Community Health Systems 2015 Annual Report Download - page 125

COMMUNITY HEALTH SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
during the years ended December 31, 2015, 2014 and 2013, respectively, and are included in other operating
expenses on the consolidated statements of income. Approximately $1 million, $69 million and $14 million of
acquisition and related integration expense related to the HMA acquisition were recognized during the years
ended December 31, 2015, 2014 and 2013, respectively.
Effective November 1, 2014, the Company entered into and closed on a restructuring agreement related to the
joint venture between an affiliate of the Company and an affiliate of Novant Health, Inc. (“Novant”), the non-
profit joint venture partner. Through this joint venture, Novant owned an indirect noncontrolling interest in Lake
Norman Regional Medical Center (“Lake Norman”), one of the former HMA hospitals. The HMA merger
triggered a change in control provision in the operating agreement of this joint venture, requiring the Company to
purchase the 30% noncontrolling interest in Lake Norman held by Novant for the higher of fair value or
$150 million. As part of the restructuring agreement, on November 3, 2014, the Company paid Novant
(1) $150 million for its 30% noncontrolling interest in Lake Norman, (2) approximately $4 million to acquire
Upstate Carolina Medical Center (125 licensed beds) in Gaffney, South Carolina, and (3) approximately
$5 million to settle prior claims with Novant. The amounts paid to Novant to acquire the noncontrolling interest
in Lake Norman and to settle prior claims were recognized as part of the opening balance sheet in the purchase
accounting for HMA. Based upon the Company’s final purchase price allocation relating to this acquisition as of
December 31, 2015, no goodwill has been recorded related to the acquisition of Upstate Carolina Medical Center.
On October 1, 2014, one or more subsidiaries of the Company completed the acquisition of Natchez Regional
Medical Center (179 licensed beds) in Natchez, Mississippi. The total cash consideration paid at closing for long-
lived assets was $10 million. As part of the closing, the Company also paid $8 million as a prepayment for future
property taxes that will be applied to the tax liability for the next 17 years. Based upon the Company’s final
purchase price allocation relating to this acquisition as of December 31, 2015, no goodwill has been recorded.
Effective April 1, 2014, one or more subsidiaries of the Company completed the acquisition of Sharon
Regional Health System in Sharon, Pennsylvania. This healthcare system includes Sharon Regional (258 licensed
beds) and other outpatient and ancillary services. The total cash consideration paid for long-lived assets and
working capital was approximately $67 million and $1 million, respectively, with additional consideration of
$9 million assumed in liabilities, for a total consideration of $77 million. Based upon the Company’s final
purchase price allocation relating to this acquisition as of December 31, 2015, approximately $8 million of
goodwill has been recorded.
Effective April 1, 2014, one or more subsidiaries 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-for-profit healthcare system,
which acquired the remaining 5% interest. The total cash consideration paid for long-lived assets plus prepaid
rent on the leased property and working capital was approximately $192 million and $4 million, respectively,
with additional consideration of $11 million assumed in liabilities, for a total consideration of $207 million. The
value of the noncontrolling interest at acquisition was $10 million. Based upon the Company’s final purchase
price allocation relating to this acquisition as of December 31, 2015, approximately $11 million of goodwill has
been recorded.
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