CYH US Equity☆

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

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

Executive Overview

We are one of the largest publicly traded providers of healthcare services 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 and affiliated businesses that we own and operate in generally larger non-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 December 31, 2021, we owned or leased 83 hospitals, comprised of 81 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.

COVID-19 Pandemic

A novel strain of coronavirus causing the disease known as COVID-19 was first identified in December 2019, and has spread throughout the world, including across the United States. The HHS Secretary has renewed the agency’s declaration of a national public health emergency, which was initially declared in January 2020, due to the continued consequences of the COVID-19 pandemic. While vaccines and booster shots for the COVID-19 virus became widely available in the United States during the year ended December 31, 2021, COVID-19 has continued to result in a significant number of hospitalizations. Moreover, various government authorities and private businesses have implemented or re-imposed restrictive measures, including mask and vaccine requirements.

As a provider of healthcare services, we have been and continue to be significantly affected by the public health and economic effects of the COVID-19 pandemic. 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 caring for COVID-19 patients, and we have been working with federal, state and local health authorities to respond to COVID-19 cases in the communities we serve.

Although we have implemented considerable safety measures, treatment of COVID-19 patients has associated risks, which may include the manner in which patients, physicians, nurses and other medical personnel perceive and respond to such risks. While our hospitals have not generally experienced major capacity constraints to date arising from the treatment of COVID-19 patients, there are hospitals in the United States that have been overwhelmed in caring for COVID-19 patients, which has prevented such hospitals from treating all patients who seek care. In certain locations, government authorities and healthcare providers have re-imposed restrictions on elective medical procedures, have activated crisis standards of care, have deployed military personnel, and have taken other measures affecting treatment capacity and care in response to COVID-19 pandemic developments. One or more of our hospitals or other facilities could be affected by these measures in the future, particularly if a major COVID-19 outbreak occurs in a geographic region where any of our hospitals are located.

We have incurred, and may continue to incur, certain increased expenses arising from the COVID-19 pandemic, including additional labor, supply chain, capital and other expenditures. Moreover, in recent months, the COVID-19 pandemic has resulted in general inflationary pressures and has resulted in significant disruptions to global supply networks. In this regard, we have experienced disruptions in connection with the provision of equipment, pharmaceuticals and medical supplies to us, as well as inflationary pressures in connection with labor, supply chain, capital and other expenditures. While we have implemented cost containment and other measures to try to counteract these developments, we may be unable to fully offset these increases in our costs and otherwise effectively respond to supply disruptions.

Negative economic conditions and other factors resulting from the COVID-19 pandemic have affected, and may continue to affect, our service mix, revenue mix, payor mix and/or patient volumes, as well as our ability to collect outstanding receivables. Pandemic-related factors may continue to adversely affect demand for our services, as well as the ability of patients and other payors to pay for services rendered. We have observed deterioration in the collectability of patient accounts receivable from uninsured patients compared to pre-pandemic levels which, if sustained, may adversely affect our financial results and require an increased level of working capital.

While we are not able to fully quantify the impact that the COVID-19 pandemic will have on our future financial results, we expect developments related to COVID-19 to continue to affect our financial performance. Moreover, the COVID-19 pandemic may otherwise have material adverse effects on our results of operations, financial position, and/or our cash flows if economic and/or public health conditions in the United States deteriorate. The ongoing impact of the pandemic on our financial results will depend on,

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among other factors, the duration and severity of the pandemic, the impact of the pandemic on economic conditions, the volume of canceled or rescheduled procedures at our facilities, the volume of COVID-19 patients cared for across our health systems, the timing, availability and acceptance of effective medical treatments, the availability, acceptance of and need for additional doses ofvaccines, the spread of potentially more contagious and/or virulent forms of the virus, including any variants of the virus that may be resistant to currently available vaccines, and the impact of government actions and administrative regulation on the hospital industry and broader economy, including through existing and any future stimulus efforts as well as vaccine requirements. As discussed below under “Overview of Legislative Developments”, we have received, and may continue to receive, payments and advances made available under the CARES Act, the PPPHCE Act, the CAA, the ARPA, and other stimulus laws, which have been beneficial in partially mitigating the impact of the COVID-19 pandemic on our results of operation and financial position to date. The federal government may consider additional stimulus and relief efforts but we are unable to predict whether any additional stimulus measures will be enacted or their impact, if any. We are unable to assess the extent to which potential ongoing negative impacts on us arising from the COVID-19 pandemic will ultimately be offset by amounts received, and benefits which we may in the future receive, under the CARES Act, the PPPHCE Act, the CAA, the ARPA or any future stimulus measures.

Completed Divestiture and Acquisition Activity

Our portfolio rationalization and deleveraging strategy involving the divestiture of hospitals and non-hospital businesses concluded at the end of 2020. However, we continue to receive interest from potential acquirers for certain of our hospitals, and may, from time to time, consider selling additional hospitals or our unconsolidated equity interests in hospitals if we consider any such disposition to be in our best interests.

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

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

During 2019, we completed the divestiture of 12 hospitals, including two which closed effective January 1, 2019 (for these hospitals, we received the net proceeds at a preliminary closing on December 31, 2018), but not including the three hospitals noted above which closed on January 1, 2020. These 12 hospitals represented annual net operating revenues in 2018 of approximately $1.1 billion and, excluding the net proceeds for the two hospitals that preliminarily closed on December 31, 2018 and the three hospitals that preliminarily closed on December 31, 2019, we received total net proceeds of approximately $335 million in connection with the disposition of these hospitals.

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The following table provides a summary of hospitals that we divested during the years ended December 31, 2021, 2020 and 2019:

Hospital Buyer City, State Licensed Beds Effective Date

Lea Regional Medical Center Covenant Health System Hobbs, NM 84 January 1, 2021

Berwick Hospital Center Fayette Holdings, Inc. Berwick, PA 90 December 1, 2020

Hill Regional Hospital AHRK Holdings, LLC Hillsboro, TX 25 August 1, 2020

Shands Live Oak Regional Medical Center HCA Live Oak, FL 25 May 1, 2020

Shands Starke Regional Medical Center HCA Starke, FL 49 May 1, 2020

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

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

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

During the year ended December 31, 2021, we paid approximately $3 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. We allocated the purchase price to property and equipment, working capital and goodwill.

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Overview of Operating Results

Our net operating revenues for the year ended December 31, 2021 increased $579 million to approximately $12.4 billion compared to approximately $11.8 billion for the year ended December 31, 2020. On a same-store basis, net operating revenues for the year ended December 31, 2021 increased $1.4 billion.

We had net income of $368 million during the year ended December 31, 2021, compared to net income of $607 million for the year ended December 31, 2020. Net income for the year ended December 31, 2021 included the following:

Net income for the year ended December 31, 2020 included the following:

Consolidated inpatient admissions for the year ended December 31, 2021, decreased 5.9%, compared to the year ended December 31, 2020, and consolidated adjusted admissions for the year ended December 31, 2021, decreased 2.3%, compared to the year ended December 31, 2020. Same-store inpatient admissions for the year ended December 31, 2021, increased 2.2%, compared to the year ended December 31, 2020, and same-store adjusted admissions for the year ended December 31, 2021, increased 5.9%, compared to the year ended December 31, 2020.

Self-pay revenues represented approximately 0.9% and (0.2)% of net operating revenues for the years ended December 31, 2021 and 2020, respectively. The amount of foregone revenue related to providing charity care services as a percentage of net operating revenues was approximately 8.9% for both years ended December 31, 2021 and 2020. Direct and indirect costs incurred in providing charity care services as a percentage of net operating revenues was approximately 1.0% for both years ended December 31, 2021 and 2020.

Overview of Legislative Developments

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 impacted access to health insurance. The most prominent of these efforts, the Affordable Care Act, affects how healthcare services are covered, delivered and reimbursed. The Affordable Care Act increased health insurance coverage through a combination of public program expansion and private sector health insurance reforms. The Affordable Care Act also made a number of changes to Medicare and Medicaid reimbursement, such as a productivity offset to the Medicare market basket update and reductions to the Medicare and Medicaid DSH payments. However, reductions to Medicaid DSH payments have been delayed by the CAA through 2023 (to begin in federal fiscal year 2024).

The Affordable Care Act has been subject to legislative and regulatory changes and court challenges. For example, effective January 1, 2019, the financial penalty associated with the mandate that most individuals enroll in a health insurance plan was effectively eliminated. This change resulted in legal challenges to the constitutionality of the individual mandate and validity of the Affordable Care Act as a whole. However, in June 2021, the U.S. Supreme Court determined that the plaintiffs lacked standing,

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allowing the law to remain in place. Nonetheless, the elimination of the individual mandate penalty and other changes may impact the number of individuals that elect to obtain public or private health insurance or the scope of such coverage, if purchased.Some states have imposed individual health insurance mandates, and other states have explored or offer public health insurance options.

The current presidential administration has indicated that it generally intends to protect and strengthen the Affordable Care Act and Medicaid programs. For example, in January 2021, President Biden issued an executive order that instructed certain governmental agencies to review and reconsider their existing policies and rules that limit access to health insurance coverage. In a final rule published in September 2021, HHS extended the annual open enrollment period for coverage through federal marketplaces and granted state exchanges flexibility to lengthen their open enrollment periods.

Of critical importance to us is the potential impact of any changes specific to the Medicaid program, including the funding and expansion provisions of the Affordable Care Act and subsequent legislation or agency initiatives. Historically, the states with the greatest reductions in the number of uninsured adult residents have expanded Medicaid. A number of states have opted out of the Medicaid coverage expansion provisions, but could ultimately decide to expand their programs at a later date. Of the 16 states in which we operated hospitals as of December 31, 2021, nine states have taken action to expand their Medicaid programs. At this time, the other seven states have not, including Florida, Alabama, Tennessee, Mississippi and Texas, where we operated a significant number of hospitals as of December 31, 2021. Some states use, or have applied to use, waivers granted by CMS to implement expansion, impose different eligibility or enrollment conditions, or otherwise implement programs that vary from federal standards.

There is uncertainty regarding the ongoing net effect of the Affordable Care Act due to the potential for continued changes to the law’s implementation and its interpretation by government agencies and courts. There is also uncertainty regarding the potential impact of other health reform efforts at the federal and state levels. Some reforms may have a positive impact on our business, while others may increase our operating costs, adversely impact the reimbursement we receive, or require us to modify certain aspects of our operations. For example, some members of Congress have proposed measures that would expand government-sponsored health insurance coverage, including single-payor models, and some states have implemented or are considering public health insurance options. Legislative and executive branch efforts related to healthcare reform could result in increased prices for consumers purchasing health insurance coverage or destabilize insurance markets, among other effects. Some current initiatives, requirements and proposals, including those aimed at price transparency and out-of-network charges, may impact prices, our competitive position and the relationships between hospitals, insurers and patients. For example, the No Surprises Act requires providers to send an insured patient’s health plan a good faith estimate of expected charges, including billing and diagnostic codes, prior to when the patient is scheduled to receive the item or service. HHS is deferring enforcement of this requirement until it issues additional regulations.

In recent years, a number of laws, including the Affordable Care Act and MACRA, have promoted shifting from traditional fee-for-service reimbursement models to alternative payment models that tie reimbursement to quality and cost of care. For example, CMS currently administers various accountable care organizations and bundled payment demonstration projects. In October 2021, the CMS Innovation Center published an outline of its strategy for the next decade, noting the need to accelerate the movement to value-based care and drive broader system transformation. However, the COVID-19 pandemic may impact provider performance and data reporting under value-based care initiatives. CMS has temporarily modified requirements of certain programs by, for example, implementing special scoring and payment policies intended to mitigate negative impacts of the public health emergency on hospitals participating in the Hospital Value-Based Purchasing Program and similar programs.

In response to the COVID-19 pandemic, federal and state governments have passed legislation, promulgated regulations, and taken other administrative actions intended to assist healthcare providers in providing care to COVID-19 and other patients during the public health emergency and to provide financial relief. These measures include temporary relief from Medicare conditions of participation requirements for healthcare providers, temporary relaxation of licensure requirements for healthcare professionals, temporary relaxation of privacy restrictions for telehealth remote communications, promoting use of telehealth by temporarily expanding the scope of services for which Medicare reimbursement is available, and limited waivers of fraud and abuse laws for activities related to COVID-19 during the public health emergency period.

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

In addition, the CARES Act expanded the Medicare Accelerated and Advance Payment Program to increase cash flow to providers impacted by the COVID-19 pandemic. Inpatient acute care hospitals were able to request accelerated payment of up to 100% of their Medicare payment amount for a six-month period. The Medicare Accelerated and Advanced Payment Program payments are advances

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that providers must repay. Providers are required to repay accelerated payments beginning one year after the payment was issued. After such one-year period, Medicare payments owed to providers will be recouped according to the repayment terms.

The CARES Act and related legislation include other provisions offering financial relief, for example suspending the Medicare sequestration payment adjustment from May 1, 2020 through December 31, 2021, which would have otherwise reduced payments to Medicare providers by 2% as required by the Budget Control Act of 2011 (but also extending sequestration through 2030). Congress further delayed these sequestration cuts through March 31, 2022, and reduced the sequestration adjustment to 1% from April 1 through June 30, 2022, but increased the reductions set for 2030. The CARES Act and related legislation also delay scheduled reductions to Medicaid DSH payments, provide a 20% add-on to the inpatient PPS DRG rate for COVID-19 patients for the duration of the public health emergency, and permit 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. However, in addition to providing funding for healthcare providers, the ARPA increased the federal budget deficit in a manner that triggers an additional statutorily mandated sequestration under the PAYGO Act. As a result, an additional Medicare spending reduction of up to 4% was required to take effect in January 2022. However, Congress has delayed implementation of this payment reduction until 2023.

Through December 31, 2021, net of amounts that have been repaid to the respective federal, state, and local agency, we received approximately $763 million in payments through the PHSSEF and various state and local programs on a cumulative basis since their enactment. Of the net amount received to-date, approximately $705 million was received during the year ended December 31, 2020 and the remainder was received during the year ended December 31, 2021.

The estimate of the amount of payments received through the PHSSEF or state and local programs for which we are reasonably assured of meeting the underlying terms and conditions is updated each reporting period and is based on, among other things, the CARES Act and subsequent relief legislation, various Post-Payment Notice of Reporting Requirements issued by HHS during the period, responses to all applicable frequently asked questions and other interpretative guidance as published by HHS, expenses incurred attributable to coronavirus, our results of operations during such period as compared to our 2020 budget and the allocation of general and targeted fund distribution payments among subsidiaries during such period. The PHSSEF and state and local program payments recognized to-date did not impact net operating revenues, and had a positive impact on net income attributable to Community Health Systems, Inc. stockholders during the year ended December 31, 2021, in the amount of $107 million. Amounts received through the PHSSEF or state and local programs that have not yet been recognized or otherwise have not been refunded to HHS are included within accrued liabilities-other in the consolidated balance sheets, and such unrecognized amounts may be returned to HHS or the respective state or local agency, as applicable, or may be recognized in future periods if the underlying conditions for recognition are reasonably assured of being met.

HHS’ interpretation of the underlying terms and conditions of such PHSSEF payments, including auditing and reporting requirements, continues to evolve. In June 2021, HHS issued guidance that set forth deadlines for using and reporting on the use of PHSSEF funds, depending on the dates on which the funds were received. Additional guidance or new and amended interpretations of existing guidance on the terms and conditions of such PHSSEF payments may result in changes in our estimate of amounts for which the terms and conditions are reasonably assured of being met, and any such changes may be material. Additionally, any such changes may result in our inability to recognize additional PHSSEF payments or may result in the derecognition of amounts previously recognized, which (in any such case) may be material. In addition, to the extent that any unrecognized PHSSEF payments that have been or may be received by us do not qualify for reimbursement based on future operations, we may be required to return such unrecognized payments to HHS.

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

There is still a high degree of uncertainty surrounding the implementation of the CARES Act and other stimulus legislation passed in response to the COVID-19 pandemic. In addition, the public health emergency continues to evolve. Some of the measures allowing for flexibility in delivery of care and various financial supports for healthcare providers are available only for the duration of the public health emergency, and it is unclear whether or for how long the public health emergency declaration will be extended. The current declaration expires April 16, 2022. The HHS Secretary may choose to renew the declaration for successive 90-day periods for as long as the emergency continues to exist and may terminate the declaration whenever he determines that the public health emergency no longer exists, but has indicated that HHS will provide states with 60 days’ notice prior to termination of the declaration. The federal government may consider additional stimulus and relief efforts, but we are unable to predict whether additional stimulus

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measures will be enacted or their impact on us. There can be no assurance as to the total amount of financial and other types of assistance that we will receive under the CARES Act, other enacted stimulus legislation, or future measures, if any, and it is difficult to predict the impact of such measures on our operations or how they will affect operations of our competitors. Further, there can be no assurance that the terms of provider relief funding or other programs will not change or be interpreted in ways that affect our funding or eligibility to participate or our ability to comply with applicable requirements and retain amounts received. We continue to assess the potential impact of the CARES Act and other enacted stimulus legislation, the potential impact of future stimulus measures, if any, and the impact of other laws, regulations, and guidance related to COVID-19 on our business, results of operations, financial condition and cash flows.

CMS issued an interim final rule in November 2021 that will require COVID-19 vaccinations in most Medicare and Medicaid certified providers and suppliers, including our hospitals. The rule applies to all staff, including clinical staff, individuals providing services under arrangements, volunteers, and staff who are not involved in direct patient care, subject to approved religious and medical exemptions. On January 13, 2022, the U.S. Supreme Court granted the U.S. government’s request for a stay of lower court injunctions of the CMS regulation, finding that the CMS rule fell within the authority granted to the HHS Secretary by Congress with respect to imposing conditions on the receipt of Medicaid and Medicare funds. Additionally, some states have implemented, or may implement in the future, vaccine mandates with respect to healthcare personnel. It is currently not possible to predict the impact that vaccine mandates (including with respect to the CMS rule noted above) may have on us. However, these vaccine mandates could result in employee attrition and the loss of personnel who are unvaccinated, which could adversely affect our business and results of operations.

In June 2019, the U.S. Supreme Court ruled in Azar v. Allina Health Services that HHS failed to comply with statutory notice and comment rulemaking procedures before announcing an earlier policy related to DSH payments made under Medicare to hospitals. In response to this adverse ruling, CMS proposed a new rule in August 2020 in an attempt to retroactively cure the underlying procedural errors cited by the U.S. Supreme Court as the basis in their decision. CMS’s action has introduced uncertainty regarding the potential outcomes from the Supreme Court ruling, and the proposed rule has resulted in further litigation. If HHS or CMS are unsuccessful in their attempt to assert the proposed rule or another legal basis for their policy, one potential outcome is the federal government could be required to reimburse hospitals, including our affiliated hospitals, for Medicare DSH payments which otherwise would have been payable over certain prior time periods absent the enactment of this policy. While the ruling in Allina was specific to the DSH payments calculated for federal fiscal year 2012 for the plaintiff hospitals, we believe that, because of the precedent of this ruling, prior time periods with the potential for higher DSH payments, including federal fiscal years 2005 to 2013, could be impacted. There continues to be uncertainty regarding the extent to which, if any, Medicare DSH payments will be remitted to our affiliated hospitals as the result of Allina and subsequent litigation, and, if so, the timing of any such payments. Litigants in lawsuits challenging the proposed rule are seeking such relief. We anticipate that if it is ultimately determined that our affiliated hospitals are entitled to receive such Medicare DSH payments for these prior time periods, these payments could have a material positive impact on a non-recurring basis in any future period in which net income is recognized in respect thereof as well as on our cash flows from operations in 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, other enacted stimulus legislation and any future stimulus measures, available borrowing capacity, long-term outlook on our debt repayments, the refinancing of certain of our notes, proceeds from the sale of hospitals and the continued projection of our ability to generate cash flows, we anticipate that we will be able to invest the necessary capital in our business over the next twelve months and for the foreseeable future thereafter. We believe there continues to be ample opportunity to strengthen our market share in substantially all of our markets by decreasing the need for patients to travel outside their communities for healthcare. Furthermore, we will continue to strive to improve operating efficiencies and procedures in order to improve the performance of our hospitals.

Sources of Revenue

The following table presents the approximate percentages of net operating revenues by payor source for the periods indicated. The data for the periods presented are not strictly comparable due to the effect that hospital acquisitions and divestitures have had on these statistics.

Year Ended December 31,

Managed Care and other third-party payors 64.2 62.9 60.6

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

Net operating revenues include amounts estimated by management to be reimbursable by Medicare and Medicaid under prospective payment systems and provisions of cost-based reimbursement and other payment methods. In addition, we are reimbursed by non-governmental payors using a variety of payment methodologies. Amounts we receive for the treatment of patients covered by Medicare, Medicaid and non-governmental payors are generally less than our standard billing rates. We account for the differences between the estimated program reimbursement rates and our standard billing rates as contractual allowance adjustments, which we deduct from gross revenues to arrive at net operating revenues. Final settlements under some of these programs are subject to adjustment based on administrative review and audit by third parties. We account for adjustments to previous program reimbursement estimates as contractual allowance adjustments and report them in the periods that such adjustments become known. Contractual allowance adjustments related to final settlements and previous program reimbursement estimates impacted net operating revenues and net income (loss) by an insignificant amount in each of the years ended December 31, 2021, 2020 and 2019.

The payment rates under the Medicare program for hospital inpatient and outpatient acute care services are based on prospective payment systems, which depend upon a patient’s diagnosis or the clinical complexity of services provided to a patient, among other factors. These rates are indexed for inflation annually, although increases have historically been less than actual inflation. On August 13, 2021, CMS published the final rule to increase this index by 2.7% for hospital inpatient acute care services that are reimbursed under the prospective payment system for federal fiscal year 2022 (which began October 1, 2021). Together with other changes to payment policies, payment rates for hospital inpatient acute care services are expected to increase approximately 2.5%. Hospitals that do not submit required patient quality data are subject to a reduction in payments. We are complying with this data submission requirement. Payments may also be affected by various other adjustments, including those that depend on patient-specific or hospital specific factors. For example, the “two midnight rule” establishes admission and medical review criteria for inpatient services limiting when services to Medicare beneficiaries are payable as inpatient hospital services. Reductions in the rate of increase or overall reductions in Medicare reimbursement may cause a decline in the growth of our net operating revenues.

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

Results of Operations

Our hospitals offer a 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. Historically, the strongest demand for hospital services generally occurs during January through April and the weakest demand for these services generally occurs during the summer months. Accordingly, eliminating the effects of new acquisitions and/or divestitures, our net operating revenues and earnings are historically highest during the first quarter and lowest during the third quarter. As previously noted, the COVID-19 pandemic has disrupted the pattern of demand for services we provide.

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

Year Ended December 31,

Operating results, as a percentage of net operating revenues:

Operating expenses (a) (84.1 ) (85.3 ) (89.5 )

Depreciation and amortization (4.4 ) (4.7 ) (4.6 )

Impairment and gain (loss) on sale of businesses, net (0.2 ) (0.4 ) (1.0 )

Interest expense, net (7.2 ) (8.7 ) (7.9 )

(Loss) gain from early extinguishment of debt (0.6 ) 2.6 (0.4 )

Gain on sale of equity interests in Macon Healthcare, LLC 0.3 — —

Equity in earnings of unconsolidated affiliates 0.2 0.1 0.1

Income (loss) before income taxes 4.0 3.6 (3.3 )

(Provision for) benefit from income taxes (1.0 ) 1.5 (1.2 )

Net income (loss) 3.0 5.1 (4.5 )

Less: Net income attributable to noncontrolling interests (1.1 ) (0.8 ) (0.6 )

Net income (loss) attributable to Community Health Systems,

Inc. stockholders 1.9 % 4.3 % (5.1 )%

Year Ended December 31,

Percentage increase (decrease) from prior year:

Net operating revenues 4.9 % (10.8 )%

Admissions (b) (5.9 ) (15.7 )

Adjusted admissions (c) (2.3 ) (19.4 )

Average length of stay (d) 6.4 6.8

Same-store percentage increase (decrease) from prior year (e):

Net operating revenues 12.5 % (3.4 )%

Admissions (b) 2.2 (8.0 )

Adjusted admissions (c) 5.9 (12.5 )

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

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

Net operating revenues increased by 4.9% to approximately $12.4 billion for the year ended December 31, 2021, from approximately $11.8 billion for the year ended December 31, 2020. Net operating revenues on a same-store basis from hospitals that were operated throughout both periods increased $1.4 billion, or 12.5%, during the year ended December 31, 2021, as compared to the year ended December 31, 2020. The increase in same-store net operating revenues was primarily due to increased volumes and higher acuity during 2021. Non-same-store net operating revenues decreased $794 million during the year ended December 31, 2021, in

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comparison to the prior year period, with the decrease attributable primarily to the divestiture of hospitals during 2020 and 2021. On a consolidated basis, inpatient admissions decreased by 5.9% during the year ended December 31, 2021 as compared to the year ended December 31, 2020. Also on a consolidated basis, adjusted admissions decreased by 2.3% during the year ended December 31, 2021 as compared to the year ended December 31, 2020. On a same-store basis, net operating revenues per adjusted admission increased 6.3%, while inpatient admissions increased by 2.2% and adjusted admissions increased by 5.9% for the year ended December 31, 2021, compared to the year ended December 31, 2020.

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

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

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

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

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

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

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

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

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

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

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

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Year Ended December 31, 2020 Compared to Year Ended December 31, 2019

Net operating revenues decreased by 10.8% to approximately $11.8 billion for the year ended December 31, 2020, from approximately $13.2 billion for the year ended December 31, 2019. Net operating revenues on a same-store basis from hospitals that were operated throughout both periods decreased $396 million, or 3.4%, during the year ended December 31, 2020, as compared to the year ended December 31, 2019. The decrease in same-store net operating revenues was primarily due to a decline in volumes resulting from the COVID-19 pandemic which was offset, in part, by COVID-19 induced changes in the mix of services provided and payor mix. Non-same-store net operating revenues decreased $1.0 billion during the year ended December 31, 2020, in comparison to the prior year period, with the decrease attributable primarily to the impact of the COVID-19 pandemic as well as the divestiture of hospitals during 2019 and 2020. On a consolidated basis, inpatient admissions decreased by 15.7% during the year ended December 31, 2020 as compared to the year ended December 31, 2019. Also on a consolidated basis, adjusted admissions decreased by 19.4% during the year ended December 31, 2020 as compared to the year ended December 31, 2019. On a same-store basis, net operating revenues per adjusted admission increased 10.4%, while inpatient admissions decreased by 8.0% and adjusted admissions decreased by 12.5% for the year ended December 31, 2020, compared to the year ended December 31, 2019.

Operating costs and expenses, as a percentage of net operating revenues, decreased from 95.1% during the year ended December 31, 2019 to 90.4% during the year ended December 31, 2020. Operating costs and expenses, excluding depreciation and amortization and impairment and (gain) loss on sale of businesses, as a percentage of net operating revenues, decreased from 89.5% for the year ended December 31, 2019 to 85.3% for the year ended December 31, 2020 due to the recognition of approximately $601 million of PHSSEF payments as a reduction of operating costs and expenses during the year ended December 31, 2020. Salaries and benefits increased as a percentage of net operating revenues from 45.0% for the year ended December 31, 2019 to 45.9% for the year ended December 31, 2020. Supplies, as a percentage of net operating revenues, increased from 16.3% for the year ended December 31, 2019 to 16.6% for the year ended December 31, 2020. Other operating expenses, as a percentage of net operating revenues, remained consistent at 25.1% for both of the years ended December 31, 2020 and 2019. Expense related to government and other legal settlements and related costs, as a percentage of net operating revenues, decreased from 0.7% for the year ended December 31, 2019 to income of less than 0.1% for the year ended December 31, 2020 primarily due to the net impact of several lawsuits settled in principle in 2019 and related legal expenses. Lease cost and rent, as a percentage of net operating revenues, increased from 2.4% for the year ended December 31, 2019 to 2.8% for the year ended December 31, 2020. The increases in salaries and benefits, supplies and lease cost and rent, as a percentage of net operating revenues, during the year ended December 31, 2020 compared to December 31, 2019 was primarily due to the impact of the COVID-19 pandemic.

Depreciation and amortization, as a percentage of net operating revenues, increased to 4.7% for the year ended December 31, 2020 from 4.6% for the year ended December 31, 2019, primarily due to a decrease in net operating revenues as a result of the COVID-19 pandemic in 2020.

Impairment and (gain) loss on sale of businesses was $48 million for the year ended December 31, 2020, compared to $138 million for the year ended December 31, 2019. For the year ended December 31, 2020, gains on facilities sold on January 1, 2020 and July 1, 2020 were offset by impairment of facilities held-for-sale or for which we were in discussions with potential buyers for the divestiture of a facility at a sales price that indicates a fair value below carrying value. The impairment and net loss on facilities during the year ended December 31, 2019 relates to impairment of the long-lived assets and reporting unit goodwill allocated to hospitals sold during the period partly offset by gains on the sale of facilities during the six months ended December 31, 2019.

Interest expense, net, decreased by $10 million to $1.031 billion for the year ended December 31, 2020 compared to $1.041 billion for the year ended December 31, 2019. This was primarily due to our debt refinancing activity during the year ended December 31, 2020 as discussed further in Capital Resources.

Gain from early extinguishment of debt of $317 million was recognized during the year ended December 31, 2020, as a result of various financing activities discussed below. Loss from early extinguishment of debt of $54 million was recognized during the year ended December 31, 2019, as a result of financing transactions during the period.

Equity in earnings of unconsolidated affiliates, as a percentage of net operating revenues, remained consistent at (0.1)% for both of the years ended December 31, 2020 and 2019.

The net results of the above-mentioned changes resulted in income (loss) before income taxes increasing $852 million to income of $422 million for the year ended December 31, 2020 from a loss of $430 million for the year ended December 31, 2019.

Our benefit from income taxes for the year ended December 31, 2020 was $185 million compared to a provision for income taxes of $160 million for the year ended December 31, 2019. Our effective tax rates were (43.8)% and (37.2)% for the years ended December 31, 2020 and 2019, respectively. The difference in our effective tax rate for the year ended December 31, 2020, when compared to the year ended December 31, 2019, was primarily due to a decrease in the valuation allowance recognized on IRC

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Section 163(j) interest carryforwards and original issue discount deferred tax asset as a result of (i) 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 and (ii) tax impacts of 2020 financing activity.

Net income (loss), as a percentage of net operating revenues, was 5.1% for the year ended December 31, 2020 compared to (4.5)% for the year ended December 31, 2019.

Net income attributable to noncontrolling interests, as a percentage of net operating revenues, increased to 0.8% for the year ended December 31, 2020 from 0.6% for the year ended December 31, 2019.

Net income attributable to Community Health Systems, Inc. was $511 million for the year ended December 31, 2020, compared to a net loss attributable to Community Health Systems, Inc. of $675 million for the year ended December 31, 2019.

Liquidity and Capital Resources

2021 Compared to 2020

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

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

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

2020 Compared to 2019

Net cash provided by operating activities increased $1.8 billion, from approximately $385 million for the year ended December 31, 2019, to approximately $2.2 billion for the year ended December 31, 2020. The increase in cash provided by operating activities was primarily the result of the receipt of PHSSEF funds as well as Medicare accelerated payments during the year ended December 31, 2020, which is discussed below. Total cash paid for interest during the year ended December 31, 2020 remained consistent at approximately $1.0 billion during both of the years ended December 31, 2020 and 2019. Cash paid for income taxes, net of refunds received, resulted in a net payment of $2 million and a net refund of $3 million during the year ended December 31, 2020 and 2019, respectively.

Our net cash provided by investing activities was approximately $177 million for the year ended December 31, 2020, compared to net cash used in investing activities of approximately $2 million for the year ended December 31, 2019, an increase of approximately $179 million. The cash provided by investing activities during the year ended December 31, 2020 was primarily impacted by a decrease in cash used for other investments (primarily from internal-use software expenditures and physician recruiting costs) of $120 million, an increase in proceeds provided by divestitures of hospitals and other ancillary operations of $44 million as a result of more hospital divestitures during 2020 (including the receipt of the net proceeds for three hospitals divested effective January 1, 2021 at a preliminary closing on December 31, 2020) compared to the same period in 2019 (including the receipt of the net proceeds for three hospitals divested effective January 1, 2020 at a preliminary closing on December 31, 2019), a decrease in the cash used in the acquisition of facilities and other related equipment of $12 million as a result of fewer physician practice, clinic and other ancillary business acquisitions during 2020 compared to the same period in 2019 and an increase to the net impact of the purchases and sales of available-for-sale securities and equity securities of $4 million, offset by an increase in cash provided by the proceeds from the sale of

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property and equipment of approximately $1 million and an increase in cash used in the purchase of property and equipment of $2 million.

Our net cash used in financing activities was $895 million for the year ended December 31, 2020, compared to approximately $363 million for the year ended December 31, 2019, an increase of approximately $532 million. The increase in cash used in 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 as further described below.

Liquidity

Net working capital was approximately $1.1 billion and $1.7 billion at December 31, 2021 and December 31, 2020, respectively. Net working capital decreased by approximately $580 million between December 31, 2020 and December 31, 2021. The decrease is primarily due to the decrease in cash, as a result of debt repayments, repayment of Medicare accelerated payments, refinancing activities and cash paid for deferred financing costs during the year ended December 31, 2021, partially offset by a decrease in current maturities of long-term debt.

In addition to cash flows from operations, available sources of capital include amounts available under the asset-based loan (ABL) credit agreement, or the ABL Credit Agreement, as amended and restated on November 22, 2021, as well as anticipated access to public and 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. At December 31, 2021, the available borrowing base under the ABL Facility was $1.0 billion, of which $103 million was reserved for outstanding letters of credit and $897 million represented excess availability. We had no outstanding borrowings as of December 31, 2021. The issued letters of credit were primarily in support of potential insurance-related claims and certain bonds. Principal amounts outstanding under the ABL Facility, if any, will be due and payable in full on November 22, 2026.

2020 Financing Activity

On February 6, 2020, we completed a private offering of $1.462 billion aggregate principal amount of 65⁄8% Senior Secured Notes due February 15, 2025, or the 65⁄8% Senior Secured Notes due 2025. We used the net proceeds of the offering of the 65⁄8% Senior Secured Notes due 2025 to (i) purchase any and all of the 51⁄8% Senior Secured Notes due 2021 validly tendered and not validly withdrawn in the cash tender offer announced on January 23, 2020, (ii) redeem all of the 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. The 65⁄8% Senior Secured Notes due 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 65⁄8% Senior Secured Notes are scheduled to mature on February 15, 2025. The 65⁄8% 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 the ABL Facility, any capital market debt securities of CHS (including CHS’ outstanding senior notes) and certain other long-term debt of CHS. The 65⁄8% Senior Secured Notes due 2025 and the related guarantees are secured by shared (i) first-priority liens on the 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 permitted liens described in the indenture governing the 65⁄8% Senior Secured Notes due 2025.

As of August 30, 2020, we terminated our last interest rate swap agreement.

During August and September of 2020, we extinguished a portion of certain series of our outstanding notes through open market repurchases, as follows (in millions):

Principal Amount

81⁄8% Junior-Priority Secured Notes due 2024 1

Total principal amount of debt extinguished $ 261

A gain from early extinguishment of debt of approximately $115 million was recognized associated with these open market repurchases.

On October 30, 2020, we commenced tender offers to purchase for cash a portion of our outstanding (i) 67⁄8% Senior Notes due 2022, (ii) 81⁄8% Junior-Priority Secured Notes due 2024, (iii) 97⁄8% Junior-Priority Secured Notes due 2023, and (iv) 67⁄8% Senior

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Notes due 2028, up to an aggregate principal amount that would not have resulted in the aggregate purchase price (excluding accrued and unpaid interest) exceeding $400 million. The tender offers expired on November 30, 2020, and resulted in the extinguishment of approximately $87 million aggregate principal amount of indebtedness, as follows (in millions):

Principal Amount

81⁄8% Junior-Priority Secured Notes due 2024 6

97⁄8% Junior-Priority Secured Notes due 2023 2

Total principal amount of debt extinguished $ 87

A gain from early extinguishment of debt of approximately $8 million was recognized associated with these tender offers.

On December 7, 2020, we entered into a privately negotiated agreement with a multi-asset investment manager who has certain funds and accounts which are holders of the 67⁄8% Senior Notes due 2028. Pursuant to the agreement, we exchanged $700 million aggregate principal amount of the 67⁄8% Senior Notes due 2028 for an aggregate consideration of $400 million of cash and 10 million newly issued shares of the Company’s common stock. The exchange transaction was completed on December 9, 2020 and the shares of common stock issued in the exchange were not, and are not required to be, registered under the Securities Act of 1933 pursuant to an exemption from registration provisions via Section 3(a)(9) of the Securities Act of 1933. A gain from early extinguishment of debt of approximately $205 million was recognized associated with this exchange.

On December 28, 2020, we completed a private offering of $1.9 billion aggregate principal amount of 55⁄8% Senior Secured Notes due 2027, or the 55⁄8% Senior Secured Notes due 2027, and $900 million aggregate principal amount of 6% Senior Secured Notes due 2029, or the 6% Senior Secured Notes due 2029. The proceeds of the offering were used to repurchase approximately $2.579 billion of the outstanding principal amount of 61⁄4% Senior Secured Notes due 2023 that were validly tendered and accepted for purchase pursuant to the early tender deadline of a tender offer that launched on December 11, 2020, and to pay related fees. The remaining principal value of 61⁄4% Senior Secured Notes due 2023 that were not validly tendered as of the early tender deadline were redeemed or repurchased via the completion of the tender offer on January 11, 2021 or redemption on January, 28, 2021. The 55⁄8% Senior Secured Notes due 2027, which mature on March 15, 2027, bear interest at a rate of 55⁄8% per year payable semi-annually in arrears on March 15 and September 15 of each year, commencing on September 15, 2021. The 6% Senior Secured Notes due 2029, which mature on January 15, 2029, bear interest at a rate of 6% per year payable semi-annually in arrears on January 15 and July 15 of each year, commencing on July 15, 2021. The 55⁄8% Senior Secured Notes due 2027 and 6% Senior Secured Notes due 2029 are unconditionally guaranteed on a senior-priority secured basis by us and each of CHS’ current and future domestic subsidiaries that provide guarantees under the ABL Facility, any capital market debt securities of CHS (including CHS’ outstanding senior notes) and certain other long-term debt of CHS. The 55⁄8% Senior Secured Notes due 2027 and 6% Senior Secured Notes due 2029 and the related guarantees are secured by (i) first-priority liens on the Non-ABL Priority Collateral that also secures on a first-priority basis the Issuer’s existing senior-priority secured notes, 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 permitted liens described in the applicable indenture.

2021 Financing Activity

On January 28, 2021, the remaining principal amount of the 61⁄4% Senior Secured Notes due 2023 of approximately $95 million was redeemed using cash on hand.

On February 2, 2021, we completed a private offering of $1.775 billion aggregate principal amount of 67⁄8% Junior-Priority Secured Notes due April 15, 2029, or the 67⁄8% Junior-Priority Secured Notes due 2029. The proceeds of the offering were used, together with cash on hand, to redeem the 97⁄8% Junior-Priority Secured Notes due 2023 via a tender offer which was funded on February 2, 2021, or to the extent not tendered, to fund the redemption of the remaining notes on February 4, 2021, and to pay related fees and expenses. The 67⁄8% Junior-Priority Secured Notes due 2029 bear interest at a rate of 6.875% per year payable semi-annually in arrears on April 15 and October 15 of each year, commencing on October 15, 2021.

On February 9, 2021, we completed a private offering of $1.095 billion aggregate principal amount of 43⁄4% Senior Secured Notes due February 15, 2031, or the 43⁄4% Senior Secured Notes due 2031. The proceeds of the offering were used, together with cash on hand, to redeem the 85⁄8% Senior Secured Notes due 2024 on February 9, 2021 and to pay related fees and expenses. The 43⁄4% Senior Secured Notes due 2031 bear interest at a rate of 4.750% per year payable semi-annually in arrears on February 15 and August 15, commencing on August 15, 2021.

On March 1, 2021, we redeemed the remaining principal amount of the 67⁄8% Senior Notes due 2022 of approximately $126 million using cash on hand.

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On May 19, 2021, we completed a private offering of $1.440 billion aggregate principal amount of 61⁄8% Junior-Priority Secured Notes due April 1, 2030, or the 61⁄8% Junior-Priority Secured Notes due 2030. The proceeds of the offering were used, together with cash on hand, to redeem the 81⁄8% Junior-Priority Secured Notes due 2024 on May 19, 2021 and to pay related fees and expenses. The 61⁄8% Junior-Priority Secured Notes due 2030 bear interest at a rate of 6.125% per year payable semi-annually in arrears on April 1 and October 1, commencing on October 1, 2021.

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

On February 4, 2022, we completed a private offering of $1.535 billion aggregate principal amount of 51⁄4% Senior Secured Notes due May 15, 2030. For additional information regarding this financing, see Note 16 of the Notes to Consolidated Financial Statements included under Part II, Item 8 of this Form 10-K, which discussion is incorporated by reference herein.

Additional Liquidity Information

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

As of December 31, 2021, approximately $31 million of our outstanding debt of approximately $12.1 billion is due within the next 12 months and approximately 100% of our outstanding debt has a fixed rate of interest. Our debt as a percentage of total capitalization decreased from 114% for the year ended December 31, 2020 to 112% for the year ended December 31, 2021, due to a decrease in accumulated deficit and an overall decrease in long-term debt.

Net proceeds from divestitures, if any, are expected to be used for general corporate purposes and capital expenditures.

Through December 31, 2021, we received approximately $763 million in payments through the PHSSEF and various state and local sources, net of amounts that have been or will be repaid to HHS and various state and local agencies either voluntarily or in relation to entities that were previously divested, and approximately $1.2 billion of accelerated payments pursuant to the Medicare Accelerated and Advance Payment Program, all of which has been repaid or recouped by CMS or assumed by buyers of divested hospitals as of December 31, 2021. 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 were required to be repaid. Amounts received through the PHSSEF or state and local programs that had not yet been recognized as a reduction in operating costs and expenses or otherwise refunded to HHS as of December 31, 2021 totaled approximately $14 million. Such amount is included within accrued liabilities-other in the consolidated balance sheets, and such unrecognized amounts may either be returned to HHS or the respective state or local agency or may be recognized in future periods if the underlying conditions for recognition are met.

The CARES Act provided 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 deferred the employer portion of social security taxes from mid-April 2020 through December 2020. During the three months ended December 31, 2021, we paid $75 million of the employer portion of social security taxes that had been deferred. Approximately $71 million is included within accrued liabilities employee compensation in the consolidated balance sheets at December 31, 2021 and will be paid in 2022.

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 the COVID-19 pandemic, which may impact service mix, revenue mix, payor mix and patient volumes, as well as our ability to collect outstanding receivables. A material increase in the amount or deterioration in the collectability of accounts receivable will adversely affect our cash flows and results of operations, requiring an increased level of working capital.

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We believe that internally generated cash flows and current levels of availability for additional borrowing under the ABL Facility, as well as our continued access to the capital markets, will be sufficient to finance acquisitions, capital expenditures, working capital requirements, and any debt repurchases or other debt repayments we may elect to make or be required to make through the next 12 months, and for the foreseeable future thereafter. PHSSEF funds that we have received and may continue to receive under the CARES Act and related legislationhave been and will be used according to applicable terms and conditions as reimbursement for lost revenues and incremental expenses attributable to COVID-19, including working capital requirements and capital expenditures. As noted above, the COVID-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 Medicare payments under the CARES Act and related legislation and may continue toreceive and be able to utilize PHSSEF payments which have been received, as noted above, there is no assurance regarding the extent to which anticipated ongoing negative impacts on us arising from the COVID-19 pandemic will be offset by benefits which we may recognize or receive in the future under the CARES Act and related legislation or any future stimulus measures.

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.

Capital Resources

Material cash requirements from known contractual and other obligations primarily consist of purchase obligations, long-term debt and related interest payments, operating leases, finance leasing and financing obligations, and capital expenditures related to routine capital, information systems infrastructure and applications, replacement or de novo construction projects and bed expansion projects, certain commitments and other investments. Refer to Notes 6, 9 and 15 of the Notes to Consolidated Financial Statements for amounts outstanding as of December 31, 2021 related to long-term debt, and related interest payments, operating leases, finance leasing and financing obligations, and certain commitments.

Purchase obligations include supplies and third-party services purchased in the normal course of business. Open purchase orders total $284 million as of December 31, 2021 and substantially all such amounts are due in the next 12 months. Other investments includes, among other things, purchases of investments in unconsolidated affiliates which are expected to be incurred within the next 24 months.

Cash expenditures for purchases of facilities and other related businesses were approximately $3 million in 2021, $1 million in 2020 and $13 million in 2019. Our expenditures for the years ended December 31, 2021 and 2020 were primarily related to physician practices and other ancillary services. Our expenditures for the year ended December 31, 2019 were primarily related to the purchase of one hospital in Mississippi, physician practices and other ancillary services.

Excluding the cost to construct replacement and de novo hospitals, our cash expenditures for routine capital for the year ended December 31, 2021 totaled $321 million, compared to $274 million in 2020 and $386 million in 2019. These capital expenditures related primarily to the purchase of additional equipment, minor renovations and information systems infrastructure. Cash expenditures to construct replacement hospitals totaled $63 million for the year ended December 31, 2021, compared to $117 million in 2020 and $36 million in 2019. The cash expenditures to construct replacement hospitals for the years ended December 31, 2021, 2020 and 2019 primarily represent construction costs for replacement facilities in La Porte, Indiana and Fort Wayne, Indiana. During the years ended December 31, 2021, 2020 and 2019, we had cash expenditures related to de novo hospitals of $85 million, $49 million and $6 million, respectively, that represent both planning and construction costs primarily for two de novo hospitals in the Tucson, Arizona market. In this regard, we commenced operations for an 18-bed micro-hospital in that market during the fourth quarter of 2020, while the other de novo hospital in that market is expected to be completed in the first half of 2022 and have 52 beds.

Pursuant to a hospital purchase agreement from our March 1, 2016 acquisition of Northwest Health - Starke, formerly known as Starke Hospital, we committed to build a replacement facility in Knox, Indiana. Construction of the replacement facility for Northwest Health - Starke is required to be completed within five years of the date we enter into a new lease with Starke County, Indiana, the hospital lessor, or in the event we do not enter into a new lease with Starke County, construction shall be completed by September 30, 2026. We have not entered into a new lease with the lessor for Northwest Health - Starke and currently anticipate completing construction of the Northwest Health - Starke replacement facility in 2026. The estimated construction costs, including equipment costs, for the construction of this replacement facility in Knox, Indiana are currently estimated to be approximately $15 million. We have incurred no cost to date for the construction of this replacement facility.

In addition to the commitment to build a replacement facility in Knox, Indiana, other off-balance sheet arrangements consist of letters of credit issued on the ABL Facility, primarily in support of potential insurance related claims and specified outstanding bonds

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of approximately $103million as well as approximately $10 million representing the maximum potential amount of future payments under physician recruiting guarantee commitments in excess of the liability recorded at December 31, 2021.

We expect total capital expenditures of approximately $500 million to $600 million in 2022, including approximately $53 million of construction costs primarily for the de novo hospital that is expected to be completed in 2022.

Noncontrolling Interests

We have sold noncontrolling interests in certain of our subsidiaries or acquired subsidiaries with existing noncontrolling interest ownership positions. As of December 31, 2021, we have 12 hospitals and outpatient facilities with noncontrolling physician ownership interests ranging from 1% to 40%. In addition, as of December 31, 2021 we have five hospitals with noncontrolling interests owned by non-profit entities or a for-profit subsidiary of a non-profit entity. Redeemable noncontrolling interests in equity of consolidated subsidiaries was $480 million and $484 million as of December 31, 2021 and 2020, respectively, and noncontrolling interests in equity of consolidated subsidiaries was $82 million and $87 million as of December 31, 2021 and 2020, respectively. The amount of net income attributable to noncontrolling interests was $138 million, $96 million and $85 million for the years ended December 31, 2021, 2020 and 2019, 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. It is difficult to estimate the impact of recent Medicare and Medicaid reimbursement changes and those that 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 recently experienced higher prices in connection with supply chain, capital and other expenditures in the current inflationary environment, and have also experienced higher labor costs in connection with the current competitive labor market. While we have implemented cost containment and other measures to try to counteract these increases, we may be unable to fully offset these increases in our costs.

Critical Accounting Policies

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

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

Revenue Recognition

Net operating revenues include amounts estimated by management to be reimbursable by Medicare and Medicaid under prospective payment systems and provisions of cost-reimbursement and other payment methods. In addition, we are reimbursed by non-governmental payors using a variety of payment methodologies. Amounts we receive for treatment of patients covered by these

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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 December 31, 2021 from our estimated reimbursement percentage, net income for the year ended December 31, 2021 would have changed by approximately $85 million, and net accounts receivable at December 31, 2021 would have changed by $110 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 income (loss) by an insignificant amount for each of the years ended December 31, 2021, 2020 and 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 and co-payments) owed by the patient. For all procedures scheduled in advance, our policy is to verify insurance coverage prior to the date of the procedure. Insurance coverage is not verified in advance of procedures for walk-in and emergency room patients.

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

Patient accounts receivable can be impacted by the effectiveness of our collection efforts and, as described in our significant accounting policies included in Note 1 of the Notes to Consolidated Financial Statements included under Part II, Item 8 of this Form 10-K, numerous factors may affect the net realizable value of accounts receivable. If the actual collection percentage differed by 1% at December 31, 2021 from our estimated collection percentage as a result of a change in expected recoveries, net income for the year ended December 31, 2021 would have changed by $43 million, and net accounts receivable at December 31, 2021 would have changed by $55 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 of self-pay receivables between pure self-pay patients and the patient responsibility portion of third-party insured receivables and the impact of recent acquisitions and dispositions.

Our policy is to write-off gross accounts receivable if the balance is under $10.00 or when such amounts are placed with outside collection agencies. We believe this policy accurately reflects our ongoing collection efforts and is consistent with industry practices. We had approximately $2.2 billion at December 31, 2021 and $3.3 billion December 31, 2020, 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 been written-off, they are not included in our accounts receivable. Collections on amounts previously written-off are recognized as a recovery of net operating revenues when received. However, we take into consideration estimated collections of these future amounts written-off in determining the implicit price concessions used to measure the transaction price for the applicable portfolio of patient accounts receivable.

All of the following information is derived from our hospitals, excluding clinics, unless otherwise noted. Patient accounts receivable from our hospitals represent approximately 98% of our total consolidated accounts receivable.

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Days revenue outstanding, adjusted for the impact of receivables for state Medicaid supplemental payment programs and divested facilities, was 55 days and 52 days at December 31, 2021 and 2020, respectively.

Total gross accounts receivable (prior to allowance for contractual adjustments and implicit price concessions) was approximately $16.2 billion as of December 31, 2021 and approximately $14.8 billion as of December 31, 2020. 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:

% of Gross Receivables

Medicare 12 % 1 % — % — %

Medicaid 7 % 1 % 1 % 1 %

Managed Care and Other 33 % 5 % 3 % 2 %

% of Gross Receivables

Medicare 13 % 1 % — % — %

Medicaid 7 % 1 % 1 % 1 %

Managed Care and Other 31 % 4 % 3 % 3 %

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

December 31,

Insured receivables 66.3 % 64.3 %

The combined total at our hospitals and clinics for the estimated implicit price concessions for self-pay accounts receivable and allowances for other self-pay discounts and contractuals, as a percentage of gross self-pay receivables, was approximately 91% at both December 31, 2021 and December 31, 2020. If the receivables that have been written-off, but where collections are still being pursued by outside collection agencies, were included in both the allowances and gross self-pay receivables specified above, the percentage of combined allowances to total self-pay receivables would have been 93% at December 31, 2021 and 94% at December 31, 2020.

Professional Liability Claims

As part of our business of providing healthcare services, we are subject to legal actions alleging liability on our part. We accrue for losses resulting from such liability claims, as well as loss adjustment expenses that are out-of-pocket and directly related to such liability claims. These direct out-of-pocket expenses include fees of outside counsel and experts. We do not accrue for costs that are part of our corporate overhead, such as the costs of our in-house legal and risk management departments. The losses resulting from professional liability claims primarily consist of estimates for known claims, as well as estimates for incurred but not reported claims. The estimates are based on specific claim facts, our historical claim reporting and payment patterns, the nature and level of our hospital operations, and actuarially determined projections. The actuarially determined projections are based on our actual claim data, including historic reporting and payment patterns which have been gathered over an approximately 20-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 of 1.8% in both 2021 and 2020 and 2.6% in 2019. 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

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as excess insurance premiums, and is presented within other operating expenses in the accompanying consolidated statements of income (loss).

Our processes for obtaining and analyzing claims and incident data are standardized across all of our businesses and have been consistent for many years. We monitor the outcomes of the medical care services that we provide and for each reported claim, we obtain various information concerning the facts and circumstances related to that claim. In addition, we routinely monitor current key statistics and volume indicators in our assessment of utilizing historical trends. The average lag period between claim occurrence and payment of a final settlement is between three and four years, although the facts and circumstances of individual claims could result in the timing of such payments being different from this average. Since claims are paid promptly after settlement with the claimant is reached, settled claims represent less than 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 and geography. Several actuarial methods are used against this data to produce estimates of ultimate paid losses and reserves for incurred but not reported claims. Each of these methods uses our company-specific historical claims data and other information. Company-specific data includes information regarding our business, including historical paid losses and loss adjustment expenses, historical and current case loss reserves, actual and projected hospital statistical data, a variety of hospital census information, employed physician information, professional liability retentions for each policy year, geographic information and other data. Significant assumptions are made on the basis of the aforementioned information in estimating reserves for incurred but not reported claims. A 100 basis point change in assumptions for either severity or frequency as of December 31, 2021 would have increased or decreased the reserve between $10 million to $20 million.

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

Year Ended December 31,

Accrual for professional liability claims, beginning of year $ 602 $ 612 $ 650

Liability for insured claims (1) (22 ) 17 (11 )

Expense (income) related to:

(Income) expense from discounting (4 ) 10 12

Total incurred loss and loss expense (2) 86 168 263

Paid claims and expenses related to:

Current accident year (1 ) — (1 )

Total paid claims and expenses (133 ) (195 ) (290 )

Accrual for professional liability claims, end of year $ 533 $ 602 $ 612

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In the ordinary course of business, our expense with respect to professional liability claims, which is actuarially determined, is limited to amounts not covered by third-party insurance policies, which typically provide coverage for professional liability claims. During the year ended December 31, 2020, we incurred expenses in the amount of approximately $50 million related to the settlement of a professional liability claim for which our third-party insurers’ obligation to provide coverage to us in connection with the underlying loss was being litigated. The subject of the litigation for the recovery of the full amount of the $50 million settlement was whether the claim was covered under the subject policies. This litigation was settled during the three months ended December 31, 2021, and in connection with this settlement, approximately $22 million was recovered from various third-party insurers related to their obligation to provide coverage for the professional liability claim. Aside from this matter, there were no significant changes in our estimate of the reserve for professional liability claims during the years ended December 31, 2021 and 2020.

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

Excess insurance for all hospitals has been purchased through commercial insurance companies and generally covers us for liabilities in excess of the self-insured retentions. The excess coverage consists of multiple layers of insurance, the sum of which totals up to $95 million per occurrence and in the aggregate for claims reported on or after June 1, 2003, up to $145 million per occurrence and in the aggregate for claims reported on or after January 1, 2008, up to $195 million per occurrence and in the aggregate for claims reported on or after June 1, 2010, and up to at least $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 through June 1, 2020. The $75 million in integrated occurrence coverage will also apply to claims reported between June 1, 2020 and June 1, 2022 for events that occurred prior to June 1, 2020 but which were not previously known or reported. For certain policy years prior to June 1, 2014, if the first aggregate layer of excess coverage becomes fully utilized, then the self-insured retention will increase to $10 million per claim for any subsequent claims in that policy year until our total aggregate coverage is met. Beginning June 1, 2018, this drop-down provision in the excess policies attaches over the $15 million per claim self-insured retention.

Effective June 1, 2014, the hospitals acquired from HMA were insured on a claims-made basis as described above and through commercial insurance companies as described above for substantially all claims reported on or after June 1, 2014 except for physician-related claims with an occurrence date prior to June 1, 2014. Prior to June 1, 2014, the former HMA hospitals obtained insurance coverage through a wholly-owned captive insurance subsidiary and a risk retention group subsidiary 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.

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 less than $1 million as of December 31, 2021. A total of less than $1 million of interest and penalties is included in the amount of liability for uncertain tax positions at December 31, 2021. It is our policy to recognize interest and penalties related to unrecognized benefits in our consolidated statements of 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 consolidated results of operations or consolidated financial position.

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Our federal income tax return for the 2018 tax year remains under examination by the Internal Revenue Service. We believe the result of this examination will not be material to our consolidated results of operations or consolidated financial position. We have extended the federal statute of limitations through June 30, 2022 for Community Health Systems, Inc. for the tax periods ended December 31, 2014 and 2015. In addition, we have extended our federal statute of limitations through December 31, 2023 for the tax period ended December 31, 2018.

Recent Accounting Pronouncements

In November 2021, the Financial Accounting Standards Board issued Accounting Standards Update, or ASU, 2021-10, “Government Assistance (Topic 832), Disclosures by Business Entities about Government Assistance”. This ASU provides specific authoritative guidance for the disclosure of government assistance including the nature of assistance received, the accounting for and presentation of assistance received and the significant terms and conditions, including commitments and contingences. This ASU is effective for all entities for financial statements issued for annual periods beginning after December 15, 2021 and may be early adopted. We early adopted this ASU beginning with this Form 10-K for the year ended December 31, 2021.

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

FORWARD-LOOKING STATEMENTS

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

• demographic changes;

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

• competition;

• changes in medical or other technology;

• changes in U.S. GAAP;

• timeliness of reimbursement payments received under government programs;

• the impact of cybersecurity threats, cyber-attacks or security breaches;

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

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

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 7A. Quantitative and Qualitative Disclosures about Market Risk

We are exposed to market risk related to changes in market value of marketable securities including debt and equity securities held by our wholly-owned captive insurance subsidiaries as well as securities held for certain deferred compensation plans. Available-for-sale debt securities are reported at fair value as determined by quoted market prices, with unrealized gains and losses reported as a separate component of stockholders’ deficit. Trading securities are reported at fair value with unrealized gains and losses included in earnings. Other comprehensive loss, net of tax, included an unrealized loss of $5 million during the year ended December 31, 2021.

We are exposed to market risk related to market illiquidity. Investments in debt and equity securities of our insurance subsidiaries could be impaired by the inability to access the capital markets. Should the insurance subsidiaries require significant amounts of cash in excess of normal cash requirements to pay claims and other expenses on short notice, we may have difficulty selling these investments in a timely manner or be forced to sell them at a price less than what we might otherwise have been able to in a normal market environment. We may be required to recognize credit-related impairments on our investment securities in future periods should issuers default on interest payments or should the fair market valuations of the securities deteriorate due to ratings downgrades or other issue-specific factors.

We are also exposed to market risk related to changes in interest rates, primarily as a result of the ABL Facility which bears interest based on floating rates. No amounts were outstanding under the ABL Facility as of December 31, 2021.

The estimated fair value of our long-term debt was $12.6 billion at December 31, 2021. The estimates of fair value are based upon the quoted market prices for the same or similar issues of long-term debt with the same maturities. Based on a hypothetical 1% increase in interest rates, the potential annualized reduction to future pre-tax earnings would be approximately $125 million. To mitigate the impact of fluctuations in interest rates, we generally target a majority of our debt portfolio to be maintained at fixed rates.

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Item 8. Financial Statements and Supplementary Data

Index to Financial Statements

Page

Community Health Systems, Inc. Consolidated Financial Statements:

Report of Independent Registered Public Accounting Firm (PCAOB ID No. 34) 77

Consolidated Balance Sheets as of December 31, 2021 and 2020 81

Notes to Consolidated Financial Statements 84

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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Stockholders and theBoardofDirectorsof

CommunityHealthSystems,Inc.

Franklin, Tennessee

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheets of Community Health Systems, Inc. and subsidiaries (the “Companyˮ) as of December 31, 2021 and 2020, the related consolidated statements of income (loss), comprehensive income (loss), stockholders’ deficit, and cash flows, for each of the three years in the period ended December 31, 2021, and the related notes (collectively referred to as the “financial statementsˮ). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2021 and 2020, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2021, in conformity with accounting principles generally accepted in the United States of America.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company's internal control over financial reporting as of December 31, 2021, based on criteria established in Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated February 17, 2022, expressed an unqualified opinion on the Company's internal control over financial reporting.

Basis for Opinion

These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.

Critical Audit Matters

The critical audit matters communicated below are matters arising from the current-period audit of the financial statements that were communicated or required to be communicated to the audit committee and that (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.

Patient Accounts Receivable — Refer to Note 1 to the financial statements

Critical Audit Matter Description

Patient accounts receivable are recorded net of implicit price concessions for insured and self-pay patients. Implicit price concessions related to self-pay patients require more extensive judgment and subjective assumptions. Self-pay price concessions relate primarily to amounts due directly from patients and are based upon management’s assessment of historical write-offs and expected net collections, business and economic conditions, trends in federal, state, and private employer health care coverage, and other collection indicators.

Auditing management’s estimate of self-pay price concessions was complex and judgmental due to the significant data inputs and subjective assumptions utilized in determining related amounts.

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How the Critical Audit Matter Was Addressed in the Audit

Our audit procedures related to the net realizable value of self-pay accounts receivable included the following, among others:

Professional Liability Claims — Refer to Note 15 to the financial statements

Critical Audit Matter Description

The Company is self-insured for professional liability claims up to certain self-insured retention limits based on the policy year. Professional liabilities consist of the projected settlement value of reported and unreported claims. The self-insurance reserves are estimated based on the Company’s historical claims experience, supplemented with industry experience, as necessary, and is established using actuarial methods followed in the insurance industry.

Auditing management’s professional liability reserves was complex and judgmental due to the significant estimations required in determining the projected settlement value of reported and unreported claims.

How the Critical Audit Matter Was Addressed in the Audit

Our audit procedures related to the self-insured professional liability claims included the following, among others:

/s/ Deloitte & Touche LLP

Nashville, Tennessee

February 17, 2022

We have served as the Company’s auditor since 1996.

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COMMUNITY HEALTH SYSTEMS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME (LOSS)

Year Ended December 31,

(In millions, except share and per share data)

Operating costs and expenses:

Government and other legal settlements and related costs — — 93

Electronic health records incentive reimbursement — — (1 )

Pandemic relief funds (148 ) (601 ) —

Impairment and (gain) loss on sale of businesses, net 24 48 138

Loss (gain) from early extinguishment of debt 79 (317 ) 54

Gain on sale of equity interests in Macon Healthcare, LLC (39 ) — —

Equity in earnings of unconsolidated affiliates (22 ) (10 ) (15 )

Income (loss) before income taxes 499 422 (430 )

Provision for (benefit from) income taxes 131 (185 ) 160

Less: Net income attributable to noncontrolling interests 138 96 85

Weighted-average number of shares outstanding:

See accompanying notes to the consolidated financial statements.

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COMMUNITY HEALTH SYSTEMS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

Year Ended December 31,

(In millions)

Other comprehensive (loss) income, net of income taxes:

Other comprehensive (loss) income (2 ) (4 ) 1

Less: Comprehensive income attributable to noncontrolling interests 138 96 85

See accompanying notes to the consolidated financial statements.

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COMMUNITY HEALTH SYSTEMS, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(In millions, except share data)

ASSETS

Current assets:

Cash and cash equivalents $ 507 $ 1,676

Patient accounts receivable (see Note 1) 2,062 1,927

Prepaid income taxes 94 50

Prepaid expenses and taxes 192 184

Property and equipment

Less accumulated depreciation and amortization (4,204 ) (4,030 )

Deferred income taxes 53 59

LIABILITIES AND STOCKHOLDERS’ DEFICIT

Current liabilities:

Current maturities of long-term debt $ 31 $ 123

Current operating lease liabilities 147 142

Accrued liabilities:

Deferred income taxes 192 29

Long-term operating lease liabilities 535 524

Other long-term liabilities 827 1,599

Commitments and contingencies (Note 15)

STOCKHOLDERS’ DEFICIT

Community Health Systems, Inc. stockholders’ deficit:

Accumulated other comprehensive loss (14 ) (13 )

Total Community Health Systems, Inc. stockholders’ deficit (1,372 ) (1,625 )

Noncontrolling interests in equity of consolidated subsidiaries 82 87

Total stockholders’ deficit (1,290 ) (1,538 )

Total liabilities and stockholders’ deficit $ 15,217 $ 16,006

See accompanying notes to the consolidated financial statements.

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COMMUNITY HEALTH SYSTEMS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ DEFICIT

Community Health Systems, Inc. Stockholders

Interests Shares Amount Capital Income (Loss) Deficit Interests Deficit

(In millions, except share data)

Contributions from noncontrolling interests 3 - - - - - 7 7

Distributions to noncontrolling interests (68 ) - - - - - (31 ) (31 )

Other reclassifications of noncontrolling interests (2 ) - - - - - 2 2

Income tax payable increase from vesting of restricted shares - 333 - - - - - -

Contributions from noncontrolling interests - - - - - - 15 15

Distributions to noncontrolling interests (82 ) - - - - - (34 ) (34 )

Purchase of subsidiary shares from noncontrolling interests (4 ) - - 3 - - - 3

Other reclassifications of noncontrolling interests 9 - - - - - (9 ) (9 )

Disposition of less-than-wholly owned hospital (14 ) - - - - - -

Income tax payable increase from vesting of restricted shares - 333 - - - - - -

Contributions from noncontrolling interests 1 - - - - - - -

Distributions to noncontrolling interests (82 ) - - - - - (39 ) (39 )

Other reclassifications of noncontrolling interests 1 - - - 1 - - 1

Disposition of less-than-wholly owned hospital (7 ) - - - - - - -

Noncontrolling interests in acquired entity 2 - - - - - - -

See accompanying notes to the consolidated financial statements.

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COMMUNITY HEALTH SYSTEMS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

Year Ended December 31,

(In millions)

Cash flows from operating activities:

Government and other legal settlements and related costs — — 51

Stock-based compensation expense 25 13 10

Impairment and (gain) loss on sale of businesses, net 24 48 138

Loss (gain) from early extinguishment of debt 79 (317 ) 54

Gain on sale of equity interests in Macon Healthcare, LLC (39 ) — —

Patient accounts receivable (136 ) 309 93

Supplies, prepaid expenses and other current assets 1 (15 ) 38

Medicare accelerated payments — 1,158 —

Repayment/derecognition of Medicare accelerated payments (1,081 ) (77 ) —

Pandemic relief funds — 104 —

Accounts payable, accrued liabilities and income taxes 16 (67 ) (157 )

Net cash (used in) provided by operating activities (131 ) 2,178 385

Cash flows from investing activities:

Acquisitions of facilities and other related businesses (3 ) (1 ) (13 )

Purchases of property and equipment (469 ) (440 ) (438 )

Proceeds from disposition of hospitals and other ancillary operations 17 648 604

Proceeds from sale of property and equipment 10 4 3

Purchases of investments in unconsolidated affiliates (7 ) (1 ) (14 )

Proceeds from sale of equity interests in Macon Healthcare, LLC 110 — —

Increase in other investments (113 ) (49 ) (156 )

Net cash (used in) provided by investing activities (524 ) 177 (2 )

Cash flows from financing activities:

Deferred financing costs and other debt-related costs (313 ) (156 ) (46 )

Proceeds from noncontrolling investors in joint ventures — 15 10

Redemption of noncontrolling investments in joint ventures (19 ) (1 ) (11 )

Distributions to noncontrolling investors in joint ventures (121 ) (116 ) (99 )

Proceeds from sale-lease back — 2 60

Proceeds from ABL Facility — 540 202

Repayments of long-term indebtedness (4,426 ) (5,493 ) (3,557 )

Net cash used in financing activities (514 ) (895 ) (363 )

Net change in cash and cash equivalents (1,169 ) 1,460 20

Cash and cash equivalents at beginning of period 1,676 216 196

Cash and cash equivalents at end of period $ 507 $ 1,676 $ 216

Supplemental disclosure of cash flow information:

Income tax (payments) refunds, net $ (4 ) $ (2 ) $ 3

See accompanying notes to the consolidated financial statements.

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COMMUNITY HEALTH SYSTEMS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES

Business. Community Health Systems, Inc. is a holding company and operates no business in its own name. On a consolidated basis, Community Health Systems, Inc. and its subsidiaries (collectively the “Company”) own, lease and operate general acute care hospitals as well as outpatient facilities in communities across the country. As of December 31, 2021, the Company owned or leased 83 hospitals, including two stand-alone rehabilitation or psychiatric hospitals, licensed for 13,289 beds in 16 states. Throughout these notes to the consolidated financial statements, Community Health Systems, Inc. (the “Parent”) 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, and management services provided, by distinct and indirect subsidiaries of Community Health Systems, Inc.

As of December 31, 2021, Indiana, Florida, Texas and Alabama represent the only areas of significant geographic concentration. Net operating revenues generated by the Company’s hospitals in Indiana, as a percentage of consolidated net operating revenues, were 16.4% in 2021, 15.0% in 2020 and 13.7% in 2019. Net operating revenues generated by the Company’s hospitals in Florida, as a percentage of consolidated net operating revenues, were 12.2% in 2021, 13.0% in 2020 and 14.3% in 2019. Net operating revenues generated by the Company’s hospitals in Texas, as a percentage of consolidated net operating revenues, were 11.0% in 2021 and 12.2% in both 2020 and 2019. Net operating revenues generated by the Company’s hospitals in Alabama, as a percentage of consolidated net operating revenues, were 13.0% in 2021, 12.1% in 2020 and 10.6% in 2019.

Use of Estimates. The preparation of financial statements in conformity with U.S. generally accepted accounting principles (“GAAP”) requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements. Actual results could differ from these estimates under different assumptions or conditions.

Principles of Consolidation. The consolidated financial statements include the accounts of the Parent, its subsidiaries, all of which are controlled by the Parent through majority voting control, and variable interest entities for which the Company is the primary beneficiary. All intercompany accounts, profits and transactions have been eliminated. Noncontrolling interests in less-than-wholly-owned consolidated subsidiaries of the Parent are presented as a component of total equity to distinguish between the interests of the Parent and the interests of the noncontrolling owners. Revenues, expenses and income from these subsidiaries are included in the consolidated amounts as presented on the consolidated statements of income (loss), along with a net income measure that separately presents the amounts attributable to the controlling interests and the amounts attributable to the noncontrolling interests for each of the periods presented. 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 consolidated balance sheets.

Reclassifications. Certain prior period amounts have been reclassified to conform to the current period presentation within the consolidated statements of cash flows.

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 collectively $222 million, $190 million and $184 million for the years ended December 31, 2021, 2020 and 2019, respectively. Included in these corporate office costs is stock-based compensation of $25 million, $13 million and $10 million for the years ended December 31, 2021, 2020 and 2019, respectively. Operating costs for the year ended December 31, 2021 reflect increased stock compensation expense and annual cash incentive compensation expense compared to the years ended December 31, 2020 and 2019.

Cash Equivalents. The Company considers highly liquid investments with original maturities of three months or less to be cash equivalents.

Supplies. Supplies, principally medical supplies, are stated at the lower of cost (first-in, first-out basis) or market.

Marketable Securities. The Company’s marketable securities consist of debt securities that are classified as trading or available-for-sale and equity securities. Available-for-sale debt securities are reported at fair value as determined by quoted market prices, with unrealized gains and losses reported as a separate component of stockholders’ deficit. Trading securities are reported at fair value with unrealized gains and losses included in earnings. Other comprehensive loss, net of tax, included an unrealized loss of $5 million during the year ended December 31, 2021, and an unrealized gain of $4 million for both of the years ended December 31, 2020 and 2019 related to these available-for-sale debt securities.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

Property and Equipment. Property and equipment are recorded at cost. Depreciation is recognized using the straight-line method over the estimated useful lives of the land and improvements (3 to 20 years), buildings and improvements (5 to 40 years) and equipment and fixtures (3 to 18 years). Costs capitalized as construction in progress were $225 million and $194 million at December 31, 2021 and 2020, respectively. Expenditures for renovations and other significant improvements are capitalized; however, maintenance and repairs which do not improve or extend the useful lives of the respective assets are charged to operations as incurred. Interest capitalized related to construction in progress was $13 million, $15 million and $20 million for the years ended December 31, 2021, 2020 and 2019, respectively. Purchases of property and equipment and internal-use software accrued in accounts payable and not yet paid were $105 million and $100 million at December 31, 2021 and 2020, respectively.

The Company also leases certain facilities and equipment under finance leases (see Note 9). Such assets are amortized on a straight-line basis over the lesser of the term of the lease or the remaining useful lives of the applicable assets. During the year ended December 31, 2021, the Company had non-cash investing activity of $166 million related to certain facility and equipment additions that were financed through finance leases and other debt.

Goodwill. Goodwill represents the excess of the fair value of the consideration conveyed in the acquisition over the fair value of net assets acquired. Goodwill arising from business combinations is not amortized. Goodwill is required to be evaluated for impairment at the same time every year and when an event occurs or circumstances change such that it is more likely than not that impairment may exist. The Company performs its annual testing of impairment for goodwill in the fourth quarter of each year. There was no goodwill impairment charge during the years ended December 31, 2021, 2020 and 2019 as a result of the Company’s annual impairment evaluation.

Other Assets. Other assets consist of the insurance recovery receivable from excess insurance carriers related to the Company’s self-insured malpractice general liability and workers’ compensation insurance liability; costs to recruit physicians to the Company’s markets, which are deferred and expensed over the term of the respective physician recruitment contract, generally three years, and included in amortization expense; equity method investments; and capitalized internal-use software costs, which are expensed over the expected useful life, which is generally three years for routine software, and included in amortization expense.

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 each of the years ended December 31, 2021, 2020 and 2019, the impact of changes to the inputs used to determine the transaction price was considered immaterial.

Currently, several states utilize supplemental reimbursement programs for the purpose of providing reimbursement to providers that is not specifically tied to 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 payment 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.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

The Company’s net operating revenues during the years ended December 31, 2021, 2020 and 2019 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):

Year Ended December 31,

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. For self-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, days revenue outstanding, the composition of self-pay receivables between pure self-pay patients and the patient responsibility portion of third-party insured receivables, the impact of recent acquisitions and dispositions and the impact of current economic and other events.

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 $118 million and $98 million as of December 31, 2021 and 2020, respectively, and these amounts are included in accrued liabilities-other in the accompanying consolidated balance sheets. Amounts due from third-party payors were $114 million and $136 million as of December 31, 2021 and 2020, respectively, and are included in other current assets in the accompanying consolidated balance sheets. Substantially all Medicare and Medicaid cost reports are final settled through 2017.

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 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 $1.1 billion, $1.0 billion and $540 million for the years ended December 31, 2021, 2020 and 2019, 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 $123 million, $122 million and $66 million for the years ended December 31, 2021, 2020 and 2019, 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. The Company determines amounts that qualify for charity care based on the patient’s household income relative to the federal poverty level guidelines, as established by the federal government. The Company updated its policy during the year ended December 31, 2020 in a manner which increased the number of accounts qualifying for charity care. This resulted in an increase in charity care services during the years ended December 31, 2020 and 2021 compared to 2019 and previous years.

Leases. The right-of-use (“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

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

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. Whenreadily 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. The Company’s lease agreements do not contain any material residual value guarantees or material restrictive covenants.

Physician Income Guarantees. The Company enters into physician recruiting agreements under which it supplements physician income to a minimum amount over a period of time, typically one year, while the physicians establish themselves in the community. As part of the agreements, the physicians are committed to practice in the community for a period of time, typically three years, which extends beyond their income guarantee period. The Company records an asset and liability for the estimated fair value of minimum revenue guarantees on new agreements and the asset is amortized over the life of each respective agreement. Adjustments to the ultimate value of the guarantee paid to physicians are recognized in the period that the change in estimate is identified. As of December 31, 2021 and 2020, the unamortized portion of these physician income guarantees was $13 million and $16 million, respectively, and is recorded in other assets in the consolidated balance sheets.

Concentrations of Credit Risk. The Company grants unsecured credit to its patients, most of whom reside in the service area of the Company’s facilities and are insured under third-party payor agreements. Because of the economic diversity of the Company’s facilities and non-governmental third-party payors, Medicare represents the only significant concentration of credit risk from payors. Accounts receivable, net of contractual allowances, from Medicare was $211 million and $232 million at December 31, 2021 and 2020, respectively, representing 5% and 6% of consolidated net accounts receivable at December 31, 2021 and 2020, respectively.

Accounting for the Impairment or Disposal of Long-Lived Assets. During the year ended December 31, 2021, the Company recorded a net loss on disposal of approximately $24 million, of which (i) approximately $29 million was recorded to adjust the carrying value of long-lived assets at several hospitals that were sold at a sales price below carrying value, (ii) approximately $3 million was recorded related to divestiture related expenses, and (iii) approximately $8 million of gain was recorded related to the disposal of the Company’s majority interest in a surgery center that was sold on January 1, 2021. Approximately $5 million of goodwill was allocated to facilities disposed of during the year ended December 31, 2021.

During the year ended December 31, 2020, the Company recorded a total combined net impairment charge and loss on disposal of approximately $48 million, of which (i) approximately $59 million was recorded to reduce the carrying value of closed hospitals and certain hospitals that have been sold or deemed held for sale based on the difference between the carrying value of the hospital disposal groups compared to estimated fair value less costs to sell, (ii) approximately $74 million was recorded primarily to adjust the carrying value of other long-lived assets at several underperforming hospitals or where the Company was in discussions with potential buyers for divestiture at a sales price that indicated a fair value below carrying value, (iii) approximately $3 million was recorded related to a hospital that closed on September 30, 2020, and (iv) approximately $1 million was recorded related to a shared service center that closed on July 31, 2020. The impairment charge was partially offset by a gain of approximately $89 million related primarily to three hospitals sold on January 1, 2020, one hospital sold on July 1, 2020 and two hospitals sold on October 27, 2020. During the year ended December 31, 2020, a net allocation of approximately $110 million of goodwill was allocated from the hospital operations reporting unit based on a calculation of each disposal groups’ relative fair value compared to the total reporting unit. 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.

Income Taxes. The Company accounts for income taxes under the asset and liability method, in which deferred income tax assets and liabilities are recognized for the tax consequences of “temporary differences” by applying enacted statutory tax rates applicable to future years to differences between the financial statement carrying amounts and the tax bases of existing assets and liabilities. The effect on deferred taxes of a change in tax rates is recognized in the consolidated statements of income (loss) during the period in which the tax rate change becomes law.

Comprehensive Loss. Comprehensive loss is the change in equity of a business enterprise during a period from transactions and other events and circumstances from non-owner sources.

Segment Reporting.A public company is required to report annual and interim financial and descriptive information about its reportable operating segments. Operating segments, as defined, are components of an enterprise about which separate financial information is available that is evaluated regularly by the chief operating decision maker in deciding how to allocate resources and in assessing performance. Aggregation of similar operating segments into a single reportable operating segment is permitted if the businesses have similar economic characteristics and meet the criteria established by U.S. GAAP. The Company operates a single

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COMMUNITY HEALTH SYSTEMS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

operating segment represented by hospital operations (which includes the Company's acute care hospitals and related healthcare entities that provide inpatient and outpatient healthcare services).

COVID-19 Pandemic.COVID-19, a disease caused by a novel strain of coronavirus, materially affected the Company’s results of operations during 2020 and continued to affect the Company’s results of operations during the year ended December 31, 2021. Federal and state governments have passed legislation, promulgated regulations and taken other administrative actions intended to assist healthcare providers in providing care to COVID-19 and other patients during the public health emergency. Sources of relief include the Coronavirus Aid, Relief and Economic Security Act (the “CARES Act”), the Paycheck Protection Program and Health Care Enhancement Act (the “PPPHCE Act”), the Consolidated Appropriations Act, 2021 (the “CAA”), and the American Rescue Plan Act of 2021 (the “ARPA”). Together, these stimulus laws authorize over $186 billion in funding to be distributed to hospitals and other healthcare providers through the Public Health and Social Services Emergency Fund (the “PHSSEF” or “Provider Relief Fund”). In addition to the relief funding, the CARES Act provided for an expansion of the Medicare Accelerated and Advance Payment Program whereby inpatient acute care hospitals and other eligible providers were able to request accelerated payment of up to 100% of their Medicare payment amount for a six-month period. Providers are required to repay accelerated payments beginning one year after the payment was issued. Repayments occur through withholding of future Medicare fee-for-service payments. Various state and local programs also exist to provide relief, either independently or through distribution of monies received via the CARES Act and other enacted federal legislation. The Company’s accounting policies for the recognition of these stimulus monies are as follows:

Pandemic Relief Funds

Through December 31, 2021, net of amounts that have been repaid to the respective federal, state, or local agency, the Company received approximately $763 million in payments through the PHSSEF and various state and local programs on a cumulative basis since their enactment. Of the net amount received through December 31, 2021, approximately $705 million was received during the year ended December 31, 2020 and the remainder was received during the year ended December 31, 2021.