, the IRS concluded its examination of the federal tax return of Community Health...

  • Page 129
    ..., 2014, a term loan C due January 25, 2017 and a $750 million revolving credit facility for working capital and general corporate purposes. In connection with the HMA merger, the Company and CHS entered into a third amendment and restatement of its credit facility (the "Credit Facility"), providing...

  • Page 130
    ... percentage based on the Company's leverage ratio (as defined in the Credit Facility generally as the ratio of total debt on the date of determination to the Company's EBITDA, as defined, for the four quarters most recently ended prior to such date), of excess cash flow (as defined) for any year...

  • Page 131
    ... proceeds from this issuance, together with available cash on hand, were used to finance the purchase of up to $1.0 billion aggregate principal amount of CHS' then outstanding 8 7/8% Senior Notes and related fees and expenses. On March 21, 2012, CHS completed the secondary offering of an additional...

  • Page 132
    ....000% Pursuant to a registration rights agreement entered into at the time of the issuance of the 8% Senior Notes, as a result of an exchange offer made by CHS, substantially all of the 8% Senior Notes issued in November 2011 and March 2012 were exchanged in May 2012 for new notes (the "8% Exchange...

  • Page 133
    ... Senior Secured Notes"). The net proceeds from this issuance, together with available cash on hand, were used to finance the prepayment of $1.6 billion of the outstanding term loans due 2014 under the Credit Facility and related fees and expenses. The 2018 Senior Secured Notes bear interest at 5.125...

  • Page 134
    ... On January 27, 2014, CHS issued $3.0 billion aggregate principal amount of 6 7/8% Senior Notes due 2022 (the "6 7/8% Senior Notes") in connection with the HMA merger, which were issued in a private placement. The net proceeds from this issuance were used to finance the HMA merger. The 6 7/8% Senior...

  • Page 135
    ... the context provides otherwise. Receivables Facility On March 21, 2012, CHS and certain of its subsidiaries entered into an accounts receivable loan agreement (the "Receivables Facility") with a group of lenders and banks, Credit Agricolé Corporate and Investment Bank, as a managing agent and...

  • Page 136
    ...$1 million and $72 million for the years ended December 31, 2014, 2013 and 2012, respectively. Other Debt As of December 31, 2014, other debt consisted primarily of the mortgage obligation on the Company's corporate headquarters and other obligations maturing in various installments through 2020. To...

  • Page 137
    ...on closing price as quoted in public markets. Estimated fair value is based on the closing price as quoted on the public market where the CVR is traded. Contingent Value Right. Credit Facility. Estimated fair value is based on publicly available trading activity and supported with information from...

  • Page 138
    ... of Receivables Facility and other debt. these obligations. Interest rate swaps. The fair value of interest rate swap agreements is the amount at which they could be settled, based on estimates calculated by the Company using a discounted cash flow analysis based on observable market inputs and...

  • Page 139
    ... 28, 2015. The Company is exposed to certain risks relating to its ongoing business operations. The risk managed by using derivative instruments is interest rate risk. Interest rate swaps are entered into to manage interest rate fluctuation risk associated with the term loans in the Credit Facility...

  • Page 140
    ... inputs that are corroborated by market data. Level 3: Unobservable inputs that are supported by little or no market activity and are significant to the fair value of the assets or liabilities. Level 3 includes values determined using pricing models, discounted cash flow methodologies, or similar...

  • Page 141
    ... a multi-dimensional relational model that incorporates standard observable inputs and assumptions such as benchmark yields, reported trades, broker/dealer quotes, issuer spreads, benchmark securities, bids/offers and other pertinent reference data. Supplemental information regarding the Company...

  • Page 142
    ...Contents COMMUNITY HETLTH SYSTEMS, INC. TND SUBSIDITRIES NOTES TO CONSOLIDTTED FINTNCITL STTTEMENTS - (Continued) Tmortized Cost Gross Unrealized Gains Gross Unrealized Losses Estimated Fair Values As of December 31, 2013: Debt securities and debt-based mutual funds Vovernment and corporate Equity...

  • Page 143
    ... of the HMA merger. The CVR is listed on the NASDAQ and the valuation at December 31, 2014 is based on the quoted trading price for the CVR on the last day of the period. Changes in the estimated fair value of the CVR are recorded through the consolidated statement of income. CVR-related Liability...

  • Page 144
    ... are classified in Level 2 of the fair value hierarchy. 9. LETSES The Company leases hospitals, medical office buildings, and certain equipment under capital and operating lease agreements. During 2014, 2013 and 2012, the Company entered into capital lease obligations of $18 million, $4 million and...

  • Page 145
    ...agreements are generally eligible to participate in the CHS/Community Health Systems, Inc. Standard 401(k) Plan. The Company also maintains the Health Management Associates, Inc. Retirement Savings Plan, a defined contribution plan covering substantially all of the employees formerly employed by HMA...

  • Page 146
    ...per share to holders of its common stock at the close of business as of December 17, 2012, which totaled approximately $23 million. The Company did not pay a cash dividend in 2013 or 2014 and does not anticipate paying any other cash dividends in the foreseeable future. The Company's Credit Facility...

  • Page 147
    ... diluted earnings per share for income from continuing operations, discontinued operations and net income attributable to Community Health Systems, Inc. common stockholders (in millions, except share data): 2014 Year Ended December 31, 2013 2012 Numerator: Income from continuing operations, net of...

  • Page 148
    ...2014, 2013 and 2012, respectively. 14. SEGMENT INFORMTTION The Company operates in two distinct operating segments, represented by hospital operations (which includes its general acute care hospitals and related healthcare entities that provide inpatient and outpatient healthcare services) and home...

  • Page 149
    ...reportable segments of the Company's net operating revenues, income from continuing operations before income taxes, expenditures for segment assets and total assets is summarized in the following tables (in millions): December 31, 2014 2013 2012 Net operating revenues: Hospital operations Corporate...

  • Page 150
    ... each significant reclassification to net income out of accumulated other comprehensive income (loss) and the line item affected in the accompanying consolidated statement of income during the years ended December 31, 2014 and 2013 (in millions): Tmount reclassified from TOCL Year Ended December 31...

  • Page 151
    ... benefit pension items Prior service costs Actuarial losses $ $ 16. COMMITMENTS TND CONTINGENCIES Construction and Other Capital Commitments. Pursuant to a hospital purchase agreement in effect as of December 31, 2014, the Company has agreed to build a replacement facility in York, Pennsylvania...

  • Page 152
    ...data are standardized across all of its hospitals and have been consistent for many years. The Company monitors the outcomes of the medical care services that it provides and for each reported claim, the Company obtains various information concerning the facts and circumstances related to that claim...

  • Page 153
    ... 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...

  • Page 154
    ... resolution of certain litigation, investigations (whether formal or informal, including subpoenas), or other actions or proceedings related to HMA or its affiliates existing on or prior to July 29, 2013 (the date of the Company's merger agreement with HMA) as more specifically provided in the CVR...

  • Page 155
    ... those claims as part of the acquired assets and liabilities at the date of acquisition pursuant to the provisions of Financial Accounting Standards Board Accounting Standards Codification Topic 805 "Business Combinations." For the estimate of the Company's liabilities associated with the HMA Legal...

  • Page 156
    ... On February 22, 2012 and February 24, 2012, the United States Department of Health and Human Services office of the Inspector Veneral ("OIV") served subpoenas on certain HMA hospitals relating to those hospitals' relationships with Allegiance Health Management, Inc. ("Allegiance"). Allegiance...

  • Page 157
    ... to employees, physicians and therapists who were involved with the IOP services provided by Allegiance at the HMA hospitals; and (v) other documents related to Allegiance, including leases, contracts, policies and procedures, training documents, budgets and financial analyses. The period of time...

  • Page 158
    ... from the Civil Division of the United States Department of Justice. The letter advised the Company that an investigation was being conducted to determine whether certain hospitals have improperly submitted claims for payment for ICDs. The period of time covered by the investigation was 2003 to...

  • Page 159
    ... of the Company sold Carolina Pines Regional Medical Center (116 licensed beds) in Hartsville, South Carolina and related outpatient services to Capella Healthcare for approximately $74 million in cash, which was received at the closing on December 31, 2014. This hospital was required to be...

  • Page 160
    ... Diluted earnings (loss) per share attributable to Community Health Systems, Inc. common stockholders(1): Continuing operations Discontinued operations Net income Weighted-average number of shares outstanding: Basic Diluted Year ended December 31, 2013: Net operating revenues Income from continuing...

  • Page 161
    ... to the release of the guarantee when a subsidiary guarantor's capital stock is sold, or a sale of all of the subsidiary guarantor's assets used in operations. The following condensed consolidating financial statements present Community Health Systems, Inc. (as parent guarantor), CHS (as the issuer...

  • Page 162
    ...Eliminations Consolidated Operating revenues (net of contractual allowances and discounts) Provision for bad debts Net operating revenues Operating costs and expenses: Salaries and benefits Supplies Other operating expenses Vovernment settlement and related costs Electronic health records incentive...

  • Page 163
    ...Eliminations Consolidated Operating revenues (net of contractual allowances and discounts) Provision for bad debts Net operating revenues Operating costs and expenses: Salaries and benefits Supplies Other operating expenses Vovernment settlement and related costs Electronic health records incentive...

  • Page 164
    ...Eliminations Consolidated Operating revenues (net of contractual allowances and discounts) Provision for bad debts Net operating revenues Operating costs and expenses: Salaries and benefits Supplies Other operating expenses Vovernment settlement and related costs Electronic health records incentive...

  • Page 165
    ...COMMUNITY HETLTH SYSTEMS, INC. TND SUBSIDITRIES NOTES TO CONSOLIDTTED FINTNCITL STTTEMENTS - (Continued) Condensed Consolidating Statement of Comprehensive Income Year Ended December 31, 2014... interests Comprehensive income attributable to Community Health Systems, Inc. stockholders $ 92 ...

  • Page 166
    ...COMMUNITY HETLTH SYSTEMS, INC. TND SUBSIDITRIES NOTES TO CONSOLIDTTED FINTNCITL STTTEMENTS - (Continued) Condensed Consolidating Statement of Comprehensive Income Year Ended December 31, 2013... interests Comprehensive income attributable to Community Health Systems, Inc. stockholders $ 141 60...

  • Page 167
    ...COMMUNITY HETLTH SYSTEMS, INC. TND SUBSIDITRIES NOTES TO CONSOLIDTTED FINTNCITL STTTEMENTS - (Continued) Condensed Consolidating Statement of Comprehensive Income Year Ended December 31, 2012... interests Comprehensive income attributable to Community Health Systems, Inc. stockholders 155 $ 266...

  • Page 168
    ... liabilities Long-term debt Intercompany payable Deferred income taxes Other long-term liabilities Total liabilities Redeemable noncontrolling interests in equity of consolidated subsidiaries Equity: Community Health Systems, Inc. stockholders' equity: Preferred stock Common stock Additional paid-in...

  • Page 169
    ... liabilities Long-term debt Intercompany payable Deferred income taxes Other long-term liabilities Total liabilities Redeemable noncontrolling interests in equity of consolidated subsidiaries Equity: Community Health Systems, Inc. stockholders' equity: Preferred stock Common stock Additional paid-in...

  • Page 170
    ... Consolidating Statement of Cash Flows Year Ended December 31, 2014 Parent Guarantor Issuer Other Guarantors Non Guarantors (In millions) Eliminations Consolidated Net cash (used in) provided by operating activities Cash flows from investing activities: Acquisitions of facilities and other related...

  • Page 171
    ... Consolidating Statement of Cash Flows Year Ended December 31, 2013 Parent Guarantor Issuer Other Non Guarantors Guarantors (In millions) Eliminations Consolidated Net cash (used in) provided by operating activities Cash flows from investing activities: Acquisitions of facilities and other related...

  • Page 172
    ... Consolidating Statement of Cash Flows Year Ended December 31, 2012 Parent Guarantor Issuer Other Non Guarantors Guarantors (In millions) Eliminations Consolidated Net cash (used in) provided by operating activities Cash flows from investing activities: Acquisitions of facilities and other related...

  • Page 173
    ... and communicated to management, including our Chief Executive Officer and Chief Financial Officer, to allow timely decisions regarding required disclosure. We completed the HMA merger on January 27, 2014. We are continuing the process of analyzing the systems of disclosure controls and procedures...

  • Page 174
    ... the Audit and Compliance Committee at any time. We completed the HMA merger on January 27, 2014. We are continuing the process of analyzing the systems of internal control over financial reporting of the former HMA hospitals and other operations acquired in the HMA acquisition and integrating them...

  • Page 175
    ... the internal control over financial reporting at Health Management Associates, Inc. ("HMA"), which was acquired on January 27, 2014 and whose financial statements constitute approximately 33% of total assets and 29% of net operating revenues of the consolidated financial statement amounts as of and...

  • Page 176
    ...to any stockholder who requests it by writing to Community Health Systems, Inc., Investor Relations, at 4000 Meridian Boulevard, Franklin, TN 37067. The Company intends to post amendments to or waivers, if any, from its Code of Conduct at this location on its website, in each case to the extent such...

  • Page 177
    ... of management and the materials it received from the independent registered public accounting firm as described above, the Audit and Compliance Committee recommended to the Board of Directors that the audited consolidated financial statements be included in the Company's Annual Report on...

  • Page 178
    ...supplementary data under Item 8 in Part II. Item 15(a) 2. Financial Statement Schedules The following financial statement schedule is filed as part of this Form 10-K at page 179 hereof: Schedule II - Valuation and Qualifying Accounts All other schedules are omitted since the required information is...

  • Page 179
    ... Community Health Systems, Inc.'s Current Report on Form 8-K filed July 30, 2013 (No. 001-15925)) Amendment and Consent to Agreement and Plan of Merger, dated as of September 24, 2013, by and among Health Management Associates, Inc., Community Health Systems, Inc. and FWCT-2 Acquisition Corporation...

  • Page 180
    ... and Regions Bank, as successor Trustee (incorporated by reference to Exhibit 4.12 to Community Health Systems, Inc.'s Annual Report on Form 10-K for the year ended December 31, 2013 filed February 26, 2014 (No. 001-15925)) Eighth Supplemental Indenture relating to CHS/Community Health Systems, Inc...

  • Page 181
    ... party thereto and Regions Bank, as Trustee (incorporated by reference to Exhibit 4.2 to Community Health Systems, Inc.'s Quarterly Report on Form 10-Q for the quarter ended June 30, 2013 filed August 1, 2014 (No. 001-15925)) Sixth Supplemental Indenture relating to CHS/Community Health Systems, Inc...

  • Page 182
    ... Agreement, dated as of August 17, 2012, among Community Health Systems, Inc., CHS Washington Holdings, LLC, Northwest Hospital, LLC, Quorum Health Resources, LLC, and Credit Suisse AV, as Collateral Agent (incorporated by reference to Exhibit 4.3 to Community Health Systems, Inc.'s Quarterly Report...

  • Page 183
    ... CHS/Community Health Systems, Inc., the guarantors party thereto and Regions Bank, as Trustee Secured Notes Registration Rights Agreement, dated as of January 27, 2014, by and among FWCT-2 Escrow Corporation, Merrill Lynch, Pierce, Fenner & Smith Incorporated and Credit Suisse Securities (USA) LLC...

  • Page 184
    ... Systems, Inc.'s Current Report on Form 8-K filed January 28, 2014 (No. 001-15925)) Receivables Sale Agreement, dated as of March 21, 2012, among CHS/Community Health Systems, Inc., the originators party thereto and CHSPSC, LLC (formerly Community Health Systems Professional Services Corporation...

  • Page 185
    ... Loan Agreement, dated as of March 21, 2012, among CHS Receivables Funding, LLC, the lenders party thereto, the managing agents party thereto, Crédit Agricole Corporate and Investment Bank, as Administrative Agent, and CHSPSC, LLC (formerly Community Health Systems Professional Services Corporation...

  • Page 186
    ....1 to Community Health Systems, Inc.'s Quarterly Report on Form 10-Q for the quarter ended March 31, 2014 filed May 7, 2014 (No. 001-15925)) Community Health Systems Supplemental Executive Benefits (incorporated by reference to Exhibit 10.14 to Community Health Systems, Inc.'s Annual Report on Form...

  • Page 187
    ...Exhibit 10.3 to Community Health Systems, Inc.'s Quarterly Report on Form 10-Q for the quarter ended March 31, 2014 filed May 7, 2014 (No. 001-15925)) Participation Agreement entered into as of January 1, 2005, by and between Community Health Systems Professional Services Corporation and HealthTrust...

  • Page 188
    ... Act of 2002 Corporate Integrity Agreement, dated July 28, 2014, between Community Health Systems, Inc. and the Office of Inspector Veneral of the United States Department of Health and Human Services (incorporated by reference to Exhibit 99.1 to Community Health Systems, Inc.'s Quarterly Report...

  • Page 189
    ...by the undersigned, thereunto duly authorized. COMMUNITY HEALTH SYSTEMS, INC. By: /s/ Wayne T. Smith Wayne T. Smith Chairman of the Board and Chief Executive Officer Date: February 25, 2015 Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the...

  • Page 190
    ... REPORT OF INDEPENDENT REGISTERED PUBLIC TCCOUNTING FIRM To the Board of Directors and Stockholders of Community Health Systems, Inc. Franklin, Tennessee We have audited the consolidated financial statements of Community Health Systems, Inc. and subsidiaries (the "Company") as of December 31, 2014...

  • Page 191
    ... of Contents Community Health Systems, Inc. and Subsidiaries Schedule II - Valuation and Qualifying Tccounts Balance at Beginning of Year Tcquisitions and Dispositions Charged to Costs and Expenses (In millions) Balance at End of Year Description Write-offs Year ended December 31, 2014 allowance...

  • Page 192
    ... Community Health Systems, Inc.'s Current Report on Form 8-K filed July 30, 2013 (No. 001-15925)) Amendment and Consent to Agreement and Plan of Merger, dated as of September 24, 2013, by and among Health Management Associates, Inc., Community Health Systems, Inc. and FWCT-2 Acquisition Corporation...

  • Page 193
    ... and Regions Bank, as successor Trustee (incorporated by reference to Exhibit 4.12 to Community Health Systems, Inc.'s Annual Report on Form 10-K for the year ended December 31, 2013 filed February 26, 2014 (No. 001-15925)) Eighth Supplemental Indenture relating to CHS/Community Health Systems, Inc...

  • Page 194
    ... party thereto and Regions Bank, as Trustee (incorporated by reference to Exhibit 4.2 to Community Health Systems, Inc.'s Quarterly Report on Form 10-Q for the quarter ended June 30, 2013 filed August 1, 2014 (No. 001-15925)) Sixth Supplemental Indenture relating to CHS/Community Health Systems, Inc...

  • Page 195
    ... Agreement, dated as of August 17, 2012, among Community Health Systems, Inc., CHS Washington Holdings, LLC, Northwest Hospital, LLC, Quorum Health Resources, LLC, and Credit Suisse AV, as Collateral Agent (incorporated by reference to Exhibit 4.3 to Community Health Systems, Inc.'s Quarterly Report...

  • Page 196
    ... CHS/Community Health Systems, Inc., the guarantors party thereto and Regions Bank, as Trustee Secured Notes Registration Rights Agreement, dated as of January 27, 2014, by and among FWCT-2 Escrow Corporation, Merrill Lynch, Pierce, Fenner & Smith Incorporated and Credit Suisse Securities (USA) LLC...

  • Page 197
    ... Systems, Inc.'s Current Report on Form 8-K filed January 28, 2014 (No. 001-15925)) Receivables Sale Agreement, dated as of March 21, 2012, among CHS/Community Health Systems, Inc., the originators party thereto and CHSPSC, LLC (formerly Community Health Systems Professional Services Corporation...

  • Page 198
    ... as of March 21, 2012 (incorporated by reference to Exhibit 10.1 to Community Health Systems, Inc.'s Quarterly Report on Form 10-Q filed November , 2014 (No. 001-15925)) Form of Indemnification Agreement between Community Health Systems, Inc. and its directors and executive officers (incorporated by...

  • Page 199
    ...-Q for the quarter ended June 30, 2013 filed July 31, 2013 (No. 001-15925)) Form of Nonqualified Stock Option Agreement (Employee) for Community Health Systems, Inc. 2000 Stock Option and Award Plan (incorporated by reference to Exhibit 10.15 to Community Health Systems, Inc.'s Annual Report on Form...

  • Page 200
    ... Act of 2002 Corporate Integrity Agreement, dated July 28, 2014, between Community Health Systems, Inc. and the Office of Inspector Veneral of the United States Department of Health and Human Services (incorporated by reference to Exhibit 99.1 to Community Health Systems, Inc.'s Quarterly Report...

  • Page 201
    ... IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK. SECTIONI5.ITrusteeIMakesINoIRepresentation.ITheITrusteeImakesInoIrepresentationIasItoItheIvalidityIorIsufficiencyIofIthis SupplementalIIndenture. SECTIONI6.ICounterparts.ITheIpartiesImayIsignIanyInumberIofIcopiesIofIthisISupplementalIIndenture...

  • Page 202
    SECTIONI7.IEffectIofIHeadings.ITheISectionIheadingsIhereinIareIforIconvenienceIonlyIandIshallInotIeffectItheIconstructionIofIthis SupplementalIIndenture. [Signature page follows] 2

  • Page 203
    INIWITNESSIWHEREOF,ItheIpartiesIhaveIcausedIthisISupplemental IndentureItoIbeIdulyIexecutedIasIofItheIdateIfirstIaboveIwritten. CHS/CommunityIHealthISystems,IInc., aIDelawareIcorporation By:/s/IRachelIA.ISeifert RachelIA.ISeifert ExecutiveIViceIPresident,ISecretaryIandIGeneral Counsel ...

  • Page 204
    RegionsIBank,IasITrustee By: /s/IWallaceIL.IDuke,IJr. Name:IWallaceIL.IDuke,IJr. Title:IViceIPresident 4

  • Page 205
    ...2014, among CHS/COMMUNITY HEALTH SYSTEMS, INC., a Delaware corporation (the "Issuer"), each of the parties identified as a New Subsidiary Guarantor on the signature pages hereto (each, a "New Subsidiary Guarantor" and collectively, the pNew Subsidiary Guarantors" ) and REGIONS...THE STATE OF NEW YORK. ...

  • Page 206
    ... as of the date first above written. CHS/Community Health Systems, Inc., a Delaware corporation By: /s/ Rachel A. Seifert Rachel A. Seifert Executive Vice President, Secretary and General Counsel Natchez Hospital Company, LLC, a Delaware limited liability company By: /s/ Rachel A. Seifert Rachel...

  • Page 207
    Regions Bank, as Trustee By: /s/ Wallace L Duke, Jr. Name: Wallace L Duke, Jr. Title: Vice President 3

  • Page 208
    ...2014, among CHS/COMMUNITY HEALTH SYSTEMS, INC., a Delaware corporation (the "Issuer"), each of the parties identified as a New Subsidiary Guarantor on the signature pages hereto (each, a "New Subsidiary Guarantor" and collectively, the pNew Subsidiary Guarantors" ), REGIONS...THE STATE OF NEW YORK. ...

  • Page 209
    ...in the Indenture. Each New Subsidiary Guarantor acknowledges that it will receive direct and indirect benefits from the financing arrangements ...pursuant to its Note Guarantee are knowingly made in contemplation of such benefits. SECTION 8. Effect of Headings. The Section headings herein are ...

  • Page 210
    ... as of the date first above written. CHS/Community Health Systems, Inc., a Delaware corporation By: /s/ Rachel A. Seifert Rachel A. Seifert Executive Vice President, Secretary and General Counsel Natchez Hospital Company, LLC, a Delaware limited liability company By: /s/ Rachel A. Seifert Rachel...

  • Page 211
    Regions Bank, as Trustee By: /s/ Wallace L. Duke, Jr. Name: Wallace L. Duke, Jr. Title: Vice President 4

  • Page 212
    Credit Suisse AG, as Collateral Agent By: /s/ Michael Spaight Name: Michael Spaight Title: Authorized Signatory By: /s/ Lingzi Huang Name: Lingzi Huang Title: Authorized Signatory 5

  • Page 213
    ...2014, by and among CHS/Community Health Systems, Inc., a Delaware corporation ("Issuer"), the parties that are signatories hereto as Guarantors (each a "Guaranteeing Subsidiary"), Credit Suisse AG, as Collateral Agent, and Regions...the rights and be subject to all of the obligations and agreements of ...

  • Page 214
    ...equitable right, remedy or claim under or in respect of this Supplemental Indenture or the Indenture or any provision herein or therein contained SECTION 3.5. Governing Law. This Supplemental Indenture shall be governed by, and construed in accordance with, the laws of the State of New York. SECTION...

  • Page 215
    ... headings of the Articles and the Sections in this Supplemental Indenture are for convenience of reference only and shall not be deemed to alter or affect the meaning or interpretation of any provisions hereof. [Signature page follows] 3

  • Page 216
    ... as of the date first above written. Natchez Hospital Company, LLC, a Delaware limited liability company By: /s/ Rachel A. Seifert Rachel A. Seifert Executive Vice President and Secretary Acknowledged by: CHS/Community Health Systems, Inc. By: /s/ Rachel A. Seifert Rachel A. Seifert Executive Vice...

  • Page 217
    Regions Bank, as Trustee By: /s/ Wallace L. Duke, Jr. Name: Wallace L. Duke, Jr. Title: Vice President 5

  • Page 218
    Credit Suisse AG, as Collateral Agent By: /s/ Michael Spaight Name: Michael Spaight Title: Authorized Signatory By: /s/ Lingzi Huang Name: Lingzi Huang Title: Authorized Signatory 6

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    ...2014, by and among CHS/Community Health Systems, Inc., a Delaware corporation ("Issuer"), the parties that are signatories hereto as Guarantors (each a "Guaranteeing Subsidiary") and Regions... will have all of the rights and be subject to all of the obligations and agreements of a "Guarantor" under ...

  • Page 220
    ...equitable right, remedy or claim under or in respect of this Supplemental Indenture or the Indenture or any provision herein or therein contained SECTION 3.5. Governing Law. This Supplemental Indenture shall be governed by, and construed in accordance with, the laws of the State of New York. SECTION...

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    ... headings of the Articles and the Sections in this Supplemental Indenture are for convenience of reference only and shall not be deemed to alter or affect the meaning or interpretation of any provisions hereof. [Signature page follows] 3

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    ... as of the date first above written. Natchez Hospital Company, LLC, a Delaware limited liability company By: /s/ Rachel A. Seifert Rachel A. Seifert Executive Vice President and Secretary Acknowledged by: CHS/Community Health Systems, Inc. By: /s/ Rachel A. Seifert Rachel A. Seifert Executive Vice...

  • Page 223
    Regions Bank, as Trustee By: /s/ Wallace L. Duke, Jr. Name: Wallace L. Duke, Jr. Title: Authorized Signatory 5

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    ...10.36 AMENDMENT To HPG Participation Agreement HealthTrust Purchasing Group, L.P. ("HPG") and CHSPSC, LLC ("CHSPSC") hereby agree ho amend hhe January 1, 2005 HPG Parhicipahion Agreemenh behween HPG and Community Health Systems Professional Services Corporation ("CHS"), hhe "Parhicipanh" hhereunder...

  • Page 225
    ... 4000 Meridian Blvd. Franklin, TN 37067 Email: [email protected] Fax No.: 615/373-9704 IN WITNESS WHEREOF, hhe parhies hereby indicahe hheir accephance of hhe herms of hhis Amendmenh by hhe signahures of hheir auhhorized represenhahives below. HealthTrust Purchasing Group, L.P. by ihs general...

  • Page 226
    ...Capitalized interest Implicit rental interest expense Total fixed charges Ratio of earnings to fixed charges $ 521 (45) 34 646 2 60 1,218 $ 2011 484 (49) 40 643 3 61 1,182 $ 2012 522 (42) 32 621 4 66 1,203 $ 2013 346 (43) 59 613 4 70 1,049 $ 2014 342 (48) 29 972 4 108 1,407 $ $ $ $ $ $ 646 11...

  • Page 227
    ...Health Facilities Development, LLC (DE) Amory HMA Physician Management, LLC (MS) Amory HMA, LLC (MS) Anesthesiology Group of Hattiesburg, LLC (DE) Angelo Community Healthcare Services, Inc. (TX) Anna Clinic Corp. (IL) Anna Home Care Services, LLC (DE) Anna Hospital Corporation (IL) Anniston HMA, LLC...

  • Page 228
    ... HMA Medical Group, LLC* (MS) Bayfront Ambulatory Surgical Center, LLC (DE) Bayfront HMA Convenient Care, LLC (FL) Bayfront HMA Healthcare Holdings, LLC* (FL) Bayfront HMA Home Health, LLC (FL) Bayfront HMA Investments, LLC (FL) Bayfront HMA Medical Center, LLC (FL) Bayfront HMA Physician Management...

  • Page 229
    ...Brevard HMA Hospitals, LLC (FL) Brevard HMA Investment Properties, LLC (FL) Brevard HMA Nursing Home, LLC (FL) Broken Arrow Medical Group, LLC (DE) Brooklyn Medical Associates, LLC (IN) Brooksville HMA Physician Management, LLC* (FL) Brownsville Clinic Corp. (TN) Brownsville Hospital Corporation (TN...

  • Page 230
    ... Park Health System, L.P.* (DE) Center for Adult Healthcare, LLC (DE) Central Alabama Physician Services, Inc. (AL) Central Florida HMA Holdings, LLC (DE) Central Polk, LLC* (FL) Central States HMA Holdings, LLC (DE) Centre Clinic Corp. (AL) Centre HBP Services, LLC (DE) Centre Home Care Corporation...

  • Page 231
    ... Physician Services, G.P.* (DE) Cleveland Home Care Services, LLC (DE) Cleveland Hospital Corporation (TN) Cleveland Medical Clinic, Inc. (TN) Cleveland PHO, Inc. (TN) Cleveland Tennessee Hospital Company, LLC (DE) Click to Care, LLC (FL) Clinton County Health System, LLC (DE) Clinton HMA, LLC...

  • Page 232
    ... Systems Professional Services Corporation Political Action Committee (TN) Community Health Systems, Inc. (DE) Community Health United Home Care, LLC (DE) Community Information Network, Inc. Community Insurance Group SPC, LTD. (Cayman Islands) Community LP Corp. (DE) Community Network Solutions, LLC...

  • Page 233
    ...(TN) Dyersburg HBP Medical Group, LLC (DE) Dyersburg Home Care Services, LLC (DE) Dyersburg Hospital Corporation (TN) E.D. Clinics, LLC (DE) East Georgia HMA Physician Management, LLC* (GA) East Georgia Regional Medical Center, LLC* (GA) East Tennessee Clinic Corp. (TN) East Tennessee Health Systems...

  • Page 234
    ...) Florence Home Care Services, LLC (DE) Florida Endoscopy and Surgery Center, LLC* (FL) Florida HMA Holdings, LLC (DE) Florida HMA Regional Service Center, LLC (FL) Florida HMA Urgent Care, LLC (FL) Flowood River Oaks HMA Medical Group, LLC (MS) Foley Clinic Corp. (AL) Foley Home Health Corporation...

  • Page 235
    ...Franklin Hospital Corporation (VA) Fulton Home Care Services, LLC (DE) Gadsden HMA Physician Management, LLC* (AL) Gadsden Home Care Services, LLC (DE) Gadsden Regional Medical Center, LLC (DE) Gadsden Regional Physician Group Practice, LLC (DE) Gadsden Regional Primary Care, LLC (AL) Gaffney Clinic...

  • Page 236
    ... Medical Associates, LLC# (OK) Helena Home Care Services, LLC (DE) Heritage Healthcare Innovation Fund, L.P.# (DE) Hernando HMA Ancillary, LLC (FL) Hernando HMA, LLC* (FL) Hidden Valley Medical Center, Inc. (GA) Highland Health Systems, Inc. (TX) Hill Regional Clinic Corp. (TX) HMA ASC Holdings, LLC...

  • Page 237
    ... Clinton Home Health & Hospice LLC (OK) Integris HMA, LLC* (OK) Intermountain Medical Group, Inc. (PA) IOM Health System, L.P.* (IN) Jackson HMA North Medical Office Building, LLC (MS) d/b/a Lutheran Hospital of Indiana d/b/a Barstow Community Hospital d/b/a Parkway Regional Hospital d/b/a Three...

  • Page 238
    ... HMA, LLC (MS) Jackson Home Care Services, LLC (DE) Jackson Hospital Corporation (TN) Jackson Hospital Corporation (KY) Jackson Physician Corp. (KY) Jackson, Tennessee Hospital Company, LLC* (TN) Jamestown HMA Leasing, LLC (TN) Jamestown HMA Physician Management, LLC (TN) Jasper Medical Group, LLC...

  • Page 239
    ... (TN) Lancaster Clinic Corp. (SC) Lancaster Emergency Medical Services Association (PA) Lancaster HMA Physician Management, LLC (PA) Lancaster HMA, LLC* (PA) Lancaster Home Care Services, LLC (DE) Lancaster Hospital Corporation (DE) Lancaster Imaging Center, LLC (SC) Lancaster Medical Group HMA, LLC...

  • Page 240
    ...Lutheran/TRMA Network, LLC# (IN) Macon Healthcare, LLC# (DE) Madison Clinic Corp. (TN) Madison HMA Physician Management, LLC (MS) Madison HMA, LLC (MS) Madison Hospital, LLC (AL) Marathon H.M.A., LLC (FL) Marathon HMA Medical Group, LLC (FL) Marion Hospital Corporation (IL) Marion Physician Services...

  • Page 241
    ...County Home Health, LLC (OK) McKenna Court Homes, LLC (DE) McKenzie Clinic Corp. (TN) McKenzie Physician Services, LLC (DE) McKenzie Tennessee Hospital Company, LLC (DE) McKenzie-Willamette Regional Medical Center Associates, LLC* (DE) McNairy Clinic Corp. (TN) McNairy Hospital Corporation (TN) MCSA...

  • Page 242
    ... HMA Hospitalists, LLC (MS) Mississippi HMA Regional Service Center, LLC (MS) Mississippi HMA Urgent Care, LLC (MS) Mississippi HMA Ventures, LLC (MS) MMC of Nevada, LLC (DE) Moberly HBP Medical Group, LLC (DE) Moberly Hospital Company, LLC (DE) Moberly Medical Clinics, Inc. (MO) Moberly Physicians...

  • Page 243
    ... Center, LLC* Newport Home Care Services, LLC (DE) NHCI of Hillsboro, Inc. (TX) North Carolina HMA Regional Service Center, LLC (NC) North Okaloosa Clinic Corp. (FL) North Okaloosa Home Health Corp. (FL) North Okaloosa Medical Corp.* (FL) North Okaloosa Surgery Venture Corp. (FL) North Port HMA, LLC...

  • Page 244
    ... Medical Clinic, Inc. (KY) Pasco Hernando HMA Physician Management, LLC* (FL) Pasco Regional Medical Center, LLC* (FL) Payson Healthcare Management, Inc. (AZ) Payson Home Care Services, LLC (DE) Payson Hospital Corporation (AZ) PBEC HMA, Inc. (FL) PDMC, LLC (DE) Peace River HMA Nursing Center, LLC...

  • Page 245
    ..., LLC (DE) Physician Practice Support, LLC (TN) Physicians Regional Marco Island, LLC (FL) Piney Woods Healthcare System, L.P.* (DE) Plymouth Hospital Corporation (NC) Poinciana HMA, LLC (FL) Polk Medical Services, Inc. (TN) Ponca City Home Care Services, Inc. (OK) Poplar Bluff Physician Management...

  • Page 246
    ... Hospital, LLC (MS) River Oaks Management Company, LLC (MS) River Oaks Medical Office Building, LLC (MS) River Region Medical Corporation (MS) River to River Heart Group, LLC (IL) Riverpark Community Cath Lab, LLC# (DE) Riverview Regional Medical Center, LLC* (DE) Rockledge HMA Convenient Care, LLC...

  • Page 247
    ... Medical Center, LLC (DE) San Leandro Surgery Center, Ltd.# (CA) San Leandro, LLC (DE) San Miguel Clinic Corp. (NM) San Miguel Hospital Corporation (NM) Santa Rosa HMA Physician Management, LLC (FL) Santa Rosa HMA Urgent Care, LLC (FL) SCA JV II, LLC# (DE) SCA JV, LLC* (DE) Scenic Managed Services...

  • Page 248
    ... Inc. (AL) South Arkansas Clinic, LLC (DE) South Arkansas Physician Services, LLC (DE) South Tulsa Medical Group, LLC (DE) SouthCrest Anesthesia Group, LLC (DE) SouthCrest Medical Group, LLC (DE) d/b/a Siloam Springs Regional Hospital d/b/a Heritage Medical Center d/b/a Sharon Regional Health System...

  • Page 249
    ... Associates, LLC (IL) Southern Texas Medical Center, LLC (DE) Southside Physician Network, LLC (DE) Southwest Florida HMA Holdings, LLC (DE) Southwest Physicians Risk Retention Group, Inc. (SC) Sparks PremierCare, L.L.C. (AR) Spokane Home Care Services, LLC (DE) Spokane Valley Washington Hospital...

  • Page 250
    ... County, Inc. (KS) Surgicenters of America, Inc. (AZ) SVRMC-HBP, LLC (DE) Tennessee HMA Holdings, LP (DE) Tennessee HMA Regional Service Center, LLC (TN) Tennyson Holdings, LLC (DE) Terrell Hospital, L.P. (DE) Terrell Medical Center, LLC (DE) Texas Bay Area Clinical Services, Inc. (TX) The Sleep...

  • Page 251
    ...Vicksburg HMA Physician Management, LLC (MS) Vicksburg Surgical Center, LLC (DE) Victoria Clinic Asset Holding Company, LLC (DE) Victoria Hospital, LLC (DE) Victoria of Texas, L.P. (DE) Victoria Texas Home Care Services, LLC (DE) Village Medical Center Associates, LLC (DE) Virginia Care Company, LLC...

  • Page 252
    ... County Texas Home Care Services, LLC (DE) Webb Hospital Corporation (DE) Webb Hospital Holdings, LLC (DE) Wesley Health System, LLC (DE) Wesley HealthTrust, Inc. (MS) Wesley Physician Services, LLC (DE) West Anaheim Medical Center, LLC (DE) West Anaheim, LLC (DE) West Grove Clinic Company, LLC (DE...

  • Page 253
    ... Medical Center, LLC (DE) Woodward Clinic Company, LLC (DE) Woodward Health System, LLC (DE) Woodward Home Care Services, LLC (DE) Yakima HMA Home Health, LLC (WA) Yakima HMA Physician Management, LLC (WA) Yakima HMA, LLC (WA) York Anesthesiology Physician Services, LLC (DE) York Clinic Company, LLC...

  • Page 254
    ... of Community Health hystems, Inc. and subsidiaries' internal control over financial reporting, appearing in this Annual Report on Form 10-K of Community Health hystems, Inc. and subsidiaries for the year ended December 31, 2014. /s/ Deloitte & Touche LLP Nashville, Tennessee February 25, 2015

  • Page 255
    ... information; and b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. /s/ Wayne T. Smith Wayne T. Smith Chairman of the Board and Chief Executive Officer Date: February 25, 2015

  • Page 256
    ... information; and b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. /s/ W. Larry Cash W. Larry Cash President of Financial Services, Chief Financial Officer and Director...

  • Page 257
    ... of the Securities Exchange Act of 1934; and (2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. /s/ Wayne T. Smith Wayne T. Smith Chairman of the Board and Chief Executive Officer February 25, 2015

  • Page 258
    ... Exchange Act of 1934; and (2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. /s/ W. Larry Cash W. Larry Cash President of Financial Services, Chief Financial Officer and Director February 25, 2015

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