UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D. C. 20549

FORM 10-Q

(Mark One)

x Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the quarterly period ended September 30, 2013

or

¨ Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the transition period from                      to                     

Commission File Number: 001-11141

HEALTH MANAGEMENT ASSOCIATES, INC.

(Exact name of registrant as specified in its charter)

Delaware	61-0963645
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

5811 Pelican Bay Boulevard, Suite 500, Naples, Florida	34108-2710
(Address of principal executive offices)	(Zip Code)

(239) 598-3131

(Registrant’s telephone number, including area code)

Not applicable

(Former name, former address and former fiscal year, if changed since last report)

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

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes  x    No  ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer	x	Accelerated filer	¨
Non-accelerated filer	¨  (Do not check if a smaller reporting company)	Smaller reporting company	¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes  ¨    No  x

As of November 1, 2013, there were 264,495,187 shares of the registrant’s Class A common stock outstanding.

HEALTH MANAGEMENT ASSOCIATES, INC.

FORM 10-Q

FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2013

INDEX

		Page
PART I – FINANCIAL INFORMATION
Item 1.	Financial Statements.
Consolidated Statements of Operations – Three and Nine Months Ended September  30, 2013 and 2012			3
Consolidated Statements of Comprehensive Income (Loss) – Three and Nine Months Ended September 30, 2013 and 2012			4
Condensed Consolidated Balance Sheets – September 30, 2013 and December 31, 2012			5
Consolidated Statements of Stockholders’ Equity – Nine Months Ended September  30, 2013 and 2012			6
Condensed Consolidated Statements of Cash Flows – Nine Months Ended September  30, 2013 and 2012			7
Notes to Interim Condensed Consolidated Financial Statements			8
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations		40
Item 3.	Quantitative and Qualitative Disclosures About Market Risk		51
Item 4.	Controls and Procedures		51
PART II – OTHER INFORMATION
Item 1.	Legal Proceedings		52
Item 1A.	Risk Factors		55
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds		56
Item 6.	Exhibits		56
Signatures			57
Index to Exhibits			58

2

PART I – FINANCIAL INFORMATION

Item 1. Financial Statements.

HEALTH MANAGEMENT ASSOCIATES, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except per share amounts)

(unaudited)

	Three Months Ended September 30,						Nine Months Ended September 30,
	2013			2012			2013			2012
				(restated)						(restated)
Net revenue before the provision for doubtful accounts	$	1,676,679		$	1,662,937		$	5,100,474		$	5,033,496
Provision for doubtful accounts		(255,436	)		(224,078	)		(729,695	)		(639,902	)
Net revenue		1,421,243			1,438,859			4,370,779			4,393,594
Salaries and benefits		655,839			637,305			2,013,515			1,941,475
Supplies		220,522			216,819			689,034			677,416
Rent expense		40,493			41,807			125,706			130,521
Other operating expenses		371,392			332,356			1,043,982			970,613
Medicare and Medicaid HCIT incentive program		(2,015	)		(24,224	)		(23,607	)		(29,875	)
Change in control and other related expense		102,886			—			112,026			—
Depreciation and amortization		99,351			91,563			289,595			255,575
Interest expense		70,747			76,916			212,352			241,049
Other		884			(2,363	)		(2,848	)		(1,745	)
		1,560,099			1,370,179			4,459,755			4,185,029
Income (loss) from continuing operations before income taxes		(138,856	)		68,680			(88,976	)		208,565
Income tax benefit (provision)		65,509			(19,663	)		48,796			(66,806	)
Income (loss) from continuing operations		(73,347	)		49,017			(40,180	)		141,759
Loss from discontinued operations, net of income taxes		—			(1,389	)		—			(5,805	)
Consolidated net income (loss)		(73,347	)		47,628			(40,180	)		135,954
Net income attributable to noncontrolling interests		(3,485	)		(6,685	)		(12,804	)		(21,757	)
Accretion of redeemable equity securities		(19,813	)		—			(19,813	)		—
Net income (loss) attributable to Health Management Associates, Inc. common stockholders	$	(96,645	)	$	40,943		$	(72,797	)	$	114,197
Earnings (loss) per share attributable to Health Management Associates, Inc. common stockholders:
Basic and diluted
Continuing operations	$	(0.37	)	$	0.16		$	(0.28	)	$	0.47
Discontinued operations		—			—			—			(0.02	)
Net income (loss)	$	(0.37	)	$	0.16		$	(0.28	)	$	0.45
Weighted average number of shares outstanding:
Basic		261,927			254,516			258,911			254,111
Diluted		261,927			256,784			258,911			256,172

See accompanying notes.

3

HEALTH MANAGEMENT ASSOCIATES, INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(in thousands)

(unaudited)

	Three Months Ended September 30,						Nine Months Ended September 30,
	2013			2012			2013			2012
				(restated)						(restated)
Consolidated net income (loss)	$	(73,347	)	$	47,628		$	(40,180	)	$	135,954
Components of other comprehensive income before income taxes attributable to:
Available-for-sale securities:
Unrealized gains, net		4,720			4,244			4,321			8,828
Adjustments for net gains reclassified into net income		(706	)		(443	)		(2,700	)		(340	)
Net activity attributable to available-for-sale securities		4,014			3,801			1,621			8,488
Interest rate swap contract:
Reclassification adjustments for amortization into net income		17,208			19,404			53,515			59,937
Other comprehensive income before income taxes		21,222			23,205			55,136			68,425
Income tax expense related to items of other comprehensive income		(8,085	)		(8,863	)		(21,343	)		(26,240	)
Other comprehensive income, net		13,137			14,342			33,793			42,185
Total consolidated comprehensive income (loss)		(60,210	)		61,970			(6,387	)		178,139
Total comprehensive income attributable to noncontrolling interests		(3,485	)		(6,685	)		(12,804	)		(21,757	)
Accretion of redeemable equity securities		(19,813	)		—			(19,813	)		—
Total comprehensive income (loss) attributable to Health Management Associates, Inc. common stockholders	$	(83,508	)	$	55,285		$	(39,004	)	$	156,382

See accompanying notes.

4

HEALTH MANAGEMENT ASSOCIATES, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands, except per share amounts)

(unaudited)

	September 30, 2013			December 31, 2012
				(restated)
ASSETS
Current assets:
Cash and cash equivalents	$	1,291		$	59,173
Available-for-sale securities		62,961			121,106
Accounts receivable, less allowances for doubtful accounts of $709,008 and $670,729 at September 30, 2013 and December 31, 2012, respectively		970,132			957,918
Supplies, prepaid expenses and other assets		226,552			220,884
Prepaid and recoverable income taxes		164,803			60,438
Restricted funds		30,667			26,525
Assets held for sale		6,250			6,250
Total current assets		1,462,656			1,452,294
Property, plant and equipment		5,832,225			5,523,870
Accumulated depreciation and amortization		(2,241,393	)		(2,057,980	)
Net property, plant and equipment		3,590,832			3,465,890
Restricted funds		125,042			125,532
Goodwill		1,032,713			1,025,137
Deferred charges and other assets		413,660			317,501
Total assets	$	6,624,903		$	6,386,354
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	160,565		$	211,387
Accrued expenses and other liabilities		570,780			609,732
Deferred income taxes		10,169			29,026
Current maturities of long-term debt and capital lease obligations		110,780			126,262
Total current liabilities		852,294			976,407
Deferred income taxes		386,543			301,237
Long-term debt and capital lease obligations, less current maturities		3,636,948			3,440,353
Other long-term liabilities		469,512			460,886
Total liabilities		5,345,297			5,178,883
Redeemable equity securities		272,013			212,458
Stockholders’ equity:
Health Management Associates, Inc. equity:
Preferred stock, $0.01 par value, 5,000 shares authorized, none issued		—			—
Common stock, Class A, $0.01 par value, 750,000 shares authorized, 264,495 shares and 256,394 shares issued at September 30, 2013 and December 31, 2012, respectively		2,645			2,564
Accumulated other comprehensive loss, net of income taxes		(8,148	)		(41,940	)
Additional paid-in capital		231,317			173,843
Retained earnings		771,141			843,938
Total Health Management Associates, Inc. stockholders’ equity		996,955			978,405
Noncontrolling interests		10,638			16,608
Total stockholders’ equity		1,007,593			995,013
Total liabilities and stockholders’ equity	$	6,624,903		$	6,386,354

See accompanying notes.

5

HEALTH MANAGEMENT ASSOCIATES, INC.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

Nine Months Ended September 30, 2013 and 2012

(in thousands)

(unaudited)

	Health Management Associates, Inc.
	Common Stock				Accumulated Other Comprehensive Income (Loss), Net			Additional Paid-in Capital			Retained Earnings			Noncontrolling Interests			Total Stockholders’ Equity
	Shares		Par Value
								(restated)			(restated)						(restated)
Balances at January 1, 2013		256,394	$	2,564	$	(41,940	)	$	173,843		$	843,938		$	16,608		$	995,013
Net income (loss)		—		—		—			—			(72,797	)		12,804			(59,993	)
Unrealized gains (losses) on available-for-sale securities and reclassifications into net income, net		—		—		1,051			—			—			—			1,051
Interest rate swap contract amortization of expense into net income, net		—		—		32,741			—			—			—			32,741
Exercises of stock options and related tax matters		2,959		30		—			27,919			—			—			27,949
Issuances of deferred stock and restricted stock and related tax matters, net of forfeitures		5,142		51		—			(29,295	)		—			—			(29,244	)
Stock-based compensation expense		—		—		—			58,850			—			—			58,850
Distributions to noncontrolling shareholders		—		—		—			—			—			(22,056	)		(22,056	)
Noncontrolling shareholder interests in an acquired business		—		—		—			—			—			3,282			3,282
Balances at September 30, 2013		264,495	$	2,645	$	(8,148	)	$	231,317		$	771,141		$	10,638		$	1,007,593

	Health Management Associates, Inc.
	Common Stock				Accumulated Other Comprehensive Income (Loss), Net			Additional Paid-in Capital			Retained Earnings		Noncontrolling Interests			Total Stockholders’ Equity
	Shares		Par Value
								(restated)			(restated)					(restated)
Balances at January 1, 2012		254,156	$	2,542	$	(95,440	)	$	156,859		$	693,991	$	15,975		$	773,927
Net income		—		—		—			—			114,197		21,757			135,954
Unrealized gains (losses) on available-for-sale securities and reclassifications into net income, net		—		—		5,515			—			—		—			5,515
Interest rate swap contract amortization of expense into net income, net		—		—		36,670			—			—		—			36,670
Issuances of deferred stock and restricted stock and related tax matters, net of forfeitures		2,212		22		—			(7,057	)		—		—			(7,035	)
Stock-based compensation expense		—		—		—			19,492			—		—			19,492
Distributions to noncontrolling shareholders		—		—		—			—			—		(23,598	)		(23,598	)
Purchases of subsidiary shares from noncontrolling shareholders		—		—		—			(274	)		—		(154	)		(428	)
Noncontrolling shareholder interests in an acquired business		—		—		—			—			—		1,917			1,917
Balances at September 30, 2012		256,368	$	2,564	$	(53,255	)	$	169,020		$	808,188	$	15,897		$	942,414

See accompanying notes.

6

HEALTH MANAGEMENT ASSOCIATES, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

(unaudited)

	Nine Months Ended September 30,
	2013			2012
				(restated)
Cash flows from operating activities:
Consolidated net income (loss)	$	(40,180	)	$	135,954
Adjustments to reconcile consolidated net income (loss) to net cash provided by continuing operating activities:
Depreciation and amortization		298,537			263,819
Amortization related to interest rate swap contract		53,515			59,937
Fair value adjustments related to interest rate swap contract		2,312			22,965
Provision for doubtful accounts		729,695			639,902
Stock-based compensation expense		58,850			19,492
(Gains) losses on sales of assets, net		(1,141	)		2,114
Gains on sales of available-for-sale securities, net		(1,478	)		(2,350	)
Write-off of deferred debt issuance costs		584			—
Deferred income tax expense (benefit)		45,105			(22,068	)
Changes in assets and liabilities of continuing operations, net of the effects of acquisitions:
Accounts receivable		(784,618	)		(716,046	)
Supplies, prepaid expenses and other current assets		(100,402	)		49,728
Deferred charges and other long-term assets		(5,186	)		(1,839	)
Accounts payable, accrued expenses and other liabilities		(116,329	)		2,096
Equity compensation excess income tax benefits		(19,056	)		(1,444	)
Loss from discontinued operations, net		—			5,805
Net cash provided by continuing operating activities		120,208			458,065
Cash flows from investing activities:
Additions to property, plant and equipment		(207,652	)		(282,343	)
Acquisitions of hospitals and other ancillary health care businesses		(173,653	)		(71,475	)
Purchases of available-for-sale securities		(471,915	)		(1,431,548	)
Proceeds from sales of available-for-sale securities		530,199			1,412,580
Other investing activities		5,300			(15,399	)
Net cash used in continuing investing activities		(317,721	)		(388,185	)
Cash flows from financing activities:
Proceeds from long-term debt borrowings		476,900			17,000
Principal payments on debt and capital lease obligations		(358,511	)		(87,927	)
Payments of debt issuance costs		(1,588	)		(636	)
Proceeds from exercises of stock options		27,949			—
Cash received from noncontrolling shareholders		—			3,591
Cash payments to noncontrolling shareholders		(24,175	)		(30,815	)
Equity compensation excess income tax benefits		19,056			1,444
Net cash provided by (used in) continuing financing activities		139,631			(97,343	)
Net decrease in cash and cash equivalents before discontinued operations		(57,882	)		(27,463	)
Net decreases in cash and cash equivalents from discontinued operations:
Operating activities		—			(1,327	)
Investing activities		—			(135	)
Net decrease in cash and cash equivalents		(57,882	)		(28,925	)
Cash and cash equivalents at the beginning of the period		59,173			64,143
Cash and cash equivalents at the end of the period	$	1,291		$	35,218

See accompanying notes

7

HEALTH MANAGEMENT ASSOCIATES, INC.

NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2013

1. Business and Basis of Presentation

Health Management Associates, Inc. by and through its subsidiaries (collectively, “we,” “our” or “us”) provides health care services to patients in hospitals and other health care facilities in non-urban communities located primarily in the southeastern United States. As of September 30, 2013, we operated 71 hospitals in fifteen states with a total of 10,782 licensed beds, including twenty-three hospitals located in Florida, ten hospitals in Mississippi and nine hospitals in Tennessee.

On July 29, 2013, we entered into an Agreement and Plan of Merger (the “Merger Agreement”) with Community Health Systems, Inc. (“CHS”) and FWCT-2 Acquisition Corporation, an indirect, wholly-owned subsidiary of CHS (“Merger Sub”) pursuant to which, subject to the satisfaction or waiver of certain conditions (including the approval of our stockholders), Merger Sub will merge with and into us and we will become an indirect, wholly-owned subsidiary of CHS (the “Merger”). The terms and conditions are described in more detail in Note 14.

As further described in Note 13, on August 12, 2013, Glenview Capital Management, LLC and certain of its affiliated investment funds (collectively “Glenview”), delivered written consents from holders of our common stock, or their duly authorized proxies, sufficient to replace the then entire Board of Directors with nominees of Glenview pursuant to a consent solicitation process (the “Consent Solicitation Process”) that had previously been commenced by Glenview.

Unless specifically indicated otherwise, all amounts and percentages presented in the notes below are exclusive of our discontinued operations, which are identified at Note 9.

The condensed consolidated balance sheet as of December 31, 2012 is unaudited; however, it was derived from the audited consolidated financial statements included in our Annual Report on Form 10-K/A for the year ended December 31, 2012 (referred to as our “2012 Form 10-K”). The interim condensed consolidated financial statements as of September 30, 2013 and for the three and nine months ended September 30, 2013 and 2012 are unaudited; however, such interim financial statements reflect all adjustments (consisting only of those of a normal recurring nature) that are, in our opinion, necessary for a fair presentation of our financial position, results of operations and cash flows. Our results of operations and cash flows for the interim periods presented are not necessarily indicative of the results to be expected for the full year due to, among other things, the seasonal nature of our business and changes in the economy and the health care regulatory environment.

The interim condensed consolidated financial statements have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”). Based on the SEC’s guidance, certain information and disclosures normally included in financial statements prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) have been condensed or omitted. The interim condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements included in our 2012 Form 10-K.

Our preparation of interim condensed consolidated financial statements requires us to make estimates and assumptions that affect the amounts reported in those financial statements and the accompanying notes. Actual results could differ from those estimates.

8

HEALTH MANAGEMENT ASSOCIATES, INC.

NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

2. Restatement and Revision of Previously Reported Consolidated Financial Statements

We have restated our consolidated financial statements for the three and nine month periods ended September 30, 2012 due to an accounting error in our application of the requirements for certifying our electronic health record (“EHR”) technology under various Medicare and Medicaid Healthcare Information Technology (“HCIT”) programs. It was determined that 11 of our hospitals did not meet the “meaningful use” criteria necessary to qualify for HCIT incentive payments. We estimate that, between July 1, 2011 and June 30, 2013, we recognized as income HCIT incentive payments totaling approximately $31.0 million for the 11 hospitals that did not meet the “meaningful use” criteria. The impact of correcting the misstatement related to the HCIT payments for these 11 hospitals, as well as correction of unrelated immaterial errors, on our consolidated balance sheets and consolidated statements of income, comprehensive income and cash flows is as follows:

	Three Months Ended September 30, 2012
	As Previously Reported			Adjustment			As Restated
Consolidated Statements of Income and Comprehensive Income
Net revenue before the provision for doubtful accounts	$	1,664,187		$	(1,250	)	$	1,662,937
Provision for doubtful accounts		(224,078	)		—			(224,078	)
Net revenue		1,440,109			(1,250	)		1,438,859
Salaries and benefits		637,305			—			637,305
Supplies		216,819			—			216,819
Rent expense		41,882			(75	)		41,807
Other operating expenses		331,935			421			332,356
Medicare and Medicaid HCIT incentive programs		(24,224	)		—			(24,224	)
Depreciation and amortization		91,610			(47	)		91,563
Interest expense		76,814			102			76,916
Other		(2,363	)		—			(2,363	)
Income from continuing operations before income taxes		70,331			(1,651	)		68,680
Provision for income taxes		(20,913	)		1,250			(19,663	)
Income from continuing operations		49,418			(401	)		49,017
Loss from discontinued operations		(1,389	)		—			(1,389	)
Consolidated net income		48,029			(401	)		47,628
Net income attributable to noncontrolling interests		(6,685	)		—			(6,685	)
Net income attributable to Health Management Associates, Inc.	$	41,344		$	(401	)	$	40,943
Comprehensive Income	$	62,371		$	(401	)	$	61,970
Earnings (loss) per share attributable to Health Management Associates, Inc. common stockholders:
Basic and diluted
Continuing operations	$	0.17		$	(0.01	)	$	0.16
Discontinued operations		(0.01	)		0.01			—
Net income	$	0.16		$	—		$	0.16

9

HEALTH MANAGEMENT ASSOCIATES, INC.

NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

2. Restatement and Revision of Previously Reported Consolidated Financial Statements (continued)

	Nine Months Ended September 30, 2012
	As Previously Reported			Adjustment			As Restated
Consolidated Statements of Income and Comprehensive Income
Net revenue before the provision for doubtful accounts	$	5,037,246		$	(3,750	)	$	5,033,496
Provision for doubtful accounts		(639,902	)		—			(639,902	)
Net revenue		4,397,344			(3,750	)		4,393,594
Salaries and benefits		1,942,322			(847	)		1,941,475
Supplies		677,416			—			677,416
Rent expense		130,746			(225	)		130,521
Other operating expenses		969,350			1,263			970,613
Medicare and Medicaid HCIT incentive programs		(31,685	)		1,810			(29,875	)
Depreciation and amortization		255,716			(141	)		255,575
Interest expense		240,743			306			241,049
Other		(1,745	)		—			(1,745	)
Income from continuing operations before income taxes		214,481			(5,916	)		208,565
Provision for income taxes		(70,931	)		4,125			(66,806	)
Income from continuing operations		143,550			(1,791	)		141,759
Loss from discontinued operations		(5,805	)		—			(5,805	)
Consolidated net income		137,745			(1,791	)		135,954
Net income attributable to noncontrolling interests		(21,757	)		—			(21,757	)
Net income attributable to Health Management Associates, Inc.	$	115,988		$	(1,791	)	$	114,197
Comprehensive Income	$	179,930		$	(1,791	)	$	178,139
Earnings (loss) per share attributable to Health Management Associates, Inc. common stockholders:
Basic and diluted
Continuing operations	$	0.48		$	(0.01	)	$	0.47
Discontinued operations		(0.03	)		0.01			(0.02	)
Net income	$	0.45		$	—		$	0.45

10

HEALTH MANAGEMENT ASSOCIATES, INC.

NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

2. Restatement and Revision of Previously Reported Consolidated Financial Statements (continued)

	December 31, 2012
	As Previously Reported		Adjustment			As Restated
Consolidated Balance Sheet
Accounts receivable, less allowances for doubtful accounts	$	976,872	$	(18,954	)	$	957,918
Other current assets		494,376		—			494,376
Total current assets		1,471,248		(18,954	)		1,452,294
Net property, plant and equipment		3,463,052		2,838			3,465,890
Goodwill		1,023,456		1,681			1,025,137
Other long-term assets		443,033		—			443,033
Total assets	$	6,400,789	$	(14,435	)	$	6,386,354
Accrued expenses and other liabilities	$	469,055	$	(5,242	)	$	463,813
Due to third party payors		26,470		25,172			51,642
Deferred income taxes		45,170		(16,144	)		29,026
Other current liabilities		431,728		198			431,926
Total current liabilities		972,423		3,984			976,407
Long-term debt and capital lease obligations, less current maturities		3,433,260		7,093			3,440,353
Other long-term liabilities		762,123		—			762,123
Redeemable equity securities		212,458		—			212,458
Total stockholders’ equity		1,020,525		(25,512	)		995,013
Total liabilities and stockholders’ equity	$	6,400,789	$	(14,435	)	$	6,386,354

	Nine Months Ended September 30, 2012
	As Previously Reported			Adjustment			As Restated
Consolidated Statements of Cash Flows
Operating activities:
Consolidated net income	$	137,745		$	(1,791	)	$	135,954
Depreciation and amortization		263,960			(141	)		263,819
Deferred tax expense		(20,156	)		(1,912	)		(22,068	)
Accounts receivable		(719,495	)		3,449			(716,046	)
Supplies, prepaid expenses and other current assets		50,679			(951	)		49,728
Accounts payable, accrued expenses and other liabilities		831			1,265			2,096
Other cash flows from operating activities		744,582			—			744,582
Net cash provided by continuing operating activities		458,146			(81	)		458,065
Investing activities:
Additions to property, plant and equipment		(282,424	)		81			(282,343	)
Other cash flows from investing activities		(105,842	)		—			(105,842	)
Net cash used in continuing investing activities		(388,266	)		81			(388,185	)
Net cash provided by continuing financing activities		(97,343	)		—			(97,343	)
Discontinued operations		(1,462	)		—			(1,462	)
Net decrease in cash and cash equivalents		(28,925	)		—			(28,925	)
Cash and cash equivalents at the beginning of the year		64,143			—			64,143
Cash and cash equivalents at the end of the year	$	35,218		$	—		$	35,218

The notes to the interim condensed consolidated financial statements have been restated for these adjustments as applicable.

11

HEALTH MANAGEMENT ASSOCIATES, INC.

NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

3. Net Revenue, Provision for Doubtful Accounts, Cost of Revenue and Other

Net Revenue. We record gross patient service charges on the accrual basis in the period that the services are rendered. Net revenue before the provision for doubtful accounts represents gross patient service charges less provisions for contractual adjustments and uninsured self-pay patient discounts. Payments for services rendered to patients covered by Medicare, Medicaid and other government programs are generally less than billed charges and, therefore, provisions for contractual adjustments are made to reduce gross patient service charges to the estimated cash receipts based on each program’s principles of payment/reimbursement. Estimates of contractual allowances for services rendered to patients covered by commercial insurance, including managed care health plans, are primarily based on the payment terms of contractual arrangements, such as predetermined rates per diagnosis, per diem rates or discounted fee for service rates. Revenue and receivables from government programs are significant to our operations; however, we do not believe that there are substantive credit risks associated with such programs. There are no other concentrations of revenue or accounts receivable with any individual payor that subject us to significant credit or other risks.

In the ordinary course of business, we provide services to patients who are financially unable to pay for their care. Accounts identified as charity and indigent care are not recognized in net revenue before the provision for doubtful accounts. We maintain a company-wide policy whereby patient account balances are characterized as charity and indigent care only if the patient meets certain percentages of the federal poverty level guidelines. Local hospital personnel and our collection agencies pursue payments on accounts receivable from patients who do not meet such criteria. For uninsured self-pay patients who do not qualify for charity and indigent care treatment, we recognize net revenue before the provision for doubtful accounts using our standard gross patient service charges, less discounts of 60% or more for non-elective procedures. Because a significant portion of uninsured self-pay patients will be unable or unwilling to pay for their care, we record a significant provision for doubtful accounts in the period that the services are provided to those patients.

Net revenue before the provision for doubtful accounts, by major payor source, is summarized in the table below (dollars in thousands).

	Three Months Ended September 30,								Nine Months Ended September 30,
	2013				2012				2013				2012
Medicare	$	435,626	26.0	%	$	456,934	27.5	%	$	1,429,839	28.0	%	$	1,460,766	29.0	%
Medicaid		162,934	9.8			203,259	12.2			509,393	10.0			530,575	10.5
Commercial insurance		842,278	50.1			792,388	47.7			2,499,200	49.0			2,409,121	47.9
Self-pay		205,628	12.3			189,722	11.4			562,959	11.1			543,653	10.8
Other		30,213	1.8			20,634	1.2			99,083	1.9			89,381	1.8
	$	1,676,679	100.0	%	$	1,662,937	100.0	%	$	5,100,474	100.0	%	$	5,033,496	100.0	%

Provision for Doubtful Accounts and Related Other. We grant credit without requiring collateral from our patients, most of whom live near our hospitals and are insured under third party payor agreements. The credit risk for non-governmental accounts receivable, excluding uninsured self-pay patients, is limited due to the large number of insurance companies and other payors that provide payment and reimbursement for patient services. Accounts receivable are reported net of estimated allowances for doubtful accounts.

Collection of accounts receivable from third party payors and patients is our primary source of cash and is therefore critical to our successful operating performance. Accordingly, we regularly monitor our cash collection trends and the aging of our accounts receivable by major payor source. Our collection risks principally relate to uninsured self-pay patient accounts and patient accounts for which the primary insurance payor has paid but patient responsibility amounts (generally deductibles and co-payments) remain outstanding. Provisions for doubtful accounts are primarily estimated based on cash collection analyses by major payor classification and accounts receivable aging reports. For accounts receivable associated with services provided to patients who have governmental and/or commercial insurance coverage, we analyze contractually due amounts and record an allowance for doubtful accounts as necessary. For accounts receivable associated with self-pay patients, which includes both patients without insurance and patients with deductible and co-payment balances due for which third party coverage exists for part of the bill, we record a significant provision for doubtful accounts in the period of service because many patients will not pay the portion of their bill for which they are financially responsible. We monitor the aging of accounts receivable from self-pay patients and record supplemental provisions for doubtful accounts when our likelihood of collection deteriorates.

At September 30, 2013 and December 31, 2012, our allowance for doubtful accounts for self-pay uninsured patient accounts was approximately 72.3% and 72.6%, respectively, of our total self-pay uninsured patient accounts receivable balance. The corresponding percentages for our allowance for doubtful accounts pertaining to accounts receivable from government payors, managed care health plans and other commercial payors were 5.4% and 6.3% at September 30, 2013 and

12

HEALTH MANAGEMENT ASSOCIATES, INC.

NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

3. Net Revenue, Provision for Doubtful Accounts, Cost of Revenue and Other (continued)

December 31, 2012, respectively. Our write-offs of patient accounts receivable (most of which related to uninsured self-pay patients), net of recoveries, were approximately $217.5 million and $128.5 million during the three months ended September 30, 2013 and 2012, respectively. The corresponding amounts for the nine months ended September 30, 2013 and 2012 were $691.4 million and $503.4 million, respectively. The year-over-year increase in patient accounts receivable write-offs was primarily due to increases in patient responsibility amounts.

When considering the adequacy of the allowance for doubtful accounts, we review accounts receivable balances in conjunction with historical collection rates, health care industry trends/indicators and other business and economic conditions that we believe might reasonably be expected to affect the collectability of patient accounts. Accounts receivable are written off after collection efforts have been pursued in accordance with our policies and procedures. Accounts written off as uncollectible are deducted from the allowance for doubtful accounts and subsequent recoveries are netted against the provision for doubtful accounts. Changes in payor mix, general economic conditions or federal and state government health care coverage could each have a material adverse effect on our accounts receivable collections, cash flows and results of operations.

Cost of Revenue. The presentation of costs and expenses in our consolidated statements of operations does not differentiate between costs of revenue and other costs because substantially all such costs and expenses relate to providing health care services. Furthermore, we believe that the natural classification of expenses is the most meaningful presentation of our operations. Amounts that could be classified as general and administrative expenses, which include the costs of our home office as well as our regional service centers, were approximately $86.2 million and $64.7 million during the three months ended September 30, 2013 and 2012, respectively. The corresponding amounts for the nine months ended September 30, 2013 and 2012 were $242.3 million and $194.5 million, respectively.

Electronic Health Record Incentive Programs. Using a gain contingency model, we recognize benefits under the HCIT programs in our consolidated statements of income when the eligible hospitals and physician practices have demonstrated meaningful use of certified electronic health record technology during the period and, if applicable, the cost report information for the full cost report year that will determine the final calculation of the incentive payment is available. In addition, HCIT incentive payments previously recognized as income are subject to audit and potential recoupment if it is determined that we did not meet the applicable meaningful use standards required in connection with such incentive payments.

During the three months ended September 30, 2013 and 2012, we recognized benefits in our consolidated statements of income of approximately $2.0 million and $24.2 million, respectively, related to the HCIT programs. The corresponding amounts for the nine months ended September 30, 2013 and 2012 were $23.6 million and $29.9 million, respectively. Included in our condensed consolidated balance sheets at September 30, 2013 and December 31, 2012 were receivables under the HCIT Programs of $5.8 million and $11.7 million, respectively. There were $0.9 million and $19.2 million in deferred incentive payment liabilities at September 30, 2013 and December 31, 2012, respectively. See Note 2 for information relating to the restatement of these amounts.

4. Long-Term Debt and Capital Lease Obligations

The following discussion of our long-term debt and capital lease obligations should be read in conjunction with Notes 3 and 4 to the audited consolidated financial statements included in our 2012 Form 10-K. The table below summarizes our long-term debt and capital lease obligations by major component (in thousands).

	September 30, 2013			December 31, 2012
				(restated)
Bank borrowings:
Revolving credit facilities	$	222,500		$	—
Term Loan A (as defined below)		619,988			670,625
Term Loan B (as defined below), net of discounts		1,344,364			1,374,318
7.375% Senior Notes due 2020		875,000			875,000
6.125% Senior Notes due 2016, net of discounts		399,062			398,785
3.75% Convertible Senior Subordinated Notes due 2028, net of discounts		88,658			85,522
Installment notes and other long-term debt		13,576			13,988
Capital lease obligations		184,580			148,377
Long-term debt and capital lease obligations		3,747,728			3,566,615
Less current maturities		(110,780	)		(126,262	)
Long-term debt and capital lease obligations, less current maturities	$	3,636,948		$	3,440,353

13

HEALTH MANAGEMENT ASSOCIATES, INC.

NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

4. Long-Term Debt and Capital Lease Obligations (continued)

Bank Borrowings. Our bank borrowings include variable rate senior secured credit facilities with a syndicate of banks (collectively, the “Credit Facilities”) that we entered into on November 18, 2011. At that date, the Credit Facilities consisted of: (i) a $500.0 million five-year revolving credit facility (the “Revolving Credit Agreement”); (ii) a $725.0 million five-year term loan (the “Term Loan A”); and (iii) a $1.4 billion seven-year term loan (the “Term Loan B”). On March 20, 2013, we amended the loan agreement underlying the Credit Facilities (the “Amendment”) in order to, among other things, provide for the refinancing of the then outstanding balance under the Term Loan B. The principal payments were unchanged; however, the Term Loan B was subject to a prepayment premium equal to 1.0% of the principal amount that is repriced or prepaid on or before September 20, 2013.

We can elect whether interest on borrowings under the Credit Facilities is determined using LIBOR or the Base Rate (as defined in the loan agreement). The effective interest rates on such borrowings, which fluctuate with market changes, include a spread above the base rate that we select. Through March 20, 2013, the effective interest rate for the Term Loan B was subject to a floor of 1.0% and 2.0% (before consideration of the interest rate spread) when using LIBOR and the Base Rate, respectively. The Amendment reduced both such interest rate floors under the Term Loan B by 0.25%. The amount of the interest rate spread is predicated on, among other things, our Consolidated Leverage Ratio (as defined in the loan agreement). The Amendment reduced the interest rate spread on the Term Loan B by 0.75%. We can elect differing interest rates for each of the debt instruments under the Credit Facilities. As of September 30, 2013, the effective interest rates on the Term Loan A and the Term Loan B were 3.0% and 3.5%, respectively. Those rates remained unchanged as of November 1, 2013.

The Revolving Credit Agreement provides that we can borrow, on a revolving basis, up to an aggregate of $500.0 million, as adjusted for outstanding standby letters of credit of up to $75.0 million. During the nine months ended September 30, 2013, we borrowed $476.9 million and repaid $254.4 million under the Revolving Credit Agreement to fund working capital and the entire purchase price of an acquisition that we completed on April 1, 2013 (see Note 8 for additional information about such acquisition). During the nine months ended September 30, 2012, we borrowed and repaid $17.0 million. As of November 1, 2013, the amount unused and available for borrowing under the Revolving Credit Agreement was approximately $237.0 million, which reflected the then outstanding balance of $210.0 million thereunder and $53.0 million of standby letters of credit in favor of third parties. The effective interest rate on the variable rate Revolving Credit Agreement was approximately 3.0% on September 30, 2013 and 2.9% on November 1, 2013.

The Credit Facilities are subject to mandatory prepayment in amounts equal to 50% of our Excess Cash Flow (as defined in the amended loan agreement) with step-downs of such percentage based on our Consolidated Leverage Ratio. Based on our Excess Cash Flow for the year ended December 31, 2012, we repaid approximately $31.5 million of additional principal under the Credit Facilities during the nine months ended September 30, 2013. As a result of such principal repayment, we wrote off $0.4 million of deferred debt issuance costs.

On July 29, 2013, we obtained the agreement of the requisite lenders under the Revolving Credit Agreement to (i) waive any default which would otherwise arise if the persons nominated by Glenview in its Consent Solicitation Process (or any other persons nominated by Glenview) (collectively, the “Glenview Nominees”) were elected or appointed as directors, provided that such Glenview Nominees were approved by at least a majority of the then Board of Directors and (ii) make a technical clarification to the definition of “Change of Control” to provide that we may enter into a merger or similar agreement and not trigger a “Change of Control” event of default until the transaction contemplated by such agreement is consummated. After interviews of all of the Glenview Nominees had been conducted, our previous Board of Directors approved the Glenview Nominees on August 1, 2013 solely for purposes of preventing a “Change of Control” under the indenture governing HMA’s 7.375% Senior Notes due 2020 and the Revolving Credit Agreement and preventing a “Fundamental Change” under the terms of the indenture governing HMA’s 3.75% Convertible Senior Subordinated Notes due 2028 and for no other purpose.

Other. Cash paid for interest on our long-term debt and capital lease obligations during the nine months ended September 30, 2013 and 2012, including amounts that have been capitalized, was approximately $212.6 million and $206.6 million, respectively. We entered into capital leases and other similar arrangements for real property and equipment aggregating $19.6 million and $58.3 million during the nine months ended September 30, 2013 and 2012, respectively. See Note 7 for information regarding the estimated fair values of our long-term debt instruments. Additionally, see Note 15 for summarized financial information in respect of our subsidiaries that provide joint and severable guarantees of payment for certain of our long-term debt obligations.

At September 30, 2013, we were in compliance with all of the covenants contained in our debt agreements.

14

HEALTH MANAGEMENT ASSOCIATES, INC.

NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

5. Shareholder Rights Plan

On May 24, 2013, we adopted and entered into a Shareholder Rights Plan (the “Rights Plan”) with American Stock Transfer & Trust Company, LLC, as rights agent. The Rights Plan is designed to promote the fair and equal treatment of all of our stockholders and ensures that the Board of Directors remains in the best position to discharge its fiduciary duties.

The Rights Plan authorizes the issuance of one preferred share purchase right (a “Right”) for each outstanding share of our common stock held of record as of June 3, 2013, and directs the issuance of one preferred share purchase right with respect to each share of our common stock that shall become outstanding thereafter until the Rights become exercisable or they expire, as described below.

Each Right, once exercisable, entitles holders of our common stock to purchase one-thousandth of a share of our preferred stock designated as Series A Junior Participating Preferred Stock, par value $0.01 per share (the “Preferred Stock”) at a price of $45.00 per one one-thousandth of a share, subject to certain adjustments. The Rights will generally become exercisable only following the tenth day after a person or group (with certain exceptions) acquires or obtained the right to acquire, or announced a tender or exchange offer, that if consummated would result in such person or group acquiring beneficial ownership of 15% or more of our outstanding common stock. Upon the occurrence of a triggering event, the Rights will entitle every holder of our common stock, other than the acquirer, to purchase our stock on terms that would likely be economically dilutive to the acquirer.

The Rights expire upon the close of business on the earliest to occur of: (i) May 24, 2014, (ii) the date on which the Rights are redeemed or exchanged by us in accordance with the Rights Plan or (iii) the date of our 2014 annual meeting of stockholders if requisite stockholder approval of the Rights Plan is not obtained at such meeting.

On July 29, 2013, prior to and in connection with entering into the Merger Agreement, we entered into an amendment (the “Rights Amendment”) to the Rights Plan which provides that, among other things, (i) none of CHS, Merger Sub or any other subsidiary of CHS is an Acquiring Person (as defined in the Rights Agreement) pursuant to the Rights Plan solely as a result of the Merger Agreement and the transactions contemplated thereby, (ii) a “Distribution Date” or a “Stock Acquisition Date” (as such terms are defined in the Rights Plan) does not occur, in each case, as a result of the adoption, approval, execution or delivery of the Merger Agreement or the consummation of the Merger Agreement and (iii) the “Final Expiration Date” prior to the Effective Time (as defined in the Merger Agreement). The Rights Amendment also provides that if for any reason the Merger Agreement is terminated in accordance with its terms, the Rights Amendment will be of no further force and effect and the Rights Plan shall remain exactly the same as it existed immediately prior to the execution of the Rights Amendment.

6. Earnings Per Share and Related Other

Basic earnings per share is computed based on the weighted average number of outstanding common shares. Diluted earnings per share is computed based on the weighted average number of outstanding common shares plus the dilutive effect of common stock equivalents, computed using the treasury stock method. The table on the following page sets forth the computations of basic and diluted earnings per share for the common stockholders of Health Management Associates, Inc. (in thousands, except per share amounts).

15

HEALTH MANAGEMENT ASSOCIATES, INC.

NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

6. Earnings Per Share and Related Other (continued)

	Three Months Ended September 30,						Nine Months Ended September 30,
	2013			2012			2013			2012
				(restated)						(restated)
Numerators:
Income (loss) from continuing operations	$	(73,347	)	$	49,017		$	(40,180	)	$	141,759
Income attributable to noncontrolling interests		(3,485	)		(6,685	)		(12,804	)		(21,757	)
Accretion of redeemable equity securities		(19,813	)		—			(19,813	)		—
Income (loss) from continuing operations attributable to Health Management Associates, Inc. common stockholders		(96,645	)		42,332			(72,797	)		120,002
Loss from discontinued operations attributable to Health Management Associates, Inc. common stockholders		—			(1,389	)		—			(5,805	)
Net income (loss) attributable to Health Management Associates, Inc. common stockholders	$	(96,645	)	$	40,943		$	(72,797	)	$	114,197
Denominators:
Denominator for basic earnings (loss) per share-weighted average number of outstanding common shares		261,927			254,516			258,911			254,111
Dilutive securities:
Stock-based compensation arrangements		—			2,268			—			2,061
Convertible notes		—			—			—			—
Denominator for diluted earnings (loss) per share		261,927			256,784			258,911			256,172
Earnings per share:
Basic
Continuing operations	$	(0.37	)	$	0.16		$	(0.28	)	$	0.47
Discontinued operations		—			—			—			(0.02	)
Net income (loss)	$	(0.37	)	$	0.16		$	(0.28	)	$	0.45
Diluted
Continuing operations	$	(0.37	)	$	0.16		$	(0.28	)	$	0.47
Discontinued operations		—			—			—			(0.02	)
Net income (loss)	$	(0.37	)	$	0.16		$	(0.28	)	$	0.45
Securities excluded from diluted earnings per share because they were antidilutive or performance conditions were not met:
Stock options		60			3,417			60			3,977
Deferred stock and restricted stock		—			1,624			—			2,091

7. Fair Value Measurements, Available-For-Sale Securities and Restricted Fund

General. GAAP defines fair value as the amount that would be received for an asset or paid to transfer a liability (i.e., an exit price) in the principal market for the asset or liability in an orderly transaction between market participants on the measurement date. GAAP also establishes a hierarchy that requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. GAAP describes the following three levels of inputs that may be used:

Level 1:	Quoted prices (unadjusted) in active markets that are accessible at the measurement date for identical assets and liabilities. The fair value hierarchy gives the highest priority to Level 1 inputs.
Level 2:	Observable prices that are based on inputs not quoted on active markets but corroborated by market data.
Level 3:	Unobservable inputs when there is little or no market data available, thereby requiring an entity to develop its own assumptions. The fair value hierarchy gives the lowest priority to Level 3 inputs.

16

HEALTH MANAGEMENT ASSOCIATES, INC.

NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

7. Fair Value Measurements, Available-For-Sale Securities and Restricted Fund (continued)

We recognize transfers between levels within the fair value hierarchy on the date of the change in circumstances that requires such transfer. We began classifying all of our fixed income available-for-sale securities as Level 2 in the first quarter of 2013 and have recast $175.4 million of those securities at December 31, 2012. The following table summarizes the estimated fair values of certain of our financial assets (liabilities) (in thousands).

	Level 1		Level 2			Level 3		Totals
As of September 30, 2013:
Available-for-sale securities, including those in restricted funds	$	65,510	$	153,160		$	—	$	218,670
Interest rate swap contract	$	—	$	(32,175	)	$	—	$	(32,175	)
As of December 31, 2012:
Available-for-sale securities, including those in restricted funds	$	51,156	$	222,007		$	—	$	273,163
Interest rate swap contract	$	—	$	(93,045	)	$	—	$	(93,045	)

The estimated fair values of our Level 1 available-for-sale securities were primarily determined by reference to quoted market prices. Our Level 2 available-for-sale securities primarily consisted of: (i) bonds and notes issued by the United States government and its agencies, domestic and foreign corporations and foreign governments and (ii) preferred securities issued by domestic and foreign corporations. The estimated fair values of these securities are determined using various valuation techniques, including a multi-dimensional relational model that incorporates standard observable inputs and assumptions such as benchmark yields, reported trades, broker/dealer quotes, issuer spreads, benchmark securities, bids/offers and other pertinent reference data.

The estimated fair value of our interest rate swap contract, which is discussed at Note 3(a) to the audited consolidated financial statements included in our 2012 Form 10-K, was determined using a model that considers various inputs and assumptions, including LIBOR swap rates, cash flow activity, forward yield curves and other relevant economic measures, all of which are observable market inputs that are classified under Level 2 of the fair value hierarchy. The model also incorporates valuation adjustments for credit risk. The table below summarizes our balance sheet classification of the estimated fair values of our interest rate swap contract liabilities (in thousands).

	September 30, 2013		December 31, 2012
Accrued expenses and other liabilities	$	32,175	$	84,277
Other long-term liabilities		—		8,768
Totals	$	32,175	$	93,045

Cash and cash equivalents, net accounts receivable, accounts payable and accrued expenses and other liabilities are reflected in the condensed consolidated balance sheets at their estimated fair values primarily due to their short-term nature.

The estimated fair values of our long-term debt instruments, which are discussed at Note 4, are determined by reference to quoted market prices and/or bid and ask prices in the relevant market. The following table summarizes the estimated fair values of our debt securities (in thousands) and indicates their corresponding level within the fair value hierarchy.

	September 30, 2013		December 31, 2012
Level 1:
6.125% Senior Notes due 2016	$	438,000	$	434,000
7.375% Senior Notes due 2020		958,125		945,000
3.75% Convertible Senior Subordinated Notes due 2028		109,902		100,948
Level 2:
Term Loan A		620,732		672,704
Term Loan B		1,355,984		1,397,227

The estimated fair values of our other long-term debt instruments reasonably approximate their carrying amounts in the condensed consolidated balance sheets.

17

HEALTH MANAGEMENT ASSOCIATES, INC.

NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

7. Fair Value Measurements, Available-For-Sale Securities and Restricted Fund (continued)

Available-For-Sale Securities (including those in restricted funds). Supplemental information regarding our available-for-sale securities (all of which had no withdrawal restrictions) is set forth in the table below (in thousands).

	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Estimated Fair Values
As of September 30, 2013:
Debt securities and debt-based mutual funds
Government and corporate	$	143,819	$	2,839	$	(1,428	)	$	145,230
Equity securities and equity-based mutual funds
Domestic		44,807		7,709		(1,012	)		51,504
International		18,988		3,241		(461	)		21,768
Commodity-based mutual fund		182		—		(14	)		168
Totals	$	207,796	$	13,789	$	(2,915	)	$	218,670
As of December 31, 2012:
Debt securities and debt-based mutual funds
Government and corporate	$	206,258	$	3,963	$	(331	)	$	209,890
Equity securities and equity-based mutual funds
Domestic		37,825		4,307		(234	)		41,898
International		18,005		1,766		(219	)		19,552
Commodity-based mutual fund		1,823		—		—			1,823
Totals	$	263,911	$	10,036	$	(784	)	$	273,163

As of September 30, 2013 and December 31, 2012, investments with aggregate estimated fair values of approximately $44.9 million (449 investments) and $123.8 million (195 investments), respectively, generated the gross unrealized losses disclosed in the above table. We concluded that other-than-temporary impairment charges were not necessary for such gross unrealized losses at either of the balance sheet dates because of, among other things, recent declines in the value of the affected securities and/or our brief holding period (i.e., most of such securities have been held for less than one year), as well as our ability to hold the securities for a reasonable period of time sufficient for a projected recovery of fair value. We will continue to monitor and evaluate the recoverability of our available-for-sale securities.

The contractual maturities of debt-based securities held by us as of September 30, 2013, excluding mutual fund holdings, are set forth in the table below. Expected maturities will differ from contractual maturities because the issuers of the debt securities may have the right to prepay their obligations without prepayment penalties.

	Amortized Cost		Estimated Fair Values
	(in thousands)
Within 1 year	$	88	$	89
After 1 year and through year 5		12,302		12,473
After 5 years and through year 10		10,704		10,956
After 10 years		18,147		17,600

18

HEALTH MANAGEMENT ASSOCIATES, INC.

NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

7. Fair Value Measurements, Available-For-Sale Securities and Restricted Fund (continued)

The weighted average cost method is used to calculate the historical cost basis of securities that are sold. Gross realized gains and losses on sales of available-for-sale securities and other investment income, which includes interest and dividends, are summarized in the table below (in thousands).

	Three Months Ended September 30,						Nine Months Ended September 30,
	2013			2012			2013			2012
Realized gains	$	1,233		$	2,043		$	4,474		$	3,508
Realized losses		(2,140	)		(276	)		(3,192	)		(1,158	)
Investment income		1,577			1,640			4,909			4,760

Restricted Funds. Our restricted funds, which consisted solely of available-for-sale securities at both September 30, 2013 and December 31, 2012, are held by a wholly owned captive insurance subsidiary that is domiciled in the Cayman Islands. The assets of such subsidiary are effectively limited to use in its proprietary operations. Supplemental information regarding the available-for-sale securities that are included in restricted funds is set forth in the table below (in thousands).

	Nine Months Ended September 30,
	2013		2012
Proceeds from sales	$	64,337	$	52,583
Purchases		65,208		70,610

8. Acquisitions, Joint Ventures and Other Activity

Acquisition Activity. The acquisitions described below are typically financed using a combination of available cash balances, proceeds from sales of available-for-sale securities, borrowings under revolving credit agreements and other long-term financing arrangements. The operating results of entities that are acquired by our subsidiaries are included in our consolidated financial statements from the date of acquisition.

2013 Acquisitions. On April 1, 2013, one of our subsidiaries acquired an 80% interest in Bayfront Health System, which includes Bayfront Medical Center, a tertiary and teaching hospital in St. Petersburg, Florida that is licensed to operate 480 beds, and certain related health care operations. A not-for-profit organization affiliated with Bayfront Health System, Bayfront Health, Education and Research Organization, retained a 20% interest in such entities. The net purchase price for our 80% interest was approximately $162.0 million in cash, plus a working capital adjustment. The acquired assets and assumed liabilities included, among other things, supply inventories, property, plant and equipment and certain long-term lease obligations. We funded the entire purchase price of this acquisition with borrowings under the Revolving Credit Agreement, which is discussed at Note 4. During the nine months ended September 30, 2013, certain of our subsidiaries also acquired ancillary health care businesses for aggregate cash consideration of approximately $5.4 million.

2012 Acquisitions. Effective April 1, 2012, one of our subsidiaries acquired from a subsidiary of INTEGRIS Health, Inc. (“Integris”) an 80% interest in five Oklahoma-based general acute care hospitals with a total of 218 beds and certain related health care operations. A subsidiary of Integris retained a 20% interest in each of these entities. The net purchase price for our 80% interest was approximately $61.9 million in cash. During the nine months ended September 30, 2012, certain of our subsidiaries also acquired ancillary health care businesses for aggregate cash consideration of approximately $9.6 million.

Other. Our acquisitions are accounted for using the purchase method of accounting. We use estimated exit price fair values as of the date of acquisition to (i) allocate the related purchase price to the assets acquired and liabilities assumed and (ii) record noncontrolling interests. We use a variety of techniques to estimate exit price fair values, including, but not limited to, valuation methodologies that derive fair values using a market approach based on comparable transactions and an approach based on depreciated replacement cost. We recorded incremental goodwill during each of the nine months ended September 30, 2013 and 2012 because the final negotiated purchase price in certain of our completed acquisitions exceeded the fair value of the net tangible and intangible assets acquired. Most of the goodwill that was added during those periods is expected to be tax deductible.

Acquisition-related costs have been included in other operating expenses in the consolidated statements of operations; however, such costs for each of the nine months ended September 30, 2013 and 2012 were not material.

19

HEALTH MANAGEMENT ASSOCIATES, INC.

NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

8. Acquisitions, Joint Ventures and Other Activity (continued)

The table below summarizes the purchase price allocations for the acquisitions that we completed during the nine months ended September 30, 2013 and 2012; however, in some cases, such purchase price allocations are preliminary and remain subject to future refinement as we gather supplemental information.

	Nine Months Ended September 30,
	2013			2012
	(in thousands)
Assets acquired:
Current and other assets	$	8,308		$	1,811
Property, plant and equipment		126,626			14,311
Intangible assets (primarily contractual rights to operate hospitals)		116,341			48,775
Goodwill		7,576			25,176
Total assets acquired		258,851			90,073
Liabilities assumed:
Current liabilities		(1,124	)		(501	)
Capital lease obligations		(36,657	)		(961	)
Other long-term liabilities		(2,274	)		—
Total liabilities assumed		(40,055	)		(1,462	)
Net assets acquired	$	218,796		$	88,611

Joint Ventures and Redeemable Equity Securities. As of September 30, 2013, we had established joint ventures to own/lease and operate 29 of our hospitals. Local physicians and/or other health care entities own minority equity interests in each of the joint ventures and participate in the related hospital’s governance. We own a majority of the equity interests in each joint venture and manage the related hospital’s day-to-day operations.

When completing a joint venture transaction, our subsidiary that is a party to the joint venture customarily issues equity securities that provide the noncontrolling shareholders with certain rights to require our subsidiary to redeem such securities. Redeemable equity securities with redemption features that are not solely within our control are classified outside of permanent equity. Those securities are initially recorded at their estimated fair value on the date of issuance. Securities that are currently redeemable or redeemable after the passage of time are adjusted to their redemption value as changes occur. If it is unlikely that a redeemable equity security will ever require redemption then subsequent adjustments to the initially recorded amount will only be recognized in the period that a redemption becomes probable.

As recorded in the condensed consolidated balance sheets, redeemable equity securities represent the minimum amounts that can be unilaterally redeemed for cash by noncontrolling shareholders in respect of their subsidiary equity holdings or the initial unadjusted estimated fair values of contingent rights held by certain noncontrolling shareholders. Through October 25, 2013, the mandatory redemptions requested by noncontrolling shareholders in respect of their subsidiary equity holdings have been nominal. A rollforward of our redeemable equity securities is summarized in the table below (in thousands).

	Nine Months Ended September 30,
	2013			2012
Balances at the beginning of the period	$	212,458		$	200,643
Noncontrolling shareholder interests in acquired businesses		41,861			15,218
Investments by noncontrolling shareholders		—			3,591
Purchases of subsidiary shares from and distributions to noncontrolling shareholders		(2,119	)		(6,789	)
Accretion in carrying value		19,813			—
Balances at the end of the period	$	272,013		$	212,663

Upon the occurrence of certain events that are defined in the underlying operating agreements, some noncontrolling shareholders may require our affected subsidiary to purchase their minority equity holdings. Specifically, we may be required to purchase the 30% noncontrolling interest in Lake Norman Regional Medical Center for the higher of fair market value or $150.0 million upon the completion of the Merger (as described in Note 14). Accordingly, upon entering into the Merger Agreement, it became probable that this noncontrolling interest will become redeemable. As such, starting in August 2013 and up to the estimated date of closing, we will record adjustments on a straight line basis to this noncontrolling interest and recognize the respective impact to earnings per share. Otherwise, we believe that it is not probable that the contingent

20

HEALTH MANAGEMENT ASSOCIATES, INC.

NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

8. Acquisitions, Joint Ventures and Other Activity (continued)

rights of any other noncontrolling shareholders will vest because there are no circumstances known to us that would trigger such equity repurchase obligations of our subsidiaries. Accordingly, insofar as the contingent rights are concerned, the carrying values of the related redeemable equity securities have not been adjusted since being initially recorded.

9. Discontinued Operations and Assets Held for Sale

Our discontinued operations during the periods presented herein included: (i) the 172-bed Woman’s Center at Dallas Regional Medical Center in Mesquite, Texas, which was closed in 2008 and the related real property of which was sold on May 21, 2012; (ii) 25-bed St. Mary’s Medical Center of Scott County in Oneida, Tennessee, which was returned to the lessor on May 24, 2012; and (iii) the 293-bed idle Riverside hospital campus (“Riverside”) in Knoxville, Tennessee. The operating results and cash flows of discontinued operations are included in our consolidated financial statements up to the date of disposition. Additionally, as required by GAAP, the operating results and cash flows of the abovementioned entities have been separately presented as discontinued operations in the interim condensed consolidated financial statements. Long-lived assets to be disposed of are reported at the lower of their carrying amount or estimated fair value, less costs to sell. The estimates of fair value are based on recent sales of similar assets, market analyses, pending disposition transactions and market responses based on discussions with, and offers received from, potential buyers (i.e., Level 2 inputs under the GAAP fair value hierarchy described at Note 7).

One of our subsidiaries acquired Riverside on September 30, 2011. The hospital at the Riverside location was closed prior to our acquisition. Although we are currently evaluating various disposal alternatives, the timing of a divestiture of Riverside has not yet been determined. At both September 30, 2013 and December 31, 2012, the assets held for sale in our condensed consolidated balance sheets were comprised of the remaining property, plant and equipment at the location.

The table below sets forth the underlying details of our discontinued operations (in thousands) during the three and nine months ended September 30, 2012 (there was no such activity during the three and nine months ended September 30, 2013).

	Three Months Ended September 30, 2012			Nine Months Ended September 30, 2012
Net revenue before the provision for doubtful accounts	$	—		$	7,316
Provision for doubtful accounts		—			(2,139	)
Net revenue		—			5,177
Salaries and benefits		192			4,587
Depreciation and amortization		—			1,988
Other operating expenses		889			5,791
Loss on sales of assets		—			1,102
Long-lived asset and goodwill impairment charges		1,187			1,187
		2,268			14,655
Loss before income taxes		(2,268	)		(9,478	)
Income tax benefit		879			3,673
Loss from discontinued operations	$	(1,389	)	$	(5,805	)

Activity Subsequent to September 30, 2013. On October 7, 2013, we announced that we had signed a definitive agreement to sell Williamson Memorial Hospital (“Williamson”), a 76-bed general acute care hospital in Williamson, West Virginia. Subject to regulatory approvals, we anticipate this transaction will close on or before March 31, 2014. Williamson will be reflected as discontinued operations in our next Annual Report on Form 10-K. Accordingly, Williamson’s results of operations and cash flows, which are not material to the consolidated financial statements as a whole for all periods presented, will be reclassified to discontinued operations in the consolidated financial statements, and the corresponding assets and liabilities will be segregated on the balance sheets.

10. Income Taxes

Our effective income tax rates were approximately 54.8% and 32.0% during the nine months ended September 30, 2013 and 2012, respectively, and 47.2% and 28.6% during the three months ended September 30, 2013 and 2012, respectively. Net income attributable to noncontrolling interests, which is not tax-effected in our consolidated financial statements, reduced our effective income tax rates by approximately 310 basis points and 370 points during the three and nine months ended September 30, 2012, respectively. The impact was an increase of 120 basis points and 690 basis points during the three and nine months ended September 30, 2013, respectively.

21

HEALTH MANAGEMENT ASSOCIATES, INC.

NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

10. Income Taxes (continued)

Our effective income tax rates were impacted by the finalization of certain federal and state income tax returns, the satisfactory completion of certain state tax audits and examinations and the lapsing of state statutes of limitations. The impacts of these items, combined with the overall decrease in income from continuing operations, contributed to the overall change in effective income tax rate.

Our net federal and state income tax payments during the nine months ended September 30, 2013 and 2012 approximated $6.3 million and $38.3 million, respectively.

11. Accumulated Other Comprehensive Income (Loss)

GAAP defines comprehensive income as the change in equity of a business enterprise from transactions and other events and circumstances that relate to non-owner sources. Rollforwards of our accumulated other comprehensive income (loss) are presented in the table below (in thousands).

	Unrealized Gains (Losses)  on Available-for-Sale Securities			Interest Rate Swap Contract			Totals
Balances at January 1, 2013, net of income taxes of $27,192	$	6,017		$	(47,957	)	$	(41,940	)
Unrealized gains (losses) on available-for-sale securities, net of income taxes of $1,514		2,807			—			2,807
Adjustments for net (gains) losses reclassified into net income, net of income taxes of $(945)		(1,756	)		—			(1,756	)
Reclassification adjustments for amortization of expense into net income, net of income taxes of $20,774		—			32,741			32,741
Balances at September 30, 2013, net of income taxes of $5,848	$	7,068		$	(15,216	)	$	(8,148	)
Balances at January 1, 2012, net of income taxes of $60,635	$	831		$	(96,271	)	$	(95,440	)
Unrealized gains (losses) on available-for-sale securities, net of income taxes of $3,092		5,736			—			5,736
Adjustments for net (gains) losses reclassified into net income, net of income taxes of $(119)		(221	)		—			(221	)
Reclassification adjustments for amortization of expense into net income, net of income taxes of $23,267		—			36,670			36,670
Balances at September 30, 2012, net of income taxes of $34,395	$	6,346		$	(59,601	)	$	(53,255	)

Supplemental information about our accumulated other comprehensive income (loss) reclassification adjustments is summarized in the table below (in thousands).

	Three Months Ended September 30,						Nine Months Ended September 30,						Affected Line Item in the
	2013			2012			2013			2012			Consolidated Statements of Income
Available-for-sale securities	$	(706	)	$	(443	)	$	(2,700	)	$	(340	)	Other
Income tax expense		247			155			945			119		Income tax benefit (provision)
Available-for-sale securities, net reclassification	$	(459	)	$	(288	)	$	(1,755	)	$	(221	)	Consolidated net income
Interest rate swap contract	$	17,208		$	19,404		$	53,515		$	59,937		Interest expense
Income tax expense		(6,680	)		(7,533	)		(20,774	)		(23,267	)	Income tax benefit (provision)
Interest rate swap contract, net reclassification	$	10,528		$	11,871		$	32,741		$	36,670		Consolidated net income

Prior to a debt restructuring that we completed on November 18, 2011, which is discussed at Note 3 to the audited consolidated financial statements included in our 2012 Form 10-K, our interest rate swap contract had been a perfectly effective cash flow hedge instrument that was used to manage the risk of variable interest rate fluctuation on certain long-term debt. Changes in the estimated fair value of our interest rate swap contract were previously recognized as a component of other comprehensive income (loss). As a result of our debt restructuring, the interest rate swap contract is no longer an effective cash flow hedge instrument. Therefore, changes in its estimated fair value subsequent to our debt restructuring are no longer included in other comprehensive income (loss) but are recognized in our consolidated statements of operations as a component of interest expense. Future amortization of the accumulated other comprehensive loss attributable to our interest rate swap contract is expected to approximate $24.9 million during the period from October 1, 2013 to the expiration of the interest rate swap contract in February 2014.

22

HEALTH MANAGEMENT ASSOCIATES, INC.

NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

12. Commitments and Contingencies

Physician and Physician Group Guarantees. We are committed to providing financial assistance to physicians and physician groups practicing in the communities that our hospitals serve through certain recruiting arrangements and professional services agreements. At September 30, 2013, we were committed to guarantees of approximately $212.9 million under such arrangements. The actual amounts advanced will depend on the financial results of each physician’s and physician group’s private practice during the related contractual measurement period, which generally approximates one to two years. We believe that the recorded liabilities for physician and physician group guarantees of $77.0 million and $89.7 million at September 30, 2013 and December 31, 2012, respectively, are adequate and reasonable; however, there can be no assurances that the ultimate liability will not exceed our estimates.

Medicare/Medicaid Billing Lawsuit. On January 11, 2010, Health Management Associates, Inc. (referred to as “Health Management” for the remainder of this Note 12) and one of its subsidiaries were named in a qui tam lawsuit entitled United States of America ex rel. J. Michael Mastej v. Health Management Associates, Inc. et al. in the U.S. District Court for the Middle District of Florida, Tampa Division. The plaintiff’s complaint alleged that, among other things, the defendants erroneously submitted claims to Medicare and that those claims were falsely certified to be in compliance with Section 1877 of the Social Security Act of 1935 (commonly known as the “Stark law”) and the Anti-Kickback Statute. The plaintiff’s complaint further alleged that the defendants’ conduct violated the federal False Claims Act of 1863 (the “False Claims Act”). The plaintiff seeks recovery of all Medicare and Medicaid reimbursement that the defendants received as a result of the alleged false certifications and treble damages under the False Claims Act, as well as a civil penalty for each Medicare and Medicaid claim supported by such alleged false certifications. On August 18, 2010, the plaintiff filed a first amended complaint that was similar to the original complaint. On February 23, 2011, the case was transferred to the U.S. District Court for the Middle District of Florida, Fort Myers Division (Case No. 2:11-cv-00089-JES-DNF). On May 5, 2011, the plaintiff filed a second amended complaint, which was similar to the first amended complaint. On May 17, 2011, the defendants moved to dismiss the second amended complaint for failure to state a claim with the particularity required and failure to state a claim upon which relief can be granted. On January 26, 2012, the United States gave notice of its decision not to intervene in this lawsuit. On February 16, 2012, the court granted the defendants’ motion to dismiss, without prejudice. The court’s order permitted the plaintiff to file an amended complaint. On March 8, 2012, the plaintiff filed a third amended complaint, which was similar to the first amended complaint and the second amended complaint. On March 26, 2012, the defendants moved to dismiss the third amended complaint on the same bases set forth in earlier motions to dismiss. On March 19, 2013, the U.S. District Court for the Middle District of Florida, Tampa Division, dismissed the third amended complaint with prejudice. On March 28, 2013, the United States of America filed a motion to clarify that the dismissal with prejudice did not relate to the United States. On April 4, 2013, the defendants filed an opposition to the United States’ motion for clarification. The Government’s motion remains pending at this time. On April 16, 2013, the plaintiff filed a motion for relief from judgment and for leave to amend the complaint, and a proposed fourth amended complaint. On April 18, 2013, the plaintiff filed a notice of appeal. On May 2, 2013, the defendants filed an opposition to the plaintiff’s motion for relief from judgment and for leave to amend the complaint for the fourth time. On July 10, 2013, the court denied plaintiff’s motion for relief from judgment and for leave to amend the complaint for the fourth time. The case is now on appeal to the Eleventh Circuit Court of Appeals. On August 26, 2013, plaintiff submitted his initial brief and, on October 15, 2013, defendants filed their answer brief and on November 8, 2013 plaintiff filed his reply brief. We intend to vigorously defend Health Management and its subsidiary against the allegations in this matter. We do not believe that the final outcome of this matter will be material.

Governmental Matters. Several Health Management hospitals received letters during 2009 requesting information in connection with a U.S. Department of Justice (“DOJ”) investigation relating to kyphoplasty procedures. Kyphoplasty is a minimally invasive spinal procedure used to treat vertebral compression fractures. The DOJ is currently investigating hospitals and hospital operators in multiple states to determine whether certain Medicare claims for kyphoplasty were incorrect when billed as an inpatient service rather than as an outpatient service. We believe that the DOJ’s investigation originated with a False Claims Act lawsuit against Kyphon, Inc., the company that developed the kyphoplasty procedure. The requested information has been provided to the DOJ and we are cooperating with the investigation. To date, the DOJ has not asserted any monetary or other claims against the Health Management hospitals in this matter. Based on the aggregate billings for inpatient kyphoplasty procedures during the period under review that were performed at the Health Management hospitals subject to the DOJ’s inquiry, we do not believe that the final outcome of this matter will be material.

During September 2010, Health Management received a letter from the DOJ indicating that an investigation was being conducted to determine whether certain Health Management hospitals improperly submitted claims for the implantation of implantable cardioverter defibrillators (“ICDs”). The DOJ’s investigation covers the period commencing with Medicare’s expansion of coverage for ICDs in 2003 to the present. The letter from the DOJ further indicates that the claims submitted by Health Management’s hospitals for ICDs and related services need to be reviewed to determine if Medicare coverage and payment was appropriate. During 2010, the DOJ sent similar letters and other requests to a large

23

HEALTH MANAGEMENT ASSOCIATES, INC.

NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

12. Commitments and Contingencies (continued)

number of unrelated hospitals and hospital operators across the country as part of a nation-wide review of ICD billing under the Medicare program. We are cooperating with the DOJ in its ongoing investigation, which could potentially give rise to claims against Health Management and/or certain of its subsidiary hospitals under the False Claims Act or other statutes, regulations or laws. Additionally, we are conducting an internal review of hospital medical records related to ICDs that are the subject of the DOJ investigation. To date, the DOJ has not asserted any monetary or other claims against Health Management or its hospitals in this matter and, at this time, we are unable to determine the potential impact, if any, that will result from the final resolution of the investigation.

The U.S. Department of Health and Human Services, Office of Inspector General (“HHS-OIG”) and the DOJ, including the Civil Division and U.S. Attorney’s Offices in the Eastern District of Pennsylvania, the Middle District of Florida, the Eastern District of Oklahoma, the Middle District of Tennessee, the Western District of North Carolina, the District of South Carolina and the Middle District of Georgia, are currently investigating Health Management and certain of its subsidiaries (HHS-OIG and the DOJ are collectively referred to as “Government Representatives”). We believe that such investigations relate to the Anti-Kickback Statute, the Stark law and the False Claims Act and are focused on: (i) physician referrals, including financial arrangements with our whole-hospital physician joint ventures; (ii) the medical necessity of emergency room tests and patient admissions, including whether the Pro-Med software that we used led to any medically unnecessary tests or admissions; and (iii) the medical necessity of certain surgical procedures. We further believe that the investigations may have originated as a result of qui tam lawsuits filed on behalf of the United States. In connection with the investigations, HHS-OIG has requested certain records through subpoenas, which apply system-wide, that were served on Health Management on May 16, 2011 and July 21, 2011. On June 10, June 26, and July 11, 2013, Health Management received additional subpoenas, which supplements the July 21, 2011 subpoena, from the HHS-OIG regional office in Atlanta, Georgia. On June 12, 2013, Health Management received an additional subpoena, which supplements the May 16, 2011 subpoena, from the HHS-OIG regional office in Miami Lakes, Florida. Additionally, Government Representatives have interviewed certain of our current and former employees. We are conducting internal investigations and have met with Government Representatives on numerous occasions to respond to their inquiries. We intend to cooperate with the Government Representatives during their investigations. At this time, we are unable to determine the potential impact, if any, that will result from the final resolution of these investigations.

On February 22, 2012 and February 24, 2012, HHS-OIG served subpoenas on certain Health Management hospitals relating to those hospitals’ relationships with Allegiance Health Management, Inc. (“Allegiance”). Allegiance, which is unrelated to Health Management, is a post acute health care management company that provides intensive outpatient psychiatric (“IOP”) services to patients. The Health Management hospitals that were served subpoenas were: (i) Central Mississippi Medical Center in Jackson, Mississippi; (ii) Crossgates River Oaks Hospital in Brandon, Mississippi; (iii) Davis Regional Medical Center in Statesville, North Carolina; (iv) Lake Norman Regional Medical Center in Mooresville, North Carolina; (v) the Medical Center of Southeastern Oklahoma in Durant, Oklahoma; and (vi) Natchez Community Hospital in Natchez, Mississippi. Each of those hospitals has or had a contract with Allegiance. Among other things, the subpoenas seek: (i) documents related to the hospitals’ financial relationships with Allegiance; (ii) documents related to patients who received IOP services from Allegiance at the Health Management hospitals, including their patient medical records; (iii) documents relating to complaints or concerns regarding Allegiance’s IOP services at the Health Management hospitals; (iv) documents relating to employees, physicians and therapists who were involved with the IOP services provided by Allegiance at the Health Management hospitals; and (v) other documents related to Allegiance, including leases, contracts, policies and procedures, training documents, budgets and financial analyses. The period of time covered by the subpoenas is January 1, 2008 through the date of subpoena compliance. We believe that HHS-OIG has served similar subpoenas on other non-Health Management hospitals that had contracts with Allegiance. We intend to cooperate with the investigations. At this time, we are unable to determine the potential impact that will result from the final resolution of these investigations.

On April 25, 2013, Health Management received a subpoena from the SEC, issued pursuant to an investigation, requesting documents related to accounts receivable, billing write-downs, contractual adjustments, reserves for doubtful accounts, and accounts receivable aging, and revenue from Medicare, Medicaid and from privately insured or uninsured patients. On June 5, 2013, Health Management received a supplemental subpoena from the SEC which requests additional financial reports. This investigation is ongoing and we are cooperating with the SEC’s investigation. We are unable to determine the potential course or impact, if any, of this investigation.

In addition to the abovementioned subpoenas and investigations, certain of our hospitals have received other requests for information from state and federal agencies. We are cooperating with all of the ongoing investigations by collecting and producing the requested materials. Because a large portion of our government investigations are in their early stages, we are unable to evaluate the outcome of such matters or determine the potential impact, if any, that could result from their final resolution.

Class Action and Derivative Action Lawsuits. On April 30, 2012, two class action lawsuits that were brought against Health Management and certain of its then executive officers, one of whom was at that time also a director, were

24

HEALTH MANAGEMENT ASSOCIATES, INC.

NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

12. Commitments and Contingencies (continued)

consolidated in the U.S. District Court for the Middle District of Florida under the caption In Re: Health Management Associates, Inc., et al. (Case No. 2:12-cv-00046-JES-DNF) and three pension fund plaintiffs were appointed as lead plaintiffs. On July 30, 2012, the lead plaintiffs filed an amended consolidated complaint purportedly on behalf of stockholders who purchased our common stock during the period from July 27, 2009, through January 9, 2012. The amended consolidated complaint (i) alleges that Health Management made false and misleading statements in certain public disclosures regarding its business and financial results and (ii) asserts claims for violations of Sections 10(b) and 20(a) of the Securities Exchange Act of 1934, as amended. Among other things, the plaintiffs claim that Health Management inflated its earnings by engaging in fraudulent Medicare billing practices that entailed admitting patients to observation status when they should not have been admitted at all and to inpatient status when they should have been admitted to observation status. The plaintiffs seek unspecified monetary damages. On October 22, 2012, the defendants moved to dismiss the plaintiffs’ amended consolidated complaint for failure to state a claim or plead facts required by the Private Securities Litigation Reform Act. The plaintiffs filed an unopposed stipulation and proposed order to suspend briefing on the defendants’ motion to dismiss because they intended to seek leave of court to file a proposed second amended consolidated complaint. On December 15, 2012, the court entered an order approving the stipulation and providing a schedule for briefing with respect to the proposed amended pleadings. On February 11, 2013, the defendants were served with the second amended consolidated complaint, which asserts the same claims as the amended consolidated complaint. As of August 15, 2013, the defendants’ motion to dismiss the second amended complaint for failure to state a claim and plead facts required by the Private Securities Litigation Reform Act was fully submitted and awaiting the Court’s decision. We intend to vigorously defend against the allegations in this lawsuit. We are unable to predict the outcome or determine the potential impact, if any, that could result from its final resolution.

On January 22, 2013, a putative shareholder derivative action entitled The City of Haverhill Retirement System v. Dauten, et al. (Case No. 8:13-cv-00213) was filed in the U.S. District Court for the Middle District of Florida, Tampa Division, purportedly on behalf of Health Management against its then directors. Health Management was also named as a nominal defendant. The complaint alleges that, among other things, the defendants breached their fiduciary duties to Health Management and its stockholders by supposedly causing Health Management to undertake a scheme to defraud Medicare by improperly admitting certain emergency room patients as “inpatients” in violation of the False Claims Act and then issuing false and misleading public statements about Health Management’s financial outlook and compliance with laws and regulations. The complaint also alleges that the defendants breached their fiduciary duties by exposing Health Management to potentially significant civil and criminal penalties as a result of the aforementioned investigations by HHS-OIG and the DOJ as well as the stockholder class action and other ongoing litigation. The complaint seeks monetary damages from the defendants, other than Health Management. On February 8, 2013, the case was transferred to the U.S. District Court for the Middle District of Florida, Fort Myers Division (Case No. 2:13-cv-00092). On April 10, 2013 the plaintiff filed an amended complaint which asserts the same claims as its prior complaint, but also names two of the Company’s then executives as defendants. On May 15, 2013, the defendants moved to dismiss the amended complaint for threshold lack of derivative standing, for failure to make a demand on the Board, and for failure to state a claim. On June 26, 2013, the plaintiff opposed the defendants’ motion to dismiss, and on August 16, 2013, the plaintiff moved to amend its complaint to add class action claims related to the Merger Agreement. On August 19, 2013, the defendants moved to suspend briefing on their motion to dismiss pending the outcome of the plaintiff’s motion for leave to amend. On August 20, 2013, the Court granted an order suspending briefing on the defendants’ motion to dismiss and setting a schedule for the briefing of the plaintiff’s motion for leave to amend, which was fully submitted for the Court’s decision as of October 8, 2013. We intend to vigorously defend against the allegations in this lawsuit. Because this lawsuit is in its early stages, we are unable to predict the outcome or determine the potential impact, if any, that could result from its final resolution.

On July 23, 2013, an action entitled Town of Davie Police Officers’ Pension Plan v. Dauten, et al. (C.A. No. 8742) was filed in the Court of Chancery of the State of Delaware. This action purportedly was brought as a class action on behalf of all of Health Management’s stockholders, as well as derivatively on behalf of Health Management against Health Management’s then directors and Wells Fargo Bank, National Association, Wells Fargo Securities, LLC, and Deutsche Bank Securities, Inc. The complaint alleges, among other things, that those directors breached their fiduciary duties (i) by approving a credit agreement in 2011 that contains a change of control covenant which plaintiff contends will coerce shareholders into supporting the re-election of Health Management’s incumbent board of directors and (ii) by not approving Glenview Nominees for election to Health Management’s Board of Directors for purposes of seeking a waiver of the change of control covenant. The complaint further alleges that the Wells Fargo and Deutsche Bank defendants aided and abetted such breaches. The complaint seeks declaratory and injunctive relief, including (i) a declaration that those directors breached their fiduciary duties by entering into the credit agreement and (ii) an order permanently enjoining the board of directors from invoking or enforcing the change of control covenant in the credit agreement. Plaintiff also seeks unspecified damages from those directors and an award of attorneys’ fees and costs. On September 20, 2013, the defendants moved to dismiss this action for lack of subject matter jurisdiction, as well as the plaintiff’s failure to make a demand on the Board of Directors and failure to state a claim. We intend to defend this action.

25

HEALTH MANAGEMENT ASSOCIATES, INC.

NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

12. Commitments and Contingencies (continued)

Five putative class action lawsuits challenging the Merger have been filed on behalf of a putative class consisting of Health Management’s stockholders. Four were filed in the Circuit Court of the Twentieth Judicial Circuit in and for Collier County, Florida: (1) Aliaga v. Health Mgmt. Assocs., Inc., et al., Civ. No. 13-2288-CA (“Aliaga”), filed on August 1, 2013; (2) Copeland v. Health Mgmt. Assocs., Inc., et al., Case No. 13-2356-CA (“Copeland”), filed on August 8, 2013; (3) Lopriore v. Health Mgmt. Assocs., Inc., et al., Case No. 13-2307-CA (“Lopriore”), filed on August 5, 2013; and (4) Smilow v. Health Mgmt. Assocs., Inc., et al., Case No. 13-2371-CA (“Smilow”), filed on August 13, 2013 (collectively, the “Florida Actions”). The fifth case, Margolis, et al. v. Schoen, et al., C.A. No. 8774-CS, was filed in the Court of Chancery of the State of Delaware on August 5, 2013. With limited exceptions, these actions name Health Management, former members of its board of directors, CHS, and Merger Sub as defendants. Generally, the plaintiffs in these actions allege that those directors breached their fiduciary duties to Health Management stockholders by, among other things, approving the Merger Agreement for allegedly inadequate consideration, following an allegedly unfair sale process that favored the interests of CHS and those directors over Health Management stockholders, and that CHS and Merger Sub aided and abetted such alleged breaches of fiduciary duty. The plaintiffs further allege that those directors breached their fiduciary duties by agreeing to terms in the Merger Agreement that favor CHS and deter alternative bids. The actions seek, among other things, an injunction against the completion of the Merger (or rescission of the Merger Agreement to the extent it has been implemented) and the payment of attorneys’ fees and expenses. We intend to defend these actions.

Other. We are also a party to various other legal actions arising out of the normal course of our business. Due to the inherent uncertainties of litigation and dispute resolution, we are unable to estimate the ultimate losses, if any, relating to each of our outstanding legal actions and other loss contingencies. Should an unfavorable outcome occur in some or all of our legal and other related matters, there could be a material adverse effect on our financial position, results of operations and liquidity.

13. Change in Control and Other Costs

On June 25, 2013, Glenview filed with the SEC a preliminary consent solicitation statement which, among other things, sought consent from our stockholders to remove all of the members of our then existing Board of Directors and replace them with the Glenview Nominees. On July 19, 2013, Glenview filed its definitive consent solicitation statement with the SEC and solicited consent from our stockholders (the “Glenview Consent Solicitation Process”). As a result of the Glenview Consent Solicitation Process, on August 16, 2013, all of the incumbent board members were removed and replaced by the Glenview Nominees. Such event constituted a change in control (the “Change in Control”) pursuant to the Health Management Associates, Inc. amended and restated 1996 Executive Incentive Compensation Plan (the “EICP”) and the 2006 Outside Director Restricted Stock Award Plan (the “2006 Director Plan”). As a result of such Change in Control and pursuant to the terms of the EICP and 2006 Director Plan and the applicable award agreements, all of the outstanding and unvested equity and performance cash awards held became vested. At such time an aggregate of approximately 7.3 million shares of common stock were subject to unvested restricted stock and deferred stock awards. The vesting of the stock resulted in the recognition of approximately $42.1 million of incremental stock compensation expense.

In addition, holders of stock options issued under the EICP were entitled to receive a cash payment due to the Change in Control and based on terms as defined in the EICP. This cash payment resulted in recognition of approximately $4.0 million of incremental compensation expense.

Finally, certain employees held an aggregate of approximately $39.0 million of unvested cash awards issued under the EICP. All such awards immediately vested upon the Change in Control.

Related to the Merger Agreement and the Glenview Consent Solicitation Process, we have incurred substantial costs associated with various advisors, including bankers, attorneys and others, and we have also entered into certain retention and severance agreements with key personnel. Outside fees associated with these events were approximately $12.3 million for the three and nine months ended September 30, 2013. Severance and retention costs were approximately $5.4 million and $14.6 million for the three and nine months, respectively, ended September 30, 2013.

All of the above items have been recognized as “Change in control and other related expense” in the Consolidated Statements of Operations in Item 1 of this report.

26

HEALTH MANAGEMENT ASSOCIATES, INC.

NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

14. Agreement and Plan of Merger

On the terms and subject to the conditions set forth in the Merger Agreement, at the effective time of the Merger (the “Effective Time”), each share of our common stock, par value $0.01 per share, (the “HMA Common Stock”) issued and outstanding immediately prior to the Effective Time (other than our treasury shares and any of our shares owned by CHS, Merger Sub or any subsidiary of CHS (other than Merger Sub), us or Merger Sub, and other than shares of HMA Common Stock as to which dissenters’ rights have been properly exercised) will be cancelled and converted into the right to receive (i) $10.50 in cash, without interest (the “Cash Consideration”), (ii) 0.06942 (the “Exchange Ratio”) of a share of CHS common stock, par value $0.01 per share, (the “CHS Common Stock”) and (iii) one contingent value right (each, a “CVR” and collectively, the “CVRs”) issued by CHS subject to and in accordance with the CVR Agreement described below (collectively, the “Merger Consideration”).

Additionally, at the Effective Time (i) each outstanding option to acquire shares of HMA Common Stock, whether or not then vested, will be cancelled and terminated in exchange for the right to receive a number of shares of HMA Common Stock equal to the number of shares of HMA Common Stock subject to such stock option minus the number of shares of HMA Common Stock subject to such option which, when multiplied by the per share closing price of HMA Common Stock as reported on the New York Stock Exchange the day before the Effective Time, is equal to the aggregate exercise price of such option; (ii) each outstanding restricted stock award, whether or not then vested, will vest in full and be treated as an outstanding share of HMA Common Stock; (iii) each deferred stock award that is then outstanding, whether or not then vested, will be cancelled and exchanged for a number of shares of HMA Common Stock underlying such deferred stock award so cancelled; and (iv) each performance cash award, whether or not then vested, will vest in full and be cancelled in exchange for a lump sum cash payment. Any shares of HMA Common Stock issued pursuant to the foregoing will be cancelled and converted into the right to receive the Merger Consideration at the Effective Time.

The Merger Agreement provides that we may not solicit competing acquisition proposals, subject to certain exceptions designed to allow our Board of Directors to fulfill its fiduciary duties.

The consummation of the Merger is subject to closing conditions, including the approval of holders of at least 70% of our outstanding shares, the expiration or termination of the waiting period under the Hart-Scott-Rodino Antitrust Improvements Act, the receipt of certain healthcare regulatory approvals, the absence of certain governmental adverse events occurring with respect to us, the absence of a “material adverse effect” with respect to us or CHS, no change of control acceleration of our debt having occurred and other conditions customary for a transaction of this type.

The Merger Agreement also provides for certain termination rights for both us and CHS. Upon termination of the Merger Agreement under specified circumstances, we may be required to pay CHS a termination fee of $109 million. In the event either party terminates the Merger Agreement because our stockholders do not approve the Merger Agreement, then we may be required to pay CHS a fixed amount of $40 million in expense reimbursement.

We and CHS each made certain representations, warranties and covenants in the Merger Agreement, including, among other things, covenants by us and CHS to conduct our businesses in the ordinary course during the interim period between the execution of the Merger Agreement and consummation of the Merger.

Upon the closing of the Merger, CHS and a trustee mutually acceptable to us and CHS will enter into a Contingent Value Rights Agreement (the “CVR Agreement”) governing the terms of the CVRs. A holder of a CVR will be entitled to receive a cash payment of $1.00 per CVR (the “CVR Payment”), following and conditioned upon the final resolution of certain of our legal matters, as defined in the CVR Agreement, (the “Existing Litigation”). If the amount of certain specified losses (including attorneys fees and expenses) arising out of or relating to the Existing Litigation exceeds $18.0 million (the “Deductible”), the amount paid to the CVR holders would be reduced by $0.90 for each dollar for which the amount of such losses exceeds the Deductible. For purposes of calculating the CVR Payment, the amount of such losses will be net of any amounts actually recovered by CHS under insurance policies. After the closing of the Merger, CHS shall control the management and disposition of the Existing Litigation, including with respect to the defense, negotiation and settlement thereof.

27

HEALTH MANAGEMENT ASSOCIATES, INC.

NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

15. Supplemental Condensed Consolidating Financial Statements

Health Management Associates, Inc. (referred to as the “Parent Issuer” for the remainder of this Note 14) is the primary obligor under the Credit Facilities, as well as our 6.125% Senior Notes due 2016 and our 7.375% Senior Notes due 2020. Certain of the Parent Issuer’s material domestic subsidiaries that are 100% owned (the “Guarantor Subsidiaries”) provide joint and several unconditional guarantees as to payment for borrowings under such long-term debt arrangements; however, other Parent Issuer subsidiaries (the “Non-Guarantor Subsidiaries”) have not been required to provide any such guarantees. See Note 3 herein and Note 3 to the audited consolidated financial statements included in our 2012 Form 10-K for further information regarding our long-term debt arrangements. Following are schedules which present condensed consolidating financial statements as of September 30, 2013 and December 31, 2012, as well as the three and nine months ended September 30, 2013 and 2012. However, this financial information may not necessarily be indicative of the results of operations, cash flows or financial position of the Parent Issuer, the Guarantor Subsidiaries and the Non-Guarantor Subsidiaries if they had operated as independent entities.

Health Management Associates, Inc.

Condensed Consolidating Statement of Operations

Three Months Ended September 30, 2013

(in thousands)

	Parent Issuer			Guarantor Subsidiaries			Non- Guarantor Subsidiaries			Eliminations			Consolidated
Net revenue before the provision for doubtful accounts	$	—		$	969,614		$	707,065		$	—		$	1,676,679
Provision for doubtful accounts		—			(149,979	)		(105,457	)		—			(255,436	)
Net revenue		—			819,635			601,608			—			1,421,243
Salaries and benefits		—			307,950			347,889			—			655,839
Supplies		—			143,672			76,850			—			220,522
Rent expense		—			19,652			20,841			—			40,493
Other operating expenses		—			191,942			179,450			—			371,392
Medicare and Medicaid HCIT incentive payments		—			(1,972	)		(43	)		—			(2,015	)
Change in control and other related expense		—			—			102,886			—			102,886
Equity in the earnings of consolidated subsidiaries		47,816			—			—			(47,816	)		—
Depreciation and amortization		9,294			55,331			34,726			—			99,351
Interest expense		65,231			2,652			2,864			—			70,747
Other		305			275			304			—			884
		122,646			719,502			765,767			(47,816	)		1,560,099
Income (loss) from continuing operations before income taxes		(122,646	)		100,133			(164,159	)		47,816			(138,856	)
Income tax (expense) benefit		45,814			(66,809	)		86,504			—			65,509
Income (loss) from continuing operations		(76,832	)		33,324			(77,655	)		47,816			(73,347	)
Income (loss) from discontinued operations, net of income taxes		—			—			—			—			—
Consolidated net income (loss)		(76,832	)		33,324			(77,655	)		47,816			(73,347	)
Net income attributable to noncontrolling interests		—			—			(3,485	)		—			(3,485	)
Accretion of redeemable equity securities		—			—			(19,813	)		—			(19,813	)
Net income (loss) attributable to Health Management Associates, Inc. common stockholders	$	(76,832	)	$	33,324		$	(100,953	)	$	47,816		$	(96,645	)

28

HEALTH MANAGEMENT ASSOCIATES, INC.

NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

15. Supplemental Condensed Consolidating Financial Statements

Health Management Associates, Inc.

Condensed Consolidating Statement of Comprehensive Income (Loss)

Three Months Ended September 30, 2013

(in thousands)

	Parent Issuer			Guarantor Subsidiaries		Non- Guarantor Subsidiaries			Eliminations		Consolidated
Consolidated net income (loss)	$	(76,832	)	$	33,324	$	(77,655	)	$	47,816	$	(73,347	)
Components of other comprehensive income before income taxes attributable to:
Available-for-sale securities:
Unrealized gains (losses), net		—			—		4,720			—		4,720
Adjustments for net (gains) losses reclassified into net income		—			—		(706	)		—		(706	)
Interest rate swap contract:
Reclassification adjustments for amortization into net income		17,208			—		—			—		17,208
Other comprehensive income before income taxes		17,208			—		4,014			—		21,222
Income tax expense related to items of other comprehensive income		(6,680	)		—		(1,405	)		—		(8,085	)
Other comprehensive income (loss), net		10,528			—		2,609			—		13,137
Total consolidated comprehensive income (loss)		(66,304	)		33,324		75,046			47,816		(60,210	)
Total comprehensive income (loss) attributable to noncontrolling interests		—			—		(3,485	)		—		(3,485	)
Accretion of redeemable equity securities		—			—		(19,813	)		—		(19,813	)
Total comprehensive income (loss) attributable to Health Management Associates, Inc. common stockholders	$	(66,304	)	$	33,324	$	(98,344	)	$	47,816	$	(83,508	)

29

HEALTH MANAGEMENT ASSOCIATES, INC.

NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

15. Supplemental Condensed Consolidating Financial Statements

Health Management Associates, Inc.

Condensed Consolidating Statement of Operations

Three Months Ended September 30, 2012

(in thousands)

(restated)

	Parent Issuer			Guarantor Subsidiaries			Non- Guarantor Subsidiaries			Eliminations			Consolidated
Net revenue before the provision for doubtful accounts	$	—		$	1,004,282		$	658,655		$	—		$	1,662,937
Provision for doubtful accounts		—			(143,884	)		(80,194	)		—			(224,078	)
Net revenue		—			860,398			578,461			—			1,438,859
Salaries and benefits		—			333,294			304,011			—			637,305
Supplies		—			147,995			68,824			—			216,819
Rent expense		—			21,409			20,398			—			41,807
Other operating expenses		—			182,506			149,850			—			332,356
Medicare and Medicaid HCIT incentive payments		—			(15,990	)		(8,234	)		—			(24,224	)
Equity in the earnings of consolidated subsidiaries		(93,895	)		—			—			93,895			—
Depreciation and amortization		4,946			52,819			33,798			—			91,563
Interest expense		72,789			2,507			1,620			—			76,916
Other		(361	)		(137	)		(1,865	)		—			(2,363	)
		(16,521	)		724,403			568,402			93,895			1,370,179
Income from continuing operations before income taxes		16,521			135,995			10,059			(93,895	)		68,680
Income tax (expense) benefit		24,422			(42,704	)		(1,381	)		—			(19,663	)
Income from continuing operations		40,943			93,291			8,678			(93,895	)		49,017
Loss from discontinued operations, net of income taxes		—			—			(1,389	)		—			(1,389	)
Consolidated net income		40,943			93,291			7,289			(93,895	)		47,628
Net income attributable to noncontrolling interests		—			8			(6,693	)		—			(6,685	)
Net income (loss) attributable to Health Management Associates, Inc. common stockholders	$	40,943		$	93,299		$	596		$	(93,895	)	$	40,943

30

HEALTH MANAGEMENT ASSOCIATES, INC.

NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

15. Supplemental Condensed Consolidating Financial Statements

Health Management Associates, Inc.

Condensed Consolidating Statement of Comprehensive Income

Three Months Ended September 30, 2012

(in thousands)

(restated)

	Parent Issuer			Guarantor Subsidiaries		Non- Guarantor Subsidiaries			Eliminations			Consolidated
Consolidated net income	$	40,943		$	93,291	$	7,289		$	(93,895	)	$	47,628
Components of other comprehensive income before income taxes attributable to:
Available-for-sale securities:
Unrealized gains (losses), net		(1	)		—		4,245			—			4,244
Adjustments for net (gains) losses reclassified into net income		—			—		(443	)		—			(443	)
Interest rate swap contract:
Reclassification adjustments for amortization into net income		19,404			—		—			—			19,404
Other comprehensive income (loss) before income taxes		19,403			—		3,802			—			23,205
Income tax expense related to items of other comprehensive income		(7,531	)		—		(1,332	)		—			(8,863	)
Other comprehensive income (loss), net		11,872			—		2,470			—			14,342
Total consolidated comprehensive income		52,815			93,291		9,759			(93,895	)		61,970
Total comprehensive income attributable to noncontrolling interests		—			8		(6,693	)		—			(6,685	)
Total comprehensive income (loss) attributable to Health Management Associates, Inc. common stockholders	$	52,815		$	93,299	$	3,066		$	(93,895	)	$	55,285

31

HEALTH MANAGEMENT ASSOCIATES, INC.

NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

15. Supplemental Condensed Consolidating Financial Statements

Health Management Associates, Inc.

Condensed Consolidating Statement of Operations

Nine Months Ended September 30, 2013

(in thousands)

	Parent Issuer			Guarantor Subsidiaries			Non- Guarantor Subsidiaries			Eliminations			Consolidated
Net revenue before the provision for doubtful accounts	$	—		$	3,017,338		$	2,083,136		$	—		$	5,100,474
Provision for doubtful accounts		—			(432,025	)		(297,670	)		—			(729,695	)
Net revenue		—			2,585,313			1,785,466			—			4,370,779
Salaries and benefits		—			962,221			1,051,294			—			2,013,515
Supplies		—			459,728			229,306			—			689,034
Rent expense		—			61,619			64,087			—			125,706
Other operating expenses		—			561,775			482,207			—			1,043,982
Medicare and Medicaid HCIT incentive payments		—			(11,876	)		(11,731	)		—			(23,607	)
Change in control and other related expense		—			—			112,026			—			112,026
Equity in the earnings of consolidated subsidiaries		(62,752	)		—			—			62,752			—
Depreciation and amortization		22,936			164,838			101,821			—			289,595
Interest expense		198,238			8,082			6,032			—			212,352
Other		1,150			(248	)		(3,750	)		—			(2,848	)
		159,572			2,206,139			2,031,292			62,752			4,459,755
Income (loss) from continuing operations before income taxes		(159,572	)		379,174			(245,826	)		(62,752	)		(88,976	)
Income tax (expense) benefit		106,588			(181,786	)		123,994			—			48,796
Income (loss) from continuing operations		(52,464	)		197,388			(121,832	)		(62,752	)		(40,180	)
Loss from discontinued operations, net of income taxes		—			—			—			—			—
Consolidated net income (loss)		(52,464	)		197,388			(121,832	)		(62,752	)		(40,180	)
Net income attributable to noncontrolling interests		—			—			(12,804	)		—			(12,804	)
Accretion of redeemable equity securities		—			—			(19,813	)					(19,813	)
Net income (loss) attributable to Health Management Associates, Inc. common stockholders	$	(52,464	)	$	197,388		$	(154,449	)	$	(62,752	)	$	(72,797	)

32

HEALTH MANAGEMENT ASSOCIATES, INC.

NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

15. Supplemental Condensed Consolidating Financial Statements

Health Management Associates, Inc.

Condensed Consolidating Statement of Comprehensive Income (Loss)

Nine Months Ended September 30, 2013

(in thousands)

	Parent Issuer			Guarantor Subsidiaries		Non- Guarantor Subsidiaries			Eliminations			Consolidated
Consolidated net income (loss)	$	(52,984	)	$	197,388	$	(121,832	)	$	(62,752	)	$	(40,180	)
Components of other comprehensive income before income taxes attributable to:
Available-for-sale securities:
Unrealized gains (losses), net		—			—		4,321			—			4,321
Adjustments for net (gains) losses reclassified into net income		—			—		(2,700	)		—			(2,700	)
Interest rate swap contract:
Reclassification adjustments for amortization into net income		53,515			—		—			—			53,515
Other comprehensive income before income taxes		53,515			—		1,621			—			55,136
Income tax expense related to items of other comprehensive income		(20,774	)		—		(569	)		—			(21,343	)
Other comprehensive income (loss), net		32,741			—		1,052			—			33,793
Total consolidated comprehensive income (loss)		(20,243	)		197,388		(120,780	)		(62,752	)		(6,387	)
Total comprehensive income attributable to noncontrolling interests		—			—		(12,804	)		—			(12,804	)
Accretion of redeemable equity securities		—			—		(19,813	)		—			(19,813	)
Total comprehensive income (loss) attributable to Health Management Associates, Inc. common stockholders	$	(20,243	)	$	197,388	$	(153,397	)	$	(62,752	)	$	(39,004	)

33

HEALTH MANAGEMENT ASSOCIATES, INC.

NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

15. Supplemental Condensed Consolidating Financial Statements

Health Management Associates, Inc.

Condensed Consolidating Statement of Operations

Nine Months Ended September 30, 2012

(in thousands)

(restated)

	Parent Issuer			Guarantor Subsidiaries			Non- Guarantor Subsidiaries			Eliminations			Consolidated
Net revenue before the provision for doubtful accounts	$	—		$	3,059,365		$	1,974,131		$	—		$	5,033,496
Provision for doubtful accounts		—			(395,487	)		(244,415	)		—			(639,902	)
Net revenue		—			2,663,878			1,729,716			—			4,393,594
Salaries and benefits		—			1,007,196			934,279			—			1,941,475
Supplies		—			464,888			212,528			—			677,416
Rent expense		—			67,522			62,999			—			130,521
Other operating expenses		—			552,278			418,335			—			970,613
Medicare and Medicaid HCIT incentive payments		—			(18,612	)		(11,263	)		—			(29,875	)
Equity in the earnings of consolidated subsidiaries		(267,785	)		—			—			267,785			—
Depreciation and amortization		10,623			152,230			92,722			—			255,575
Interest expense		229,237			7,180			4,632			—			241,049
Other		(768	)		(299	)		(678	)		—			(1,745	)
		(28,693	)		2,232,383			1,713,554			267,785			4,185,029
Income from continuing operations before income taxes		28,693			431,495			16,162			(267,785	)		208,565
Income tax (expense) benefit		85,504			(154,263	)		1,953			—			(66,806	)
Income from continuing operations		114,197			277,232			18,115			(267,785	)		141,759
Loss from discontinued operations, net of income taxes		—			—			(5,805	)		—			(5,805	)
Consolidated net income		114,197			277,232			12,310			(267,785	)		135,954
Net income attributable to noncontrolling interests		—			(133	)		(21,624	)		—			(21,757	)
Net income (loss) attributable to Health Management Associates, Inc. common stockholders	$	114,197		$	277,099		$	(9,314	)	$	(267,785	)	$	114,197

34

HEALTH MANAGEMENT ASSOCIATES, INC.

NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

15. Supplemental Condensed Consolidating Financial Statements

Health Management Associates, Inc.

Condensed Consolidating Statement of Comprehensive Income

Nine Months Ended September 30, 2012

(in thousands)

(restated)

	Parent Issuer			Guarantor Subsidiaries			Non- Guarantor Subsidiaries			Eliminations			Consolidated
Consolidated net income	$	114,197		$	277,232		$	12,310		$	(267,785	)	$	135,954
Components of other comprehensive income before income taxes attributable to:
Available-for-sale securities:
Unrealized gains (losses), net		66			—			8,762			—			8,828
Adjustments for net (gains) losses reclassified into net income		—			—			(340	)		—			(340	)
Interest rate swap contract:
Reclassification adjustments for amortization into net income		59,937			—			—			—			59,937
Other comprehensive income before income taxes		60,003			—			8,422			—			68,425
Income tax expense related to items of other comprehensive income		(23,292	)		—			(2,948	)		—			(26,240	)
Other comprehensive income, net		36,711			—			5,474			—			42,185
Total consolidated comprehensive income		150,908			277,232			17,784			(267,785	)		178,139
Total comprehensive income attributable to noncontrolling interests		—			(133	)		(21,624	)		—			(21,757	)
Total comprehensive income (loss) attributable to Health Management Associates, Inc. common stockholders	$	150,908		$	277,099		$	(3,840	)	$	(267,785	)	$	156,382

35

HEALTH MANAGEMENT ASSOCIATES, INC.

NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

15. Supplemental Condensed Consolidating Financial Statements

Health Management Associates, Inc.

Condensed Consolidating Balance Sheet

September 30, 2013

(in thousands)

	Parent Issuer			Guarantor Subsidiaries		Non- Guarantor Subsidiaries		Eliminations			Consolidated
Current assets:
Cash and cash equivalents	$	(11,989	)	$	10,974	$	2,306	$	—		$	1,291
Available-for-sale securities		—			—		62,961		—			62,961
Accounts receivable, net		—			551,445		418,687		—			970,132
Supplies, prepaid expenses and other assets		3,605			134,892		88,055		—			226,552
Prepaid and recoverable income taxes		164,803			—		—		—			164,803
Restricted funds		—			—		30,667		—			30,667
Assets held for sale		—			—		6,250		—			6,250
Total current assets		156,419			697,311		608,926		—			1,462,656
Property, plant and equipment, net		165,248			2,272,618		1,152,966		—			3,590,832
Investments in consolidated subsidiaries		3,767,387			—		—		(3,767,387	)		—
Restricted funds		—			—		125,042		—			125,042
Intercompany receivables		931,826			343,308		—		(1,275,134	)		—
Goodwill		—			654,500		378,213		—			1,032,713
Deferred charges and other assets		87,404			101,170		225,086		—			413,660
Total assets	$	5,108,284		$	4,068,907	$	2,490,233	$	(5,042,521	)	$	6,624,903
Current liabilities:
Accounts payable	$	13,693		$	91,004	$	55,868	$	—		$	160,565
Accrued expenses and other current liabilities		62,355			226,184		282,241		—			570,780
Deferred income taxes		10,169			—		—		—			10,169
Current maturities of long-term debt and capital lease obligations		80,690			22,666		7,424		—			110,780
Total current liabilities		166,907			339,854		345,533		—			852,294
Deferred income taxes		386,543			—		—		—			386,543
Long-term debt and capital lease obligations, less current maturities		3,468,883			81,083		86,982		—			3,636,948
Intercompany payables		27,008			—		1,248,126		(1,275,134	)		—
Other long-term liabilities		61,988			92,920		314,604		—			469,512
Total liabilities		4,111,329			513,857		1,995,245		(1,275,134	)		5,345,297
Redeemable equity securities		—			—		272,013		—			272,013
Stockholders’ equity:
Total Health Management Associates, Inc. stockholders’ equity		996,955			3,555,050		212,337		(3,767,387	)		996,955
Noncontrolling interests		—			—		10,638		—			10,638
Total stockholders’ equity		996,955			3,555,050		222,975		(3,767,387	)		1,007,593
Total liabilities and stockholders’ equity	$	5,108,284		$	4,068,907	$	2,490,233	$	(5,042,521	)	$	6,624,903

36

HEALTH MANAGEMENT ASSOCIATES, INC.

NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

15. Supplemental Condensed Consolidating Financial Statements

Health Management Associates, Inc.

Condensed Consolidating Balance Sheet

December 31, 2012

(in thousands)

(restated)

	Parent Issuer		Guarantor Subsidiaries		Non- Guarantor Subsidiaries		Eliminations			Consolidated
Current assets:
Cash and cash equivalents	$	23,214	$	24,823	$	11,136	$	—		$	59,173
Available-for-sale securities		65,376		—		55,730		—			121,106
Accounts receivable, net		—		587,754		370,164		—			957,918
Supplies, prepaid expenses and other assets		4,459		136,078		80,347		—			220,884
Prepaid and recoverable income taxes		60,438		—		—		—			60,438
Restricted funds		—		—		26,525		—			26,525
Assets held for sale		—		—		6,250		—			6,250
Total current assets		153,487		748,655		550,152		—			1,452,294
Property, plant and equipment, net		118,699		2,322,678		1,024,513		—			3,465,890
Investments in consolidated subsidiaries		3,768,249		—		—		(3,768,249	)		—
Restricted funds		—		—		125,532		—			125,532
Intercompany receivables		827,770		24,838		—		(852,608	)		—
Goodwill		—		654,500		370,637		—			1,025,137
Deferred charges and other assets		80,118		125,144		112,239		—			317,501
Total assets	$	4,948,323	$	3,875,815	$	2,183,073	$	(4,620,857	)	$	6,386,354
Current liabilities:
Accounts payable	$	42,093	$	112,643	$	56,651	$	—		$	211,387
Accrued expenses and other current liabilities		120,598		239,281		249,853		—			609,732
Deferred income taxes		29,026		—		—		—			29,026
Current maturities of long-term debt and capital lease obligations		100,542		20,091		5,629		—			126,262
Total current liabilities		292,259		372,015		312,133		—			976,407
Deferred income taxes		301,237		—		—		—			301,237
Long-term debt and capital lease obligations, less current maturities		3,304,667		82,871		52,815		—			3,440,353
Intercompany payables		—		—		852,608		(852,608	)		—
Other long-term liabilities		71,755		96,250		292,881		—			460,886
Total liabilities		3,969,918		551,136		1,510,437		(852,608	)		5,178,883
Redeemable equity securities		—		—		212,458		—			212,458
Stockholders’ equity:
Total Health Management Associates, Inc. stockholders’ equity		978,405		3,324,679		443,570		(3,768,249	)		978,405
Noncontrolling interests		—		—		16,608		—			16,608
Total stockholders’ equity		978,405		3,324,679		460,178		(3,768,249	)		995,013
Total liabilities and stockholders’ equity	$	4,948,323	$	3,875,815	$	2,183,073	$	(4,620,857	)	$	6,386,354

37

HEALTH MANAGEMENT ASSOCIATES, INC.

NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

15. Supplemental Condensed Consolidating Financial Statements

Health Management Associates, Inc.

Condensed Consolidating Statement of Cash Flows

Nine Months Ended September 30, 2013

(in thousands)

	Parent Issuer			Guarantor Subsidiaries			Non- Guarantor Subsidiaries			Consolidated
Net cash provided by (used in) continuing operating activities	$	(184,216	)	$	344,180		$	(39,756	)	$	120,208
Cash flows from investing activities:
Additions to property, plant and equipment		(70,328	)		(74,414	)		(62,910	)		(207,652	)
Acquisitions of hospitals and other ancillary health care businesses		—			—			(173,653	)		(173,653	)
Purchases of available-for-sale securities		(426,197	)		—			(45,718	)		(471,915	)
Proceeds from sales of available-for-sale securities		491,471			—			38,728			530,199
Other investing activities		—			1,547			3,753			5,300
Net cash provided by (used in) continuing investing activities		(5,054	)		(72,867	)		(239,800	)		(317,721	)
Cash flows from financing activities:
Proceeds from long-term debt borrowings		476,900			—			—			476,900
Principal payments on debt and capital lease obligations		(337,166	)		(18,193	)		(3,152	)		(358,511	)
Payments of debt issuance costs		(1,588	)		—			—			(1,588	)
Proceeds from exercises of stock options		27,949			—			—			27,949
Cash payments to noncontrolling shareholders		—			—			(24,175	)		(24,175	)
Changes in intercompany balances, net		(31,084	)		(266,969	)		298,053			—
Equity compensation excess income tax benefits		19,056			—			—			19,056
Net cash provided by (used in) continuing financing activities		154,007			(285,162	)		270,726			139,631
Net increase (decrease) in cash and cash equivalents		(35,203	)		(13,849	)		(8,830	)		(57,882	)
Cash and cash equivalents at the beginning of the period		23,214			24,823			11,136			59,173
Cash and cash equivalents at the end of the period	$	(11,989	)	$	10,974		$	2,306		$	1,291

38

HEALTH MANAGEMENT ASSOCIATES, INC.

NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

15. Supplemental Condensed Consolidating Financial Statements

Health Management Associates, Inc.

Condensed Consolidating Statement of Cash Flows

Nine Months Ended September 30, 2012

(in thousands)

(restated)

	Parent Issuer			Guarantor Subsidiaries			Non- Guarantor Subsidiaries			Consolidated
Net cash provided by (used in) continuing operating activities	$	(86,109	)	$	445,061		$	99,113		$	458,065
Cash flows from investing activities:
Additions to property, plant and equipment		(16,705	)		(201,571	)		(64,067	)		(282,343	)
Acquisitions of hospitals and other ancillary health care businesses		—			(800	)		(70,675	)		(71,475	)
Purchases of available-for-sale securities		(1,395,665	)		—			(35,883	)		(1,431,548	)
Proceeds from sales of available-for-sale securities		1,380,985			—			31,595			1,412,580
Other investing activities		—			—			(15,399	)		(15,399	)
Net cash provided by (used in) continuing investing activities		(31,385	)		(202,371	)		(154,429	)		(388,185	)
Cash flows from financing activities:
Proceeds from long-term debt borrowings		17,000			—			—			17,000
Principal payments on debt and capital lease obligations		(68,890	)		(12,456	)		(6,581	)		(87,927	)
Payments for debt issuance costs		(636	)		—			—			(636	)
Cash received from noncontrolling shareholders		—			—			3,591			3,591
Cash payments to noncontrolling shareholders		—			(3,431	)		(27,384	)		(30,815	)
Changes in intercompany balances, net		149,062			(274,666	)		125,604			—
Equity compensation excess income tax benefits		1,444			—			—			1,444
Net cash provided by (used in) continuing financing activities		97,980			(290,553	)		95,230			(97,343	)
Net increase (decrease) in cash and cash equivalents before discontinued operations		(19,514	)		(47,863	)		39,914			(27,463	)
Net cash used in discontinued operations		—			—			(1,462	)		(1,462	)
Net increase (decrease) in cash and cash equivalents		(19,514	)		(47,863	)		38,452			(28,925	)
Cash and cash equivalents at the beginning of the period		28,586			47,094			(11,537	)		64,143
Cash and cash equivalents at the end of the period	$	9,072		$	(769	)	$	26,915		$	35,218

39

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

Results of Operations

This Item 2 has been amended and restated to give effect to the restatement of our consolidated financial statements for the three and nine months ended September 30, 2012 due to an error in the Company’s application of the requirements for certifying its EHR technology under various Medicare and Medicaid HCIT programs and corrects certain unrelated immaterial errors. See Note 2 to the consolidated financial statements in Item 1 of this report for additional information

Overview

As of September 30, 2013, Health Management Associates, Inc. by and through its subsidiaries (collectively, “we,” “our” or “us”) operated 71 hospitals with a total of 10,782 licensed beds in non-urban communities in Alabama, Arkansas, Florida, Georgia, Kentucky, Mississippi, Missouri, North Carolina, Oklahoma, Pennsylvania, South Carolina, Tennessee, Texas, Washington and West Virginia. The operating results of hospitals and other ancillary health care businesses that we acquire are included in our consolidated financial statements subsequent to the date of acquisition.

On July 29, 2013, we entered into a definitive merger agreement with Community Health Systems, Inc. (“CHS”) pursuant to which, subject to the satisfaction of certain conditions, CHS will acquire us as described in more detail in Note 14 to the Interim Condensed Consolidated Financial Statements in Item 1 of this report.

Effective August 1, 2013, John M. Starcher Jr., who previously served as a Group President, was named our Interim President and Chief Executive Officer, succeeding Gary D. Newsome who retired as President, Chief Executive Officer and member of the board of directors effective July 31, 2013. Effective September 16, 2013, Gary S. Bryant, who previously served as our Senior Vice President and Controller, was appointed Senior Vice President and Interim Chief Financial Officer, succeeding Kelly E. Curry, whose employment as Executive Vice President and Chief Financial Officer ceased effective as of September 13, 2013.

As described in more detail in Note 13 to the Interim Condensed Consolidated Financial Statements in Item 1 of this report, as a result of consent solicitation process by Glenview Capital Partners, LLC and certain of its affiliated investment funds (collectively, “Glenview”), on August 16, 2013, we announced that a majority of our stockholders voted to appoint a new Board of Directors. As such, the persons nominated by Glenview were selected to serve on our Board of Directors. The new members of our Board of Directors are Steven Epstein, Mary Taylor Behrens, Kirk Gorman, Steven Guillard, Joann Reed, John McCarty, Steven Shulman and Peter Urbanowicz.

Unless specifically indicated otherwise, the following discussion excludes our discontinued operations, which are identified at Note 9 to the Interim Condensed Consolidated Financial Statements in Item 1. Discontinued operations were not material to our consolidated results of operations during the periods presented herein.

During March 2010, the Patient Protection and Affordable Care Act and the Health Care and Education Reconciliation Act of 2010 (collectively, the “Health Care Reform Act”) were signed into law by President Obama. The primary goals of the Health Care Reform Act are to: (i) provide coverage by January 1, 2014 to an estimated 32 to 34 million Americans who currently do not have health insurance; (ii) reform the health care delivery system to improve quality; and (iii) lower the overall costs of providing health care. To accomplish the goal of expanding coverage, such legislation mandates that all Americans maintain a minimum level of health care coverage. To that end, the Health Care Reform Act expands Medicaid coverage, provides federal subsidies to assist low-income individuals when they obtain health insurance and establishes insurance exchanges through which individuals and small employers can purchase health insurance. Health care cost savings under the Health Care Reform Act are expected to come from: (i) reductions in Medicare and Medicaid reimbursement payments to health care providers, including hospital operators; (ii) initiatives to reduce fraud, waste and abuse in government reimbursement programs; and (iii) other reforms to federal and state reimbursement systems. Although certain aspects of the Health Care Reform Act have already become effective, it will be several years before most of the far-reaching and innovative provisions of the legislation are fully implemented. While we continue to evaluate the provisions of the Health Care Reform Act, its overall effect on our business cannot be determined at the present time because, among other things, the legislation is very broad in scope and uncertainties exist regarding the interpretation and future implementation of many of the regulations mandated under the Health Care Reform Act. Additionally, the Health Care Reform Act remains subject to significant legislative debate, including the possible amendment and/or defunding of some of its provisions. For further discussion of the Health Care Reform Act and its possible impact on our business and results of operations, see “Business – Sources of Revenue” in Item 1 of Part I and “Risk Factors” in Item 1A of Part I of our Annual Report on Form 10-K/A for the year ended December 31, 2012.

Our consolidated financial statements for the three and nine months ended September 30, 2012 have been restated due to an accounting error in the Company’s application of the requirements for certifying its electronic health record (“EHR”) technology under various Medicare and Medicare incentive programs and corrects certain immaterial unrelated errors. See Note 2 to the Interim Condensed Consolidated Financial Statements in Item 1 for information regarding the restated financial statements. See also “Item 4 – Controls and Procedures” for a discussion of management’s conclusions regarding the existence of material weakness in internal control over financial reporting at September 30, 2013 related to the administration, oversight and accounting for the Company’s EHR enrollment process and the remediation thereof.

40

Our loss from continuing operations before income taxes was $138.9 million during the three months ended September 30, 2013, compared to income of $68.7 million for the same period in the prior year. A significant factor in our net loss for the three months ended September 30, 2013 were the change in control expenses incurred as a result of the change in our Board of Directors as well as the merger agreement with CHS. These costs include severance and retention accruals, stock compensation expenses upon acceleration of deferred and restricted stock award vesting and additional legal and audit fees. Additionally, decreases in same three month hospital inpatient admissions, adjusted admissions, surgeries and emergency room visits substantially impacted our income from continuing operations before income taxes.

During the three months ended September 30, 2013 our net revenue before the provision for doubtful accounts increased by $13.7 million as compared to the three months ended September 30, 2012. We experienced some revenue growth principally resulting from our April 1, 2013 acquisition of an 80% interest in Bayfront Health System, which includes Bayfront Medical Center, a tertiary and teaching hospital in St. Petersburg, Florida that is licensed to operate 480 beds, and certain health care operations. Items that adversely affected our operations and profitability during the three months ended September 30, 2013 included (i) overall volume declines resulting primarily from increased efforts by managed care/commercial payors to reduce inpatient utilization; (ii) reductions in government reimbursement due to sequestration as well as the ongoing impact of recovery audit contractor (“RAC”) audits and (iii) increases in the provision for doubtful accounts. Partially offsetting these factors were declines in operating costs due to volume as well as a result of expense management efforts. In addition, during the three months ended September 30, 2013, we recognized a benefit of approximately $2.0 million under various Medicare and Medicaid Healthcare Information Technology programs (collectively, the “HCIT Programs”). We recognized $24.2 million for such HCIT Programs during the three months ended September 30, 2012.

In light of the Health Care Reform Act, we have designed our strategic operational objectives to, among other things, increase patient volume and achieve greater operational efficiencies. Our specific plans focus on center-led capabilities and include, among other things, utilizing experienced local and regional management teams, modifying physician employment agreements, renegotiating payor and vendor contracts, developing action plans responsive to feedback from patient, physician and employee satisfaction surveys and maintaining cost effective home office and regional service center operations. Based on the needs of the communities that we serve, we also seek opportunities for market service development, including, among other things, establishing ambulatory surgical centers, urgent care centers, cardiac cath labs, angiography suites and orthopedic, cardiology and neurology/neurosurgery centers of excellence. Furthermore, we are investing significant resources in physician recruitment and retention, emergency room operations, advanced robotic surgical systems, replacement hospital construction and other capital projects. For example, we have deployed new MAKOplasty® and da Vinci® robotic surgical systems at many of our hospitals and, in January 2013, we opened a newly constructed general acute care hospital in Poplar Bluff, Missouri to replace our north campus facility in that marketplace. We believe that our strategic initiatives, coupled with appropriate executive management oversight, centralized support and innovative marketing campaigns, will enhance patient, physician and employee satisfaction, improve clinical outcomes and yield increased surgical volume, emergency room visits and admissions.

We have also taken steps that we believe are necessary to achieve industry leadership in patient safety and quality. Our goal is to be one of the highest rated health care providers of any hospital system in the country, as measured by Medicare. We measure key performance objectives, maintain accountability for achieving those objectives and recognize the leaders whose quality indicators and clinical outcomes demonstrate improvement. As most recently reported by the Centers for Medicare and Medicaid Services, all four of our core measure care areas (i.e., myocardial infarction, congestive heart failure, pneumonia and surgical care improvement project) have dramatically improved since the commencement of our clinical quality initiatives and we are now one of the top ranked systems in core measures amongst large for-profit hospital companies. Additionally, The Joint Commission, a leading independent not-for-profit organization that accredits and certifies health care organizations in the United States, in 2012 named 64% of our hospitals as Top Performers on Key Quality Measures, which compared to a nationwide achievement rate of approximately 18%. Moreover, 77% of our hospitals that were top performers during 2010 were once again recognized by The Joint Commission during 2012 based on 2011 quality performance statistics. To determine top performers, The Joint Commission aggregates certain evidence-based accountability data, including core measurement performance data.

Outpatient services continue to play an important role in the delivery of health care in our markets, with more than half of our net revenue before the provision for doubtful accounts generated on an outpatient basis. Recognizing the importance of these services, we have improved many of our health care facilities to accommodate the outpatient needs of the communities that they serve. We have also invested substantial capital in many of our hospitals and physician practices during the past several years, resulting in improvements and enhancements to our diagnostic imaging and ambulatory surgical services.

During the past several years, various economic and other factors have resulted in a large number of uninsured and underinsured patients seeking health care in the United States. Self-pay admissions as a percent of total admissions at our

41

hospitals were approximately 7.0% and 7.4% during the three months ended September 30, 2013 and 2012, respectively. We continue to take various measures to address the impact of uninsured and underinsured patients on our business. Additionally, one of the primary goals of the Health Care Reform Act is to provide health insurance coverage to more Americans. Nevertheless, there can be no assurances that our self-pay admissions will not grow in future periods, especially in light of the prolonged downturn in the economy and correspondingly higher levels of unemployment in many of the markets served by our hospitals. Therefore, we regularly evaluate our self-pay patient policies and programs and consider changes or modifications as circumstances warrant.

Critical Accounting Policies and Estimates Update

General. The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires us to make estimates and assumptions that affect the amounts reported in our consolidated financial statements and accompanying notes. We consider a critical accounting policy to be one that requires us to make significant judgments and estimates when we prepare our consolidated financial statements. Such critical accounting policies and estimates, which are more fully described in Note 2 to the Interim Condensed Consolidated Financial Stetments included in Item 1 of this report and in Item 7 of Part II of our Annual Report on Form 10-K for the year ended December 31, 2012, include (i) revenue; (ii) the provision for doubtful accounts; (iii) impairments of long-lived assets and goodwill; (iv) income taxes; (v) professional liability risks and other self-insured programs; and (vi) loss contingencies. There were no material changes to our critical accounting policies and estimates in 2013.

Goodwill. We test our goodwill for impairment on an annual basis on October 1 and whenever circumstances indicate that a possible impairment might exist. Our judgment regarding the existence of impairment indicators is based on many qualitative and quantitative factors, including market conditions and operational performance. When performing the goodwill impairment test, among other things, we compare the estimated fair values of the net assets of our reporting units to the corresponding carrying amounts on our consolidated balance sheet. If the estimated fair value of one of our reporting unit’s net assets is less than the balance sheet carrying amount, we determine the implied fair value of the reporting unit’s goodwill, compare such fair value to the corresponding carrying amount and, if necessary, record a goodwill impairment charge. We do not believe that any of our reporting units are currently at risk of requiring a goodwill impairment charge.

42

Three Months ended September 30, 2013 Compared to the Three Months ended September 30, 2012

The tables below summarize our operating results for the applicable periods. Hospitals that were owned/leased and operated by us for one year or more as of September 30, 2013 are referred to as our same three month hospitals. For all year-over-year comparative discussions herein, the operating results of our same three month hospitals are only considered to the extent that there was a similar period of operation in both years.

	Three Months Ended September 30,
	2013						2012
	Amount			Percent of Net Revenue			Amount			Percent of Net Revenue
	(in thousands)						(in thousands)
							(restated)
Net revenue before the provision for doubtful accounts	$	1,676,679					$	1,662,937
Provision for doubtful accounts		(255,436	)					(224,078	)
Net revenue		1,421,243			100.0	%		1,438,859			100.0	%
Salaries and benefits		655,839			46.1			637,305			44.3
Supplies		220,522			15.5			216,819			15.1
Rent expense		40,493			2.9			41,807			2.9
Other operating expenses		371,392			26.1			332,356			23.1
Medicare and Medicaid HCIT incentive payments		(2,015	)		(0.1	)		(24,224	)		(1.7	)
Change in control and other related expense		102,886			7.2			—			0.0
Depreciation and amortization		99,351			7.0			91,563			6.4
Interest expense		70,747			5.0			76,916			5.3
Other		884			0.1			(2,363	)		(0.2	)
		1,560,099			109.8			1,370,179			95.2
Income (loss) from continuing operations before income taxes		(138,856	)		(9.8	)		68,680			4.8
Income tax benefit (provision)		65,529			4.6			(19,663	)		(1.4	)
Income (loss) from continuing operations	$	(73,347	)		(5.2	)%	$	49,017			3.4	%

	Three Months Ended September 30,									Percent Change
	2013			2012			Change
Same Three Month Hospitals *
Occupancy		35.1	%		38.9	%		(380	) bps **		n/a
Patient days		328,484			357,094			(28,610	)		(8.0	)%
Admissions		78,951			84,704			(5,753	)		(6.8	)%
Adjusted admissions †		166,284			171,206			(4,922	)		(2.9	)%
Emergency room visits		432,204			441,805			(9,601	)		(2.2	)%
Surgeries		95,169			97,253			(2,084	)		(2.1	)%
Outpatient revenue percent ¿		57.1	%		55.4	%		170	bps		n/a
Inpatient revenue percent ¿		42.9	%		44.6	%		(170	) bps		n/a
Total Hospitals
Occupancy		35.6	%		38.9	%		(330	) bps		n/a
Patient days		348,812			357,094			(8,282	)		(2.3	)%
Admissions		82,936			84,704			(1,768	)		(2.1	)%
Adjusted admissions †		171,215			171,206			9			0.0	%
Emergency room visits		444,105			441,805			2,300			0.5	%
Surgeries		97,603			97,253			350			0.4	%
Outpatient revenue percent ¿		56.3	%		55.4	%		90	bps		n/a
Inpatient revenue percent ¿		43.7	%		44.6	%		(90	) bps		n/a

* Includes acquired hospitals to the extent we operated them for comparable periods

** basis points

† Admissions adjusted for outpatient volume

¿ Determined by reference to net revenue before the provision for doubtful accounts

Net revenue before the provision for doubtful accounts during the three months ended September 30, 2013 was approximately $1,676.7 million as compared to $1,662.9 million during the three months ended September 30, 2012. This change represented an increase of $13.7 million, or 0.9%. Bayfront Health System contributed $76.2 million of net revenue before the provision for doubtful accounts. This amount was offset by a decrease of $62.5 million at our same three month

43

hospitals in net revenue before the provision for doubtful accounts. Such decrease was primarily the result of a shift in payor mix and a reduction in volume. In addition, increased RAC activity and the impact of sequestration reduced net revenue by approximately $12.1 million. Further, during the three months ended September 30, 2012, we recognized approximately $19.0 million of underpayment recoveries that were not as significant in 2013.

Our provision for doubtful accounts during the three months ended September 30, 2013 increased 170 basis points to 15.2% of net revenue before the provision for doubtful accounts as compared to 13.5% of net revenue before the provision for doubtful accounts during the same period in the prior year. This change was primarily due to an increase in amounts considered to be patient responsibility including deductibles, co-payments and other amounts not covered by insurance.

Our consistently applied accounting policy is that accounts written off as charity and indigent care are not recognized in net revenue before the provision for doubtful accounts and, accordingly, such amounts have no impact on our provision for doubtful accounts. However, as a measure of our fiscal performance, we routinely aggregate amounts pertaining to our (i) provision for doubtful accounts, (ii) uninsured self-pay patient discounts and (iii) foregone/unrecognized revenue for charity and indigent care and divide the resulting total by the sum of our (a) net revenue before the provision for doubtful accounts, (b) uninsured self-pay patient discounts and (c) foregone/unrecognized revenue for charity and indigent care. We believe that this fiscal measure, which we refer to as our Uncompensated Patient Care Percentage, provides us with key information regarding the aggregate level of patient care for which we do not receive remuneration. During the three months ended September 30, 2013 and 2012, our Uncompensated Patient Care Percentage was 32.0% and 29.0%, respectively. This 300 basis point increase during the current period primarily reflects increased outpatient self-pay volume, particularly in our emergency rooms, and greater uninsured self-pay patient revenue discounts.

Salaries and benefits as a percent of net revenue after the provision for doubtful accounts (hereinafter referred to as “net revenue”) increased from 44.3% during the three months ended September 30, 2012 to 46.1% during the same period in 2013. This increase was primarily due to disproportionately higher costs at our recent acquisitions, increased physician employment and investments in personnel as a part of centralization efforts at regional service centers. Such costs were partially offset by adjustments in staffing corresponding to changes in inpatient and outpatient volume, as well as the outsourcing of certain hospital support services.

Other operating expenses as a percent of net revenue increased from 23.1% during the three months ended September 30, 2012 to 26.1% during the same period in 2013. This increase was primarily due certain support services at our hospitals that have been outsourced and/or contracted to third parties.

During the three months ended September 30, 2013, we incurred $102.9 million of change in control and other related costs. No such amounts were incurred during the same 2012 period. These costs were comprised of $85.1 million of compensation related expenses, $12.3 million of outside professional fees and $5.4 million of severance and retention costs. The compensation expense resulted from an acceleration of various stock and cash awards, as well as cash payments for stock options, due to the change of the Board of Directors on August 16, 2013 as such change constituted a change of control as defined in such award agreements. The outside professional fees are a directly related to the merger agreement with CHS and the consent solicitation process of Glenview. The severance and retention costs represents accruals associated with various agreements entered into with key employees due to the merger agreement and other events.

Depreciation and amortization increased approximately $7.8 million during comparable periods. This increase resulted from: (i) our recent acquisitions; (ii) depreciation associated with hospitals that were replaced in early 2013 and 2012; and (iii) an increase in capitalized equipment.

Interest expense decreased from approximately $76.9 million during the three months ended September 30, 2012 to $70.7 million during the same period in 2013. Such decrease was primarily due to non-cash interest expense of $18.9 million in the three months ended September 30, 2013 attributable to our interest rate swap contract (i.e., accumulated other comprehensive loss amortization and net fair value adjustment expense) that we recognized in our consolidated statement of operations, as compared to $23.9 million of corresponding non-cash interest expense during the three months ended September 30, 2012. See “Liquidity, Capital Resources and Capital Expenditures” below and Note 3 to the Interim Condensed Consolidated Financial Statements in Item 1 for further information regarding our long-term debt arrangements and capital lease obligations.

During the three months ended September 30, 2013, we recognized a $65.5 million income tax benefit as compared to a $19.7 million income tax provision for the three months ended September 30, 2012. The $85.2 million change in income taxes was a result of the finalization of certain federal and state income tax returns, the satisfactory completion of certain state tax audits and examinations and the lapsing of state statutes of limitations. The impacts of these items, combined with the overall decrease in income from continuing operations, contributed to the overall change in effective income tax rate. Our effective income tax rates were approximately 47.2% and 28.6% during the three months ended September 30, 2013 and 2012, respectively. Net income attributable to noncontrolling interests, which is not tax-effected in our consolidated financial statements, impacted our effective income tax rates by increasing approximately 120 basis points and decreasing approximately 310 basis points during the three months ended September 30, 2013 and 2012, respectively.

44

Nine Months ended September 30, 2013 Compared to the Nine Months ended September 30, 2012

The tables below summarize our operating results for the applicable periods. Hospitals that were owned/leased and operated by us for one year or more as of September 30, 2013 are referred to as our same nine month hospitals. For all year-over-year comparative discussions herein, the operating results of our same nine month hospitals are only considered to the extent that there was a similar period of operation in both years.

	Nine Months Ended September 30,
	2013						2012
	Amount			Percent of Net Revenue			Amount			Percent of Net Revenue
	(in thousands)						(in thousands)
							(restated)
Net revenue before the provision for doubtful accounts	$	5,100,474					$	5,033,496
Provision for doubtful accounts		(729,695	)					(639,902	)
Net revenue		4,370,779			100.0	%		4,393,594			100.0	%
Salaries and benefits		2,013,515			46.0			1,941,475			44.2
Supplies		689,034			15.8			677,416			15.4
Rent expense		125,706			2.9			130,521			3.0
Other operating expenses		1,043,982			23.8			970,613			22.1
Medicare and Medicaid HCIT incentive payments		(23,607	)		(0.5	)		(29,875	)		(0.7	)
Change in control and other related expense		112,026			2.6			—			0.0
Depreciation and amortization		289,595			6.6			255,575			5.8
Interest expense		212,352			4.9			241,049			5.5
Other		(2,848	)		(0.1	)		(1,745	)		—
		4,459,755			102.0			4,185,029			95.3
Income from continuing operations before income taxes		(88,976	)		(2.0	)		208,565			4.7
Income tax benefit (provision)		48,796			1.1			(66,806	)		(1.5	)
Income from continuing operations	$	(40,180	)		(0.9	)%	$	141,759			3.2	%

	Nine Months Ended September 30,									Percent Change
	2013			2012			Change
Same Three Month Hospitals *
Occupancy		38.0	%		40.5	%		(250	) bps **		n/a
Patient days		1,046,486			1,120,123			(73,637	)		(6.6	)%
Admissions		244,791			264,548			(19,757	)		(7.5	)%
Adjusted admissions †		501,789			521,459			(19,670	)		(3.8	)%
Emergency room visits		1,315,411			1,338,884			(23,473	)		(1.8	)%
Surgeries		287,748			297,177			(9,429	)		(3.2	)%
Outpatient revenue percent ¿		56.8	%		54.4	%		240	bps		n/a
Inpatient revenue percent ¿		43.2	%		45.6	%		(240	) bps		n/a
Total Hospitals
Occupancy		38.1	%		40.5	%		(240	) bps		n/a
Patient days		1,089,642			1,120,123			(30,481	)		(2.7	)%
Admissions		253,677			264,548			(10,871	)		(4.1	)%
Adjusted admissions †		514,397			521,459			(7,062	)		(1.4	)%
Emergency room visits		1,352,418			1,338,884			13,534			1.0	%
Surgeries		293,598			297,177			(3,579	)		(1.2	)%
Outpatient revenue percent ¿		56.4	%		54.4	%		200	bps		n/a
Inpatient revenue percent ¿		43.6	%		45.6	%		(200	) bps		n/a

* Includes acquired hospitals to the extent we operated them for comparable periods

** basis points

† Admissions adjusted for outpatient volume

¿ Determined by reference to net revenue before the provision for doubtful accounts

Net revenue before the provision for doubtful accounts during the nine months ended September 30, 2013 was approximately $5,100.5 million as compared to $5,033.5 million during the nine months ended September 30, 2012. This change represented an increase of $67.0 million, or 1.3%. Our same nine month hospitals accounted for a decrease of $108.0 million in net revenue before the provision for doubtful accounts. Such decrease was primarily the result of a shift in payor mix and a reduction in surgeries, increased RAC activity, the impact of sequestration and less underpayment recoveries in 2013 as compared to 2012. Our acquisition of Bayfront Health System offset the decrease in our net revenue before the provision for doubtful accounts.

45

Our provision for doubtful accounts during the nine months ended September 30, 2013 increased 160 basis points to 14.3% of net revenue before the provision for doubtful accounts as compared to 12.7% of net revenue before the provision for doubtful accounts during the same period in the prior year. This change was primarily due to an increase in revenue from uninsured self-pay patients and amounts considered to be patient responsibility including deductibles, co-payments and other amounts not covered by insurance. During the nine months ended September 30, 2013 and 2012, our Uncompensated Patient Care Percentage was 30.2% and 27.4%, respectively. This 280 basis point increase during the current period primarily reflects increased outpatient self-pay volume, particularly in our emergency rooms, and greater uninsured self-pay patient revenue discounts.

Salaries and benefits as a percent of net revenue after the provision for doubtful accounts (hereinafter referred to as “net revenue”) increased from 44.2% during the nine months ended September 30, 2012 to 46.0% during the same period in 2013. This increase was primarily due to disproportionately higher costs at our recent acquisitions, increased physician employment and investments in personnel as a part of centralization efforts at regional service centers in early 2013. Such costs were partially offset by adjustments in staffing corresponding to changes in inpatient and outpatient volume, as well as the outsourcing of certain hospital support services.

Other operating expenses as a percent of net revenue increased from 22.1% during the nine months ended September 30, 2012 to 23.8% during the same period in 2013. This increase was primarily due to certain support services at our hospitals that have been outsourced and/or contracted to third parties.

During the nine months ended September 30, 2013, we incurred $112.0 million of change in control and other related costs. No such amounts were incurred during the same 2012 period. These costs were comprised of $85.1 million of compensation related expenses due to the change of control, $12.3 million of outside professional fees and $14.6 million of severance and retention costs.

Depreciation and amortization increased approximately $34.0 million during comparable periods. This increase resulted from: (i) our recent acquisitions; (ii) depreciation associated with hospitals that were replaced in early 2013 and 2012; and (iii) an increase in capitalized equipment.

Interest expense decreased from approximately $241.0 million during the nine months ended September 30, 2012 to $212.4 million during the same period in 2013. Such decrease was primarily due to non-cash interest expense of $57.7 million during the nine months ended September 30, 2013 attributable to our interest rate swap contract (i.e., accumulated other comprehensive loss amortization and net fair value adjustment expense) that we recognized in our consolidated statement of operations, as compared to $82.9 million of corresponding non-cash interest expense during the same period in 2012. See “Liquidity, Capital Resources and Capital Expenditures” below and Note 3 to the Interim Condensed Consolidated Financial Statements in Item 1 for further information regarding our long-term debt arrangements and capital lease obligations.

During the nine months ended September 30, 2013, we recognized a $48.8 million income tax benefit as compared to a $66.8 million income tax provision for the nine months ended September 30, 2012. The $115.6 million change in income taxes as primarily a result of our pre-tax loss position in 2013 as opposed to our pre-tax income position in 2012. Our effective income tax rates were approximately 54.8% and 32.0% during the nine months ended September 30, 2013 and 2012, respectively. Net income attributable to noncontrolling interests, which is not tax-effected in our consolidated financial statements, increased our effective income tax rates by approximately 690 basis points and reduced it by approximately 370 basis points during the nine months ended September 30, 2013 and 2012, respectively. In addition, our 2013 and 2012 provisions for income taxes were favorably impacted by the satisfactory conclusion of certain state tax audits and examinations.

Liquidity, Capital Resources and Capital Expenditures

Liquidity

Our cash flows from continuing operating activities provide the primary source of cash for our ongoing business needs. Additionally, at September 30, 2013 we had approximately $224.5 million of borrowing capacity under our $500.0 million long-term revolving credit facility available for general business purposes, including acquisitions. As discussed at Note 7 to the Interim Condensed Consolidated Financial Statements in Item 1, on April 1, 2013, we funded the entire purchase price of our acquisition of an 80% interest in a 480-bed Florida-based hospital and certain related health care operations (collectively, “Bayfront Health System”) with a net borrowing of approximately $162.0 million under our long-term revolving credit facility. We believe that our various sources of cash are adequate to meet our foreseeable operating, capital expenditure, business acquisition and debt service needs.

46

The table below summarizes our recent cash flow activity (in thousands).

	Nine Months Ended September 30,
	2013			2012
				(restated)
Sources (uses) of cash and cash equivalents:
Operating activities	$	120,208		$	458,065
Investing activities		(317,721	)		(388,185	)
Financing activities		139,631			(97,343	)
Discontinued operations		—			(1,462	)
Net decreases in cash and cash equivalents	$	(57,882	)	$	(28,925	)

Operating Activities

Our cash flows from continuing operating activities decreased approximately $337.9 million, or 73.8%, during the nine months ended September 30, 2013 as compared to the nine months ended September 30, 2012. The decrease primarily related to (i) an overall decline in net income during 2013 as compared to 2012; (ii) higher collections of acquisition related receivables during the nine months ended September 30, 2012 as compared to the nine months ended September 30, 2013, due to the receipt, or lack there-of, of tie-in notices in the applicable periods; (iii) an increase in our interest payments during 2013 when compared to 2012; and (iv) a net decrease in our liabilities during 2013 as compared to 2012 due to the amount and timing of payments associated with such liabilities.

As we received tie-in notices late in the third quarter of 2013, our cash flows from continuing operating activities was adversely impacted by delayed cash collections on accounts receivable at Bayfront Health System. However, the ultimate collection of the related accounts receivable will favorably impact our cash flow during the fourth quarter of 2013. We also believe that the professional and other costs of our ongoing government investigations and the merger agreement with CHS, while difficult to predict, will continue and will vary throughout the duration of such investigations. We expect that those costs will be paid with our cash flows from continuing operating activities. See Note 12 to the Interim Condensed Consolidated Financial Statements in Item 1 for information regarding such government investigations and proxy solicitations. Although subject to change due to a variety of factors beyond our control, we project that (i) during the twelve months ending September 30, 2014 we will pay approximately $32.1 million to the counterparties of our interest rate swap contract, which is discussed at Note 2(a) to the audited consolidated financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2012 and (ii) we will receive additional reimbursement under the meaningful use measurement standard of the HCIT Programs ranging from $50 million to $60 million during the year ending December 31, 2013.

In connection with the restatement of our consolidated financial statements, we estimate that, between July 1, 2011 and June 30, 2013, we recognized as income HCIT incentive payments totaling approximately $31.0 million for 11 hospitals that did not meet the meaningful use criteria under such programs. See Note 2 to the Interim Condensed Consolidated Financial Statements in Item 1 for information regarding our restated financial statements. In November 2013, the Company repaid the majority of the funds to the Centers for Medicare and Medicaid Services (“CMS”), the governmental agency responsible for administering federal HCIT programs. The Company is also in the process of repaying the balance of the funds to the relevant state HCIT programs.

Investing Activities

Cash used in investing activities during 2013 included (i) approximately $207.7 million of additions to property, plant and equipment, consisting primarily of new medical equipment, renovation and expansion projects at certain of our facilities and replacement hospital construction (including a 250-bed hospital that opened on January 26, 2013 to replace the north campus facility at Poplar Bluff Regional Medical Center in Poplar Bluff, Missouri); and (ii) $173.7 million to acquire an 80% interest in Bayfront Health System and seven ancillary health care businesses including working capital. Excluding the available-for-sale securities in restricted funds, we had net cash proceeds of $58.3 million from buying and selling such securities during 2013.

Cash used in investing activities during 2012 included: (i) approximately $282.3 million of additions to property, plant and equipment, consisting primarily of new medical equipment, renovation and expansion projects at certain of our facilities and replacement hospital construction (including a replacement hospital for Walton Regional Medical Center in Monroe, Georgia that opened on April 22, 2012 and the abovementioned 250-bed hospital in Poplar Bluff, Missouri); and (ii) $61.9 million to acquire an 80% interest in each of five Oklahoma-based hospitals (the Integris Hospitals); (iii) $9.6 million to acquire six ancillary health care businesses; and (iv) a $18.7 million net increase in our restricted funds. Excluding the available-for-sale securities in restricted funds, we had a net cash outlay of $19.0 million from buying and selling such

47

securities during the nine months ended September 30, 2012. During such period, we also received (i) $1.4 million of proceeds from the sale of the remaining real property at the Woman’s Center at Dallas Regional Medical Center, our closed hospital facility in Mesquite, Texas, and (ii) $1.9 million of proceeds from sales of assets and insurance recoveries.

Financing Activities

During the nine months ended September 30, 2013, we borrowed $476.9 million under our $500.0 million long-term revolving credit facility, which we used for working capital and our acquisition of Bayfront Health System. Additionally, we repaid a portion of funds borrowed under the revolving credit agreement and made principal payments on our other long-term debt and capital lease obligations of approximately $358.5 million during such period, including a $31.5 million excess cash flow payment as required under our Credit Facilities described below, as well as repayments of amounts borrowed thereunder. We also paid $24.2 million to noncontrolling shareholders for recurring distributions and purchases of their shares in certain of our subsidiaries. Partially offsetting these cash outlays were: (i) $27.9 million of cash proceeds from exercises of stock options and (ii) $19.1 million of excess income tax benefits from our stock-based compensation arrangements. See Note 4 to the Interim Condensed Consolidated Financial Statements in Item 1 for further information regarding our long-term debt arrangements and capital lease obligations.

During the nine months ended September 30, 2012, we borrowed and repaid $17.0 million under our $500.0 million long-term revolving credit facility, the proceeds were used for acquisition working capital. Additionally, we made principal payments on our other long-term debt and capital lease obligations of approximately $70.9 million during such period. We also paid $30.8 million to noncontrolling shareholders for recurring distributions and purchases of their subsidiary shares. Partially offsetting these cash outlays were (i) $1.4 million of excess income tax benefits from our stock-based compensation arrangements and (ii) $3.6 million that we received from noncontrolling shareholders to acquire minority equity interests in two of our joint ventures.

Discontinued Operations

Cash used by our discontinued operations during 2012 was approximately $1.5 million. We do not believe that the exclusion of such amounts from our consolidated cash flows in future periods will have a material effect on our liquidity or financial position. See Note 9 to the Interim Condensed Consolidated Financial Statements in Item 1 for further information regarding our discontinued operations.

Days Sales Outstanding

To calculate days sales outstanding, or DSO, we initially divide quarterly net revenue before the provision for doubtful accounts by the number of days in the quarter. The result is divided into the net patient accounts receivable balance at the end of the quarter to obtain our DSO. We believe that this statistic is an important measure of collections on our accounts receivable, as well as our liquidity. Our DSO was 53 days at September 30, 2013, which compares to 50 days at December 31, 2012 and 53 days at September 30, 2012. The delay in the receipt of tie-in notices at Bayfront Health System negatively impacted our DSO by approximately three days at September 30, 2013.

Income Taxes

Other than certain state net operating loss carryforwards, we believe that it is more likely than not that reversals of existing taxable temporary differences, future taxable income and carrybacks will allow us to realize the deferred tax assets that are recognized in our condensed consolidated balance sheets.

Capital Resources

Senior Secured Credit Facilities. Our long-term debt includes, among other things, variable rate senior secured credit facilities with a syndicate of banks (collectively, the “Credit Facilities”) that we entered into on November 18, 2011. At that date, the Credit Facilities consisted of: (i) a $500.0 million five-year revolving credit facility (the “Revolving Credit Agreement”); (ii) a $725.0 million five-year term loan (the “Term Loan A”); and (iii) a $1.4 billion seven-year term loan (the “Term Loan B”). On March 20, 2013, we amended the loan agreement underlying the Credit Facilities (the “Amendment”) in order to, among other things, provide for the refinancing of the then outstanding balance under the Term Loan B. The principal payments on the Term Loan B are unchanged, however, that it is subject to a prepayment premium equal to 1.0% of the principal amount of the Term Loan B that is repriced or prepaid on or before September 20, 2013.

We can elect whether interest on borrowings under the Credit Facilities is determined using LIBOR or the Base Rate (as defined in the amended loan agreement). The effective interest rates on such borrowings, which fluctuate with market changes, include a spread above the base rate that we select. Through March 20, 2013, the effective interest rate for the Term Loan B was subject to a floor of 1.0% and 2.0% (before consideration of the interest rate spread) when using LIBOR and the Base Rate, respectively. The Amendment reduced both such interest rate floors under the Term Loan B by 0.25%. The amount of the interest rate spread is predicated on, among other things, our Consolidated Leverage Ratio (as defined in the amended loan agreement). The Amendment reduced the interest rate spread on the Term Loan B by 0.75%. We can elect differing interest rates for each of the debt instruments under the Credit Facilities. Interest is payable in arrears at the end of a calendar quarter or on the date that the selected interest duration period ends.

48

Our mandatory principal payments under the Credit Facilities for the twelve months ending September 30, 2014 are approximately $80.7 million. Except as described above in respect of the Term Loan B, we have the right to prepay amounts outstanding under the Credit Facilities at any time without penalty. As of September 30, 2013, the effective interest rates on the Term Loan A and the Term Loan B were 3.0% and 3.5%, respectively. Those rates remained unchanged as of November 1, 2013.

Throughout the Revolving Credit Agreement’s five-year term, we are obligated to pay commitment fees based on the amounts available for borrowing. The Revolving Credit Agreement provides that we can borrow, on a revolving basis, up to an aggregate of $500.0 million, as adjusted for outstanding standby letters of credit of up to $75.0 million. During the nine months ended September 30, 2013 there were borrowings of $476.9 million thereunder including borrowings of $210.0 million to fund the acquisition of Bayfront Health System, which we completed on April 1, 2013 (see Note 8 to the Interim Condensed Consolidated Financial Statements in Item 1 for information about such acquisition). As of November 1, 2013, the amount unused and available for borrowing under the Revolving Credit Agreement was approximately $237.0 million, which reflected the then outstanding balance of $210.0 million thereunder and $53.0 million of standby letters of credit in favor of third parties. The effective interest rate on the variable rate Revolving Credit Agreement was approximately 2.9% on November 1, 2013.

The Credit Facilities are generally subject to mandatory prepayment in amounts equal to: (i) 100% of the net cash proceeds received from certain asset sales, including insurance recoveries and condemnation events, subject to reinvestment provisions and the ratable offer requirements of other pari passu secured debt; (ii) 100% of the net cash proceeds from our issuance of certain new debt; and (iii) 50% of our Excess Cash Flow (as defined in the loan agreement) with step-downs of such percentage based on our Consolidated Leverage Ratio.

We intend to fund the required principal and interest payments under the Credit Facilities with available cash balances, cash provided by operating activities, proceeds from sales of available-for-sale securities and, if necessary, borrowings under the Revolving Credit Agreement.

Demand Promissory Note. We maintain a $10.0 million secured demand promissory note in favor of a bank for use as a working capital line of credit in conjunction with our cash management program. Pursuant to the terms and conditions of the demand promissory note, we may borrow, on a revolving basis, up to the principal face amount of the note. All principal and accrued interest under the demand promissory note will be immediately due and payable upon the bank’s written demand. We did not borrow under this credit facility during the nine months ended September 30, 2013. The demand promissory note’s effective interest rate on November 1, 2013 was approximately 2.2%; however, there were no amounts outstanding thereunder on such date.

Debt Covenants

The Credit Facilities and the indentures governing our 3.75% Convertible Senior Subordinated Notes due 2028, 7.375% Senior Notes due 2020 and 6.125% Senior Notes due 2016 contain covenants that, among other things, require us to maintain compliance with certain financial ratios. At September 30, 2013, we were in compliance with all of the covenants contained in those debt agreements. Although there can be no assurances, we believe that we will continue to be in compliance with all of our debt covenants. Should we fail to comply with one or more of our debt covenants in the future and are unable to remedy the matter, an event of default may result. In that circumstance, we would seek a waiver from our lenders or renegotiate the related debt agreement; however, such renegotiations could, among other things, subject us to higher interest and financing costs on our debt obligations and our credit ratings could be adversely affected.

Dividends

The Credit Facilities and the indentures for certain of our other debt agreements restrict our ability to pay cash dividends.

Standby Letters of Credit

As of November 1, 2013, we maintained approximately $53.0 million of standby letters of credit in favor of third parties with various expiration dates through October 31, 2014. Should any or all of these letters of credit be drawn upon, we intend to satisfy such obligations with available cash balances, cash provided by operating activities, proceeds from sales of available-for-sale securities and, if necessary, borrowings under the Revolving Credit Agreement.

Interest Rate Swap Contract

As required by a former credit facility, we entered into a seven-year receive variable/pay fixed interest rate swap contract during February 2007. As part of a restructuring of our long-term debt on November 18, 2011, our former credit facility was terminated but the interest rate swap contract was not. Although we are exposed to financial risk in the event of nonperformance by one or more of the counterparties to the contract, we do not anticipate nonperformance because our interest rate swap contract is in a liability position and would require us to make settlement payments to the counterparties in the event of a contract termination. The interest rate swap contract provides for us to pay interest on the contract’s notional

49

amount, which was originally expected to reasonably approximate the declining principal balance of a term loan under the former credit facility. Interest payable to the counterparties is determined by reference to, among other things, LIBOR rates. As of September 30, 2013, the notional amount of the interest rate swap contract was approximately $1,668.4 million. The estimated fair value of our liability for the interest rate swap contract on such date was $32.2 million and we project that such amount will be payable to the counterparties during the twelve months ending September 30, 2014. However, our aggregate payments through the contract’s expiration in February 2014 are subject to change based on, among other things, future LIBOR rates. See Note 7 to the Interim Condensed Consolidated Financial Statements in Item 1 for further information regarding the estimated fair value of our interest rate swap contract.

Net interest payable or receivable is settled between us and the counterparties at the end of each calendar quarter. We intend to fund any net interest payable to the counterparties with available cash balances, cash provided by operating activities, proceeds from sales of available-for-sale securities and, if necessary, borrowings under the Revolving Credit Agreement.

Capital Expenditures and Other

We believe that our capital expenditures for property, plant and equipment will range from 5.0% to 5.5% of our net revenue after the provision for doubtful accounts for the year ending December 31, 2013. As of September 30, 2013, we had undertaken several hospital renovation and expansion projects and various information technology hardware and software upgrades. We do not believe that any of our construction, renovation and/or expansion projects are individually significant or that they represent, in the aggregate, a material commitment of our resources.

Part of our strategic business plan calls for us to acquire hospitals and other ancillary health care businesses in non-urban communities that are aligned with our business model, available at a reasonable price and otherwise meet our strict acquisition criteria. We typically fund acquisitions, replacement hospital construction and other recurring capital expenditures with available cash balances, cash provided by operating activities, proceeds from sales of available-for-sale securities, amounts available under revolving credit agreements and proceeds from long-term debt issuances, or a combination thereof. Specifically, on April 1, 2013, we funded the entire purchase price of our acquisition of an 80% interest in a 480-bed Florida-based hospital and certain related health care operations with borrowings under the Revolving Credit Agreement. This acquisition is discussed at Note 8 to the Interim Condensed Consolidated Financial Statements in Item 1.

Divestiture of Idle Property

We intend to sell the former Riverside hospital campus that we acquired as part of a 2011 acquisition transaction. However, the timing of such divestiture has not yet been determined. We intend to use the proceeds therefrom for general business purposes. See Note 9 to the Interim Condensed Consolidated Financial Statements in Item 1 for further information about this idle facility.

Contractual Obligations and Off-Balance Sheet Arrangements

During 2013, there were no material changes to the contractual obligation and off-balance sheet information presented in Item 7 of Part II of our Annual Report on Form 10-K/A for the year ended December 31, 2012. However, see Note 3 to the Interim Condensed Consolidated Financial Statements in Item 1 for a discussion of certain modifications to the Credit Facilities during 2013 that affect the determination of the variable interest rates thereunder.

Forward-Looking Statements

Certain statements contained in this Quarterly Report on Form 10-Q, including, without limitation, statements containing the words “believe,” “anticipate,” “intend,” “expect,” “may,” “could,” “plan,” “pending,” “designed,” “continue,” “should,” “project,” “estimate” and words of similar import, constitute “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. These statements may include projections of revenue, statements regarding our definitive merger agreement with CHS, provisions for doubtful accounts, income or loss, capital expenditures, debt structure, principal payments on debt, capital structure, the amount and timing of funds under the meaningful use measurement standard of various Healthcare Information Technology incentive programs, other financial items and operating statistics, statements regarding our plans and objectives for future operations, the impact of changes in observation stays, our ability to achieve operational efficiencies, factors we believe may have an impact on our deductibles and copays, acquisitions, acquisition financing, divestitures, joint ventures, market service development and other transactions, statements of future economic performance, statements regarding our legal proceedings and other loss contingencies (including, but not limited to, the timing and estimated costs of such matters), statements regarding market risk exposures, statements regarding our ability to achieve cost efficiencies and/or reductions, statements regarding the effects and/or interpretations of recently enacted or future health care laws and regulations, statements regarding the potential impact of healthcare exchanges, statements relating to the remediation of the material weakness in internal control over financial reporting, statements of the beliefs or assumptions underlying or relating to any of the foregoing statements, and statements that are other than statements of historical fact.

50

Forward-looking statements are based on our current plans and expectations and involve known and unknown risks, uncertainties and other factors that may cause our actual results, performance, achievements or industry results to be materially different from any future results, performance or achievements expressed or implied by our forward-looking statements. Such factors include, among other things, the risks and uncertainties identified by us under the heading “Risk Factors” in Item 1A of Part I of our Annual Report on Form 10-K for the year ended December 31, 2012. Furthermore, we operate in a continually changing business and regulatory environment and new risk factors emerge from time to time. We cannot predict what these new risk factors may be, nor can we assess the impact, if any, of such new risk factors on our business or results of operations or the extent to which any factor or combination of factors may cause our actual results to differ materially from those expressed or implied by any of our forward-looking statements.

Undue reliance should not be placed on our forward-looking statements. Except as required by law, we disclaim any obligation to update our risk factors or to publicly announce updates to the forward-looking statements contained in this Quarterly Report on Form 10-Q to reflect new information, future events or other developments.

Item 3. Quantitative and Qualitative Disclosures About Market Risk.

During the nine months ended September 30, 2013, there were no material changes to the quantitative and qualitative disclosures about market risks that were presented in Item 7A of Part II of our Annual Report on Form 10-K/A for the year ended December 31, 2012. However, see Note 4 to the Interim Condensed Consolidated Financial Statements in Item 1 for a discussion of certain modifications to the Credit Facilities during the nine months ended September 30, 2013 that affect the determination of the variable interest rates thereunder.

Item 4. Controls and Procedures.

Conclusion Regarding the Effectiveness of Disclosure Controls and Procedures

Our Interim President and Chief Executive Officer (principal executive officer) and our Senior Vice President and Interim Chief Financial Officer (principal financial officer) evaluated our disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) as of the end of the period covered by this Quarterly Report on Form 10-Q. Based on this evaluation, management identified the following material weakness as of September 30, 2013: management failed to design and maintain effective controls over the administration, oversight and accounting for the Company’s EHR enrollment process. Specifically, management did not design effective controls to properly apply the requirements for certifying its EHR technology under the HCIT programs and, as a result, certain of the hospitals it had enrolled in the HCIT programs did not meet the “meaningful use” criteria necessary to qualify for HCIT payments. Based on this evaluation, our Interim President and Chief Executive Officer and our Senior Vice President and Interim Chief Financial Officer concluded that, solely as a result of this material weakness, our disclosure controls and procedures were not effective at the reasonable assurance level.

The Company has corrected its accounting treatment for HCIT payments and is in the process of implementing new controls that management believes will remediate the material weakness in internal control over financial reporting described above. The Company has engaged Ober Kaler, a national law firm providing regulatory services to healthcare organizations, to assist in the oversight and provide independent validation of all processes related to HCIT certification and attestation. The Company will test the operating effectiveness of the new controls in future periods. The material weakness cannot be considered remediated until the applicable remedial controls operate for a sufficient period of time and management has concluded, through testing, that these controls are operating effectively.

Changes in Internal Control Over Financial Reporting

There has been no change in our internal control over financial reporting that occurred during the fiscal quarter covered by this Quarterly Report on Form 10-Q that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

51

PART II – OTHER INFORMATION

Item 1. Legal Proceedings.

We operate in a highly regulated and litigious industry. As a result, we have been, and expect to continue to be, subject to various claims, lawsuits, government investigations and regulatory proceedings. The ultimate resolution of these matters, individually or in the aggregate, could have a materially adverse effect on our business, financial condition, results of operations and/or cash flows. We are currently a party to a number of legal and regulatory proceedings, including those described below.

Medicare/Medicaid Billing Lawsuits. On January 11, 2010, Health Management Associates, Inc. (referred to as “Health Management” for the remainder of this Item 1) and one of its subsidiaries were named in a qui tam lawsuit entitled United States of America ex rel. J. Michael Mastej v. Health Management Associates, Inc. et al. in the U.S. District Court for the Middle District of Florida, Tampa Division. The plaintiff’s complaint alleged that, among other things, the defendants erroneously submitted claims to Medicare and that those claims were falsely certified to be in compliance with Section 1877 of the Social Security Act of 1935 (commonly known as the “Stark law”) and the Anti-Kickback Statute. The plaintiff’s complaint further alleged that the defendants’ conduct violated the federal False Claims Act of 1863 (the “False Claims Act”). The plaintiff seeks recovery of all Medicare and Medicaid reimbursement that the defendants received as a result of the alleged false certifications and treble damages under the False Claims Act, as well as a civil penalty for each Medicare and Medicaid claim supported by such alleged false certifications. On August 18, 2010, the plaintiff filed a first amended complaint that was similar to the original complaint. On February 23, 2011, the case was transferred to the U.S. District Court for the Middle District of Florida, Fort Myers Division (Case No. 2:11-cv-00089-JES-DNF). On May 5, 2011, the plaintiff filed a second amended complaint, which was similar to the first amended complaint. On May 17, 2011, the defendants moved to dismiss the second amended complaint for failure to state a claim with the particularity required and failure to state a claim upon which relief can be granted. On January 26, 2012, the United States gave notice of its decision not to intervene in this lawsuit. On February 16, 2012, the court granted the defendants’ motion to dismiss, without prejudice. The court’s order permitted the plaintiff to file an amended complaint. On March 8, 2012, the plaintiff filed a third amended complaint, which was similar to the first amended complaint and the second amended complaint. On March 26, 2012, the defendants moved to dismiss the third amended complaint on the same bases set forth in earlier motions to dismiss. On March 19, 2013, the U.S. District Court for the Middle District of Florida, Tampa Division, dismissed the third amended complaint with prejudice. On March 28, 2013, the United States of America filed a motion to clarify that the dismissal with prejudice did not relate to the United States. On April 4, 2013, the defendants filed an opposition to the United States’ motion for clarification. The Government’s motion remains pending at this time. On April 16, 2013, the plaintiff filed a motion for relief from judgment and for leave to amend the complaint, and a proposed fourth amended complaint. On April 18, 2013, the plaintiff filed a notice of appeal. On May 2, 2013, the defendants filed an opposition to the plaintiff’s motion for relief from judgment and for leave to amend the complaint for the fourth time. On July 10, 2013, the court denied plaintiff’s motion for relief from judgment and for leave to amend the complaint for the fourth time. The case is now on appeal to the Eleventh Circuit Court of Appeals. On August 26, 2013, plaintiff submitted his initial brief and, on October 15, 2013, defendants filed their answer brief. We intend to vigorously defend Health Management and its subsidiary against the allegations in this matter. We do not believe that the final outcome of this matter will be material.

On July 31, 2013, Health Management received a courtesy copy of a qui tam lawsuit captioned United States ex rel. Williams v. Health Management Associates, Inc.. Health Management has not yet been formally served with that complaint, which is pending in the U.S. District Court for the Middle District of Georgia. The federal government has declined to intervene in that case, but the State of Georgia has decided to intervene. The complaint alleges that the hospital defendants engaged in a kickback scheme with Clínica de la Mama, a prenatal clinic, whereby Clínica de la Mama would provide translation and eligibility services in exchange for the referral of Medicaid patients to the defendant hospitals. The State alleges that these referrals violated the Georgia False Medical Claims Act, the Georgia Medical Assistance Act, and various state laws. Health Management denies the allegations in the complaint and intends to vigorously defend itself against those allegations. At this time, we do not believe that the final outcome of this matter will be material.

Governmental Matters. Several Health Management hospitals received letters during 2009 requesting information in connection with a U.S. Department of Justice (“DOJ”) investigation relating to kyphoplasty procedures. Kyphoplasty is a minimally invasive spinal procedure used to treat vertebral compression fractures. The DOJ is currently investigating hospitals and hospital operators in multiple states to determine whether certain Medicare claims for kyphoplasty were incorrect when billed as an inpatient service rather than as an outpatient service. We believe that the DOJ’s investigation originated with a False Claims Act lawsuit against Kyphon, Inc., the company that developed the kyphoplasty procedure. The requested information has been provided to the DOJ and we are cooperating with the investigation. To date, the DOJ has not asserted any monetary or other claims against the Health Management hospitals in this matter. Based on the aggregate billings for inpatient kyphoplasty procedures during the period under review that were performed at the Health Management hospitals subject to the DOJ’s inquiry, we do not believe that the final outcome of this matter will be material.

52

During September 2010, Health Management received a letter from the DOJ indicating that an investigation was being conducted to determine whether certain Health Management hospitals improperly submitted claims for the implantation of implantable cardioverter defibrillators (“ICDs”). The DOJ’s investigation covers the period commencing with Medicare’s expansion of coverage for ICDs in 2003 to the present. The letter from the DOJ further indicates that the claims submitted by Health Management’s hospitals for ICDs and related services need to be reviewed to determine if Medicare coverage and payment was appropriate. During 2010, the DOJ sent similar letters and other requests to a large number of unrelated hospitals and hospital operators across the country as part of a nation-wide review of ICD billing under the Medicare program. We are cooperating with the DOJ in its ongoing investigation, which could potentially give rise to claims against Health Management and/or certain of its subsidiary hospitals under the False Claims Act or other statutes, regulations or laws. Additionally, we are conducting an internal review of hospital medical records related to ICDs that are the subject of the DOJ investigation. To date, the DOJ has not asserted any monetary or other claims against Health Management or its hospitals in this matter and, at this time, we are unable to determine the potential impact, if any, that will result from the final resolution of the investigation.

The U.S. Department of Health and Human Services, Office of Inspector General (“HHS-OIG”) and the DOJ, including the Civil Division and U.S. Attorney’s Offices in the Eastern District of Pennsylvania, the Middle District of Florida, the Eastern District of Oklahoma, the Middle District of Tennessee, the Western District of North Carolina, the District of South Carolina and the Middle District of Georgia, are currently investigating Health Management and certain of its subsidiaries (HHS-OIG and the DOJ are collectively referred to as “Government Representatives”). We believe that such investigations relate to the Anti-Kickback Statute, the Stark law and the False Claims Act and are focused on: (i) physician referrals, including financial arrangements with our whole-hospital physician joint ventures; (ii) the medical necessity of emergency room tests and patient admissions, including whether the Pro-Med software that we used led to any medically unnecessary tests or admissions; and (iii) the medical necessity of certain surgical procedures. We further believe that the investigations may have originated as a result of qui tam lawsuits filed on behalf of the United States. In connection with the investigations, HHS-OIG has requested certain records through subpoenas, which apply system-wide, that were served on Health Management on May 16, 2011 and July 21, 2011. On June 10, June 26, and July 11, 2013, Health Management received additional subpoenas, which supplements the July 21, 2011 subpoena, from the HHS-OIG regional office in Atlanta, Georgia. On June 12, 2013, Health Management received an additional subpoena, which supplements the May 16, 2011 subpoena, from the HHS-OIG regional office in Miami Lakes, Florida. Additionally, Government Representatives have interviewed certain of our current and former employees. We are conducting internal investigations and have met with Government Representatives on numerous occasions to respond to their inquiries. We intend to cooperate with the Government Representatives during their investigations. At this time, we are unable to determine the potential impact, if any, that will result from the final resolution of these investigations.

On February 22, 2012 and February 24, 2012, HHS-OIG served subpoenas on certain Health Management hospitals relating to those hospitals’ relationships with Allegiance Health Management, Inc. (“Allegiance”). Allegiance, which is unrelated to Health Management, is a post acute health care management company that provides intensive outpatient psychiatric (“IOP”) services to patients. The Health Management hospitals that were served subpoenas were: (i) Central Mississippi Medical Center in Jackson, Mississippi; (ii) Crossgates River Oaks Hospital in Brandon, Mississippi; (iii) Davis Regional Medical Center in Statesville, North Carolina; (iv) Lake Norman Regional Medical Center in Mooresville, North Carolina; (v) the Medical Center of Southeastern Oklahoma in Durant, Oklahoma; and (vi) Natchez Community Hospital in Natchez, Mississippi. Each of those hospitals has or had a contract with Allegiance. Among other things, the subpoenas seek: (i) documents related to the hospitals’ financial relationships with Allegiance; (ii) documents related to patients who received IOP services from Allegiance at the Health Management hospitals, including their patient medical records; (iii) documents relating to complaints or concerns regarding Allegiance’s IOP services at the Health Management hospitals; (iv) documents relating to employees, physicians and therapists who were involved with the IOP services provided by Allegiance at the Health Management hospitals; and (v) other documents related to Allegiance, including leases, contracts, policies and procedures, training documents, budgets and financial analyses. The period of time covered by the subpoenas is January 1, 2008 through the date of subpoena compliance. We believe that HHS-OIG has served similar subpoenas on other non-Health Management hospitals that had contracts with Allegiance. We intend to cooperate with the investigations. At this time, we are unable to determine the potential impact that will result from the final resolution of these investigations.

On April 25, 2013, Health Management received a subpoena from the Securities and Exchange Commission (the “SEC”), issued pursuant to an investigation, requesting documents related to accounts receivable, billing write-downs, contractual adjustments, reserves for doubtful accounts, and accounts receivable aging, and revenue from Medicare, Medicaid and from privately insured or uninsured patients. On June 5, 2013, Health Management received a supplemental subpoena from the SEC which requests additional financial reports. This investigation is ongoing and we are cooperating with the SEC’s investigation. We are unable to determine the potential course or impact, if any, of this investigation.

53

In addition to the abovementioned subpoenas and investigations, certain of our hospitals have received other requests for information from state and federal agencies. We are cooperating with all of the ongoing investigations by collecting and producing the requested materials. Because a large portion of our government investigations are in their early stages, we are unable to evaluate the outcome of such matters or determine the potential impact, if any, that could result from their final resolution.

Class Action and Derivative Action Lawsuits. On April 30, 2012, two class action lawsuits that were brought against Health Management and certain of its then executive officers, one of whom was at that time also a director, were consolidated in the U.S. District Court for the Middle District of Florida under the caption In Re: Health Management Associates, Inc., et al. (Case No. 2:12-cv-00046-JES-DNF) and three pension fund plaintiffs were appointed as lead plaintiffs. On July 30, 2012, the lead plaintiffs filed an amended consolidated complaint purportedly on behalf of stockholders who purchased our common stock during the period from July 27, 2009, through January 9, 2012. The amended consolidated complaint (i) alleges that Health Management made false and misleading statements in certain public disclosures regarding its business and financial results and (ii) asserts claims for violations of Sections 10(b) and 20(a) of the Securities Exchange Act of 1934, as amended. Among other things, the plaintiffs claim that Health Management inflated its earnings by engaging in fraudulent Medicare billing practices that entailed admitting patients to observation status when they should not have been admitted at all and to inpatient status when they should have been admitted to observation status. The plaintiffs seek unspecified monetary damages. On October 22, 2012, the defendants moved to dismiss the plaintiffs’ amended consolidated complaint for failure to state a claim or plead facts required by the Private Securities Litigation Reform Act. The plaintiffs filed an unopposed stipulation and proposed order to suspend briefing on the defendants’ motion to dismiss because they intended to seek leave of court to file a proposed second amended consolidated complaint. On December 15, 2012, the court entered an order approving the stipulation and providing a schedule for briefing with respect to the proposed amended pleadings. On February 11, 2013, the defendants were served with the second amended consolidated complaint, which asserts the same claims as the amended consolidated complaint. As of August 15, 2013, the defendants’ motion to dismiss the second amended complaint for failure to state a claim and plead facts required by the Private Securities Litigation Reform Act was fully submitted and awaiting the Court’s decision. We intend to vigorously defend against the allegations in this lawsuit. We are unable to predict the outcome or determine the potential impact, if any, that could result from its final resolution.

On January 22, 2013, a putative shareholder derivative action entitled The City of Haverhill Retirement System v. Dauten, et al. (Case No. 8:13-cv-00213) was filed in the U.S. District Court for the Middle District of Florida, Tampa Division, purportedly on behalf of Health Management against its then directors. Health Management was also named as a nominal defendant. The complaint alleges that, among other things, the defendants breached their fiduciary duties to Health Management and its stockholders by supposedly causing Health Management to undertake a scheme to defraud Medicare by improperly admitting certain emergency room patients as “inpatients” in violation of the False Claims Act and then issuing false and misleading public statements about Health Management’s financial outlook and compliance with laws and regulations. The complaint also alleges that the defendants breached their fiduciary duties by exposing Health Management to potentially significant civil and criminal penalties as a result of the aforementioned investigations by HHS-OIG and the DOJ as well as the stockholder class action and other ongoing litigation. The complaint seeks monetary damages from the defendants, other than Health Management. On February 8, 2013, the case was transferred to the U.S. District Court for the Middle District of Florida, Fort Myers Division (Case No. 2:13-cv-00092). On April 10, 2013 the plaintiff filed an amended complaint which asserts the same claims as its prior complaint, but also names two of the Company’s then executives as defendants. On May 15, 2013, the defendants moved to dismiss the amended complaint for threshold lack of derivative standing, for failure to make a demand on the Board, and for failure to state a claim. On June 26, 2013, the plaintiff opposed the defendants’ motion to dismiss, and on August 16, 2013, the plaintiff moved to amend its complaint to add class action claims related to the Merger Agreement. On August 19, 2013, the defendants moved to suspend briefing on their motion to dismiss pending the outcome of the plaintiff’s motion for leave to amend. On August 20, 2013, the Court granted an order suspending briefing on the defendants’ motion to dismiss and setting a schedule for the briefing of the plaintiff’s motion for leave to amend, which was fully submitted for the Court’s decision as of October 8, 2013. We intend to vigorously defend against the allegations in this lawsuit. Because this lawsuit is in its early stages, we are unable to predict the outcome or determine the potential impact, if any, that could result from its final resolution.

On July 23, 2013, an action entitled Town of Davie Police Officers’ Pension Plan v. Dauten, et al. (C.A. No. 8742) was filed in the Court of Chancery of the State of Delaware. This action purportedly was brought as a class action on behalf of all of Health Management’s stockholders, as well as derivatively on behalf of Health Management against Health Management’s then directors and Wells Fargo Bank, National Association, Wells Fargo Securities, LLC, and Deutsche Bank Securities, Inc. The complaint alleges, among other things, that those directors breached their fiduciary duties (i) by approving a credit agreement in 2011 that contains a change of control covenant which plaintiff contends will coerce shareholders into supporting the re-election of Health Management’s incumbent board of directors and (ii) by not approving Glenview Nominees for election to Health Management’s Board of Directors for purposes of seeking a waiver of the change of control covenant. The complaint further alleges that the Wells Fargo and Deutsche Bank defendants aided and abetted

54

such breaches. The complaint seeks declaratory and injunctive relief, including (i) a declaration that those directors breached their fiduciary duties by entering into the credit agreement and (ii) an order permanently enjoining the board of directors from invoking or enforcing the change of control covenant in the credit agreement. Plaintiff also seeks unspecified damages from those directors and an award of attorneys’ fees and costs. On September 20, 2013, the defendants moved to dismiss this action for lack of subject matter jurisdiction, as well as the plaintiff’s failure to make a demand on the Board of Directors and failure to state a claim. We intend to defend this action.

Five putative class action lawsuits challenging the Merger have been filed on behalf of a putative class consisting of Health Management’s stockholders. Four were filed in the Circuit Court of the Twentieth Judicial Circuit in and for Collier County, Florida: (1) Aliaga v. Health Mgmt. Assocs., Inc., et al., Civ. No. 13-2288-CA (“Aliaga”), filed on August 1, 2013; (2) Copeland v. Health Mgmt. Assocs., Inc., et al., Case No. 13-2356-CA (“Copeland”), filed on August 8, 2013; (3) Lopriore v. Health Mgmt. Assocs., Inc., et al., Case No. 13-2307-CA (“Lopriore”), filed on August 5, 2013; and (4) Smilow v. Health Mgmt. Assocs., Inc., et al., Case No. 13-2371-CA (“Smilow”), filed on August 13, 2013 (collectively, the “Florida Actions”). The fifth case, Margolis, et al. v. Schoen, et al., C.A. No. 8774-CS, was filed in the Court of Chancery of the State of Delaware on August 5, 2013. With limited exceptions, these actions name Health Management, former members of its board of directors, CHS, and Merger Sub as defendants. Generally, the plaintiffs in these actions allege that those directors breached their fiduciary duties to Health Management stockholders by, among other things, approving the Merger Agreement for allegedly inadequate consideration, following an allegedly unfair sale process that favored the interests of CHS and those directors over Health Management stockholders, and that CHS and Merger Sub aided and abetted such alleged breaches of fiduciary duty. The plaintiffs further allege that those directors breached their fiduciary duties by agreeing to terms in the Merger Agreement that favor CHS and deter alternative bids. The actions seek, among other things, an injunction against the completion of the Merger (or rescission of the Merger Agreement to the extent it has been implemented) and the payment of attorneys’ fees and expenses. We intend to defend these actions.

Wrongful Termination Lawsuit. On or about October 19, 2011, a wrongful termination action was commenced against us by Paul Meyer, our former Director of Compliance. That litigation, entitled Meyer v. Health Management Associates, Inc., was commenced in the Circuit Court of the Seventeenth Judicial Circuit in and for Broward County, Florida (Case No. 11-25334(09)). The plaintiff seeks unspecified compensatory and punitive damages. Mr. Meyer was terminated after insubordinately refusing to cooperate with our efforts to comply with our obligations under a government subpoena by refusing to return documents belonging to us that were in his possession. Moreover, Mr. Meyer’s failure to cooperate with us in response to a subpoena was contrary to both the intent and purpose of our compliance department and our company-wide compliance program. We have filed a counterclaim against Mr. Meyer for breach of contract, conversion and breach of duty of loyalty. The trial in this matter is scheduled to take place during the third quarter of 2014. We intend to vigorously defend against the wrongful termination allegations made by Mr. Meyer and we do not believe that the final outcome of this matter will be material.

Other. We are also a party to various other legal actions arising out of the normal course of our business. Due to the inherent uncertainties of litigation and dispute resolution, we are unable to estimate the ultimate losses, if any, relating to each of our outstanding legal actions and other loss contingencies.

Item 1A. Risk Factors

Except as provided below, there have not been any material changes to the risk factors previously disclosed in our Amendment No. 1 to Annual Report on Form 10-K/A for the year ended December 31, 2012.

We have identified a material weakness in our internal control over financial reporting, which, if not remediated effectively, may impact our ability to report our financial results accurately.

On November 5, 2013, we announced that we would restate our previously issued consolidated financial statements for the years ended December 31, 2012, 2011 and 2010 and for periods ended March 31, 2013 and June 30, 2013 to correct an error in the accounting treatment of approximately $31.0 million in incentive payments under the Company’s HCIT programs that the Company recognized as income between July 1, 2011 and June 30, 2013. In connection with this restatement, management of the Company concluded that a control deficiency related to the administration, oversight and accounting for the Company’s EHR enrollment process constituting a material weakness in its internal control over financial reporting existed at September 30, 2013 and that, due solely to this material weakness, the Company’s internal control over financial reporting and its disclosure controls and procedures were not effective as of that date. See “Part I, Item 4 – Controls and Procedures.”

Effective internal controls are necessary for us to provide reliable financial reports and to detect and prevent fraud. A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of our annual or interim financial statements will not be

55

prevented or detected on a timely basis. The Company has corrected its accounting treatment for HCIT payments and is in the process of implementing new controls that management believes will remediate the material weakness in internal control over financial reporting described above. The Company has engaged Ober Kaler, a national law firm providing regulatory services to healthcare organizations, to assist in the oversight and provide independent validation of all processes related to HCIT certification and attestation. The Company will test the ongoing operating effectiveness of the new controls in future periods. The material weakness cannot be considered remediated until the applicable remedial controls operate for a sufficient period of time and management has concluded, through testing, that these controls are operating effectively. A failure to remediate the material weakness and maintain an effective system of internal controls could result in a future material misstatement to the annual or interim consolidated financial statements that would not be prevented or detected.

In addition, HCIT incentive payments previously recognized as income are subject to audit and potential recoupment if it is determined that the Company did not meet the applicable meaningful use standards required in connection with such incentive payments.

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

The table below summarizes the number of shares of our common stock that were withheld to satisfy the tax withholding obligations for our stock-based compensation awards that vested during the three months ended September 30, 2013.

Month Ended	Total Number of Shares Purchased		Average Price Per Share
July 31, 2013		—	$	—
August 31, 2013		2,480,926		12.95
September 30, 2013		—		—
Total		2,480,926

Item 6. Exhibits.

See Index to Exhibits on page 58 of this Quarterly Report on Form 10-Q.

56

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

	HEALTH MANAGEMENT ASSOCIATES, INC.
Date: November 13, 2013	By:	/s/ Gary S. Bryant
		Gary S. Bryant
		Senior Vice President and Interim Chief Financial Officer
		(Principal Financial and Accounting Officer)

57

INDEX TO EXHIBITS

2.1	Agreement and Plan of Merger, dated as of July 29, 2013, by and among Health Management Associates, Inc., Community Health Systems, Inc. and FWCT-2 Acquisition Corporation (schedule and exhibits omitted pursuant to 601(b)(2) of Regulation S-K), previously filed and included as Exhibit 2.1 to the Company’s Current Report on Form 8-K dated July 29, 2013, is incorporated herein by reference.
2.2	Amendment and Consent to Agreement and Plan of Merger, dated as of September 24, 2013, by and among Health Management Associates, Inc., Community Health Systems, Inc. and FWCT-2 Acquisition Corporation previously filed and included as Exhibit 2.1 to the Company’s Current Report on Form 8-K dated September 24, 2013, is incorporated herein by reference.
3.1	By-laws, as amended and restated, previously filed and included as Exhibit 3.1 to the Company’s Current Report on Form 8-K dated August 12, 2013, are incorporated herein by reference.
4.1	Amendment to the Rights Agreement, dated as of July 29, 2013, between Health Management Associates, Inc. and American Stock Transfer & Trust Company, LLC, previously filed and included as Exhibit 4.1 to the Company’s Current Report on Form 8-K dated July 29, 2013, is incorporated herein by reference.
4.2	Waiver dated as of July 29, 2013 under the Credit Agreement, dated as of November 18, 2011, among HMA, Wells Fargo Bank, National Association and the other parties thereto (the “Credit Agreement”).
10.1	Form of Contingent Value Rights Agreement to be entered into between Community Health Systems, Inc. and Trustee previously filed and included as Exhibit 10.1 to the Company’s Current Report on Form 8-K dated July 29, 2013, is incorporated herein by reference.
10.2	Certain executive officer compensation information, previously filed and included in the Company’s Current Report on Form 8-K dated July 29, 2013, is incorporated herein by reference.
10.3	Health Management Associates, Inc. Executive Change in Control Retention Bonus and Severance Plan, previously filed with and included as Exhibit 10.1 to the Company’s Current Report on Form 8-K dated August 6, 2013, is incorporated by reference.
10.4	Steven E. Clifton Retention Letter, dated as of August 10, 2013, previously filed and included as Exhibit 10.2 to the Company’s Current Report on Form 8-K dated August 6, 2013, is incorporated herein by reference.
10.5	Certain executive officer compensation information, previously filed and included in the Company’s Current Report on Form 8-K dated September 11, 2013, is incorporated herein by reference.
31.1	Rule 13a-14(a)/15d-14(a) Certification of Principal Executive Officer.
31.2	Rule 13a-14(a)/15d-14(a) Certification of Principal Financial Officer.
32.1	Section 1350 Certifications.
101.INS	XBRL Instance Document
101.SCH	XBRL Taxonomy Extension Schema Document
101.CAL	XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF	XBRL Taxonomy Extension Definition Linkbase Document
101.LAB	XBRL Taxonomy Extension Label Linkbase Document
101.PRE	XBRL Taxonomy Extension Presentation Linkbase Document

58