Community Health Systems 2015 Annual Report Download - page 96

operating leases for hospital operations since December 2000. At December 31, 2015, we operated three
hospitals under operating leases that had an immaterial impact on our consolidated operating results. The terms
of the three operating leases we currently have in place expire between December 2020 and June 2028, not
including lease extension options. If we allow these leases to expire, we would no longer generate revenues nor
incur expenses from these hospitals.
As described more fully in Note 17 of the Notes to Consolidated Financial Statements, at December 31, 2015,
we have certain cash obligations for a replacement facility and other construction commitments of $382 million
and open purchase orders for $646 million.
Noncontrolling Interests
We have sold noncontrolling interests in certain of our subsidiaries or acquired subsidiaries with existing
noncontrolling interest ownership positions. In conjunction with the HMA merger, we acquired 29 hospitals
containing minority ownership interests ranging from less than 1% to 40%. We do not believe the minority
ownership interests acquired in the HMA merger are material to our financial position or results of operations. In
addition, effective November 1, 2014, we acquired from Novant Health, Inc. its 30% noncontrolling interest in
Lake Norman Regional Medical Center for $150 million pursuant to a change in control provision in the
operating agreement that was triggered with the HMA merger. As of December 31, 2015, we have hospitals in
29 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 entity as a partner. In addition, we have 9 other hospitals with
noncontrolling interests owned by non-profit entities. Redeemable noncontrolling interests in equity of
consolidated subsidiaries was $571 million and $531 million as of December 31, 2015 and December 31, 2014,
respectively, and noncontrolling interests in equity of consolidated subsidiaries was $86 million and $80 million
as of December 31, 2015 and December 31, 2014, respectively. The amount of net income attributable to
noncontrolling interests was $101 million, $111 million and $76 million for the years ended December 31, 2015,
2014 and 2013, respectively. As a result of the change in the Stark Law “whole hospital” exception included in
the Reform Legislation, we are not permitted to introduce physician ownership at any of our wholly-owned
hospital facilities or increase the aggregate percentage of physician ownership in any of our existing hospital
joint ventures in excess of the aggregate physician ownership level held at the time of the adoption of the Reform
Legislation.
Reimbursement, Legislative and Regulatory Changes
Ongoing legislative and regulatory efforts could reduce or otherwise adversely affect the payments we receive
from Medicare and Medicaid. Within the statutory framework of the Medicare and Medicaid programs, including
programs currently unaffected by the Reform Legislation, there are substantial areas subject to administrative
rulings, interpretations and discretion which may further affect payments made under those programs, and the
federal and state governments might, in the future, reduce the funds available under those programs or require
more stringent utilization and quality reviews of hospital facilities. Additionally, there may be a continued rise in
managed care programs and additional restructuring of the financing and delivery of healthcare in the United
States. These events could cause our future financial results to decline. We cannot estimate the impact of
Medicare and Medicaid reimbursement changes that have been enacted or are under consideration. We cannot
predict whether additional reimbursement reductions will be made or whether any such changes would have a
material adverse effect on our business, financial conditions, results of operations, cash flow, capital resources
and liquidity.
Inflation
The healthcare industry is labor intensive. Wages and other expenses increase during periods of inflation and
when labor shortages occur in the marketplace. In addition, our suppliers pass along rising costs to us in the form
of higher prices. We have implemented cost control measures, including our case and resource management
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