UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)

OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended ~~June 30, 2019~~March 31, 2020

Commission file number001-15925

COMMUNITY HEALTH SYSTEMS, INC.

(Exact name of registrant as specified in its charter)


Delaware		13-3893191
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification Number)

4000 Meridian Boulevard Franklin, Tennessee		37067 (Zip Code)

(Address of principal executive offices)

615-465-7000

(Registrant’s telephone number)

Securities registered pursuant to Section 12(b) of the Act:


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, $.01 par value	CYH	New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☑ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 ofRegulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☑ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, anon-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule12b-2 of the Exchange Act.


Large accelerated filer ☐	Accelerated filer ☑	Smaller reporting company	☐

Non-accelerated filer ☐			Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.☐

Indicate by check mark whether the registrant is a shell company (as defined inRule 12b-2 of the Exchange Act). Yes ☐ No ☑

As of ~~July~~April 24, ~~2019,~~2020, there were outstanding ~~118,052,308~~119,665,237 shares of the Registrant’s Common Stock, $0.01 par value.

Community Health Systems, Inc.

Form10-Q

For the Three ~~and Six~~ Months Ended ~~June 30, 2019~~March 31, 2020



Part I.	Financial Information			Page

	Item 1.	Financial Statements:

		Condensed Consolidated Statements of ~~Loss~~Income (Loss) – Three ~~and Six~~ Months Ended ~~June 30,~~March 31, 2020 and March 31, 2019 ~~and June 30, 2018~~ (Unaudited)		2

		Condensed Consolidated Statements of Comprehensive ~~Loss~~Income (Loss) - Three ~~and Six~~ Months Ended ~~June 30,~~March 31, 2020 and March 31, 2019 ~~and June 30, 2018~~ (Unaudited)		3

		Condensed Consolidated Balance Sheets - ~~June 30, 2019~~March 31, 2020 and December 31, ~~2018~~2019 (Unaudited)		4

		Condensed Consolidated Statements of Cash Flows – ~~Six~~Three Months Ended ~~June 30,~~March 31, 2020 and March 31, 2019 ~~and June 30, 2018~~ (Unaudited)		5

		~~Notes to Condensed Consolidated Financial Statements (Unaudited)~~	6

		~~Item 2.~~Notes to Condensed Consolidated Financial Statements (Unaudited)	6

	Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations		53	30

	Item 3.	Quantitative and Qualitative Disclosures about Market Risk		78	52

	Item 4.	Controls and Procedures		78	52

Part II.	Other Information

	Item 1.	Legal Proceedings		79	53

	Item 1A.	Risk Factors		83	58

	Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds		84	60

	Item 3.	Defaults Upon Senior Securities		84	61

	Item 4.	Mine Safety Disclosures		84	61

	Item 5.	Other Information		84	61

	Item 6.	Exhibits		85	62

Signatures				86	64

COMMUNITY HEALTH SYSTEMS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF ~~LOSS~~INCOME (LOSS)

(In millions, except share and per share data)

(Unaudited)

   Three Months Ended    Six Months Ended
   June 30,    June 30,
               2019                            2018                            2019                            2018
Net operating revenues
   $ 3,302    $ 3,562    $ 6,679    $ 7,251
Operating costs and expenses:

Salaries and benefits
   1,488    1,617    3,030    3,265
Supplies
   539    592    1,097    1,208
Other operating expenses
   893    879    1,704    1,789
Government and other legal settlements and related costs
   4    1    9    7
Electronic health records incentive reimbursement
   -    -    -    (1)
Lease cost and rent
   81    85    162    173
Depreciation and amortization
   153    177    305    358
Impairment and (gain) loss on sale of businesses, net
   33    174    71    202








Total operating costs and expenses
   3,191    3,525    6,378    7,001








Income from operations
   111    37    301    250
Interest expense, net
   265    235    522    464
Loss (gain) from early extinguishment of debt
   -    (64)    31    (59)
Equity in earnings of unconsolidated affiliates
   (5)    (5)    (9)    (12)








Loss before income taxes
   (149)    (129)    (243)    (143)
(Benefit from) provision for income taxes
   (3)    (38)    3    (45)








Net loss
   (146)    (91)    (246)    (98)
Less: Net income attributable to noncontrolling interests
   21    19    39    37








Net loss attributable to Community Health Systems, Inc. stockholders
   $ (167)    $ (110)    $ (285)    $ (135)








Loss per share attributable to Community Health Systems, Inc. common stockholders:

Basic
   $ (1.47)    $ (0.97)    $ (2.51)    $ (1.20)








Diluted
   $ (1.47)    $ (0.97)    $ (2.51)    $ (1.20)








Weighted-average number of shares outstanding:

Basic
   113,862,097    112,837,944    113,561,523    112,566,230








Diluted
   113,862,097    112,837,944    113,561,523    112,566,230

~~See accompanying notes to the condensed consolidated financial statements.~~


	Three Months Ended
	March 31,
	2020			2019
Net operating revenues	$	3,025		$	3,376
Operating costs and expenses:
Salaries and benefits		1,408			1,542
Supplies		498			558
Other operating expenses		737			811
Government and other legal settlements and related costs		2			5
Lease cost and rent		81			80
Depreciation and amortization		144			153
Impairment and loss on sale of businesses, net		45			38
Total operating costs and expenses		2,915			3,187
Income from operations		110			189
Interest expense, net		262			257
Loss from early extinguishment of debt		4			31
Equity in earnings of unconsolidated affiliates		(7	)		(5	)
Loss before income taxes		(149	)		(94	)
(Benefit from) provision for income taxes		(183	)		7
Net income (loss)		34			(101	)
Less: Net income attributable to noncontrolling interests		16			17
Net income (loss) attributable to Community Health Systems, Inc. stockholders	$	18		$	(118	)

Earnings (loss) per share attributable to Community Health Systems, Inc. common stockholders:
Basic	$	0.15		$	(1.04	)

Diluted	$	0.15		$	(1.04	)

Weighted-average number of shares outstanding:
Basic		114,301,519			113,257,608

Diluted		114,379,331			113,257,608



See accompanying notes to the condensed consolidated financial statements.

COMMUNITY HEALTH SYSTEMS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE ~~LOSS~~INCOME (LOSS)

(In millions)

(Unaudited)

   Three Months Ended    Six Months Ended
   June 30,    June 30,
           2019                    2018                    2019                    2018
Net loss
   $ (146)    $ (91)    $ (246)    $ (98)
Other comprehensive income (loss), net of income taxes:

Net change in fair value of interest rate swaps, net of tax
   -    7    (2)    25
Net change in fair value ofavailable-for-sale securities, net of tax
   2    (1)    4    (2)
Amortization and recognition of unrecognized pension cost components, net of tax
   -    1    -    1


��





Other comprehensive income
   2    7    2    24








Comprehensive loss
   (144)    (84)    (244)    (74)
Less: Comprehensive income attributable to noncontrolling interests
   21    19    39    37








Comprehensive loss attributable to Community Health Systems, Inc. stockholders
   $ (165)    $ (103)    $ (283)    $ (111)

~~See accompanying notes to the condensed consolidated financial statements.~~


	Three Months Ended
	March 31,
	2020		2019
Net income (loss)	$	34	$	(101	)
Other comprehensive income (loss), net of income taxes:
Net change in fair value of interest rate swaps, net of tax		-		(2	)
Net change in fair value ofavailable-for-sale debt securities, net of tax		2		2
Other comprehensive income		2		-
Comprehensive income (loss)		36		(101	)
Less: Comprehensive income attributable to noncontrolling interests		16		17
Comprehensive income (loss) attributable to Community Health Systems, Inc. stockholders	$	20	$	(118	)


See accompanying notes to the condensed consolidated financial statements.

COMMUNITY HEALTH SYSTEMS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(In millions, except share data)

(Unaudited)

           June 30, 2019                 December 31, 2018
ASSETS

Current assets:

Cash and cash equivalents
   $ 207    $ 196
Patient accounts receivable
   2,356    2,352
Supplies
   378    402
Prepaid income taxes
   -    3
Prepaid expenses and taxes
   177    196
Other current assets
   366    400




Total current assets
   3,484    3,549




Property and equipment
   10,120    10,301
Less accumulated depreciation and amortization
   (4,186)    (4,162)




Property and equipment, net
   5,934    6,139




Goodwill
   4,494    4,559




Deferred income taxes
   57    69




Other assets, net
   2,163    1,543




Total assets
   $ 16,132    $ 15,859




LIABILITIES AND STOCKHOLDERS’ DEFICIT

Current liabilities:

Current maturities of long-term debt
   $ 206    $ 204
Current operating lease liabilities
   133    -
Accounts payable
   812    887
Accrued liabilities:

Employee compensation
   549    627
Accrued interest
   388    206
Other
   415    468




Total current liabilities
   2,503    2,392




Long-term debt
   13,393    13,392




Deferred income taxes
   26    26




Long-term operating lease liabilities
   479    -




Other long-term liabilities
   987    1,008




Total liabilities
   17,388    16,818




Redeemable noncontrolling interests in equity of consolidated subsidiaries
   503    504




STOCKHOLDERS’ DEFICIT

Community Health Systems, Inc. stockholders’ deficit:

Preferred stock, $.01 par value per share, 100,000,000 shares authorized; none issued
   -    -
Common stock, $.01 par value per share, 300,000,000 shares authorized; 118,051,975 shares issued and outstanding at June 30, 2019, and 116,248,376 shares issued and outstanding at December 31, 2018
   1    1
Additionalpaid-in capital
   2,002    2,017
Accumulated other comprehensive loss
   (8)    (10)
Accumulated deficit
   (3,828)    (3,543)




Total Community Health Systems, Inc. stockholders’ deficit
   (1,833)    (1,535)
Noncontrolling interests in equity of consolidated subsidiaries
   74    72




Total stockholders’ deficit
   (1,759)    (1,463)




Total liabilities and stockholders’ deficit
   $ 16,132    $ 15,859

~~See accompanying notes to the condensed consolidated financial statements.~~


	March 31, 2020		December 31, 2019
ASSETS
Current assets:
Cash and cash equivalents	$	246	$	216
Patient accounts receivable		2,100		2,258
Supplies		354		354
Prepaid income taxes		47		48
Prepaid expenses and taxes		188		193
Other current assets		425		358


Total current assets		3,360		3,427

Property and equipment		9,618		9,653
Less accumulated depreciation and amortization		(4,096)		(4,045)

Property and equipment, net		5,522		5,608

Goodwill		4,322		4,328

Deferred income taxes		50		38

Other assets, net		2,191		2,208

Total assets	$	15,445	$	15,609

LIABILITIES AND STOCKHOLDERS’ DEFICIT
Current liabilities:
Current maturities of long-term debt	$	30	$	20
Current operating lease liabilities		132		136
Accounts payable		727		811
Accrued liabilities:
Employee compensation		593		594
Accrued interest		180		189
Other		503		532


Total current liabilities		2,165		2,282

Long-term debt		13,525		13,385

Deferred income taxes		29		200

Long-term operating lease liabilities		514		487

Other long-term liabilities		846		894

Total liabilities		17,079		17,248

Redeemable noncontrolling interests in equity of consolidated subsidiaries		502		502


STOCKHOLDERS’ DEFICIT
Community Health Systems, Inc. stockholders’ deficit:
Preferred stock,$.01 par value per share, 100,000,000 shares authorized; none issued		-		-
Common stock,$.01 par value per share, 300,000,000 shares authorized; 119,678,238 shares issued and outstanding at March 31, 2020, and 117,822,631 shares issued and outstanding at December 31, 2019		1		1
Additionalpaid-in capital		2,001		2,008
Accumulated other comprehensive loss		(7)		(9)
Accumulated deficit		(4,200)		(4,218)

Total Community Health Systems, Inc. stockholders’ deficit		(2,205)		(2,218)
Noncontrolling interests in equity of consolidated subsidiaries		69		77

Total stockholders’ deficit		(2,136)		(2,141)

Total liabilities and stockholders’ deficit	$	15,445	$	15,609


See accompanying notes to the condensed consolidated financial statements.

COMMUNITY HEALTH SYSTEMS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In millions)

(Unaudited)

   Six Months Ended
   June 30,
               2019                            2018
Cash flows from operating activities:

Net loss
   $ (246)    $ (98)
Adjustments to reconcile net loss to net cash provided by operating activities:

Depreciation and amortization
   305    358
Government and other legal settlements and related costs
   9    7
Stock-based compensation expense
   6    7
Impairment and (gain) loss on sale of businesses, net
   71    202
Loss (gain) from early extinguishment of debt
   31    (59)
Othernon-cash expenses, net
   101    23
Changes in operating assets and liabilities, net of effects of acquisitions and divestitures:

Patient accounts receivable
   (7)    (21)
Supplies, prepaid expenses and other current assets
   72    (15)
Accounts payable, accrued liabilities and income taxes
   27    (308)
Other
   (104)    (2)




Net cash provided by operating activities
   265    94




Cash flows from investing activities:

Acquisitions of facilities and other related businesses
   (13)    (10)
Purchases of property and equipment
   (212)    (295)
Proceeds from disposition of hospitals and other ancillary operations
   161    88
Proceeds from sale of property and equipment
   1    4
Purchases ofavailable-for-sale securities and equity securities
   (39)    (38)
Proceeds from sales ofavailable-for-sale securities and equity securities
   52    63
Increase in other investments
   (97)    (53)




Net cash used in investing activities
   (147)    (241)




Cash flows from financing activities:

Repurchase of restricted stock shares for payroll tax withholding requirements
   (1)    (1)
Deferred financing costs and other debt-related costs
   (28)    (54)
Proceeds from noncontrolling investors in joint ventures
   2    1
Redemption of noncontrolling investments in joint ventures
   (2)    (6)
Distributions to noncontrolling investors in joint ventures
   (57)    (52)
Borrowings under credit agreements
   23    26
Issuance of long-term debt
   2,034    -
Proceeds from ABL facility
   25    587
Repayments of long-term indebtedness
   (2,103)    (709)




Net cash used in financing activities
   (107)    (208)




Net change in cash and cash equivalents
   11    (355)
Cash and cash equivalents at beginning of period
   196    563




Cash and cash equivalents at end of period
   $ 207    $ 208




Supplemental disclosure of cash flow information:

Interest payments
   $ (318)    $ (486)




Income tax refunds (payments), net
   $ 3    $ 9

~~See accompanying notes to the condensed consolidated financial statements.~~


	Three Months Ended
	March 31,
	2020			2019
Cash flows from operating activities:
Net income (loss)	$	34		$	(101)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depreciation and amortization		144			153
Deferred income taxes		(184)			6
Government and other legal settlements and related costs		2			5
Stock-based compensation expense		2			3
Impairment and loss on sale of businesses, net		45			38
Loss from early extinguishment of debt		4			31
Othernon-cash expenses, net		49			36
Changes in operating assets and liabilities, net of effects of acquisitions and divestitures:
Patient accounts receivable		158			(10)
Supplies, prepaid expenses and other current assets		(53)			14
Accounts payable, accrued liabilities and income taxes		(78)			17
Other		(66)			(59)

Net cash provided by operating activities		57			133

Cash flows from investing activities:
Acquisitions of facilities and other related businesses		-			(4)
Purchases of property and equipment		(99)			(121)
Proceeds from disposition of hospitals and other ancillary operations		2			161
Purchases ofavailable-for-sale debt securities and equity securities		(17)			(15)
Proceeds from sales ofavailable-for-sale debt securities and equity securities		21			32
Increase in other investments		(16)			(34)

Net cash (used in) provided by investing activities		(109)			19

Cash flows from financing activities:
Repurchase of restricted stock shares for payroll tax withholding requirements		(1)			(1)
Deferred financing costs and other debt-related costs		(32)			(25)
Proceeds from noncontrolling investors in joint ventures		-			1
Redemption of noncontrolling investments in joint ventures		(2)			(1)
Distributions to noncontrolling investors in joint ventures		(30)			(27)
Proceeds from sale-lease back		2			-
Other borrowings		14			12
Issuance of long-term debt		1,462			1,840
Proceeds from ABL Facility		540			25
Repayments of long-term indebtedness		(1,871)			(1,895)

Net cash provided by (used in) financing activities		82			(71)

Net change in cash and cash equivalents		30			81
Cash and cash equivalents at beginning of period		216			196

Cash and cash equivalents at end of period	$	246		$	277
			��
Supplemental disclosure of cash flow information:
Interest payments	$	(264)		$	(189)

Income tax refunds (payments), net	$	2		$	-


See accompanying notes to the condensed consolidated financial statements.

COMMUNITY HEALTH SYSTEMS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

1.	1. BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES

The unaudited condensed consolidated financial statements of Community Health Systems, Inc. (the “Parent” or “Parent Company”) and its subsidiaries (the “Company”) as of ~~June 30, 2019~~March 31, 2020 and December 31, ~~2018~~2019 and for the three-month ~~andsix-month~~periods ended ~~June 30,~~March 31, 2020 and 2019, ~~and 2018,~~ have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”). In the opinion of management, such information contains all adjustments, consisting only of normal recurring adjustments, necessary for a fair presentation of the results for such periods. All intercompany transactions and balances have been eliminated. The results of operations for the three ~~and six~~ months ended ~~June 30, 2019,~~March 31, 2020, are not necessarily indicative of the results to be expected for the full fiscal year ending December 31, ~~2019.~~ 2020. The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the amounts reported in the condensed consolidated financial statements. Actual results could differ from these estimates under different assumptions or conditions. Where applicable, the impact, if any, resulting from the emergence of a novel coronavirus(“COVID-19”) during the three months ended March 31, 2020, has been considered.

Certain information and disclosures normally included in the notes to ~~condensed~~the consolidated financial statements have been condensed or omitted as permitted by the rules and regulations of the Securities and Exchange Commission (the “SEC”). The Company believes the disclosures are adequate to make the information presented not misleading. The accompanying unaudited condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto for the year ended December 31, ~~2018,~~2019, contained in the Company’s Annual Report on Form10-K filed with the SEC on February ~~21,~~ 20, 2020 (“2019 ~~(“2018~~ Form10-K”). Certain prior period amounts have been reclassified to conform to the current period presentation within the condensed consolidated statements of cash flows.

During the first quarter of 2020, the Company early adopted the SEC’s Financial Disclosures About Guarantors and Issuers of Guaranteed Securities and Affiliates Whose Securities Collateralize a Registrant’s Securities rules, which simplify the disclosure requirements related to the Company’s registered debt securities under Rule3-10 of RegulationS-X (see Note 15).

Noncontrolling interests in less-than-wholly-owned consolidated subsidiaries of the Parent are presented as a component of total equity on the condensed consolidated balance sheets to distinguish between the interests of the Parent Company and the interests of the noncontrolling owners. Noncontrolling interests that are redeemable or may become redeemable at a fixed or determinable price at the option of the holder or upon the occurrence of an event outside of the control of the Company are presented in mezzanine equity on the condensed consolidated balance sheets.

Substantially all of the Company’s operating costs and expenses are “cost of revenue” items. Operating costs that could be classified as general and administrative by the Company include the Company’s corporate office costs at its Franklin, Tennessee office, which were $37 million and $43 million for the three months ended March 31, 2020 and 2019, respectively. Included in these corporate office costs is stock-based compensation of $2 million and $3 million for the three months ended March 31, 2020 and 2019, respectively.

Throughout these notes to the condensed consolidated financial statements, Community Health Systems, Inc., and its consolidated subsidiaries are referred to on a collective basis as the “Company.” This drafting style is not meant to indicate that the publicly traded Parent or any particular subsidiary of the Parent owns or operates any asset, business, or property. The hospitals, operations and businesses described in this filing are owned and operated by distinct and indirect subsidiaries of Community Health Systems, Inc.

~~Revenue Recognition.~~On January 1, 2018, the Company adopted the new revenue recognition accounting standard issued by the Financial Accounting Standards Board (“FASB”) and codified in the FASB Accounting Standards Codification (“ASC”) as topic 606 (“ASC 606”). The revenue recognition standard in ASC 606 outlines a single comprehensive model for recognizing revenue as performance obligations, defined in a contract with a customer as goods or services transferred to the customer in exchange for consideration, are satisfied. The standard also requires expanded disclosures regarding the Company’s revenue recognition policies and significant judgments employed in the determination of revenue.

The Company applied the modified retrospective approach to all contracts when adopting ASC 606. As a result, upon the Company’s adoption of ASC 606 the majority of what was previously classified as the provision for bad debts in the statement of operations is now reflected as implicit price concessions (as defined in ASC 606) and therefore is included as a reduction to net operating revenues. For changes in credit issues not assessed at the date of service, the Company prospectively recognizes those amounts in other operating expenses on the statement of operations. Other than these changes in presentation on the consolidated statement of operations, the adoption of ASC 606 did not have a material impact on the consolidated results of operations for the year ended December 31, 2018 or the six months ended June 30, 2019, and the Company does not expect it to have a material impact on its consolidated results of operations on a prospective basis.

As part of the adoption of ASC 606, the Company elected two of the available practical expedients provided for in the standard. First, the Company does not adjust the transaction price for any financing components as those were deemed to be insignificant. Additionally, the Company expenses all incremental customer contract acquisition costs as incurred because such costs are not material and would be amortized over a period less than one year.

COMMUNITY HEALTH SYSTEMS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(UNAUDITED) – (Continued)

Revenue Recognition.

Net Operating Revenues

Net operating revenues are recorded at the transaction price estimated by the Company to reflect the total consideration due from patients and third-party payors in exchange for providing goods and services in patient care. These services are considered to be a single performance obligation and have a duration of less than one year. Revenues are recorded as these goods and services are provided. The transaction price, which involves significant estimates, is determined based on the Company’s standard charges for the goods and services provided, with a reduction recorded for price concessions related to third party contractual arrangements as well as patient discounts and other patient price concessions. During ~~the year ended December 31, 2018 and~~both of the three month periods ended March 31, 2020 and ~~six months ended June 30,~~March 31, 2019, the impact of changes to the inputs used to determine the transaction price was considered ~~immaterial to the current period.~~immaterial.

Currently, several states utilize supplemental reimbursement programs for the purpose of providing reimbursement to providers that is not specifically tied to ~~offset~~an individual’s care, some of which offsets a portion of the cost of providing care to Medicaid and indigent patients. These programs are designed with input from the Centers for Medicare & Medicaid Services (“CMS”) and are funded with a combination of state and federal resources, including, in certain instances, fees or taxes levied on the providers. Under these supplemental programs, the Company recognizes revenue and related expenses in the period in which amounts are estimable and collection is reasonably assured. Reimbursement under these programs is reflected in net operating revenues and fees, taxes or other program-related costs are reflected in other operating expenses.

The Company’s net operating revenues during the three ~~and six~~ months ended ~~June 30,~~March 31, 2020 and 2019 ~~and 2018~~ have been presented in the following table based on an allocation of the estimated transaction price with the patient between the primary patient classification of insurance coverage (in millions):


	Three Months Ended				Six Months Ended				Three Months Ended
	June 30,				June 30,				March 31,
	2019		2018		2019		2018		2020		2019
Medicare	$	819	$	943	$	1,708	$	1,977	$	756	$	889
Medicaid		452		479		880		938		407		428
Managed Care and other third-party payors		1,993		2,110		4,019		4,227		1,832		2,025
Self-pay		38		30		72		109		30		34

Total	$	3,302	$	3,562	$	6,679	$	7,251	$	3,025	$	3,376

Patient Accounts Receivable

Patient accounts receivable are recorded at net realizable value based on certain assumptions determined by each payor. For third-party payors including Medicare, Medicaid, and Managed Care, the net realizable value is based on the estimated contractual reimbursement percentage, which is based on current contract prices or historical paid claims data by payor. Forself-pay accounts receivable, which includes patients who are uninsured and the patient responsibility portion for patients with insurance, the net realizable value is determined using estimates of historical collection experience without regard to aging category. These estimates are adjusted for estimated conversions of patient responsibility portions, expected recoveries and any anticipated changes in trends.

Patient accounts receivable can be impacted by the effectiveness of the Company’s collection efforts. Additionally, significant changes in payor mix, business office operations, economic conditions or trends in federal and state governmental healthcare coverage could affect the net realizable value of accounts receivable. The Company also continually reviews the net realizable value of accounts receivable by monitoring historical cash collections as a percentage of trailing net operating revenues, as well as by analyzing current period net revenue and admissions by payor classification, aged accounts receivable by payor, days revenue outstanding, the composition ofself-pay receivables between pureself-pay patients and the patient responsibility portion of third-party insured receivables and the impact of recent acquisitions and dispositions.

COMMUNITY HEALTH SYSTEMS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(UNAUDITED) – (Continued)

Final settlements for some payors and programs are subject to adjustment based on administrative review and audit by third parties. As a result of these final settlements, the Company has recorded amounts due to third-party payors of ~~$129~~$87 million and ~~$144~~$83 million as of ~~June 30, 2019~~March 31, 2020 and December 31, ~~2018,~~2019, respectively, and these amounts are included in accrued liabilities-other in the accompanying condensed consolidated balance sheets. Amounts due from third-party payors were ~~$136~~$131 million and ~~$155~~$137 million as of ~~June 30, 2019~~March 31, 2020 and December 31, ~~2018,~~2019, respectively, and are included in other current assets in the accompanying condensed consolidated balance sheets. Substantially all Medicare and Medicaid cost reports are final settled through ~~2015.~~

~~COMMUNITY HEALTH SYSTEMS, INC. AND SUBSIDIARIES~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~ ~~(UNAUDITED) – (Continued)~~

2016.

Charity Care

In the ordinary course of business, the Company renders services to patients who are financially unable to pay for hospital care. The Company’s policy is to not pursue collections for such amounts; therefore, the related charges for those patients who are financially unable to pay and that otherwise do not qualify for reimbursement from a governmental program are not reported in net operating revenues, and are thus classified as charity care. The Company determines amounts that qualify for charity care primarily based on the patient’s household income relative to the federal poverty level guidelines, as established by the federal government.

These charity care services are estimated to be ~~$142~~$166 million and ~~$115~~$141 million for the three months ended ~~June 30,~~March 31, 2020 and 2019, ~~and 2018, respectively, and $284 million and $229 million for the six months ended June 30, 2019 and 2018,~~ respectively, representing the value (at the Company’s standard charges) of these charity care services that are excluded from net operating revenues. The estimated cost incurred by the Company to provide these charity care services to patients who are unable to pay was approximately ~~$18~~$19 million and ~~$14~~$15 million during the three months ended ~~June 30,~~March 31, 2020 and 2019, ~~and 2018, respectively, and $33 million and $28 million during the six months ended June 30, 2019 and 2018,~~ respectively. The estimated cost of these charity care services was determined using a ratio of cost to gross charges and applying that ratio to the gross charges associated with providing care to charity patients for the period.

~~Leases.~~On January 1, 2019, the Company adopted the cumulative accounting standard updates initially issued by the FASB in February 2016 that amend the accounting for leases and are codified as ASC 842. These changes to the lease accounting model require operating leases be recorded on the balance sheet through recognition of a liability for the discounted present value of future fixed lease payments and a corresponding~~right-of-use~~ (“ROU”) asset. The Company’s accounting for finance leases remained substantially unchanged from its prior accounting for capital leases. The ROU asset recorded at commencement of the lease represents the right to use the underlying asset over the lease term in exchange for the lease payments. Leases with an initial term of 12 months or less that do not have an option to purchase the underlying asset that is deemed reasonably certain to be exercised are not recorded on the balance sheet; rather, rent expense for these leases is recognized on a straight-line basis over the lease term, or when incurred if a~~month-to-month~~ lease. When readily determinable, the Company uses the interest rate implicit in a lease to determine the present value of future lease payments. For leases where the implicit rate is not readily determinable, the Company’s incremental borrowing rate is utilized. The Company calculates its incremental borrowing rate on a quarterly basis using a third-party financial model that estimates the rate of interest the Company would have to pay to borrow an amount equal to the total lease payments on a collateralized basis over a term similar to the lease. Our lease agreements do not contain any material residual value guarantees or material restrictive covenants.

~~The Company elected the amended transition requirements allowed for by the FASB in Accounting Standards Update (“ASU”)2018-11,~~ which provide entities relief by allowing them not to recast prior comparative periods from the adoption of ASC 842. As a result, the prior year comparative financial statements have not been restated to reflect the adoption of ASC 842. Additionally, the Company elected the package of practical expedients available in ASC 842 upon adoption whereby an entity need not reassess expired contracts for lease identification or classification as a finance or operating lease, or for the reassessment of initial direct costs. The Company has not elected the practical expedient to use hindsight to determine the lease term for its leases at transition. Certain of the Company’s lease agreements have lease and~~non-lease~~ ~~components, which for the majority of leases the Company accounts for separately when the actual lease andnon-lease~~ ~~components are determinable. For equipment leases with immaterialnon-lease~~ ~~components incorporated into the fixed rent payment, the Company accounts for the lease andnon-lease~~ components as a single lease component in determining the lease payment. Additionally, for certain individually insignificant equipment leases such as copiers, the Company applies a portfolio approach to effectively record the operating lease liability and ROU asset.

The adoption of ASC 842 had a material impact on the Company’s condensed consolidated balance sheet through the recording of the operating lease liabilities and related ROU assets for leases in effect at January 1, 2019, but the adoption did not have a material impact on the Company’s condensed consolidated statement of loss or condensed consolidated statement of cash flows for the six months ended June 30, 2019. The Company recorded approximately $673 million of operating lease liabilities and ROU assets on January 1, 2019 upon adoption of ASC 842, with no impact on accumulated deficit.

~~COMMUNITY HEALTH SYSTEMS, INC. AND SUBSIDIARIES~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~ ~~(UNAUDITED) – (Continued)~~

Accounting for the Impairment or Disposal of Long-Lived Assets. During the ~~six~~three months ended ~~June 30, 2019,~~March 31, 2020, the Company recorded a total combined net impairment charge and ~~loss~~gain on disposal of approximately ~~$71~~$45 million. An impairment charge of approximately $64 million was recorded primarily to ~~reduce~~adjust the carrying value of ~~closed~~long-lived assets at several hospitals ~~and certain hospitals~~where the Company is in discussions with potential buyers for divestiture at a sales price that ~~have been deemed held for sale based on the difference between the carrying value of the hospital disposal groups compared to estimated~~indicates a fair value ~~less costs to sell.~~below carrying value. Included in the carrying value of the hospital disposal groups at ~~June 30, 2019~~March 31, 2020 is a net allocation of approximately ~~$68~~$6 million of goodwill allocated from the hospital operations reporting unit ~~goodwill~~ based on a calculation of the disposal groups’ relative fair value compared to the total reporting unit. The impairment charge was partially offset by a gain of approximately $19 million related to three hospitals sold on January 1, 2020. The Company will continue to evaluate the potential for further impairment of the long-lived assets of underperforming hospitals as well as evaluate offers for potential sales. Based on such analysis, additional impairment charges may be recorded in the future.

During the ~~six~~three months ended ~~June 30, 2018,~~March 31, 2019, the Company recorded a total combined impairment charge and loss on disposal of approximately ~~$202~~$38 million to reduce the carrying value of closed hospitals and certain hospitals that have been deemed held for sale based on the difference between the carrying value of the hospital disposal groups compared to the estimated fair value less costs to sell. Included in the carrying value of the hospital disposal groups at June 30, 2018 is a net allocation of approximately $77 million of goodwill allocated from the hospital operations reporting unit goodwill based on a calculation of the disposal groups’ relative fair value compared to the total reporting unit.

New Accounting Pronouncements. In ~~August 2018,~~March 2020, the FASB issued Accounting Standards Update (“ASU”) 2020-04, “Reference Rate Reform: Facilitation of the Effects of Reference Rate Reform on Financial Reporting.” This ASU~~2018-15~~ provides optional expedients and exceptions for applying GAAP to ~~provide guidance on the accounting for implementation costs incurred in a cloud computing arrangement~~contract modifications and hedging relationships, subject to meeting certain criteria that reference LIBOR or another rate that is ~~accounted for as a service contract. This~~expected to be discontinued. The amendments in the ASU ~~requires entities to account for such costs consistent with the guidance on capitalizing costs associated with developing or obtaininginternal-use~~ ~~software. The ASU is~~are effective for all entities ~~for fiscal years beginning after~~as of March 12, 2020 through December ~~15, 2019, and interim periods within those fiscal years, with early adoption permitted.~~31, 2022. The ~~Company is currently evaluating the impact that~~ adoption of this ~~ASU will~~guidance did not have a material impact on ~~its~~the Company’s condensed consolidated financial position ~~and~~or results of operations.

The Company has evaluated all other recently issued, but not yet effective, ASUs and does not expect the eventual adoption of these ASUs to have a material impact on its condensed consolidated financial position or results of operations.

2.	COMMUNITY HEALTH SYSTEMS, INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(UNAUDITED) – (Continued) 2. ACCOUNTING FOR STOCK-BASED COMPENSATION

Stock-based compensation awards have been granted under the Community Health Systems, Inc. Amended and Restated 2000 Stock Option and Award Plan, amended and restated as of March 20, 2013 (the “2000 Plan”), and the Community Health Systems, Inc. Amended and Restated 2009 Stock Option and Award Plan, which was amended and restated as of March 14, 2018 and approved by the Company’s stockholders at the annual meeting of stockholders held on May 15, 2018 (the “2009 Plan”). In addition, at the annual meeting of stockholders to be held on May 12, 2020 (the “2020 Annual Meeting”), the Company’s stockholders will be voting on whether or not to approve the further amendment and restatement of the 2009 Plan (the “Amended 2009 Plan”) which was approved by the Board of Directors on March 20, 2020.

The 2000 Plan allowed for the grant of incentive stock options intended to qualify under Section 422 of the Internal Revenue Code (the “IRC”), as well as stock options which did not so qualify, stock appreciation rights, restricted stock, restricted stock units, performance-based shares or units and other share awards. Prior to being amended in 2009, the 2000 Plan also allowed for the grant of phantom stock. Persons eligible to receive grants under the 2000 Plan included the Company’s directors, officers, employees and consultants. All options granted under the 2000 Plan were “nonqualified” stock options for tax purposes. Generally, vesting of these granted options occurred inone-third increments on each of the first three anniversaries of the award date. Options ~~granted prior to 2005 had a10-year~~ ~~contractual term, options granted in 2005 through 2007 had an eight-year contractual term and options~~ granted since 2008 had a10-year contractual term. Pursuant to the amendment and restatement of the 2000 Plan dated March 20, 2013, no further grants will be awarded under the 2000 Plan.

The 2009 Plan provides for the grant of incentive stock options intended to qualify under Section 422 of the IRC and for the grant of stock options which do not so qualify, stock appreciation rights, restricted stock, restricted stock units, performance-based shares or units and other share awards. Persons eligible to receive grants under the 2009 Plan include the Company’s directors, officers, employees and consultants. To date, all options granted under the 2009 Plan have been “nonqualified” stock options for tax purposes. Generally, vesting of these granted options occurs inone-third increments on each of the first three anniversaries of the award date. Options granted in 2011 or later have a10-year contractual term. As of ~~June 30, 2019, 4,970,500~~March 31, 2020, 1,318,802 shares of unissued common stock were reserved for future grants under the 2009 Plan. In addition, if the Amended 2009 Plan is approved by the Company’s stockholders at the 2020 Annual Meeting, 9,000,000 additional shares of unissued common stock will be reserved for future grants under the Amended 2009 Plan.

The exercise price of all options granted under the 2000 Plan and the 2009 Plan ~~has been~~is equal to the fair value of the Company’s common stock on the option grant date.

~~COMMUNITY HEALTH SYSTEMS, INC. AND SUBSIDIARIES~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~ ~~(UNAUDITED) – (Continued)~~

The following table reflects the impact of total compensation expense related to stock-based equity plans on the reported operating results for the respective periods (in millions):


	Three Months Ended				Six Months Ended				Three Months Ended
	June 30,				June 30,				March 31,
	2019		2018		2019		2018		2020		2019
Effect on loss before income taxes	$	(3)	$	(3)	$	(6)	$	(7)	$	(2)	$	(3)

Effect on net loss	$	(2)	$	(2)	$	(4)	$	(4)

Effect on net income (loss)									$	(1)	$	(2)

At ~~June 30, 2019, $19~~March 31, 2020, $25 million of unrecognized stock-based compensation expense related to outstanding unvested stock options, restricted stock and restricted stock units (the terms of which are summarized below) was expected to be recognized over a weighted-average period of 2629 months. Of that amount, $2$4 million related to outstanding unvested stock options was expected to be recognized over a weighted-average period of 3231 months and ~~$17~~$21 million related to outstanding unvested restricted stock and restricted stock units was expected to be recognized over a weighted-average period of 2528 months. There were no modifications to awards during the three ~~or six~~ months ended ~~June 30, 2019~~March 31, 2020 and ~~2018.~~2019.

COMMUNITY HEALTH SYSTEMS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(UNAUDITED) – (Continued)

The fair value of stock options was estimated using the Black Scholes option pricing model with the following assumptions and weighted-average fair values during the three ~~and six~~ months ended ~~June 30,~~March 31, 2020 and 2019:


	Three Months Ended		Six Months Ended		Three Months Ended March 31,
	June 30, 2019		June 30, 2019		2020			2019
Expected volatility		67.5 %		68.4 %		73.5	%		66.6	%
Expected dividends		-		-		-			-
Expected term		6 years		5.6 years		6 years			6 years
Risk-free interest rate		1.9 %		2.6 %		1.0	%		2.6	%

In determining the expected term, the Company examined concentrations of option holdings and historical patterns of option exercises and forfeitures, as well as forward-looking factors, in an effort to determine if there were any discernable employee populations. From this analysis, the Company identified two primary employee populations, one consisting of certain senior executives and the other consisting of substantially all other recipients.

The expected volatility rate was estimated based on historical volatility. In determining expected volatility, the Company also reviewed the market-based implied volatility of actively traded options of its common stock and determined that historical volatility utilized to estimate the expected volatility rate did not differ significantly from the implied volatility.

The expected term computation is based on historical exercise and cancellation patterns and forward-looking factors, where present, for each population identified. The risk-free interest rate is based on the U.S. Treasury yield curve in effect at the time of the grant. Thepre-vesting forfeiture rate is based on historical rates and forward-looking factors for each population identified. The Company adjusts the estimated forfeiture rate to its actual experience.

~~COMMUNITY HEALTH SYSTEMS, INC. AND SUBSIDIARIES~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~ ~~(UNAUDITED) – (Continued)~~

Options outstanding and exercisable under the 2000 Plan and the 2009 Plan as of ~~June 30, 2019,~~March 31, 2020, and changes during ~~each of~~ the three-month ~~periods~~period following December 31, ~~2018, were~~2019, was as follows (in millions, except share and per share data):


					Weighted-		Aggregate							Weighted-	Aggregate
					Average		Intrinsic							Average	Intrinsic
			Weighted-		Remaining		Value as of					Weighted-		Remaining	Value as of
			Average		Contractual		June 30,					Average		Contractual	March 31,
	Shares		Exercise Price		Term		2019		Shares			Exercise Price		Term	2020
Outstanding at December 31, 2018		624,938	$	31.21
Outstanding at December 31, 2019										1,110,134		$	16.90	5.6 years
Granted		646,500		4.99						946,500			4.93
Exercised		-		-						-			-
Forfeited and cancelled		(92,301)		25.57						(159,938	)		33.90

Outstanding at March 31, 2019		1,179,137		17.27
Granted		12,000		2.66
Exercised		-		-
Forfeited and cancelled		(30,834)		31.94
Outstanding at March 31, 2020										1,896,696		$	9.50	8.1 years	$	-

Outstanding at June 30, 2019		1,160,303	$	16.73		6.2 years	$	-
Exercisable at March 31, 2020										530,192		$	21.27	4.2 years	$	-

Exercisable at June 30, 2019		501,803	$	32.20		1.5 years	$	-

The weighted-average grant date fair value of stock options granted during the three ~~and six~~ months ended ~~June 30,~~March 31, 2020 and 2019 was ~~$1.63~~$3.17 and ~~$2.36,~~$3.08, respectively. ~~No stock options were granted during the three and six months ended June 30, 2018.~~ The aggregate intrinsic value (calculated as the number ofin-the-money stock options multiplied by the difference between the Company’s closing stock price on the last trading day of the reporting period ($~~2.67)~~3.34) and the exercise price of the respective stock options) in the table above represents the amount that would have been received by the option holders had all option holders exercised their options on ~~June 30, 2019.~~March 31, 2020. This amount changes based on the market value of the Company’s common stock. There were no options exercised during the three ~~or six~~ months ended ~~June 30, 2019~~March 31, 2020 and ~~2018.~~2019. The aggregate intrinsic value of options vested and expected to vest approximates that of the outstanding options.

COMMUNITY HEALTH SYSTEMS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(UNAUDITED) – (Continued)

The Company has also awarded restricted stock under the 2009 Plan to employees of certain subsidiaries. With respect to time-based vesting restricted stock that has been awarded under the 2009 Plan, the restrictions on these shares have generally lapsed inone-third increments on each of the first three anniversaries of the award date. In addition, certain of the restricted stock awards granted to the Company’s senior executives have contained performance objectives required to be met in addition to any time-based vesting requirements. If the applicable performance objectives are not attained, these awards will be forfeited in their entirety. For ~~such performance-based awards granted prior to March 1, 2017, performance objectives were measured over aone-year~~ ~~period, and, provided the target performance objective was attained, restrictions lapsed inone-third~~ ~~increments on each of the first three anniversaries of the award date. For~~ performance-based awards granted on or after March 1, 2017, the performance objectives have been measured cumulatively over a three-year period. With respect to performance-based awards granted on or after March 1, 2017, if the applicable target performance objective is met at the end of the three-year period, then the ~~portion of the~~ restricted stock award subject to such performance objective will vest in full on the third anniversary of the award date. Additionally, for these performance-based awards, based on the level of achievement for the applicable performance objective within the parameters specified in the award agreement, the number of shares to be issued in connection with the vesting of the award may be adjusted to decrease or increase the number of shares specified in the original award. Notwithstanding the above-mentioned performance objectives and vesting requirements, the restrictions with respect to restricted stock granted under the 2009 Plan may lapse earlier in the event of death, disability or termination of employment by the Company for any reason other than for cause of the holder of the restricted stock, or change in control of the Company. The entire restricted stock awards subject to performance objectives granted on March 1, 2017 were forfeited during the three months ended March 31, 2020 as a result of the minimum level of the applicable cumulative performance objectives for the 2017-2019 performance period not having been met. Restricted stock awards subject to performance objectives that have not yet been satisfied are not considered outstanding for purposes of determining earnings per share until the performance objectives have been satisfied.

~~COMMUNITY HEALTH SYSTEMS, INC. AND SUBSIDIARIES~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~ ~~(UNAUDITED) – (Continued)~~

Restricted stock outstanding under the 2009 Plan as of ~~June 30, 2019,~~March 31, 2020, and changes during ~~each of~~ the three-month ~~periods~~period following December 31, ~~2018, were~~2019, was as follows:


			Weighted-					Weighted-
			Average Grant					Average Grant
	Shares		Date Fair Value		Shares			Date Fair Value
Unvested at December 31, 2018		3,308,907	$	7.00
Unvested at December 31, 2019						3,857,402		$	5.47
Granted		1,958,000		4.97		2,197,500			4.90
Vested		(983,986)		9.17		(988,650	)		5.77
Forfeited		(57,335)		6.37		(328,500	)		9.19

Unvested at March 31, 2019		4,225,586		5.56
Granted		17,000		2.66
Vested		(62,665)		8.52
Forfeited		(19,334)		4.72
Unvested at March 31, 2020						4,737,752			4.89

Unvested at June 30, 2019		4,160,587		5.51

Restricted stock units (“RSUs”) have been granted to the Company’s outside directors under the ~~2000 Plan and the~~ 2009 Plan. ~~On March 1, 2018, each~~Each of the Company’s then serving outside directors received ~~a grant under the 2009 Plan of 37,118 RSUs. On March 1, 2019, each of the Company’s outside directors received a grant~~grants under the 2009 Plan of 34,068 ~~RSUs.~~RSUs and 34,483 RSUs on March 1, 2019 and 2020, respectively. Each of the ~~2018~~2019 and ~~2019~~2020 grants had a grant date fair value of approximately $170,000. Vesting of these RSUs occurs inone-third increments on each of the first three anniversaries of the award date or upon the director’s earlier cessation of service on the board, other than for cause. Beginning with the 2020 grant, the director may elect, prior to the beginning of the calendar year in which the award is granted, to defer the receipt of shares of the Company’s common stock issuable upon vesting until either his or her (i) separation from service with the Company or (ii) attainment of an age specified in advance by thenon-management director.

RSUs outstanding under the 2009 Plan as of ~~June 30, 2019,~~March 31, 2020, and changes during ~~each of~~ the three-month ~~periods~~period following December 31, ~~2018, were~~2019, was as follows:

      Weighted-
      Average Grant
               Shares                    Date Fair Value
Unvested at December 31, 2018
   397,906    $ 6.17
Granted
   306,612    4.99
Vested
   (162,942)    7.42
Forfeited
   -    -



Unvested at March 31, 2019
   541,576    5.13
Granted
   -    -
Vested
   -    -
Forfeited
   -    -



Unvested at June 30, 2019
   541,576    5.13

3.	~~COST OF REVENUE~~

Substantially all of the Company’s operating costs and expenses are “cost of revenue” items. Operating costs that could be classified as general and administrative by the Company would include the Company’s corporate office costs at its Franklin, Tennessee office, which were $43 million for both of the three-month periods ended June 30, 2019 and 2018, and $86 million and $95 million for the six months ended June 30, 2019 and 2018, respectively. Included in these corporate office costs is stock-based compensation of $3 million for both of the three-month periods ended June 30, 2019 and 2018, and $6 million and $7 million for the six months ended June 30, 2019 and 2018, respectively.

4.	~~USE OF ESTIMATES~~

The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the amounts reported in the condensed consolidated financial statements. Actual results could differ from these estimates under different assumptions or conditions.


				Weighted-
				Average Grant
	Shares			Date Fair Value
Unvested at December 31, 2019		541,576		$	5.13
Granted		310,347			4.93
Vested		(238,184	)		5.47
Forfeited		-			-

Unvested at March 31, 2020		613,739			4.89

COMMUNITY HEALTH SYSTEMS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(UNAUDITED) – (Continued)

5.	3. ACQUISITIONS AND DIVESTITURES

Acquisitions

The Company accounts for all transactions that represent business combinations using the acquisition method of accounting, where the identifiable assets acquired, the liabilities assumed and any noncontrolling interest in the acquired entity are recognized and measured at their fair values on the date the Company obtains control in the acquiree. Such fair values that are not finalized for reporting periods following the acquisition date are estimated and recorded as provisional amounts. Adjustments to these provisional amounts during the measurement period (defined as the date through which all information required to identify and measure the consideration transferred, the assets acquired, the liabilities assumed and any noncontrolling interests has been obtained, limited to one year from the acquisition date) are recorded when identified. Goodwill is determined as the excess of the fair value of the consideration conveyed in the acquisition over the fair value of the net assets acquired.

Acquisition and integration expenses related to prospective and closed acquisitions included in other operating expenses on the condensed consolidated statements of ~~loss~~income (loss) were ~~$2 million and~~ less than $1 million for the three months ended ~~June 30, 2019~~March 31, 2020 and ~~2018, respectively, and $3 million and~~were approximately $1 million for the ~~six~~three months ended ~~June 30, 2019 and 2018, respectively.~~March 31, 2019.

During the ~~six~~three months ended ~~June 30, 2019,~~March 31, 2020, one or more subsidiaries of the Company paid ~~approximately $7~~less than $1 million to acquire the operating assets and related businesses of certain physician practices, clinics and other ancillary businesses that operate within the communities served by the Company’s affiliated hospitals. ~~In connection with these acquisitions, during the six months ended June 30, 2019, the~~The Company allocated ~~approximately $4 million of~~ the ~~consideration paid~~purchase price to property and equipment, ~~and net~~ working capital and ~~the remainder, approximately $3 million consisting of intangible assets that do not qualify for separate recognition, to~~ goodwill.

Effective June 1, 2019, one or more subsidiaries of the Company completed the acquisition of Northwest Mississippi Medical Center in Clarksdale, Mississippi. This healthcare system includes 181 licensed beds and other outpatient and ancillary services. The total cash consideration paid for operating assets was approximately $2 million with additional consideration of $5 million in assumed liabilities, for a total consideration of $7 million. This hospital was acquired in conjunction with the bankruptcy proceedings for the previous owner that acquired the hospital from the Company in 2017 as part of an agreement with the local county government associated with its lease of the hospital building. Based on the current purchase price allocation relating to this acquisition, no goodwill has been recorded. Prior to the completion of the acquisition, the Company initiated a plan to sell this hospital and as such has classified this hospital as held for sale at June 30, 2019.

~~COMMUNITY HEALTH SYSTEMS, INC. AND SUBSIDIARIES~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~ ~~(UNAUDITED) – (Continued)~~

Divestitures

The following table provides a summary of hospitals that the Company divested during the ~~six~~three months ended ~~June 30, 2019~~March 31, 2020 and the year ended December 31, ~~2018:~~2019:


			Licensed
Hospital	Buyer	City, State	Beds			Effective Date

~~2019~~2020 Divestitures:

Southside Regional Medical Center	Bon Secours Mercy Health System	Petersburg, VA	300		January 1, 2020

Southampton Memorial Hospital	Bon Secours Mercy Health System	Franklin, VA	105		January 1, 2020

Southern Virginia Regional Medical Center	Bon Secours Mercy Health System	Emporia, VA	80		January 1, 2020

2019 Divestitures:

Bluefield Regional Medical Center	Princeton Community Hospital Association	Bluefield, WV	92		October 1, 2019

Lake Wales Medical Center	Adventist Health System	Lake Wales, FL	160		September 1, 2019

Heart of Florida Regional Medical Center	Adventist Health System	Davenport, FL	193		September 1, 2019

College Station Medical Center	St. Joseph Regional Health Center	College Station, TX	167		August 1, 2019

Tennova Healthcare - Lebanon	Vanderbilt University Medical Center	Lebanon, TN	245		August 1, 2019

Chester Regional Medical Center	Medical University Hospital Authority	Chester, SC		82			March 1, 2019

Carolinas Hospital System - Florence	Medical University Hospital Authority	Florence, SC		396			March 1, 2019

Springs Memorial Hospital	Medical University Hospital Authority	Lancaster, SC		225			March 1, 2019

Carolinas Hospital System - Marion	Medical University Hospital Authority	Mullins, SC		124			March 1, 2019

Memorial Hospital of Salem County	Community Healthcare Associates, LLC	Salem, NJ		126			January 31, 2019

Mary Black Health System - Spartanburg	Spartanburg Regional Healthcare System	Spartanburg, SC		207			~~January 1, 2019~~
~~Mary Black Health System - Gaffney~~	~~Spartanburg Regional Healthcare System~~	~~Gaffney, SC~~		~~125~~			January 1, 2019

~~2018 Divestitures:~~Mary Black Health System - Gaffney

~~Sparks~~Spartanburg Regional ~~Medical Center~~	~~Baptist Health~~	~~Fort Smith, AR~~		~~492~~			~~November 1, 2018~~
~~Sparks Medical Center - Van Buren~~	~~Baptist Health~~	~~Van Buren, AR~~		~~103~~			~~November 1, 2018~~
~~AllianceHealth Deaconess~~	~~INTEGRIS Health~~	~~Oklahoma City, OK~~		~~238~~			~~October 1, 2018~~
~~Munroe Regional Medical Center~~	~~Adventist Health~~Healthcare System	~~Ocala, FL~~Gaffney, SC		~~425~~125			~~August~~January 1, ~~2018~~
~~Tennova Healthcare - Dyersburg Regional~~	~~West Tennessee Healthcare~~	~~Dyersburg, TN~~		~~225~~			~~June 1, 2018~~
~~Tennova Healthcare - Regional Jackson~~	~~West Tennessee Healthcare~~	~~Jackson, TN~~		~~150~~			~~June 1, 2018~~
~~Tennova Healthcare - Volunteer Martin~~	~~West Tennessee Healthcare~~	~~Martin, TN~~		~~100~~			~~June 1, 2018~~
~~Williamson Memorial Hospital~~	~~Mingo Health Partners, LLC~~	~~Williamson, WV~~		76			~~June 1, 2018~~
~~Byrd Regional Hospital~~	~~Allegiance Health Management~~	~~Leesville, LA~~		60			~~June 1, 2018~~
~~Tennova Healthcare - Jamestown~~	~~Rennova Health, Inc.~~	~~Jamestown, TN~~		85			~~June 1, 2018~~
~~Bayfront Health Dade City~~	~~Adventist Health System~~	~~Dade City, FL~~		~~120~~			~~April 1, 2018~~2019

A discontinued operation in U.S. GAAP is a disposal that represents a strategic shift that has (or will have) a major effect on an entity’s operations and financial results. Additional disclosures are required for significant componentsOn January 30, 2020, one or more affiliates of the entity that are disposed of or are held for sale but do not qualify as discontinued operations. The divestitures above do not meet the criteria for reporting as discontinued operations and are included in continuing operationsCompany entered into definitive agreements for the ~~six months ended June 30, 2019~~sale of substantially all of the assets of each of Shands Live Oak Regional Medical Center (25 licensed beds) in Live Oak, Florida and ~~2018.~~Shands Starke Regional Medical Center (49 licensed beds) in Starke, Florida to affiliates of HCA Healthcare, Inc.

COMMUNITY HEALTH SYSTEMS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(UNAUDITED) – (Continued)

On March 18, 2020, one or more affiliates of the Company entered into a definitive agreement for the sale of substantially all of the assets of Northern Louisiana Medical Center (130 licensed beds) in Ruston, Louisiana to affiliates of Allegiance Health Management, Inc.

The following table discloses amounts included in the condensed consolidated balance ~~sheet~~sheets for the hospitals classified as held for sale as of ~~June 30, 2019~~March 31, 2020 and December 31, ~~2018~~2019 (in millions):. No divestitures or potential divestitures meet the criteria for reporting as a discontinued operation.


	June 30, 2019		December 31, 2018		March 31, 2020		December 31, 2019
Other current assets	$	23	$	21	$	20	$	25
Other assets, net		213		154		286		262
Accrued liabilities		28		44		25		43

Other Hospital Closures

During the three months ended December 31, 2018, the Company completed the planned closure of Tennova – Physicians Regional Medical Center in Knoxville, Tennessee and Tennova – Lakeway Regional Medical Center in Morristown, Tennessee. The Company recorded an impairment charge of ~~approximately $9~~$27 million during the ~~six~~three months ended ~~June 30,~~December 31, 2018, to adjust the fair value of the supplies, inventory and long-lived assets of these hospitals, including property and equipment and capitalized software costs, based on their estimated fair value and future utilization. During 2019, the Company recorded an impairment charge of approximately $9 million to further adjust the fair value of the supplies, inventory and long-lived assets of these hospitals, including property and equipment and capitalized software costs, based on the Company’s updated evaluation of their estimated fair value and future utilization and consideration of costs to dispose of such assets.

~~COMMUNITY HEALTH SYSTEMS, INC. AND SUBSIDIARIES~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~ ~~(UNAUDITED) – (Continued)~~

6.	~~INCOME TAXES~~

The total amount of unrecognized benefit that would affect the effective tax rate, if recognized, was approximately $1 million as of June 30, 2019. A total of approximately $1 million of interest and penalties is included in the amount of the liability for uncertain tax positions at June 30, 2019. It is the Company’s policy to recognize interest and penalties related to unrecognized benefits in its condensed consolidated statements of loss 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, the Company does not anticipate the change will have a material impact on the Company’s condensed consolidated results of operations or condensed consolidated financial position.

~~The Company’s federal income tax returns for the 2009 and 2010 tax years have been settled with the Internal Revenue Service. The results of these examinations~~ There were not material to the Company’s consolidated results of operations or consolidated financial position. The Company’s federal income tax returns for the 2014 and 2015 tax years remain under examination by the Internal Revenue Service. The Company believes the results of these examinations will not be material to its consolidated results of operations or consolidated financial position. The Company has extended the federal statute of limitations through December 31, 2020 for Community Health Systems, Inc. for the tax periods ended December 31, 2014 and 2015.

The Company’s effective tax rates were 2.0% and 29.5% for the three months ended June 30, 2019 and 2018, respectively, and (1.2)% and 31.5% for the six months ended June 30, 2019 and 2018, respectively. The difference in the Company’s effective tax rate for the three and six months ended June 30, 2019, when compared to the three and six months ended June 30, 2018, was primarily due to the increase in valuation allowance recognized on IRC Section 163(j) interest carryforwards and the~~write-off~~ of~~non-deductible~~ ~~goodwill.~~

~~Cash paid for income taxes, net of refunds received, resulted in a net refund of $3 million and $9 million~~no hospital closures during the three months ended ~~June 30, 2019 and 2018, respectively, and a net refund of $3 million and $9 million during the six months ended June 30, 2019 and 2018, respectively.~~March 31, 2020.

7.	4. GOODWILL AND OTHER INTANGIBLE ASSETS

Goodwill

The changes in the carrying amount of goodwill for the ~~six~~three months ended ~~June 30, 2019~~March 31, 2020 are as follows (in millions):


Balance, as of December 31, ~~2018~~2019
Goodwill	$	~~7,373~~7,142
Accumulated impairment losses		(2,814)

		~~4,559~~4,328


~~Goodwill acquired as part of acquisitions during current year~~		3
Goodwill allocated to hospitals held for sale		~~(68)~~ (6)


Balance, as of ~~June 30, 2019~~March 31, 2020
Goodwill		~~7,308~~7,136
Accumulated impairment losses		(2,814)

	$	~~4,494~~4,322

Goodwill is allocated to each identified reporting unit, which is defined as an operating segment or one level below the operating segment (referred to as a component of the entity). Management has determined that the Company’s operating ~~segments meet~~segment meets the criteria to be classified as a reporting ~~units.~~unit. At ~~June 30, 2019,~~March 31, 2020, after giving effect to 2020 divestiture activity, the Company had approximately ~~$4.5~~$4.3 billion of goodwill recorded.

COMMUNITY HEALTH SYSTEMS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(UNAUDITED) – (Continued)

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. ~~During 2017, the Company early adopted ASU2017-04,~~ ~~which allows a company to record a goodwill impairment when the reporting unit’s carrying value exceeds the fair value determined in step one.~~ The Company performed its last annual goodwill impairment evaluation during the fourth quarter of ~~2018~~2019 using ~~the October 31, 2018 measurement date, which evaluation indicated no impairment. The next annual goodwill evaluation will be performed during the fourth quarter of 2019 with~~ an October 31, 2019 measurement date, ~~or sooner if the Company identifies certain indicators of~~which indicated no impairment.

The Company estimates the fair value of the ~~related~~ reporting ~~units~~unit using both a discounted cash flow model as well as a market multiple model. The cash flow forecasts are adjusted by an appropriate discount rate based on the Company’s estimate of a market participant’s weighted-average cost of capital. These models are both based on the Company’s best estimate of future revenues and operating costs and are reconciled to the Company’s consolidated market capitalization, with consideration of the amount a potential acquirer would be required to pay, in the form of a control premium, in order to gain sufficient ownership to set policies, direct operations and control management decisions.

While no impairment was indicated in the Company’s ~~most recent~~ annual goodwill evaluation as of the October 31, ~~2018~~2019 measurement date, the reduction in the Company’s fair value and the resulting goodwill impairment charges recorded in 2016 and 2017 reduced the carrying value of the Company’s hospital operations reporting unit to an amount equal to its estimated fair ~~value.~~value as of such prior year measurement dates. This increases the risk that future declines in fair value could result in goodwill impairment. The determination of fair value in the Company’s goodwill impairment analysis is based on an estimate of fair value for each 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 the Company’s common stock orand fair value of long-term debt, estimates of future revenue and expense growth, estimated market multiples, expected capital expenditures, income tax rates, and costs of invested capital. A detailed evaluation of potential impairment indicators was performed as of March 31, 2020, which specifically considered the decline in the fair market value of the Company’s outstanding senior secured and unsecured notes and common stock during the first quarter as a result of theCOVID-19 pandemic. Volatility was observed in the prices of the Company’s outstanding debt securities and common stock and the decline in patient volumes following the emergence ofCOVID-19 was also considered. On the basis of available evidence as of March 31, 2020, no indicators of impairment were identified.

Future estimates of fair value could be adversely affected if the actual outcome of one or more of ~~these~~the assumptions described above changes materially in the future, including ~~further~~a decline in the Company’s stock price orand the fair value of its long-term debt, lower than expected hospital volumes, higher market interest rates or increased operating costs. Such changes impacting the calculation of fair value, the risks of which are amplified by theCOVID-19 pandemic, could result in a material impairment charge in the future.

The determination of fair value of the Company’s hospital operations reporting unit as part of its goodwill impairment measurement represents a Level 3 fair value measurement in the fair value hierarchy due to its use of internal projections and unobservable measurement inputs.

Intangible Assets

No intangible assets other than goodwill were acquired during the ~~six~~three months ended ~~June 30, 2019.~~March 31, 2020. The gross carrying amount of the Company’s other intangible assets subject to amortization was $1 million at both ~~June 30, 2019~~March 31, 2020 and December 31, ~~2018,~~2019, and the net carrying amount was less than $1 million at both ~~June 30, 2019~~March 31, 2020 and December 31, ~~2018.~~2019. The carrying amount of the Company’s other intangible assets not subject to amortization was ~~$64~~$60 million and ~~$67~~$63 million at ~~June 30, 2019~~March 31, 2020 and December 31, ~~2018,~~2019, respectively. Other intangible assets are included in other assets, net on the Company’s condensed consolidated balance sheets. Substantially all of the Company’s intangible assets are contract-based intangible assets related to operating licenses, management contracts, ~~tradenames,~~ ornon-compete agreements entered into in connection with prior acquisitions.

The weighted-average remaining amortization period for the intangible assets subject to amortization is approximately two years. There are no expected residual values related to these intangible assets. Amortization expense on these intangible assets was less than $1 million for both of the three-month periods ended June 30, 2019 and 2018, and less than $1 million and $1 million for the six months ended June 30, 2019 and 2018, respectively. Amortization expense on intangible assets is estimated to be less than $1 million for the remainder of 2019 and in 2020 through 2022.

The gross carrying amount of capitalized software for internal use was approximately ~~$1.2~~$1.1 billion at both ~~June 30, 2019~~March 31, 2020 and December 31, ~~2018,~~2019, and the net carrying amount was approximately ~~$355~~$301 million and $321 million at ~~both June 30, 2019~~March 31, 2020 and December 31, ~~2018.~~2019, respectively. The estimated amortization period for capitalizedinternal-use software is generally three years, except for capitalized costs related to significant system conversions, which is generally eight to ten years. There is no expected residual value for capitalizedinternal-use software. At ~~June 30, 2019,~~March 31, 2020, there was approximately ~~$53~~$39 million of capitalized costs forinternal-use software that is currently in the development stage and will begin amortization once the software project is complete and ready for its intended use. Amortization expense on capitalizedinternal-use software was ~~$31~~$32 million and ~~$34~~$30 million during the three months ended ~~June 30,~~March 31, 2020 and 2019, ~~and 2018, respectively, and $61 million and $70 million during the six months ended June 30, 2019 and 2018,~~ respectively. Amortization expense on capitalizedinternal-use software is estimated to be ~~$60~~$94 million for the remainder of ~~2019, $118 million in~~ 2020, ~~$81~~$108 million in 2021, ~~$46~~$52 million in 2022, ~~$27~~$24 million in 2023, ~~$15~~$12 million in 2024, $6 million in 2025 and $8$5 million thereafter.

COMMUNITY HEALTH SYSTEMS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS ~~(UNAUDITED) – (Continued)~~

8.	~~EARNINGS PER SHARE~~

~~The following table sets forth the components of the denominator for the computation of basic and diluted (loss) earnings per share attributable to Community Health Systems, Inc. common stockholders:~~

   Three Months Ended    Six Months Ended
   June 30,    June 30,
             2019                        2018                        2019                        2018
Weighted-average number of shares outstanding — basic
   113,862,097    112,837,944    113,561,523    112,566,230
Effect of dilutive securities:

Restricted stock awards
   -    -    -    -
Employee stock options
   -    -    -    -
Other equity-based awards
   -    -    -    -








Weighted-average number of shares outstanding — diluted
       113,862,097        112,837,944        113,561,523        112,566,230

~~The Company generated a loss attributable to Community Health Systems, Inc. common stockholders for the three andsix-month~~ periods ended June 30, 2019 and 2018, so the effect of dilutive securities is not considered because their effect would be antidilutive. If the Company had generated income, the effect of restricted stock awards on the diluted shares calculation would have been an increase of 30,472 shares and 47,754 shares during the three months ended June 30, 2019 and 2018, respectively, and 44,867 shares and 60,558 shares during the six months ended June 30, 2019 and 2018, respectively.

   Three Months Ended    Six Months Ended
   June 30,    June 30,
             2019                        2018                        2019                        2018
Dilutive securities outstanding not included in the computation of earnings per share because their effect is antidilutive:

Employee stock options and restricted stock awards
   4,020,947    1,792,512    3,908,725    1,856,431

9.	~~STOCKHOLDERS’ DEFICIT~~

Authorized capital shares of the Company include 400,000,000 shares of capital stock consisting of 300,000,000 shares of common stock and 100,000,000 shares of preferred stock. Each of the aforementioned classes of capital stock has a par value of $0.01 per share. Shares of preferred stock, none of which were outstanding as of June 30, 2019, may be issued in one or more series having such rights, preferences and other provisions as determined by the Board of Directors without approval by the holders of common stock.

The Company is a holding company which operates through its subsidiaries. The Company’s Credit Facility and the indentures governing each series of its outstanding notes contain various covenants under which the assets of the subsidiaries of the Company are subject to certain restrictions relating to, among other matters, dividends and distributions, as referenced in the paragraph below.

With the exception of a special cash dividend of $0.25 per share paid by the Company in December 2012, historically, the Company has not paid any cash dividends. Subject to certain exceptions, the Company’s Credit Facility limits the ability of the Company’s subsidiaries to pay dividends and make distributions to the Company, and limits the Company’s ability to pay dividends and/or repurchase stock, to an amount not to exceed $100 million in the aggregate. The indentures governing each series of our outstanding notes also restrict the Company’s subsidiaries from, among other matters, paying dividends and making distributions to the Company, which thereby limits the Company’s ability to pay dividends and/or repurchase stock. As of June 30, 2019, under the most restrictive test in these agreements (and subject to certain exceptions), the Company has approximately $100 million available with which to pay permitted dividends and/or repurchase shares of stock or make other restricted payments.

~~COMMUNITY HEALTH SYSTEMS, INC. AND SUBSIDIARIES~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~(UNAUDITED) – (Continued)

5. INCOME TAXES

The ~~following schedule presents~~total amount of unrecognized benefit that would affect the ~~reconciliation~~effective tax rate, if recognized, was approximately $1 million as of March 31, 2020. A total of approximately $1 million of interest and penalties is included in the amount of the ~~carrying~~liability for uncertain tax positions at March 31, 2020. It is the Company’s policy to recognize interest and penalties related to unrecognized benefits in its condensed consolidated statements of income (loss) as income tax expense.

It is possible the amount of ~~total equity, equity attributable~~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, the Company does not anticipate the change will have a material impact on the Company’s condensed consolidated results of operations or financial position.

The Company’s federal income tax returns for the 2009 and 2010 tax years have been settled with the Internal Revenue Service. The results of these examinations were not material to the Company’s consolidated results of operations or financial position. The Company’s federal income tax returns for the 2014 and 2015 tax years remain under examination by the Internal Revenue Service. The Company ~~and equity attributable~~believes the results of these examinations will not be material to its condensed consolidated results of operations or financial position. The Company has extended the ~~noncontrolling interests as~~federal statute of ~~June 30, 2019, and during each of the three-month periods following~~limitations through December 31, ~~2018 (in millions):~~

Community Health Systems, Inc. Stockholders
Redeemable
  Noncontrolling
Interest    Common
Stock Additional
Paid-In
Capital

Accumulated
Other
Comprehensive
Loss
Accumulated
Deficit Noncontrolling
Interest Total
  Stockholders’
Deficit
Balance, December 31, 2018
$ 504 $ 1 $ 2,017 $ (10) $ (3,543) $ 72 $ (1,463)
Comprehensive income (loss)
9 - - - (118) 8 (110)
Contributions from noncontrolling interests
1 - - - - - -
Distributions to noncontrolling interests
(19) - - - - (8) (8)
Purchase of subsidiary shares from noncontrolling interests
(1) - - - - - -
Other reclassifications of noncontrolling interests
(1) - - - - 1 1
Adjustment to redemption value of redeemable noncontrolling interests
12 - (12) - - - (12)
Cancellation of restricted stock for tax withholdings on vested shares
- - (1) - - - (1)
Share-based compensation
- - 3 - - - 3

Balance, March 31, 2019
505 1 2,007 (10) (3,661) 73 (1,590)
Comprehensive income (loss)
14 - - 2 (167) 8 (157)
Contributions from noncontrolling interests
1 - - - - - -
Distributions to noncontrolling interests
(22) - - - - (8) (8)
Purchase of subsidiary shares from noncontrolling interests
- - (1) - - - (1)
Other reclassifications of noncontrolling interests
(1) - (1) - - 1 -
Adjustment to redemption value of redeemable noncontrolling interests
6 - (6) - - - (6)
Share-based compensation
- - 3 - - - 3

Balance, June 30, 2019
$ 503 $ 1 $ 2,002 $ (8) $ (3,828) $ 74 $ (1,759)

~~COMMUNITY HEALTH SYSTEMS, INC. AND SUBSIDIARIES~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~ ~~(UNAUDITED) – (Continued)~~

The following schedule presents the reconciliation of the carrying amount of total equity, equity attributable to the Company, and equity attributable to the noncontrolling interests as of June 30, 2018, and during each of the three-month periods following December 31, 2017 (in millions):

Community Health Systems, Inc. Stockholders
Redeemable
  Noncontrolling
Interest    Common
Stock Additional
Paid-In
Capital

Accumulated
Other
Comprehensive
Loss
Accumulated
Deficit Noncontrolling
Interest Total
  Stockholders’
Deficit
Balance, December 31, 2017
$ 527 $ 1 $ 2,014 $ (21) $ (2,761) $ 75 $ (692)
Comprehensive income (loss)
13 - - 17 (25) 6 (2)
Adoption of new accounting standards
- - - (12) 12 - -
Distributions to noncontrolling interests
(17) - - - - (6) (6)
Purchase of subsidiary shares from noncontrolling interests
(1) - (2) - - - (2)
Other reclassifications of noncontrolling interests
1 - - - - (1) (1)
Cancellation of restricted stock for tax withholdings on vested shares
- - (2) - - - (2)
Share-based compensation
- - 4 - - - 4

Balance, March 31, 2018
523 1 2,014 (16) (2,774) 74 (701)
Comprehensive income (loss)
8 - - 7 (110) 10 (93)
Contributions from noncontrolling interests
- - - - - 1 1
Distributions to noncontrolling interests
(20) - - - - (9) (9)
Purchase of subsidiary shares from noncontrolling interests
(1) - (1) - - (1) (2)
Other reclassifications of noncontrolling interests
(1) - - - - 1 1
Adjustment to redemption value of redeemable noncontrolling interests
5 - (5) - - - (5)
Cancellation of restricted stock for tax withholdings on vested shares
- - 2 - - - 2
Share-based compensation
- - 3 - - - 3

Balance, June 30, 2018
$ 514 $ 1 $ 2,013 $ (9) $ (2,884) $ 76 $ (803)

~~COMMUNITY HEALTH SYSTEMS, INC. AND SUBSIDIARIES~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~ ~~(UNAUDITED) – (Continued)~~

~~The following schedule discloses the effects of changes in the Company’s ownership interest in its less-than-wholly-owned subsidiaries on~~2020 for Community Health Systems, Inc. ~~stockholders’ deficit (in millions):~~for the tax periods ended December 31, 2014 and 2015. The Company’s federal income tax return for the 2018 tax year is under examination by the Internal Revenue Service.

The Company’s effective tax rates were 122.8% and (7.4)% for the three months ended March 31, 2020 and 2019, respectively. The difference in the Company’s effective tax rate for the three months ended March 31, 2020, when compared to the three months ended March 31, 2019, was primarily due to discrete tax benefits of approximately $240 million related to the release of federal and state valuation allowances on IRC Section 163(j) interest carryforwards as a result of an increase to the deductible interest expense allowed for 2019 and 2020 under the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”) that was enacted during the three months ended March 31, 2020.

   Three Months Ended    Six Months Ended
   June 30,    June 30,
             2019                        2018                        2019                        2018
Net loss attributable to Community Health Systems, Inc. stockholders
   $ (167)    $ (110)    $ (285)    $ (135)
Transfers to the noncontrolling interests:

Net decrease in Community Health Systems, Inc.paid-in-capital for purchase of subsidiary partnership interests
   (1)    (1)    (1)    (3)








Net transfers to the noncontrolling interests
   (1)    (1)    (1)    (3)








Change to Community Health Systems, Inc. stockholders’ deficit from net loss attributable to Community Health Systems, Inc. stockholders and transfers to noncontrolling interests
   $ (168)    $ (111)    $ (286)    $ (138)

Cash paid for income taxes, net of refunds received, resulted in a net refund of approximately $2 million and less than $1 million during the three months ended March 31, 2020 and 2019, respectively.

~~10.~~

6. LONG-TERM DEBT

Long-term debt, net of unamortized debt issuance costs and discounts or premiums, consists of the following (in millions):


	June 30,			December 31,		March 31,			December 31,
	2019			2018		2020			2019
Credit Facility:
Term H Loan	$	-		$	1,622
Revolving Credit Facility		-	��		-
8% Senior Notes due 2019		155			155
7¹⁄₈% Senior Notes due 2020		121			121
5¹⁄₈% Senior Secured Notes due 2021		1,000			1,000	$	-		$	1,000
6⁷⁄₈% Senior Notes due 2022		2,632			2,632		231			231
6¹⁄₄% Senior Secured Notes due 2023		3,100			3,100		2,675			3,100
8⁵⁄₈% Senior Secured Notes due 2024		1,033			1,033		1,033			1,033
6⁵⁄₈% Senior Secured Notes due 2025							1,462			-
8% Senior Secured Notes due 2026		1,601			-		2,101			2,101
Junior-Priority Secured Notes due 2023		1,770			1,770
Junior-Priority Secured Notes due 2024		1,355			1,355
8% Senior Secured Notes due 2027							700			700
6⁷⁄₈% Senior Notes due 2028							1,700			1,700
9⁷⁄₈% Junior-Priority Secured Notes due 2023							1,770			1,770
8¹⁄₈% Junior-Priority Secured Notes due 2024							1,355			1,355
ABL Facility		723			698		380			273
Finance lease and financing obligations		225			231		290			272
Other		45			43		25			17
Less: Unamortized deferred debt issuance costs and note premium		(161)			(164)		(167	)		(147	)

Total debt		13,599			13,596		13,555			13,405
Less: Current maturities		(206)			(204)		(30	)		(20	)

Total long-term debt	$	13,393		$	13,392	$	13,525		$	13,385

COMMUNITY HEALTH SYSTEMS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(UNAUDITED) – (Continued)

~~Credit Facility~~

~~The Company’s wholly-owned subsidiary,~~On February 6, 2020, CHS/Community Health Systems, Inc. (“CHS”)~~, has senior secured financing under~~ completed a ~~credit facility with a syndicate~~private offering of financial institutions led by Credit Suisse, as administrative agent and collateral agent (the “Credit Facility”), which at December 31, 2018 included (i) a revolving credit facility with commitments through January 27, 2021 of $425 million (the “Revolving Facility”), and (ii) a Term H facility due 2021 (the “Term H Facility). The Revolving Facility includes a subfacility for letters of credit.

~~The loans under the Credit Facility bore interest on the outstanding unpaid~~$1.462 billion aggregate principal amount ~~at a rate equal to an applicable percentage plus, at CHS’ option, either (a) an Alternate Base Rate (as defined) determined by reference to the greater~~ of (1) the Prime Rate (as defined) announced by Credit Suisse or (2) the NYFRB Rate (as defined) plus 0.50% or (3) the adjusted London Interbank Offered Rate (“LIBOR”) on such day for a three-month interest period commencing on the second business day after such day plus 1% or (b) LIBOR. In addition, the margin in respect of the Revolving Facility is subject to adjustment determined by reference to a leverage-based pricing grid. Based on the Company’s current leverage, loans in respect of the Revolving Facility currently accrue interest at a rate per annum equal to LIBOR plus 2.75%, in the case of LIBOR borrowings, and Alternate Base Rate plus 1.75%, in the case of Alternate Base Rate borrowings. Prior to the refinancing discussed below, the Term H Loan accrued interest at a rate per annum equal to LIBOR plus 3.25%, in the case of LIBOR borrowings, and Alternate Base Rate plus 2.25%, in the case of Alternate Base Rate borrowings. The Term H Loan was subject to a 1.00% LIBOR floor and a 2.00% Alternate Base Rate floor.

The term loan facility was required to be prepaid in an amount equal to (1) 100% of the net cash proceeds of certain asset sales and dispositions by the Company and its subsidiaries, subject to certain exceptions and reinvestment rights (as further described below), (2) 100% of the net cash proceeds of issuances of certain debt obligations or receivables-based financing by the Company and its subsidiaries, subject to certain exceptions, and (3) 75%, subject to reduction to a lower percentage based on the Company’s first lien net leverage ratio (as defined in the Credit Facility generally as the ratio of first lien net debt on the date of determination to the Company’s consolidated EBITDA, as defined, for the four quarters most recently ended prior to such date), of excess cash flow (as defined) for any year, subject to certain exceptions. Voluntary prepayments and commitment reductions were permitted in whole or in part, without any premium or penalty, subject to minimum prepayment or reduction requirements. There were no scheduled principal amortization payments on the Term H Facility after December 31, 2018.

The borrower under the Credit Facility is CHS. All of the obligations under the Credit Facility are unconditionally guaranteed by the Company and certain of its existing and subsequently acquired or organized domestic subsidiaries. All obligations under the Credit Facility and the related guarantees are secured by a perfected first priority lien or security interest in substantially all of the assets of the Company, CHS and each subsidiary guarantor, including equity interests held by the Company, CHS or any subsidiary guarantor, but excluding, among others, the equity interests of~~non-significant~~ subsidiaries, syndication subsidiaries, securitization subsidiaries and joint venture subsidiaries, and subject to the ABL Facility. Such assets constitute substantially the same assets, subject to certain exceptions, that secure (i) on a first lien basis CHS’ obligations under the 5¹⁄₈~~% Senior Secured Notes, the~~ 6¹⁄₄~~% Senior Secured Notes, the 8~~⁵⁄₈% Senior Secured Notes and the 8% Senior Secured Notes (in each case, as defined below) and (ii) on a junior-priority basis the 2023 Junior-Priority Notes and the 2024 Junior-Priority Notes (in each case, as defined below).

CHS has agreed to pay letter of credit fees equal to the applicable percentage then in effect with respect to LIBOR borrowings under the Revolving Facility times the maximum aggregate amount available to be drawn under all letters of credit outstanding under the subfacility for letters of credit. The issuer of any letter of credit issued under the subfacility for letters of credit will also receive a customary fronting fee and other customary processing charges. CHS is obligated to pay commitment fees of 0.50% per annum (subject to adjustment based upon the Company’s leverage ratio) on the unused portion of the Revolving Facility.

~~COMMUNITY HEALTH SYSTEMS, INC. AND SUBSIDIARIES~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~ ~~(UNAUDITED) – (Continued)~~

The Credit Facility contains customary representations and warranties, subject to limitations and exceptions, and customary covenants restricting the Company’s and its subsidiaries’ ability, subject to certain exceptions, to, among other things (1) declare dividends, make distributions or redeem or repurchase capital stock, (2) prepay, redeem or repurchase other debt, (3) incur liens or grant negative pledges, (4) make loans and investments and enter into acquisitions and joint ventures, (5) incur additional indebtedness or provide certain guarantees, (6) make capital expenditures, (7) engage in mergers, acquisitions and asset sales, (8) conduct transactions with affiliates, (9) alter the nature of the Company’s businesses, (10) grant certain guarantees with respect to physician practices, (11) engage in sale and leaseback transactions or (12) change the Company’s fiscal year. The Company is also required to comply with specified financial covenants (consisting of a first lien net debt to consolidated EBITDA leverage ratio) and various affirmative covenants. Under the Credit Facility, the first lien net debt to consolidated EBITDA ratio is calculated as the ratio of total first lien debt, less unrestricted cash and cash equivalents, to consolidated EBITDA, as defined in the Credit Facility. The calculation of consolidated EBITDA as defined in the Credit Facility is a trailing~~12-month~~ calculation that begins with net income attributable to the Company, with certain pro forma adjustments to consider the impact of material acquisitions or divestitures, and adjustments for interest, taxes, depreciation and amortization, net income attributable to noncontrolling interests, stock compensation expense, restructuring costs, and the financial impact of other~~non-cash~~ or~~non-recurring~~ ~~items recorded during any such12-month~~ ~~period. For the12-month~~ period ended June 30, 2019, the first lien net debt to consolidated EBITDA ratio financial covenant under the Credit Facility limited the ratio of first lien net debt to consolidated EBITDA, as defined, to less than or equal to 5.25 to 1.0. The Company was in compliance with all such covenants at June 30, 2019, with a first lien net debt to consolidated EBITDA ratio of approximately 4.96 to 1.0.

~~Events of default under the Credit Facility include, but are not limited to, (1) CHS’ failure to pay principal, interest, fees or other amounts under the credit agreement when~~ due (taking into account any applicable grace period), (2) any representation or warranty proving to have been materially incorrect when made, (3) covenant defaults subject, with respect to certain covenants, to an available cure, (4) bankruptcy and insolvency events, (5) a cross default to certain other debt, (6) certain undischarged judgments (not paid within an applicable grace period), (7) a change of control (as defined), (8) certain ERISA-related defaults and (9) the invalidity or impairment of specified security interests, guarantees or subordination provisions in favor of the administrative agent or lenders under the Credit Facility.

As of June 30, 2019, the availability for additional borrowings under the Credit Facility, subject to certain limitations as set forth in the Credit Facility, was approximately $385 million pursuant to the Revolving Facility, of which no borrowings were outstanding. As of June 30, 2019, the Company had letters of credit issued, primarily in support of potential insurance-related claims and certain bonds, of approximately $148 million. CHS has the ability to amend the Credit Facility to provide for one or more tranches of term loans or increases in the Revolving Facility in an aggregate principal amount of up to $500 million. As of June 30, 2019, the weighted-average interest rate under the Credit Facility, excluding swaps, was 6.4%.

On February 15, ~~2019, the Company and CHS entered into Amendment No. 1~~2025 (the “Agreement”), among the Company, CHS, the subsidiary guarantors party thereto, the lenders party thereto and Credit Suisse AG, Cayman Islands Branch, as administrative agent and collateral agent, to the Credit Facility. The Credit Facility was amended by the Agreement, with requisite covenant lender approval, to amend the first lien net debt to EBITDA ratio financial covenant and to reduce the extended revolving credit commitments to $385 million. The amended financial covenant provides for a maximum first lien net debt to EBITDA ratio of 5.00 to 1.0 from July 1, 2018 through December 31, 2018, 5.25 to 1.0 from January 1, 2019 through December 31, 2019, 5.00 to 1.00 from January 1, 2020 through June 30, 2020, 4.50 to 1.00 from July 1, 2020 through September 30, 2020, and 4.25 to 1.0 thereafter. In addition, CHS agreed pursuant to the Agreement to further restrict its ability to make restricted payments. The revolving credit commitments will terminate on January 27, 2021. The amended Credit Facility includes a~~91-day~~ ~~springing maturity date applicable if more than $250 million in the aggregate principal amount of our 8% Senior Notes, 7~~“6¹⁵/⁄₈% ~~Senior Notes, Term H Facility or refinancings thereof are scheduled to mature or similarly become due within 91 days of such date.~~

~~On March 6, 2019, CHS completed a private offering of $1.601 billion aggregate principal amount of 8%~~ Senior Secured Notes due ~~March 15, 2026 (the “8% Senior Secured Notes”~~2025”). ~~The terms~~CHS used the net proceeds of the 8% Senior Secured Notes are discussed below. Using the proceeds from the offering, the Company repaid the outstanding balance owed under the Term H Loan and paid fees and expenses related to the offering.

~~COMMUNITY HEALTH SYSTEMS, INC. AND SUBSIDIARIES~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~ ~~(UNAUDITED) – (Continued)~~

~~8% Senior Notes due 2019~~

~~On November 22, 2011, CHS completed a private~~ offering of $1.0 billion aggregate principal amount of 8% Senior Notes due November 15, 2019 (the “8% Senior Notes”). The net proceeds from this issuance, together with available cash on hand, were used to finance the ~~purchase of up to $1.0 billion aggregate principal amount of CHS’ then outstanding 8~~6⁷⁵⁄₈% Senior Notes due 2015 and related fees and expenses. On March 21, 2012, CHS completed an offering of an additional $1.0 billion aggregate principal amount of 8% Senior Notes, which were issued in a private placement (at a premium of 102.5%). The net proceeds from this issuance were used to finance the purchase of approximately $850 million aggregate principal amount of CHS’ then outstanding 8⁷⁄₈% Senior Notes due 2015, to pay related fees and expenses and for general corporate purposes. The 8% Senior Notes bear interest at 8% per annum, payable semiannually in arrears on May 15 and November 15. Interest on the 8% Senior Notes accrues from the date of original issuance. Interest is calculated on the basis of a~~360-day~~ ~~year comprised of twelve30-day~~ ~~months.~~

CHS is entitled, at its option, to redeem all or a portion of the 8% Senior Notes upon not less than 30 nor more than 60 days’ notice, at par, plus accrued and unpaid interest, if any, to the redemption date (subject to the right of holders of record on the relevant record date to receive interest due on the relevant interest payment date).

Pursuant to a registration rights agreement entered into at the time of the issuance of the 8% Senior Notes, as a result of an exchange offer made by CHS, substantially all of the 8% Senior Notes issued in November 2011 and March 2012 were exchanged in May 2012 for new notes (the “8% Exchange Notes”) having terms substantially identical in all material respects to the 8% Senior Notes (except that the 8% Exchange Notes were issued under a registration statement pursuant to the Securities Act of 1933, as amended (the “1933 Act”)). References to the 8% Senior Notes shall also be deemed to include the 8% Exchange Notes unless the context provides otherwise.

~~On June 22, 2018, CHS issued approximately $1.770 billion aggregate principal amount of new Junior-Priority~~ Secured Notes due ~~June 30, 2023 (the “2023 Junior-Priority Notes”) in exchange for the same amount~~2025 to (i) purchase any and all of ~~8% Senior Notes. The terms of the 2023 Junior-Priority Notes are described below. Following this exchange, CHS had $155 million aggregate principal amount of 8% Senior Notes outstanding.~~

7¹⁄₈~~% Senior Notes due 2020~~

~~On July 18, 2012, CHS completed a public offering of 7~~¹⁄₈~~% Senior Notes due July 15, 2020 (the “7~~¹⁄₈~~% Senior Notes”). The net proceeds from this issuance were used to finance the purchase or redemption of $934 million aggregate principal amount of CHS’ then outstanding 8~~⁷⁄₈~~% Senior Notes due 2015, to pay for consents delivered in connection with a related tender offer, to pay related fees and expenses, and for general corporate purposes. The 7~~¹⁄₈~~% Senior Notes bear interest at 7.125% per annum, payable semiannually in arrears on July 15 and January 15. Interest on the 7~~¹⁄₈~~% Senior Notes accrues from the date of original issuance. Interest is calculated on the basis of a360-day~~ ~~year comprised of twelve30-day~~ ~~months.~~

~~CHS is entitled, at~~ its ~~option, to redeem all or a portion of the 7~~¹⁄₈% Senior Notes upon not less than 30 nor more than 60 days’ notice at par, plus accrued and unpaid interest, if any, to the redemption date (subject to the right of holders of record on the relevant record date to receive interest due on the relevant interest payment date).

On June 22, 2018, CHS issued approximately $1.079 billion aggregate principal amount of new Junior-Priority Secured Notes due June 30, 2024 (the “2024 Junior-Priority Notes”) in exchange for the same amount of 7¹⁄₈~~% Senior Notes. The terms of the 2024 Junior-Priority Notes are described below. Following this exchange, CHS had $121 million aggregate principal amount of 7~~¹⁄₈~~% Senior Notes outstanding.~~

~~COMMUNITY HEALTH SYSTEMS, INC. AND SUBSIDIARIES~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~ ~~(UNAUDITED) – (Continued)~~

5¹⁄₈% Senior Secured Notes due 2021

~~On January 27, 2014, CHS completed a private offering of $1.0 billion aggregate principal amount of 5~~¹⁄₈~~% Senior Secured Notes due August 1, 2021 (the “5~~¹⁄₈~~% Senior Secured Notes”). The net proceeds from this issuance were used to finance the Company’s acquisition by merger of Health Management Associates (“HMA”). The 5~~¹⁄₈~~% Senior Secured Notes bear interest at 5.125% per annum, payable semiannually in arrears on February 1~~ validly tendered and ~~August 1. Interest on the 5~~¹⁄₈~~% Senior Secured Notes accrues from the date of original issuance. Interest is calculated on the basis of a360-day~~ ~~year comprised of twelve30-day~~ ~~months.~~

~~The 5~~¹⁄₈~~% Senior Secured Notes and the related guarantees are secured by (i) first-priority liens on the collateral (the“Non-ABL~~ ~~Priority Collateral”) that also secures on a first-priority basis the Credit Facility (subject to certain exceptions), the 6~~¹⁄₄~~% Senior Secured Notes, the 8~~⁵⁄₈~~% Senior Secured Notes and the 8% Senior Secured Notes and (ii) second-priority liens on the collateral (the“ABL-Priority~~ ~~Collateral”) that secures on a first-priority basis the ABL Facility (and also secures on a second-priority basis the Credit Facility and the 6~~¹⁄₄~~% Senior Secured Notes, the 8~~⁵⁄₈~~% Senior Secured Notes and the 8% Senior Secured Notes), in each case subject to permitted liens described~~not validly withdrawn in the ~~indenture governing the 5~~¹⁄₈~~% Senior Secured Notes.~~

~~CHS is entitled, at its option, to~~cash tender offer announced on January 23, 2020, (ii) redeem ~~all or a portion of the 5~~¹⁄₈% Senior Secured Notes upon not less than 30 nor more than 60 days’ notice, at the following redemption prices (expressed as a percentage of principal amount on the redemption date), plus accrued and unpaid interest, if any, to the redemption date (subject to the right of holders of record on the relevant record date to receive interest due on the relevant interest payment date), if redeemed during the periods set forth below:


~~Period~~		~~Redemption Price~~
~~February 1, 2019 to January 31, 2020~~		~~101.281 %~~
~~February 1, 2020 to January 31, 2021~~		~~100.000 %~~

~~Pursuant to a registration rights agreement entered into at the time of the issuance of the 5~~¹⁄₈~~% Senior Secured Notes, as a result of an exchange offer made by CHS,~~ all of the 5¹⁄₈% Senior Secured Notes ~~issued in January 2014~~due 2021 that were ~~exchanged in October 2014 for new notes (the “2021 Exchange Notes”) having terms substantially identical in all material respects to the 5~~¹⁄₈~~% Senior Secured Notes (except that the exchange notes were issued under a registration statement~~not purchased pursuant to ~~the 1933 Act). References to the 5~~¹⁄₈~~% Senior Secured Notes shall be deemed to be the 2021 Exchange Notes unless the context provides otherwise.~~

~~COMMUNITY HEALTH SYSTEMS, INC. AND SUBSIDIARIES~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~ ~~(UNAUDITED) – (Continued)~~

6⁷⁄₈~~% Senior Notes due 2022~~

~~On January 27, 2014, CHS completed a private offering of $3.0 billion aggregate principal amount of 6~~⁷⁄₈~~% Senior Notes due February 1, 2022 (the “6~~⁷⁄₈~~% Senior Notes”). The net proceeds from this issuance were used to finance the HMA merger. The 6~~⁷⁄₈~~% Senior Notes bear interest at 6.875% per annum, payable semiannually~~such tender offer, (iii) purchase in ~~arrears on February 1 and August 1. Interest on the 6~~⁷⁄₈~~% Senior Notes accrues from the date of original issuance. Interest is calculated on the basis of a360-day~~ ~~year comprised of twelve30-day~~ ~~months.~~

~~CHS is entitled, at its option, to redeem all~~one or ~~a portion of the 6~~⁷⁄₈~~% Senior Notes upon not less than 30 nor~~ more than 60 days’ notice, at the following redemption prices (expressed as a percentage of principal amount on the redemption date), plus accrued and unpaid interest, if any, to the redemption date (subject to the right of holders of record on the relevant record date to receive interest due on the relevant interest payment date), if redeemed during the periods set forth below:


~~Period~~		~~Redemption Price~~
~~February 1, 2019 to January 31, 2020~~		~~101.719 %~~
~~February 1, 2020 to January 31, 2022~~		~~100.000 %~~

~~Pursuant to a registration rights agreement entered into at the time of the issuance of the 6~~⁷⁄₈~~% Senior Notes, as a result of an exchange offer made by CHS, all of the 6~~⁷⁄₈~~% Senior Notes issued in January 2014 were exchanged in October 2014 for new notes (the “6~~⁷⁄₈~~% Exchange Notes”) having terms substantially identical in all material respects to the 6~~⁷⁄₈~~% Senior Notes (except that the exchange notes were issued under a registration statement pursuant to the 1933 Act). References to the 6~~⁷⁄₈~~% Senior Notes shall be deemed to be the 6~~⁷⁄₈~~% Exchange Notes unless the context provides otherwise.~~

~~On June 22, 2018, CHS issued~~privately negotiated transactions approximately ~~$276~~$426 million aggregate principal amount of ~~the 2024 Junior-Priority Notes in exchange for approximately $368 million of 6~~⁷⁄₈~~% Senior Notes. Following this exchange, CHS had $2.632 billion aggregate principal amount of 6~~⁷⁄₈~~% Senior Notes outstanding.~~

its 6¹⁄₄% Senior Secured Notes due 2023

~~On March 16, 2017, CHS completed a public offering of $2.2 billion aggregate principal amount of 6~~¹⁄₄~~% Senior Secured Notes due March 31, 2023 (the “6~~¹⁄₄% Senior Secured Notes”). The net proceeds from this issuance were used to finance the purchase or redemption of $700 million aggregate principal amount of CHS’ then outstanding 2018 Senior Secured Notes and (iv) pay related fees and ~~expenses, and the repayment of $1.445 billion of the Term F Facility. On May 12, 2017, CHS completed atack-on~~ ~~offering of $900 million aggregate principal amount of 6~~¹⁄₄~~% Senior Secured Notes, increasing the total aggregate principal amount of 6~~¹⁄₄% Senior Secured Notes to $3.1 billion. A portion of the net proceeds from this issuance were used to finance the repayment of approximately $713 million aggregate principal amount of CHS’ then outstanding Term A Facility and related fees and expenses. ~~Thetack-on~~ ~~notes have identical terms, other than issue date and issue price as the 6~~¹⁄₄~~% Senior Secured Notes issued on March 16, 2017. The 6~~¹⁄₄~~% Senior Secured Notes bear interest at 6.250% per annum, payable semiannually in arrears on March 31 and September 30. Interest on the 6~~¹⁄₄~~% Senior Secured Notes accrues from the date of original issuance. Interest is calculated on the basis of a360-day~~ ~~year comprised of twelve30-day~~ ~~months.~~

The 6¹⁄₄~~% Senior Secured Notes and the related guarantees are secured by (i) first-priority liens on theNon-ABL~~ ~~Priority Collateral that also secures on a first-priority basis the Credit Facility (subject to certain exceptions), the 5~~¹⁄₈~~% Senior Secured Notes, the 8~~⁵⁄₈~~% Senior Secured Notes and the 8% Senior Secured Notes and (ii) second-priority liens on theABL-Priority~~ ~~Collateral that secures on a first-priority basis the ABL Facility (and also secures on a second-priority basis the Credit Facility and the 5~~¹⁄₈~~% Senior Secured Notes, the 8~~⁵⁄₈~~% Senior Secured Notes and the 8% Senior Secured Notes), in each case subject to permitted liens described in the indenture governing the 6~~¹⁄₄~~% Senior Secured Notes.~~

~~CHS is entitled, at its option, to redeem all or a portion of the 6~~¹⁄₄~~% Senior Secured Notes at any time prior to March 31, 2020, upon not less than 30 nor more than 60 days’ notice, at a price equal to 100% of the principal amount of the 6~~¹⁄₄~~% Senior Secured Notes redeemed plus accrued and unpaid interest, if any, plus a “make-whole” premium, as described in the indenture governing the 6~~¹⁄₄~~% Senior Secured Notes. In addition, CHS may redeem up to 40% of the aggregate principal amount of the 6~~¹⁄₄~~% Senior Secured Notes at any time prior to March 31, 2020 using the net proceeds from certain equity offerings at the redemption price of 106.250% of the principal amount of the 6~~¹⁄₄~~% Senior Secured Notes redeemed, plus accrued and unpaid interest, if any.~~

~~COMMUNITY HEALTH SYSTEMS, INC. AND SUBSIDIARIES~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~ ~~(UNAUDITED) – (Continued)~~

~~CHS may redeem some or all of the 6~~¹⁄₄% Senior Secured Notes at any time on or after March 31, 2020 upon not less than 30 nor more than 60 days’ notice, at the following redemption prices (expressed as a percentage of principal amount on the redemption date), plus accrued and unpaid interest, if any, to the redemption date (subject to the right of holders of record on the relevant record date to receive interest due on the relevant interest payment date), if redeemed during the periods set forth below:


~~Period~~		~~Redemption Price~~
~~March 31, 2020 to March 30, 2021~~		~~103.125 %~~
~~March 31, 2021 to March 30, 2022~~		~~101.563 %~~
~~March 31, 2022 to March 30, 2023~~		~~100.000 %~~

~~Junior-Priority Secured Notes due 2023~~

On June 22, 2018, CHS completed a private offering of $1.770 billion aggregate principal amount of the 2023 Junior-Priority Notes in exchange for the same amount of 8% Senior Notes. The 2023 Junior-Priority Notes bear interest at (i) 11% per annum from June 22, 2018 to, but excluding, June 22, 2019 and (ii) 9⁷⁄₈~~% per annum from June 22, 2019 until maturity, payable semiannually in arrears on June 30 and December 31.~~

~~The 2023 Junior-Priority Notes and the related guarantees are secured by (i) second-priority liens on theNon-ABL~~ ~~Priority Collateral that secures on a first-priority basis the Credit Facility (subject to certain exceptions), the 5~~¹⁄₈~~% Senior Secured Notes, the 6~~¹⁄₄~~% Senior Secured Notes, the 8~~⁵⁄₈~~% Senior Secured Notes and the 8% Senior Secured Notes and (ii) third-priority liens on theABL-Priority~~ ~~Collateral that secures on a first-priority basis the ABL Facility (and also secures on a second-priority basis the Credit Facility, the 5~~¹⁄₈~~% Senior Secured Notes, the 6~~¹⁄₄~~% Senior Secured Notes, the 8~~⁵⁄₈~~% Senior Secured Notes and the 8% Senior Secured Notes), in each case subject to permitted liens described in the indenture governing the 2023 Junior-Priority Notes.~~

Prior to June 30, 2020, CHS may redeem some or all of the 2023 Junior-Priority Notes at a redemption price equal to 100% of the principal amount of the notes redeemed plus accrued and unpaid interest, if any, plus a “make-whole” premium, as described in the indenture governing the 2023 Junior-Priority Notes. In addition, at any time prior to June 30, 2020, CHS may redeem up to 40% of the aggregate principal amount of the 2023 Junior-Priority Notes with the proceeds of certain equity offerings at 109.875%, plus accrued and unpaid interest, if any, to, but excluding, the applicable redemption date.

After June 30, 2020, CHS is entitled, at its option, to redeem all or a portion of the 2023 Junior-Priority Notes upon not less than 15 nor more than 60 days’ notice, at the following redemption prices (expressed as a percentage of principal amount on the redemption date), plus accrued and unpaid interest, if any, to the redemption date (subject to the right of holders of record on the relevant record date to receive interest due on the relevant interest payment date), if redeemed during the periods set forth below:


~~Period~~		~~Redemption Price~~
~~June 30, 2020 to June 29, 2021~~		~~107.406 %~~
~~June 30, 2021 to June 29, 2022~~		~~103.703 %~~
~~June 30, 2022 to June 29, 2023~~		~~100.000 %~~

~~Junior-Priority Secured Notes due 2024~~

~~On June 22, 2018, CHS completed a private offering of $1.355 billion aggregate principal amount of the 2024 Junior-Priority Notes in exchange for approximately $1.079 billion of 7~~¹⁄₈~~% Senior Notes and approximately $368 million of 6~~⁷⁄₈~~% Senior Notes. The 2024 Junior-Priority Notes bear interest at a rate of 8~~¹⁄₈~~% per annum, payable semiannually in arrears on June 30 and December 31.~~

~~COMMUNITY HEALTH SYSTEMS, INC. AND SUBSIDIARIES~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~ ~~(UNAUDITED) – (Continued)~~

~~The 2024 Junior-Priority Notes and the related guarantees are secured by (i) second-priority liens on theNon-ABL~~ ~~Priority Collateral that secures on a first-priority basis the Credit Facility (subject to certain exceptions), the 5~~¹⁄₈~~% Senior Secured Notes, the 6~~¹⁄₄~~% Senior Secured Notes, the 8~~⁵⁄₈~~% Senior Secured Notes and the 8% Senior Secured Notes and (ii) third-priority liens on theABL-Priority~~ ~~Collateral that secures on a first-priority basis the ABL Facility (and also secures on a second-priority basis the Credit Facility, the 5~~¹⁄₈~~% Senior Secured Notes, the 6~~¹⁄₄~~% Senior Secured Notes, the 8~~⁵⁄₈~~% Senior Secured Notes and the 8% Senior Secured Notes), in each case subject to permitted liens described in the indenture governing the 2024 Junior-Priority Notes.~~

Prior to June 30, 2021, CHS may redeem some or all of the 2024 Junior-Priority Notes at a redemption price equal to 100% of the principal amount of the notes redeemed plus accrued and unpaid interest, if any, plus a “make-whole” premium, as described in the indenture governing the 2024 Junior-Priority Notes. In addition, at any time prior to June 30, 2021, CHS may redeem up to 40% of the aggregate principal amount of the 2024 Junior-Priority Notes with the proceeds of certain equity offerings at 108.125%, plus accrued and unpaid interest, if any, to, but excluding, the applicable redemption date.

After June 30, 2021, CHS is entitled, at its option, to redeem all or a portion of the 2024 Junior-Priority Notes upon not less than 15 nor more than 60 days’ notice, at the following redemption prices (expressed as a percentage of principal amount on the redemption date), plus accrued and unpaid interest, if any, to the redemption date (subject to the right of holders of record on the relevant record date to receive interest due on the relevant interest payment date), if redeemed during the periods set forth below:


~~Period~~		~~Redemption Price~~
~~June 30, 2021 to June 29, 2022~~		~~104.063 %~~
~~June 30, 2022 to June 29, 2023~~		~~102.031 %~~
~~June 30, 2023 to June 29, 2024~~		~~100.000 %~~

The indentures governing each of the 2023 Junior-Priority Notes and 2024 Junior-Priority Notes also prohibit CHS from purchasing, repurchasing, redeeming, defeasing or otherwise acquiring or retiring any outstanding 8% Senior Notes and 7¹⁄₈% Senior Notes with: (a) cash or cash equivalents on hand as of the consummation of the exchange offers; (b) cash generated from operations; (c) proceeds from assets sales; or (d) proceeds from the issuance of, or in exchange for, secured debt, in each case, prior to the date that is 60 days prior to the relevant maturity dates of such 8% Senior Notes and 7¹⁄₈~~% Senior Notes, as applicable.~~

8⁵⁄₈% Senior Secured Notes due ~~2024~~

~~On July~~2025 bear interest at a rate of 6.625% per annum, payable semi-annually in arrears on February 15 and August 15 of each year, commencing on August 15, 2020. The 6 ~~2018, CHS completed a private offering of $1.033 billion aggregate principal amount of~~ ⁵⁄₈% Senior Secured Notes are scheduled to mature on February 15, 2025. The 6⁵⁄₈% Senior Secured Notes due ~~January 15, 2024 (the “8~~⁵⁄₈~~% Senior Secured Notes”). The terms of the 8~~⁵⁄₈% Senior Secured Notes are governed by an indenture, dated as of July 6, 2018, among CHS, the Company, the subsidiary guarantors party thereto, Regions Bank, as trustee and Credit Suisse AG, as collateral agent. The 8⁵⁄₈~~% Senior Secured Notes bear interest at a rate of 8~~⁵⁄₈~~% per year payable semi-annually in arrears on January 15 and July 15 of each year, commencing on January 15, 2019. The notes~~2025 are unconditionally guaranteed on a senior-priority secured basis by the Company and each of the CHS current and future domestic subsidiaries that provide guarantees under ~~CHS’ senior secured credit facilities, CHS’ ABL~~the revolving asset-based loan facility (the “ABL Facility”), any capital market debt securities of CHS (including CHS’ outstanding senior notes) and certain other long-term debt of CHS.

The 86⁵⁄₈% Senior Secured Notes due 2025 and the related guarantees are secured by shared (i) first-priority liens on theNon-ABL Priority Collateral ~~that also secures on a first-priority basis the Credit Facility (subject to certain exceptions), the 5~~¹⁄₈~~% Senior Secured Notes, the 6~~¹⁄₄~~% Senior Secured Notes and the 8% Senior Secured Notes~~ and (ii) second-priority liens on the~~ABL-Priority~~ ABL Priority Collateral that secures on a first-priority basis the ABL Facility, ~~(and also secures on a second-priority basis the Credit Facility and the 5~~¹⁄₈~~% Senior Secured Notes, the 6~~¹⁄₄~~% Senior Secured Notes and the 8% Senior Secured Notes),~~ in each case subject to permitted liens described in the indenture governing the 86⁵⁄₈% Senior Secured ~~Notes.~~

Notes due 2025.

~~COMMUNITY HEALTH SYSTEMS, INC. AND SUBSIDIARIES~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~ ~~(UNAUDITED) – (Continued)~~

~~Prior~~At any time prior to ~~January~~February 15, ~~2021,~~2022, CHS may redeem some or all of the 6⁵⁄₈% Senior Secured Notes due 2025 at a price equal to 100% of their principal amount plus accrued and unpaid interest, if any, to, but excluding the applicable redemption date plus a make-whole premium as defined in the indenture agreement dated February 6, 2020. After February 15, 2022, CHS is entitled, at its option, to redeem some or all of the 6⁵⁄₈% Senior Secured Notes at a redemption price equal to ~~100%~~the percentage of ~~the~~ principal amount ~~of the notes redeemed plus accrued and unpaid interest, if any, plus a “make-whole” premium, as described in the indenture governing the 8~~⁵⁄₈~~% Senior Secured Notes. In addition, at any time prior to January 15, 2021, CHS may redeem up to 40% of the aggregate principal amount of the 8~~⁵⁄₈~~% Senior Secured Notes with the proceeds of certain equity offerings at 108.625%,~~below plus accrued and unpaid interest, if any, to, but excluding the applicable redemption ~~date.~~

~~After January 15, 2021, CHS is entitled, at its option, to redeem all or a portion of the 8~~⁵⁄₈% Senior Secured Notes upon not less than 15 nor more than 60 days’ notice, at the following redemption prices (expressed as a percentage of principal amount on the redemption date), plus accrued and unpaid interest, if any, to the redemption date, ~~(subject to the right of holders of record on the relevant record date to receive interest due on the relevant interest payment date),~~ if redeemed during the ~~periods~~twelve-month period beginning on February 15 of the years set forth below:


Period		Redemption Price
~~January 15, 2021 to January 14, 2022~~		~~104.313 %~~
~~January~~February 15, 2022 to ~~January~~February 14, 2023		~~102.156~~103.313 %
~~January~~February 15, 2023 to ~~January~~February 14, 2024		101.656 %
February 15, 2024 to February 14, 2025		100.000 %

~~8% Senior Secured Notes due 2026~~

~~On March 6, 2019, CHS completed~~The financing and repayment transactions discussed above resulted in a ~~private offering~~pre-tax andafter-tax loss from early extinguishment of $1.601 billion aggregate principal amount of the 8% Senior Secured Notes. The terms of the 8% Senior Secured Notes are governed by an indenture, dated as of March 6, 2019, among CHS, the Company, the subsidiary guarantors party thereto, Regions Bank, as trustee and Credit Suisse AG, as collateral agent. The 8% Senior Secured Notes bear interest at a rate of 8% per year payable semi-annually in arrears on March 15 and September 15 of each year, commencing on September 15, 2019. The notes are unconditionally guaranteed on a senior-priority secured basis by the Company and each of the CHS current and future domestic subsidiaries that provide guarantees under CHS’ senior secured credit facilities, CHS’ ABL facility, any capital market debt securities of CHS (including CHS’ outstanding senior notes) and certain other long-term debt of ~~CHS.~~$4 million and $3 million, respectively, for the three months ended March 31, 2020.

~~The 8% Senior Secured Notes and~~At March 31, 2020, the ~~related guarantees are secured by (i) first-priority liens on theNon-ABL~~ ~~Priority Collateral that also secures on a first-priority basis the Credit Facility (subject to certain exceptions), the 5~~¹⁄₈~~% Senior Secured Notes, the 6~~¹⁄₄~~% Senior Secured Notes, and the 8~~⁵⁄₈~~% Senior Secured Notes and (ii) second-priority liens on theABL-Priority~~ ~~Collateral that secures on a first-priority basis the ABL Facility (and also secures on a second-priority basis the Credit Facility and the 5~~¹⁄₈~~% Senior Secured Notes, the 6~~¹⁄₄~~% Senior Secured Notes, and the 8~~⁵⁄₈~~% Senior Secured Notes), in each case subject to permitted liens described in the indenture governing the 8% Senior Secured Notes.~~

Prior to March 15, 2022, CHS may redeem some or all of the 8% Senior Secured Notes at a redemption price equal to 100% of the principal amount of the notes redeemed plus accrued and unpaid interest, if any, plus a “make-whole” premium, as described in the indenture governing the 8% Senior Secured Notes. In addition, at any time prior to March 15, 2022, CHS may redeem up to 40% of the aggregate principal amount of the 8% Senior Secured Notes with the proceeds of certain equity offerings at 108.000%, plus accrued and unpaid interest, if any, to, but excluding, the applicable redemption date.

After March 15, 2022, CHS is entitled, at its option, to redeem all or a portion of the 8% Senior Secured Notes upon not less than 15 nor more than 60 days’ notice, at the following redemption prices (expressed as a percentage of principal amount on the redemption date), plus accrued and unpaid interest, if any, to the redemption date (subject to the right of holders of record on the relevant record date to receive interest due on the relevant interest payment date), if redeemed during the periods set forth below:


~~Period~~		~~Redemption Price~~
~~March 15, 2022 to March 14, 2023~~		~~104.000 %~~
~~March 15, 2023 to March 14, 2024~~		~~102.000 %~~
~~March 15, 2024 to March 14, 2026~~		~~100.000 %~~

~~COMMUNITY HEALTH SYSTEMS, INC. AND SUBSIDIARIES~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~ ~~(UNAUDITED) – (Continued)~~

~~ABL Facility~~

On April 3, 2018, the Company and CHS entered into an asset-based loan (ABL) credit agreement (the “ABL Credit Agreement”) (as further described below), with JPMorgan Chase Bank, N.A., as administrative agent, and the lenders and other agents party thereto. Pursuant to the ABL Credit Agreement, the lenders have extended to CHS a revolving asset-based loan facility (the “ABL Facility”) in the maximum aggregate principal amount of $1.0 billion, subject toavailable borrowing base capacity. The ABL facility includes borrowing capacity available for letters of credit of $50 million. CHS and all domestic subsidiaries of CHS that guarantee CHS’ other outstanding senior and senior secured indebtedness guarantee the obligations of CHS under the ABL Facility. In conjunction with the closing of the ABL Facility, the wholly-owned special-purpose entity that owned the Receivables pledged under the previous Receivables Facility became a subsidiary guarantor under the Credit Facility and CHS’ outstanding notes. Subject to certain exceptions, all obligations under the ABL Facility ~~and the related guarantees are secured by a perfected first-priority security interest in substantially all~~was $769 million, of ~~the Receivables, deposit, collection and other accounts and contract rights, books, records and other instruments related to the foregoing of~~which the Company CHS and the guarantors as well as a perfected junior-priority security interest in substantially all of the other assets of the Company, CHS and the guarantors, subject to customary exceptions and intercreditor arrangements. The revolving credit commitments under the Credit Facility were reduced to $425 million upon the effectiveness of the ABL Facility. In connection with entering into the ABL Credit Agreement and the ABL Facility, the Company repaid in full and terminated its Receivables Facility. Thehad outstanding borrowings ~~pursuant to the ABL Facility at June 30, 2019 totaled $723~~of $380 million ~~on the condensed consolidated balance sheet.~~

~~Borrowings under the ABL Facility bear interest at a rate per annum equal to an applicable percentage, plus, at the Borrower’s option, either (a) an Alternative base rate or (b) a LIBOR rate. From~~ and ~~after December 31, 2018, the applicable percentage under the ABL Facility will be determined based on excess availability as a percentage~~letters of ~~the maximum commitment amount under the ABL facility at a rate per annum~~credit issued of ~~1.25%, 1.50%~~$150 million. The issued letters of credit were primarily in support of potential insurance-related claims and 1.75% for loans based on the Alternative base rate and 2.25%, 2.50% and 2.75% for loans based on the LIBOR rate. From and after September 30, 2018, the applicable commitment fee rate under the ABL Facility is determined based on average utilization as a percentage of the maximum commitment amount under the ABL Facility at a rate per annum of either 0.50% or 0.625% times the unused portion of the ABL facility.

~~Principal amounts outstanding under the ABL Facility will be due and payable in full on April 3, 2023. The ABL Facility includes a91-day~~ springing maturity applicable if more than $250 million in the aggregate principal amount of the Borrower’s 8% Senior Notes due 2019, Term G loans due 2019, 7.125% Senior Notes due 2020, Term H loans due 2021, 5.125% Senior Secured Notes due 2021, 6.875% Senior Notes due 2022 or 6.25% Senior Secured Notes due 2023 or refinancings thereof are scheduled to mature or similarly become due on a date prior to April 3, 2023.certain bonds.

The ABL Facility contains customary representations and warranties, subject to limitations and exceptions, and customary covenants restricting ~~our~~the Company’s ability, subject to certain exceptions, to, among other things (1) declare dividends, make distributions or redeem or repurchase capital stock, (2) prepay, redeem or repurchase other debt, (3) incur liens or grant negative pledges, (4) make loans and investments and enter into acquisitions and joint ventures, (5) incur additional indebtedness or provide certain guarantees, (6) engage in mergers, acquisitions and asset sales, (7) conduct transactions with affiliates, (8) alter the nature of the Company’s, CHS’ or the guarantors’ businesses, (9) grant certain guarantees with respect to physician practices, (10) engage in sale and leaseback transactions or (11) change ~~our~~the Company’s fiscal year. The Company is also required to comply with a consolidated fixed coverage ratio, upon certain triggering events described below, and various affirmative covenants. The consolidated fixed coverage ratio is calculated as the ratio of (x) consolidated EBITDA (as defined in the ABL Facility) less capital expenditures to (y) the sum of consolidated interest expense (as defined in the ABL Facility), scheduled principal payments, income taxes and restricted payments made in cash or in permitted investments. For purposes of calculating the consolidated fixed charge coverage ratio, the calculation of consolidated EBITDA as defined in the ABL Facility is a trailing12-month calculation that begins with the Company’s consolidated net income, ~~attributable to Holdings,~~ with certain adjustments for interest, taxes, depreciation and amortization, net income attributable to noncontrolling interests, stock compensation expense, restructuring costs, and the financial impact of othernon-cash ornon-recurring items recorded during any such12-month period. The consolidated fixed charge coverage ratio is a required covenant only in periods where the total borrowings outstanding under the ABL Facility reduce the amount available in the facility to less than the greater of (i) $95 million ~~and~~or (ii) 10% of the calculated borrowing base. As a result, in the event the Company has less than $95 million available under the ABL Facility, the Company would need to comply with the consolidated fixed charge coverage ratio. At ~~June 30, 2019,~~

COMMUNITY HEALTH SYSTEMS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(UNAUDITED) – (Continued)

March 31, 2020, the Company is not subject to the consolidated fixed charge coverage ratio as such triggering event had not occurred during the last twelve months ended ~~June 30, 2019.~~

~~COMMUNITY HEALTH SYSTEMS, INC. AND SUBSIDIARIES~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~ ~~(UNAUDITED) – (Continued)~~

Events of default under the ABL Facility include, but are not limited to, (1) CHS’ failure to pay principal, interest, fees or other amounts under the ABL Credit Agreement when due (taking into account any applicable grace period), (2) any representation or warranty proving to have been materially incorrect when made, (3) covenant defaults subject, with respect to certain covenants, to an available cure and applicable grace periods, (4) bankruptcy and insolvency events, (5) a cross default to certain other debt, (6) certain undischarged judgments (not paid within an applicable grace period), (7) a change of control (as defined), (8) certain ERISA-related defaults and (9) the invalidity or impairment of specified security interests, guarantees or subordination provisions in favor of the ABL Agent or lenders under the ABL Facility.

~~Receivables Facility~~

Prior to the effectiveness of the ABL Facility described above, CHS, through certain of its subsidiaries, participated in an accounts receivable loan agreement (the “Receivables Facility”) with a group of lenders and banks, Credit Agricolé Corporate and Investment Bank, as a managing agent and as the administrative agent. Patient-related accounts receivable (the “Receivables”) for certain affiliated hospitals served as collateral for the outstanding borrowings under the Receivables Facility. The interest rate on the borrowings was based on the commercial paper rate plus an applicable interest rate spread. The Receivables Facility was repaid in full and terminated upon the effectiveness of the ABL Facility on April 3, 2018.

~~Loss (Gain) from Early Extinguishment of Debt~~

There was no loss on early extinguishment of debt for the three months ended June 30, 2019. The financing and repayment transactions discussed above resulted in a gain from early extinguishment of debt of $64 million for the three months ended June 30, 2018, and~~after-tax~~ gain of $50 million for the three months ended June 30, 2018. The financing and repayment transactions discussed above resulted in a loss from early extinguishment of debt of $31 million and a gain from early extinguishment of debt of $59 million for the six months ended June 30, 2019 and 2018, respectively, and an~~after-tax~~ ~~loss of $23 million and anafter-tax~~ ~~gain of $46 million for the six months ended June 30, 2019 and 2018, respectively.~~

~~Other Debt~~

~~As of June 30, 2019, other debt consisted primarily of other obligations maturing in various installments through 2028.~~March 31, 2020.

To limit the effect of changes in interest rates on a portion of the Company’s long-term borrowings, the Company is a party to ~~three separate~~one interest swap ~~agreements in effect at June 30, 2019,~~agreement with ~~an aggregate~~a notional amount ~~for currently effective swaps~~ of ~~$700 million. On each~~approximately $300 million as of ~~these swaps, the~~March 31, 2020. The Company receives a variable rate of interest on this swap based on the three-month LIBOR in exchange for the payment of a fixed rate of interest. See Note 117 for additional information regarding ~~these swaps.~~this swap.

The Company paid interest of ~~$117~~$264 million and ~~$274~~$189 million on borrowings during the three months ended ~~June 30,~~March 31, 2020 and 2019, ~~and 2018, respectively, and $318 million and $486 million on borrowings during the six months ended June 30, 2019 and 2018,~~ respectively.

~~COMMUNITY HEALTH SYSTEMS, INC. AND SUBSIDIARIES~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~ ~~(UNAUDITED) – (Continued)~~

~~11.~~7. FAIR VALUE OF FINANCIAL INSTRUMENTS

The fair value of financial instruments has been estimated by the Company using available market information as of ~~June 30, 2019~~March 31, 2020 and December 31, ~~2018,~~2019, and valuation methodologies considered appropriate. The estimates presented in the table below are not necessarily indicative of amounts the Company could realize in a current market exchange (in millions):


	June 30, 2019				December 31, 2018				March 31, 2020				December 31, 2019
	Carrying		Estimated Fair		Carrying		Estimated Fair		Carrying		Estimated Fair		Carrying		Estimated Fair
	Amount		Value		Amount		Value		Amount		Value		Amount		Value
Assets:
Cash and cash equivalents	$	207	$	207	$	196	$	196	$	246	$	246	$	216	$	216
Investments in equity securities		136		136		137		137		114		114		141		141
Available-for-sale securities		99		99		93		93
Available-for-sale debt securities										103		103		101		101
Trading securities		12		12		11		11		12		12		12		12
Liabilities:
Contingent Value Right		-		-		-		-
Credit Facility		-		-		1,602		1,564
8% Senior Notes due 2019		155		152		155		146
7¹⁄₈% Senior Notes due 2020		121		112		121		100
5¹⁄₈% Senior Secured Notes due 2021		986		988		984		934		-		-		990		1,003
6⁷⁄₈% Senior Notes due 2022		2,599		1,773		2,593		1,175		229		173		229		188
6¹⁄₄% Senior Secured Notes due 2023		3,071		2,990		3,067		2,819		2,654		2,560		3,074		3,148
8⁵⁄₈% Senior Secured Notes due 2024		1,022		1,039		1,021		1,025		1,024		1,028		1,023		1,099
6⁵⁄₈% Senior Secured Notes due 2025										1,421		1,379		-		-
8% Senior Secured Notes due 2026		1,572		1,544		-		-		2,071		2,004		2,070		2,182
Junior-Priority Secured Notes due 2023		1,752		1,442		1,750		1,380
Junior-Priority Secured Notes due 2024		1,339		1,017		1,338		976
8% Senior Secured Notes due 2027										691		602		691		700
6⁷⁄₈% Senior Notes due 2028										1,678		516		1,678		1,700
9⁷⁄₈% Junior-Priority Secured Notes due 2023										1,755		1,419		1,754		1,539
8¹⁄₈% Junior-Priority Secured Notes due 2024										1,341		936		1,340		1,113
ABL Facility and other debt		763		763		734		734		401		401		285		285

The carrying value of the Company’s long-term debt in the above table is presented net of unamortized deferred debt issuance costs. The estimated fair value is determined using the methodologies discussed below in accordance with accounting standards related to the determination of fair value based on the U.S. GAAP fair value hierarchy as discussed in Note ~~12.~~8. The estimated fair value for financial instruments with a fair value that does not equal its carrying value is considered a Level 1 valuation. The Company utilizes the market approach and obtains indicative pricing ~~from the administrative agent to the Credit Facility to determine fair values or~~ through publicly available subscription services such as Bloomberg to determine fair values where relevant.

Cash and cash equivalents. The carrying amount approximates fair value due to the short-term maturity of these instruments (less than three months).

Investments in equity securities. Estimated fair value is based on closing price as quoted in public markets. ~~Prior to the adoption of ASU2016-01~~ ~~on January 1, 2018, such investments were classified as eitheravailable-for-sale~~ ~~or trading securities.~~

Available-for-sale debt securities. Estimated fair value is based on closing price as quoted in public markets or other various valuation techniques.

Trading securities. Estimated fair value is based on closing price as quoted in public markets.

~~Contingent Value Right~~~~. Estimated fair value is based on the closing price as quoted on the public market where the CVR is traded.~~

~~Credit Facility.~~ Estimated fair value is based on publicly available trading activity and supported with information from the Company’s bankers regarding relevant pricing for trading activity among the Company’s lending institutions.

~~8% Senior Notes due 2019.~~ ~~Estimated fair value is based on the closing market price for these notes.~~

7¹⁄₈~~% Senior Notes due 2020.~~ ~~Estimated fair value is based on the closing market price for these notes.~~

COMMUNITY HEALTH SYSTEMS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(UNAUDITED) – (Continued)

5¹⁄₈% Senior Secured Notes due 2021. Estimated fair value is based on the closing market price for these notes.

6⁷⁄₈% Senior Notes due 2022. Estimated fair value is based on the closing market price for these notes.

6¹⁄₄% Senior Secured Notes due 2023. Estimated fair value is based on the closing market price for these notes.

8⁵⁄₈% Senior Secured Notes due 2024. Estimated fair value is based on the closing market price for these notes.

6⁵⁄₈% Senior Secured Notes due 2025. Estimated fair value is based on the closing market price for these notes.

8% Senior Secured Notes due 2026. Estimated fair value is based on the closing market price for these notes.

8% Senior Secured Notes due 2027. Estimated fair value is based on the closing market price for these notes.

6⁷⁄₈% Senior Secured Notes due 2028. Estimated fair value is based on the closing market price for these notes.

9⁷⁄₈% Junior-Priority Secured Notes due 2023. Estimated fair value is based on the closing market price for these notes.

8¹⁄₈%Junior-Priority Secured Notes due 2024. Estimated fair value is based on the closing market price for these notes.

ABL Facility and other debt. The carrying amount of the ABL Facility and all other debt approximates fair value due to the nature of these obligations.

Interest rate swaps. The fair value of the interest rate swap ~~agreements~~agreement is the amount at which ~~they~~it could be settled, based on estimates calculated by the Company using a discounted cash flow analysis based on observable market inputs and validated by comparison to estimates obtained from the counterparty. The Company incorporates credit valuation adjustments (“CVAs”) to appropriately reflect both its own nonperformance or credit risk and the respective counterparty’s nonperformance or credit risk in the fair value measurements. In adjusting the fair value of its interest rate swap ~~agreements~~agreement for the effect of nonperformance or credit risk, the Company has considered the impact of any netting features included in the ~~agreements.~~agreement.

~~The Company assesses the effectiveness of its hedge instruments on a quarterly basis. For the six months ended June 30, 2019 and 2018,~~At March 31, 2020, the Company ~~completed an assessment~~had one interest rate swap with a notional amount of ~~the cash flow hedge instruments~~approximately $300 million, a fixed interest rate of 2.892%, a termination date of August 30, 2020, and ~~determined the hedges to be highly effective.~~a fair value of approximately $2 million. The Company has also determined that the ineffective portion of the hedges do not have a material effect on the Company’s condensed consolidated financial position, operations or cash flows. The counterpartiescounterparty to the interest rate swap ~~agreements expose~~agreement exposes the Company to credit risk in the event of nonperformance by such ~~counterparties.~~counterparty. However, at ~~June 30, 2019,~~March 31, 2020, the Company does not anticipate nonperformance by ~~these counterparties.~~the counterparty. The Company does not hold or issue derivative financial instruments for trading purposes.

~~COMMUNITY HEALTH SYSTEMS, INC. AND SUBSIDIARIES~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~ ~~(UNAUDITED) – (Continued)~~

~~Interest rate swaps consisted of the following at June 30, 2019:~~

            Asset (Liability)
     Notional Amount            Fair Value
            Swap #
   (in millions)      Fixed Interest Rate
Termination Date
   (in millions)
1    $ 200      2.515 %      August 30, 2019    $ -
2    200      2.613 %      August 30, 2019    -
3    300      2.892 %      August 30, 2020    (3)

The Company is exposed to certain risks relating to its ongoing business operations. The risk managed by using derivative instruments is interest rate risk. Companies are required to recognize all derivative instruments as either assets or liabilities at fair value in the condensed consolidated statement of financial position. ~~The Company designates its interest rate swaps as cash flow hedges.~~ For derivative instruments that are designated and qualify as cash flow hedges, the effective portion of the gain or loss on the derivative is reported as a component of other comprehensive income (“OCI”) and reclassified into earnings in the same period or periods during which the hedged transactions affect earnings. Gains and losses on the derivative representing either ~~hedge~~ ineffectiveness or hedge components excluded from the assessment of effectiveness are recognized in current earnings.

Assuming no change in interest rates in effect as of ~~June 30, 2019, approximately $2~~March 31, 2020, less than $1 million of interest income resulting from the spread between the fixed and floating rates defined in ~~each~~the interest rate swap agreement will be recognized ~~during the next 12 months. If interest rate swaps do not remain highly effective as a cash flow hedge, the derivatives’ gains or losses resulting from the change in fair value reported~~ through ~~OCI will be reclassified into earnings.~~

~~The following tabular disclosure provides the amount ofpre-tax~~ ~~(loss) gain recognized as a component~~its termination date of ~~OCI during the three and six months ended June~~August 30, ~~2019 and 2018 (in millions):~~2020.

Amount of Pre-Tax (Loss) Gain Recognized in OCI (Effective Portion)
Derivatives in Cash Flow Hedging Three Months Ended June 30, Six Months Ended June 30,
Relationships
        2019                 2018                 2019                 2018
Interest rate swaps
$ (1) $ 6   $ (3) $ 23
The following tabular disclosure provides the location of the effective portion of thepre-tax loss (gain) reclassified from accumulated other comprehensive loss (“AOCL”) into interest expense on the condensed consolidated statements of loss during the three and six months ended June 30, 2019 and 2018 (in millions):

Amount ofPre-Tax Loss (Gain) Reclassified
from AOCL into Income (Effective Portion)
Location of Loss (Gain) Reclassified from Three Months Ended June 30, Six Months Ended June 30,
AOCL into Income (Effective Portion)
        2019                       2018                         2019                         2018
Interest expense, net
$ -   $ 2   $ (1) $ 7

COMMUNITY HEALTH SYSTEMS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(UNAUDITED) – (Continued)

The following tabular disclosure provides the amount ofpre-tax loss recognized as a component of OCI during the three months ended March 31, 2020 and 2019 (in millions):


	Amount of Pre-Tax Loss Recognized in OCI (Effective Portion) Three Months Ended March 31,


Derivatives in Cash Flow Hedging Relationships	2020		2019
Interest rate swaps	$	(1)	$	(2)

The following tabular disclosure provides the location of the effective portion of thepre-tax loss (gain) reclassified from accumulated other comprehensive loss (“AOCL”) into interest expense on the condensed consolidated statements of income (loss) during the three months ended March 31, 2020 and 2019 (in millions):


	Amount of Pre-Tax Loss (Gain) Reclassified from AOCL into Income (Effective Portion) Three Months Ended March 31,

Location of Loss (Gain) Reclassified from AOCL into Income (Effective Portion)
	2020		2019
Interest expense, net	$	1	$	(1)

The fair values of derivative instruments in the condensed consolidated balance sheets as of ~~June 30, 2019~~March 31, 2020 and December 31, ~~2018~~2019 were as follows (in millions):

   Asset Derivatives    Liability Derivatives
       June 30, 2019            December 31, 2018            June 30, 2019            December 31, 2018
   Balance       Balance       Balance       Balance
   Sheet       Sheet       Sheet       Sheet
   Location    Fair Value    Location    Fair Value    Location    Fair Value    Location    Fair Value
Derivatives designated as hedging instruments
   Other
assets,
net    $ -    Other
assets,
net    $ 3    Other
long-term
liabilities    $ 3    Other
long-term
liabilities    $ 2

Asset Derivatives

Liability Derivatives

March 31, 2020

December 31, 2019

March 31, 2020

December 31, 2019

Balance

Sheet

Location

Fair Value

Location

Fair Value

Location

Fair Value

Location

Fair Value

Derivatives designated as hedging instruments

Other
assets,
net

Other
long-term
liabilities

~~12.~~8. FAIR VALUE

Fair Value Hierarchy

Fair value is a market-based measurement, not an entity-specific measurement. Therefore, a fair value measurement should be determined based on the assumptions that market participants would use in pricing the asset or liability. As a basis for considering market participant assumptions in fair value measurements, the Company utilizes the U.S. GAAP fair value hierarchy that distinguishes between market participant assumptions based on market data obtained from sources independent of the reporting entity (observable inputs that are classified within Levels 1 and 2 of the hierarchy) and the reporting entity’s own assumption about market participant assumptions (unobservable inputs classified within Level 3 of the hierarchy).

The inputs used to measure fair value are classified into the following fair value hierarchy:

Level 1:

Quoted market prices in active markets for identical assets or liabilities.

Level 2:

Observable market-based inputs or unobservable inputs that are corroborated by market data.

Level 3:

Unobservable inputs that are supported by little or no market activity and are significant to the fair value of the assets or liabilities. Level 3 includes values determined using pricing models, discounted cash flow methodologies, or similar techniques reflecting the Company’s own assumptions.

COMMUNITY HEALTH SYSTEMS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(UNAUDITED) – (Continued)

In instances where the determination of the fair value hierarchy measurement is based on inputs from different levels of the fair value hierarchy, the level in the fair value hierarchy within which the entire fair value measurement falls is based on the lowest level input that is significant to the fair value measurement in its entirety. The Company’s assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment of factors specific to the asset or liability. Transfers between levels within the fair value hierarchy are recognized by the Company on the date of the change in circumstances that requires such transfer. There were no transfers between levels during the~~six-month~~ three-month periods ended ~~June 30, 2019~~March 31, 2020 or ~~June 30, 2018.~~

~~COMMUNITY HEALTH SYSTEMS, INC. AND SUBSIDIARIES~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~ ~~(UNAUDITED) – (Continued)~~

March 31, 2019.

The following table sets forth, by level within the fair value hierarchy, the financial assets and liabilities recorded at fair value on a recurring basis as of ~~June 30, 2019~~March 31, 2020 and December 31, ~~2018~~2019 (in millions):


	June 30, 2019		Level 1		Level 2		Level 3		March 31, 2020		Level 1		Level 2		Level 3
Investments in equity securities	$	136	$	136	$	-	$	-	$	114	$	114	$	-	$	-
Available-for-sale securities		99		-		99		-
Available-for-sale debt securities										103		-		103		-
Trading securities		12		-		12		-		12		-		12		-
Fair value of interest rate swap agreements		-		-		-		-

Total assets	$	247	$	136	$	111	$	-	$	229	$	114	$	115	$	-


Fair value of interest rate swap agreements	$	3	$	-	$	3	$	-
Fair value of interest rate swap agreement									$	2	$	-	$	2	$	-

Total liabilities	$	3	$	-	$	3	$	-	$	2	$	-	$	2	$	-


	December 31, 2018		Level 1		Level 2		Level 3			December 31, 2019		Level 1		Level 2		Level 3
Investments in equity securities	$	137	$	137	$	-	$	-	$	141	$	141	$	-	$	-
Available-for-sale securities		93		-		93		-
Available-for-sale debt securities										101		-		101		-
Trading securities		11		-		11		-		12		-		12		-
Fair value of interest rate swap agreements		3		-		3		-

Total assets	$	244	$	137	$	107	$	-	$	254	$	141	$	113	$	-


Contingent Value Right (CVR)	$	-	$	-	$	-	$	-
Fair value of interest rate swap agreements		2		-		2		-
Fair value of interest rate swap agreement									$	2	$	-	$	2	$	-

Total liabilities	$	2	$	-	$	2	$	-	$	2	$	-	$	2	$	-

Investments in Equity Securities,~~Available-for-sale~~Available-for-Sale Debt Securities and Trading Securities

Investments in equity securities and trading securities classified as Level 1 are measured using quoted market prices. Level 2available-for-sale debt securities and trading securities primarily consisted of bonds and notes issued by the United States government and its agencies and domestic and foreign corporations. The estimated fair values of these securities are determined using various valuation techniques, including a multi-dimensional relational model that incorporates standard observable inputs and assumptions such as benchmark yields, reported trades, broker/dealer quotes, issuer spreads, benchmark securities, bids/offers and other pertinent reference data.

~~Contingent Value Right (CVR)~~

~~The CVRs represented the estimate~~As of ~~the fair value for the contingent consideration paid to HMA shareholders as part of the HMA merger. The CVRs were listed on the Nasdaq~~March 31, 2020 and ~~the valuation of the CVRs was based on the quoted trading price for the CVRs on the last day of the period. Changes in the~~December 31, 2019,available-for-sale debt securities with aggregate estimated fair ~~value~~values of ~~the CVRs were recorded through the condensed consolidated statements~~approximately $35 million and $51 million, respectively, generated gross unrealized losses of ~~loss. In January 2019, the CVRs were terminated~~$2 million and ~~removed~~$1 million, respectively. Aby-security impairment assessment was performed as of March 31, 2020 wherein it was determined thatCOVID-19 related changes in interest rates and market liquidity resulted in incremental unrealized losses compared to December 31, 2019. No material impairment resulted from ~~listing with Nasdaq after the determination that no amount was payable under the CVR agreement.~~credit loss or other factors.

COMMUNITY HEALTH SYSTEMS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(UNAUDITED) – (Continued)

Fair Value of Interest Rate Swap ~~Agreements~~Agreement

The valuation of the Company’s interest rate swap ~~agreements~~agreement is determined using market valuation techniques, including discounted cash flow analysis on the expected cash flows of each agreement. This analysis reflects the contractual terms of the agreement, including the period to maturity, and uses observable market-based inputs, including forward interest rate curves. The fair value of interest rate swap ~~agreements are~~agreement is determined by netting the discounted future fixed cash payments and the discounted expected variable cash receipts. The variable cash receipts are based on the expectation of future interest rates based on observable market forward interest rate curves and the notional amount being hedged.

~~COMMUNITY HEALTH SYSTEMS, INC. AND SUBSIDIARIES~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~ ~~(UNAUDITED) – (Continued)~~

The Company incorporates CVAs to appropriately reflect both its own nonperformance or credit risk and the respective counterparty’s nonperformance or credit risk in the fair value ~~measurements.~~measurement. In adjusting the fair value of its interest rate swap agreements for the effect of nonperformance or credit risk, the Company has considered the impact of any netting features included in the ~~agreements.~~agreement. The CVA on the Company’s interest rate swap ~~agreements~~agreement had an immaterial effect on the fair value of the related ~~asset or~~ liability at ~~June 30, 2019~~March 31, 2020 and December 31, ~~2018.~~2019.

The majority of the inputs used to value the Company’s interest rate swap ~~agreements,~~agreement, including the forward interest rate curves and market perceptions of the Company’s credit risk used in the CVAs, are observable inputs available to a market participant. As a result, the Company has determined that the interest rate swap ~~valuations are~~valuation is classified in Level 2 of the fair value hierarchy.

~~13.~~9. LEASES

The Company utilizes operating and finance leases for the use of certain hospitals, medical office buildings, and medical equipment. ~~All lease agreements generally require~~The Company has elected to account forCOVID-19 related concessions as though the ~~Company to pay maintenance, repairs, property taxes~~enforceable rights and ~~insurance costs, which~~obligations for those concessions are ~~variable amounts based on actual costs incurred during each applicable period. Such costs are not included in~~explicit within the ~~determination of~~underlying contract. During the ROU asset or lease liability. Variable lease cost also includes escalating rent payments that are not fixed at commencement but are based on an index that is determined in future periods over the lease term based on changes in the Consumer Price Indexthree months ended March 31, 2020, there were no material price concessions or other ~~measure of cost inflation. Most leases include one~~incentives received or ~~more options to renew~~granted by the lease at the end of the initial term, with renewal terms that generally extend the lease at the then market rate of rental payment. Certain leases also include an option to buy the underlying asset at or a short time prior to the termination of the lease. All such options are at the Company’s discretion and are evaluated at the commencement of the lease, with only those that are reasonably certain of exercise included in determining the appropriate lease term. Company.

The components of lease cost and rent expense for the three ~~and six~~ months ended ~~June 30,~~March 31, 2020 and 2019 are as follows (in millions):


							Three Months Ended
							March 31,
	Three Months Ended			Six Months Ended
Lease Cost	June 30, 2019			June 30, 2019			2020		2019

Operating lease cost:
Operating lease cost	$	48		$	95		$	51	$	48
Short-term rent expense		27			59			26		30
Variable lease cost		7			10			5		3
Sublease income		(1	)		(2	)		(1)		(1)

Total operating lease cost	$	81		$	162		$	81	$	80


Finance lease cost:
Amortization ofright-of-use assets	$	3		$	6		$	3	$	3
Interest on finance lease liabilities		2			4			2		2

Total finance lease cost	$	5		$	10		$	5	$	5

COMMUNITY HEALTH SYSTEMS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(UNAUDITED) – (Continued)

Supplemental balance sheet information related to leases was as follows (in millions):


	Balance Sheet Classification	June 30, 2019			Balance Sheet Classification	March 31, 2020		December 31, 2019
Operating Leases:
Operating Lease ROU Assets	Other assets, net	$	603		Other assets, net	$	634	$	607

Finance Leases:
Finance Lease ROU Assets	Property and equipment		184		Property and equipment
Accumulated amortization	Accumulated depreciation and amortization		(59	)
					Land and improvements	$	8	$	8
					Buildings and improvements		168		154
					Equipment and fixtures		11		11

					Property and equipment		187		173
					Less accumulated depreciation and amortization		(58)		(56)

					Property and equipment, net	$	129	$	117


Current finance lease liabilities	Current maturities of long-term debt		8		Current maturities of long-term debt	$	6	$	6
Long-term finance lease liabilities	Long-term debt		118		Long-term debt		122		107

Supplemental cash flow ~~and other~~ information related to leases ~~as of and~~ for the ~~six~~three months ended ~~June 30,~~March 31, 2020 and 2019 ~~are as follows (dollars in millions):~~

         Six Months Ended
Other information
   June 30, 2019
Cash paid for amounts included in the measurement of lease liabilities:

Operating cash flows from operating leases
   $ 78
Operating cash flows from finance leases
   4
Financing cash flows from finance leases
   5
Right-of-use assets obtained in exchange for new finance lease liabilities
   1
Right-of-use assets obtained in exchange for new operating lease liabilities
   47
Weighted-average remaining lease term:

Operating leases
   6 years
Finance leases
   20 years
Weighted-average discount rate:

Operating leases
   9.3 %
Finance leases
   5.7 %

On December 22, 2016, the Company completed the sale and leaseback of ten medical office buildings for net proceeds of $159 million to HCP, Inc. The buildings, with a combined total of 756,183 square feet, are located in five states and support a wide array of diagnostic, medical and surgical services in an outpatient setting for the respective nearby hospitals. Because of the Company’s continuing involvement in these leased buildings, the transaction did not qualify for sale treatment and the related leases have been recorded as financing obligations in the Company’s condensed consolidated balance sheet at December 31, 2018. Upon adoption of ASC 842 on January 1, 2019, the Company reevaluated the classification of these financing arrangements utilizing the new accounting requirements for sale-leasebacks in ASC 842, concluding that these financing arrangements continue to not qualify for sale treatment and therefore should continue to be classified as financing obligations. At June 30, 2019, six of these financing obligations remain outstanding and are included in the table below, with the other four medical office buildings having been divested in conjunction with the sale of the related hospital entity.

~~COMMUNITY HEALTH SYSTEMS, INC. AND SUBSIDIARIES~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~ ~~(UNAUDITED) – (Continued)~~

~~Commitments relating to noncancellable operating and finance leases and financing obligations for each of the next five years and thereafter~~ are as follows (in millions):

   Financing
Year Ending December 31,
           Operating                 Finance             Obligations
2019 (remaining six months)
   $ 104 $ 7 $ 4
2020
   165 13 7
2021
   123 11 7
2022
   100 10 7
2023
   80 16 7
Thereafter
   243 166 120


Total minimum future payments
   815 223 152
Less: Imputed interest
   (203 ) (97 ) (51 )


Total liabilities
   612 126 101
Less: Current portion
   (133 ) (8 ) (3 )


Long-term liabilities
   $                   479 $                   118 $               98


As previously disclosed in our 2018 Annual Report on Form10-K, which followed the lease accounting prior to adoption of ASC 842, future commitments relating to noncancellable operating and capital leases and financing obligations for the five years and period thereafter as of December 31, 2018 were as follows (in millions):

   Financing
Year Ending December 31,
         Operating (1)                 Capital               Obligations
2019
   $ 188 $ 12 $ 12
2020
   157 10 9
2021
   121 8 10
2022
   98 7 10
2023
   79 14 10
Thereafter
   234 121 106


Total minimum future payments
   $ 877 172 157


Less: Imputed interest
   (80 ) (18 )


Total capital lease and financing obligations
   92 139
Less: Current portion
   (8 ) (5 )


Long-term capital lease and financing obligations
   $ 84 $ 134


	Three Months Ended March 31,

Cash flow information	2020		2019

Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases (1)	$	47	$	35
Operating cash flows from finance leases		2		2
Financing cash flows from finance leases		1		3
Right-of-use assets obtained in exchange for new finance lease liabilities		17		1
Right-of-use assets obtained in exchange for new operating lease liabilities		35		15

~~(1) Minimum lease payments have not been reduced by minimum sublease rentals due in the future, which are considered immaterial.~~

~~As of June 30, 2019, there were approximately $14 million of assets underlying approved but pending leases that have not yet commenced, primarily for medical equipment.~~

~~COMMUNITY HEALTH SYSTEMS, INC. AND SUBSIDIARIES~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~ ~~(UNAUDITED) – (Continued)~~

(1)	Included in the change in other operating assets and liabilities in the condensed consolidated statement of cash flows.

~~14.~~10. EMPLOYEE BENEFIT PLANS

The Company provides an unfunded Supplemental Executive Retirement Plan (“SERP”) for certain members of its executive management. The Company uses a December 31 measurement date for the benefit obligations and a January 1 measurement date for its net periodic costs for the SERP. Variances from actuarially assumed rates will result in increases or decreases in benefit obligations and net periodic cost in future periods. Benefits expense under the SERP was $2 million for both of the three-month periods ended ~~June 30,~~March 31, 2020 and 2019, ~~and 2018, and $3 million and $4 million during the six months ended June 30, 2019 and 2018,~~ respectively. The accrued benefit liability for the SERP totaled ~~$69~~$74 million and ~~$66~~$72 million at ~~June 30, 2019~~March 31, 2020 and December 31, ~~2018,~~2019, respectively, and is included in other long-term liabilities on the condensed consolidated balance sheets. The weighted-average assumptions used in determining net periodic cost for the ~~six~~three months ended ~~June 30,~~March 31, 2020 and March 31, 2019 ~~and June 30, 2018~~ were a discount rate of ~~4.2%~~3.1% and ~~3.4%~~4.2%, respectively, and an annual salary increase of 3.0% ~~and 2.0%, respectively.~~. The Company had equity investment securities in a rabbi trust generally designated to pay benefits of the SERP in the amounts of ~~$80~~$78 million and ~~$74~~$84 million at ~~June 30, 2019~~March 31, 2020 and December 31, ~~2018,~~2019, respectively. These amounts are included in other assets, net on the condensed consolidated balance sheets.

~~During 2018, certain members of executive management~~

COMMUNITY HEALTH SYSTEMS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(UNAUDITED) – (Continued)

11. STOCKHOLDERS’ DEFICIT

Authorized capital shares of the Company ~~that~~include 400,000,000 shares of capital stock consisting of 300,000,000 shares of common stock and 100,000,000 shares of preferred stock. Each of the aforementioned classes of capital stock has a par value of $0.01 per share. Shares of preferred stock, none of which were ~~participants~~outstanding as of March 31, 2020, may be issued in one or more series having such rights, preferences and other provisions as determined by the Board of Directors without approval by the holders of common stock.

The Company is a holding company which operates through its subsidiaries. The Company’s ABL Facility and the indentures governing each series of the Company’s outstanding notes contain various covenants under which the assets of the subsidiaries of the Company are subject to certain restrictions relating to, among other matters, dividends and distributions, as referenced in the ~~SERP retired~~paragraph below.

The ABL Facility and ~~met~~ the ~~requirements for payout~~indentures governing each series of ~~their SERP retirement benefit. The SERP payout provisions require payment~~the Company’s outstanding notes restrict the Company’s subsidiaries from, among other matters, paying dividends and making distributions to the ~~participant~~Company, which thereby limits the Company’s ability to pay dividends and/or repurchase stock. As of March 31, 2020, under the most restrictive test in ~~an actuarially determined lump sum amount six months after~~these agreements (and subject to certain exceptions), the ~~participant retires from~~Company has approximately $200 million of capacity to pay permitted dividends and/or repurchase shares of stock or make other restricted payments.

The following schedule presents the ~~Company. Such amounts were paid out~~reconciliation of the ~~rabbi trust. As required by the pension accounting rules in U.S. GAAP,~~carrying amount of total equity, equity attributable to the Company, ~~recognized~~and equity attributable to the noncontrolling interests as of March 31, 2020, and during the three-month period following December 31, 2019 (in millions):


			Community Health Systems, Inc. Stockholders

	Redeemable Noncontrolling Interest		Common Stock		Additional Paid-In Capital		Accumulated Other Comprehensive Loss (Income)		Accumulated Deficit		Noncontrolling Interest		Total Stockholders’ Deficit
Balance, December 31, 2019	$	502	$	1	$	2,008	$	(9)	$	(4,218)	$	77	$	(2,141)
Comprehensive income		8		-		-		2		18		8		28
Distributions to noncontrolling interests		(22)		-		-		-		-		(8)		(8)
Purchase of subsidiary shares from noncontrolling interests		(1)		-		(1)		-		-		-		(1)
Other reclassifications of noncontrolling interests		8		-		-		-		-		(8)		(8)
Adjustment to redemption value of redeemable noncontrolling interests		7		-		(7)		-		-		-		(7)
Cancellation of restricted stock for tax withholdings on vested shares		-		-		(1)		-		-		-		(1)
Share-based compensation		-		-		2		-		-		-		2

Balance, March 31, 2020	$	502	$	1	$	2,001	$	(7)	$	(4,200)	$	69	$	(2,136)

COMMUNITY HEALTH SYSTEMS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(UNAUDITED) – (Continued)

The following schedule presents the reconciliation of the carrying amount of total equity, equity attributable to the Company, and equity attributable to the noncontrolling interests as of March 31, 2019, and during the three-month period following December 31, 2018 (in millions):


			Community Health Systems, Inc. Stockholders

	Redeemable Noncontrolling Interest		Common Stock		Additional Paid-In Capital		Accumulated Other Comprehensive Loss		Accumulated Deficit		Noncontrolling Interest		Total Stockholders’ Deficit
Balance, December 31, 2018	$	504	$	1	$	2,017	$	(10)	$	(3,543)	$	72	$	(1,463)
Comprehensive income (loss)		9		-		-		-		(118)		8		(110)
Contributions from noncontrolling interests		1		-		-		-		-		-		-
Distributions to noncontrolling interests		(19)		-		-		-		-		(8)		(8)
Purchase of subsidiary shares from noncontrolling interests		(1)		-		-		-		-		-		-
Other reclassifications of noncontrolling interests		(1)		-		-		-		-		1		1
Adjustment to redemption value of redeemable noncontrolling interests		12		-		(12)		-		-		-		(12)
Cancellation of restricted stock for tax withholdings on vested shares		-		-		(1)		-		-		-		(1)
Share-based compensation		-		-		3		-		-		-		3

Balance, March 31, 2019	$	505	$	1	$	2,007	$	(10)	$	(3,661)	$	73	$	(1,590)

The following schedule discloses the effects of changes in the Company’s ownership interest in its less-than-wholly-owned subsidiaries on Community Health Systems, Inc. stockholders’ deficit (in millions):


	Three Months Ended
	March 31,
	2020		2019
Net income (loss) attributable to Community Health Systems, Inc. stockholders	$	18	$	(118)
Transfers to the noncontrolling interests:
Net decrease in Community Health Systems, Inc.paid-in-capital for purchase of subsidiary partnership interests		(1)		-

Net transfers to the noncontrolling interests		(1)		-

Change to Community Health Systems, Inc. stockholders’ deficit from net income (loss) attributable to Community Health Systems, Inc. stockholders and transfers to noncontrolling interests	$	17	$	(118)

COMMUNITY HEALTH SYSTEMS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(UNAUDITED) – (Continued)

12. EARNINGS PER SHARE

The following table sets forth the components of the denominator for the computation of basic and diluted earnings per share for net income (loss) attributable to Community Health Systems, Inc. common stockholders:


	Three Months Ended
	March 31,

	2020		2019

Weighted-average number of shares outstanding — basic		114,301,519		113,257,608
Effect of dilutive securities:
Restricted stock awards		77,336		-
Employee stock options		476		-
Other equity-based awards		-		-

Weighted-average number of shares outstanding — diluted		114,379,331		113,257,608

The Company generated a loss attributable to Community Health Systems, Inc. common stockholders for the three months ended March 31, 2019, so the effect of ~~$1 million~~dilutive securities is not considered because their effect would be antidilutive. If the Company had generated income during the ~~six~~three months ended ~~June 30, 2018. There was no settlement loss during~~March 31, 2019, the ~~six months ended June 30, 2019.~~effect of restricted stock awards, employee stock options, and other equity-based awards on the diluted shares calculation would have been an increase in shares of 59,261.

~~15.~~


	Three Months Ended
	March 31,

	2020		2019

Dilutive securities outstanding not included in the computation of earnings per share because their effect is antidilutive:
Employee stock options and restricted stock awards		4,851,171		3,273,866

13. CONTINGENCIES

The Company is a party to various legal, regulatory and governmental proceedings incidental to its business. Based on current knowledge, management does not believe that loss contingencies arising from pending legal, regulatory and governmental matters, including the matters described herein, will have a material adverse effect on the condensed consolidated financial position or liquidity of the Company. However, in light of the inherent uncertainties involved in pending legal, regulatory and governmental matters, some of which are beyond the Company’s control, and the very large or indeterminate damages sought in some of these matters, an adverse outcome in one or more of these matters could be material to the Company’s results of operations or cash flows for any particular reporting period.

With respect to all legal, regulatory and governmental proceedings, the Company considers the likelihood of a negative outcome. If the Company determines the likelihood of a negative outcome with respect to any such matter is probable and the amount of the loss can be reasonably estimated, the Company records an accrual for the estimated loss for the expected outcome of the matter. If the likelihood of a negative outcome with respect to material matters is reasonably possible and the Company is able to determine an estimate of the possible loss or a range of loss, whether in excess of a related accrued liability or where there is no accrued liability, the Company discloses the estimate of the possible loss or range of loss. However, the Company is unable to estimate a possible loss or range of loss in some instances based on the significant uncertainties involved in, and/or the preliminary nature of, certain legal, regulatory and governmental matters.

COMMUNITY HEALTH SYSTEMS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(UNAUDITED) – (Continued)

In connection with thespin-off of Quorum Health Corporation (“QHC”), the Company agreed to indemnify QHC for certain liabilities relating to outcomes or events occurring prior to April 29, 2016, the closing date of thespin-off, including (i) certain claims and proceedings that were known to be outstanding at or prior to the consummation of thespin-off and involved multiple facilities and (ii) certain claims, proceedings and investigations by governmental authorities or private plaintiffs related to activities occurring at or related to QHC’s healthcare facilities prior to the closing date of thespin-off, but only to the extent, in the case of clause (ii), that such claims are covered by insurance policies maintained by the Company, including professional liability and employer practices. Notwithstanding the foregoing, the Company is not required to indemnify QHC in respect of any claims or proceedings arising out of or related to the business operations of Quorum Health Resources, LLC at any time or QHC’s compliance with the corporate integrity agreement. Subsequent to thespin-off of QHC, the Office of the Inspector General provided the Company with written assurance that it would look solely at QHC for compliance for its facilities under the Company’s Corporate Integrity Agreement; however, the Office of the Inspector General declined to enter into a separate corporate integrity agreement with QHC.

~~COMMUNITY HEALTH SYSTEMS, INC. AND SUBSIDIARIES~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~ ~~(UNAUDITED) – (Continued)~~

Probable Contingencies

Becker v. Community Health Systems, Inc. d/b/a Community Health Systems Professional Services Corporation d/b/a Community Health Systems d/b/a Community Health Systems PSC, Inc. d/b/a Rockwood Clinic P.S. and Rockwood Clinic, P.S. (Superior Court, Spokane, Washington). This suit was filed on February 29, 2012, by a former chief financial officer at Rockwood Clinic in Spokane, Washington. Becker claims he was wrongfully terminated for allegedly refusing to certify a budget for Rockwood Clinic in 2012. On February 29, 2012, he also filed an administrative complaint with the Department of Labor, Occupational Safety and Health Administration alleging that he is a whistleblower under Sarbanes-Oxley, which was dismissed by the agency and was appealed to an administrative law judge for a hearing that occurred on January19-26, 2016. In a decision dated November 9, 2016, the law judge awarded Becker approximately $1.9 million for front pay, back pay and emotional damages with attorney fees to be later determined. The Company has appealed the award to the Administrative Review Board and is awaiting its decision. At a hearing on July 27, 2012, the trial court dismissed Community Health Systems, Inc. from the state case and subsequently certified the state case for an interlocutory appeal of the denial to dismiss his employer and the management company. The appellate court accepted the interlocutory appeal, and it was argued on April 30, 2014. On August 14, 2014, the court denied the Company’s appeal. On October 20, 2014, the Company filed a petition to review the denial with the Washington Supreme Court. The appeal was accepted and oral argument was heard on June 9, 2015. On September 15, 2015, the court denied the Company’s appeal and remanded to the trial court; a previous trial setting of September 12, 2016 has been vacated and not reset. On October 15, 2019, the Administrative Review Board released an order to show cause requiring Becker to file a brief to show cause why the Administrative Review Board should not remand the previous administrative decision for a new hearing before a new law judge. The ~~Company continues to vigorously defend these actions.~~

~~The table below presents a reconciliation of~~parties have settled this case for an immaterial amount and both the beginning and ending liability balances (in millions) during the six months ended June 30, 2019, with respect to the Company’s determination of the contingencies of the Company in respect of which an accrual has been recorded.

~~Summary of Recorded Amounts~~


	~~Probable~~
	~~Contingencies~~
~~Balance as of December 31, 2018~~	$	19
~~Expense~~		3
~~Reserve for insured claim~~		-
~~Cash payments~~		(5	)

~~Balance as of June 30, 2019~~	$	17

In accordance with applicable accounting guidance, the Company establishes a liability for litigation, regulatory and governmental matters for which, based on information currently available, the Company believes that a negative outcome is known or is probableadministrative action and the ~~amount of the loss is reasonably estimable. For all such matters (whether or not discussed in this contingencies footnote), such amounts~~Superior Court case have been recorded in other accrued liabilities on the condensed consolidated balance sheet and are included in the table above. Due to the uncertainties and difficulty in predicting the ultimate resolution of these contingencies, the actual amount could differ from the estimated amount reflected as a liability on the condensed consolidated balance sheet.

In the aggregate, attorneys’ fees and other costs incurred but not included in the table above related to probable contingencies, totaled $2 million and less than $1 million for the three month ended June 30, 2019 and 2018, respectively, and $4 million and $1 million for the six month ended June 30, 2019 and 2018, respectively, and are included in other operating expenses in the accompanying condensed consolidated statements of loss.dismissed.

~~Matters for which an Outcome Cannot be Assessed~~

For the following legal matter, due to the uncertainties surrounding the ultimate outcome of the case, the Company cannot at this time assess what the outcome may be and is further unable to determine any estimate of loss or range of loss.

~~COMMUNITY HEALTH SYSTEMS, INC. AND SUBSIDIARIES~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~ ~~(UNAUDITED) – (Continued)~~

2011 Class Action Shareholder Federal Securities Cases. Three purported class action cases have been filed in the United States District Court for the Middle District of Tennessee; namely, Norfolk County Retirement System v. Community Health Systems, Inc., et al., filed May 9, 2011; De Zheng v. Community Health Systems, Inc., et al., filed May 12, 2011; and Minneapolis Firefighters Relief Association v. Community Health Systems, Inc., et al., filed June 21, 2011. All three seek class certification on behalf of purchasers of the Company’s common stock between July 27, 2006 and April 11, 2011 and allege that misleading statements resulted in artificially inflated prices for the Company’s common stock. In December 2011, the cases were consolidated for pretrial purposes and NYC Funds and its counsel were selected as lead plaintiffs/lead plaintiffs’ counsel. In lieu of ruling on the Company’s motion to dismiss, the court permitted the plaintiffs to file a first amended consolidated class action complaint, which was filed on October 5, 2015. The Company’s motion to dismiss was filed on November 4, 2015 and oral argument was held on April 11, 2016. The Company’s motion to dismiss was granted on June 16, 2016 and on June 27, 2016, the plaintiffs filed a notice of appeal to the Sixth Circuit Court of Appeals. The matter was heard on May 3, 2017. On December 13, 2017, the Sixth Circuit reversed the trial court’s dismissal of the case and remanded it to the District Court. The Company filed a renewed partial motion to dismiss on February 9, 2018, which was denied by the District Court on September 24, 2018. The Company also filed a petition for a writ of certiorari to the United States Supreme Court on April 18, 2018 seeking review of the Sixth Circuit’s decision. The United States Supreme Court denied the petition for a writ of certiorari on October 1, 2018. The District Court granted the Plaintiff’s motion for class certification on July 26, 2019. The Company ~~believes~~filed a petition for permission to appeal the District Court’s class certification order in the Sixth Circuit Court of Appeals on August 9, 2019, and that petition was denied on October 23, 2019. Trial for this ~~consolidated~~ matter is ~~without merit and will vigorously defend this case.~~

~~16. SUBSEQUENT EVENTS~~

set for December 1, 2020. On ~~August 1, 2019, one or more subsidiaries of~~January 21, 2020, the Company ~~sold Tennova Healthcare - Lebanon (245 licensed beds) in Lebanon, Tennessee,~~ and ~~its associated assets to~~the Plaintiff filed a ~~subsidiary~~stipulation of ~~Vanderbilt University Medical Center pursuant~~settlement indicating to the District Court that the parties had reached agreement on the principal terms of a ~~definitive agreement~~settlement for $53 million. The settlement received preliminary approval from the District Court on January 30, 2020. Objections to the settlement are due May 18, 2020, and the hearing for final approval of the settlement is set for June 19, 2020. The Company’s $53 million reserve for this matter, which was ~~entered into on~~recorded during the three months ended December 31, 2019, remains as of March ~~29, 2019.~~

~~On August 1, 2019, one or more subsidiaries~~31, 2020, pending final approval of the Company sold College Station Medical Center (167 licensed beds) in College Station, Texas, and its associated assets to a subsidiary of St. Joseph Regional Health Center pursuant to the terms of a definitive agreement which was entered into on May 23, 2019.

On August 1, 2019, one or more subsidiaries of the Company sold a 50% ownership interest in Merit Health Madison (67 licensed beds) and its associated healthcare businesses in Canton, Mississippi to HMC Madison, Inc., a Mississippi corporation owned by the Healthier Mississippi Collaborative, which is a~~non-profit~~ ~~company affiliated with the University of Mississippi Medical Center, pursuant to the terms of a definitive agreement which was entered into on July 2, 2019.~~settlement. The proposed

COMMUNITY HEALTH SYSTEMS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(UNAUDITED) – (Continued)

~~17. SUPPLEMENTAL~~settlement amount has been funded by the Company and is held in escrow as of March 31, 2020. Such amount is recorded in other current assets in the condensed consolidated balance sheet.

The table below presents a reconciliation of the beginning and ending liability balances (in millions) during the three months ended March 31, 2020, with respect to the Company’s determination of the contingencies of the Company in respect of which an accrual has been recorded.

Summary of Recorded Amounts


	Probable
	Contingencies

Balance as of December 31, 2019	$	68
Expense		-
Reserve for insured claim		7
Cash payments		(7)

Balance as of March 31, 2020	$	68

In accordance with applicable accounting guidance, the Company establishes a liability for litigation, regulatory and governmental matters for which, based on information currently available, the Company believes that a negative outcome is known or is probable and the amount of the loss is reasonably estimable. For all such matters (whether or not discussed in this contingencies footnote), such amounts have been recorded in other accrued liabilities on the condensed consolidated balance sheet and are included in the table above. Due to the uncertainties and difficulty in predicting the ultimate resolution of these contingencies, the actual amount could differ from the estimated amount reflected as a liability on the condensed consolidated balance sheet.

In the aggregate, attorneys’ fees and other costs incurred but not included in the table above related to probable contingencies, and Contingent Value Right-related contingencies accounted for at fair value totaled $2 million and less than $1 million for the three month ended March 31, 2020 and 2019, respectively, and are included in other operating expenses in the accompanying condensed consolidated statements of income (loss).

Matters for which an Outcome Cannot be Assessed

Steadfast Insurance Company, et al v. Community Health Systems, Inc., CHS/Community Health Systems, Inc., CHSPSC, LLC and Pecos Valley of New Mexico, LLC; Community Health Systems, Inc., et al v. Steadfast Insurance Company, et al.These cases are filed in the Superior Court for the State of Delaware and the Chancery Court for the State of Delaware, respectively, and involve insurance coverage disputes related to a $73 million judgment rendered against Pecos Valley of New Mexico, LLC inAnne Sperling, et al v. Pecos Valley of New Mexico, LLC. The first case was brought by Steadfast Insurance Company in Delaware Superior Court seeking a declaration that theSperlingjudgment is not a covered loss as defined by the insurance policies that are the subject of the case. The second case, filed by the Company in Delaware Chancery Court, seeks reformation of the subject policies. TheSteadfast complaint was served on November 30, 2018. On December 13, 2018, Admiral Insurance Company, Endurance Specialty Insurance Ltd, and Illinois Union Insurance Company moved to intervene in the suit as petitioners. The Company has initiated counterclaims against each insurer in that case, including for bad faith against Steadfast. The Company filed theCommunity Health Systems complaint on January 22, 2020. TheSperlingjudgment against Pecos Valley of New Mexico, LLC, which is the subject of this litigation and which was rendered on September 5, 2018, in First Judicial Court of the State of New Mexico, is currently on appeal to the Court of Appeals of New Mexico. Trial of theSteadfast matter is set for December 7, 2020. The Company believes the insurers’ claims in theSteadfast litigation are without merit and will vigorously defend the case.

COMMUNITY HEALTH SYSTEMS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED ~~CONSOLIDATING~~CONSOLIDATED FINANCIAL STATEMENTS(UNAUDITED) – (Continued)

14. SUBSEQUENT EVENTS

On April 20, 2020, one or more affiliates of the Company entered into a definitive agreement for the sale of substantially all of the assets of San Angelo Community Medical Center (171 licensed beds) in San Angelo, Texas to affiliates of Shannon Health System.

On April 27, 2020, one or more affiliates of the Company entered into a definitive agreement for the sale of substantially all of the assets of each of Abilene Regional Medical Center (231 licensed beds) in Abilene, Texas and Brownwood Regional Medical Center (188 licensed beds) in Brownwood, Texas to subsidiaries of Hendrick Health System.

On April 27, 2020, one or more affiliates of the Company entered into a definitive agreement for the sale of the majority ownership interest in St. Cloud Regional Medical Center (84 licensed beds) in St. Cloud, Florida to affiliates of Orlando Health, Inc., who already hold the minority ownership interest.

The CARES Act, which was enacted on March 27, 2020, authorizes $100 billion in funding to hospitals and other healthcare providers to be distributed through the Public Health and Social Services Emergency Fund (the “PHSSEF”). Payments from the PHSSEF are intended to compensate healthcare providers for lost revenues and incremental expenses incurred in response to theCOVID-19 pandemic and are not required to be repaid provided the recipients attest to and comply with certain terms and conditions, including limitations on balance billing and not using PHSSEF funds to reimburse expenses or losses that other sources are obligated to reimburse. The U.S. Department of Health and Human Services (the “HHS”) initially distributed $30 billion of this funding based on each provider’s share of total Medicarefee-for-service reimbursement in 2019, but has announced that $50 billion in CARES Act funding (including the $30 billion already distributed) will be allocated proportional to providers’ share of 2018 net patient revenue. HHS has indicated that distributions of the remaining $50 billion will be targeted primarily to hospitals inCOVID-19 high impact areas, to rural providers, and to reimburse providers forCOVID-19-related treatment of uninsured patients. In April 2020, the Company received approximately $245 million in payments from the initial PHSSEF payments, which did not qualify for recognition during the three months ended March 31, 2020.

An additional $75 billion in emergency appropriations forCOVID-19 response will be available to eligible providers under the Paycheck Protection Program and Health Care Enhancement Act (“PPPHCE Act”), which was enacted on April 24, 2020. These funds will also be distributed through the PHSSEF. Recipients will not be required to repay the amounts received, provided they comply with terms and conditions, which have not yet been finalized.

As a way to increase cash flow to Medicare providers impacted by theCOVID-19 pandemic, the CARES Act expanded the Medicare Accelerated and Advance Payment Program. Inpatient acute care hospitals may request accelerated payments of up to 100% of the Medicare payment amount for asix-month period (not including Medicare Advantage payments), although CMS is now reevaluating pending and new applications in light of direct payments made available through PHSSEF. CMS will base payment amounts for inpatient acute care hospitals on the provider’s Medicarefee-for-service reimbursements in the last six months of 2019. Such accelerated payments are interest free for inpatient acute care hospitals for 12 months, and the program currently requires CMS to recoup the payments beginning 120 days after receipt by the provider, by withholding future Medicarefee-for-service payments for claims until the full accelerated payment has been recouped. The program currently requires any outstanding balance remaining after 12 months to be repaid by the provider or be subject to an interest rate currently set at 10.25%. In April 2020, the Company received approximately $1.2 billion of accelerated payments, which did not qualify for recognition during the three months ended March 31, 2020.

Lastly, the CARES Act provides for deferred 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. The Company began deferring the employer portion of social security taxes inmid-April 2020.

COMMUNITY HEALTH SYSTEMS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(UNAUDITED) – (Continued)

15. SUMMARIZED FINANCIAL INFORMATION

The 6⁷⁄₈% Senior Notes due ~~2019, 2020 and~~ 2022, which are senior unsecured obligations of CHS, ~~the 5~~¹⁄₈~~% Senior Secured Notes due 2021,~~ and the 6¹⁄₄% Senior Secured Notes due 2023, which are senior secured obligations of CHS (collectively, “the Notes”) are guaranteed on a senior basis by the Company and by certain of its existing and subsequently acquired or organized 100% owned domestic ~~subsidiaries.~~subsidiaries (collectively, the “subsidiary guarantors”). In addition, equity interests held by the Company innon-guarantor subsidiaries have been pledged as collateral under the Notes, except for equity interests held in three hospitals owned jointly with anon-profit, health organization. The Notes are fully and unconditionally guaranteed on a joint and several basis, with exceptions considered customary for such guarantees, limited to the release of the guarantee when a subsidiary guarantor’s capital stock is sold, or a sale of all of the subsidiary guarantor’s assets used in operations. ~~The following condensed consolidating~~There are no significant restrictions on the ability of the subsidiary guarantors to make distributions to the issuer. Summarized financial ~~statements present~~information is provided for Community Health Systems, Inc. ~~(as parent~~(parent guarantor), CHS ~~(as the issuer),~~(issuer) and the subsidiary guarantors ~~the subsidiarynon-guarantors~~ ~~and eliminations. These condensed consolidating financial statements have been prepared and presented~~on a combined basis in accordance with SEC Regulation~~Regulation S-XRule~~ S-X Rules3-10 ~~“Financial Statements of Guarantors~~ and ~~Issuers of Guaranteed Securities Registered or Being Registered.”~~13-01.

The accounting policies used in the preparation of this summarized financial information are consistent with those elsewhere in the condensed consolidated financial statements of the Company, except ~~as noted below:~~

~~Intercompany receivables and payables are presented gross in the supplemental condensed consolidating balance sheets.~~

~~Cash flows from~~that intercompany transactions ~~are presented in cash flows from financing activities, as changes in intercompany~~and balances ~~with affiliates, net.~~

~~Income tax expense is allocated from~~of the parent, issuer and subsidiary guarantor ~~to the income producing operations (other guarantors and~~entities with~~non-guarantors)~~non-guarantors ~~and the issuer through stockholders’ deficit. As this approach represents an allocation, the income tax expense allocation is considered~~entities have not been eliminated. Equity in earnings from investments in~~non-cash~~non-guarantors ~~for statement of cash flow purposes.~~

~~Interest expense, net~~entities has not been ~~presented to reflect net interest expense and interest income from outstanding long-term debt and intercompany balances.~~

The Company’s intercompany activity consists primarily of daily cash transfers for purposes of cash management, the allocation of certain expenses and expenditures paid for by the Parent on behalf of its subsidiaries, and the push down of investment in its subsidiaries. This activity also includes the intercompany transactions between consolidated entities as part of the ABL Facility and Receivables Facility that are further discussed in Note 10. The Company’s subsidiaries generally do not purchase services from one another; thus, the intercompany transactions do not represent revenue generating transactions. All intercompany transactions eliminate in consolidation.presented.

From time to time, subsidiaries of the Company sell and/or repurchase noncontrolling interests in consolidated subsidiaries, which may change subsidiaries between guarantors andnon-guarantors. Amounts for prior periods have been revised to reflect the status of guarantors andnon-guarantors as of ~~June 30, 2019.~~

March 31, 2020.

~~COMMUNITY HEALTH SYSTEMS, INC. AND SUBSIDIARIES~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~ ~~(UNAUDITED) – (Continued)~~Summarized statements of income (loss) (in millions):


	Three Months Ended
	March 31, 2020
Net operating revenues	$	1,996
Income from operations		249
Net income		86
Net income attributable to Community Health Systems, Inc. Stockholders		86

~~Condensed Consolidating Statement of Loss~~

~~Three Months Ended June 30, 2019~~Summarized balance sheets (in millions):

   Parent
  Guarantor          Issuer        Other
  Guarantors      Non -
  Guarantors      Eliminations    Consolidated
   (In millions)
Net operating revenues
   $ -    $ 1    $ 2,010    $ 1,291    $ -    $ 3,302
Operating costs and expenses:

Salaries and benefits
   -    -    766    722    -    1,488
Supplies
   -    -    351    188    -    539
Other operating expenses
   -    22    592    279    -    893
Government and other legal settlements and related costs
   -    -    4    -    -    4
Lease cost and rent
   -    -    43    38    -    81
Depreciation and amortization
   -    -    93    60    -    153
Impairment and (gain) loss on sale of businesses, net
   -    (2)    21    14    -    33












Total operating costs and expenses
   -    20    1,870    1,301    -    3,191












(Loss) income from operations
   -    (19)    140    (10)    -    111
Interest expense, net
   -    157    127    (19)    -    265
Equity in earnings of unconsolidated affiliates
   167    (7)    12    -    (177)    (5)












(Loss) income before income taxes
   (167)    (169)    1    9    177    (149)
(Benefit from) provision for income taxes
   -    (2)    (2)    1    -    (3)












Net (loss) income
   (167)    (167)    3    8    177    (146)
Less: Net income attributable to noncontrolling interests
   -    -    -    21    -    21












Net (loss) income attributable to Community Health Systems, Inc. stockholders
   $ (167)    $ (167)    $ 3    $ (13)    $ 177    $ (167)

~~COMMUNITY HEALTH SYSTEMS, INC. AND SUBSIDIARIES~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~ ~~(UNAUDITED) – (Continued)~~


	March 31, 2020		December 31, 2019
Current assets	$	2,469	$	2,464
Noncurrent assets (a)		14,450		14,596
Current liabilities		1,413		1,472
Noncurrent liabilities (b)		17,330		15,800

~~Condensed Consolidating Statement of Loss~~

~~Three Months Ended June 30, 2018~~
(a)
Includes amounts due fromnon-guarantor subsidiaries of $6.5 billion at both March 31, 2020 and December 31, 2019.

   Parent
  Guarantor          Issuer        Other
  Guarantors      Non -
  Guarantors      Eliminations    Consolidated
   (In millions)
Net operating revenues
   $ -    $ (2)    $ 2,182    $ 1,382    $ -    $ 3,562
Operating costs and expenses:

Salaries and benefits
   -    -    833    784    -    1,617
Supplies
   -    -    388    204    -    592
Other operating expenses
   -    -    577    302    -    879
Government and other legal settlements and related costs
   -    -    1    -    -    1
Lease cost and rent
   -    -    44    41    -    85
Depreciation and amortization
   -    -    113    64    -    177
Impairment and (gain) loss on sale of businesses, net
   -    14    4    156    -    174












Total operating costs and expenses
   -    14    1,960    1,551    -    3,525












(Loss) income from operations
   -    (16)    222    (169)    -    37
Interest expense, net
   -    98    145    (8)    -    235
(Gain) loss from early extinguishment of debt
   -    (65)    1    -    -    (64)
Equity in earnings of unconsolidated affiliates
   110    116    192    -    (423)    (5)












Loss before income taxes
   (110)    (165)    (116)    (161)    423    (129)
(Benefit from) provision for income taxes
   -    (55)    4    13    -    (38)












Net loss
   (110)    (110)    (120)    (174)    423    (91)
Less: Net income attributable to noncontrolling interests
   -    -    -    19    -    19












Net loss attributable to Community Health Systems, Inc. stockholders
   $ (110)    $ (110)    $ (120)    $ (193)    $ 423    $ (110)

~~COMMUNITY HEALTH SYSTEMS, INC. AND SUBSIDIARIES~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~ ~~(UNAUDITED) – (Continued)~~

~~Condensed Consolidating Statement of Loss~~

~~Six Months Ended June 30, 2019~~

   Parent
  Guarantor          Issuer        Other
  Guarantors      Non -
  Guarantors      Eliminations    Consolidated
   (In millions)
Net operating revenues
   $ -    $ 44    $ 4,083    $ 2,552    $ -    $ 6,679
Operating costs and expenses:

Salaries and benefits
   -    -    1,567    1,463    -    3,030
Supplies
   -    -    724    373    -    1,097
Other operating expenses
   -    22    1,122    560    -    1,704
Government and other legal settlements and related costs
   -    -    9    -    -    9
Lease cost and rent
   -    -    84    78    -    162
Depreciation and amortization
   -    -    186    119    -    305
Impairment and (gain) loss on sale of businesses, net
   -    (2)    45    28    -    71












Total operating costs and expenses
   -    20    3,737    2,621    -    6,378












Income (loss) from operations
   -    24    346    (69)    -    301
Interest expense, net
   -    296    263    (37)    -    522
Loss from early extinguishment of debt
   -    31    -    -    -    31
Equity in earnings of unconsolidated affiliates
   285    (9)    90    -    (375)    (9)












Loss before income taxes
   (285)    (294)    (7)    (32)    375    (243)
(Benefit from) provision for income taxes
   -    (9)    (4)    16    -    3












Net loss
   (285)    (285)    (3)    (48)    375    (246)
Less: Net income attributable to noncontrolling interests
   -    -    -    39    -    39












Net loss attributable to Community Health Systems, Inc. stockholders
   $ (285)    $ (285)    $ (3)    $ (87)    $ 375    $ (285)

~~COMMUNITY HEALTH SYSTEMS, INC. AND SUBSIDIARIES~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~ ~~(UNAUDITED) – (Continued)~~

~~Condensed Consolidating Statement of Loss~~

~~Six Months Ended June 30, 2018~~

   Parent
  Guarantor          Issuer        Other
  Guarantors      Non -
  Guarantors      Eliminations    Consolidated
   (In millions)
Net operating revenues
   $ -    $ (8)    $ 4,467    $ 2,792    $ -    $ 7,251
Operating costs and expenses:

Salaries and benefits
   -    -    1,680    1,585    -    3,265
Supplies
   -    -    793    415    -    1,208
Other operating expenses
   -    -    1,184    605    -    1,789
Government and other legal settlements and related costs
   -    -    7    -    -    7
Electronic health records incentive reimbursement
   -    -    -    (1)    -    (1)
Lease cost and rent
   -    -    90    83    -    173
Depreciation and amortization
   -    -    229    129    -    358
Impairment and (gain) loss on sale of businesses, net
   -    14    20    168    -    202












Total operating costs and expenses
   -    14    4,003    2,984    -    7,001












Loss from operations
   -    (22)    464    (192)    -    250
Interest expense, net
   -    189    288    (13)    -    464
(Gain) loss from early extinguishment of debt
   -    (61)    2    -    -    (59)
Equity in earnings of unconsolidated affiliates
   135    82    214    -    (443)    (12)












Loss from income taxes
   (135)    (232)    (40)    (179)    443    (143)
(Benefit from) provision for income taxes
   -    (97)    48    4    -    (45)












Net loss
   (135)    (135)    (88)    (183)    443    (98)
Less: Net income attributable to noncontrolling interests
   -    -    -    37    -    37












Net loss attributable to Community Health Systems, Inc. stockholders
   $ (135)    $ (135)    $ (88)    $ (220)    $ 443    $ (135)

~~COMMUNITY HEALTH SYSTEMS, INC. AND SUBSIDIARIES~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~ ~~(UNAUDITED) – (Continued)~~

~~Condensed Consolidating Statement of Comprehensive Loss~~

~~Three Months Ended June 30, 2019~~

   Parent
Guarantor    Issuer    Other
Guarantors    Non -
Guarantors    Eliminations    Consolidated
   (In millions)
Net (loss) income
   $ (167)    $ (167)    $ 3    $ 8    $ 177    $ (146)
Other comprehensive income (loss), net of income taxes:

Net change in fair value of interest rate swaps, net of tax
   -    -    -    -    -    -
Net change in fair value ofavailable-for-sale securities, net of tax
   2    2    2    -    (4)    2
Amortization and recognition of unrecognized pension cost components, net of tax
   -    -    -    -    -    -












Other comprehensive income (loss)
   2    2    2    -    (4)    2












Comprehensive (loss) income
   (165)    (165)    5    8    173    (144)
Less: Comprehensive income attributable to noncontrolling interests
   -    -    -    21    -    21












Comprehensive (loss) income attributable to Community Health Systems, Inc. stockholders
   $ (165)    $ (165)    $ 5    $ (13)    $ 173    $ (165)

~~Condensed Consolidating Statement of Comprehensive Loss~~

~~Three Months Ended June 30, 2018~~

   Parent
Guarantor    Issuer    Other
Guarantors    Non -
Guarantors    Eliminations    Consolidated
   (In millions)
Net loss
   $ (110)    $ (110)    $ (120)    $ (174)    $ 423    $ (91)
Other comprehensive income (loss), net of income taxes:

Net change in fair value of interest rate swaps, net of tax
   7    7    -    -    (7)    7
Net change in fair value ofavailable-for-sale securities, net of tax
   (1)    (1)    (1)    -    2    (1)
Amortization and recognition of unrecognized pension cost components, net of tax
   1    1    1    -    (2)    1












Other comprehensive income
   7    7    -    -    (7)    7












Comprehensive loss
   (103)    (103)    (120)    (174)    416    (84)
Less: Comprehensive income attributable to noncontrolling interests
   -    -    -    19    -    19












Comprehensive loss attributable to Community Health Systems, Inc. stockholders
   $ (103)    $ (103)    $ (120)    $ (193)    $ 416    $ (103)

~~COMMUNITY HEALTH SYSTEMS, INC. AND SUBSIDIARIES~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~ ~~(UNAUDITED) – (Continued)~~

~~Condensed Consolidating Statement of Comprehensive Loss~~

~~Six Months Ended June 30, 2019~~

   Parent
Guarantor    Issuer    Other
Guarantors    Non -
Guarantors    Eliminations    Consolidated
   (In millions)
Net loss
   $ (285)    $ (285)    $ (3)    $ (48)    $ 375    $ (246)
Other comprehensive (loss) income, net of income taxes:

Net change in fair value of interest rate swaps, net of tax
   (2)    (2)    -    -    2    (2)
Net change in fair value ofavailable-for-sale securities, net of tax
   4    4    4    -    (8)    4
Amortization and recognition of unrecognized pension cost components, net of tax
   -    -    -    -    -    -












Other comprehensive income
   2    2    4    -    (6)    2












Comprehensive (loss) income
   (283)    (283)    1    (48)    369    (244)
Less: Comprehensive income attributable to noncontrolling interests
   -    -    -    39    -    39












Comprehensive (loss) income attributable to Community Health Systems, Inc. stockholders
   $ (283)    $ (283)    $ 1    $ (87)    $ 369    $ (283)

~~Condensed Consolidating Statement of Comprehensive Loss~~

~~Six Months Ended June 30, 2018~~

   Parent
Guarantor    Issuer    Other
Guarantors    Non -
Guarantors    Eliminations    Consolidated
   (In millions)
Net loss
   $ (135)    $ (135)    $ (88)    $ (183)    $ 443    $ (98)
Other comprehensive income (loss), net of income taxes:

Net change in fair value of interest rate swaps, net of tax
   25    25    -    -    (25)    25
Net change in fair value ofavailable-for-sale securities, net of tax
   (2)    (2)    (2)    -    4    (2)
Amortization and recognition of unrecognized pension cost components, net of tax
   1    1    1    -    (2)    1












Other comprehensive income (loss)
   24    24    (1)    -    (23)    24












Comprehensive loss
   (111)    (111)    (89)    (183)    420    (74)
Less: Comprehensive income attributable to noncontrolling interests
   -    -    -    37    -    37












Comprehensive loss attributable to Community Health Systems, Inc. stockholders
   $ (111)    $ (111)    $ (89)    $ (220)    $ 420    $ (111)

~~COMMUNITY HEALTH SYSTEMS, INC. AND SUBSIDIARIES~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~ ~~(UNAUDITED) – (Continued)~~

~~Condensed Consolidating Balance Sheet~~

~~June 30, 2019~~

   Parent
Guarantor    Issuer    Other
Guarantors    Non -
Guarantors    Eliminations    Consolidated
   (In millions)
   ASSETS
Current assets:

Cash and cash equivalents
     $ -      $ -      $ 163      $ 44      $ -      $ 207
Patient accounts receivable
   -    -    1,949    407    -    2,356
Supplies
   -    -    241    137    -    378
Prepaid income taxes
   -    -    -    -    -    -
Prepaid expenses and taxes
   -    -    128    49    -    177
Other current assets
   -    -    112    254    -    366












Total current assets
   -    -    2,593    891    -    3,484












Intercompany receivable
   -    12,552    4,791    6,161    (23,504)    -












Property and equipment, net
   -    -    3,802    2,132    -    5,934












Goodwill
   -    -    2,692    1,802    -    4,494












Deferred income taxes
   57    -    -    -    -    57












Other assets, net
   -    -    1,255    908    -    2,163












Net investment in subsidiaries
   -    22,182    11,867    -    (34,049)    -












Total assets
     $ 57      $ 34,734      $ 27,000      $ 11,894      $ (57,553)      $ 16,132












   LIABILITIES AND DEFICIT
Current liabilities:

Current maturities of long-term debt
     $ -      $ 155      $ 26      $ 25      $ -      $ 206
Current operating lease liabilities
   -    -    72    61    -    133
Accounts payable
   -    -    507    305    -    812
Accrued interest
   -    388    -    -    -    388
Accrued liabilities
   -    1    522    441    -    964












Total current liabilities
   -    544    1,127    832    -    2,503












Long-term debt
   -    13,173    144    76    -    13,393












Intercompany payable
   1,863    22,762    24,639    11,759    (61,023)    -












Deferred income taxes
   26    -    -    -    -    26












Long-term operating lease liabilities
   -    -    234    245    -    479












Other long-term liabilities
   1    3    720    263    -    987












Total liabilities
   1,890    36,482    26,864    13,175    (61,023)    17,388












Redeemable noncontrolling interests in equity of consolidated subsidiaries
   -    -    -    503    -    503












Deficit:

Community Health Systems, Inc. stockholders’ deficit:

Common stock
   1    -    -    -    -    1
Additionalpaid-in capital
   2,002    (393)    161    (586)    818    2,002
Accumulated other comprehensive loss
   (8)    (8)    (10)    -    18    (8)
(Accumulated deficit) retained earnings
   (3,828)    (1,347)    (15)    (1,272)    2,634    (3,828)












Total Community Health Systems, Inc. stockholders’ (deficit) equity
   (1,833)    (1,748)    136    (1,858)    3,470    (1,833)
Noncontrolling interests in equity of consolidated subsidiaries
   -    -    -    74    -    74












Total (deficit) equity
   (1,833)    (1,748)    136    (1,784)    3,470    (1,759)












Total liabilities and deficit
     $ 57      $ 34,734      $ 27,000      $ 11,894      $ (57,553)      $ 16,132

~~COMMUNITY HEALTH SYSTEMS, INC. AND SUBSIDIARIES~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~ ~~(UNAUDITED) – (Continued)~~

~~Condensed Consolidating Balance Sheet~~

~~December 31, 2018~~

   Parent
Guarantor    Issuer    Other
Guarantors    Non -
Guarantors    Eliminations    Consolidated
   (In millions)
   ASSETS
Current assets:

Cash and cash equivalents
     $ -      $ -      $ 135      $ 61      $ -      $ 196
Patient accounts receivable
   -    -    1,974    378    -    2,352
Supplies
   -    -    262    140    -    402
Prepaid income taxes
   3    -    -    -    -    3
Prepaid expenses and taxes
   -    -    132    64    -    196
Other current assets
   -    -    132    268    -    400












Total current assets
   3    -    2,635    911    -    3,549












Intercompany receivable
   -    12,696    4,895    6,314    (23,905)    -












Property and equipment, net
   -    -    3,994    2,145    -    6,139












Goodwill
   -    -    2,760    1,799    -    4,559












Deferred income taxes
   69    -    -    -    -    69












Other assets, net
   -    25    958    560    -    1,543












Net investment in subsidiaries
   -    21,642    11,617    -    (33,259)    -












Total assets
     $ 72      $ 34,363      $ 26,859      $ 11,729      $ (57,164)      $ 15,859












   LIABILITIES AND DEFICIT
Current liabilities:

Current maturities of long-term debt
     $ -      $ 155      $ 22      $ 27      $ -      $ 204
Accounts payable
   -    -    595    292    -    887
Accrued interest
   -    206    -    -    -    206
Accrued liabilities
   -    -    638    457    -    1,095












Total current liabilities
   -    361    1,255    776    -    2,392












Long-term debt
   -    13,167    147    78    -    13,392












Intercompany payable
   1,572    22,299    24,599    11,796    (60,266)    -












Deferred income taxes
   26    -    -    -    -    26












Other long-term liabilities
   9    2    714    283    -    1,008












Total liabilities
   1,607    35,829    26,715    12,933    (60,266)    16,818












Redeemable noncontrolling interests in equity of consolidated subsidiaries
   -    -    -    504    -    504












Deficit:

Community Health Systems, Inc. stockholders’ deficit:

Common stock
   1    -    -    -    -    1
Additionalpaid-in capital
   2,017    (329)    162    (565)    732    2,017
Accumulated other comprehensive loss
   (10)    (10)    (5)    (9)    24    (10)
(Accumulated deficit) retained earnings
   (3,543)    (1,127)    (13)    (1,206)    2,346    (3,543)












Total Community Health Systems, Inc. stockholders’ (deficit) equity
   (1,535)    (1,466)    144    (1,780)    3,102    (1,535)
Noncontrolling interests in equity of consolidated subsidiaries
   -    -    -    72    -    72












Total (deficit) equity
   (1,535)    (1,466)    144    (1,708)    3,102    (1,463)












Total liabilities and deficit
     $ 72      $ 34,363      $ 26,859      $ 11,729      $ (57,164)      $ 15,859

~~COMMUNITY HEALTH SYSTEMS, INC. AND SUBSIDIARIES~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~ ~~(UNAUDITED) – (Continued)~~

~~Condensed Consolidating Statement of Cash Flows~~

~~Six Months Ended June 30, 2019~~

   Parent       Other    Non -
   Guarantor    Issuer    Guarantors    Guarantors    Eliminations    Consolidated
   (In millions)
Net cash provided by (used in) operating activities
     $ 4      $ (67)      $ 210      $ 118      $ -      $ 265












Cash flows from investing activities:

Acquisitions of facilities and other related businesses
   -    -    (6)    (7)    -    (13)
Purchases of property and equipment
   -    -    (176)    (36)    -    (212)
Proceeds from disposition of hospitals and other ancillary operations
   -    18    135    8    -    161
Proceeds from sale of property and equipment
   -    -    -    1    -    1
Purchases ofavailable-for-sale securities and equity securities
   -    -    (15)    (24)    -    (39)
Proceeds from sales ofavailable-for-sale securities and equity securities
   -    -    25    27    -    52
Increase in other investments
   -    -    (63)    (34)    -    (97)












Net cash provided by (used in) investing activities
   -    18    (100)    (65)    -    (147)












Cash flows from financing activities:

Repurchase of restricted stock shares for payroll tax withholding requirements
   (1)    -    -    -    -    (1)
Deferred financing costs and other debt-related costs
   -    (28)    -    -    -    (28)
Proceeds from noncontrolling investors in joint ventures
   -    -    -    2    -    2
Redemption of noncontrolling investments in joint ventures
   -    -    -    (2)    -    (2)
Distributions to noncontrolling investors in joint ventures
   -    -    -    (57)    -    (57)
Changes in intercompany balances with affiliates, net
   (3)    94    (82)    (9)    -    -
Borrowings under credit agreements
   -    -    23    -    -    23
Issuance of long-term debt
   -    2,034    -    -    -    2,034
Proceeds from ABL facility
   -    25    -    -    -    25
Repayments of long-term indebtedness
   -    (2,076)    (23)    (4)    -    (2,103)












Net cash (used in) provided by financing activities
   (4)    49    (82)    (70)    -    (107)












Net change in cash and cash equivalents
   -    -    28    (17)    -    11
Cash and cash equivalents at beginning of period
   -    -    135    61    -    196












Cash and cash equivalents at end of period
     $ -      $ -      $ 163      $ 44      $ -      $ 207

~~COMMUNITY HEALTH SYSTEMS, INC. AND SUBSIDIARIES~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~ ~~(UNAUDITED) – (Continued)~~

~~Condensed Consolidating Statement of Cash Flows~~

~~Six Months Ended June 30, 2018~~

   Parent       Other    Non -
   Guarantor    Issuer    Guarantors    Guarantors    Eliminations    Consolidated
   (In millions)
Net cash provided by (used in) operating activities
     $ 37      $ (228)      $ 94      $ 191      $ -      $ 94












Cash flows from investing activities:

Acquisitions of facilities and other related businesses
   -    -    (3)    (7)    -    (10)
Purchases of property and equipment
   -    -    (213)    (82)    -    (295)
Proceeds from disposition of hospitals and other ancillary operations
   -    -    12    76    -    88
Proceeds from sale of property and equipment
   -    -    1    3    -    4
Purchases ofavailable-for-sale securities and equity securities
   -    -    (25)    (13)    -    (38)
Proceeds from sales ofavailable-for-sale securities and equity securities
   -    -    50    13    -    63
Increase in other investments
   -    -    (24)    (29)    -    (53)












Net cash used in investing activities
   -    -    (202)    (39)    -    (241)












Cash flows from financing activities:

Repurchase of restricted stock shares for payroll tax withholding requirements
   (1)    -    -    -    -    (1)
Deferred financing costs and other debt-related costs
   -    (54)    -    -    -    (54)
Proceeds from noncontrolling investors in joint ventures
   -    -    -    1    -    1
Redemption of noncontrolling investments in joint ventures
   -    -    -    (6)    -    (6)
Distributions to noncontrolling investors in joint ventures
   -    -    -    (52)    -    (52)
Changes in intercompany balances with affiliates, net
   (36)    (186)    315    (93)    -    -
Borrowings under credit agreements
   -    -    22    4    -    26
Issuance of long-term debt
   -    -    -    -    -    -
Proceeds from ABL facility
   -    538    49    -    -    587
Repayments of long-term indebtedness
   -    (70)    (636)    (3)    -    (709)












Net cash (used in) provided by financing activities
   (37)    228    (250)    (149)    -    (208)












Net change in cash and cash equivalents
   -    -    (358)    3    -    (355)
Cash and cash equivalents at beginning of period
   -    -    471    92    -    563












Cash and cash equivalents at end of period
     $ -      $ -      $ 113      $ 95      $ -      $ 208

(b)
Includes amounts due tonon-guarantor subsidiaries of $3.0 billion and $1.4 billion as of March 31, 2020 and December 31, 2019, respectively.

Item 2.Management’s Discussion and Analysis of Financial Condition and Results of Operations

You should read this discussion together with our condensed consolidated financial statements and the accompanying notes included herein.

Throughout this Quarterly Report on Form10-Q, we refer to Community Health Systems, Inc., or the Parent Company, and its consolidated subsidiaries in a simplified manner and on a collective basis, using words like “we,” “our,” “us” and the “Company”. This drafting style is suggested by the Securities and Exchange Commission, or SEC, and is not meant to indicate that the publicly traded Parent Company or any particular subsidiary of the Parent Company owns or operates any asset, business or property. The hospitals, operations and businesses described in this filing are owned and operated by distinct and indirect subsidiaries of Community Health Systems, Inc.

Executive Overview

We are one of the largest publicly traded hospital companies in the United States and a leading operator of general acute care hospitals and outpatient facilities in communities across the country. We provide healthcare services through the hospitals that we own and operate and affiliated businesses innon-urban and selected urban markets throughout the United States. 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. As of ~~June 30, 2019,~~March 31, 2020, we owned or leased ~~107~~99 hospitals, comprised of ~~105~~97 general acute care hospitals and two stand-alone rehabilitation or psychiatric hospitals. For the hospitals that we own and operate, we are paid for our services by governmental agencies, private insurers and directly by the patients we serve.

We have been implementing a portfolio rationalization and deleveraging strategy by divesting hospitals andnon-hospital businesses that are attractive to strategic and other buyers. ~~Generally,~~As discussed further below, we currently expect to complete our formal portfolio rationalization strategy by the end of the third quarter of 2020.

COVID-19 Pandemic

A novel strain of coronavirus causing the disease known asCOVID-19 was first identified in Wuhan, China in December 2019. The disease has spread throughout the world, including across the United States, and the World Health Organization declared theCOVID-19 outbreak a pandemic in March 2020. In an attempt to contain the spread and impact ofCOVID-19, authorities throughout the United States and the world have implemented measures such as travel bans and restrictions, quarantines,stay-at-home andshelter-in-place orders, the promotion of social distancing, and limitations on business activity. This pandemic has resulted in a significant economic downturn in the United States and globally and has also led to significant disruptions and volatility in capital and financial markets.

The safety of our patients, physicians, nurses, and employees in the communities in which we serve remains our primary focus. Our hospitals, medical clinics, medical personnel, and employees have been actively preparing for and responding toCOVID-19 patients and are continuing to operate and to work as essential businesses and essential employees through state and localstay-at-home orders. We are working with federal, state and local health authorities to respond toCOVID-19 cases in the communities we serve and are taking or supporting measures to try to limit the spread of the virus and to mitigate the burden on the healthcare system. Certain of the measures that we have been taking (such as rescheduling or cancelling elective procedures at our hospitals and other healthcare facilities) will adversely affect our financial results.

As a provider of healthcare services, we are significantly exposed to the health and economic effects ofCOVID-19. Beginning in March 2020, we have experienced a substantial reduction in the number of elective surgeries, physician office visits and emergency room volumes at our hospitals and other healthcare facilities due to restrictive measures, including quarantines andstay-at-home andshelter-in-place orders, as well as general concerns related to the risk of contractingCOVID-19 from interacting with the healthcare system. We believe that certain of these ~~businesses~~patient volume declines reflect a deferral of healthcare services utilization to a later period, rather than a permanent reduction in demand for our services. Given the general necessity of the healthcare services we provide, we anticipate that in the future historically normal service levels may resume and that the deferral of services during the pandemic may create a backlog of demand; however, there is no assurance that either will occur. While our hospitals have not experienced major capacity constraints to date arising from the treatment ofCOVID-19 patients, there are hospitals in the United States that are located in centers of theCOVID-19 outbreak and have been overwhelmed in caring forCOVID-19 patients, which has prevented such hospitals from treating all patients who seek care. Our hospitals could be subject to such conditions in the future if a majorCOVID-19 outbreak occurs in a geographic region where any of our hospitals are located.

We may experience supply chain disruptions, including delays and price increases in equipment, pharmaceuticals and medical supplies. Staffing, equipment, and pharmaceutical and medical supplies shortages may impact our ability to admit and treat patients. We have incurred, and may continue to incur, increased expenses arising from theCOVID-19 pandemic, including additional supply chain and other expenditures.

Broad economic factors resulting from the currentCOVID-19 pandemic, including high unemployment and underemployment levels and reduced consumer spending and confidence, could also affect our service mix, revenue mix, payor mix and patient volumes, as well as our ability to collect outstanding receivables. Business closures and layoffs in the geographic areas in which we operate may lead to increases in the uninsured and underinsured populations and adversely affect demand for our services, as well as the ability of patients and other payors to pay for services rendered. Any increase in the amount or deterioration in the collectability of patient accounts receivable will adversely affect our financial results and require an increased level of working capital.

We are not able to fully quantify the impact that theCOVID-19 pandemic will have on our financial results during 2020, but expect developments related toCOVID-19 to materially affect our financial performance in ~~one~~2020. Moreover, theCOVID-19 pandemic may otherwise have material adverse effects on our results of ~~our strategically beneficial service areas, are less complementary to our business strategy~~operations, financial position, and/or ~~have lower operating margins. In connection with~~ our ~~announced divestiture initiative,~~cash flows,particularly if negative economic and/or public health conditions in the United States deteriorate or persist for a significant period of time. The ultimate impact of the pandemic on our financial results will depend on, among other factors, the duration and severity of the pandemic as well as negative economic conditions arising from the pandemic, the volume of canceled or rescheduled procedures at our facilities, the volume ofCOVID-19 patients cared for across our health systems, and the impact of government actions and administrative regulations on the hospital industry and broader economy, including through existing and any future stimulus efforts. Furthermore, the pandemic has resulted in, and may continue to result in, significant disruption of global financial markets, which could reduce our ability to access capital and negatively affect our liquidity in the future. As discussed below under “Legislative Overview”, we have received, ~~offers~~and may continue to receive, payments and advances under the Coronavirus Aid, Relief, and Economic Security Act, or the CARES Act, and the Paycheck Protection Program and Health Care Enhancement Act, or PPPHCE Act, which will be beneficial in addressing the impact of theCOVID-19 pandemic on our results of operations and financial position. We are unable to assess the extent to which anticipated negative impacts on us arising from ~~strategic buyers to buy certain of our assets. After considering these offers,~~theCOVID-19 pandemic will be offset by amounts received, and which we ~~have divested~~may in the future receive, under the CARES Act, the PPPHCE Act, or ~~may divest hospitals andnon-hospital~~ ~~businesses when we find such offers to be attractive and in line with our operating strategy.~~other legislation.

Completed Divestiture and Acquisition Activity

During the ~~six~~three months ended ~~June 30,~~March 31, 2020, we completed the divestiture of three hospitals, which closed effective January 1, 2020 (for these hospitals, we received the net proceeds at a preliminary closing on December 31, 2019). These three hospitals represented annual net operating revenues in 2019 of approximately $306 million and, we received total net proceeds of approximately $240 million in connection with the disposition of these hospitals.

During 2019, we completed the divestiture of ~~seven~~12 hospitals, including two ~~hospitals the divestitures of~~ which closed effective January 1, 2019 (for these hospitals, we received the net proceeds at a preliminary closing on December 31, 2018). These ~~seven~~12 hospitals represented annual net operating revenues in 2018 of approximately ~~$620 million~~$1.1 billion and, excluding the net proceeds for the two hospitals that preliminarily closed on December 31, 2018, we received total net proceeds of approximately ~~$161 million in connection with the disposition of these hospitals.~~

During 2018, we completed the divestiture of 11 hospitals. These 11 hospitals represented annual net operating revenues in 2017 of approximately $950 million and, including the net proceeds for the two additional hospitals that preliminarily closed on December 31, 2018 noted above, we received total net proceeds of approximately $405$335 million in connection with the disposition of these hospitals.

The following table provides a summary of hospitals that we divested during the ~~six~~three months ended ~~June 30, 2019~~March 31, 2020 and the year ended December 31, ~~2018:~~2019:

~~Licensed~~

Hospital

Buyer

City, State

~~Beds~~

Licensed
Beds

Effective Date

~~2019~~2020 Divestitures:

Southside Regional Medical Center

Bon Secours Mercy Health System

Petersburg, VA

300

January 1, 2020

Southampton Memorial Hospital

Bon Secours Mercy Health System

Franklin, VA

105

January 1, 2020

Southern Virginia Regional Medical Center

Bon Secours Mercy Health System

Emporia, VA

January 1, 2020

2019 Divestitures:

Bluefield Regional Medical Center

Princeton Community Hospital Association

Bluefield, WV

October 1, 2019

Lake Wales Medical Center

Adventist Health System

Lake Wales, FL

160

September 1, 2019

Heart of Florida Regional Medical Center

Adventist Health System

Davenport, FL

193

September 1, 2019

College Station Medical Center

St. Joseph Regional Health Center

College Station, TX

167

August 1, 2019

Tennova Healthcare - Lebanon

Vanderbilt University Medical Center

Lebanon, TN

245

August 1, 2019

Chester Regional Medical Center

Medical University Hospital Authority

Chester, SC

March 1, 2019

Carolinas Hospital System - Florence

Medical University Hospital Authority

Florence, SC

396

March 1, 2019

Springs Memorial Hospital

Medical University Hospital Authority

Lancaster, SC

225

March 1, 2019

Carolinas Hospital System - Marion

Medical University Hospital Authority

Mullins, SC

124

March 1, 2019

Memorial Hospital of Salem County

Community Healthcare Associates, LLC

Salem, NJ

126

January 31, 2019

Mary Black Health System - Spartanburg

Spartanburg Regional Healthcare System

Spartanburg, SC

207

January 1, 2019

Mary Black Health System - Gaffney

Spartanburg Regional Healthcare System

Gaffney, SC

125

January 1, 2019

~~2018 Divestitures:~~

~~Sparks Regional Medical Center~~

~~Baptist Health~~

~~Fort Smith, AR~~

~~492~~

~~November 1, 2018~~

~~Sparks Medical Center - Van Buren~~

~~Baptist Health~~

~~Van Buren, AR~~

~~103~~

~~November 1, 2018~~

~~AllianceHealth Deaconess~~

~~INTEGRIS Health~~

~~Oklahoma City, OK~~

~~238~~

~~October 1, 2018~~

~~Munroe Regional Medical Center~~

~~Adventist Health System~~

~~Ocala, FL~~

~~425~~

~~August 1, 2018~~

~~Tennova Healthcare - Dyersburg Regional~~

~~West Tennessee Healthcare~~

~~Dyersburg, TN~~

~~225~~

~~June 1, 2018~~

~~Tennova Healthcare - Regional Jackson~~

~~West Tennessee Healthcare~~

~~Jackson, TN~~

~~150~~

~~June 1, 2018~~

~~Tennova Healthcare - Volunteer Martin~~

~~West Tennessee Healthcare~~

~~Martin, TN~~

~~100~~

~~June 1, 2018~~

~~Williamson Memorial Hospital~~

~~Mingo Health Partners, LLC~~

~~Williamson, WV~~

~~June 1, 2018~~

~~Byrd Regional Hospital~~

~~Allegiance Health Management~~

~~Leesville, LA~~

~~June 1, 2018~~

~~Tennova Healthcare - Jamestown~~

~~Rennova Health, Inc.~~

~~Jamestown, TN~~

~~June 1, 2018~~

~~Bayfront Health Dade City~~

~~Adventist Health System~~

~~Dade City, FL~~

~~120~~

~~April 1, 2018~~

In addition to the divestiture of the hospitals in 2019 and 2020 noted above, we have entered into several definitive agreements to sell a total of seven hospitals, for which we expect to receive aggregate proceeds of approximately $400 million.

On ~~May 22, 2019,~~January 30, 2020, we ~~signed~~entered into definitive agreements for the sale of substantially all of the assets of each of Shands Live Oak Regional Medical Center (25 licensed beds) in Live Oak, Florida and Shands Starke Regional Medical Center (49 licensed beds) in Starke, Florida to affiliates of HCA Healthcare, Inc., or HCA.

On March 18, 2020, we entered into a definitive agreement for the sale of ~~Lake Wales~~substantially all of the assets of Northern Louisiana Medical Center ~~(160~~(130 licensed beds) in ~~Lake Wales, Florida, and Heart~~Ruston, Louisiana to affiliates of ~~Florida Regional Medical Center (193 licensed beds) in Davenport, Florida, and their associated assets to a subsidiary of Adventist~~Allegiance Health ~~System Sunbelt Healthcare Corporation.~~Management, Inc.

On ~~June 27, 2019,~~April 20, 2020, we ~~signed~~entered into a definitive agreement for the sale of ~~Bluefield~~substantially all of the assets of San Angelo Community Medical Center (171 licensed beds) in San Angelo, Texas to affiliates of Shannon Health System.

On April 27, 2020, we entered into a definitive agreement for the sale of substantially all of the assets of each of Abilene Regional Medical Center ~~(92~~(231 licensed beds) in ~~Bluefield, West Virginia,~~Abilene, Texas and ~~its associated assets to a subsidiary of Princeton Community Hospital Association.~~

~~On August 1, 2019, we sold Tennova Healthcare - Lebanon (245~~Brownwood Regional Medical Center (188 licensed beds) in ~~Lebanon, Tennessee, and its associated assets~~Brownwood, Texas to ~~a subsidiary~~subsidiaries of ~~Vanderbilt University Medical Center pursuant to the terms of~~Hendrick Health System.

On April 27, 2020, we entered into a definitive agreement ~~which was entered into on March 29, 2019.~~

~~On August 1, 2019, we sold College Station~~for the sale of the majority ownership interest in St. Cloud Regional Medical Center ~~(167~~(84 licensed beds) in ~~College Station, Texas,~~St. Cloud, Florida to affiliates of Orlando Health, Inc., who already hold the minority ownership interest.

These divestitures, which are expected to be completed at various times during the second and ~~its associated assets to a subsidiary~~third quarters of ~~St. Joseph Regional Health Center pursuant to~~2020, will mark the ~~terms of a definitive agreement which was entered into on May 23, 2019.~~

On August 1, 2019, we sold a 50% ownership interest in Merit Health Madison (67 licensed beds) and its associated healthcare businesses in Canton, Mississippi to HMC Madison, Inc., a Mississippi corporation owned by the Healthier Mississippi Collaborative, which is a~~non-profit~~ ~~company affiliated with the University of Mississippi Medical Center, pursuant to the terms of a definitive agreement which was entered into on July 2, 2019.~~

~~In addition to the divestiture of these hospitals in 2018 and 2019 as noted above, we continue to receive interest from potential buyers for certain~~end of our ~~hospitals. We intend to continue our~~formal portfolio rationalization strategy, ~~during the remainder of 2019 and are pursuing additional interests for sale transactions,~~ which ~~are currently~~commenced in ~~various stages of negotiation with potential buyers.~~2017. There can be no assurance that these potential divestitures ~~(or the potential divestitures currently~~ subject to definitive ~~agreements)~~agreements will be

completed, or if they are completed, the ultimate timing of the completion of these divestitures. We continue to receive interest from potential acquirers for certain of our hospitals, and may, from time to time, consider selling additional hospitals following the completion of our formal portfolio rationalization strategy, if we consider any such disposition to be in our best interests.

We expect to use proceeds from divestitures ~~to reduce debt and/or reinvest in our facilities to strengthen our regional networks and local market operations.~~

On June 1, 2019, we completed the acquisition of Northwest Mississippi Medical Center in Clarksdale, Mississippi. This healthcare system includes 181 licensed beds and other outpatient and ancillary services. The total cash consideration paid for operating assets was approximately $2 million, with additional consideration of $5 million in assumed liabilities, for a total consideration of $7 million. This hospital was acquired in conjunction with the bankruptcy proceedings of the previous owner that acquired the hospital from the Company in 2017 as part of an agreement with the local county government associated with its lease of the hospital building. Based on the current purchase price allocation relating to this acquisition, no goodwill has been recorded. Prior to the completion of the acquisition, the Company initiated a plan to sell this hospital and as such has classified this hospital as held for sale at June 30, 2019.general corporate purposes.

During the ~~six~~three months ended ~~June 30, 2019,~~March 31, 2020, we paid ~~approximately $7~~less than $1 million to acquire the operating assets and related businesses of certain physician practices, clinics and other ancillary businesses that operate within the communities served by our hospitals.

Overview of Operating Results

Our net operating revenues for the three months ended ~~June 30, 2019~~March 31, 2020 decreased ~~$260~~$351 million to approximately ~~$3.3~~$3.0 billion compared to approximately ~~$3.6~~$3.4 billion for the three months ended ~~June 30, 2018.~~March 31, 2019, primarily as a result of developments related toCOVID-19 as highlighted above, and hospitals divested during 2019 and 2020. On a same-store basis, net operating revenues for the three months ended ~~June 30, 2019 increased $153~~March 31, 2020 decreased $109 million, ~~compared to~~also primarily as a result of the ~~three months ended June 30, 2018.~~COVID-19 pandemic.

We had a net ~~loss~~income of ~~$146~~$34 million during the three months ended ~~June 30, 2019,~~March 31, 2020, compared to a net loss of ~~$91~~$101 million for the three months ended ~~June 30, 2018. Loss~~March 31, 2019. Net income for the three months ended ~~June 30, 2019 included the following:~~

an~~after-tax~~ ~~charge of $3 million for government and other legal settlements, net of related legal expenses,~~

an~~after-tax~~ ~~charge of $1 million for employee termination benefits and other restructuring costs,~~

an~~after-tax~~ charge of $17 million to reserve the outstanding balance of a promissory note that was received as part of the purchase price from the sale of two hospitals in 2017 following such time that the buyer in such acquisition, which was the maker of the note filed for bankruptcy during the second quarter,

an~~after-tax~~ ~~charge of $53 million for a change in estimate for professional liability claims accrual related to claims incurred in 2016 and prior years,~~

an~~after-tax~~ ~~charge of $37 million for the impairment of goodwill and long-lived assets of hospitals sold or held for sale based on their estimated fair values, and~~

an~~after-tax~~ ~~charge of $2 million for legal expenses related to the settlement of the CVR agreement liability and related HMA legal proceedings.~~

~~Loss for the three months ended June 30, 2018~~March 31, 2020 included the following:

anafter-tax charge of $1 million for government and other legal settlements ~~net of~~and related ~~legal expenses,~~

an~~after-tax~~ ~~charge of $145 million for the impairment of goodwill and long-lived assets of hospitals sold or held for sale based on their estimated fair values,~~

an~~after-tax~~ ~~charge of $9 million for employee termination benefits and other restructuring~~ costs,

~~after-tax~~ ~~income of $50 million for gain from early extinguishment of debt, and~~

anafter-tax charge of $3 million for loss from ~~fair value adjustments on the CVR agreement liability accounted for at fair value related to the Health Management Associates, Inc., or HMA, legal proceedings, and related legal expenses.~~

Consolidated inpatient admissions for the three months ended June 30, 2019, decreased 11.5%, compared to the three months ended June 30, 2018. Consolidated adjusted admissions for the three months ended June 30, 2019, decreased 12.3%, compared to the three months ended June 30, 2018. Same-store inpatient admissions for the three months ended June 30, 2019, increased 2.3%, compared to the three months ended June 30, 2018, and same-store adjusted admissions for the three months ended June 30, 2019, increased 1.8%, compared to the three months ended June 30, 2018.

Our net operating revenues for the six months ended June 30, 2019 decreased $572 million to approximately $6.7 billion compared to approximately $7.3 billion for the six months ended June 30, 2018. On a same-store basis, net operating revenues for the six months ended June 30, 2019 increased $253 million compared to the six months ended June 30, 2018.

~~We had a net loss~~early extinguishment of $246 million during the six months ended June 30, 2019, compared to a net loss of $98 million for the six months ended June 30, 2018. Loss for the six months ended June 30, 2019 included the following:

an~~after-tax~~ ~~charge of $7 million for government and other legal settlements, net of related legal expenses,~~debt,

anafter-tax charge of ~~$66~~$35 million for the impairment of goodwill and long-lived assets of hospitals sold or held for sale based on their estimated fair values,

anafter-tax charge of $1 million for ~~employee termination~~legal expenses related to the final global resolution and settlement of certain Health Management Associates, Inc., or HMA, legal proceedings entered into with the U.S. Department of Justice in the three months ended September 30, 2018, or the HMA Legal Matters, and

income of approximately $240 million due to discrete tax benefits related to the release of federal and state valuation allowances on IRC Section 163(j) interest carryforwards as a result of an increase to the deductible interest expense allowed for 2019 and 2020 under the CARES Act that was enacted during the three months ended March 31, 2020.

Net

loss for the three months ended March 31, 2019 included the following:

anafter-tax charge of $4 million for government and other ~~restructuring~~legal settlements and related costs,

anafter-tax charge of $17 million to reserve the outstanding balance of a promissory note outstanding that was received as part of the purchase price from the sale of two hospitals in 2017 following such time that the buyer in such acquisition, which was the maker of the note filed for bankruptcy during the second quarter,

an~~after-tax~~ ~~charge of $53 million for a change in estimate for professional liability claims accrual related to claims incurred in 2016 and prior years,~~

an~~after-tax~~ ~~charge of $23 million for loss from early extinguishment of debt, and~~

an~~after-tax~~ ~~charge of $3 million from legal expenses related to the settlement of the CVR agreement liability and related HMA legal proceedings.~~

~~Loss for the six months ended June 30, 2018 included the following:~~

an~~after-tax~~ ~~charge of $5 million for government and other legal settlements, net of related legal expenses,~~

an~~after-tax~~ ~~charge of $172~~$29 million for the impairment of goodwill and long-lived assets of hospitals sold or held for sale based on their estimated fair values,

anafter-tax charge of ~~$10~~$23 million for ~~employee termination benefits and other restructuring costs,~~

~~after-tax~~ ~~income of $46 million for gain~~loss from early extinguishment of debt, and

anafter-tax charge of $7$1 million ~~from fair value adjustments on the CVR agreement liability accounted~~ for ~~at fair value~~legal expenses related to the settlement of the HMA ~~legal proceedings, and related legal expenses.~~Legal Matters.

Consolidated inpatient admissions for the ~~six~~three months ended ~~June 30, 2019,~~March 31, 2020, decreased ~~12.5%~~13.3%, compared to the ~~six~~three months ended ~~June 30, 2018.~~March 31, 2019. Consolidated adjusted admissions for the ~~six~~three months ended ~~June 30, 2019,~~March 31, 2020, decreased ~~12.5%~~12.8%, compared to the ~~six~~three months ended ~~June 30, 2018.~~March 31, 2019. Same-store inpatient admissions for the ~~six~~three months ended ~~June 30, 2019, increased 1.1%~~March 31, 2020, decreased 5.2%, compared to the ~~six~~three months ended ~~June 30, 2018,~~March 31, 2019, and same-store adjusted admissions for the ~~six~~three months ended ~~June 30, 2019, increased 1.3%~~March 31, 2020, decreased 4.8%, compared to the ~~six~~three months ended ~~June 30, 2018.~~March 31, 2019.

Self-pay revenues represented approximately ~~1.1% and 0.8%~~1.0% of net operating revenues for both of the ~~three months~~three-month periods ended ~~June 30, 2019~~March 31, 2020 and ~~2018, respectively, and 1.1% and 1.5% for the six months ended June 30, 2019 and 2018, respectively.~~2019. The amount of foregone revenue related to providing charity care services as a percentage of net operating revenues was approximately ~~4.3%~~5.5% and ~~3.2%~~4.2% for the

three months ended ~~June 30,~~March 31, 2020 and 2019, ~~and 2018, respectively, and 4.3% and 3.2% for the six months ended June 30, 2019 and 2018,~~ respectively. Direct and indirect costs incurred in providing charity care services as a percentage of net operating revenues was approximately ~~0.5%~~0.6% and ~~0.4%~~0.5% for the three months ended ~~June 30,~~March 31, 2020 and 2019, ~~and 2018, respectively, and 0.5% and 0.4% for the six months ended June 30, 2019 and 2018,~~ respectively.

Legislative Overview

The U.S. Congress and certain state legislatures have introduced and passed a large number of proposals and legislation designed to make major changes in the healthcare system, including changes that have ~~increased~~impacted access to health insurance. The most prominent of these recent efforts, the Affordable Care Act, ~~affects~~affected how healthcare services are covered, delivered and reimbursed. ~~It mandates that substantially all U.S. citizens maintain health insurance and increases~~The Affordable Care Act increased health insurance coverage through a combination of public program expansion and private sector health insurance ~~reforms.~~reforms and mandated that substantially all U.S. citizens maintain health insurance. The Affordable Care Act also made a number of changes to Medicare and Medicaid, such as a productivity offset to the Medicare market basket update and reductions to the Medicare and Medicaid disproportionate share hospital, or DSH, payments.

However, the future of the Affordable Care Act is uncertain. Since the 2016 presidential election, significant changes have been made to the Affordable Care Act, its implementation, and its ~~interpretation. The~~interpretation, and the current presidential administration and certain members of Congress have stated their intent to repeal or make additional significant changes to the law. For example, as part of the tax reform legislation which was enacted in December 2017, the financial penalty associated with the individual mandate was eliminated, effective January 1, 2019, which may result in fewer individuals electing to purchase health insurance. In December 2018, a federal judge in Texas found the entire Affordable Care Act to be unconstitutional as a result of the individual mandate penalty being eliminated. However, the law remains in place pending appeal. In addition, final rules issued in 2018 expand availability of association health plans and allow the sale of short-term, limited-duration health plans, neither of which are required to cover all of the essential health benefits mandated by the Affordable Care Act. ~~These~~Additionally, effective January 1, 2019, the financial penalty associated with the individual mandate was eliminated as part of the tax reform legislation that was enacted in December 2017. In December 2018, as a result of this change, a federal judge in Texas found the individual mandate unconstitutional and determined the rest of the Affordable Care Act was therefore invalid. In December 2019, the Fifth Circuit Court of Appeals upheld this decision with respect to the individual mandate, but remanded for further consideration of how this affects the rest of the law. Pending the appeals process, the law remains in effect. The elimination of the individual mandate penalty and other changes may impact the number of individuals ~~who~~that elect to ~~purchase~~obtain public or private health insurance or the scope of such coverage, if purchased.

Of critical importance to us will be the potential impact of any changes specific to the Medicaid program, including the funding and expansion provisions of the Affordable Care ~~Act. We operate hospitals in five of the ten states that experienced the largest reductions in uninsured rates among adult residents between 2013 and 2015. In general,~~Act or any 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 1817 states in which we operated hospitals as of ~~June 30, 2019, nine~~March 31, 2020, eight states have taken action to expand their Medicaid programs. At this time, the other nine states have not, including Florida, Alabama, Tennessee and Texas, where we operated a significant number of hospitals as of ~~June 30, 2019.~~March 31, 2020. Some states use, or have applied to use, waivers granted by CMS to implement expansion, impose different eligibility or enrollment restrictions, or otherwise implement programs that vary from federal standards. CMS administrators have indicated that they are increasing state flexibility in the administration of Medicaid programs. For example, CMS has granted a limited number of state applications for waivers that allow a state to condition Medicaid enrollment on work or other community engagement. Several states have similar applications pending.

The Affordable Care Act makes a number of changes to Medicare and Medicaid, such as reductions to the Medicare annual market basket update for federal fiscal years 2010 through 2019, a productivity offset to the Medicare market basket update, and a reduction to the Medicare and Medicaid disproportionate share hospital payments, each of which could adversely impact the reimbursement received under these programs. The Affordable Care Act also includes provisions aimed at reducing fraud, waste and abuse in the healthcare industry.

We believe that the Affordable Care Act has had a positive impact on net operating revenues and income as the result of the expansion of private sector and Medicaid coverage that has occurred. However, ~~legislative~~other provisions of the Affordable Care Act, such as requirements related to employee health insurance coverage and changes to Medicare and Medicaid reimbursement, have increased our operating costs or adversely impacted the reimbursement we receive. Legislative and executive branch efforts related to healthcare reform could result in increased prices for consumers purchasing health insurance coverage or the sale of insurance plans that contain gaps in coverage, which could destabilize insurance markets and impact the rates of uninsured or underinsured adults. ~~Other provisions~~Some current initiatives and proposals, including those aimed at price transparency andout-of-network charges, may impact prices and the relationships between hospitals and insurers. In addition, members of ~~the Affordable Care Act, such as requirements related to employee health insurance~~Congress have proposed measures that would expand government-sponsored coverage, ~~and changes to Medicare and Medicaid reimbursement, have increased our operating costs or adversely impacted the reimbursement we receive.~~including single-payor models.

It is difficult to predict the ongoing effect of the Affordable Care Act due to executive orders, changes to the law’s implementation, clarifications and modifications resulting from the rule-making process, judicial interpretations resulting from court challenges to its constitutionality and interpretation, whether and how many states ultimately decide to expand Medicaid coverage, the number of uninsured who elect to purchase health insurance coverage, budgetary issues at federal and state levels, and efforts to change or repeal the statute. We may not be able to fully realize the positive impact the Affordable Care Act may otherwise have on our business, results of operations, cash flow, capital resources and liquidity. We cannot predict whether we will be able to modify certain aspects of our operations to offset any potential adverse consequences from the Affordable Care Act or the impact of any alternative provisions that may be adopted.

In recent years, a number of laws, including the Affordable Care Act and Medicare Access and CHIP Reauthorization Act of 2015, or MACRA, have promoted shifting from traditionalfee-for-service reimbursement models to alternative payment models that tie reimbursement to quality and cost of care. CMS currently administers various ACOs and bundled payment demonstration projects and has indicated that it will continue to pursue similar initiatives. However, theCOVID-19 pandemic may impact provider performance and data reporting under these initiatives. CMS has temporarily modified requirements of certain programs by, for example, extending reporting deadlines.

~~The~~As a result of theCOVID-19 pandemic, federal ~~government has implemented a number of~~and state governments have passed legislation, promulgated regulations, and ~~programs designed~~taken other administrative actions intended to ~~promote~~assist healthcare providers in providing care toCOVID-19 and other patients during the public health emergency. 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 ~~EHR technology~~telehealth by temporarily expanding the scope of services for which Medicare reimbursement is available, and ~~pursuant~~limited waivers of fraud and abuse laws for activities related toCOVID-19 during the ~~Health Information Technology~~emergency period.

One of the primary sources of relief for ~~Economic~~healthcare providers is the CARES Act, an economic stimulus package signed into law on March 27, 2020. The CARES Act includes $100 billion in funding to be distributed through the PHSSEF to eligible providers, including public entities and ~~Clinical Health Act,~~ Medicare- and/or ~~HITECH, established requirements for a Medicare and Medicaid incentive payments program for eligible hospitals and professionals that adopt and meaningfully use certified EHR technology. These~~Medicaid-enrolled providers. PHSSEF payments are ~~available~~intended to compensate healthcare providers for lost revenues and incremental expenses incurred in response to theCOVID-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 and not using PHSSEF funds to reimburse expenses or losses that other sources are obligated to reimburse. In addition, the CARES Act expanded the Medicare Accelerated and Advance Payment Program to increase cash flow to providers impacted by theCOVID-19 pandemic. Inpatient acute care hospitals may request an accelerated payments of up to 100% of the Medicare payment amount for a ~~maximum~~six-month period (not including Medicare Advantage payments), although CMS is now reevaluating pending and new applications in light of ~~five or six years, depending on~~direct payments made available through the ~~program. Our hospital facilities have been implementing EHR technology on afacility-by-facility~~ ~~basis since 2011. We recognize incentive reimbursement related to~~PHSSEF. The Medicare Accelerated and Advanced Payment Program payments are advances that providers must repay. CMS must recoup the accelerated payments beginning 120 days after receipt by the provider by withholding future Medicare payments for claims. The CARES Act also includes other provisions offering financial relief, for example temporarily lifting the Medicare orsequester, which would have otherwise reduced payments to Medicare providers by 2%, delaying scheduled reductions to Medicaid incentives as we are able to implement the certified EHR technology and meet the defined “meaningful use criteria,” and information from completed cost report periods is available from which to calculate the incentive reimbursement.

~~Eligible hospitals and professionals that have not demonstrated meaningful use of certified EHR technology and have not applied and qualified for~~DSH payments, providing a ~~hardship exception are subject to payment adjustments. Eligible hospitals are subject to a reduced market basket update~~20%add-on to the inpatient ~~prospective~~PPS DRG rate forCOVID-19 patients for the duration of the public health emergency, and permitting the deferral of payment ~~system standardized~~of the employer portion of social security taxes between March 27, 2020 and December 31, 2020, with 50% of the deferred amount ~~as of 2015~~due December 31, 2021 and ~~for each subsequent fiscal year. Eligible professionals are subject~~the remaining 50% due December 31, 2022.

In addition to ~~payment adjustments based on their meaningful use of certified EHR technology, among other factors,~~the funds appropriated under the ~~Merit-Based Incentive Payment Systems, or MIPS.~~CARES Act, the PPPHCE Act, a stimulus package signed into law on April 24, 2020, includes additional emergency appropriations forCOVID-19 response, including $75 billion to be distributed to eligible providers through the PHSSEF. This funding is also intended to reimburse providers for lost revenues and healthcare-related expenses attributable to theCOVID-19 pandemic. Applicants for the funds will be required to submit a justification statement for the payments. Recipients will not be required to repay the government for funds received, provided they comply with terms and conditions, which have not yet been finalized.

Due to the recent enactment of the CARES Act and the PPPHCE Act, there is still a high degree of uncertainty surrounding their implementation, and the public health emergency continues to evolve. We continue to assess the potential impact of the CARES Act, the PPPHCE Act, the potential impact of future stimulus measures, if any, and the impact of other laws, regulations, and guidance related toCOVID-19 on our business, results of operations, financial condition and cash flows.

In June 2019, the U.S. Supreme Court ruled inAzar v. Allina Health Services that the U.S. Department of Health and Human Services failed to comply with statutory notice and comment rulemaking procedures before announcing an earlier policy related to ~~disproportionate share hospital, or~~ DSH payments made under Medicare to hospitals. Following this ruling, unless the U.S. Department of Health and Human Services is able to successfully assert another legal basis for this policy, one potential outcome is the federal government could be required to reimburse hospitals, including ~~the Company,~~us, for DSH Medicare payments which otherwise would have been payable over certain prior time periods absent the enactment of this policy. While the ruling in this case was specific to the DSH payments calculated for federal fiscal year 2012 for the plaintiff hospitals, we believe that prior time periods with the potential for higher DSH payments because of the precedent of this ruling could include federal fiscal years 2005 to 2013. There continues to be uncertainty regarding the extent to which, if any, DSH Medicare payments will be remitted to us as the result of this ruling, and if so the timing of any such payments. However, we anticipate that if it is ultimately determined that ~~the Company is~~we are entitled to receive such DSH Medicare payments for these prior time periods, these payments could have a material positive impact on anon-recurring basis in ~~the~~any future period in which net income is recognized in respect thereof as well as on our cash flows from operations in ~~the~~any future period in which these payments are received.

As a result of our current levels of cash, funds we have received and may in the future receive under the CARES Act, the PPPHCE Act, or any future stimulus measures, available borrowing capacity, long-term outlook on our debt repayments, the refinancing of certain of our ~~term loans~~notes, proceeds from the sale of hospitals and our 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 twelve months. 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 hospital acquisitions and divestitures have had on these statistics.

           Three Months Ended                    Six Months Ended
   June 30,    June 30,
   2019    2018    2019    2018
Medicare
   24.8 %    26.5 %    25.6 %    27.3 %
Medicaid
   13.7        13.5        13.2        12.9
Managed Care and other third-party payors
   60.4        59.2        60.1        58.3
Self-pay
   1.1        0.8        1.1        1.5








Total
   100.0 %    100.0 %    100.0 %    100.0 %


	Three Months Ended
	March 31,
	2020			2019
Medicare		25.0	%		26.3	%
Medicaid		13.5			12.7
Managed Care and other third-party payors		60.5			60.0
Self-pay		1.0			1.0
Total		100.0	%		100.0	%

As shown above, we receive a substantial portion of our revenues from the Medicare and Medicaid programs. Included in Managed Care and other third-party payors is operating revenues from insurance companies with which we have insurance provider contracts, Medicare managed care, insurance companies for which we do not have insurance provider contracts, workers’ compensation carriers andnon-patient service revenue, such as rental income and cafeteria sales. In the future, we generally expect the portion of revenues received from the Medicare and Medicaid programs to increase over the long-term due to the general aging of the ~~population. In addition,~~population and the impacts of the Affordable Care Act. The Affordable Care Act has increased the number of insured patients in states that have expanded Medicaid, which in turn, has reduced the percentage of revenues fromself-pay patients. However, it is unclear whether the trend of increased coverage will continue, due in part to the impact of theCOVID-19 pandemic and the elimination of the financial penalty associated with the individual mandate, effective January 1, 2019. Further, the Affordable Care Act imposes significant reductions in amounts the government pays Medicare managed care plans. The trend toward increased enrollment in Medicare and Medicaid managed care may adversely affect our operating revenue. ~~Other provisions~~An executive order issued in ~~the Affordable Care Act impose~~October 2019 seeks to accelerate this shift away from traditionalfee-for-service Medicare to Medicare managed care. We may also be impacted by regulatory requirements imposed on insurers, such as minimum medical-loss ratios and ~~require insurers to meet~~ specific benefit requirements. Furthermore, in the normal course of business, managed care programs, insurance companies and employers actively negotiate the amounts paid to hospitals. ~~The trend toward increased enrollment in managed care~~Our relationships with payors may ~~adversely affect our operating performance.~~be impacted by price transparency initiatives andout-of-network billing proposals. There can be no assurance that we will retain our existing reimbursement arrangements or that these 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 bynon-governmental payors using a variety of payment methodologies. Amounts we receive for the treatment of patients covered by Medicare, Medicaid andnon-governmental payors are generally less than ~~the~~our standard billing rates. We account for the differences between the estimated program reimbursement rates and ~~the~~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 ~~loss~~income (loss) by an insignificant amount in each of the ~~three andsix-month~~three-month periods ended ~~June 30, 2019~~March 31, 2020 and ~~2018.~~2019.

The payment rates under the Medicare program for hospital inpatient and outpatient acute care services are based on a prospective payment system, depending upon the diagnosis of a patient’s condition. These rates are indexed for inflation annually, although increases have historically been less than actual inflation. On August 2,16, 2019, CMS issued the final rule to increase this index by 3.0% for hospital inpatient acute care services that are reimbursed under the prospective payment system, beginning October 1, 2019. The final rule provides for a ~~0.4%~~0.4 percentage point multifactor productivity reduction and a positive ~~0.5%~~0.5 percentage point adjustment in accordance with MACRA, which, together with other changes to payment policies is expected to yield an ~~estimated net 3.0%~~average 2.9% increase in reimbursement for hospital inpatient acute care services. An additional reduction applies to hospitals that do not submit required patient quality data. We are complying with this data submission requirement. Payments may also be affected by various other adjustments, such as admission and medical review criteria for inpatient services commonly known as the “two midnight rule.” ~~Under the~~This rule ~~for admissions on or after October 1, 2013,~~limits when services to Medicare beneficiaries are ~~only~~ payable as inpatient hospital services when there is a reasonable expectation that the hospital care is medically necessary and will be required across two midnights, absent unusual circumstances. Stays expected to need less than two midnights of hospital care are subject to medical review on a~~case-by-case~~ ~~basis.~~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.

~~Currently,~~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 ~~for the purpose~~to make separate payments that are not specifically tied to an individual’s care, some of ~~providing reimbursement to providers to~~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. ~~Similar programs are also being considered by other states.~~ The programs are generally authorized for a specified period of time and require CMS’s approval to be extended. ~~CMS has indicated that it will take into account a state’s status with respect to expanding its Medicaid program in considering whether to extend these supplemental programs.~~ 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 collection 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 variety of services involving a broad range 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. 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.

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


	Three Months Ended						Six Months Ended
	June 30,						June 30,						Three Months Ended March 31,
	2019			2018			2019			2018			2020			2019
Operating results, as a percentage of net operating revenues:
Net operating revenues		100.0	%		100.0	%		100.0	%		100.0	%		100.0	%		100.0	%
Operating expenses (a)		(91.0	)		(89.1	)		(89.8	)		(88.9	)		(90.1	)		(88.8	)
Depreciation and amortization		(4.6	)		(5.0	)		(4.6	)		(4.9	)		(4.8	)		(4.5	)
Impairment and gain (loss) on sale of businesses, net		(1.0	)		(4.9	)		(1.1	)		(2.8	)

Impairment and loss on sale of businesses, net														(1.5	)		(1.1	)
Income from operations		3.4			1.0			4.5			3.4			3.6			5.6
Interest expense, net		(8.0	)		(6.6	)		(7.8	)		(6.4	)		(8.7	)		(7.6	)
Loss from early extinguishment of debt		-			1.8			(0.5	)		0.8			(0.1	)		(0.9	)
Equity in earnings of unconsolidated affiliates		0.1			0.2			0.2			0.2			0.3			0.1

Loss before income taxes		(4.5	)		(3.6	)		(3.6	)		(2.0	)		(4.9	)		(2.8	)
Benefit from (provision for) income taxes		0.1			1.0			(0.1	)		0.6			6.0			(0.2	)

Net loss		(4.4	)		(2.6	)		(3.7	)		(1.4	)
Net income (loss)														1.1			(3.0	)
Less: Net income attributable to noncontrolling interests		(0.7	)		(0.5	)		(0.6	)		(0.5	)		(0.5	)		(0.5	)

Net loss attributable to Community Health Systems, Inc. stockholders		(5.1	)%		(3.1	)%		(4.3	)%		(1.9	)%

Net income (loss) attributable to Community Health Systems, Inc. stockholders														0.6	%		(3.5	) %

   Three Months Ended Six Months Ended
   June 30, 2019 June 30, 2019
Percentage (decrease) increase from prior year:

Net operating revenues
   (7.3 )% (7.9 )%
Admissions
   (11.5 ) (12.5 )
Adjusted admissions (b)
   (12.3 ) (12.5 )
Average length of stay
   2.3 -
Net loss attributable to Community Health Systems, Inc.
   51.8 111.1
Same-store percentage increase from prior year (c):

Net operating revenues
   4.9 % 4.0 %
Admissions
   2.3 1.1
Adjusted admissions (b)
   1.8 1.3


	Three Months Ended March 31,
	2020			2019
Percentage (decrease) increase from prior year:
Net operating revenues		(10.4	)%		(8.5	)%
Admissions (b)		(13.3	)		(13.4	)
Adjusted admissions (c)		(12.8	)		(12.8	)
Average length of stay (d)		(2.2	)		-
Net income (loss) attributable to Community Health Systems, Inc.		115.3			(372.0	)
Same-store percentage increase (decrease) from prior year (e):
Net operating revenues		(3.5	)%		3.1	%
Admissions (b)		(5.2	)		(0.1	)
Adjusted admissions (c)		(4.8	)		0.8

(a)	Operating expenses include salaries and benefits, supplies, other operating expenses, government and other legal settlements and related costs ~~electronic health records incentive reimbursement~~ and lease cost and rent.

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

(c)	Adjusted admissions is a general measure of combined inpatient and outpatient volume. We computed adjusted admissions by multiplying admissions by gross patient revenues and then dividing that number by gross inpatient revenues.

~~(c)~~(d)

Average length of stay represents the average number of days inpatients stay in our hospitals.

(e)

Includes acquired hospitals to the extent we operated them in both periods and excludes ~~our hospitals that have previously been classified as discontinued operations for accounting purposes. In addition, also excludes~~ information for the hospitals sold ~~or closed~~ during ~~2018~~2019 and the three ~~and six~~ months ended ~~June 30, 2019.~~March 31, 2020.

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.

Three Months Ended ~~June 30, 2019~~March 31, 2020 Compared to Three Months Ended ~~June 30, 2018~~March 31, 2019

Net operating revenues decreased by ~~7.3%~~10.4% to approximately ~~$3.3~~$3.0 billion for the three months ended ~~June 30, 2019,~~March 31, 2020, from approximately ~~$3.6~~$3.4 billion for the three months ended ~~June 30, 2018.~~March 31, 2019. Net operating revenues on a same-store basis from hospitals that were operated throughout both periods ~~increased $153~~decreased $109 million, or ~~4.9%~~3.5%, during the three months ended ~~June 30, 2019,~~March 31, 2020, as compared to the three months ended ~~June 30, 2018.~~March 31, 2019. The ~~increase~~decrease in same-store net operating revenues was ~~attributable to improved pricing~~primarily due to ~~higher acuity, and an increase~~a decline in ~~inpatient admissions.~~volumes resulting from theCOVID-19 pandemic.Non-same-store net operating revenues decreased ~~$413~~$243 million during the three months ended ~~June 30, 2019,~~March 31, 2020, in comparison to the prior year period, with the decrease attributable primarily to the divestiture of hospitals during ~~2018~~2019 and ~~2019.~~2020. On a consolidated basis, inpatient admissions decreased by ~~11.5%~~13.3% during the three months ended ~~June 30, 2019~~March 31, 2020 as compared to the three months ended ~~June 30, 2018.~~March 31, 2019. Also on a consolidated basis, adjusted admissions decreased by ~~12.3%~~12.8% during the three months ended ~~June 30, 2019~~March 31, 2020 as compared to the three months ended ~~June 30, 2018.~~March 31, 2019. On a same-store basis, net operating revenues per adjusted admission increased ~~3.1%~~1.4%, while inpatient admissions ~~increased~~decreased by ~~2.3%~~5.2% and adjusted admissions ~~increased~~decreased by ~~1.8%~~4.8% for the three months ended ~~June 30, 2019,~~March 31, 2020, compared to the three months ended ~~June 30, 2018.~~March 31, 2019.

Operating expenses, as a percentage of net operating revenues, ~~decreased~~increased from ~~99.0%~~94.4% during the three months ended ~~June 30, 2018~~March 31, 2019 to ~~96.6%~~96.4% during the three months ended ~~June 30, 2019.~~March 31, 2020. Operating expenses, excluding depreciation and amortization and impairment and ~~(gain)~~ loss on sale of businesses, as a percentage of net operating revenues, increased from ~~89.1%~~88.8% for the three months ended ~~June 30, 2018~~March 31, 2019 to ~~91.0%~~90.1% for the three months ended ~~June 30, 2019.~~March 31, 2020. Salaries and benefits, as a percentage of net operating revenues, ~~decreased~~increased from ~~45.4%~~45.7% for the three months ended ~~June 30, 2018~~March 31, 2019 to ~~45.1%~~46.4% for the three months ended June 30, 2019. This decrease in salaries and benefits, as a percentage of net operating revenues, was primarily due to improved staffing and benefit expense management. Supplies, as a percentage of net operating revenues, decreased from 16.6% for the three months ended June 30, 2018 to 16.3% for the three months ended June 30, 2019.March 31, 2020. Other operating expenses, as a percentage of net operating revenues, increased from ~~24.7% for the three month ended June 30, 2018 to 27.0%~~24.1% for the three months ended ~~June 30, 2019. This increase in~~March 31, 2019 to 24.4% for the three months ended March 31, 2020. Salaries and benefits and other operating expenses increased as a percentage of net operating revenues ~~was primarily~~ due to ~~the change~~a decline in ~~estimate for professional liability claims expense and the bad debt expense for the reserve recorded for a promissory note~~net operating revenues resulting from the ~~buyer~~COVID-19 pandemic. Supplies, as a percentage of ~~two~~net operating revenues, remained consistent at 16.5% for both of ~~our former hospitals in 2017 that filed for bankruptcy as described above.~~the three-month periods ended March 31, 2020 and 2019. Expense related to government and other legal settlements and related costs, as a percentage of net operating revenues, ~~increased from less than~~remained consistent at 0.1% for both of the ~~three months~~three-month periods ended ~~June 30, 2018 to 0.1% for the three months ended June 30,~~March 31, 2020 and 2019. Lease cost and rent, as a percentage of net operating revenues, increased from 2.4% for the three months ended ~~June 30, 2018~~March 31, 2019 to ~~2.5%~~2.7% for the three months ended ~~June 30, 2019.~~March 31, 2020.

Depreciation and amortization, as a percentage of net operating revenues, ~~decreased~~increased from ~~5.0%~~4.5% for the three months ended ~~June 30, 2018~~March 31, 2019 to ~~4.6%~~4.8% for the three months ended ~~June 30, 2019,~~March 31, 2020, primarily due to ~~ceasing depreciation on property and equipment at hospitals sold or held for sale.~~a decrease in net operating revenues as a result of theCOVID-19 pandemic.

Impairment and ~~(gain)~~ loss on sale of businesses was ~~$33~~$45 million for the three months ended ~~June 30, 2019,~~March 31, 2020, compared to ~~$174~~$38 million for the three months ended ~~June 30, 2018,~~March 31, 2019, 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, increased by ~~$30~~$5 million to ~~$265~~$262 million for the three months ended ~~June 30, 2019~~March 31, 2020 compared to ~~$235~~$257 million for the three months ended ~~June 30, 2018, which~~March 31, 2019. This was ~~driven by an increase in interest rates~~primarily due to our debt refinancing activity during the three months ended ~~June 30, 2019,~~March 31, 2020 as discussed further in Capital Resources, compared to the same period in ~~2018,~~2019, which resulted in an increase in interest expense of ~~$34~~$5 million. ~~Additionally,~~We also had one additional day of interest expense since 2020 was a ~~decrease~~leap year, which resulted in ~~major construction projects~~a $3 million increase in interest expense during the three months ended ~~June 30, 2019 resulted in $1 million less interest being capitalized~~March 31, 2020, compared to the same period ~~in 2018.~~2019. These increases were partially offset by a decrease in our average outstanding debt during the three months ended ~~June 30, 2019,~~March 31, 2020, which resulted in a decrease in interest expense of ~~$5 million.~~$3 million, compared to the same period in 2019.

~~No loss from early extinguishment of debt was recognized during the three months ended June 30, 2019. Gain~~Loss from early extinguishment of debt of ~~$64~~$4 million was recognized during the three months ended ~~June 30, 2018, which resulted primarily from~~March 31, 2020, as a result of the refinancing ~~and exchange~~ of certain of our outstanding notes ~~during that period~~ as discussed further in Capital Resources. Loss from early extinguishment of debt of $31 million was recognized during the three months ended March 31, 2019, as a result of the Credit Facility amendment and repayment of the term loans thereunder.

Equity in earnings of unconsolidated affiliates, as a percentage of net operating revenues, ~~decreased~~increased from ~~0.2% during~~0.1% for the three months ended ~~June 30, 2018~~March 31, 2019 to ~~0.1% during~~0.3% for the three months ended ~~June 30, 2019.~~March 31, 2020.

The net results of the above-mentioned changes resulted in loss before income taxes increasing ~~$20~~$55 million from ~~$129~~$94 million for the three months ended ~~June 30, 2018~~March 31, 2019 to $149 million for the three months ended ~~June 30, 2019.~~March 31, 2020.

Our benefit from income taxes for the three months ended ~~June 30, 2019~~March 31, 2020 was $3$183 million compared to ~~$38~~a provision for income taxes of $7 million for the three months ended ~~June 30, 2018.~~March 31, 2019. Our effective tax rates were ~~2.0%~~122.8% and ~~29.5%~~(7.4)% for the three months ended ~~June 30,~~March 31, 2020 and 2019, ~~and 2018,~~ respectively. The difference in our effective tax rate for the three months ended ~~June 30, 2019,~~March 31, 2020, when compared to the three months ended ~~June 30, 2018,~~March 31, 2019, was primarily due to ~~an increase in~~discrete tax benefits of approximately $240 million related to the release of federal and state valuation ~~allowance recognized~~allowances on IRC Section 163(j) interest carryforwards as a result of an increase to the deductible interest expense allowed for 2019 and 2020 under the~~write-off~~ of~~non-deductible~~ ~~goodwill.~~ CARES Act that was enacted in the three months ended March 31, 2020.

Net ~~loss,~~income (loss), as a percentage of net operating revenues, ~~increased from (2.6)~~was (3.0)% for the three months ended ~~June 30, 2018~~March 31, 2019 compared to ~~(4.4)%~~1.1% for the three months ended ~~June 30, 2019.~~March 31, 2020.

Net income attributable to noncontrolling interests, as a percentage of net operating revenues, ~~increased from~~remained consistent at 0.5% for both of the three-month periods ended March 31, 2020 and 2019.

Net income attributable to Community Health Systems, Inc. was $18 million for the three months ended ~~June 30, 2018~~March 31, 2020, compared to ~~0.7% for the three months ended June 30, 2019.~~

~~Net~~a net loss attributable to Community Health Systems, Inc. ~~was $167~~of $118 million for the three months ended ~~June 30, 2019, compared to $110 million for the three months ended June 30, 2018.~~

~~Six Months Ended June 30, 2019 Compared to Six Months Ended June 30, 2018~~

Net operating revenues decreased by 7.9% to approximately $6.7 billion for the six months ended June 30, 2019, from approximately $7.3 billion for the six months ended June 30, 2018. Net operating revenues on a same-store basis from hospitals that were operated throughout both periods increased $253 million, or 4.0%, during the six months ended June 30, 2019, as compared to the six months ended June 30, 2018. The increase in same-store net operating revenues was attributable to improved pricing due to higher acuity, and an increase in inpatient admissions.~~Non-same-store~~ net operating revenues decreased $825 million during the six months ended June 30, 2019, in comparison to the prior year period, with the decrease attributable primarily to the divestiture of hospitals during 2018 andMarch 31, 2019. On a consolidated basis, inpatient admissions decreased by 12.5% during the six months ended June 30, 2019 as compared to the six months ended June 30, 2018. Also on a consolidated basis, adjusted admissions decreased by 12.5% during the six months ended June 30, 2019 as compared to the six months ended June 30, 2018. On a same-store basis, net operating revenues per adjusted admission increased 2.7%, while inpatient admissions increased by 1.1% and adjusted admissions increased by 1.3% for the six months ended June 30, 2019, compared to the six months ended June 30, 2018.

Operating expenses, as a percentage of net operating revenues, decreased from 96.6% during the six months ended June 30, 2018 to 95.5% during the six months ended June 30, 2019. Operating expenses, excluding depreciation and amortization and impairment and (gain) loss on sale of businesses, as a percentage of net operating revenues, increased from 88.9% for the six months ended June 30, 2018 to 89.8% for the six months ended June 30, 2019. Salaries and benefits, as a percentage of net operating revenues, increased from 45.0% for the six months ended June 30, 2018 to 45.4% for the six months ended June 30, 2019. This increase in salaries and benefits, as a percentage of net operating revenues, was primarily due to higher benefits expenses, including health insurance claims cost and an increase in certain~~non-qualified~~ benefit plan liabilities from overall market appreciation of plan investments. Supplies, as a percentage of net operating revenues, decreased from 16.7% for the six months ended June 30, 2018 to 16.4% for the six months ended June 30, 2019. Other operating expenses, as a percentage of net operating revenues, increased from 24.7% for the six months ended June 30, 2018 to 25.5% for the six months ended June 30, 2019. This increase in other operating expenses, as a percentage of net operating revenues, was primarily due to the change in estimate for professional liability claims expense and the bad debt expense for the reserve recorded for a promissory note from the buyer of two of our former hospitals in 2017 that filed for bankruptcy as described above. Expense related to government and other legal settlements and related costs, as a percentage of net operating revenues, remained consistent at 0.1% for both of the~~six-month~~ ~~periods ended June 30, 2019 and 2018. Lease cost and rent, as a percentage of net operating revenues, remained consistent at 2.4% for both of thesix-month~~ ~~periods ended June 30, 2019 and 2018.~~

Depreciation and amortization, as a percentage of net operating revenues, decreased from 4.9% for the six months ended June 30, 2018 to 4.6% for the six months ended June 30, 2019, primarily due to ceasing depreciation on property and equipment at hospitals sold or held for sale.

Impairment and (gain) loss on sale of businesses was $71 million for the six months ended June 30, 2019, compared to $202 million for the six months ended June 30, 2018, 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, increased by $58 million to $522 million for the six months ended June 30, 2019 compared to $464 million for the six months ended June 30, 2018, which was driven by an increase in interest rates during the six months ended June 30, 2019, compared to the same period in 2018, which resulted in an increase in interest expense of $71 million. This increase was partially offset by a decrease in our average outstanding debt during the six months ended June 30, 2019, which resulted in a decrease in interest expense of $11 million, and an increase in major construction projects during the six months ended June 30, 2019 resulted in $2 million more interest being capitalized, compared to the same period in 2018.

Loss from early extinguishment of debt of $31 million was recognized during the six months ended June 30, 2019, as a result of the Credit Facility amendment and repayment of the term loans under the Credit Facility as discussed further in Capital Resources. Gain from early extinguishment of debt of $59 million was recognized during the six months ended June 30, 2018 which resulted primarily from the refinancing and exchange of certain of our outstanding notes and repayment of a portion of our term loans under the Credit Facility as discussed further in Capital Resources.

~~Equity in earnings of unconsolidated affiliates, as a percentage of net operating revenues, remained consistent at 0.2% for both of thesix-month~~ ~~periods ended June 30, 2019 and 2018.~~

The net results of the above-mentioned changes resulted in loss before income taxes increasing $100 million from $143 million for the six months ended June 30, 2018 to $243 million for the six months ended June 30, 2019.

Our provision for income taxes for the six months ended June 30, 2019 was $3 million compared to a benefit from income taxes of $45 million for the six months ended June 30, 2018. Our effective tax rates were (1.2)% and 31.5% for the six months ended June 30, 2019 and 2018, respectively. The difference in our effective tax rate for the six months ended June 30, 2019, when compared to the six months ended June 30, 2018, was primarily due to an increase in the valuation allowance recognized on IRC Section 163(j) interest carryforwards and the write-off of non-deductible goodwill.

~~Net loss, as a percentage of net operating revenues, increased from (1.4)% for the six months ended June 30, 2018 to (3.7)% for the six months ended June 30, 2019.~~

Net income attributable to noncontrolling interests, as a percentage of net operating revenues, increased from 0.5% for the six months ended June 30, 2018 to 0.6% for the six months ended June 30, 2019.

~~Net loss attributable to Community Health Systems, Inc. was $285 million for the six months ended June 30, 2019, compared to $135 million for the six months ended June 30, 2018.~~

Liquidity and Capital Resources

Net cash provided by operating activities ~~increased $171~~decreased $76 million, from approximately ~~$94~~$133 million for the ~~six~~three months ended ~~June 30, 2018,~~March 31, 2019, to approximately ~~$265~~$57 million for the ~~six~~three months ended ~~June 30, 2019.~~March 31, 2020. The ~~increase~~decrease in cash provided by operating activities was primarily the result of ~~lower interest payments due to the~~ timing of payments resulting from the refinancing activity during the six months ended June 30, 2019, as well as from an increase in cash flow from patient accounts receivable collections. Such increases were offset by higher malpractice claiminterest payments, compared to the same period in ~~2018.~~2019. Total cash paid for interest during the ~~six~~three months ended ~~June 30, 2019 decreased~~March 31, 2020 increased to approximately ~~$318~~$264 million compared to ~~$486~~$189 million for the ~~six~~three months ended ~~June 30, 2018.~~March 31, 2019. Cash paid for income taxes, net of refunds received, resulted in a net refund of $3$2 million and $9less than $1 million during the ~~six~~three months ended ~~June 30,~~March 31, 2020 and 2019, ~~and 2018,~~ respectively.

Our net cash used in investing activities was approximately ~~$147~~$109 million for the ~~six~~three months ended ~~June 30, 2019,~~March 31, 2020, compared to net cash provided by investing activities of approximately ~~$241~~$19 million for the ~~six~~three months ended ~~June 30, 2018,~~March 31, 2019, a decrease of approximately ~~$94~~$128 million. The cash used in investing activities during the ~~six~~three months ended ~~June 30, 2019,~~March 31, 2020, was primarily impacted by ~~an increase~~a decrease in proceeds ~~from the~~provided by divestitures of hospitals and other ancillary operations of ~~$73~~$159 million as a result of fewer hospital divestitures in the first ~~six~~three months of ~~2019~~2020 compared to the same period in ~~2018, and a decrease in~~2019 (including the ~~cash used in~~receipt of the ~~purchase of property and equipment of $83 million~~net proceeds for the ~~six months ended June 30, 2019 compared to the same period in 2018. The decreases in cash used in investing activities were also impacted by~~hospitals divested effective January 1, 2020, on December 31, 2019), and a decrease in cash provided by the net impact of the purchases and sales ofavailable-for-sale securities and equity securities of ~~$12~~$13 million. The decrease in cash provided by investing activities was partially offset by a decrease in cash used in the purchase of property and equipment of $22 million, ~~an increase of $3 million~~and a decrease in the cash used in the acquisition of facilities and other related equipment of $4 million as ~~there was~~ a ~~hospital acquisition during the six months ended June 30, 2019, a decrease~~result of fewer physician practice, clinic and other ancillary business acquisitions in the ~~proceeds from sale~~first three months of ~~property and equipment of $3 million for the six months ended June 30, 2019~~2020 compared to the same period in ~~2018~~2019 and ~~an increase~~a decrease in cash used for other investments (primarily frominternal-use software expenditures and physician recruiting costs) of ~~$44~~$18 million.

Our net cash provided by financing activities was $82 million for the three months ended March 31, 2020, compared to net cash used in financing activities ~~was $107~~of approximately $71 million for the ~~six~~three months ended ~~June 30,~~March 31, 2019, ~~compared to approximately $208 million for the six months ended June 30, 2018, a decrease~~an increase of approximately ~~$101~~$153 million. The ~~decrease~~increase in cash ~~used in~~provided by financing activities, in comparison to the prior year period, was primarily due to the net effect of our debt repayment, refinancing activity, and cash paid for deferred financing costs and other debt-related costs.

The CARES Act, which was enacted on March 27, 2020, authorizes $100 billion in funding to hospitals and other healthcare providers to be distributed through the PHSSEF. The PPPHCA Act, which was enacted on April 24, 2020, includes additional emergency appropriations forCOVID-19 response, including $75 billion to be distributed to eligible providers through the PHSSEF. Payments from the PHSSEF are intended to compensate healthcare providers for lost revenues and incremental expenses incurred in response to theCOVID-19 pandemic and are not required to be repaid provided the recipients attest to and comply with certain terms and conditions, including limitations on balance billing and not using PHSSEF funds to reimburse expenses or losses that other sources are obligated to reimburse. HHS initially distributed $30 billion of this funding based on each provider’s share of total Medicarefee-for-service reimbursement in 2019, but has announced that $50 billion in CARES Act funding (including the $30 billion already distributed) will be allocated proportional to providers’ share of 2018 net patient revenue. HHS has indicated that distributions of the remaining $50 billion will be targeted primarily to hospitals inCOVID-19 high impact areas, to rural providers, and to reimburse providers forCOVID-19-related treatment of uninsured patients. In April 2020, we received approximately $245 million in payments from the initial funding of the PHSSEF as noted above, which did not qualify for recognition during the three months ended March 31, 2020. The HHS has not yet announced the precise method by which certain future payments from the PHSSEF will be determined or allocated, so the potential impact to us of future payments from the PHSSEF is unclear.

As a way to increase cash flow to Medicare providers impacted by theCOVID-19 pandemic, the CARES Act expanded the Medicare Accelerated and Advance Payment Program. Inpatient acute care hospitals may request accelerated payments of up to 100% of their anticipated Medicare payment amount for asix-month period (not including Medicare Advantage payments), although CMS is now reevaluating pending and new applications in light of direct payments made available through PHSSEF. CMS will base payment amounts for inpatient acute care hospitals on the provider’s Medicarefee-for-service reimbursements in the last six months of 2019. Such accelerated payments are interest free for inpatient acute care hospitals for 12 months, and the program currently requires CMS to recoup the payments beginning 120 days after receipt by the provider, by withholding future Medicarefee-for-service payments for claims until such time as the full accelerated payment has been recouped. The program currently requires the provider must repay any outstanding balance remaining after 12 months or be subjected to an interest rate currently set at 10.25%. In April 2020, we received approximately $1.2 billion of such accelerated payments, which did not qualify for recognition during the three months ended March 31, 2020.

The CARES Act provides for deferred 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. We began deferring the employer portion of social security taxes inmid-April 2020.

There have been no material changes outside of the ordinary course of business to our upcoming cash obligations during the ~~six~~three months ended ~~June 30, 2019~~March 31, 2020 from those disclosed in the table on page 72 of our ~~2018~~2019 Form10-K and discussed below related to debt refinancing activity during ~~2019.~~2020.

Capital Expenditures

Cash expenditures for purchases of facilities and other related businesses were ~~$13~~less than $1 million for the ~~six~~three months ended ~~June 30, 2019,~~March 31, 2020, compared to ~~$10~~$4 million for the ~~six~~three months ended ~~June 30, 2018.~~March 31, 2019. Our expenditures for the ~~six~~three months ended ~~June 30,~~March 31, 2020 and 2019 ~~were primarily related to the purchase of one hospital in Mississippi, physician practices and other ancillary services. Our expenditures for the six months ended June 30, 2018~~ were primarily related to physician practices and other ancillary services. ~~No hospital acquisitions were completed during the six months ended June 30, 2018.~~

Excluding the cost to construct replacement hospitals, our cash expenditures for routine capital for the ~~six~~three months ended ~~June 30, 2019~~March 31, 2020 totaled ~~$206~~$70 million compared to ~~$294~~$117 million for the ~~six~~three months ended ~~June 30, 2018.~~March 31, 2019. These capital expenditures related primarily to the purchase of additional equipment, minor renovations and information systems infrastructure. Costs to construct replacement hospitals totaled $6$29 million for the ~~six~~three months ended ~~June 30, 2019,~~March 31, 2020, compared to $1$4 million for the ~~six~~three months ended ~~June 30, 2018.~~March 31, 2019. The costs to construct replacement hospitals for the ~~six~~three months ended ~~June 30,~~March 31, 2020 and 2019 ~~and 2018~~ primarily represent both planning and construction costs for the replacement facility at La Porte, Indiana.

Pursuant to a hospital purchase agreement from our March 1, 2016 acquisition of La Porte Hospital and Starke Hospital, we committed to build replacement facilities in both La Porte, Indiana and Knox, Indiana. Under the terms of such agreement, construction of the replacement hospital for LaPorte Hospital is required to be completed within five years of the date of acquisition, or March 2021. In addition, construction of the replacement facility for Starke Hospital 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, 2026. We have not entered into a new lease with the lessor for Starke Hospital and currently anticipate completing construction of the Starke Hospital replacement facility in 2026. Construction costs, including equipment costs, for the La Porte and Starke replacement facilities are currently estimated to be approximately $128 million and $15 million, respectively.

Capital Resources

Net working capital was approximately ~~$981 million~~$1.2 billion at ~~June 30, 2019,~~March 31, 2020, compared to ~~$1.2~~$1.1 billion at December 31, ~~2018.~~2019. Net working capital ~~decreased~~increased by approximately ~~$176~~$50 million between December 31, ~~2018~~2019 and ~~June 30, 2019.~~March 31, 2020. This ~~decrease~~increase is primarily due to the ~~increase~~increases in other current ~~operating lease liabilities, partially offset by an increase in~~assets and cash and cash equivalents and a decrease in accounts payable, partially offset by a decrease in patient accounts receivable during the ~~six~~three months ended ~~June 30, 2019.~~March 31, 2020.

~~We have senior secured financing under a credit facility with a syndicate~~In addition to cash flows from operations, available sources of financial institutions led by Credit Suisse, as administrative agent and collateral agent, which at December 31, 2018 included (i) a revolving credit facility with commitments through January 27, 2021 of approximately $425 million, or the Revolving Facility and (ii) a Term H facility due 2021, or the Term H Facility. The Revolving Facility includes a subfacility for letters of credit.

~~As of June 30, 2019, the availability for additional borrowings~~capital include amounts available under the Credit Facility, subject to certain limitations as set forth in the Credit Facility, was approximately $385 million pursuant to the Revolving Facility, of which $148 million is in the form of outstanding letters of credit. CHS has the ability to amend the Credit Facility to provide for one or more tranches of term loans or increases in the Revolving Facility in an aggregate principal amount of up to $500 million. As of June 30, 2019, the weighted-average interest rate under the Credit Facility, excluding swaps, was 6.4%.

The loans under the Credit Facility bear interest on the outstanding unpaid principal amount at a rate equal to an applicable percentage plus, at our option, either (a) an Alternate Base Rate (as defined) determined by reference to the greater of (1) the Prime Rate (as defined) announced by Credit Suisse or (2) the NYFRB Rate (as defined) plus 0.50% or (3) the adjusted LIBOR rate on such day for a three-month interest period commencing on the second business day after such day plus 1% or (b) LIBOR. In addition, the margin in respect of the Revolving Facility will be subject to adjustment determined by reference to a leverage-based pricing grid. Based on our current leverage, loans in respect of the Revolving Facility currently accrue interest at a rate per annum equal to LIBOR plus 2.75%, in the case of LIBOR borrowings, and Alternate Base Rate plus 1.75%, in the case of Alternate Base Rate borrowings. Prior to the refinancing transactions discussed below, the Term H Loan accrued interest at a rate per annum equal to LIBOR plus 3.25%, in the case of LIBOR borrowings, and Alternate Base Rate plus 2.25%, in the case of Alternate Base Rate borrowings. The Term H Loan was subject to a 1.00% LIBOR floor and a 2.00% Alternate Base Rate floor.

The term loan facility must be prepaid in an amount equal to (1) 100% of the net cash proceeds of certain asset sales and dispositions by us and our subsidiaries, subject to certain exceptions and reinvestment rights (as further described below), (2) 100% of the net cash proceeds of issuances of certain debt obligations or receivables-based financing by us and our subsidiaries, subject to certain exceptions, and (3) 75%, subject to reduction to a lower percentage based on our first lien net leverage ratio (as defined in the Credit Facility generally as the ratio of first lien net debt on the date of determination to our consolidated EBITDA, as defined, for the four quarters most recently ended prior to such date), of excess cash flow (as defined) for any year, subject to certain exceptions. Voluntary prepayments and commitment reductions were permitted in whole or in part, without any premium or penalty, subject to minimum prepayment or reduction requirements.

The borrower under the Credit Facility is our wholly-owned subsidiary CHS/Community Health Systems, Inc., or CHS. All of our obligations under the Credit Facility are unconditionally guaranteed by Community Health Systems, Inc. and certain of its existing and subsequently acquired or organized domestic subsidiaries. All obligations under the Credit Facility and the related guarantees are secured by a perfected first priority lien or security interest in substantially all of the assets of Community Health Systems, Inc., CHS and each subsidiary guarantor, including equity interests held by us or any subsidiary guarantor, but excluding, among others, the equity interests of~~non-significant~~ subsidiaries, syndication subsidiaries, securitization subsidiaries and joint venture subsidiaries. Such assets constitute substantially the same assets, subject to certain exceptions, that secure CHS’ obligations under its outstanding first lien senior secured notes and, on a junior-priority basis, its outstanding junior-priority secured notes.

We have agreed to pay letter of credit fees equal to the applicable percentage then in effect with respect to LIBOR borrowings under the Revolving Facility times the maximum aggregate amount available to be drawn under all letters of credit outstanding under the subfacility for letters of credit. The issuer of any letter of credit issued under the subfacility for letters of credit will also receive a customary fronting fee and other customary processing charges. We are obligated to pay commitment fees of 0.50% per annum (subject to adjustment based upon our leverage ratio), on the unused portion of the Revolving Facility.

The Credit Facility contains customary representations and warranties, subject to limitations and exceptions, and customary covenants restricting our and our subsidiaries’ ability, subject to certain exceptions, to, among other things, (1) declare dividends, make distributions or redeem or repurchase capital stock, (2) prepay, redeem or repurchase other debt, (3) incur liens or grant negative pledges, (4) make loans and investments and enter into acquisitions and joint ventures, (5) incur additional indebtedness or provide certain guarantees, (6) make capital expenditures, (7) engage in mergers, acquisitions and asset sales, (8) conduct transactions with affiliates, (9) alter the nature of our businesses, (10) grant certain guarantees with respect to physician practices, (11) engage in sale and leaseback transactions or (12) change our fiscal year. We and our subsidiaries are also required to comply with specified financial covenants (consisting of a maximum first lien net debt to consolidated EBITDA leverage ratio) and various affirmative covenants. Under the Credit Facility, the first lien net debt to consolidated EBITDA leverage ratio is calculated as the ratio of total first lien debt, less unrestricted cash and cash equivalents, to consolidated EBITDA, as defined in the Credit Facility. The calculation of consolidated EBITDA as defined in the Credit Facility is a trailing~~12-month~~ calculation that begins with net income attributable to us, with certain pro forma adjustments to consider the impact of material acquisitions or divestitures, and adjustments for interest, taxes, depreciation and amortization, net income attributable to noncontrolling interests, stock compensation expense, restructuring costs, and the financial impact of other~~non-cash~~ or~~non-recurring~~ ~~items recorded during any such12-month~~ ~~period. For the12-month~~ period ended June 30, 2019, the first lien net debt to consolidated EBITDA leverage ratio financial covenant under the Credit Facility limited the ratio of first lien net debt to consolidated EBITDA, as defined, to less than or equal to 5.25 to 1.0. We were in compliance with all such covenants at June 30, 2019, with a first lien net debt to consolidated EBITDA leverage ratio of approximately 4.96 to 1.0.

Events of default under the Credit Facility include, but are not limited to, (1) our failure to pay principal, interest, fees or other amounts under the credit agreement when due (taking into account any applicable grace period), (2) any representation or warranty proving to have been materially incorrect when made, (3) covenant defaults subject, with respect to certain covenants, to an available cure, (4) bankruptcy and insolvency events, (5) a cross default to certain other debt, (6) certain undischarged judgments (not paid within an applicable grace period), (7) a change of control (as defined), (8) certain ERISA-related defaults and (9) the invalidity or impairment of specified security interests, guarantees or subordination provisions in favor of the administrative agent or lenders under the Credit Facility.

On February 15, 2019, the Credit Facility was amended, with requisite covenant lender approval, to amend the first lien net debt to EBITDA ratio financial covenant and to reduce the extended revolving credit commitments to $385 million. The amended financial covenant provides for a maximum first lien net debt to EBITDA ratio of 5.00 to 1.0 from July 1, 2018 through December 31, 2018, 5.25 to 1.0 from January 1, 2019 through December 31, 2019, 5.00 to 1.00 from January 1, 2020 through June 30, 2020, 4.50 to 1.00 from July 1, 2020 through September 30, 2020, and 4.25 to 1.0 thereafter. In addition, CHS agreed to further restrict its ability to make restricted payments. The revolving credit commitments will terminate on January 27, 2021. The amended Credit Facility includes a~~91-day~~ ~~springing maturity date applicable if more than $250 million in the aggregate principal amount of our 8% Senior Notes due 2019, 7~~¹⁄₈~~% Senior Notes due 2020, Term H Facility or refinancings thereof are scheduled to mature or similarly become due within 91 days of such date.~~

Prior to the effectiveness of the ABL Facility described below, CHS, through certain of its subsidiaries, participated in an accounts receivable loan agreement, or the Receivables Facility, with a group of lenders and banks, Credit Agricolé Corporate and Investment Bank, as a managing agent and as the administrative agent. Patient-related accounts receivable, or the Receivables, for certain affiliated hospitals served as collateral for the outstanding borrowings under the Receivables Facility. The interest rate on the

borrowings was based on the commercial paper rate plus an applicable interest rate spread. The Receivables Facility was repaid in full and terminated upon the effectiveness of the ABL Facility on April 3, 2018.

~~On April 3, 2018, we and CHS entered into an~~ asset-based loan (ABL) credit agreement, or the ABL Credit Agreement, ~~with JPMorgan Chase Bank, N.A.,~~which we entered into on April 3, 2018, as ~~administrative agent,~~well as anticipated access to public and ~~the lenders and other agents party thereto.~~ private debt markets.

Pursuant to the ABL Credit Agreement, the lenders have extended to CHS/Community Health Systems, Inc., or CHS, a revolving asset-based loan facility, or the ABL Facility, in the maximum aggregate principal amount of $1.0 billion, subject to borrowing base capacity. ~~The ABL Facility includes~~At March 31, 2020, the available borrowing capacity available for letters of credit of $50 million. CHS and all domestic subsidiaries of CHS that guarantee CHS’ other outstanding senior and senior secured indebtedness guarantee the obligations of CHS under the ABL Facility. Subject to certain exceptions, all obligationsbase under the ABL Facility ~~and the related guarantees are secured by a perfected first-priority security interest in substantially all~~was $769 million, of the Receivables, deposit, collection and other accounts and contract rights, books, records and other instruments related to the foregoing of the Company, CHS and the guarantors as well as a perfected junior-priority security interest in substantially all of the other assets of the Company, CHS and the guarantors, subject to customary exceptions and intercreditor arrangements. The revolving credit commitments under the Credit Facility were reduced to $425 million upon the effectiveness of the ABL facility. In connection with entering into the ABL Credit Agreement and the ABL Facility,which we ~~repaid in full and terminated our Receivables Facility. The~~had outstanding borrowings ~~pursuant to the ABL Facility at June 30, 2019 totaled $723~~of $380 million ~~on the condensed consolidated balance sheet.~~

certain bonds. Principal amounts outstanding under the ABL Facility will be due and payable in full on ~~April 3, 2023. The ABL Facility includes a91-day~~ springing maturity applicable if more than $250 million in the aggregate principal amount of the Borrower’s 8% Senior Notes due 2019, Term G loans due 2019, 7.125% Senior Notes due 2020, Term H loans due 2021, 5.125% Senior Secured Notes due 2021, 6.875% Senior Notes due 2022 or 6.25% Senior Secured Notes due 2023 or refinancings thereof are scheduled to mature or similarly become due on a date prior to April 3, 2023.

The ABL Facility contains customary representations and warranties, subject to limitations and exceptions, and customary covenants restricting our ability, subject to certain exceptions, to, among other things (1) declare dividends, make distributions or redeem or repurchase capital stock, (2) prepay, redeem or repurchase other debt, (3) incur liens or grant negative pledges, (4) make loans and investments and enter into acquisitions and joint ventures, (5) incur additional indebtedness or provide certain guarantees, (6) engage in mergers, acquisitions and asset sales, (7) conduct transactions with affiliates, (8) alter the nature of ~~the Company’s, CHS’ or the guarantors’~~our businesses, (9) grant certain guarantees with respect to physician practices, (10) engage in sale and leaseback transactions or (11) change our fiscal year. We are also required to comply with a consolidated fixed coverage ratio, upon certain triggering events described below, and various affirmative covenants. The consolidated fixed coverage ratio is calculated as the ratio of (x) consolidated EBITDA (as defined in the ABL Facility) less capital expenditures to (y) the sum of consolidated interest expense (as defined in the ABL Facility), scheduled principal payments, income taxes and restricted payments made in cash or in permitted investments. For purposes of calculating the consolidated fixed charge coverage ratio, the calculation of consolidated EBITDA as defined in the ABL Facility is a trailing12-month calculation that begins with our consolidated net income, ~~attributable to Holdings,~~ with certain adjustments for interest, taxes, depreciation and amortization, net income attributable to noncontrolling interests, stock compensation expense, restructuring costs, and the financial impact of othernon-cash ornon-recurring items recorded during any such12-month period. The consolidated fixed charge coverage ratio is a required covenant only in periods where the total borrowings outstanding under the ABL Facility reduce the amount available in the facility to less than the greater of (i) $95 million ~~and~~or (ii) 10% of the calculated borrowing base. As a result, in

the event we have less than $95 million available under the ABL Facility, we would need to comply with the consolidated fixed charge coverage ratio. At ~~June 30, 2019,~~March 31, 2020, we were not subject to the consolidated fixed charge coverage ratio as such triggering event had not occurred during the last twelve months ended ~~June 30, 2019.~~

~~defaults and (9) the invalidity or impairment of specified security interests, guarantees or subordination provisions in favor of the ABL Agent or lenders under the ABL Facility.~~March 31, 2020.

On ~~June 22, 2018,~~February 6, 2020, CHS completed ~~offers to exchange (i) up to $1.925~~a private offering of $1.462 billion aggregate principal amount of its new Junior-Priority Secured Notes due 2023, or the 2023 Junior-Priority Notes, in exchange for any and all of its $1.925 billion aggregate principal amount of outstanding 8% Senior Notes, (ii) up to $1.200 billion aggregate principal amount of its new Junior-Priority Secured Notes due 2024, or the 2024 Junior-Priority Notes, in exchange for any and all of its $1.200 billion aggregate principal amount of outstanding 7¹⁄₈~~% Senior Notes, and (iii) to the extent that less than all of the outstanding 8% Senior Notes and 7~~¹⁄₈% Senior Notes were tendered in the exchange offers, up to an aggregate principal amount of 2024 Junior-Priority Notes equal to, when taken together with the total notes issued in exchange for the validly tendered and accepted 8% Senior Notes and 7¹⁄₈~~% Senior Notes, $3.125 billion, in exchange for its outstanding~~ 6⁷⁄₈% Senior Notes. Upon completion of the exchange offers, CHS issued (i) approximately $1.770 billion aggregate principal amount of the 2023 Junior-Priority Notes in exchange for the same amount of 8% Senior Notes, (ii) approximately $1.079 billion aggregate principal amount of the 2024 Junior-Priority Notes in exchange for the same amount of 7¹⁄₈~~% Senior Notes and (iii) approximately $276 million aggregate principal amount of the 2024 Junior-Priority Notes in exchange for approximately $368 million of 6~~⁷⁄₈~~% Senior Notes.~~

~~On July 6, 2018, CHS completed an offering of $1.033 billion aggregate principal amount of 8~~⁵⁄₈% Senior Secured Notes due ~~2024, or the 8~~February 15, 2025 (the “6⁵⁄₈% Senior Secured ~~Notes. We~~Notes due 2025”). CHS used the net proceeds ~~from this~~of the offering of the 6⁵⁄₈% Senior Secured Notes due 2025 to ~~repay~~(i) purchase any and all of its 5¹⁄₈% Senior Secured Notes due 2021 validly tendered and not validly withdrawn in the ~~outstanding balance owed under~~cash tender offer announced on January 23, 2020, (ii) redeem all of the ~~Term G Loan~~5¹⁄₈% Senior Secured Notes due 2021 that were not purchased pursuant to such tender offer, (iii) purchase in one or more privately negotiated transactions approximately $426 million aggregate principal amount of its 6¹⁄₄% Senior Secured Notes due 2023 and (iv) pay related fees and ~~expenses related to the offering.~~ expenses.

The ~~terms~~6⁵⁄₈% Senior Secured Notes due 2025 bear interest at a rate of ~~the 8~~6.625% per annum, payable semi-annually in arrears on February 15 and August 15 of each year, commencing on August 15, 2020. The 6⁵⁄₈% Senior Secured Notes are ~~governed by an indenture, dated as of July~~scheduled to mature on February 15, 2025. The 6 ~~2018, among CHS, the Company, the subsidiary guarantors party thereto, Regions Bank, as trustee and Credit Suisse AG, as collateral agent. The 8~~⁵⁄₈% Senior Secured Notes ~~bear interest at a rate of 8~~⁵⁄₈~~% per year payable semi-annually in arrears on January 15 and July 15 of each year, commencing on January 15, 2019. The 8~~⁵⁄₈~~% Senior Secured Notes~~due 2025 are unconditionally guaranteed on a senior-priority secured basis by us and each of the CHS current and future domestic subsidiaries that provide guarantees under ~~CHS’ senior secured credit facilities, CHS’~~the ABL ~~facility,~~Facility, any capital market debt securities of CHS (including CHS’ outstanding senior notes) and certain other long-term debt of CHS.

~~On March~~ The 6 ~~2019, CHS completed an offering of $1.601 billion aggregate principal amount of 8%~~⁵⁄₈% Senior Secured Notes due ~~2026, or~~2025 and the ~~8% Senior Secured Notes. We used~~related guarantees are secured by shared (i) first-priority liens on the ~~proceeds from this offering~~Non-ABL Priority Collateral and (ii) second-priority liens on the ABL Priority Collateral that secures on a first-priority basis the ABL Facility, in each case subject to ~~repay~~permitted liens described in the ~~outstanding balance owed under~~indenture governing the ~~Term H Facility and pay fees and expenses related to the offering. The terms of the 8%~~6⁵⁄₈% Senior Secured Notes are governed by an indenture, dated as of March 6, 2019, among CHS, the Company, the subsidiary guarantors party thereto, Regions Bank, as trustee and Credit Suisse AG, as collateral agent. The 8% Senior Secured Notes bear interest at a rate of 8% per year payable semi-annually in arrears on March 15 and September 15 of each year, commencing on September 15, 2019. The 8% Senior Secured Notes are unconditionally guaranteed on a senior-priority secured basis by us and each of the CHS current and future domestic subsidiaries that provide guarantees under CHS’ senior secured credit facilities, CHS’ ABL facility, any capital market debt securities of CHS (including CHS’ outstanding senior notes) and certain other long-term debt of CHS.due 2025.

As of ~~June 30, 2019,~~March 31, 2020, we are currently a party to one interest rate swap ~~agreements~~agreement to limit the effect of changes in interest rates on ~~approximately 96.8%~~all of our variable rate debt. ~~On each of these swaps, we~~We receive a variable rate of interest on this swap based on the three-month LIBOR, in exchange for the payment by us of a fixed rate of interest. ~~See Note 11 in the footnotes to the condensed consolidated financial statements for further information on our interest rate swap agreements.~~

~~The indentures that govern our outstanding notes contain various covenants that limit our ability to take certain actions, including our ability to:~~

~~incur, assume or guarantee additional indebtedness;~~

~~issue redeemable stock and preferred stock;~~

~~repurchase capital stock;~~

~~make restricted payments, including paying dividends and making certain loans, acquisitions and investments;~~

~~redeem debt that is subordinated in right of payment to our outstanding notes;~~

~~create liens;~~

~~sell or otherwise dispose of assets, including capital stock of subsidiaries;~~

~~impair the security interests;~~

~~enter into agreements that restrict dividends and certain other payments from subsidiaries;~~

~~merge, consolidate, sell or otherwise dispose of substantially all of our assets;~~

~~enter into transactions with affiliates; and~~

~~guarantee certain obligations.~~

The indentures governing each of the 2023 Junior-Priority Notes and 2024 Junior-Priority Notes also prohibit CHS from purchasing, repurchasing, redeeming, defeasing or otherwise acquiring or retiring any outstanding 8% Senior Notes and 7¹⁄₈% Senior Notes with: (a) cash or cash equivalents on hand as of the consummation of such exchange offers; (b) cash generated from operations; (c) proceeds from assets sales; or (d) proceeds from the issuance of, or in exchange for, secured debt, in each case, prior to the date that is 60 days prior to the relevant maturity dates of such 8% Senior Notes and 7¹⁄₈~~% Senior Notes, as applicable.~~

Our ability to meet the restricted covenants and financial ratios and tests in ~~our Credit Facility,~~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 ~~our Credit Facility,~~the ABL Facility and/or the indentures that govern our outstanding notes. Upon the occurrence of an event of default under ~~our Credit Facility,~~the ABL Facility or indentures that govern our outstanding notes, all amounts outstanding under ~~our Credit Facility,~~the ABL Facility and the indentures that govern our outstanding notes may become immediately due and payable and all commitments under the ~~Credit Facility or~~ ABL Facility to extend further credit may be terminated.

As of March 31, 2020, approximately $30 million of our total long-term debt of $13.5 billion is due within the next 12 months.

Proceeds, if any, from the previously announced portfolio rationalization strategy, which is anticipated to formally conclude in the third quarter of this year, are expected to be used for general corporate purposes.

In April 2020, we received relief via the CARES Act, including approximately $245 million in payments through the PHSSEF and approximately $1.2 billion of accelerated payments pursuant to the Medicare Accelerated and Advance Payment Program. As previously noted, PHSSEF payments are not required to be repaid, subject to certain terms and conditions, while payments received under the Medicare Accelerated and Advance Payment Program are required to be repaid. Additionally, the CARES Act permits 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. We believe that deferral of the employer portion of social security taxes, which we began doing in mid-April 2020, along with the funds received under the CARES Act provisions noted above, will positively impact our cash flows from operations during 2020.

As previously discussed, we may require an increased level of working capital if we experience extended billing and collection cycles resulting from negative economic conditions (including high unemployment and underemployment levels) arising from theCOVID-19 pandemic, which may impact service mix, revenue mix, payor mix and patient volumes, as well as our ability to collect outstanding receivables. Any increase in the amount or deterioration in the collectability of accounts receivable will adversely affect our cash flows and results of operations, requiring an increased level of working capital.

We believe that internally generated cash flows, funds we have received under the CARES Act, and funds we may receive in the future, under the CARES Act and the PPPHCE Act, and current levels of ~~cash~~ availability for additional ~~borrowings~~borrowing under ~~our Credit Facility, of approximately $385 million, of which approximately $148 million is in~~ the ~~form of outstanding letters of credit, the availability under our new~~ ABL Facility and our ability to amend the Credit Facility to provide for one or more incremental tranches of term loans and revolving credit commitments in an aggregate principal amount of up to $500 million, in each case subject to certain limitations as set forth in the Credit 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. As noted above, theCOVID-19 pandemic has 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 PHSSEF payments and accelerated payments under the CARES Act, and we may receive additional amounts in the future under the CARES Act and the PPPHCE Act, as noted above, there is no assurance regarding the extent to which anticipated negative impacts on us arising from theCOVID-19 pandemic will be offset by amounts and benefits received under the CARES Act, and which we may receive in the future under the CARES Act and the PPPHCE Act, or other legislation.

We may elect from time to time 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.

Off-balance Sheet Arrangements

Off-balance sheet arrangements consist of letters of credit of ~~$148~~$150 million issued on ~~our Revolving~~the ABL Facility, primarily in support of potential insurance-related claims and certain bonds, as well as approximately ~~$22~~$18 million representing the maximum potential amount of future payments under physician recruiting guarantee commitments in excess of the liability recorded at ~~June 30, 2019.~~March 31, 2020.

Noncontrolling Interests

We have sold noncontrolling interests in certain of our subsidiaries or acquired subsidiaries with existing noncontrolling interest ownership positions. As of ~~June 30, 2019,~~March 31, 2020, we have hospitals in 1710 of the markets we serve, with noncontrolling physician ownership interests ranging from ~~less than~~ 1% to 40%. In addition, as of March 31, 2020, we have ~~eight~~nine other hospitals with noncontrolling interests owned bynon-profit entities. Redeemable noncontrolling interests in equity of consolidated subsidiaries was ~~$503~~$502 million ~~and $504 million as of June 30, 2019~~at both March 31, 2020 and December 31, ~~2018, respectively,~~2019, and noncontrolling interests in equity of consolidated subsidiaries was ~~$74~~$69 million and ~~$72~~$77 million as of ~~June 30, 2019~~March 31, 2020 and December 31, ~~2018,~~2019, respectively. The amount of net income attributable to noncontrolling interests was ~~$21~~$16 million and ~~$19~~$17 million for the three months ended ~~June 30,~~March 31, 2020 and 2019, ~~and 2018, respectively, and $39 million and $37 million for the six months ended June 30, 2019 and 2018,~~ respectively. As a result of the change in the Stark Law “whole hospital” exception included in the Affordable Care Act, we are not permitted to introduce physician ownership at any of our hospital facilities that did not have physician ownership at the time of the adoption of the Affordable Care Act, or increase the aggregate percentage of physician ownership in any of our former or existing hospital joint ventures in excess of the aggregate physician ownership level held at the time of the adoption of the Affordable Care Act.

Reimbursement, Legislative and Regulatory Changes

Ongoing legislative and regulatory efforts 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 which may further affect payments made under those programs, and the federal and state governments might, in the future, reduce the funds available under those programs or require more stringent utilization and quality reviews of hospital facilities. Additionally, there may be a continued rise in managed care programs and additional restructuring of the financing and delivery of healthcare in the United States. These events could cause our future financial results to be adversely impacted. We cannot estimate the impact of Medicare and Medicaid reimbursement changes that have been enacted or are under consideration. We cannot predict whether additional reimbursement reductions will be made or whether any such changes 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.

Inflation

The healthcare industry is labor intensive. Wages and other expenses increase during periods of inflation and when labor shortages occur in the marketplace. In addition, our suppliers pass along rising costs to us in the form of higher prices. We have implemented cost control measures, including our case and resource management program, to curb increases in operating costs and expenses. We have generally offset increases in operating costs by increasing reimbursement for services, expanding services and reducing costs in other areas. However, we cannot predict our ability to cover or offset future cost increases, particularly any increases in our cost of providing health insurance benefits to our employees. Moreover, as noted above, we have incurred, and may continue to incur, increased expenses arising from theCOVID-19 pandemic, including additional labor, equipment, pharmaceutical, medical supplies, and other expenditures.

Critical Accounting Policies

The discussion and analysis of our financial condition and results of operations are based upon our condensed 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 condensed consolidated financial statements. Actual results may differ from these estimates under different assumptions or conditions.

Critical accounting policies are defined as those that are reflective of significant judgments and uncertainties, and potentially result in materially different results under different assumptions and conditions. We believe that our critical accounting policies are limited to those described below.

Revenue Recognition

~~Upon our adoption of the new revenue recognition standard in the Financial Accounting Standards Board, or FASB, Accounting Standards Codification Topic 606, or ASC 606, we~~We record net operating revenues at the transaction price estimated to reflect the total consideration due from patients and third-party payors in exchange for providing goods and services in patient care. These services are considered to be a single performance obligation and have a duration of less than one year. Revenues are recorded as these goods and services are provided. The transaction price, which involves significant estimates, is determined based on our standard charges for the goods and services provided, with a reduction recorded for price concessions related to third party contractual arrangements as well as patient discounts and patient price concessions. During both of the ~~six months~~three month periods ended ~~June 30,~~March 31, 2020 and 2019, the impact of changes to the inputs used to determine the transaction price was considered immaterial to the current period.

Currently, several states utilize supplemental reimbursement programs for the purpose of providing reimbursement to providers to offset a portion of the cost of providing care to Medicaid and indigent patients. These programs are designed with input from the ~~Centers for Medicare & Medicaid Services~~CMS and are funded with a combination of state and federal resources, including, in certain instances, fees or taxes levied on the providers. Under these supplemental programs, we recognize revenue and related expenses in the period in which amounts are estimable and collection is reasonably assured. Reimbursement under these programs is reflected in net operating revenues and fees, taxes or other program-related costs are reflected in other operating expenses.

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 bynon-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 internally-developed data collection and analysis tools to automate the monthly estimation of required contractual allowances. Within this automated system, payors’ historical paid claims data are utilized to calculate the contractual allowances. This data is automatically 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 ~~June 30, 2019~~March 31, 2020 from our estimated reimbursement percentage, net ~~loss~~income (loss) for the ~~six~~three months ended ~~June 30, 2019~~March 31, 2020 would have changed by approximately ~~$79~~$74 million, and net accounts receivable at ~~June 30, 2019~~March 31, 2020 would have changed by ~~$104~~$95 million. 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 ~~loss~~income (loss) by an insignificant amount for each of the~~six-month~~ three-month periods ended ~~June 30, 2019~~March 31, 2020 and ~~2018.~~2019.

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 andco-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 forwalk-in and emergency room patients.

We estimate any adjustments to the transaction price for implicit price concessions by reserving a percentage of allself-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 asself-pay. The percentage used to reserve for allself-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. Additionally, significant changes in payor mix, business office operations, economic conditions or trends in federal and state governmental healthcare coverage could affect the net realizable value of accounts receivable. We also continually review the net realizable value of accounts receivable by monitoring historical cash collections as a percentage of trailing net operating revenues, as well as by analyzing current period net revenue and admissions by payor classification, aged accounts receivable by payor, days revenue outstanding, the composition ofself-pay receivables between pureself-pay patients and the patient responsibility portion of third-party insured receivables and the impact of recent acquisitions and dispositions. If the actual collection percentage differed by 1% at ~~June 30, 2019~~March 31, 2020 from our estimated collection percentage as a result of a change in expected recoveries, net ~~loss~~income (loss) for the ~~six~~three months ended ~~June 30, 2019~~March 31, 2020 would have changed by $52 million, and net accounts receivable at ~~June 30, 2019~~March 31, 2020 would have changed by ~~$69~~$67 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 revenue and admissions by payor classification, days revenue outstanding, the composition ofself-pay receivables between pureself-pay patients and the patient responsibility portion of third-party insured receivables and the impact of recent acquisitions and dispositions.

Our policy is towrite-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 ~~$4.6~~$3.6 billion at ~~June 30, 2019~~March 31, 2020 and ~~$4.7~~$3.8 billion December 31, ~~2018,~~2019, being pursued by various outside collection agencies. We expect to collect less than 3%, net of estimated collection fees, of the amounts being pursued by outside collection agencies. As these amounts have beenwritten-off, they are not included in our accounts receivable. Collections on amounts previouslywritten-off are recognized as a recovery of net operating revenues when received. However, we take into consideration estimated collections of these future amountswritten-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, was 57 days and 58 days at ~~both June 30, 2019~~March 31, 2020 and December 31, ~~2018.~~2019, respectively.

Total gross accounts receivable (prior to allowance for contractual adjustments and implicit price concessions) was approximately ~~$16.9~~$15.9 billion ~~at June 30, 2019~~as of March 31, 2020 and ~~$17.2~~approximately $16.6 billion atas of December 31, ~~2018.~~2019. 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 March 31, 2020:

As of June 30, 2019:
            % of Gross Receivables

Payor
         0 - 90 Days              90 - 180 Days            180 - 365 Days            Over 365 Days

Medicare
   14 %    1 %    - %    - %

Medicaid
   7 %    1 %    1 %    1 %

Managed Care and Other
   25 %    4 %    3 %    3 %

Self-Pay
   10 %    8 %    9 %    13 %
As of December 31, 2018:
   % of Gross Receivables

Payor
   0 - 90 Days    90 - 180 Days    180 - 365 Days    Over 365 Days

Medicare
   14 %    - %    - %    - %

Medicaid
   7 %    1 %    1 %    1 %

Managed Care and Other
   26 %    4 %    3 %    3 %

Self-Pay
   9 %    8 %    10 %    13 %


	% of Gross Receivables
Payor	0 - 90 Days			90 - 180 Days			180 - 365 Days			Over 365 Days
Medicare		12	%		-	%		-	%		1	%
Medicaid		6	%		1	%		1	%		1	%
Managed Care and Other		26	%		4	%		3	%		2	%
Self-Pay		10	%		8	%		11	%		14	%

As of December 31, 2019:


	% of Gross Receivables
Payor	0 - 90 Days			90 - 180 Days			180 - 365 Days			Over 365 Days
Medicare		13	%		1	%		-	%		1	%
Medicaid		6	%		1	%		1	%		1	%
Managed Care and Other		27	%		4	%		3	%		2	%
Self-Pay		9	%		8	%		10	%		13	%

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


	June 30,			December 31,			March 31,			December 31,
	2019			2018			2020			2019
Insured receivables		59.7	%		60.0	%		58.1	%		59.5	%
Self-pay receivables		40.3			40.0			41.9			40.5

Total		100.0	%		100.0	%		100.0	%		100.0	%

The combined total at our hospitals and clinics for the estimated implicit price concessions forself-pay accounts receivable and allowances for otherself-pay discounts and contractuals, as a percentage of grossself-pay receivables, was approximately ~~89% and~~ 90% at ~~June 30, 2019~~both March 31, 2020 and December 31, ~~2018, respectively. During the three months ended June 30, 2018, we directed the placement with outside collection agencies of approximately $1.3 billion of grossself-pay~~ ~~accounts receivable. Since these receivables were fully reserved at the time ofwrite-off,~~ ~~the overall percentage of reserves for the remainingself-pay~~ ~~accounts receivable decreased.~~2019. If the receivables that have beenwritten-off, but where collections are still being pursued by outside collection agencies, were included in both the allowances and grossself-pay receivables specified above, the percentage of combined allowances to totalself-pay receivables would have been ~~approximately~~93% and 94% at ~~both June 30, 2019~~March 31, 2020 and December 31, ~~2018.~~2019, respectively.

Goodwill and Other Intangibles

Goodwill represents the excess of the fair value of the consideration conveyed in the 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. During 2017, we early adopted Accounting Standards Update, or ASU2017-04, which allows a company to record a goodwill impairment when the reporting units carrying value exceeds the fair value determined in step one. ~~Our most recent~~We performed our last annual goodwill impairment evaluation ~~was performed~~ during the fourth quarter of ~~2018 with an~~2019 using the October 31, ~~2018~~2019 measurement date, which indicated no impairment.

At ~~June 30, 2019,~~March 31, 2020, we had approximately ~~$4.5~~$4.3 billion of goodwill recorded, all of which resides at our hospital operations reporting unit.

While no impairment was indicated in our ~~most recent~~ annual goodwill evaluation as of the October 31, ~~2018~~2019 measurement date, the reduction in our fair value and the resulting goodwill impairment charges recorded in 2016 and 2017 reduced the carrying value of our hospital operations reporting unit to an amount equal to our estimated fair ~~value.~~value as of such prior year measurement dates. This increases the risk that future declines in fair value could result in goodwill impairment. The determination of fair value in step one of 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 or fair value of our long-term debt, estimates of future revenue and expense growth, estimated market multiples, expected capital expenditures, income tax rates, and costs of invested capital. A detailed evaluation of potential impairment indicators was performed as of March 31, 2020, which specifically considered the decline in the fair market value of our outstanding senior secured and unsecured notes and common stock during the first quarter as a result of theCOVID-19 pandemic. Volatility was observed in the prices of our outstanding debt securities and common stock and the decline in patient volumes following the emergence ofCOVID-19 was also considered. On the basis of available evidence as of March 31, 2020, no indicators of impairment were identified.

Future estimates of fair value could be adversely affected if the actual outcome of one or more of ~~these~~the assumptions described above changes materially in the future, including ~~further~~a decline in our stock price orand the fair value of its our long-term debt, lower than expected hospital volumes, higher market interest rates or increased operating costs. Such changes impacting the calculation of our fair value, the risks of which are amplified by theCOVID-19 pandemic, could result in a material impairment charge in the future.

Impairment or Disposal of Long-Lived Assets

Whenever events or changes in circumstances indicate that the carrying values of certain long-lived assets may be impaired, we project the undiscounted cash flows expected to be generated by these assets. If the projections indicate that the reported amounts are not expected to be recovered, such amounts are reduced to their estimated fair value based on a quoted market price, if available, or an estimate based on valuation techniques available in the circumstances.

Professional Liability Claims

As part of our business of owning and operating hospitals, 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 areout-of-pocket and directly related to such liability claims. These directout-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 ourin-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 an approximately20-year period. As discussed below, since we purchase excess insurance on a claims-made basis that transfers risk to third-party insurers, the liability we accrue does include an amount for the losses covered by our excess insurance. We also record a receivable for the 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 using the risk-free interest rate corresponding to the timing of our expected payments.

The net present value of the projected payments was discounted using a weighted-average risk-free rate ~~3.1%, 2.2%~~of 2.0% as of March 31, 2020 and ~~1.8%~~2.6% and 3.1% in ~~2018, 2017~~2019 and ~~2016,~~2018, respectively. This liability is adjusted for new claims information in the period such information becomes known to us. Professional malpractice expense includes the losses resulting from professional liability claims and loss adjustment expense, as well as paid excess insurance premiums, and is presented within other operating expenses in the accompanying condensed consolidated statements of ~~loss.~~income (loss).

Our processes for obtaining and analyzing claims and incident data are standardized across all of our hospitals 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 1.0% 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, geography, and claims relating to the acquired HMA hospitals versus claims relating to our other hospitals. 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. This 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.

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 reserving data or the trends and factors that influence reserving 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.

During the six months ended June 30, 2019, we experienced a significant increase in the amounts paid to settle outstanding professional liability claims, compared to the same period in the prior year and to previous actuarially determined estimates. This increase in claims paid related to claims incurred in 2016 and prior years and was primarily related to divested hospitals. The settlement of these claims at amounts greater than the previously determined actuarial estimates resulted in us recording a $70 million change in estimate during the six months ended June 30, 2019.

We are primarily self-insured for these 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 ~~$220~~at least $215 million per occurrence and in the aggregate for claims reported on or after June 1, 2015. In addition, for integrated occurrence malpractice 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. 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 which are domiciled in the Cayman Islands and South Carolina, respectively. Those insurance subsidiaries, which are collectively referred to as 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.

Effective January 1, 2008, the former Triad hospitals were insured on a claims-made basis as described above and through commercial insurance companies as described above for substantially all claims occurring on or after January 1, 2002 and reported on or after January 1, 2008. Substantially all losses for the former Triad hospitals in periods prior to May 1, 1999 were insured through a wholly-owned insurance subsidiary of HCA, Triad’s owner prior to that time, and excess loss policies maintained by HCA. HCA has agreed to indemnify the former Triad hospitals in respect of claims covered by such insurance policies arising prior to May 1, 1999. From May 1, 1999 through December 31, 2006, the former Triad hospitals obtained insurance coverage on a claims incurred basis from HCA’s wholly-owned insurance subsidiary with excess coverage obtained from other carriers that is subject to certain deductibles. Effective for claims incurred after December 31, 2006, Triad began insuring its claims from $1 million to $5 million through its wholly-owned captive insurance company, replacing the coverage provided by HCA. Substantially all claims occurring during 2007 were self-insured up to $10 million per claim.

There were no significant changes in our estimate of the reserve for professional liability claims during the three months ended March 31, 2020.

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.

The total amount of unrecognized benefit that would impact the effective tax rate, if recognized, was approximately $1 million as of ~~June 30, 2019.~~March 31, 2020. A total of approximately $1 million of interest and penalties is included in the amount of liability for uncertain tax positions at ~~June 30, 2019.~~March 31, 2020. It is our policy to recognize interest and penalties related to unrecognized benefits in our condensed consolidated statements of ~~loss~~income (loss) 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 ~~condensed~~ consolidated results of operations or ~~condensed~~ consolidated financial position.

Our federal income tax returns for the 2009 and 2010 tax years have been settled with the Internal Revenue Service. The results of these examinations were not material to our consolidated results of operations or consolidated financial position. Our federal income tax returns for the 2014 and 2015 tax years remain under examination by the Internal Revenue Service. We believe the results of these examinations will not be material to our consolidated results of operations or consolidated financial position. We have extended the federal statute of limitations through December 31, 2020 for Community Health Systems, Inc. for the tax periods ended December 31, 2014 and 2015. Our federal income tax return for the 2018 tax year is under examination by the Internal Revenue Service.

Recent Accounting Pronouncements

In ~~August 2018,~~March 2020, the FASB issued Accounting Standards Update, orASU,~~2018-15~~ 2020-04, or Reference Rate Reform: Facilitation of the Effects of Reference Rate Reform on Financial Reporting. This ASU provides optional expedients and exceptions for applying GAAP to ~~provide guidance on the accounting for implementation costs incurred in a cloud computing arrangement (CCA)~~contract modifications and hedging relationships, subject to meeting certain criteria that reference LIBOR or another rate that is ~~a service contract. This~~expected to be discontinued. The amendments in the ASU ~~requires entities to account for such costs consistent with the guidance on capitalizing costs associated with developing or obtaininginternal-use~~ ~~software. The ASU is~~are effective for all entities ~~for fiscal years beginning after~~as of March 12, 2020 through December ~~15, 2019, and interim periods within those fiscal years, with early adoption permitted. We are currently evaluating the impact that~~31, 2022. The adoption of this ~~ASU will~~guidance did not have a material impact on our condensed consolidated financial position ~~and~~or results of operations.

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

FORWARD-LOOKING STATEMENTS

Some of the matters discussed in this Report include ~~forward-looking statements.~~“forward-looking statements” within the meaning of the federal securities laws, which involve risks, assumptions 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. These factors include, among other things:

developments related toCOVID-19, including, without limitation, related to the length and severity of the pandemic; the volume of canceled or rescheduled procedures; the volume ofCOVID-19 patients cared for across our health systems; measures we are taking to respond to theCOVID-19 pandemic; the impact of government and administrative regulation on us; changes in net revenue due to patient volumes, payor mix and deteriorating macroeconomic conditions; potential increased expenses related to labor, supply chain or other expenditures; workforce disruptions; and supply shortages and disruptions;

uncertainty regarding the implementation of the CARES Act, the PPPHCE Act, and any other future stimulus measures related toCOVID-19, including the magnitude and timing of any future payments or benefits we may receive thereunder;

general economic and business conditions, both nationally and in the regions in which we ~~operate;~~operate, including economic and business conditions resulting from theCOVID-19 pandemic;

the impact of current or future federal and state health reform initiatives, including, without limitation, the Affordable Care Act, and the potential for the Affordable Care Act to be repealed or found unconstitutional or otherwise invalidated, or for additional changes to the law, 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 regulation or otherwise;

the future and long-term viability of health insurance exchanges and potential changes to the beneficiary enrollment process;

risks associated with our substantial indebtedness, leverage and debt service obligations, ~~and the fact that a substantial portion of our indebtedness will mature and become due in the near future,~~ including our ability to refinance such indebtedness on acceptable terms or to incur additional ~~indebtedness;~~indebtedness, and our ability to remain in compliance with debt covenants, as well as risks associated with disruptions in the financial and capital markets as the result of theCOVID-19 pandemic which could impact us from a financing and liquidity perspective;

demographic changes;

changes in, or the failure to comply with, federal, state or local laws or governmental regulations affecting our ~~business;~~business, including any such laws or governmental regulations which are adopted in connection with theCOVID-19 pandemic;

potential adverse impact of known and unknown government investigations, audits, and federal and state false claims act litigation and other legal proceedings;

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 potential additional 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 continued implementation of the sequestration spending reductions 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, includingco-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;

increases in wages as a result of inflation or competition for highly technical positions and rising supply and drug costs due to market pressure from pharmaceutical companies and new product releases;

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

competition;

our ability to attract and retain, at reasonable employment costs, qualified personnel, key management, physicians, nurses and other healthcare workers;

trends toward treatment of patients in less acute or specialty healthcare settings, including ambulatory surgery centers or specialty ~~hospitals;~~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, including the disposition of hospitals andnon-hospital businesses pursuant to our portfolio rationalization and deleveraging strategy, 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, or to recognize expected synergies from acquisitions;

the impact of seasonal severe weather conditions, including the timing and amount of insurance recoveries in relation to severe weather events;

our ability to obtain adequate levels of insurance, including 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;~~diseases, including the coronavirus known asCOVID-19 as noted above;

the impact of ~~prior or potential future~~ cyber-attacks or security breaches;

any failure to comply with the terms of the Corporate Integrity Agreement;

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;

changes in interpretations, assumptions and expectations regarding the Tax Cuts and Jobs Act; and

the other risk factors set forth in our ~~2018~~2019 Form10-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.

Item 3.Quantitative and Qualitative Disclosures about Market Risk

We are exposed to interest rate changes, primarily as a result of ~~our Credit~~the ABL Facility which bears interest based on floating rates. In order to manage the volatility relating to the market risk, we entered into interest rate swap agreements to manage our exposure to these fluctuations, as described under the heading “Liquidity and Capital Resources” in Part I, Item 2. We utilize risk management procedures and controls in executing derivative financial instrument transactions. We do not execute transactions or hold derivative financial instruments for trading purposes. Derivative financial instruments related to interest rate sensitivity of debt obligations are used with the goal of mitigating a portion of the exposure when it is cost effective to do so. As of ~~June 30, 2019,~~March 31, 2020, our ~~approximately $700 million~~one outstanding interest rate swap agreement with a notional amount of ~~interest rate swap agreements outstanding~~$300 million and a termination date of August 30, 2020 represented approximately ~~96.8%~~78.9% of our variable rate debt.

A 1% change in interest rates on variable rate debt in excess of that amount covered by interest rate swaps would have resulted in interest expense fluctuating ~~approximately~~ less than $1 million and approximately $3 million for the three months ended ~~June 30,~~March 31, 2020 and 2019, ~~and 2018, respectively, and $2 million and $6 million for the six months ended June 30, 2019 and 2018,~~ respectively.

Item 4.Controls and Procedures

Our Chief Executive Officer and Chief Financial Officer, with the participation of other members of management, have evaluated the effectiveness of our disclosure controls and procedures (as defined in Rules13a-15(e) and15d-15(e)) under the Securities and Exchange Act of 1934, as amended, as of the end of the period covered by this report. Based on such evaluations, our Chief Executive Officer and Chief Financial Officer concluded that, as of such date, our disclosure controls and procedures were effective (at the reasonable assurance level) to ensure that the information required to be included in this report has been recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms and to ensure that the information required to be included in this report was accumulated and communicated to management, including our Chief Executive Officer and Chief Financial Officer, to allow timely decisions regarding required disclosure.

There have been no changes in our internal control over financial reporting during the three months ended ~~June 30, 2019~~March 31, 2020 that have materially affected or are reasonably likely to materially affect our internal controls over financial reporting.

PART II OTHER INFORMATION

Item 1.Legal Proceedings

From time to time, we receive inquiries or subpoenas from state regulators, state Medicaid Fraud Control units, fiscal intermediaries, the Centers for Medicare and Medicaid Services, the Department of Justice and other government entities regarding various Medicare and Medicaid issues. In addition to the matters discussed below, we are currently responding to subpoenas and administrative demands concerning (a) an inquiry regarding sleep labs at two Louisiana hospitals (one formerly owned), (b) a ~~civil investigative demand concerning short-term Medicaid eligibility determinations processed by third party vendors at one of our Pennsylvania hospitals, (c) a~~ subpoena related to certain services provided by a formerly-employed physician to Medicaid beneficiaries at one of our New Mexico hospitals, ~~(d)~~(c) an inquiry regarding certain services performed by one of our affiliated emergency services companies in Pennsylvania, ~~and (e) an inquiry~~(d) a civil investigative demand related to ~~certain~~call coverage services provided ~~to Medicaid beneficiaries~~by a cardiology group at one of our ~~Texas~~Tennessee hospitals; and (e) a civil investigative demand related to charges for certain emergency department services at our four New Mexico hospitals. In addition, we are subject to other claims and lawsuits arising in the ordinary course of our business including lawsuits and claims related to billing practices and the administration of charity care policies at our hospitals. Based on current knowledge, management does not believe that loss contingencies arising from pending legal, regulatory and governmental matters, including the matters described herein, will have a material adverse effect on the consolidated financial position or liquidity of the Company. However, in light of the inherent uncertainties involved in pending legal, regulatory and governmental matters, some of which are beyond our control, and the very large or indeterminate damages sought in some of these matters, an adverse outcome in one or more of these matters could be material to our results of operations or cash flows for any particular reporting period. Settlements of suits involving Medicare and Medicaid issues routinely require both monetary payments as well as corporate integrity agreements. Additionally, qui tam or “whistleblower” actions initiated under the civil False Claims Act may be pending but placed under seal by the court to comply with the False Claims Act’s requirements for filing such suits. In September 2014, the Criminal Division of the United States Department of Justice, or DOJ, announced that all qui tam cases will be shared with their Division to determine if a parallel criminal investigation should be opened. The Criminal Division has also frequently stated an intention to pursue corporations in criminal prosecutions. From time to time, we detect issues ofnon-compliance with Federal healthcare laws pertaining to claims submission and reimbursement practices and/or financial relationships with physicians. We avail ourselves of various mechanisms to address potential overpayments arising out of these issues, including repayment of claims, rebilling of claims, and participation in voluntary disclosure protocols offered by the Centers for Medicare and Medicaid Services and the Office of the Inspector General. Participating in voluntary repayments and voluntary disclosure protocols can have the potential for significant settlement obligations or even enforcement action.

The following legal proceedings are described in detail because, although they may not be required to be disclosed in this Part II, Item 1 under SEC rules, due to the nature of the business of the Company, we believe that the following discussion of these matters may provide useful information to security holders. This discussion does not include claims and lawsuits covered by medical malpractice, general liability or employment practices insurance and risk retention programs, none of which claims or lawsuits would in any event be required to be disclosed in this Part II, Item 1 under SEC rules. Certain of the matters referenced below are also discussed in Note 1513 of the Notes to Consolidated Financial Statements included under Part I, Item 1 of this Form10-Q.

Shareholder Litigation

2011 Class Action Shareholder Federal Securities Cases. Three purported class action cases have been filed in the United States District Court for the Middle District of Tennessee; namely, Norfolk County Retirement System v. Community Health Systems, Inc., et al., filed May 9, 2011; De Zheng v. Community Health Systems, Inc., et al., filed May 12, 2011; and Minneapolis Firefighters Relief Association v. Community Health Systems, Inc., et al., filed June 21, 2011. All three seek class certification on behalf of purchasers of our common stock between July 27, 2006 and April 11, 2011 and allege that misleading statements resulted in artificially inflated prices for our common stock. In December 2011, the cases were consolidated for pretrial purposes and NYC Funds and its counsel were selected as lead plaintiffs/lead plaintiffs’ counsel. In lieu of ruling on our motion to dismiss, the court permitted the plaintiffs to file a first amended consolidated class action complaint which was filed on October 5, 2015. Our motion to dismiss was filed on November 4, 2015 and oral argument took place on April 11, 2016. Our motion to dismiss was granted on June 16, 2016 and on June 27, 2016, the plaintiffs filed a notice of appeal to the Sixth Circuit Court of Appeals. The matter was heard on May 3, 2017. On December 13, 2017, the Sixth Circuit reversed the trial court’s dismissal of the case and remanded it to the District Court. We filed a renewed partial motion to dismiss on February 9, 2018, which was denied by the District Court on September 24, 2018. We also filed a petition for writ of certiorari with the United States Supreme Court on April 18, 2018 seeking review of the Sixth Circuit’s decision. The United States Supreme Court denied the petition for a writ of certiorari on October 1, 2018. The District Court granted

the Plaintiff’s motion for class certification on July 26, 2019. We ~~believe~~filed a petition for permission to appeal the District Court’s class certification order in the Sixth Circuit Court of Appeals on August 9, 2019, and that petition was denied on October 23, 2019. On January 21, 2020, the Company and the Plaintiff filed a stipulation of settlement indicating to the District Court that the parties had reached agreement on the principal terms of a settlement for $53 million. The settlement received preliminary approval from the District Court on January 30, 2020. Objections to the settlement are due May 18, 2020, and the hearing for final approval of the settlement is set for June 19, 2020. Our $53 million reserve for this matter, which was recorded during the three months ended December 31, 2019, remains as of March 31, 2020, pending final approval of the settlement. The proposed settlement amount has been funded by us and is held in escrow as of March 31, 2020. Such amount is recorded in other current assets in the condensed consolidated ~~matter is without merit and will vigorously defend this case.~~balance sheet.

Caleb Padilla, individually and on behalf of all others similarly situated v Community Health Systems, Inc., Wayne T. Smith, Larry Cash, and Thomas JJ. Aaron. This purported federal securities class action was filed in the United States District Court for the Middle District of Tennessee on May 30, 2019. It seeks class certification on behalf of purchasers of our common stock between February 20, 2017 and February 27, 2018 and alleges misleading statements resulted in artificially inflated prices for our common stock. ~~No responsive pleading is due to the complaint at this time, pending~~On November 20, 2019, the District ~~Court’s appointment of a Lead Plaintiff~~Court appointed Arun Bhattacharya and Michael Gaviria as lead plaintiffs in the ~~action.~~case. The lead plaintiffs filed a consolidated class complaint on January 21, 2020. The Company filed a motion to dismiss the consolidated class complaint on March 23, 2020. That motion is pending. We believe this matter is without merit and will vigorously defend this case.

PadillaDerivative Litigation. Four purported shareholder derivative cases have been filed in two District Courts relating to the factual allegations in the Padillalitigation; namely, Faisal Hussain v. Wayne T. Smith, et al, filed August 12, 2019 in the United States District Court for the District of Delaware; Roger Trombley v. Wayne T. Smith, et al, filed August 20, 2019 in the United States District Court for the Middle District of Tennessee; Susheel Tanjavoor v. Wayne T. Smith, et al., filed August 29, 2019, in the United States District Court for the District of Delaware; and Roofers Local No. 149 Pension Fund v. John A. Clerico, et al, filed October 30, 2019, in the United States District Court for the District of Delaware. All four seek relief derivatively and on behalf of Community Health Systems, Inc. against certain Company officers and directors based on alleged breaches of fiduciary duty, unjust enrichment, and other acts related to certain Company disclosures in 2017 and 2018 regarding the Company’s adoption of Accounting Standards Update2014-09, which the Company adopted effective January 1, 2018. All four cases have been stayed by agreement.

Section 220 Demand. On September 19, 2019, the Company received a demand from Kevin Aronson, a Company shareholder, purporting to demand inspection of certain Company books and records pursuant to Title 8, Section 220 of the Delaware General Corporation Law Code. The alleged grounds for Mr. Aronson’s demand are similar to the allegations in both thePadillaandPadilladerivative litigation. The Company has provided a response to Mr. Aronson’s demand.

Other Government Investigations

Florida LIP Program CIDs – On September 14, 2017, our hospital in St. Petersburg, Florida received a CID from the United States Department of Justice for information concerning its historic participation in the Florida Low Income Pool Program. The Low Income Pool Program, or LIP, is a funding pool to support healthcare providers that provide uncompensated care to Florida residents who are uninsured or underinsured. The CID sought documentation related to agreements between the hospital and Pinellas County. On June 13, 2019, an additional ten of our affiliated hospitals in Florida received CIDs related to the same subject matter, along with two CIDs addressed to our affiliated management company and the parent company. We are cooperating fully with this investigation.

Commercial Litigation and Other Lawsuits

Becker v. Community Health Systems, Inc. d/b/a Community Health Systems Professional Services Corporation d/b/a Community Health Systems d/b/a Community Health Systems PSC, Inc. d/b/a Rockwood Clinic P.S. and Rockwood Clinic, P.S. (Superior Court, Spokane, Washington).This suit was filed on February 29, 2012, by a former chief financial officer at Rockwood Clinic in Spokane, Washington. Becker claims he was wrongfully terminated for allegedly refusing to certify a budget for Rockwood Clinic in 2012. On February 29, 2012, he also filed an administrative complaint with the Department of Labor, Occupational Safety and Health Administration alleging that he is a whistleblower under Sarbanes-Oxley, which was dismissed by the agency and was appealed to an administrative law judge for a hearing that occurred onJanuary 19-26, 2016. In a decision dated November 9, 2016, the law judge awarded Becker approximately $1.9 million for front pay, back pay and emotional damages with attorney fees to be later determined. We have appealed the award to the Administrative Review Board and are awaiting its decision. At a hearing on July 27, 2012, the trial court dismissed Community Health Systems, Inc. from the state case and subsequently certified the state case for an interlocutory appeal of the denial to dismiss his employer and the management company. The appellate court accepted the interlocutory appeal, and it was argued on April 30, 2014. On August 14, 2014, the court denied our appeal. On October 20, 2014, we filed a petition to review the denial with the Washington Supreme Court. Our appeal was accepted and oral argument was heard on June 9, 2015. On September 15, 2015, the court denied our appeal and remanded to the trial court; a previous trial setting of September 12, 2016 has been vacated and not reset. ~~We continue~~On October 15, 2019, the Administrative Review Board released an order to ~~vigorously defend these actions.~~show cause requiring Becker to file a brief to show cause why the Administrative Review Board should not remand the previous administrative decision for a new hearing before a new law judge. The parties have settled this case for an immaterial amount and both the administrative action and the Superior Court case have been dismissed.

Cyber ~~Attack.~~Attack. As previously disclosed on a Current Report on Form8-K filed by us on August 18, 2014, our computer network was the target of an external, criminal cyber-attack that we believe occurred between April and June, 2014. We and Mandiant (a FireEye Company), the forensic expert engaged by us in connection with this matter, believe the attacker was a foreign “Advanced Persistent Threat” group who used highly sophisticated malware and technology to attack our systems. The attacker was able to bypass our security measures and successfully copy and transfer outside the Company certainnon-medical patient identification data (such as patient names, addresses, birthdates, telephone numbers and social security numbers), but not including patient credit card, medical or clinical information. We worked closely with federal law enforcement authorities in connection with their investigation and prosecution of those determined to be responsible for this attack. Mandiant has conducted a thorough investigation of this incident and continues to advise us regarding security and monitoring efforts. We have provided appropriate notification to affected patients and regulatory agencies as required by federal and state law. We have offered identity theft protection services to individuals affected by this attack.

We have incurred certain expenses to remediate and investigate this matter. In addition, multiple purported class action lawsuits have been filed against us and certain subsidiaries. These lawsuits allegebelieve that sensitive information was unprotected and inadequately encrypted by us. The plaintiffs claim breach of contract and other theories of recovery, and are seeking damages, as well as restitution for any identity theft. On February 4, 2015, the United States Judicial Panel on Multidistrict Litigation ordered the transfer of the purportedall class actions, pending outside of the District Court for the Northern District of Alabama to the District Court for the Northern District of Alabama for coordinated or consolidated pretrial proceedings. A consolidated complaint was filedlitigation, and we filed a motion to dismiss on September 21, 2015, which was partially argued on February 10, 2016. In an oral ruling from the bench, the court greatly limited the potential class by ruling only plaintiffs with specific injury resulting from the breach had standing to sue. Further, on jurisdictional grounds, the court dismissed Community Health Systems, Inc. from all~~non-Tennessee~~ based cases. Finally, the court set April 15, 2016 for further argument on whether the remaining plaintiffs have sufficiently stated a cause of action to continue their cases. On April 15, 2016 in an oral ruling from the bench, the court dismissed additional claims and following this oral ruling only eight of the forty plaintiffs remained, with significant limitations imposed on their ability to assert claims for damages. These oral rulings were confirmed in a written order filed on September 12, 2016. On October 20, 2016, the plaintiffs filed a renewed motion for interlocutory appeal from the motion to dismiss ruling and on February 15, 2017 this motion was denied. Plaintiffs refiled their motion for permission to seek interlocutory appeal on March 15, 2017, and that motion was also denied. We have settled these class action lawsuits, and the settlement has been approved by the District Court. Notices of the settlement and claim forms have been mailed to purported class members. The deadline for purported class members to opt out of or object to the settlement was May 18, 2019, with no purported class members objecting or opting out. The deadline for purported class members to submit claims was August 1, 2019.

~~We are also currently responding to two government~~ investigations related to the ~~2014 cyber-attack. The first is being conducted by various~~data breach have been resolved. In March 2020, we resolved and settled both the State Attorneys General and ~~the second is being conducted by the~~ U.S. Department of Health and Human Services Office for Civil ~~Rights. We are cooperating fully~~Rights investigations. The settlement with ~~both investigations.~~

~~Empire Health Foundation v. CHS/Community Health Systems, Inc., CHS Washington Holdings, LLC, Spokane Washington Hospital Company, LLC, Spokane Valley Washington Hospital Company, LLC.~~~~This suit was filed on June 12, 2017 by Empire Health Foundation claiming Deaconess and Valley Hospitals failed to abide by charity care obligations allegedly existing in~~ the 2008 Asset Purchase Agreement between Empire Health System and Company affiliates. The court granted in part and denied in part the hospitals’ motion to dismiss on October 11, 2017. All parties filed motionsOffice for ~~summary judgment,~~Civil Rights includes a Corrective Action Plan, and the court granted in part and denied in part both parties’ motions on February 27, 2019 and July 9, 2019. The trial for this matter is set for August 12, 2019. We believe these claims are without merit and will vigorously defendsettlement with the ~~case.~~State Attorneys General includes an agreed injunction.

Gibson, individually and on behalf of all others similarly situated v. National Healthcare of Leesville, Inc. d/b/a Byrd Regional Medical Center. This case is a purported class action lawsuit filed in the 30^th Judicial District Court for the State of Louisiana and served on August 3, 2016, claiming our formerly affiliated Leesville, Louisiana hospital violated payor contracts by allegedly improperly asserting hospital liens against third-party tortfeasors and seeking class certifications for any similarly situated plaintiffs. The court has certified a class and denied our motion for summary judgment. We appealed both rulings to the Louisiana Third Circuit Court of Appeals, which affirmed the trial court’s decisions on March 7, 2019. We filed an application for writ of certiorari to the Louisiana Supreme Court, which was denied on May 29, 2019. Plaintiff’s motion for approval of notice of class action was granted on October 24, 2019. We believe these claims are without merit and will vigorously defend the case.

Bowden, individually and on behalf of all others similarly situated v. Ruston Louisiana Hospital Company, LLC d/b/a Northern Louisiana Medical Center.This case is a purported class action lawsuit filed in the 3^rd Judicial District Court for the State of Louisiana and served on September 7, 2016, claiming our affiliated Ruston, Louisiana hospital violated payor contracts by allegedly improperly asserting hospital liens against third-party tortfeasors and seeking class certifications for any similarly situated plaintiffs. Our motion for summary judgment is pending, as is plaintiff’s motion for class certification. ~~Both motions are set for hearing on August 22, 2019.~~ We believe these claims are without merit and will vigorously defend the case.

Zwick Partners, LP and Aparna Rao, individually and on behalf of all others similarly situated v. Quorum Health Corporation, Community Health Systems, Inc., Wayne T. Smith, W. Larry Cash, Thomas D. Miller, and Michael J. Culotta. This purported class action lawsuit previously filed in the United States District Court, Middle District of Tennessee was amended on April 17, 2017 to include Community Health Systems, Inc., Wayne T. Smith and W. Larry Cash as additional defendants. The plaintiffs seek to represent a class of Quorum Health Corporation, or QHC, shareholders and allege that the failure to record a goodwill and long-lived asset impairment charge against QHC at the time of thespin-off of QHC violated federal securities laws. The District Court denied all defendants’ motions to dismiss on April 20, 2018. The plaintiffs moved for class certification. Plaintiffs also amended their complaint on September 14, 2018. We moved to dismiss the additional claims in the plaintiffs’ September 14, 2018 amended complaint and responded to plaintiffs’ class certification motion. On March 29, 2019, the court granted our motion to dismiss the additional claims. The court granted the plaintiffs’ motion for class certification on that same date. On April 12, 2019, we filed a petition for permission to appeal the court’s order granting class certification with the United States Court of Appeals for the Sixth Circuit, which was denied on July 31, 2019. On May 17, 2019, the plaintiffs moved to amend their complaint for a third time to add additional claims, which the District Court denied on August 2, 2019. ~~We believe the claims are without merit and will vigorously defend the case.~~

R2 Investments v Quorum Health Corporation; Community Health Systems, Inc.; Wayne T. Smith; W. Larry Cash; Thomas D. Miller; Michael J. Culotta; John A. Clerico; James S. Ely, III; John A. Fry; William Norris Jennings; Julia B. North; H. Mitchell Watson, Jr.; H. James Williams. ~~This case~~The trial for this matter is ~~pending in the Circuit Court~~set for Williamson County, Tennessee and was served on October 26, 2017. The plaintiff alleges common law fraud and violation of Tennessee securities fraud statutes in connection with its purchase of QHC stock and QHC senior secured notes. The court granted in part and denied in part the director defendants’ motion to dismiss and denied the remaining defendants’ motions to dismiss on May 11, 2018.July 7, 2020. We believe the claims are without merit and will vigorously defend the case.

Steadfast Insurance Company, et al v. Community Health Systems, Inc., CHS/Community Health Systems, Inc., CHSPSC, LLC and Pecos Valley of New Mexico, ~~LLC.~~LLC; Community Health Systems, Inc., et al v. Steadfast Insurance Company, et al.These cases are filed in the Superior Court for the State of Delaware and the Chancery Court for the State of Delaware, respectively, and involve ~~suits by three excess liability insurers seeking a declaration that~~insurance coverage disputes related to a $73 million judgment rendered against Pecos Valley of New Mexico, LLC inAnne Sperling, et al v. Pecos Valley of New Mexico, LLC. The first case was brought by Steadfast Insurance Company in Delaware Superior Court seeking a declaration that theSperlingjudgment is not a covered loss as defined by the insurance policies ~~at issue.~~that are the subject of the case. The second case, filed by the Company in Delaware Chancery Court, seeks reformation of the subject policies. TheSteadfast complaint was served on November 30, 2018. On December 13, 2018, Admiral Insurance Company, ~~and~~ Endurance Specialty Insurance Ltd, and Illinois Union Insurance Company moved to intervene in the suit as petitioners. ~~CHS/~~The Company has initiated counterclaims against each insurer in that case, including for bad faith against Steadfast. The Company filed theCommunity Health Systems ~~Inc. and CHSPSC, LLC have moved to dismiss the petition filed by Steadfast Insurance Company. The~~ complaint on January 22, 2020.TheSperlingjudgment against Pecos Valley of New Mexico, LLC, which is the subject of these litigations and which was rendered on September 5, 2018, in First Judicial Court of the State of New Mexico, is currently on appeal to the Court of Appeals of New Mexico. ~~We believe~~Trial of theSteadfast matter is set for December 7, 2020. The Company believes the insurers’ claims in theSteadfast litigation are without merit and will vigorously defend the case.

Becky Kirk, Perry Ayoob, and Dawn Karzenoski, as representatives of a class of similarly situated persons, and on behalf of the CHS/Community Health Systems, Inc. Retirement Savings Plan v. Retirement Committee of CHS/Community Health Systems, Inc., John and Jane Does1-20, Principal Life Insurance Company, Principal Management Corporation, and Principal Global Investors, LLC.This purported class action was filed in the United States District Court for the Middle District of Tennessee on August 8, 2019. The plaintiffs seek to represent a class of current and former participants in the CHS/Community Health Systems, Inc. Retirement Savings Plan and allege that the defendants breached their fiduciary duties by offering certain investments in the Plan that were more expensive and/or did not perform as well as other marketplace alternatives. We filed a motion to dismiss the complaint on October 18, 2019, which is pending. We believe these claims are without merit and will vigorously defend the case.

Thomas Mason, MD, Steven Folstad, MD andMid-Atlantic Emergency Medical Associates, PA v Health Management Associates, LLC f/k/a Health Management Associates, Inc., Mooresville Hospital Management Associates d/b/a Lake Norman Regional Medical Center and Statesville HMA, LLC d/b/a Davis Regional Medical Center, Envision Healthcare Corporation f/k/a Emergency Medical Services Corporation, Emcare Holdings, Inc., Emergency Medical Services, LP. This alleged wrongful retaliation case is filed in the United States District Court for the Western District of North Carolina. The plaintiffs allege their agreements with the defendants were terminated in retaliation for plaintiffs’ alleged refusal to admit patients unnecessarily to the defendant hospitals or otherwise perform unnecessary diagnostic testing. The allegations of the complaint relate to time periods prior to the hospitals’ affiliation with the Company. The plaintiffs filed a Third Amended Complaint on April 26, 2019. The defendants filed motions to dismiss, which were granted in part and denied in part on September 5, 2019. Trial of this matter is set for January 3, 2022. We believe these claims are without merit and will vigorously defend the case.

Qui Tam Matters Where the Government Declined Intervention

U.S. and the State of Mississippi ex rel. W. Blake Vanderlan, M.D. v. Jackson HMA, LLC d/b/a Central Mississippi Medical Center and Merit Health Central.By order filed on August 31, 2017, the United States District Court for the Southern District of Mississippi ordered the unsealing of this qui tam suit. The unsealing revealed that on August 31, 2017 the United States had declined to intervene in the allegations that certain alleged EMTALA violations at the hospital resulted in a violation of the False Claims Act. Both the hospital and the United States have filed motions to dismiss the litigation, and those motions are pending. We believe this matter is without merit and will vigorously defend this case.

U.S. ex rel. Derek Lewis and Joey Neiman v. Community Health Systems, Inc., Medhost, Inc., et al. By order filed on March 14, 2019, the United States District Court for the Southern District of Florida ordered the unsealing of this qui tam suit. The order revealed that the United States had declined to intervene in the action. The complaint alleges that Community Health Systems, Inc. and its affiliated hospitals (CHS Hospitals) violated the False Claims Act by submitting claims for EHR Meaningful Use incentive payments that they knew or should have known were false. The allegations regarding falsity generally relate to the CHS Hospitals’ use of certain software products sold to them byco-defendant, Medhost, Inc. The plaintiffs amended their complaint on July 26, 2019. ~~The defendants’ response~~We filed a motion to dismiss the ~~amended~~ complaint ~~is due~~on September 24, ~~2019.~~2019, which is pending. We believe this matter is without merit and will vigorously defend this case.

~~U.S. ex rel. Andrea Schultz v. Naples HMA, LLC (d/b/a Physicians Regional Healthcare System), Naples Heart Rhythm Specialists, P.A., and Dr.~~ ~~Kenneth Plunkitt~~. By order filed on April 1, 2019, the United States District Court for the Middle District of Florida ordered the unsealing of this qui tam suit. The order revealed that the United States had declined to intervene in the action. The complaint alleges the defendants violated the False Claims Act by submitting claims for payment related to certain procedures performed by defendant Dr. Kenneth Plunkitt at Physicians Regional Medical Center. Plaintiff voluntarily dismissed the hospital as a defendant from this case on May 31, 2019.

U.S. ex rel. Maur v. Elie Hage-Korban, M.D., Delta Clinics, PLC d/b/a The Heart and Vascular Center of West Tennessee. Community Health Systems, Inc., Knoxville HMA Holdings, LLC d/b/a/ Tennova Healthcare, Jackson Hospital Corporation d/b/a/ Regional Jackson, and Dyersburg Hospital Company, LLC, d/b/ Dyersburg Regional Medical Center. By order filed on April 30, 2019, the United States District Court for the Western District of Tennessee ordered the unsealing of this qui tam lawsuit. The order revealed that the United States had declined to intervene in the action. The complaint alleges the defendants violated the False Claims Act by submitting claims for payment related to certain cardiac procedures performed by defendant Dr. Elie Hage-Korban at two hospitals formerly affiliated with the Company. Dr. Hage-Korban was not employed by either hospital or their affiliates. The plaintiff amended his complaint on July 24, 2019. ~~None~~We filed a motion to dismiss the complaint on September 30, 2019, which the District Court granted on February 25, 2020. On March 18, 2020, the plaintiff filed a Notice of Appeal to the ~~defendants have been served with~~United States Court of Appeals for the ~~amended complaint.~~Sixth Circuit of all claims except those related to defendant Community Health Systems, Inc. We believe this matter is without merit and will vigorously defend this case.

Management of Significant Legal Proceedings

In accordance with our governance documents, including our Governance Guidelines and the charter of the Audit and Compliance Committee, our management of significant legal proceedings is overseen by the independent members of the Board of Directors and, in particular, the Audit and Compliance Committee. The Audit and Compliance Committee is charged with oversight of compliance, regulatory and litigation matters, and enterprise risk management. Management has been instructed to refer all significant legal proceedings and allegations of financial statement fraud, error, or misstatement to the Audit and Compliance Committee for its oversight and evaluation. Consistent with New York Stock Exchange and Sarbanes-Oxley independence requirements, the Audit and Compliance Committee is comprised entirely of individuals who are independent of our management, and all four members of the Audit and Compliance Committee are “audit committee financial experts” as defined in the Securities Exchange Act of 1934, as amended.

In addition, the Audit and Compliance Committee and the other independent members of the Board of Directors oversee the functions of the voluntary compliance program, including its auditing and monitoring functions and confidential disclosure program. In recent years, the voluntary compliance program has addressed the potential for a variety of billing errors that might be the subject of audits and payment denials by the CMS Recovery Audit Contractors’ permanent project, includingMS-DRG coding, outpatient hospital and physician coding and billing, and medical necessity for services (including a focus on hospital stays of very short duration). Efforts by management, through the voluntary compliance program, to identify and limit risk from these government audits have included significant policy and guidance revisions, training and education, and auditing. The Board of Directors now oversees and reviews periodic reports of our compliance with the Corporate Integrity Agreement, or CIA, that we entered into with the United States Department of Health and Human Services Office of the Inspector General during 2014 and which was amended and extended in September 2018.

Item 1A. Risk Factors

~~There~~The following supplements the Company’s risk factors previously disclosed in the 2019 Form10-K by adding the following risk factors that take into account developments with respect toCOVID-19 and the federal stimulus legislation specified below since the filing of the 2019 Form10-K. Except as set forth below, there have been no material changes with regard to the risk factors previously disclosed in the ~~2018~~2019 Form10-K.

We expect theCOVID-19 pandemic to materially affect our financial performance in 2020, and such pandemic may otherwise have material adverse effects on our results of operations, financial condition, and/or our cash flows.

COVID-19 was first identified in Wuhan, China in December 2019. The disease has spread throughout the world, including across the United States, and the World Health Organization declared theCOVID-19 outbreak a pandemic in March 2020. In an attempt to contain the spread and impact ofCOVID-19, authorities throughout the United States and the world have implemented measures such as travel bans and restrictions, quarantines,stay-at-home andshelter-in-place orders, the promotion of social distancing, and limitations on business activity. This pandemic has resulted in a significant economic downturn in the United States and globally, and has also led to significant disruptions and volatility in capital and financial markets.

We are working with federal, state and local health authorities to respond toCOVID-19 cases in the communities we serve and are taking or supporting measures to try to limit the spread of the virus and to mitigate the burden on the healthcare system. Certain of the measures we have been taking (such as rescheduling or cancelling elective procedures at our hospitals and other healthcare facilities) will adversely affect our financial results that we may be unable to fully quantify.

Beginning in March 2020, theCOVID-19 pandemic has caused us to experience a substantial reduction in the number of elective surgeries, physician office visits and emergency room volumes at our hospitals and other healthcare facilities due to restrictive measures, including quarantines andshelter-in-place orders, as well as general concerns related to the risk of contractingCOVID-19 from interacting with the healthcare system. We believe that certain of these patient volume declines reflect a deferral of healthcare services utilization to a later period, rather than a permanent reduction in demand for our services. Given the general necessity of the healthcare services we provide, we anticipate that in the future historically normal service levels may resume and that the deferral of services may create a backlog of demand; however, there is no assurance that either will occur. In addition, while our hospitals have not experienced major capacity constraints to date arising from the treatment ofCOVID-19 patients, there are hospitals in the United States that are located in centers of theCOVID-19 outbreak and have been overwhelmed in caring forCOVID-19 patients, which has prevented such hospitals from treating all patients who seek care. Our hospitals could be subject to such conditions in the future if a majorCOVID-19 outbreak occurs in a geographic region where any of our hospitals are located.

We may experience supply chain disruptions, including shortages, delays and price increases in equipment, pharmaceuticals and medical supplies, particularly personal protective equipment, or PPE. Staffing, equipment, and pharmaceutical and medical supplies shortages may also impact our ability to admit and treat patients. We have also incurred, and may continue to incur, increased expenses arising from theCOVID-19 pandemic, including additional supply chain and other expenditures.

We have been implementing considerable safety measures at our hospitals and healthcare facilities, and we have instituted a work-from-home policy for certain of our corporate and administrative offices. Nevertheless, exposure toCOVID-19 patients has increased risks to our physicians, nurses and other medical staff, which may further reduce our operating capacity. All of these developments could result in reduced employee morale, labor unrest, work stoppages or other workforce disruptions.

Broad economic factors resulting from the currentCOVID-19 pandemic, including increased unemployment and underemployment levels and reduced consumer spending and confidence, also affect our service mix, revenue mix, payor mix and patient volumes, as well as our ability to collect outstanding receivables. Business closures and layoffs in the geographic areas in which we operate may lead to increases in the uninsured and underinsured populations and adversely affect demand for our services, as well as the ability of patients and other payors to pay for services rendered. Any increase in the amount or deterioration in the collectability of patient accounts receivable will adversely affect our financial results, and require an increased level of working capital. In addition, our financial performance may be adversely affected by federal or state laws, regulations, orders, or other governmental or regulatory actions addressing the currentCOVID-19 pandemic or the U.S. healthcare system, which, if adopted, could result in direct or indirect restrictions with respect to our business that adversely impact us. We may also be subject to lawsuits from patients, employees and others exposed toCOVID-19 at our facilities. Such actions may involve large demands, as well as substantial defense costs. Our professional and general liability insurance may not cover all claims against us.

There is a high degree of uncertainty regarding the implementation and impact of the CARES Act and the PPPHCE Act. There can be no assurance as to the total amount and types of assistance we will receive or that we will be able to benefit from provisions intended to increase access resources and ease regulatory burdens for healthcare providers.

The CARES Act is a $2 trillion economic stimulus package signed into law on March 27, 2020, in response to theCOVID-19 pandemic. For hospitals and other healthcare providers, it authorizes $100 billion in funding to be distributed through the PHSSEF. These funds are intended to reimburse eligible providers, including public entities and Medicare- and/or Medicaid-enrolled providers and suppliers, lost revenues and incremental expenses attributable toCOVID-19. Recipients are not required to repay these funds, provided that they attest to and comply with certain terms and conditions, including limitations on balance billing and not using funds received from the PHSSEF to reimburse expenses or losses that other sources are obligated to reimburse. HHS allocated half of the provider relief funding for general distribution to Medicare providers impacted byCOVID-19. Inmid-April 2020, HHS distributed $30 billion of this funding based on each provider’s share of total Medicarefee-for-service reimbursement in 2019, and the agency has started to distribute an additional $20 billion such that the total $50 billion of general distribution funding will be allocated proportional to providers’ share of 2018 net patient revenue. As noted above, we have received payments from the initial funding of the PHSSEF. For the $50 billion of targeted allocations, HHS has indicated that $10 billion will be allocated for targeted distribution to hospitals in geographic areas particularly impacted by theCOVID-19 pandemic and $10 billion will be allocated for rural health clinics and hospitals. Much of the remaining $30 billion is expected to be used to reimburse healthcare providers that submit claim requests forCOVID-19-related treatment of uninsured patients at Medicare rates.

The CARES Act also makes other forms of financial assistance available to healthcare providers, including through Medicare and Medicaid payments adjustments and an expansion of the Medicare Accelerated and Advance Payment Program, which makes available accelerated payments of Medicare funds in order to increase cash flow to providers. As noted above, we have received

accelerated payments under this program. In addition to financial assistance, the CARES Act includes provisions intended to increase access to medical supplies and equipment and ease legal and regulatory burdens on healthcare providers. Many of these measures, such as flexibility related to the provision of telehealth services, are effective only for the duration of the public health emergency. The CARES Act also includes numerous income tax provisions including changes to the business interest expense deduction rules.

In addition to the funds appropriated under the CARES Act, the PPPHCE Act, a stimulus package signed into law on April 24, 2020, includes additional emergency appropriations forCOVID-19 response, including $75 billion to be distributed to eligible providers through the PHSSEF. This funding is also intended to reimburse providers for lost revenues and healthcare-related expenses attributable to theCOVID-19 pandemic. Applicants for the funds will be required to submit a justification statement for the payments. Recipients will not be required to repay the government for funds received, provided they comply with terms and conditions, which have not yet been finalized.

Due to the recent enactment of the CARES Act and the PPPHCE Act, there is still a high degree of uncertainty surrounding their implementation, and the public health emergency continues to evolve. The federal government may consider additional stimulus and relief efforts, but we are unable to predict whether additional stimulus measures will be enacted or their impact. There can be no assurance as to the total amount of financial and other types of assistance we will receive under the CARES Act and the PPPHCE Act, and it is difficult to predict the impact of such legislation on our operations or how they will affect operations of our competitors. Moreover, we are unable to assess the extent to which anticipated negative impacts on us arising from theCOVID-19 pandemic will be offset by amounts or benefits received under the CARES Act, and which we may in the future receive under the CARES Act and the PPPHCE Act. We continue to assess the potential impact ofCOVID-19 and government responses to the pandemic on our business, results of operations, financial position and cash flows.

Item 2. Unregistered Sale of Equity Securities and Use of Proceeds

The following table contains information about our purchases of common stock during the three months ended ~~June 30, 2019.~~March 31, 2020.

Period
   Total Number of Shares
Purchased (a)        Average Price Paid per
Share    Total Number of Shares
Purchased as Part of Publicly
Announced Plans or
Programs (b)    Maximum Number of Shares
That May Yet Be Purchased
Under the Plans or Programs
(b)
April 1, 2019 -

April 30, 2019
   -      $ -      -      -
May 1, 2019 -

May 31, 2019
   -      -      -      -
June 1, 2019 -

June 30, 2019
   43,696      2.66      -      -





Total
   43,696      $ 2.66      -      -


Period	Total Number of Shares Purchased (a)			Average Price Paid per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs (b)		Maximum Number of Shares That May Yet Be Purchased Under the Plans or Programs (b)
January 1, 2020 -
January 31, 2020		2,738	$		2.75		-		-
February 1, 2020 -
February 29, 2020		-			-		-		-
March 1, 2020 -
March 31, 2020		248,839			4.93		-		-


Total		251,577	$		4.91		-		-

(a)

~~43,696~~251,577 shares were withheld to satisfy the payment of tax obligations related to the vesting of restricted stock awards.

(b)

We had no publicly announced plans or open market repurchase programs for shares of our common stock during the ~~six~~three months ended ~~June 30, 2019.~~March 31, 2020.

~~With~~The ABL Facility and the exception of a special cash dividend of $0.25 per share paid by us in December 2012, historically, we have not paid any cash dividends. Subject to certain exceptions, our Credit Facility limits the ability of our subsidiaries to pay dividends and make distributions to us, and limits our ability to pay dividends and/or repurchase stock, to an amount not to exceed $100 million in the aggregate, subject to certain restrictions. The indentures governing each series of our outstanding notes ~~also~~ restrict our subsidiaries from, among other matters, paying dividends and making distributions to us, which thereby limits our ability to pay dividends and/or repurchase stock. As of ~~June 30, 2019,~~March 31, 2020, under the most restrictive test in these agreements (and subject to certain exceptions), we have approximately ~~$100~~$200 million ~~available with which~~of capacity to pay permitted dividends and/or repurchase shares of ~~our~~ stock or make other restricted payments.

Item 3. Defaults Upon Senior Securities

None.

Item 4.Mine Safety Disclosures

Not applicable.

Item 5.OtherInformation

None.

Item 6.Exhibits


No.		Description
4.1		Indenture, dated as of February 6, 2020, among CHS/Community Health Systems, Inc., Community Health Systems, Inc., the guarantors party thereto, Regions Bank, as Trustee, and Credit Suisse AG, as Collateral Agent, relating to the 6.625% Senior Secured Notes due 2025 (incorporated by reference to Exhibit 4.1 to Community Health Systems, Inc.’s Current Report on Form8-K filed February 6, 2020 (No.001-15925))
4.2		Form of 6.625% Senior Secured Note due 2025 (included in Exhibit 4.1)
4.3	*	Fifteenth Supplemental Indenture relating to CHS/Community Health Systems, Inc.’s 6.875% Senior Notes due 2022, dated as of March 27, 2020, by and among CHS/Community Health Systems, Inc., the guarantors party thereto and Regions Bank, as Trustee
4.4	*	Eighth Supplemental Indenture relating to CHS/Community Health Systems, Inc.’s 6.250% Senior Secured Notes due 2023, dated as of March 27, 2020, by and among CHS/Community Health Systems, Inc., the guarantors party thereto and Regions Bank, as Trustee and Credit Suisse AG, as Collateral Agent
4.5	*	Fifth Supplemental Indenture relating to CHS/Community Health Systems, Inc.’s 9.875% Junior-Priority Secured Notes due 2023, dated as of March 27, 2020, by and among CHS/Community Health Systems, Inc., the guarantors party thereto, and Regions Bank, as Trustee and as Junior-Priority Collateral Agent
4.6	*	Fifth Supplemental Indenture relating to CHS/Community Health Systems, Inc.’s 8.125% Junior-Priority Secured Notes due 2024, dated as of March 27, 2020, by and among CHS/Community Health Systems, Inc., the guarantors party thereto, and Regions Bank, as Trustee and as Junior-Priority Collateral Agent
4.7	*	Fifth Supplemental Indenture relating to CHS/Community Health Systems, Inc.’s 8.625% Senior Secured Notes due 2024, dated as of March 27, 2020, by and among CHS/Community Health Systems, Inc., the guarantors party thereto and Regions Bank, as Trustee and Credit Suisse AG, as Collateral Agent
4.8	*	Fifth Supplemental Indenture relating to CHS/Community Health Systems, Inc.’s 8.000% Senior Secured Notes due 2026, dated as of March 27, 2020, by and among CHS/Community Health Systems, Inc., the guarantors party thereto and Regions Bank, as Trustee and Credit Suisse AG, as Collateral Agent
4.9	*	First Supplemental Indenture relating to CHS/Community Health Systems, Inc.’s 8.000% Senior Secured Notes due 2027, dated as of March 27, 2020, by and among CHS/Community Health Systems, Inc., the guarantors party thereto and Regions Bank, as Trustee and Credit Suisse AG, as Collateral Agent
4.10	*	First Supplemental Indenture relating to CHS/Community Health Systems, Inc.’s 6.875% Senior Notes due 2028, dated as of March 27, 2020, by and among CHS/Community Health Systems, Inc., the guarantors party thereto and Regions Bank, as Trustee
4.11	*	First Supplemental Indenture relating to CHS/Community Health Systems, Inc.’s 6.625% Senior Secured Notes due 2025, dated as of March 27, 2020, by and among CHS/Community Health Systems, Inc., the guarantors party thereto and Regions Bank, as Trustee and Credit Suisse AG, as Collateral Agent
10.1	*†	Form of Performance Based Restricted Stock Award Agreement (Senior Officers) for Community Health Systems, Inc. 2009 Stock Option and Award Plan (for awards granted on or after March 1, 2020)
22.1	*	List of Subsidiary Guarantors and Issuers of Guaranteed Securities
31.1	*	Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

31.2	*	Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

32.1	**	Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

32.2	**	Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

101.INS	*	XBRL Instance Document

101.SCH	*	XBRL Taxonomy Extension Schema

101.CAL	*	XBRL Taxonomy Extension Calculation Linkbase


101.DEF	*	XBRL Taxonomy Extension Definition Linkbase

101.LAB	*	XBRL Taxonomy Extension Label Linkbase

101.PRE	*	XBRL Taxonomy Extension Presentation Linkbase

* Filed herewith.

*	~~Filed~~ ** Furnished herewith. † Indicates a management contract or compensatory plan or arrangement.

**	~~Furnished herewith~~

SIGNATURES

Pursuant to the requirements of section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.


COMMUNITY HEALTH SYSTEMS, INC. (Registrant)

By:	/s/ Wayne T. Smith
		Wayne T. Smith
		Chairman of the Board and
		Chief Executive Officer
	~~(principal executive officer)~~

~~By:~~	~~/s/ Thomas J. Aaron~~
	~~Thomas J. Aaron~~
	~~Executive Vice President and~~
	~~Chief Financial Officer~~
	~~(principal financial officer)~~

By:	/s/ Kevin J. Hammons
		Kevin J. Hammons
Executive Vice President and
Chief Financial Officer

By:	/s/ Jason K. Johnson
Jason K. Johnson
Senior Vice President ~~Assistant Chief Financial~~and
		~~Officer,~~ Chief Accounting Officer ~~and Treasurer~~
	~~(principal accounting officer)~~

Date: ~~August 6, 2019~~April 29, 2020

8664


			Community Health Systems, Inc. Stockholders
	Redeemable Noncontrolling Interest		Common Stock		Additional Paid-In Capital		Accumulated Other Comprehensive Loss		Accumulated Deficit		Noncontrolling Interest		Total Stockholders’ Deficit
Balance, December 31, 2018	$	504	$	1	$	2,017	$	(10)	$	(3,543)	$	72	$	(1,463)
Comprehensive income (loss)		9		-		-		-		(118)		8		(110)
Contributions from noncontrolling interests		1		-		-		-		-		-		-
Distributions to noncontrolling interests		(19)		-		-		-		-		(8)		(8)
Purchase of subsidiary shares from noncontrolling interests		(1)		-		-		-		-		-		-
Other reclassifications of noncontrolling interests		(1)		-		-		-		-		1		1
Adjustment to redemption value of redeemable noncontrolling interests		12		-		(12)		-		-		-		(12)
Cancellation of restricted stock for tax withholdings on vested shares		-		-		(1)		-		-		-		(1)
Share-based compensation		-		-		3		-		-		-		3

Balance, March 31, 2019		505		1		2,007		(10)		(3,661)		73		(1,590)
Comprehensive income (loss)		14		-		-		2		(167)		8		(157)
Contributions from noncontrolling interests		1		-		-		-		-		-		-
Distributions to noncontrolling interests		(22)		-		-		-		-		(8)		(8)
Purchase of subsidiary shares from noncontrolling interests		-		-		(1)		-		-		-		(1)
Other reclassifications of noncontrolling interests		(1)		-		(1)		-		-		1		-
Adjustment to redemption value of redeemable noncontrolling interests		6		-		(6)		-		-		-		(6)
Share-based compensation		-		-		3		-		-		-		3

Balance, June 30, 2019	$	503	$	1	$	2,002	$	(8)	$	(3,828)	$	74	$	(1,759)


						Asset (Liability)
	Notional Amount					Fair Value
Swap #	(in millions)		Fixed Interest Rate		Termination Date	(in millions)
1	$	200		2.515 %	August 30, 2019	$	-
2		200		2.613 %	August 30, 2019		-
3		300		2.892 %	August 30, 2020		(3)


	Amount of Pre-Tax (Loss) Gain Recognized in OCI (Effective Portion)
Derivatives in Cash Flow Hedging	Three Months Ended June 30,				Six Months Ended June 30,
Relationships	2019		2018		2019		2018
Interest rate swaps	$	(1)	$	6	$	(3)	$	23

The following tabular disclosure provides the location of the effective portion of thepre-tax loss (gain) reclassified from accumulated other comprehensive loss (“AOCL”) into interest expense on the condensed consolidated statements of loss during the three and six months ended June 30, 2019 and 2018 (in millions):

	Amount ofPre-Tax Loss (Gain) Reclassified
	from AOCL into Income (Effective Portion)
Location of Loss (Gain) Reclassified from	Three Months Ended June 30,				Six Months Ended June 30,
AOCL into Income (Effective Portion)	2019		2018		2019		2018
Interest expense, net	$	-	$	2	$	(1)	$	7


							Financing
Year Ending December 31,	Operating			Finance			Obligations
2019 (remaining six months)	$	104		$	7		$	4
2020		165			13			7
2021		123			11			7
2022		100			10			7
2023		80			16			7
Thereafter		243			166			120

Total minimum future payments		815			223			152
Less: Imputed interest		(203	)		(97	)		(51	)

Total liabilities		612			126			101
Less: Current portion		(133	)		(8	)		(3	)

Long-term liabilities	$	479		$	118		$	98

As previously disclosed in our 2018 Annual Report on Form10-K, which followed the lease accounting prior to adoption of ASC 842, future commitments relating to noncancellable operating and capital leases and financing obligations for the five years and period thereafter as of December 31, 2018 were as follows (in millions):
							Financing
Year Ending December 31,	Operating (1)			Capital			Obligations
2019	$	188		$	12		$	12
2020		157			10			9
2021		121			8			10
2022		98			7			10
2023		79			14			10
Thereafter		234			121			106

Total minimum future payments	$	877			172			157

Less: Imputed interest					(80	)		(18	)

Total capital lease and financing obligations					92			139
Less: Current portion					(8	)		(5	)

Long-term capital lease and financing obligations				$	84		$	134


	Parent Guarantor		Issuer		Other Guarantors		Non - Guarantors		Eliminations		Consolidated
	(In millions)

Net operating revenues	$	-	$	1	$	2,010	$	1,291	$	-	$	3,302
Operating costs and expenses:
Salaries and benefits		-		-		766		722		-		1,488
Supplies		-		-		351		188		-		539
Other operating expenses		-		22		592		279		-		893
Government and other legal settlements and related costs		-		-		4		-		-		4
Lease cost and rent		-		-		43		38		-		81
Depreciation and amortization		-		-		93		60		-		153
Impairment and (gain) loss on sale of businesses, net		-		(2)		21		14		-		33

Total operating costs and expenses		-		20		1,870		1,301		-		3,191

(Loss) income from operations		-		(19)		140		(10)		-		111
Interest expense, net		-		157		127		(19)		-		265
Equity in earnings of unconsolidated affiliates		167		(7)		12		-		(177)		(5)

(Loss) income before income taxes		(167)		(169)		1		9		177		(149)
(Benefit from) provision for income taxes		-		(2)		(2)		1		-		(3)

Net (loss) income		(167)		(167)		3		8		177		(146)
Less: Net income attributable to noncontrolling interests		-		-		-		21		-		21

Net (loss) income attributable to Community Health Systems, Inc. stockholders	$	(167)	$	(167)	$	3	$	(13)	$	177	$	(167)


	Parent				Other		Non -
	Guarantor		Issuer		Guarantors		Guarantors		Eliminations		Consolidated
	(In millions)

Net cash provided by (used in) operating activities	$	4	$	(67)	$	210	$	118	$	-	$	265

Cash flows from investing activities:
Acquisitions of facilities and other related businesses		-		-		(6)		(7)		-		(13)
Purchases of property and equipment		-		-		(176)		(36)		-		(212)
Proceeds from disposition of hospitals and other ancillary operations		-		18		135		8		-		161
Proceeds from sale of property and equipment		-		-		-		1		-		1
Purchases ofavailable-for-sale securities and equity securities		-		-		(15)		(24)		-		(39)
Proceeds from sales ofavailable-for-sale securities and equity securities		-		-		25		27		-		52
Increase in other investments		-		-		(63)		(34)		-		(97)

Net cash provided by (used in) investing activities		-		18		(100)		(65)		-		(147)

Cash flows from financing activities:
Repurchase of restricted stock shares for payroll tax withholding requirements		(1)		-		-		-		-		(1)
Deferred financing costs and other debt-related costs		-		(28)		-		-		-		(28)
Proceeds from noncontrolling investors in joint ventures		-		-		-		2		-		2
Redemption of noncontrolling investments in joint ventures		-		-		-		(2)		-		(2)
Distributions to noncontrolling investors in joint ventures		-		-		-		(57)		-		(57)
Changes in intercompany balances with affiliates, net		(3)		94		(82)		(9)		-		-
Borrowings under credit agreements		-		-		23		-		-		23
Issuance of long-term debt		-		2,034		-		-		-		2,034
Proceeds from ABL facility		-		25		-		-		-		25
Repayments of long-term indebtedness		-		(2,076)		(23)		(4)		-		(2,103)

Net cash (used in) provided by financing activities		(4)		49		(82)		(70)		-		(107)

Net change in cash and cash equivalents		-		-		28		(17)		-		11
Cash and cash equivalents at beginning of period		-		-		135		61		-		196

Cash and cash equivalents at end of period	$	-	$	-	$	163	$	44	$	-	$	207


As of June 30, 2019:
		% of Gross Receivables
	Payor	0 - 90 Days		90 - 180 Days		180 - 365 Days		Over 365 Days
	Medicare		14 %		1 %		- %		- %
	Medicaid		7 %		1 %		1 %		1 %
	Managed Care and Other		25 %		4 %		3 %		3 %
	Self-Pay		10 %		8 %		9 %		13 %

As of December 31, 2018:

		% of Gross Receivables
	Payor	0 - 90 Days		90 - 180 Days		180 - 365 Days		Over 365 Days
	Medicare		14 %		- %		- %		- %
	Medicaid		7 %		1 %		1 %		1 %
	Managed Care and Other		26 %		4 %		3 %		3 %
	Self-Pay		9 %		8 %		10 %		13 %