Community Health Systems 2015 Annual Report Download - page 142

COMMUNITY HEALTH SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
exchanged in October 2014 for new notes (the “6
7
⁄ 8 % Exchange Notes”) having terms substantially identical in
all material respects to the 6
7
⁄ 8 % Senior Notes (except that the exchange notes were issued under a registration
statement pursuant to the 1933 Act). References to the 6
7
⁄ 8 % Senior Notes shall be deemed to be the 6
7
⁄ 8 %
Exchange Notes unless the context provides otherwise.
Receivables Facility
On March 21, 2012, through certain of its subsidiaries, CHS 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 as the administrative agent, and The Bank of Nova Scotia, as a
managing agent. On March 7, 2013, CHS and certain of its subsidiaries amended the Receivables Facility to add
an additional managing agent, The Bank of Tokyo-Mitsubishi UFJ, Ltd., to increase the size of the facility from
$300 million to $500 million and to extend the scheduled termination date. Additional subsidiaries also agreed to
participate in the Receivables Facility as of that date. On March 31, 2014, CHS and certain of its subsidiaries
amended the Receivables Facility to increase the size of the facility from $500 million to $700 million and to
extend the scheduled termination date. Additional subsidiaries also agreed to participate in the Receivables
Facility as of that date. On November 13, 2015, CHS and certain of its subsidiaries amended the Receivables
Facility to extend the scheduled termination date and amend certain other provisions thereof. The existing and
future non-self pay patient-related accounts receivable (the “Receivables”) for certain affiliated hospitals serve as
collateral for the outstanding borrowings under the Receivables Facility. The interest rate on the borrowings is
based on the commercial paper rate plus an applicable interest rate spread. Unless earlier terminated or
subsequently extended pursuant to its terms, the Receivables Facility will expire on November 13, 2017, subject
to customary termination events that could cause an early termination date. CHS maintains effective control over
the Receivables because, pursuant to the terms of the Receivables Facility, the Receivables are sold from certain
of CHS’ subsidiaries to CHS, and CHS then sells or contributes the Receivables to a special-purpose entity that is
wholly-owned by CHS. The wholly-owned special-purpose entity in turn grants security interests in the
Receivables in exchange for borrowings obtained from the group of third-party lenders and banks of up to
$700 million outstanding from time to time based on the availability of eligible Receivables and other customary
factors. The group of third-party lenders and banks do not have recourse to CHS or its subsidiaries beyond the
assets of the wholly-owned special-purpose entity that collateralizes the loan. The Receivables and other assets of
the wholly-owned special-purpose entity will be available first and foremost to satisfy the claims of the creditors
of such entity. The outstanding borrowings pursuant to the Receivables Facility at December 31, 2015 totaled
$700 million and are classified as long-term debt on the consolidated balance sheet. At December 31, 2015, the
carrying amount of Receivables included in the Receivables Facility totaled approximately $1.7 billion and is
included in patient accounts receivable on the consolidated balance sheet.
The Company has transitioned all of its hospitals to the ICD-10 coding system, which was required of all
healthcare providers covered by the Health Insurance Portability and Accountability Act (“HIPAA”). This
transition involved a significant capital investment in technology and coding of our information systems, as well
as significant costs related to training of staff involved with coding and billing. As noted in the Company’s risk
factors set forth in this Annual Report on Form 10-K, the potential for delay in billing and collection on patient
receivables resulting from these changes or from new payment systems and processes implemented by third-
party payors could have an adverse effect on the quality of receivables that serve as collateral under the
Receivables Facility, resulting in a potential default or repayment of outstanding borrowings. Should such a
repayment of borrowings under the Receivables Facility be required, the Company has availability, and expects
that it will continue to have availability, under its Revolving Facility to provide sufficient financial resources and
liquidity to fund the repayment.
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