COMMUNITY HEALTH SYSTEMS INC – 10-K – Management's Discussion and Analysis of Financial Condition and Results of Operations

You should read this discussion together with our Consolidated Financial
Statements and the accompanying Notes to Consolidated Financial Statements
included elsewhere in this Form 10-K.

Executive Overview

We are one of the nation's largest healthcare companies. Our affiliates are
leading providers of healthcare services, developing and operating healthcare
delivery systems in 46 distinct markets across 16 states. As of December 31,
2022, our subsidiaries own or lease 80 affiliated hospitals, with approximately
13,000 beds, and operate more than 1,000 sites of care, including physician
practices, urgent care centers, freestanding emergency departments, occupational
medicine clinics, imaging centers, cancer centers and ambulatory surgery
centers. We generate revenues by providing a broad range of general and
specialized hospital healthcare services and outpatient services to patients in
the communities in which we are located. We are paid for our services by
governmental agencies, private insurers and directly by the patients we serve.

Economic Conditions and COVID-19 Pandemic

Economic conditions in the United States continue to be challenging in various
respects, and the United States economy continues to experience significant
inflationary pressures, elevated interest rates, challenging labor market
conditions, and disruptions to supply networks. Taking into account these
factors, we have incurred, and may continue to incur, increased expenses arising
from factors such as wage inflation for permanent employees and increased rates
for and utilization of temporary contract labor (including contract nursing
personnel), and during the year ended December 31, 2022, we also experienced
unfavorable changes in payor mix, declines in inpatient admissions and lower
overall acuity. These factors had an unfavorable impact on our financial results
during the year ended December 31, 2022, and may have an unfavorable impact on
our financial results in future periods which could be material. While we have
implemented cost containment and other measures to try to counteract these
developments, we may continue to be unable to fully offset the impact of these
factors on the operation of our business. In addition, during the year ended
December 31, 2022, our financial results were adversely impacted by Hurricane
Ian, which negatively impacted certain of our hospitals and other healthcare
facilities located in Florida.

As a provider of healthcare services, we have been and may continue to be
affected by the public health and economic effects of the COVID-19 pandemic.
While we are not able to fully quantify the impact that the pandemic will have
on our future financial results, developments related to the pandemic may
continue to affect our financial performance. The ongoing impact of the pandemic
on our financial results will depend on, among other factors, the duration and
severity of the pandemic, the impact of the pandemic on economic conditions, the
volume of canceled or rescheduled procedures at our facilities, and the spread
of potentially more contagious and/or virulent forms of the virus, including any
variants of the virus that may be resistant to currently available vaccines.

If economic conditions in the United States further significantly deteriorate
and/or public health conditions related to the COVID-19 pandemic significantly
worsen, any such developments could materially and adversely affect our results
of operations, financial position, and/or our cash flows.

Acquisition, Divestiture and Closure Activity

We may give consideration to divesting certain of our hospitals and non-hospital
businesses. Generally, these hospitals and non-hospital businesses are not in
one of our strategically beneficial service areas, are less complementary to our
business strategy and/or have lower operating margins. In addition, we continue
to receive interest from potential acquirers for certain of our hospitals and
non-hospital businesses. As such, we may sell additional hospitals and/or
non-hospital businesses if we consider any such disposition to be in our best
interests. We expect proceeds from any such divestitures to be used for general
corporate purposes (including potential debt repayments and/or debt repurchases)
and capital expenditures.

During 2022, we completed the divestiture of one hospital. This hospital
represented annual net operating revenues in 2021 of approximately $18 million,
and we received total net proceeds of less than $1 million in connection with
this disposition. In addition, we completed the divestiture of one hospital on
January 1, 2023, for which we received net proceeds of approximately $85 million
at a preliminary closing on December 30, 2022. As noted below, we have also
entered into a definitive agreement to sell another hospital which has not yet
been completed.

During 2021, we completed the divestiture of five hospitals, including three
which closed effective January 1, 2021 (for these hospitals we received net
proceeds at a preliminary closing on December 31, 2020). These five hospitals
represented annual net operating revenues in 2020 of approximately $275 million
and, including the net proceeds for the three hospital divestitures that
preliminarily closed on December 31, 2020, we received total net proceeds of
approximately $28 million in connection with the disposition of these hospitals.

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During 2020, we completed the divestiture of 13 hospitals, including three which
closed effective January 1, 2020 (for these hospitals, we received the net
proceeds at a preliminary closing on December 31, 2019). These 13 hospitals
represented annual net operating revenues in 2019 of approximately $1.2 billion
and, including the net proceeds for the three hospitals that preliminarily
closed on December 31, 2019, we received total net proceeds of approximately
$845 million in connection with the disposition of these hospitals.

The following table provides a summary of hospitals that we divested during the
years ended December 31, 2022, 2021 and 2020:

                                                                   Licensed      Effective
Hospital                     Buyer                  City, State      Beds        Date
2022 Divestiture:
AllianceHealth Seminole      SSM Health Care of     Seminole, OK      32         July 1,
                             Oklahoma, Inc.                                      2022

2021 Divestitures:
Lea Regional Medical         Covenant Health                                     January 1,
Center                       System                 Hobbs, NM         84         2021
Tennova Healthcare -         Vanderbilt
Tullahoma                    University Medical     Tullahoma,                   January 1,
                             Center                 TN                135        2021
Tennova Healthcare -         Vanderbilt
Shelbyville                  University Medical     Shelbyville,                 January 1,
                             Center                 TN                60         2021
Northwest Mississippi                               Clarksdale,                  February
Medical Center               Delta Health System    MS                181        1, 2021
AllianceHealth Midwest       SSM Health Care of     Midwest                      April 1,
                             Oklahoma, Inc.         City, OK          255        2021

2020 Divestitures:
Berwick Hospital Center      Fayette Holdings,                                   December
                             Inc.                   Berwick, PA         90       1, 2020
Brownwood Regional Medical   Hendrick Health        Brownwood,                   October
Center                       System                 TX                 188       27, 2020
Abilene Regional Medical     Hendrick Health                                     October
Center                       System                 Abilene, TX        231       27, 2020
San Angelo Community         Shannon Health         San Angelo,                  October
Medical Center               System                 TX                 171       24, 2020
Bayfront Health St.                                 St.
Petersburg                                          Petersburg,                  October 1,
                             Orlando Health, Inc.   FL                 480       2020
Hill Regional Hospital                              Hillsboro,                   August 1,
                             AHRK Holdings, LLC     TX                  25       2020
St. Cloud Regional Medical                          St. Cloud,                   July 1,
Center                       Orlando Health, Inc.   FL                  84       2020
Northern Louisiana Medical   Allegiance Health                                   July 1,
Center                       Management, Inc.       Ruston, LA         130       2020
Shands Live Oak Regional     HCA Healthcare,                                     May 1,
Medical Center               Inc., or HCA           Live Oak, FL        25       2020
Shands Starke Regional                                                           May 1,
Medical Center               HCA                    Starke, FL          49       2020
Southside Regional Medical   Bon Secours Mercy      Petersburg,                  January 1,
Center                       Health System          VA                 300       2020
Southampton Memorial         Bon Secours Mercy                                   January 1,
Hospital                     Health System          Franklin, VA       105       2020
Southern Virginia Regional   Bon Secours Mercy                                   January 1,
Medical Center               Health System          Emporia, VA         80       2020



During the three months ended September 30, 2022, we completed the closure of
Shorepoint Health Venice hospital (312 licensed beds) in Venice, Florida. We
recorded an impairment charge of approximately $29 million during the year ended
December 31, 2022, to adjust the fair value of the long-lived assets of this
hospital, including property and equipment and capitalized software costs, based
on their estimated fair value.

During the three months ended September 30, 2022, the provision of inpatient
services and substantially all outpatient services ceased at First Hospital
Wyoming Valley (psychiatric hospital) (149 licensed beds) in Wilkes-Barre,
Pennsylvania, resulting in the closure of this facility being substantially
complete as of September 30, 2022. We completed the closure of First Hospital
Wyoming Valley during the three months ended December 31, 2022. We recorded an
impairment charge of approximately $15 million during the year ended
December 31, 2022, to adjust the fair value of the long-lived assets of this
hospital, including property and equipment and capitalized software costs, based
on their estimated fair value.

On January 1, 2023, we completed the sale of substantially all of the assets of
Greenbrier Valley Medical Center (122 licensed beds) in Ronceverte, West
Virginia, to a subsidiary of Vandalia Health, Inc. pursuant to the terms of a
definitive agreement which was entered into on September 14, 2022, as amended.
The net proceeds from this sale were received at a preliminary closing on
December 30, 2022.

On December 30, 2022, we entered into a definitive agreement for the sale of
substantially all of the assets of Plateau Medical Center (25 licensed beds) in
Oak Hill, West Virginia, to a subsidiary of Vandalia Health, Inc. There can be
no assurance that this potential divestiture subject to definitive agreement
will be completed, or if it is completed, the ultimate timing of the completion
of this divestiture.

During the three months ended December 31, 2022, we notified the lessor of
AllianceHealth Woodward (87 licensed beds) in Woodward, Oklahoma that the lease
will not be renewed and will therefore expire effective December 1, 2023. We
recorded an impairment charge of approximately $8 million in conjunction with
the determination to exit this lease.


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Effective December 31, 2022, the lease for AllianceHealth Clinton (56 licensed
beds) in Clinton, Oklahoma expired and was not renewed. We recorded an
impairment charge of approximately $1 million during the year ended December 31,
2022 in conjunction with exiting the lease to operate this hospital.

On July 30, 2021, we sold our unconsolidated equity interests in Macon
Healthcare, LLC, a joint venture with certain subsidiaries of HCA representing
two hospitals in Macon, Georgia, in which we owned a 38% interest. We received
$110 million in cash in connection with the sale of these equity interests and
recognized a pre-tax gain of approximately $39 million on the sale of our
investments in unconsolidated affiliates during the year ended December 31,
2021.

Effective September 30, 2020, one or more affiliates of the Company finalized an
agreement to terminate the lease and cease operations of Shands Lake Shore
Regional Medical Center (99 licensed beds) in Lake City, Florida, including
transferring leased assets back to the landlord, the Lake Shore Hospital
Authority. We recorded an impairment charge of approximately $3 million during
the year ended December 31, 2020 in conjunction with exiting the lease to
operate this hospital.

On November 30, 2020, we completed the sale of 50% ownership interest in Merit
Health Biloxi (153 licensed beds) and its associated healthcare businesses in
Biloxi, Mississippi to Memorial Properties, Inc., an affiliate of Memorial
Hospital of Gulfport pursuant to the terms of a definitive agreement which was
entered into October 12, 2020. Merit Health Biloxi and its associated healthcare
businesses remain consolidated entities of the Company.

During the year ended December 31, 2022, we paid approximately $9 million to
acquire the operating assets and related businesses of certain physician
practices, clinics, ambulatory surgery centers and other ancillary businesses
that operate within the communities served by our hospitals. We allocated the
purchase price to property and equipment, working capital, noncontrolling
interests and goodwill.

Overview of Operating Results

Our net operating revenues for the year ended December 31, 2022 decreased $157
million to approximately $12.2 billion compared to approximately $12.4 billion
for the year ended December 31, 2021. On a same-store basis, net operating
revenues for the year ended December 31, 2022 decreased $27 million.

We had net income of $179 million during the year ended December 31, 2022,
compared to $368 million for the year ended December 31, 2021. Net income for
the year ended December 31, 2022 included the following:

• an after-tax charge of $4 million for expense related to government and other

legal matters and related costs,

• an after-tax benefit of $208 million for gain from early extinguishment of

    debt,


  • an after-tax benefit of $93 million from the gain on the CoreTrust
    transaction,


  • an after-tax charge of $12 million for the change in estimate of the
    professional claims liability related to divested locations,

• an after-tax charge of $55 million for the impairment of long-lived assets of

divested and closed businesses based on their estimated fair values, and

• an after-tax benefit of $5 million for restructuring charges related to the

closure of businesses as well as service line closures and consolidations at

certain hospitals.

Additionally, during the year ended December 31, 2022, certain of our facilities
in Florida experienced an interruption in their business and incurred additional
costs as a direct result of Hurricane Ian, which made landfall in late September
2022. The hurricane resulted in an estimated loss of net operating revenues
together with incremental expenses directly related to hurricane response
efforts of approximately $18 million on a pre-tax basis during the year ended
December 31, 2022. Amounts incurred are net of insurance proceeds received
to-date totaling $2 million. Due to the timing of this event, it is expected
that an immaterial amount of incremental expenses will be incurred in the first
half of 2023 for continued clean-up and remediation efforts. Likewise,
additional insurance proceeds received by us related to this event, if any, are
expected to be immaterial.

Net income for the year ended December 31, 2021 included the following:

• an after-tax charge of $116 million for loss from early extinguishment of

debt,

• an after-tax charge of $19 million for the impairment of long-lived assets of

    divested businesses based on their estimated fair values, net of gains
    recognized upon the sale of certain businesses,

• an after-tax benefit of $31 million for gain on the sale of unconsolidated

equity interests in Macon Healthcare, LLC, and

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• an after-tax benefit of $15 million related to the settlement of professional

liability claims for which the third-party insurer's obligation to insure us

for the underlying loss has been settled.

Consolidated inpatient admissions for the year ended December 31, 2022,
decreased 1.7%, compared to the year ended December 31, 2021, and consolidated
adjusted admissions for the year ended December 31, 2022, increased 2.6%,
compared to the year ended December 31, 2021. Same-store inpatient admissions
for the year ended December 31, 2022, increased 0.5%, compared to the year ended
December 31, 2021, and same-store adjusted admissions for the year ended
December 31, 2022, increased 5.0%, compared to the year ended December 31, 2021.

Self-pay revenues represented approximately 0.7% and 0.9% of net operating
revenues for the years ended December 31, 2022 and 2021, respectively. The
amount of foregone revenue related to providing charity care services as a
percentage of net operating revenues was approximately 11.5% and 8.9% for the
years ended December 31, 2022 and 2021, respectively. Direct and indirect costs
incurred in providing charity care services as a percentage of net operating
revenues was approximately 1.4% and 1.0% for the years ended December 31, 2022
and 2021, respectively.

Overview of Legislative and Other Governmental Developments

The healthcare industry is subject to changing political, regulatory, and
economic influences that may affect our business. In recent years, the
healthcare industry has undergone significant changes, many of which have been
aimed at reducing costs and government spending. The U.S. Congress and certain
state legislatures have introduced and passed a large number of proposals and
legislation affecting the healthcare system, including laws intended to impact
access to health insurance. The most prominent of these efforts, the Affordable
Care Act, affects how healthcare services are covered, delivered and reimbursed,
and expanded health insurance coverage through a combination of public program
expansion and private sector health insurance reforms. The Affordable Care Act
has been, and continues to be, subject to legislative and regulatory changes and
court challenges. For example, effective January 1, 2019, the financial penalty
associated with the mandate that most individuals enroll in a health insurance
plan was effectively eliminated. However, some states have imposed individual
health insurance mandates, and other states have explored or offer public health
insurance options. To increase access to health insurance during the COVID-19
pandemic, the ARPA enhanced subsidies for individuals eligible to purchase
coverage through Affordable Care Act marketplaces. The Inflation Reduction Act,
enacted in August 2022, extends these enhanced subsidies through 2025. In
addition, in a September 2021 final rule, HHS extended the annual open
enrollment period for coverage through federal marketplaces and granted state
exchanges flexibility to lengthen their open enrollment periods. These changes
and initiatives may impact the number of individuals that elect to obtain public
or private health insurance or the scope of such coverage, if purchased.

Of critical importance to us is the potential impact of any changes specific to
the Medicaid program, including the funding and expansion provisions of the
Affordable Care Act and subsequent legislation or agency initiatives.
Historically, the states with the greatest reductions in the number of uninsured
adult residents have expanded Medicaid. A number of states have opted out of the
Medicaid coverage expansion provisions, but could ultimately decide to expand
their programs at a later date. Of the 16 states in which we operated hospitals
as of December 31, 2022, nine states have taken action to expand their Medicaid
programs. At this time, the other seven states have not, including Florida,
Alabama, Tennessee, Mississippi and Texas, where we operated a significant
number of hospitals as of December 31, 2022. Some states use, or have applied to
use, waivers granted by CMS to implement expansion, impose different eligibility
or enrollment conditions, or otherwise implement programs that vary from federal
standards.

Other recent reform initiatives and proposals at the federal and state levels
include those focused on price transparency and limiting out-of-network charges,
which may impact prices, our competitive position and the relationships between
hospitals, insurers, patients, and ancillary providers (such as
anesthesiologists, radiologists, and pathologists). For example, the No
Surprises Act imposes various requirements on providers and health plans
intended to prevent "surprise" medical bills. Among other restrictions and
requirements, the law prohibits providers from charging patients an amount
beyond the in-network cost sharing amount for services rendered by
out-of-network providers, subject to limited exceptions. For services for which
balance billing is prohibited (even when no balance billing occurs), the No
Surprises Act includes provisions that may limit the amounts received by
out-of-network providers by health plans, and also establishes an IDR process
for providers and payors to handle payment disputes that cannot be resolved
through direct negotiations. Additionally, in connection with requirements that
providers provide, in advance of the date of the scheduled item or service or
upon request, a good faith estimate of expected charges to uninsured or self-pay
patients for scheduled items and services, such patients may invoke a
patient-provider dispute resolution process established by regulation to
challenge charges in certain circumstances.

Other trends toward transparency and value-based purchasing may impact the
competitive position and patient volumes of providers. For example, the CMS Care
Compare website makes available to the public certain data that hospitals submit
in connection with Medicare reimbursement claims, including hospital performance
data on quality measures and patient satisfaction. In addition, Medicare
reimbursement for hospitals is adjusted based on quality and efficiency
measures, and CMS currently administers various accountable care organizations
and bundled payment demonstration projects. The CMS Innovation Center has
highlighted the need to

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accelerate the movement to value-based care and drive broader system
transformation. However, the COVID-19 pandemic may impact provider performance
and data reporting under value-based care initiatives. CMS has temporarily
modified requirements of certain programs by, for example, implementing special
scoring and payment policies intended to mitigate negative impacts of the public
health emergency on hospitals participating in the Hospital Value-Based
Purchasing Program and similar programs.

In response to the COVID-19 pandemic, federal and state governments have passed
legislation, promulgated regulations, and taken other administrative actions
intended to assist healthcare providers in providing care to COVID-19 and other
patients during the public health emergency and to provide financial relief.

Primary legislative sources of COVID-19 relief include the CARES Act, the PPPHCE
Act, the CAA, and the ARPA. Together, these stimulus laws authorized over $186
billion in funding to be distributed through the PHSSEF to eligible healthcare
providers, including public entities and Medicare- and/or Medicaid-enrolled
providers. PHSSEF payments are intended to compensate healthcare providers for
lost revenues and incremental expenses incurred in response to the COVID-19
pandemic and are not required to be repaid, provided that recipients attest to
and comply with certain terms and conditions, including limitations on balance
billing, not using PHSSEF funds to reimburse expenses or losses that other
sources have been or are obligated to reimburse and audit and reporting
requirements.

The CARES Act and related legislation include other provisions offering
financial relief, including through Medicare and Medicaid payment adjustments,
such as a 20% add-on to the inpatient PPS DRG rate for COVID-19 patients and
delays of scheduled reductions to Medicaid DSH reductions, and expansion of the
Medicare Accelerated and Advance Payment Program. All accelerated payments
received by us through this program had, by the end of 2021, been recouped or
repaid or assumed by buyers in connection with hospitals we divested. In
addition, the Congress temporarily suspended the Medicare sequestration payment
adjustment, which would have otherwise reduced payments to Medicare providers by
2% as required by the BCA. The sequestration adjustment was phased back in with
a 1% reduction beginning April 1, 2022, and returned to 2% on July 1, 2022. The
BCA sequestration has been extended through the first six months of 2032. The
ARPA, in addition to providing funding for healthcare providers, increased the
federal budget deficit in a manner that triggers an additional statutorily
mandated sequestration under the PAYGO Act. As a result, an additional Medicare
spending reduction of up to 4% was required to take effect in January 2022.
However, Congress has delayed implementation of this payment reduction until
2025. The CARES Act and related legislation also permitted the deferral of
payment of the employer portion of social security taxes between March 27, 2020
and December 31, 2020, with 50% of the deferred amount due December 31, 2021 and
the remaining 50% due December 31, 2022.

Through December 31, 2022, net of amounts that have been repaid to the
respective federal, state, and local agencies, we received approximately $924
million in pandemic relief fund payments through various federal, state and
local programs on a cumulative basis since their enactment. Of the net amount
received to-date, we received (returned) pandemic relief fund payments through
various federal, state and local programs of approximately $161 million, $58
million and $705 million during the years ended December 31, 2022, 2021 and
2020, respectively. Payments recognized to-date have not impacted net operating
revenues, and had a positive impact on net income attributable to Community
Health Systems, Inc. stockholders during the years ended December 31, 2022, 2021
and 2020 in the amount of $133 million, $107 million and $452 million,
respectively. Amounts received through various federal, state or local programs
that have not yet been recognized or otherwise have not been refunded to HHS or
the various state and local agencies are included within accrued
liabilities-other in the consolidated balance sheets, and such unrecognized
amounts may be returned to HHS or the respective state or local agency, as
applicable, or may be recognized in future periods if the underlying conditions
for recognition are reasonably assured of being met. We have satisfied all
current reporting requirements for pandemic relief funds received to-date, as
applicable.

With respect to the Medicare Accelerated and Advanced Payment Program, we
received Medicare accelerated payments of approximately $1.2 billion in April
2020. No additional Medicare accelerated payments have been received by us since
such time and because CMS is no longer accepting new applications for
accelerated payments, we do not expect to receive additional Medicare
accelerated payments. CMS began recouping Medicare accelerated payments in April
2021. As of December 31, 2022, all Medicare accelerated payments received by us
have been recouped or repaid to CMS or assumed by buyers related to hospitals we
divested. Approximately $1.1 billion and $77 million of Medicare accelerated
payments were recouped or repaid to CMS or assumed by buyers related to
hospitals we divested during the years ended December 31, 2021 and 2020,
respectively.

There is still uncertainty regarding the magnitude and timing of any future
payments or benefits that we may receive or realize under the CARES Act and
other stimulus and relief legislation passed in response to the COVID-19
pandemic. However, we did not receive or recognize any significant level of
payments or benefits under the CARES Act and other existing legislation during
the three months ended December 31, 2022, and do not expect to receive or
recognize any significant level of payments or benefits under the CARES Act and
other existing legislation in future periods.

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Beyond financial assistance, federal and state governments have enacted
legislation and established regulations intended to ease legal and regulatory
burdens on healthcare providers. These measures include temporary relief from
Medicare conditions of participation requirements for healthcare providers,
temporary relaxation of licensure requirements for healthcare professionals,
temporary relaxation of privacy restrictions for telehealth remote
communications, promoting use of telehealth by temporarily expanding the scope
of services for which Medicare reimbursement is available, and limited waivers
of fraud and abuse laws for activities related to COVID-19 during the public
health emergency period. As the United States has experienced a moderation of
infection and related hospitalization rates in comparison to earlier periods,
federal and state governments have shifted to reducing or terminating certain
temporary measures that were implemented earlier in the COVID-19 public health
emergency.

The public health emergency continues to evolve, and there is uncertainty
regarding the ultimate impact to our business of governmental efforts to assist
healthcare providers responding to and otherwise affected by the COVID-19
pandemic. Some of the measures allowing for flexibility in delivery of care and
various financial supports for healthcare providers are available only until
funds expire or for the duration of the federal public health emergency. The
current declaration expires May 11, 2023. The presidential administration has
indicated that the public health emergency will not be extended. Termination of
the public health emergency may impact our operations and financial results.
Further, there can be no assurance that the terms of provider relief funding or
other programs will not change or be interpreted in ways that affect our funding
or eligibility to participate or our ability to comply with applicable
requirements and retain amounts received. We continue to assess the potential
impact of the CARES Act and other enacted stimulus and relief legislation, the
potential impact of future stimulus and relief measures, if any, and the impact
of other laws, regulations, and guidance related to COVID-19 on our business,
results of operations, financial condition and cash flows.

In June 2022, the U.S. Supreme Court ruled in American Hospital Association v.
Becerra, a case on the 340B Drug Pricing Program that could impact Medicare
reimbursement to us, both in respect of past periods and future periods. The
340B program allows certain non-profit healthcare organizations that care for
many uninsured and low-income patients to purchase outpatient drugs from
pharmaceutical manufacturers at discounted rates. Our hospitals do not
participate in the 340B program. In 2018, HHS implemented a payment policy that
reduced Medicare payments to 340B hospitals for most drugs obtained at
340B-discounted rates. These payment cuts resulted in increased payments for
non-340B hospitals, including our facilities. In Becerra, the U.S. Supreme Court
determined that HHS unlawfully reduced reimbursement rates for 340B hospitals.
The remedy for past payment years has not yet been determined. However, if it is
determined that budget neutrality applies to the remedy, companies or entities
that operate non-340B hospitals such as us may be required to repay previously
received payments, which could have a material adverse impact on our financial
results in any future reporting period in which such future repayments are
recognized or paid. In addition, depending on future Medicare payment policies,
companies or entities that operate non-340B hospitals such as us could receive
decreased reimbursement going forward for outpatient drugs and services, which
would adversely impact our results on a prospective basis. As noted above, for
calendar year 2023, CMS finalized the payment rate for drugs acquired through
the 340B program in light of the U.S. Supreme Court decision and, as a result of
the payment rate change, implemented a reduction of approximately 3.1% to
payment rates for non-drug services under the outpatient PPS for calendar year
2023 to achieve budget neutrality.

As a result of our current levels of cash, available borrowing capacity,
long-term outlook on our debt repayments, the refinancing of certain of our
notes, proceeds from any potential future disposition of hospitals or other
investments such as our minority equity interests in various businesses, as
applicable, and the continued projection of our ability to generate cash flows,
we anticipate that we will be able to invest the necessary capital in our
business over the next 12 months and for the foreseeable future thereafter. We
believe there continues to be ample opportunity to strengthen our market share
in substantially all of our markets by decreasing the need for patients to
travel outside their communities for healthcare. Furthermore, we will continue
to strive to improve operating efficiencies and procedures in order to improve
the performance of our hospitals.

Sources of Revenue

The following table presents the approximate percentages of net operating
revenues by payor source for the periods indicated. The data for the periods
presented are not strictly comparable due to the effect that businesses
acquired, sold, closed or opened during each of the respective periods, as
applicable, have had on these statistics.

                               Year Ended December 31,
                             2022        2021        2020
Medicare                       20.9 %      21.4 %      23.9 %
Medicaid                       14.8        13.5        13.4
Medicare Managed Care          16.1        15.1        13.6
Other third-party payors       47.5        49.1        49.3
Self-pay                        0.7         0.9        (0.2 )
Total                         100.0 %     100.0 %     100.0 %




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As shown above, we receive a substantial portion of our revenues from the
Medicare, Medicaid and Medicare Managed Care programs. Included in other
third-party payors is operating revenues from insurance companies with which we
have insurance provider contracts, insurance companies for which we do not have
insurance provider contracts, workers' compensation carriers and non-patient
service revenue, such as rental income and cafeteria sales. In the future, we
generally expect the portion of revenues received from the Medicare, including
Medicare Managed Care, and Medicaid programs to increase over the long-term due
to the general aging of the population and other factors, including health
reform initiatives. There has been a trend toward increased enrollment in
Medicare and Medicare Managed Care, which may adversely affect our operating
revenue. We may also be impacted by regulatory requirements imposed on insurers,
such as minimum medical-loss ratios and specific benefit requirements.
Furthermore, in the normal course of business, managed care programs, insurance
companies and employers actively negotiate the amounts paid to hospitals. Our
relationships with payors may be impacted by price transparency initiatives and
out-of-network billing restrictions, including those in the No Surprises Act,
which took effect January 1, 2022. There can be no assurance that we will retain
our existing reimbursement arrangements or that third-party payors will not
attempt to further reduce the rates they pay for our services.

Net operating revenues include amounts estimated by management to be
reimbursable by Medicare and Medicaid under prospective payment systems and
provisions of cost-based reimbursement and other payment methods. In addition,
we are reimbursed by non-governmental payors using a variety of payment
methodologies. Amounts we receive for the treatment of patients covered by
Medicare, Medicaid and non-governmental payors are generally less than our
standard billing rates. We account for the differences between the estimated
program reimbursement rates and our standard billing rates as contractual
allowance adjustments, which we deduct from gross revenues to arrive at net
operating revenues. Final settlements under some of these programs are subject
to adjustment based on administrative review and audit by third parties. We
account for adjustments to previous program reimbursement estimates as
contractual allowance adjustments and report them in the periods that such
adjustments become known. Contractual allowance adjustments related to final
settlements and previous program reimbursement estimates impacted net operating
revenues and net income by an insignificant amount in each of the years ended
December 31, 2022, 2021 and 2020.

The payment rates under the Medicare program for hospital inpatient and
outpatient acute care services are based on prospective payment systems, which
depend upon a patient's diagnosis or the clinical complexity of services
provided to a patient, among other factors. These rates are indexed for
inflation annually, although increases have historically been less than actual
inflation. On August 10, 2022, CMS published the final rule to increase this
index by 4.1% for hospital inpatient acute care services that are reimbursed
under the prospective payment system for federal fiscal year 2023 (which began
October 1, 2022). Together with other changes to payment policies, payment rates
for hospital inpatient acute care services are expected to increase
approximately 4.3%. Hospitals that do not submit required patient quality data
are subject to a reduction in payments. We are complying with this data
submission requirement. Payments may also be affected by various other
adjustments, including those that depend on patient-specific or hospital
specific factors. For example, the "two midnight rule" establishes admission and
medical review criteria for inpatient services limiting when services to
Medicare beneficiaries are payable as inpatient hospital services. Reductions in
the rate of increase or overall reductions in Medicare reimbursement may cause a
decline in the growth of our net operating revenues.

Payment rates under the Medicaid program vary by state. In addition to the base
payment rates for specific claims for services rendered to Medicaid enrollees,
several states utilize supplemental reimbursement programs to make separate
payments that are not specifically tied to an individual's care, some of which
offset a portion of the cost of providing care to Medicaid and indigent
patients. These programs are designed with input from CMS and are funded with a
combination of state and federal resources, including, in certain instances,
fees or taxes levied on the providers. The programs are generally authorized for
a specified period of time and require CMS's approval to be extended. We are
unable to predict whether or on what terms CMS will extend the supplemental
programs in the states in which we operate. Under these supplemental programs,
we recognize revenue and related expenses in the period in which amounts are
estimable and payment is reasonably assured. Reimbursement under these programs
is reflected in net operating revenues and included as Medicaid revenue in the
table above, and fees, taxes or other program related costs are reflected in
other operating expenses.

Results of Operations

Our hospitals offer a broad variety of inpatient and outpatient medical and
surgical services. These include general acute care, emergency room, general and
specialty surgery, critical care, internal medicine, obstetrics, diagnostic
services, psychiatric and rehabilitation services. Historically, the strongest
demand for hospital services generally occurs during January through April and
the weakest demand for these services generally occurs during the summer months.
Accordingly, eliminating the effects of new acquisitions and/or divestitures,
our net operating revenues and earnings are historically highest during the
first quarter and lowest during the third quarter.

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The following tables summarize, for the periods indicated, selected operating
data.

                                                         Year Ended December 31,
                                                   2022            2021           2020
Operating results, as a percentage of net
operating revenues:
Net operating revenues                                100.0 %        100.0 %        100.0 %
Operating expenses (a)                                (88.3 )        (84.1 )        (85.3 )
Depreciation and amortization                          (4.4 )         (4.4 )         (4.7 )
Impairment and gain (loss) on sale of
businesses, net                                        (0.6 )         (0.2 )         (0.4 )
Income from operations                                  6.7           11.3            9.6
Interest expense, net                                  (7.0 )         (7.2 )         (8.7 )
Gain (loss) from early extinguishment of debt           2.1           (0.6 )          2.6
Gain on sale of equity interests in Macon
Healthcare, LLC                                           -            0.3              -
Gain from CoreTrust transaction                         1.0              -              -
Equity in earnings of unconsolidated
affiliates                                              0.1            0.2  

0.1

Income before income taxes                              2.9            4.0  

3.6

(Provision for) benefit from income taxes              (1.4 )         (1.0 )          1.5
Net income                                              1.5            3.0  

5.1

Less: Net income attributable to
noncontrolling interests                               (1.1 )         (1.1 )         (0.8 )
Net income attributable to Community Health
Systems,
Inc. stockholders                                       0.4 %          1.9 %          4.3 %



                                                             Year Ended December 31,
                                                           2022                  2021
Percentage (decrease) increase from prior year:
Net operating revenues                                          (1.3 )%                4.9 %
Admissions (b)                                                  (1.7 )                (5.9 )
Adjusted admissions (c)                                          2.6                  (2.3 )
Average length of stay (d)                                      (6.0 )                 6.4

Net income attributable to Community Health Systems,

  Inc. stockholders                                            (80.0 )               (55.0 )
Same-store percentage (decrease) increase from prior
year (e):
Net operating revenues                                          (0.2 )%               12.5 %
Admissions (b)                                                   0.5                   2.2
Adjusted admissions (c)                                          5.0                   5.9

(a) Operating expenses include salaries and benefits, supplies, other operating

expenses, and lease cost and rent, net of the reduction in operating expenses

resulting from the recognition of pandemic relief funds.

(b) Admissions represents the number of patients admitted for inpatient

treatment.

(c) Adjusted admissions is a general measure of combined inpatient and outpatient

volume. Adjusted admissions is computed by multiplying admissions by gross

patient revenues and then dividing that number by gross inpatient revenues.

(d) Average length of stay represents the average number of days inpatients stay

in our hospitals.

(e) Excludes information for businesses sold or closed during each of the

respective periods, as applicable, and one hospital opened in 2022.

Items (b) - (e) are metrics used to manage our performance. These metrics
provide useful insight to investors about the volume and acuity of services we
provide, which aid in evaluating our financial results.

Year Ended December 31, 2022 Compared to Year Ended December 31, 2021

Net operating revenues decreased by 1.3% to approximately $12.2 billion for the
year ended December 31, 2022, from approximately $12.4 billion for the year
ended December 31, 2021. Net operating revenues on a same-store basis from
hospitals that were operated throughout both periods decreased $27 million, or
0.2%, during the year ended December 31, 2022, compared to the same period in
2021. On a period-over-period basis, there was a decline in net operating
revenues as a result of fewer inpatient admissions which was partially offset by
an increase in outpatient visits and surgeries. Also, lower overall acuity of
services was

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partially offset by improved reimbursement rates. Non-same-store net operating
revenues decreased $130 million during the year ended December 31, 2022,
compared to the same period in 2021, with the decrease attributable primarily to
the divestiture of hospitals during 2021 and 2022. On a consolidated basis,
inpatient admissions decreased by 1.7% during the year ended December 31, 2022,
compared to the same period in 2021. Also on a consolidated basis, adjusted
admissions increased by 2.6% during the year ended December 31, 2022, as
compared to the same period in 2021. On a same-store basis, net operating
revenues per adjusted admission decreased 5.0%, while inpatient admissions
increased by 0.5% and adjusted admissions increased by 5.0% for the year ended
December 31, 2022, compared to the same period in 2021.

Operating costs and expenses, as a percentage of net operating revenues,
increased from 88.7% during the year ended December 31, 2021 to 93.3% during the
year ended December 31, 2022. Operating costs and expenses, excluding
depreciation and amortization and impairment and (gain) loss on sale of
businesses, as a percentage of net operating revenues, increased from 84.1% for
the year ended December 31, 2021 to 88.3% for the year ended December 31, 2022.
Salaries and benefits increased as a percentage of net operating revenues from
42.4% for the year ended December 31, 2021 to 43.6% for the year ended December
31, 2022, primarily due to wage increases driven by inflation and current
competitive labor market conditions. Supplies, as a percentage of net operating
revenues, decreased from 16.5% for the year ended December 31, 2021 to 16.2% for
the year ended December 31, 2022. Other operating expenses, as a percentage of
net operating revenues, increased from 23.9% for the year ended December 31,
2021 to 27.3% for the year ended December 31, 2022, primarily due to higher
costs for contract labor, professional liability insurance and medical
specialist fees. Lease cost and rent, as a percentage of net operating revenues,
increased from 2.5% for the year ended December 31, 2021 to 2.6% for the year
ended December 31, 2022. Pandemic relief funds, as a percentage of net operating
revenues, were (1.4)% for the year ended December 31, 2022, compared to (1.2)%
for the same period in 2021.

Depreciation and amortization, as a percentage of net operating revenues,
remained consistent at 4.4% for both years ended December 31, 2022 and 2021.

Impairment and (gain) loss on sale of businesses was $71 million for the year
ended December 31, 2022, which primarily related to a hospital divestiture and
the closure or non-renewal of leases for three hospitals as discussed more
specifically under "Acquisition, Divestiture, Closures and Other Activity"
herein, compared to $24 million for the same period in 2021, which related
primarily to divestitures during the period.

Interest expense, net, decreased by $27 million to $858 million for the year
ended December 31, 2022 compared to $885 million for the same period in 2021.
This was primarily due to our debt refinancing activity during 2021 and 2022.

Gain from early extinguishment of debt of $253 million was recognized during the
year ended December 31, 2022, compared to a loss from early extinguishment of
debt of $79 million in the same period in 2021, as a result of the refinancing
of certain of our outstanding notes in each period as well as open market and
privately negotiated repurchases of certain of our outstanding notes completed
during the year ended December 31, 2022.

There was no pre-tax gain recognized on the sale of unconsolidated equity
interests during the year ended December 31, 2022. A pre-tax gain of $39 million
was recognized during the year ended December 31, 2021 on the sale of
unconsolidated equity interests in Macon Healthcare, LLC, a joint venture with
certain subsidiaries of HCA representing two hospitals in Macon, Georgia, in
which we owned a 38% interest.

Gain from the CoreTrust transaction of $119 million was recognized during the
year ended December 31, 2022, as discussed below under the heading "Liquidity
and Capital Resources." There was no gain from the CoreTrust transaction
recognized during the year ended December 31, 2021.

Equity in earnings of unconsolidated affiliates, as a percentage of net
operating revenues, decreased to (0.1)% for the year ended December 31, 2022
from (0.2)% for the year ended December 31, 2021, primarily due to the sale of
our unconsolidated equity interests in Macon Healthcare, LLC during the year
ended December 31, 2021.

The net results of the above-mentioned changes resulted in income before income
taxes decreasing $150 million to $349 million for the year ended December 31,
2022 from $499 million for the year ended December 31, 2021.

Our provision for income taxes for the years ended December 31, 2022 and 2021
was $170 million and $131 million, respectively, and the effective tax rates
were 48.7% and 26.3% for the years ended December 31, 2022 and 2021,
respectively. The increase in the provision for income taxes for the year ended
December 31, 2022, compared to the same period in 2021 was primarily due to an
increase in non-deductible interest for 2022 compared to 2021, compounded by an
adverse change in the Internal Revenue Code Section 163(j) limit for deductible
interest expense beginning in 2022. The difference in our effective tax rate for
the year ended December 31, 2022, compared to the same period in 2021 was due to
the aforementioned increase in the provision for income taxes and the decline in
income before taxes.

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Net income, as a percentage of net operating revenues, was 1.5% for the year
ended December 31, 2022 compared to 3.0% for the same period in 2021.

Net income attributable to noncontrolling interests, as a percentage of net
operating revenues, remained consistent at 1.1% for both years ended December
31, 2022 and 2021.

Net income attributable to Community Health Systems, Inc. was $46 million for
the year ended December 31, 2022, compared to $230 million for the same period
in 2021.

Year Ended December 31, 2021 Compared to Year Ended December 31, 2020

Net operating revenues increased by 4.9% to approximately $12.4 billion for the
year ended December 31, 2021, from approximately $11.8 billion for the year
ended December 31, 2020. Net operating revenues on a same-store basis from
hospitals that were operated throughout both periods increased $1.4 billion, or
12.5%, during the year ended December 31, 2021, as compared to the year ended
December 31, 2020. The increase in same-store net operating revenues was
primarily due to increased volumes and higher acuity during 2021. Non-same-store
net operating revenues decreased $794 million during the year ended December 31,
2021, in comparison to the prior year period, with the decrease attributable
primarily to the divestiture of hospitals during 2020 and 2021. On a
consolidated basis, inpatient admissions decreased by 5.9% during the year ended
December 31, 2021 as compared to the year ended December 31, 2020. Also on a
consolidated basis, adjusted admissions decreased by 2.3% during the year ended
December 31, 2021 as compared to the year ended December 31, 2020. On a
same-store basis, net operating revenues per adjusted admission increased 6.3%,
while inpatient admissions increased by 2.2% and adjusted admissions increased
by 5.9% for the year ended December 31, 2021, compared to the year ended
December 31, 2020.

All operating expense calculations, as a percentage of net operating revenues,
were impacted by the net effect of divestitures and the aforementioned increase
in same-store net operating revenues. Operating costs and expenses, as a
percentage of net operating revenues, decreased from 90.4% during the year ended
December 31, 2020 to 88.7% during the year ended December 31, 2021. Operating
costs and expenses, excluding depreciation and amortization and impairment and
(gain) loss on sale of businesses, as a percentage of net operating revenues,
decreased from 85.3% for the year ended December 31, 2020 to 84.1% for the year
ended December 31, 2021. Salaries and benefits decreased as a percentage of net
operating revenues from 45.9% for the year ended December 31, 2020 to 42.4% for
the year ended December 31, 2021. Supplies, as a percentage of net operating
revenues, decreased from 16.6% for the year ended December 31, 2020 to 16.5% for
the year ended December 31, 2021. Other operating expenses, as a percentage of
net operating revenues, decreased from 25.1% for the year ended December 31,
2020 to 23.9% for the year ended December 31, 2021. Lease cost and rent, as a
percentage of net operating revenues, decreased from 2.8% for the year ended
December 31, 2020 to 2.5% for the year ended December 31, 2021. Pandemic relief
funds, as a percentage of net operating revenues, were (1.2)% for the year ended
December 31, 2021, compared to (5.1)% for the year ended December 31, 2020. The
decreases in salaries and benefits, supplies and lease cost and rent, as a
percentage of net operating revenues, during the year ended December 31, 2021
compared to December 31, 2020 is primarily due to the impact of the COVID-19
pandemic on net operating revenues in 2020.

Depreciation and amortization, as a percentage of net operating revenues,
decreased to 4.4% for the year ended December 31, 2021 from 4.7% for the year
ended December 31, 2020, primarily due to a decrease in net operating revenues
as a result of the COVID-19 pandemic in 2020.

Impairment and (gain) loss on sale of businesses was $24 million for the year
ended December 31, 2021, compared to $48 million for the year ended December 31,
2020, related to impairment of the long-lived assets and reporting unit goodwill
allocated to hospitals classified as held-for-sale or sold during the respective
periods.

Interest expense, net, decreased by $146 million to $885 million for the year
ended December 31, 2021 compared to $1.031 billion for the year ended December
31, 2020. This was primarily due to our debt refinancing activity during the
years ended December 31, 2021 and 2020 as discussed further in Capital
Resources.

Loss from early extinguishment of debt of $79 million was recognized during the
year ended December 31, 2021, as a result of the refinancing of certain of our
outstanding notes as discussed further in Capital Resources. Gain from early
extinguishment of debt of $317 million was recognized during the year ended
December 31, 2020, as a result of various financing activities.

Equity in earnings of unconsolidated affiliates, as a percentage of net
operating revenues, increased to (0.2)% for the year ended December 31, 2021
from (0.1)% for the year ended December 31, 2020.

The net results of the above-mentioned changes resulted in income before income
taxes increasing $77 million to $499 million for the year ended December 31,
2021 from $422 million for the year ended December 31, 2020.

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Our provision for income taxes for the year ended December 31, 2021 was $131
million compared to a benefit from income taxes of $185 million for the year
ended December 31, 2020. Our effective tax rates were 26.3% and (43.8)% for the
years ended December 31, 2021 and 2020, respectively. The difference in our
effective tax rate for the year ended December 31, 2021, when compared to the
year ended December 31, 2020, was primarily due to a decrease in the valuation
allowance in 2020 as a result of an increase to the deductible interest expense
allowed for 2019 and 2020 under the CARES Act; the CARES Act related benefits
for deductibility of interest recognized in 2020 did not reoccur in 2021.

Net income, as a percentage of net operating revenues, was 3.0% for the year
ended December 31, 2021 compared to 5.1% for the year ended December 31, 2020.

Net income attributable to noncontrolling interests, as a percentage of net
operating revenues, increased to 1.1% for the year ended December 31, 2021 from
0.8% for the year ended December 31, 2020.

Net income attributable to Community Health Systems, Inc. was $230 million for
the year ended December 31, 2021, compared to $511 million for the year ended
December 31, 2020.

Cybersecurity Event

As previously disclosed on a Current Report on Form 8-K filed by us on February
13, 2023, Fortra, LLC, a third-party vendor who provides a secure file transfer
software platform utilized by our subsidiaries experienced a security breach
whereby PHI and PI of certain patients of our healthcare facilities were exposed
to Fortra's attacker. Upon receiving notification of the security breach, we
promptly launched an investigation. While the investigation is ongoing, we do
not believe this security breach has had an impact on any of our information
systems and we have not experienced a material interruption of business,
including the delivery of patient care. With regard to the PHI and PI
compromised by the Fortra breach, we currently estimate that approximately one
million individuals may have been affected by this attack. We have incurred, and
may incur in the future, expenses and losses related to this incident, some of
which may not be covered by our cyber/privacy liability insurance policies. We
will ensure that appropriate notification is provided to affected patients and
regulatory agencies as required by federal and state law. While we are
continuing to measure the impact of this security breach, including certain
remediation expenses and other potential liabilities, we do not currently
believe this incident will have a material adverse effect on our business,
operations, or financial results.

Liquidity and Capital Resources

2022 Compared to 2021

Net cash provided by operating activities was approximately $300 million for the
year ended December 31, 2022, compared to net cash used in operating activities
of $131 million for the year ended December 31, 2021, with the change primarily
attributable to the repayment of Medicare accelerated payments in 2021. Total
cash paid for interest increased to approximately $835 million for the year
ended December 31, 2022, from approximately $778 million for the year ended
December 31, 2021. Cash paid for income taxes, net of refunds received, resulted
in a net payment of $6 million and $4 million during the years ended December
31, 2022 and 2021, respectively.

Our net cash used in investing activities was approximately $259 million for the
year ended December 31, 2022, compared to approximately $524 million for the
year ended December 31, 2021, a decrease of approximately $265 million. The
decrease in net cash used in investing activities during the year ended December
31, 2022, compared to the prior year, primarily resulted from a decrease of $54
million in cash used for the purchase of property and equipment, an increase of
$28 million in cash proceeds from the sale of property and equipment, a
decrease of $53 million in cash used to purchase other investments, a decrease
of $65 million in cash used in the net impact of the purchases and sales of
available-for-sale debt and equity securities, an increase resulting from $121
million in cash representing our share of proceeds from the sale of a majority
interest in CoreTrust by HealthTrust, a group purchasing organization in which
we are a noncontrolling partner, distributed during the year ended December 31,
2022, and an increase of $72 million in cash proceeds from dispositions of
hospitals and other ancillary operations. These items, which decreased cash used
in investing activities, were partially offset by an increase of $6 million in
cash paid for acquisitions of facilities and other related businesses, an
increase of $12 million in cash used to purchase investments in unconsolidated
affiliates, and a decrease of $110 million in cash from the sale of equity
interests in Macon Healthcare, LLC during the year ended December 31, 2022,
compared to the year ended December 31, 2021.

Our net cash used in financing activities was $430 million for the year ended
December 31, 2022, compared to approximately $514 million for the year ended
December 31, 2021, a decrease of approximately $84 million. This was primarily
due to the net effect of our debt repayments, refinancing activities, and cash
paid for deferred financing costs and other debt-related costs during the years
ended December 31, 2022 and 2021.

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2021 Compared to 2020

Net cash used in operating activities was approximately $131 million for the
year ended December 31, 2021, compared to net cash provided by operating
activities of $2.2 billion for the year ended December 31, 2020. The change was
primarily attributable to the receipt of Medicare accelerated payments as well
as PHSSEF funds under the CARES Act and PPPHCE Act during the year ended
December 31, 2020 and the repayment of Medicare accelerated payments during the
year ended December 31, 2021. Total cash paid for interest decreased to
approximately $778 million for the year ended December 31, 2021 from
approximately $1.0 billion for the year ended December 31, 2020. Cash paid for
income taxes, net of refunds received, resulted in a net payment of $4 million
and $2 million during the years ended December 31, 2021 and 2020, respectively.

Our net cash used in investing activities was approximately $524 million for the
year ended December 31, 2021, compared to net cash provided by investing
activities of approximately $177 million for the year ended December 31, 2020, a
decrease of approximately $701 million. The cash used in investing activities
during the year ended December 31, 2021 was primarily impacted by a decrease of
$631 million in cash proceeds from dispositions of hospitals and other ancillary
operations, an increase in cash used in the purchase of property and equipment
of $29 million, an increase of $2 million in cash used for acquisition of
facilities and other related businesses, a decrease in cash used in the net
impact of the purchase and sale of available-for-sale and equity securities of
$85 million, an increase in cash from proceeds from the sale of equity interests
in Macon Healthcare, LLC of $110 million and an increase in cash used to
purchase other investments of $64 million.

Our net cash used in financing activities was $514 million for the year ended
December 31, 2021, compared to approximately $895 million for the year ended
December 31, 2020, an increase of approximately $381 million. The increase in
cash used in financing activities, in comparison to the prior year, was
primarily due to the net effect of our debt repayments, refinancing activities,
and cash paid for deferred financing costs and other debt-related costs as
further described below.

Liquidity

Net working capital was approximately $896 million and $1.1 billion at December
31, 2022 and December 31, 2021, respectively. Net working capital decreased by
approximately $219 million between December 31, 2021 and December 31, 2022. The
decrease is primarily due to the decrease in cash and cash equivalents as a
result of cash paid for interest, deferred financing costs, contract labor and
open market and privately negotiated repurchases of certain of our outstanding
notes as well as a decrease in patient accounts receivable, net, during the year
ended December 31, 2022, partially offset by an increase in prepaid expenses and
taxes and a decrease in accrued employee compensation.

In addition to cash flows from operations, available sources of capital include
amounts available under the asset-based loan (ABL) credit agreement, or the ABL
Credit Agreement, as amended and restated on November 22, 2021, and anticipated
access to public and private debt markets as well as proceeds from the
disposition of hospitals or other investments such as our minority equity
interests in various businesses, as applicable.

Pursuant to the ABL Credit Agreement, the lenders have extended to CHS/Community
Health Systems, Inc., or CHS, a revolving asset-based loan facility. The maximum
aggregate amount under the ABL Facility is $1.0 billion, subject to borrowing
base capacity. At December 31, 2022, we had outstanding borrowings of $53
million and approximately $852 million of additional borrowing capacity (after
taking into consideration $83 million of outstanding letters of credit) under
the ABL Facility. Letters of credit were reduced during the year ended December
31, 2022 by $20 million primarily due to a reduction in an insurance-related
letter of credit. The issued letters of credit were primarily in support of
potential insurance-related claims and certain bonds. Principal amounts
outstanding under the ABL Facility, if any, will be due and payable in full on
November 22, 2026.

2021 Financing Activity

On January 28, 2021, the remaining principal amount of the 6¼% Senior Secured
Notes due 2023 of approximately $95 million was redeemed using cash on hand.

On February 2, 2021, we completed a private offering of $1.775 billion aggregate
principal amount of 6?% Junior-Priority Secured Notes due April 15, 2029, or the
6?% Junior-Priority Secured Notes due 2029. The proceeds of the offering were
used, together with cash on hand, to redeem the 9?% Junior-Priority Secured
Notes due 2023 via a tender offer which was funded on February 2, 2021, or to
the extent not tendered, to fund the redemption of the remaining notes on
February 4, 2021, and to pay related fees and expenses. The 6?% Junior-Priority
Secured Notes due 2029 bear interest at a rate of 6.875% per year payable
semi-annually in arrears on April 15 and October 15 of each year, commencing on
October 15, 2021.

On February 9, 2021, we completed a private offering of $1.095 billion aggregate
principal amount of 4¾% Senior Secured Notes due February 15, 2031, or the 4¾%
Senior Secured Notes due 2031. The proceeds of the offering were used, together
with cash on

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hand, to redeem the 8?% Senior Secured Notes due 2024 on February 9, 2021 and to
pay related fees and expenses. The 4¾% Senior Secured Notes due 2031 bear
interest at a rate of 4.750% per year payable semi-annually in arrears on
February 15 and August 15, commencing on August 15, 2021.

On March 1, 2021, we redeemed the remaining principal amount of the 6?% Senior
Notes due 2022 of approximately $126 million using cash on hand.

On May 19, 2021, we completed a private offering of $1.440 billion aggregate
principal amount of 6?% Junior-Priority Secured Notes due April 1, 2030, or the
6?% Junior-Priority Secured Notes due 2030. The proceeds of the offering were
used, together with cash on hand, to redeem the 8?% Junior-Priority Secured
Notes due 2024 on May 19, 2021 and to pay related fees and expenses. The 6?%
Junior-Priority Secured Notes due 2030 bear interest at a rate of 6.125% per
year payable semi-annually in arrears on April 1 and October 1, commencing on
October 1, 2021.

On November 22, 2021, we entered into an amendment and restatement agreement, or
the Amendment, to refinance and replace the Credit Agreement, and, as amended by
the Amendment, or the Amended and Restated ABL Credit Agreement, dated as of
April 3, 2018 with JPMorgan Chase Bank, N.A., as administrative agent, and the
lenders and other agents party thereto. Pursuant to the Amended and Restated ABL
Credit Agreement, we have a revolving asset-based loan facility available to us
in the maximum aggregate principal amount of $1.0 billion, subject to borrowing
base capacity. The ABL Facility includes borrowing capacity available for
letters of credit of $200 million. Refer to Note 6 of the Notes to Consolidated
Financial Statements included under Part II, Item 8 of this Form 10-K for
additional information about the ABL Facility.

2022 Financing Activity

On February 4, 2022, we completed a private offering of $1.535 billion aggregate
principal amount of 5¼% Senior Secured Notes due May 15, 2030, or the 5¼% Senior
Secured Notes due 2030. The proceeds of the offering were used to redeem the 6?%
Senior Secured Notes due 2025 on February 4, 2022, and to pay related fees and
expenses. The 5¼% Senior Secured Notes due 2030 bear interest at a rate of
5.250% per year payable semi-annually in arrears on May 15 and November 15,
commencing on November 15, 2022.

During the year ended December 31, 2022, we extinguished a portion of certain
series of our outstanding notes through a combination of open market and
privately negotiated repurchases, as follows (in millions):

                                              Principal Amount
6?% Senior Notes due 2028                     $              11
4¾% Senior Secured Notes due 2031                            37
6?% Junior-Priority Secured Notes due 2029                  389
6?% Junior-Priority Secured Notes due 2030                  208
Total principal amount of debt extinguished   $             645


A pre-tax gain from early extinguishment of debt of approximately $253 million
was recognized associated with these financing activities during the year ended
December 31, 2022.

Additional Liquidity Information

Our ability to meet the restricted covenants and financial ratios and tests in
the ABL Facility and the indentures governing our outstanding notes can be
affected by events beyond our control, and we cannot assure you that we will
meet those tests. A breach of any of these covenants could result in a default
under the ABL Facility and/or the indentures that govern our outstanding notes.
Upon the occurrence of an event of default under the ABL Facility or indentures
that govern our outstanding notes, all amounts outstanding under the ABL
Facility and the indentures that govern our outstanding notes may become
immediately due and payable and all commitments under the ABL Facility to extend
further credit may be terminated.

As of December 31, 2022, approximately $21 million of our outstanding debt of
approximately $11.6 billion is due within the next 12 months and approximately
100% of our outstanding debt has a fixed rate of interest. Our debt as a
percentage of total capitalization remained consistent at 112% for the years
ended December 31, 2022 and 2021.

Net proceeds from divestitures, if any, are expected to be used for general
corporate purposes (including potential debt repayments and/or debt repurchases)
and capital expenditures.

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As previously discussed, we may require an increased level of working capital if
we experience extended billing and collection cycles resulting from ongoing
negative economic conditions and/or factors arising from the COVID-19 pandemic,
which may impact service mix, revenue mix, payor mix and patient volumes, as
well as our ability to collect outstanding receivables. A material increase in
the amount or deterioration in the collectability of accounts receivable would
adversely affect our cash flows and results of operations, requiring an
increased level of working capital.

We believe that internally generated cash flows and current levels of
availability for additional borrowing under the ABL Facility, as well as our
continued access to the capital markets, will be sufficient to finance
acquisitions, capital expenditures, working capital requirements, and any debt
repurchases or other debt repayments we may elect to make or be required to make
through the next 12 months and the foreseeable future thereafter. Pandemic
relief funds that we have received and may continue to receive through various
federal, state and local stimulus or relief programs have been and will continue
to be used according to applicable terms and conditions as reimbursement for
lost revenues or incremental expenses attributable to COVID-19, including
working capital requirements and capital expenditures. In addition, ongoing
negative economic conditions (including inflationary conditions and elevated
interest rate levels) and/or the COVID-19 pandemic have resulted in, and may
continue to result in, significant disruptions of financial and capital markets,
which could reduce our ability to access capital and negatively affect our
liquidity in the future. Additionally, while we have received and may continue
to receive pandemic relief funds and may continue to be able to utilize pandemic
relief funds which have been received, as noted above, there is no assurance
regarding the extent to which we will continue to benefit from these payments or
other stimulus and relief measures. Moreover, we do not expect to receive or
recognize any significant level of payments or benefits under the CARES Act and
other existing legislation in future periods.

As noted above, during the year ended December 31, 2022, we extinguished a
portion of certain series of our outstanding notes through open market and
privately negotiated repurchases, and we may elect from time to time to continue
to purchase our outstanding debt in open market purchases, privately negotiated
transactions or otherwise. Any such debt repurchases will depend upon prevailing
market conditions, our liquidity requirements, contractual restrictions,
applicable securities laws requirements, and other factors.

Capital Resources

Material cash requirements from known contractual and other obligations
primarily consist of purchase obligations, long-term debt and related interest
payments, operating leases, finance leasing and financing obligations, and
capital expenditures related to routine capital, information systems
infrastructure and applications, replacement or de novo construction projects
and bed expansion projects, certain commitments and other investments. Refer to
Notes 6, 9 and 15 of the Notes to Consolidated Financial Statements for amounts
outstanding as of December 31, 2022 related to long-term debt, and related
interest payments, operating leases, finance leasing and financing obligations,
and certain commitments.

Purchase obligations include supplies and third-party services purchased in the
normal course of business. Open purchase orders total $269 million as of
December 31, 2022 and substantially all such amounts are due in the next 12
months. Other investments includes, among other things, purchases of investments
in unconsolidated affiliates which are expected to be incurred within the next
24 months.

Cash expenditures for purchases of facilities and other related businesses were
approximately $9 million in 2022, $3 million in 2021 and $1 million in 2020. Our
expenditures for the years ended December 31, 2022, 2021 and 2020, were
primarily related to physician practices, clinics, ambulatory surgery centers
and other ancillary businesses.

Excluding the cost to construct replacement and de novo hospitals, our cash
expenditures for routine capital for the year ended December 31, 2022 totaled
$358 million compared to $321 million in 2021 and $274 million in 2020. These
capital expenditures related primarily to the purchase of additional equipment,
minor renovations and information systems infrastructure. While none of our
hospitals experienced extensive property damage from Hurricane Ian, we have
incurred costs for repairs and may incur costs for capital expenditures needed
to remediate damage that was incurred. Costs to construct replacement hospitals
totaled $17 million, $63 million and $117 million for the years ended December
31, 2022, 2021 and 2020, respectively, primarily related to the construction of
a replacement facility in Fort Wayne, Indiana. During the years ended December
31, 2022, 2021 and 2020, we also had cash expenditures of $40 million, $85
million and $49 million, respectively, that represent both planning and
construction costs primarily for two de novo hospitals in the Tucson, Arizona
market. These two de novo hospitals were completed during the fourth quarter of
2020 and the first half of 2022, respectively.

Pursuant to a hospital purchase agreement from our March 1, 2016 acquisition of
Northwest Health - Starke, formerly known as Starke Hospital, we committed to
build a replacement facility in Knox, Indiana. Construction of the replacement
facility for Northwest Health - Starke is required to be completed within five
years of the date we enter into a new lease with Starke County, Indiana, the
hospital lessor, or in the event we do not enter into a new lease with Starke
County, construction shall be completed by September 30,

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2026. We have not entered into a new lease with the lessor for Northwest Health
- Starke and currently anticipate completing construction of the Northwest
Health - Starke replacement facility in 2026.

In addition to the commitment to build a replacement facility in Knox, Indiana,
other off-balance sheet arrangements consist of letters of credit issued on the
ABL Facility, primarily in support of potential insurance-related claims and
specified outstanding bonds of approximately $83 million as well as
approximately $6 million representing the maximum potential amount of future
payments under physician recruiting guarantee commitments in excess of the
liability recorded at December 31, 2022.

We expect total capital expenditures of approximately $450 million to $500
million in 2023.

Reimbursement, Legislative and Regulatory Changes

Ongoing legislative and regulatory efforts, and judicial interpretations, could
reduce or otherwise adversely affect the payments we receive from Medicare and
Medicaid and other payors. Within the statutory framework of the Medicare and
Medicaid programs, there are substantial areas subject to administrative
rulings, interpretations and discretion, and which are at times subject to court
challenges, which may further affect payments made under those programs.
Further, the federal and state governments might, in the future, reduce the
funds available under those programs, require repayment of previously received
funds 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 be
adversely impacted. We cannot estimate the impact of Medicare and Medicaid
reimbursement changes that have been enacted or are currently or may in the
future be under consideration. We cannot predict whether additional
reimbursement reductions will be made or whether any such changes or other
restructuring of the financing and delivery of healthcare would have a material
adverse effect on our business, financial conditions, results of operations,
cash flow, capital resources and liquidity.

Critical Accounting Policies

The discussion and analysis of our financial condition and results of operations
are based upon our consolidated financial statements, which have been prepared
in accordance with U.S. GAAP. The preparation of these financial statements
requires us to make estimates and judgments that affect the reported amount of
assets and liabilities, revenues and expenses, and related disclosure of
contingent assets and liabilities at the date of our consolidated financial
statements. Actual results may differ from these estimates under different
assumptions or conditions.

Critical accounting policies are defined as those policies that involve a
significant level of estimation uncertainty and have had or are reasonably
likely to have a material impact on the financial condition or results of
operations of the registrant. We believe that our critical accounting policies
are limited to those described below. The following information should be read
in conjunction with our significant accounting policies included in Note 1 of
the Notes to Consolidated Financial Statements included under Part II, Item 8 of
this Form 10-K.

Revenue Recognition

Net operating revenues include amounts estimated by management to be
reimbursable by Medicare and Medicaid under prospective payment systems and
provisions of cost-reimbursement and other payment methods. In addition, we are
reimbursed by non-governmental payors using a variety of payment methodologies.
Amounts we receive for treatment of patients covered by these programs are
generally less than the standard billing rates. Explicit price concessions are
recorded for contractual allowances that are calculated and recorded through a
combination of internally- and externally-developed data collection and analysis
tools to automate the monthly estimation of required contractual allowances.
Within these automated systems, payors' historical paid claims data and
contracted amounts are utilized to calculate the contractual allowances. This
data is updated on a monthly basis. All hospital contractual allowance
calculations are subjected to monthly review by management to ensure
reasonableness and accuracy. We account for the differences between the
estimated program reimbursement rates and the standard billing rates as
contractual allowance adjustments, which is one component of the deductions from
gross revenues to arrive at net operating revenues. The process of estimating
contractual allowances requires us to estimate the amount expected to be
received based on payor contract provisions. The key assumption in this process
is the estimated contractual reimbursement percentage, which is based on payor
classification, historical paid claims data and, when applicable, application of
the expected managed care plan reimbursement based on contract terms.

Due to the complexities involved in these estimates, actual payments we receive
could be different from the amounts we estimate and record. If the actual
contractual reimbursement percentage under government programs and managed care
contracts differed by 1% at December 31, 2022 from our estimated reimbursement
percentage, net income for the year ended December 31, 2022 would have changed
by approximately $88 million, and net accounts receivable at December 31, 2022
would have changed by $113 million. Final settlements under some of these
programs are subject to adjustment based on administrative review and audit by
third parties.

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We account for adjustments to previous program reimbursement estimates as
contractual allowance adjustments and report them in the periods that such
adjustments become known. Contractual allowance adjustments related to final
settlements and previous program reimbursement estimates impacted net operating
revenues and net income by an insignificant amount for each of the years ended
December 31, 2022, 2021 and 2020.

Patient Accounts Receivable

Substantially all of our accounts receivable are related to providing healthcare
services to patients at our hospitals and affiliated businesses. Collection of
these accounts receivable is our primary source of cash and is critical to our
operating performance. Our primary collection risks relate to uninsured patients
and outstanding patient balances for which the primary insurance payor has paid
some but not all of the outstanding balance, with the remaining outstanding
balance (generally deductibles and co-payments) owed by the patient. For all
procedures scheduled in advance, our policy is to verify insurance coverage
prior to the date of the procedure. Insurance coverage is not verified in
advance of procedures for walk-in and emergency room patients.

We estimate any adjustments to the transaction price for implicit price
concessions by reserving a percentage of all self-pay accounts receivable
without regard to aging category, based on collection history, adjusted for
expected recoveries and any anticipated changes in trends. Our ability to
estimate the transaction price and any implicit price concessions is not
impacted by not utilizing an aging of our net accounts receivable as we believe
that substantially all of the risk exists at the point in time such accounts are
identified as self-pay. The percentage used to reserve for all self-pay accounts
is based on our collection history. We believe that we collect substantially all
of our third-party insured receivables, which include receivables from
governmental agencies.

Patient accounts receivable can be impacted by the effectiveness of our
collection efforts and, as described in our significant accounting policies
included in Note 1 of the Notes to Consolidated Financial Statements included
under Part II, Item 8 of this Form 10-K, numerous factors may affect the net
realizable value of accounts receivable. If the actual collection percentage
differed by 1% at December 31, 2022 from our estimated collection percentage as
a result of a change in expected recoveries, net income for the year ended
December 31, 2022 would have changed by $38 million, and net accounts receivable
at December 31, 2022 would have changed by $49 million. We also continually
review our overall reserve adequacy by monitoring historical cash collections as
a percentage of trailing net operating revenues, as well as by analyzing current
period net operating revenues and admissions by payor classification, days
revenue outstanding, the composition of self-pay receivables between pure
self-pay patients and the patient responsibility portion of third-party insured
receivables and the impact of recent acquisitions and dispositions.

Our policy is to write-off gross accounts receivable if the balance is under
$10.00 or when such amounts are placed with outside collection agencies. We
believe this policy accurately reflects our ongoing collection efforts and is
consistent with industry practices. We had approximately $1.7 billion at
December 31, 2022 and $2.2 billion at December 31, 2021, being pursued by
various outside collection agencies. We expect to collect less than 4%, net of
estimated collection fees, of the amounts being pursued by outside collection
agencies. As these amounts have been written-off, they are not included in our
accounts receivable. Collections on amounts previously written-off are
recognized as a recovery of net operating revenues when received. However, we
take into consideration estimated collections of these future amounts
written-off in determining the implicit price concessions used to measure the
transaction price for the applicable portfolio of patient accounts receivable.

All of the following information is derived from our hospitals, excluding
clinics, unless otherwise noted.

Patient accounts receivable from our hospitals represent approximately 98% of
our total consolidated accounts receivable.

Days revenue outstanding, adjusted for the impact of receivables for state
Medicaid supplemental payment programs and divested facilities, was 56 days and
55 days at December 31, 2022 and 2021, respectively.

Total gross accounts receivable (prior to allowance for contractual adjustments
and implicit price concessions) was approximately $15.9 billion as of December
31, 2022 and approximately $16.2 billion as of December 31, 2021. The
approximate percentage of total gross accounts receivable (prior to allowance
for contractual adjustments and implicit price concessions) summarized by aging
categories is as follows:

As of December 31, 2022:
                                                                  % of Gross Receivables
              Payor                   0 - 90 Days          90 - 180 Days         180 - 365 Days       Over 365 Days
Medicare                                         11 %                    1 %                   - %                  - %
Medicaid                                          7 %                    1 %                   1 %                  1 %
Medicare Managed Care                            15 %                    3 %                   3 %                  1 %
Other third-party payors                         18 %                    3 %                   3 %                  2 %
Self-Pay                                          7 %                    6 %                   8 %                  9 %


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As of December 31, 2021:
                                                                 % of Gross Receivables
              Payor                   0 - 90 Days          90 - 180 Days        180 - 365 Days       Over 365 Days
Medicare                                         12 %                    1 %                  - %                 - %
Medicaid                                          7 %                    1 %                  1 %                 1 %
Medicare Managed Care                            13 %                    2 %                  1 %                 1 %
Other third-party payors                         20 %                    3 %                  2 %                 1 %
Self-Pay                                          8 %                    5 %                  9 %                12 %

The approximate percentage of total gross accounts receivable (prior to
allowances for contractual adjustments and implicit price concessions)
summarized by payor is as follows:

                          December 31,
                        2022        2021
Insured receivables       69.5 %      66.3 %
Self-pay receivables      30.5        33.7
Total                    100.0 %     100.0 %



The combined total at our hospitals and clinics for the estimated implicit price
concessions for self-pay accounts receivable and allowances for other self-pay
discounts and contractuals, as a percentage of gross self-pay receivables, was
approximately 91% at both December 31, 2022 and 2021. If the receivables that
have been written-off, but where collections are still being pursued by outside
collection agencies, were included in both the allowances and gross self-pay
receivables specified above, the percentage of combined allowances to total
self-pay receivables would have been 93% at both December 31, 2022 and 2021.

Goodwill

At December 31, 2022, we had approximately $4.2 billion of goodwill recorded,
all of which resides at our hospital operations reporting unit. Goodwill
represents the excess of the fair value of the consideration conveyed in an
acquisition over the fair value of net assets acquired. Goodwill is evaluated
for impairment annually and when an event occurs or circumstances change that,
more likely than not, reduce the fair value of the reporting unit below its
carrying value. We performed our last annual goodwill impairment evaluation
during the fourth quarter of 2022 using the October 31, 2022 measurement date,
which indicated no impairment.

The determination of fair value in our goodwill impairment analysis is based on
an estimate of fair value for the hospital operations reporting unit utilizing
known and estimated inputs at the evaluation date. Some of those inputs include,
but are not limited to, the most recent price of our common stock and fair value
of our long-term debt, our recent financial results, estimates of future revenue
and expense growth, estimated market multiples, expected capital expenditures,
income tax rates, costs of invested capital and a discount rate.

Future estimates of fair value could be adversely affected if the actual outcome
of one or more of the assumptions described above changes materially in the
future, including as a result of any decline in or volatility of our stock price
and the fair value of our long-term debt, lower than expected hospital volumes
and/or net operating revenues, higher market interest rates, increased operating
costs or other adverse impacts on our financial results. Such changes impacting
the calculation of our fair value could result in a material impairment charge
in the future. Moreover, declines in the fair market value of our senior and
unsecured notes and common stock during the year ended December 31, 2022, as
well as macroeconomic conditions and our financial results during the year ended
December 31, 2022 (including the effect of increased wage and contract labor
expense), have increased our risk of future goodwill impairment, which could be
material.

Professional Liability Claims

As part of our business of providing healthcare services, we are subject to
legal actions alleging liability on our part. We accrue for losses resulting
from such liability claims, as well as loss adjustment expenses that are
out-of-pocket and directly related to such liability claims. These direct
out-of-pocket expenses include fees of outside counsel and experts. We do not
accrue for costs that are part of our corporate overhead, such as the costs of
our in-house legal and risk management departments. The losses resulting from
professional liability claims primarily consist of estimates for known claims,
as well as estimates for incurred but not reported claims. The estimates are
based on specific claim facts, our historical claim reporting and payment
patterns, the nature and level of our hospital operations, and actuarially
determined projections. The actuarially determined projections are based on our
actual claim data, including historic reporting and payment patterns which have
been gathered over the life of the Company. As discussed below, since we
purchase excess insurance on a claims-made basis that transfers risk to
third-party insurers, the estimated liability for professional and general
liability claims does include an amount for the losses covered by our excess
insurance. We also record a receivable for the

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expected reimbursement of losses covered by our excess insurance. Since we
believe that the amount and timing of our future claims payments are reliably
determinable, we discount the amount we accrue for losses resulting from
professional liability claims.

The net present value of the projected payments was discounted using
weighted-average interest rates of 3.8% in 2022 and 1.8% in both 2021 and 2020.
This liability is adjusted for new claims information in the period such
information becomes known to us. Professional liability expense includes the
losses resulting from professional liability claims and loss adjustment expense,
as well as excess insurance premiums, and is presented within other operating
expenses in the accompanying consolidated statements of income.

Our processes for obtaining and analyzing claims and incident data are
standardized across all of our businesses and have been consistent for many
years. We monitor the outcomes of the medical care services that we provide and
for each reported claim, we obtain various information concerning the facts and
circumstances related to that claim. In addition, we routinely monitor current
key statistics and volume indicators in our assessment of utilizing historical
trends. The average lag period between claim occurrence and payment of a final
settlement is between three and four years, although the facts and circumstances
of individual claims could result in the timing of such payments being different
from this average. Since claims are paid promptly after settlement with the
claimant is reached, settled claims represent approximately 7% or less of the
total liability at the end of any period.

For purposes of estimating our individual claim accruals, we utilize specific
claim information, including the nature of the claim, the expected claim amount,
the year in which the claim occurred and the laws of the jurisdiction in which
the claim occurred. Once the case accruals for known claims are determined,
information is stratified by loss layers and retentions, accident years,
reported years and geography. Several actuarial methods are used against this
data to produce estimates of ultimate paid losses and reserves for incurred but
not reported claims. Each of these methods uses our company-specific historical
claims data and other information. Company-specific data includes information
regarding our business, including historical paid losses and loss adjustment
expenses, historical and current case loss reserves, actual and projected
hospital statistical data, a variety of hospital census information, employed
physician information, professional liability retentions for each policy year,
geographic information and other data. Significant assumptions are made on the
basis of the aforementioned information in estimating reserves for incurred but
not reported claims. A 1% change in assumptions for either severity or frequency
as of December 31, 2022 would have increased or decreased the reserve between $5
million to $15 million.

Based on these analyses, we determine our estimate of the professional liability
claims. The determination of management's estimate, including the preparation of
the reserve analysis that supports such estimate, involves subjective judgment
of management. Changes in reserve data or the trends and factors that influence
reserve data may signal fundamental shifts in our future claim development
patterns or may simply reflect single-period anomalies. Even if a change
reflects a fundamental shift, the full extent of the change may not become
evident until years later. Moreover, since our methods and models use different
types of data and we select our liability from the results of all of these
methods, we typically cannot quantify the precise impact of such factors on our
estimates of the liability. Due to our standardized and consistent processes for
handling claims and the long history and depth of our company-specific data, our
methodologies have historically produced reliably determinable estimates of
ultimate paid losses. Management considers any changes in the amount and pattern
of its historical paid losses up through the most recent reporting period to
identify any fundamental shifts or trends in claim development experience in
determining the estimate of professional liability claims. However, due to the
subjective nature of this estimate and the impact that previously unforeseen
shifts in actual claim experience can have, future estimates of professional
liability could be adversely impacted when actual paid losses develop
unexpectedly based on assumptions and settlement events that were not previously
known or anticipated.

                                                          Year Ended December 31,
                                                   2022              2021           2020
Accrual for professional liability claims,
beginning of year                               $       533       $      602     $      612
Liability for insured claims (1)                         (5 )            (22 )           17
Expense (income) related to:
Current accident year                                    92              108            102
Prior accident years                                     19              (18 )           56
(Income) expense from discounting                       (18 )             (4 )           10
Total incurred loss and loss expense (2)                 93               86            168
Paid claims and expenses related to:
Current accident year                                     -               (1 )            -
Prior accident years                                   (154 )           (132 )         (195 )
Total paid claims and expenses                         (154 )           (133 )         (195 )
Accrual for professional liability claims,
end of year                                     $       467       $      533     $      602

(1) The liability for insured claims is recorded in the consolidated balance

sheets with a corresponding insurance recovery receivable.

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(2) Total expense, including premiums for insured coverage, was $132 million in

2022, $98 million in 2021 and $203 million in 2020.

In the ordinary course of business, our expense with respect to professional
liability claims, which is actuarially determined, is limited to amounts not
covered by third-party insurance policies, which typically provide coverage for
professional liability claims. During the year ended December 31, 2020, we
incurred expenses in the amount of approximately $50 million related to the
settlement of a professional liability claim for which our third-party insurers'
obligation to provide coverage to us in connection with the underlying loss was
being litigated. The subject of the litigation for the recovery of the full
amount of the $50 million settlement was whether the claim was covered under the
subject policies. This litigation was settled during the year ended December 31,
2021, and in connection with this settlement, approximately $22 million was
recovered from various third-party insurers related to their obligation to
provide coverage for the professional liability claim. During the year ended
December 31, 2022, we experienced an increase in the amounts paid or expected to
be paid to settle outstanding professional liability claims related to divested
locations, compared to the same period in the prior year and to previous
actuarially determined estimates. This resulted in a change in estimate of $15
million during the three months and year ended December 31, 2022. There were no
other significant changes in our estimate of the reserve for professional
liability claims during the years ended December 31, 2022, 2021 and 2020.

We are primarily self-insured for professional liability claims; however, we
obtain excess insurance that transfers the risk of loss to a third-party insurer
for claims in excess of our self-insured retentions. Our excess insurance is
underwritten on a claims-made basis. For claims reported prior to June 1, 2002,
substantially all of our professional and general liability risks were subject
to a less than $1 million per occurrence self-insured retention and for claims
reported from June 1, 2002 through June 1, 2003, these self-insured retentions
were $2 million per occurrence. Substantially all claims reported after June 1,
2003 and before June 1, 2005 are self-insured up to $4 million per claim.
Substantially all claims reported on or after June 1, 2005 and before June 1,
2014 are self-insured up to $5 million per claim. Substantially all claims
reported on or after June 1, 2014 and before June 1, 2018 are self-insured up to
$10 million per claim. Substantially all claims reported on or after June 1,
2018 are self-insured up to $15 million per claim. Management, on occasion, has
selectively increased the insured risk at certain hospitals based upon insurance
pricing and other factors and may continue that practice in the future.

Excess insurance for all hospitals has been purchased through commercial
insurance companies and generally covers us for liabilities in excess of the
self-insured retentions. The excess coverage consists of multiple layers of
insurance, the sum of which totals up to $95 million per occurrence and in the
aggregate for claims reported on or after June 1, 2003, up to $145 million per
occurrence and in the aggregate for claims reported on or after January 1, 2008,
up to $195 million per occurrence and in the aggregate for claims reported on or
after June 1, 2010, and up to at least $216 million per occurrence and in the
aggregate for claims reported on or after June 1, 2015. In addition, for
integrated occurrence professional liability claims, there is an additional
$50 million of excess coverage for claims reported on or after June 1, 2014 and
an additional $75 million of excess coverage for claims reported on or after
June 1, 2015 through June 1, 2020. The $75 million in integrated occurrence
coverage will also apply to claims reported between June 1, 2020 and June 1,
2023 for events that occurred prior to June 1, 2020 but which were not
previously known or reported. For certain policy years prior to June 1, 2014, if
the first aggregate layer of excess coverage becomes fully utilized, then the
self-insured retention will increase to $10 million per claim for any subsequent
claims in that policy year until our total aggregate coverage is met. Beginning
June 1, 2018, this drop-down provision in the excess policies attaches over the
$15 million per claim self-insured retention.

Effective June 1, 2014, the hospitals acquired from HMA were insured on a
claims-made basis as described above and through commercial insurance companies
as described above for substantially all claims reported on or after June 1,
2014 except for physician-related claims with an occurrence date prior to
June 1, 2014. Prior to June 1, 2014, the former HMA hospitals obtained insurance
coverage through a wholly-owned captive insurance subsidiary and a risk
retention group subsidiary, or Insurance Subsidiaries, that are domiciled in the
Cayman Islands and South Carolina, respectively. The Insurance Subsidiaries
provided (i) claims-made coverage to all of the former HMA hospitals and
(ii) occurrence-basis coverage to most of the physicians employed by the former
HMA hospitals. The employed physicians not covered by the Insurance Subsidiaries
generally maintained claims-made policies with unrelated third-party insurance
companies. To mitigate the exposure of the program covering the former HMA
hospitals and other healthcare facilities, the Insurance Subsidiaries bought
claims-made reinsurance policies from unrelated third parties for claims above
self-retention levels of $10 million or $15 million per claim, depending on the
policy year.

Income Taxes

We must make estimates in recording provision for income taxes, including
determination of deferred tax assets and deferred tax liabilities and any
valuation allowances that might be required against the deferred tax assets. We
believe that future income will enable us to realize certain deferred tax
assets, subject to the valuation allowance we have established.

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The total amount of unrecognized benefit that would impact the effective tax
rate, if recognized, was $2 million as of December 31, 2022. A total of less
than $1 million of interest and penalties is included in the amount of liability
for uncertain tax positions at December 31, 2022. It is our policy to recognize
interest and penalties related to unrecognized benefits in our consolidated
statements of income as income tax expense.

It is possible the amount of unrecognized tax benefit could change in the next
12 months as a result of a lapse of the statute of limitations and settlements
with taxing authorities; however, we do not anticipate the change will have a
material impact on our consolidated results of operations or consolidated
financial position.

Our federal income tax return for the 2014, 2015 and 2018 tax years are under
examination by the Internal Revenue Service. We believe the result of this
examination will not be material to our consolidated results of operations or
consolidated financial position. In addition, we have extended our federal
statute of limitations through December 31, 2023 for the tax period ended
December 31, 2018.

Recent Accounting Pronouncements

In September 2022, the Financial Accounting Standards Board issued Accounting
Standards Update, or ASU, 2022-04, "Liabilities - Supplier Finance Programs
(Subtopic 405-50), Disclosure of Supplier Finance Program Obligations." This ASU
provides specific authoritative guidance for disclosure of supplier finance
programs including key terms of such programs, amounts outstanding, and where
the obligations are presented in the statement of financial position. This ASU
is effective for all entities for financial statements issued for annual periods
beginning after December 15, 2022, including interim periods, except for the
disclosure of rollforward information, which is effective for annual periods
beginning after December 15, 2023. Certain components of this guidance must be
applied retrospectively while others may be applied prospectively. We are
currently evaluating the impact that adoption of this ASU will have on our
consolidated financial statements.

We have evaluated all other recently issued, but not yet effective, ASUs and do
not expect the eventual adoption of these ASUs to have a material impact on our
consolidated financial position or results of operations.

FORWARD-LOOKING STATEMENTS

This Form 10-K contains forward-looking statements within the meaning of Section
27A of the Securities Act of 1933, as amended, Section 21E of the Securities
Exchange Act of 1934, as amended, and the Private Securities Litigation Reform
Act of 1995 that involve risk and uncertainties. Statements that are predictive
in nature, that depend upon or refer to future events or conditions or that
include words such as "expects," "anticipates," "intends," "plans," "believes,"
"estimates," "thinks," and similar expressions are forward-looking statements.
These statements involve known and unknown risks, uncertainties, and other
factors that may cause our actual results and performance to be materially
different from any future results or performance expressed or implied by these
forward-looking statements. A number of factors could affect the future results
of the Company or the healthcare industry generally and could cause the
Company's expected results to differ materially from those expressed in this
Form 10-K. These factors include, among other things:

• general economic and business conditions, both nationally and in the regions

in which we operate, including the current negative macroeconomic conditions,

ongoing inflationary pressures that have significantly increased and may

continue to significantly increase our expenses, the current high interest

rate environment, ongoing challenging labor market conditions and labor

shortages, and supply chain shortages and disruptions, as well as the current

and/or potential future adverse impact of such economic conditions and other

factors on our net operating revenues (including our service mix, revenue mix,

payor mix and/or patient volumes) and our ability to collect outstanding

receivables;

• developments related to COVID-19, including, without limitation, related to

the length and severity of the pandemic; the volume of canceled or rescheduled

procedures; and the spread of potentially more contagious and/or virulent

forms of the virus, including variants of the virus for which currently

available vaccines, treatments and tests may not be effective or authorized;

• uncertainty regarding the magnitude and timing of any future payments or

benefits we may receive or realize under the CARES Act, the PPPHCE Act, the

CAA, the ARPA and any other future stimulus or relief measures related to

COVID-19;

• the impact of current or future federal and state health reform initiatives,

including the Affordable Care Act, and the potential for changes to the

Affordable Care Act, its implementation or its interpretation (including

through executive orders and court challenges);

• the extent to and manner in which states support increases, decreases or

changes in Medicaid programs, implement health insurance exchanges or alter

the provision of healthcare to state residents through legislation, regulation

or otherwise;

• the future and long-term viability of health insurance exchanges and potential

changes to the beneficiary enrollment process;

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• risks associated with our substantial indebtedness, leverage and debt service

    obligations, including our ability to refinance such indebtedness on
    acceptable terms or to incur additional indebtedness, and our ability to
    remain in compliance with debt covenants;


  • demographic changes;

• changes in, or the failure to comply with, federal, state or local laws or

    governmental regulations affecting our business;


  • potential adverse impact of known and unknown legal, regulatory and

governmental proceedings and other loss contingencies, including governmental

investigations and audits, and federal and state false claims act litigation;

• our ability, where appropriate, to enter into and maintain provider

arrangements with payors and the terms of these arrangements, which may be

further affected by the increasing consolidation of health insurers and

managed care companies and vertical integration efforts involving payors and

healthcare providers;

• changes in, or the failure to comply with, contract terms with payors and

changes in reimbursement policies or rates paid by federal or state healthcare

programs or commercial payors;

• any security breaches, cyber-attacks, loss of data, other cybersecurity

threats or incidents, and any actual or perceived failures to comply with

legal requirements governing the privacy and security of health information or

other regulated, sensitive or confidential information, or legal requirements

regarding data privacy or data protection, and the impact of the security

breach announced by us on February 13, 2023, including legal, reputational,

and financial risks associated with this security breach, the results of our

ongoing investigation of this security breach, any potential regulatory

inquiries and/or litigation to which we may become subject in connection with

this security breach, and the extent of remediation and other additional costs

that may be incurred by us in connection with this security breach;

• any potential impairments in the carrying value of goodwill, other intangible

assets, or other long-lived assets, or changes in the useful lives of other

intangible assets;

• changes in inpatient or outpatient Medicare and Medicaid payment levels and

methodologies;

• the effects related to the implementation of the sequestration spending

reductions pursuant to both the Budget Control Act of 2011 and the

Pay-As-You-Go Act of 2010 and the potential for future deficit reduction

legislation;

• increases in the amount and risk of collectability of patient accounts

receivable, including decreases in collectability which may result from, among

other things, self-pay growth and difficulties in recovering payments for

which patients are responsible, including co-pays and deductibles;

• the efforts of insurers, healthcare providers, large employer groups and

others to contain healthcare costs, including the trend toward value-based

purchasing;

• the impact of competitive labor market conditions and the shortage of nurses,

including in connection with our ability to hire and retain qualified nurses,

physicians, other medical personnel and key management, and increased labor

expenses as a result of such competitive labor market conditions, inflation

and competition for such positions;

• any failure to obtain medical supplies or pharmaceuticals at favorable prices;

• liabilities and other claims asserted against us, including self-insured

    professional liability claims;


  • competition;

• trends toward treatment of patients in less acute or specialty healthcare

settings, including ambulatory surgery centers or specialty hospitals or via

    telehealth;


  • changes in medical or other technology;


  • changes in U.S. GAAP;

• the availability and terms of capital to fund any additional acquisitions or

replacement facilities or other capital expenditures;

• our ability to successfully make acquisitions or complete divestitures, our

ability to complete any such acquisitions or divestitures on desired terms or

at all, the timing of the completion of any such acquisitions or divestitures,

and our ability to realize the intended benefits from any such acquisitions or

divestitures;

• the impact that changes in our relationships with joint venture or syndication

    partners could have on effectively operating our hospitals or ancillary
    services or in advancing strategic opportunities;

• our ability to successfully integrate any acquired hospitals and/or outpatient

facilities, or to recognize expected synergies from acquisitions;

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• the impact of severe weather conditions and climate change, as well as the

    timing and amount of insurance recoveries in relation to severe weather
    events;

• our ability to obtain adequate levels of insurance, including cyber, general

    liability, professional liability, and directors and officers liability
    insurance;

• timeliness of reimbursement payments received under government programs;

• effects related to pandemics, epidemics, or outbreaks of infectious diseases,

including the coronavirus causing the disease known as COVID-19;

• any failure to comply with our obligations under license or technology

agreements;

• challenging economic conditions in non-urban communities in which we operate;

  • the concentration of our revenue in a small number of states;

• our ability to realize anticipated cost savings and other benefits from our

current strategic and operational cost savings initiatives;

• any changes in or interpretations of income tax laws and regulations; and

• the risk factors set forth in this Form 10-K and our other public filings with

the SEC.

Although we believe that these forward-looking statements are based upon
reasonable assumptions, these assumptions are inherently subject to significant
regulatory, economic and competitive uncertainties and contingencies, which are
difficult or impossible to predict accurately and may be beyond our control.
Accordingly, we cannot give any assurance that our expectations will in fact
occur, and we caution that actual results may differ materially from those in
the forward-looking statements. Given these uncertainties, prospective investors
are cautioned not to place undue reliance on these forward-looking statements.
These forward-looking statements are made as of the date of this filing. We
undertake no obligation to revise or update any forward-looking statements, or
to make any other forward-looking statements, whether as a result of new
information, future events or otherwise.