Community Health Systems 2015 Annual Report Download - page 46

If competition decreases our ability to acquire additional hospitals on favorable terms, we may be unable to
execute our acquisition strategy.
An important part of our business strategy is to acquire two to four hospitals each year. However, not-for-
profit hospital systems and other for-profit hospital companies generally attempt to acquire the same type of
hospitals as we do. LifePoint Hospitals, Inc. is a principal competitor for acquisitions. Other competitors include
HCA Holdings, Inc., Universal Health Services, Inc., other non-public, for profit hospitals and local market
hospitals. Some of our competition for acquisitions have greater financial resources than we have. Furthermore,
some hospitals are sold through an auction process, which may result in higher purchase prices than we believe
are reasonable. Therefore, we may not be able to acquire additional hospitals on terms favorable to us.
If we fail to improve the operations of acquired hospitals, we may be unable to achieve our growth strategy.
Many of the hospitals we have acquired had lower operating margins than we do and operating losses incurred
prior to the time we acquired them. Future acquired hospitals may have similar financial performance issues. In
the past, we have occasionally experienced delays in improving the operating margins or effectively integrating
the operations of acquired hospitals. In the future, if we are unable to improve the operating margins of acquired
hospitals, operate them profitably, or effectively integrate their operations, we may be unable to achieve our
growth strategy.
If we acquire hospitals with unknown or contingent liabilities, we could become liable for material
obligations.
Hospitals that we have acquired, or in the future could acquire, may have unknown or contingent liabilities,
including liabilities for failure to comply with healthcare laws and regulations. Although we generally seek
indemnification from sellers covering these matters, we may nevertheless 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 we offer.
Some states in which we operate require a CON or other prior approval for the construction or acquisition of
healthcare facilities, capital expenditures exceeding a prescribed amount, changes in bed capacity or services and
some other matters. In evaluating a proposal, these states consider the need for additional or expanded healthcare
facilities or services. If we are not able to obtain required CONs or other prior approvals, we would not be able to
acquire, operate, replace or expand our facilities or expand the breadth of services we offer. Furthermore, if a
CON or other prior approval upon which we relied to invest in construction of a replacement or expanded facility
were to be revoked or lost through an appeal process, we may not be able to recover the value of our investment.
State efforts to regulate the sale of hospitals operated by municipal or not-for-profit entities could prevent us
from acquiring these types of hospitals and executing our business strategy.
Many states have adopted legislation regarding the sale or other disposition of hospitals operated by municipal
or not-for-profit entities. In some states that do not have specific legislation, the attorneys general have
demonstrated an interest in these transactions under their general obligation to protect the use of charitable assets.
These legislative and administrative efforts focus primarily on the appropriate valuation of the assets divested
and the use of the proceeds of the sale by the non-profit seller. While these review and, in some instances,
approval processes can add additional time to the closing of a hospital acquisition, we have not had any
significant difficulties or delays in completing acquisitions. However, future state actions could seriously delay
or even prevent our ability to acquire hospitals.
33