Community Health Systems 2015 Annual Report Download - page 47

If we are unable to effectively compete for patients, local residents could use other hospitals and healthcare
providers.
The healthcare industry is highly competitive among hospitals and other healthcare providers for patients,
affiliations with physicians and acquisitions. The competition among hospitals and other healthcare providers for
patients has intensified in recent years. However, the majority of our hospitals are located in non-urban service
areas where we believe we are the sole provider of general acute care health services. As a result, the most
significant competition our hospitals face typically comes from hospitals outside of our primary service areas,
including hospitals in urban areas that provide more complex services. Patients in our primary service areas may
travel to these other hospitals because of physician referrals or their need for services we do not offer, among
other reasons. Patients who receive services from these other hospitals may subsequently shift their preferences
to those hospitals for the services we provide. Competition for patients is also increasing among other healthcare
providers, including outpatient surgery, orthopedic, oncology and diagnostic centers. Our hospitals and our
competitors are implementing physician alignment strategies, such as acquiring physician practice groups,
employing physicians and participating in ACOs or other clinical integration models, which may impact our
competitive position.
At December 31, 2015, 63 of our hospitals competed with more than one other hospital in their respective
primary service areas. In most markets in which we are not the sole provider of general acute care health
services, our primary competitor is a municipal or not-for-profit hospital. These hospitals are owned by tax-
supported governmental agencies or not-for-profit entities supported by endowments and charitable
contributions. They do not pay income or property taxes, and can make capital expenditures without paying sales
tax. These financial advantages may better position these hospitals to maintain more modern and technologically
upgraded facilities and equipment and offer services more specialized than those available at our hospitals. If our
competitors are better able to attract patients with these offerings, we may experience an overall decline in
patient volume.
Trends toward clinical transparency and value-based purchasing may have an unanticipated impact on our
competitive position and patient volumes. The CMS Hospital Compare website makes available to the public
certain data that hospitals submit in connection with Medicare reimbursement 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’s standard charges for items and services or publish its policies for allowing the
public to view a list of these charges in response to an inquiry. If any of our hospitals achieve poor results (or
results that are lower than our competitors) on these quality measures or on patient satisfaction surveys, or if our
standard charges are higher than our competitors, we may attract fewer patients.
We expect these competitive trends to continue. If we are unable to compete effectively with other hospitals
and other healthcare providers, local residents may seek healthcare services at providers other than our hospitals
and affiliated businesses.
The failure to obtain our medical supplies at favorable prices could cause our operating results to decline.
We have a participation agreement with HealthTrust, a GPO. The current term of this agreement expires in
January 2017, with automatic renewal terms of one year unless either party terminates by giving notice of non-
renewal. GPOs attempt to obtain favorable pricing on medical supplies with manufacturers and vendors,
sometimes by negotiating exclusive supply arrangements in exchange for discounts. To the extent these exclusive
supply arrangements are challenged or deemed unenforceable, we could incur higher costs for our medical
supplies obtained through HealthTrust. Further, costs of supplies and drugs may continue to increase due to
market pressure from pharmaceutical companies and new product releases. Higher costs could continue to
adversely impact our operating results. Also, there can be no assurance that our arrangement with HealthTrust
will provide the discounts we expect to achieve.
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