10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q

(Mark One)
R	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIESEXCHANGE ACT OF 1934
	For the quarterly period ended June 30, 2016
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 001-37550

QUORUM HEALTH CORPORATION

(Exact name of registrant as specified in its charter)

Delaware	47-4725208
(State or Other Jurisdiction of Incorporation or Organization)	(I.R.S. Employer Identification Number)
1573 Mallory Lane Brentwood, Tennessee	37027
(Address of Principal Executive Offices)	(Zip Code)

615-221-1400

(Registrant’s Telephone Number)

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  R     No  o

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  R     No  o

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	o		Accelerated filer	o
Non-accelerated filer	R	(Do not check if a smaller reporting company)	Smaller reporting company	o

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

As of August 8, 2016, there were 29,487,497 shares outstanding of the registrant’s Common Stock, $0.0001 par value per share.

QUORUM HEALTH CORPORATION

TABLE OF CONTENTS

			Page
PART I – FINANCIAL INFORMATION
	Item 1.	Financial Statements	1
	Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	36
	Item 3.	Quantitative and Qualitative Disclosures about Market Risk	65
	Item 4.	Controls and Procedures	65
PART II – OTHER INFORMATION
	Item 1.	Legal Proceedings	66
	Item 1A.	Risk Factors	68
	Item 6.	Exhibits	68
Signatures			69
Index to Exhibits			70

PART I – FINANCIAL INFORMATION

Item 1.Financial Statements

QUORUM HEALTH CORPORATION

CONDENSED CONSOLIDATED AND COMBINED STATEMENTS OF INCOME (LOSS)

(Unaudited)

(In Thousands, Except Per Share Amounts and Shares)

	Three Months Ended June 30,						Six Months Ended June 30,
	2016			2015			2016			2015
Operating revenues, net of contractual allowances and discounts	$	598,163		$	608,636		$	1,212,647		$	1,215,108
Provision for bad debts		68,426			70,284			133,359			129,139
Net operating revenues		529,737			538,352			1,079,288			1,085,969
Operating costs and expenses:
Salaries and benefits		264,886			253,812			521,748			513,878
Supplies		64,136			61,663			127,797			126,215
Other operating expenses		163,185			158,811			327,648			311,051
Depreciation and amortization		31,463			32,141			62,620			63,839
Rent		12,545			12,065			25,094			24,502
Electronic health records incentives earned		(4,247	)		(7,624	)		(8,455	)		(15,331	)
Legal and settlement costs		5,447			—			5,688			—
Impairment of long-lived assets and goodwill		250,400			—			250,400			—
Transaction costs related to the spin-off		1,177			—			4,912			—
Total operating costs and expenses		788,992			510,868			1,317,452			1,024,154
Income (loss) from operations		(259,255	)		27,484			(238,164	)		61,815
Interest expense, net		29,276			23,828			56,728			49,630
Income (loss) before income taxes		(288,531	)		3,656			(294,892	)		12,185
Provision for (benefit from) income taxes		(44,565	)		1,451			(46,239	)		4,156
Net income (loss)		(243,966	)		2,205			(248,653	)		8,029
Less: Net income attributable to noncontrolling interests		1,095			775			1,410			400
Net income (loss) attributable to Quorum Health Corporation	$	(245,061	)	$	1,430		$	(250,063	)	$	7,629
Earnings (loss) per share attributable to Quorum Health Corporation stockholders:
Basic and diluted	$	(8.63	)	$	0.05		$	(8.80	)	$	0.27
Weighted-average common shares outstanding:
Basic and diluted		28,412,720			28,412,054			28,412,389			28,412,054

See accompanying notes

1

QUORUM HEALTH CORPORATION

CONDENSED CONSOLIDATED AND COMBINED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(Unaudited)

(In Thousands)

	Three Months Ended June 30,					Six Months Ended June 30,
	2016			2015		2016			2015
Net income (loss)	$	(243,966	)	$	2,205	$	(248,653	)	$	8,029
Amortization and recognition of unrecognized pension cost components, net of income taxes		(3,810	)		-		(3,810	)		-
Comprehensive income (loss)		(247,776	)		2,205		(252,463	)		8,029
Less:  Comprehensive income attributable to noncontrolling interests		1,095			775		1,410			400
Comprehensive income (loss) attributable to Quorum Health Corporation	$	(248,871	)	$	1,430	$	(253,873	)	$	7,629

See accompanying notes

2

QUORUM HEALTH CORPORATION

CONDENSED CONSOLIDATED AND COMBINED BALANCE SHEETS

(Unaudited)

(In Thousands, Except Par Value per Share and Shares)

	June 30,			December 31,
	2016			2015
ASSETS
Current assets:
Cash and cash equivalents	$	55,145		$	1,106
Patient accounts receivable, net of allowance for doubtful accounts of $337,253 and $346,507 at June 30, 2016 and December 31, 2015, respectively		394,120			390,890
Inventories		57,059			60,542
Prepaid expenses		23,306			16,030
Due from third-party payors		116,765			110,806
Current assets of hospitals held for sale		7,918			—
Other current assets		49,506			59,011
Total current assets		703,819			638,385
Property and equipment, at cost		1,549,751			1,603,653
Less:  Accumulated depreciation and amortization		(732,719	)		(723,404	)
Total property and equipment, net		817,032			880,249
Goodwill		336,790			541,704
Intangible assets, net		109,444			129,250
Long-term assets of hospitals held for sale		21,225			—
Other long-term assets		114,049			105,268
Total assets	$	2,102,359		$	2,294,856
LIABILITIES AND EQUITY
Current liabilities:
Current maturities of long-term debt	$	16,271		$	7,915
Accounts payable		148,627			138,483
Accrued liabilities:
Accrued salaries and benefits		105,737			82,620
Accrued interest		19,283			—
Due to third-party payors		41,214			30,103
Current liabilities of hospitals held for sale		2,256			—
Other current liabilities		48,129			45,255
Total current liabilities		381,517			304,376
Long-term debt		1,236,659			15,500
Due to Parent, net		—			1,800,908
Deferred income tax liabilities, net		55,297			41,030
Other long-term liabilities		126,875			108,141
Total liabilities		1,800,348			2,269,955
Redeemable noncontrolling interests		8,360			8,958
Equity:
Quorum Health Corporation stockholders' equity:
Preferred stock, $0.0001 par value per share, 100,000,000 shares authorized, none issued at June 30, 2016		—			—
Common stock, $0.0001 par value per share, 300,000,000 shares authorized, 29,489,247 shares issued and outstanding at June 30, 2016		3			—
Additional paid-in capital		520,336			—
Accumulated other comprehensive loss		(3,810	)		—
Accumulated deficit		(234,951	)		—
Total Quorum Health Corporation stockholders' equity		281,578			—
Parent's equity		—			3,184
Nonredeemable noncontrolling interests		12,073			12,759
Total equity		293,651			15,943
Total liabilities and equity	$	2,102,359		$	2,294,856

See accompanying notes

3

QUORUM HEALTH CORPORATION

CONDENSED CONSOLIDATED AND COMBINED STATEMENT OF EQUITY

(Unaudited)

(In Thousands, Except Shares)

				Quorum Health Corporation Stockholders' Equity
												Accumulated
	Redeemable								Additional			Other									Nonredeemable
	Noncontrolling			Common Stock					Paid-in			Comprehensive			Accumulated			Parent's			Noncontrolling			Total
	Interests			Shares			Amount		Capital			Loss			Deficit			Equity			Interests			Equity
Balance at December 31, 2015	$	8,958			—		$	-	$	-		$	-		$	-		$	3,184		$	12,759		$	15,943
Comprehensive income (loss)		(296	)		—			—		—			(3,810	)		(234,951	)		(15,112	)		1,706			(252,167	)
Transfers to Parent (prior to spin-off transaction)		—			—			—		—			—			—			15,112			—			15,112
Changes in equity on spin-off transaction date		—			28,412,054			3		518,518			—			—			(3,137	)		—			515,384
Stock-based compensation expense		—			1,078,005			—		1,897			—			—			—			—			1,897
Cancellation of restricted stock awards for payroll tax withholdings on vesting shares		—			(812	)		—		(28	)		—			—			—			—			(28	)
Cash distributions to noncontrolling investors		(255	)		—			—		—			—			—			—			(2,392	)		(2,392	)
Purchases of shares from noncontrolling investors		(31	)		—			—		—			—			—			19			—			19
Adjustments to redemption value of redeemable noncontrolling interests investments		117			—			—		(51	)		—			—			(66	)		—			(117	)
Reclassifications of noncontrolling interests investments		(133	)		—			—		—			—			—			—			—			-
Balance at June 30, 2016	$	8,360			29,489,247		$	3	$	520,336		$	(3,810	)	$	(234,951	)	$	-		$	12,073		$	293,651

See accompanying notes

4

QUORUM HEALTH CORPORATION

CONDENSED CONSOLIDATED AND COMBINED STATEMENTS OF CASH FLOWS

(Unaudited)

(In Thousands)

	Three Months Ended June 30,						Six Months Ended June 30,
	2016			2015			2016			2015
Cash flows from operating activities:
Net income (loss)	$	(243,966	)	$	2,205		$	(248,653	)	$	8,029
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depreciation and amortization		31,463			32,141			62,620			63,839
Non-cash interest expense		729			-			729			-
Benefit from deferred income taxes		(47,451	)		-			(47,451	)		-
Stock-based compensation expense		1,897			-			1,897			-
Impairment of long-lived assets and goodwill		250,400			-			250,400			-
Non-cash changes in self-insurance reserves		5,418			-			5,418			-
Other non-cash income, net		(33	)		(1,137	)		(587	)		(1,508	)
Changes in operating assets and liabilities, net of acquisitions:
Patient accounts receivable, net		4,911			17,642			(7,211	)		16,830
Due to and due from third-party payors, net		(4,745	)		17,218			5,355			1,748
Inventories, prepaid expenses and other current assets		5,103			4,127			2,277			7,585
Accounts payable and accrued liabilities		33,234			(16,073	)		36,074			(73,902	)
Long-term assets and liabilities, net		(164	)		223			325			75
Net cash provided by operating activities		36,796			56,346			61,193			22,696
Cash flows from investing activities:
Capital expenditures for property and equipment		(20,367	)		(10,471	)		(33,207	)		(20,410	)
Capital expenditures for software		(1,278	)		(1,664	)		(3,804	)		(2,661	)
Acquisitions, net of cash acquired		-			(2,012	)		-			(2,012	)
Proceeds from sales of property and equipment		-			2,917			858			3,017
Other investing activities		492			(1,867	)		544			(3,292	)
Net cash used in investing activities		(21,153	)		(13,097	)		(35,609	)		(25,358	)
Cash flows from financing activities:
Borrowings of long-term debt		1,255,500			75			1,255,520			135
Repayments of long-term debt		(3,188	)		(340	)		(4,277	)		(736	)
Increase (decrease) in Due to Parent, net		31,669			(42,939	)		25,183			9,261
Increase (decrease) in receivables facility, net		-			(2,854	)		-			(5,187	)
Payments of debt issuance costs		(28,003	)		-			(28,003	)		-
Cash paid to Parent in spin-off transaction		(1,217,336	)		-			(1,217,336	)		-
Cancellation of restricted stock awards for payroll tax withholdings on vesting shares		27			-			27			-
Cash distributions to noncontrolling investors		(163	)		(1,292	)		(2,647	)		(1,422	)
Purchases of shares from noncontrolling investors		-			(722	)		(12	)		(722	)
Net cash provided by (used in) financing activities		38,506			(48,072	)		28,455			1,329
Net change in cash and cash equivalents		54,149			(4,823	)		54,039			(1,333	)
Cash and cash equivalents at beginning of period		996			6,049			1,106			2,559
Cash and cash equivalents at end of period	$	55,145		$	1,226		$	55,145		$	1,226
Supplemental cash flow information:
Interest payments, net	$	8,894		$	23,828		$	36,347		$	49,630
Income tax payments, net of refunds (after spin-off transaction)		34			-			34			-

See accompanying notes

5

NOTE 1 – DESCRIPTION OF THE BUSINESS AND SPIN-OFF TRANSACTION

Description of the Business

The principal business of Quorum Health Corporation (“QHC” or the “Company”) is to provide general hospital healthcare and other outpatient services in its markets across the United States. As of June 30, 2016, the Company owned or leased 38 hospitals with 3,579 licensed beds in 16 states. The Company provides outpatient healthcare services through its hospitals and affiliated facilities, including urgent care centers, diagnostic and imaging centers, physician clinics and surgery centers. The Company’s wholly-owned subsidiary, Quorum Health Resources, LLC (“QHR”), provides management advisory and consulting services to non-affiliated hospitals located throughout the United States.  Over 95% of the Company’s net operating revenues are attributable to its hospital operations business.

Description of the Spin-off Transaction

On April 29, 2016, Community Health Systems, Inc. (“CHS” or “Parent” when referring to the carve-out period prior to April 29, 2016) completed the spin-off of 38 hospitals, including their affiliated facilities, and QHR to form Quorum Health Corporation through the distribution of 100% of the common stock of QHC, issued at a par value of $0.0001 per share, to CHS stockholders of record as of the close of business on April 22, 2016 (the “Record Date”) and cash proceeds to CHS of $1.2 billion (the “Spin-off Transaction”).  Each CHS stockholder received a distribution of one share of QHC common stock for every four shares of CHS common stock held as of the Record Date plus cash in lieu of fractional shares. Quorum Health Corporation began regular-way trading on the New York Stock Exchange (“NYSE”) under the ticker symbol “QHC” on May 2, 2016.

In connection with the Spin-off Transaction, QHC and CHS entered into a Separation and Distribution Agreement, a Tax Matters Agreement and an Employee Matters Agreement on April 29, 2016, which, collectively, governed or continue to govern the allocation of employees, assets and liabilities that were transferred to QHC from CHS, including but not limited to investments, working capital, property and equipment, employee benefits and deferred tax assets and liabilities.  In addition, QHC and CHS entered into various transition services agreements and other ancillary agreements, which govern certain relationships and activities of QHC and CHS for a period of five years following the Spin-off Transaction.  See Note 16 – Related Party Transactions for additional information on the agreements that exist between QHC and CHS after the Spin-off Transaction.

In connection with the Spin-off Transaction, QHC issued $400 million in aggregate principal amount of 11.625% Senior Notes due 2023 (the “Senior Notes”) on April 22, 2016, pursuant to an indenture (the “Indenture”) by and between the Company and Regions Bank, as Trustee.  The Senior Notes were issued at a discount of $6.9 million, or 1.734%.  The gross offering proceeds of the Senior Notes were deposited into a segregated escrow account at the closing of the offering on April 22, 2016.  On April 29, 2016, the Company entered into a credit agreement (the “Senior Credit Facility”) consisting of an $880 million senior secured term loan facility (the “Term Loan Facility”), which was issued at a discount of $17.6 million, or 98% of par value, and a $100 million senior secured revolving credit facility (the “Revolving Credit Facility”).  In addition, the Company entered into a $125 million senior secured asset-based revolving credit facility (the “ABL Credit Facility”) on April 29, 2016.  The net offering proceeds of the Senior Notes were released to QHC from the escrow account on April 29, 2016.  The net offering proceeds of the Senior Notes, together with the net borrowings under the Term Loan Facility, were used to pay $1.2 billion of the cash proceeds to CHS, as mentioned above, and to pay the Company’s fees and expenses related to the Spin-off Transaction.  The cash proceeds paid to CHS were characterized as a one-time, tax-free cash distribution.

In connection with the Spin-off Transaction, CHS contributed $518.5 million of additional paid-in capital to QHC and made a $13.5 million cash contribution, pursuant to the Separation and Distribution Agreement.  This contribution consisted of $20.0 million of cash contributed to fund a portion of QHC’s initial working capital, reduced by $6.5 million for the difference in estimated and actual financing transaction fees related to the Spin-off Transaction.

6

A summary of the major transactions that occurred on April 29, 2016 to effect the spin-off of QHC as a newly formed, independent company were as follows (dollars in thousands):

										Additional
	Long-Term		Due to			Common Stock				Paid-in			Parent's
	Debt		Parent, Net			Shares		Amount		Capital			Equity
Balance at April 29, 2016 (prior to spin-off transaction)	$	24,179	$	1,811,034			—	$	-	$	-		$	3,137
Borrowings of long-term debt, net of debt issuance costs and discounts		1,230,819		—			—		—		—			—
Cash proceeds paid to Parent		—		(1,217,336	)		—		—		—			—
Transfer of liabilities from Parent		—		(16,596	)		—		—		—			—
Net deferred tax liability resulting from spin-off transaction				(61,718	)
Non-cash capital contribution from Parent		—		(515,384	)		—		—		518,521			(3,137	)
Distribution of common stock		—		—			27,719,645		3		(3	)		—
Distribution of restricted stock awards		—		—			692,409		—		—			—
Balance at April 29, 2016 (after spin-off transaction)	$	1,254,998	$	-			28,412,054	$	3	$	518,518		$	-

A summary of the liabilities transferred to QHC from CHS just prior to the consummation of the Spin-off Transaction, previously included in Due to Parent, net, were as follows (in thousands): 

	April 29,
	2016
Accounts payable for capital expenditures	$	8,422
Benefit plan liabilities		5,964
Other liabilities		2,210
Total liabilities transferred from Parent	$	16,596

NOTE 2 - BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

The condensed consolidated and combined financial statements and accompanying notes of the Company presented herein have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”). These financial statements should be read in conjunction with the Company’s Registration Statement on Form 10, as amended, initially filed with the Securities and Exchange Commission (“SEC”) on September 4, 2015 and declared effective on April 4, 2016 (the “Form 10”), which includes combined financial statements and accompanying notes as of December 31, 2015 and 2014 and for each of the three years ended December 31, 2015, 2014 and 2013.  In the opinion of the Company’s management, the condensed consolidated and combined financial information presented herein includes all adjustments necessary to present fairly the results of operations, financial position and cash flows of the Company for the interim periods presented.  Results of operations for interim periods should not be considered indicative of the results of operations expected for the full year. Certain information and disclosures have been condensed or omitted as presented herein and as permitted by the rules and regulations of the SEC for interim period presentation. The Company’s management believes the financial statements and disclosures presented herein are adequate in order to make the information not misleading.

Prior to its separation from CHS on April 29, 2016, QHC did not operate as a separate company and stand-alone financial statements were not historically prepared; however, QHC was comprised of certain stand-alone legal entities for which discrete financial information was available under CHS’ ownership. The accompanying consolidated and combined financial statements include amounts and disclosures for QHC that have been derived from the consolidated financial statements and accounting records of CHS for the periods prior to the Spin-off Transaction in combination with the amounts and disclosures related to the stand-alone financial statements and accounting records of QHC after the Spin-off Transaction.  The accompanying consolidated and combined financial statements may not necessarily be indicative of the results of operations, financial position and cash flows of QHC in the future or those that would have occurred had the Company operated on a stand-alone basis during the entirety of the periods presented herein.  See Note 16 – Related Party Transactions for additional information on the carve-out of financial information from CHS.

7

Principles of Consolidation and Combination

The consolidated and combined financial statements include the accounts of the Company and its subsidiaries in which it holds either a direct or indirect ownership of a majority voting interest. These investments in less-than-wholly-owned consolidated subsidiaries of QHC are presented separately in the equity component of the consolidated and combined balance sheets to distinguish between the interests of QHC and the interests of the noncontrolling investors. Revenues and expenses from these subsidiaries are included in the respective individual line items of the Company’s consolidated and combined statements of income, and net income is presented both in total and separately to show the amounts attributable to the Company and the amounts attributable to the  interests of the noncontrolling investors.  Noncontrolling interests that are redeemable, or may become redeemable at a fixed or determinable price at the option of the holder or upon the occurrence of an event outside of the control of the Company, are presented in mezzanine equity on the consolidated and combined balance sheets.

 All significant intercompany transactions and accounts of the Company are eliminated in consolidation.  Additionally, all significant transactions with CHS that occurred prior to the Spin-off Transaction have been included in the consolidated and combined balance sheets within Due to Parent, net. This liability to CHS was settled in the Spin-off Transaction.

Reclassifications

Certain prior period amounts have been reclassified to conform to the current period presentation as follows:

The Company reclassified third-party final cost report settlement receivables and state supplemental payment program receivables to amounts due from and due to third-party payors on its consolidated and combined balance sheets. Third-party final cost report settlement receivables were previously classified as other current assets, and the cost report settlement liabilities were previously classified as other current liabilities. Accounts receivable from state supplemental payment programs were previously classified as patient accounts receivable, and the amounts owed related to these programs was classified as other current liabilities. The Company believes the current presentation helps distinguish between amounts due related to a specific patient service and amounts due from or owed by the Company related to state supplemental payment programs.

The Company reclassified intangible assets to present them separately on its consolidated and combined balance sheets for all periods presented. Previously, these amounts were classified as a component of other long-term assets. The Company believes that this presentation helps distinguish the portion of other long-term assets which are intangible assets.

The Company reclassified equity in earnings of unconsolidated subsidiaries to other operating expenses in the consolidated and combined statements of income. Previously, these amounts were classified as non-operating income. These amounts are immaterial to the Company. This change in classification has no effect on the Company’s results of operations or cash flows included in previously issued consolidated and combined financial statements.

Use of Estimates

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

Revenues and Accounts Receivable

Revenue Recognition

The Company recognizes revenues from patient services at its hospitals and affiliated facilities in the period services are performed and reports these revenues at their net realizable amount expected to be collected from patients and third-party payors. The amounts that the Company collects for patient services are generally less than established billing rates, or standard billing charges, due to contractual agreements with third-party payors, governmental programs that require reduced billing rates, discounts offered as incentives for payment, and a portion related to bad debts.  The Company recognizes revenues related to its QHR business when management advisory and consulting services are provided and reports these revenues at their net realizable amount expected to be collected from the non-affiliated hospital clients.

A summary of the components of operating revenues before the provision for bad debts follows (in thousands):

	Three Months Ended June 30,						Six Months Ended June 30,
	2016			2015			2016			2015
Operating revenues	$	3,042,786		$	2,923,172		$	6,123,439		$	5,771,609
Less:  Contractual allowances		(2,335,554	)		(2,224,369	)		(4,696,589	)		(4,383,729	)
Less:  Discounts		(109,069	)		(90,167	)		(214,203	)		(172,772	)
Total operating revenues, net of contractual allowances and discounts	$	598,163		$	608,636		$	1,212,647		$	1,215,108

8

Payor Sources

The primary sources of payment for patient healthcare services are third-party payors, including federal and state agencies administering the Medicare and Medicaid programs, other governmental agencies, managed care health plans, commercial insurance companies, workers’ compensation carriers and employers.  Self-pay revenues are the portion of patient service revenues derived from patients that do not have health insurance coverage and the patient responsibility portion of services that is not covered by health insurance plans.  Non-patient revenues include revenues from QHR’s hospital management advisory and consulting services business, rental income and hospital cafeteria sales.

A summary of operating revenues by payor source follows (dollars in thousands):

	Three Months Ended June 30,
	2016					2015
	$  Amount		% of Total			$  Amount		% of Total
Medicare	$	167,549		28.0	%	$	156,649		25.7	%
Medicaid		113,283		18.9	%		103,972		17.1	%
Managed care and commercial		230,595		38.6	%		259,984		42.7	%
Self-pay		59,171		9.9	%		57,181		9.4	%
Non-patient		27,565		4.6	%		30,850		5.1	%
Total operating revenues, net of contractual allowances and discounts	$	598,163		100.0	%	$	608,636		100.0	%
	Six Months Ended June 30,
	2016					2015
	$  Amount		% of Total			$  Amount		% of Total
Medicare	$	343,083		28.3	%	$	331,373		27.3	%
Medicaid		216,351		17.8	%		208,306		17.1	%
Managed care and commercial		474,879		39.2	%		495,752		40.8	%
Self-pay		123,925		10.2	%		120,095		9.9	%
Non-patient		54,409		4.5	%		59,582		4.9	%
Total operating revenues, net of contractual allowances and discounts	$	1,212,647		100.0	%	$	1,215,108		100.0	%

As of June 30, 2016, the Company began classifying its revenues related to Medicare Managed Care Advantage Plans as Medicare revenues.  As a result, the Company retroactively reclassified these amounts from managed care and commercial revenues to Medicare revenues for all periods presented in the tables above.  The revenues from Medicare Managed Care Advantage Plans that were reclassified were $43.4 million and $35.5 million for the three months ended June 30, 2016 and 2015, respectively, and $85.1 million and $72.1 million for the six months ended June 30, 2016 and 2015, respectively.

Contractual Allowances and Discounts

The net realizable amount of patient service revenues due from third-party payors is subject to complexities and interpretations of payor-specific contractual agreements and governmental regulations that are frequently changing.  The Medicare and Medicaid programs, which represent a large portion of the Company’s operating revenues, are highly complex programs to administer and subject to interpretation of federal and state-specific reimbursement rates, new legislation and final cost report settlements.  Contractual allowances, or differences in standard billing rates and the payments derived from contractual terms with governmental and non-governmental third–party payors, are recorded based on management’s best estimates in the period in which services are performed and a payment methodology is established with the patient.  Recorded estimates for past contractual allowances are subject to change, in large part, due to ongoing contract negotiations and regulation changes, which is typical in the healthcare industry.  Revisions to estimates are recorded in the periods in which they become known and may be subject to further revisions.  Self-pay and other payor discounts are incentives offered to uninsured or underinsured payors to reduce their costs of healthcare services with the purpose of maximizing the Company’s collection efforts.

Third-Party Program Reimbursements

Cost report settlements under reimbursement programs with Medicare, Medicaid and other managed care plans are estimated and recorded in the period the related services are performed and are adjusted in future periods, as needed, until the final cost report settlements are determined.These previous program reimbursements and final cost report settlements are included in due from and

9

due to third-party payors in the consolidated and combined balance sheets.  Previously, these amounts were a component of other current assets and other current liabilities in the consolidated and combined balance sheets. Contractual adjustments related to previous program reimbursements and final cost report settlements unfavorably impacted revenues by $2.5 million and $11.2 million during the three months ended June 30, 2016 and 2015, respectively, and $4.4 million and $11.7 million during the six months ended June 30, 2016 and 2015, respectively.  Contractual adjustments in the three and six months ended June 30, 2015 periods include the unfavorable impact of an $11.1 million Illinois cost report settlement which was recorded in 2014 and reversed in the second quarter of 2015 due to contract negotiations that were finalized in that quarter.

Currently, several states utilize supplemental payment programs, including disproportionate share programs, for the purpose of providing reimbursement to providers to offset a portion of the cost of providing care to Medicaid and indigent patients. These programs are designed with input from Centers for Medicare and Medicaid Services (“CMS”) and funded with a combination of federal and state resources, including, in certain instances, taxes, fees or other program costs (collectively, “provider taxes”) levied on the providers. Similar programs are also currently being considered by other states. These amounts are included in due from and due to third-party payors in the consolidated and combined balance sheets, respectively.  Previously, amounts due from third parties related to these programs were included in patient accounts receivable, and the provider taxes owed were included in other current liabilities in the consolidated and combined balance sheets.  See the Reclassifications accounting policy above for additional information on reclassification adjustments made by the Company as of June 30, 2016.

The following table summarizes the components of amounts due from and due to third-party payors, as presented in the consolidated and combined balance sheets (in thousands):

	June 30,		December 31,
	2016		2015
Amounts due from third-party payors:
Previous program reimbursements and final cost report settlements	$	29,438	$	33,732
State supplemental payment programs		87,327		77,074
Total amounts due from third-party payors	$	116,765	$	110,806
Amounts due to third-party payors:
Previous program reimbursements and final cost report settlements	$	31,961	$	21,015
State supplemental payment programs		9,253		9,088
Total amounts due to third party payors	$	41,214	$	30,103

After a state supplemental payment program is approved and fully authorized by the appropriate state legislative or governmental agency, the Company recognizes revenue and related expenses based on the terms of the program in the period in which amounts are estimable and revenue collection is reasonably assured.  The revenues earned by the Company under these programs are included in net operating revenues and the expenses associated with these programs are included in other operating expenses in the consolidated and combined statements of income.

The table below summarizes the impact on income (loss) from operations related to state supplemental payment programs (in thousands):

	Three Months Ended June 30,				Six Months Ended June 30,
	2016		2015		2016		2015
State supplemental payment programs:
Revenues	$	55,105	$	49,838	$	107,320	$	105,217
Expenses		18,604		19,324		38,030		38,493
Total operating income from state supplemental payment programs	$	36,501	$	30,514	$	69,290	$	66,724

Charity Care

In the ordinary course of business, the Company provides services to patients who are financially unable to pay for hospital care. The related charges for those patients who are financially unable to pay and that otherwise do not qualify for reimbursement from a governmental program are classified as charity care. The Company determines amounts that qualify for charity care primarily based on the patient’s household income relative to the poverty level guidelines established by the federal government. The Company’s policy is to not pursue collections for such amounts; therefore, the related charges are recorded in operating revenues at the standard billing rates and fully offset in contractual allowances.  The gross amounts of charity care revenues were $7.0 million and

10

$6.3 million for the three months ended June 30, 2016 and 2015, respectively, and $14.8 million and $13.3 million for the six months ended June 30, 2016 and 2015, respectively.

The estimated cost of providing charity care services is determined using a ratio of cost to gross charges and applying this ratio to the gross charges associated with providing care to charity patients for the period.  The Company recorded charity care costs of $1.2 million and $1.1 million for the three months ended June 30, 2016 and 2015, respectively, and $2.4 million and $2.3 million for the six months ended June 30, 2016 and 2015, respectively.  To the extent the Company receives reimbursement through any of the various governmental assistance programs in which it participates to subsidize its care of indigent patients, the Company does not include these patients’ charges in its cost of care provided under its charity care program. 

Accounts Receivable and Allowance for Doubtful Accounts

Substantially all of the Company’s receivables are related to providing healthcare services to patients at its hospitals and affiliated businesses.  As of June 30, 2016, the Company retroactively reclassified receivables related to state supplemental payment programs from patient accounts receivable to due from and due to third-party payors in the consolidated and combined balance sheet.  The net amounts reclassified were $78.1 million and $68.0 million as of June 30, 2016 and December 31, 2015, respectively. See the Reclassifications accounting policy above for additional information on reclassification adjustments made by the Company as of June 30, 2016.

A summary of the components of accounts receivable before contractual allowances, discounts and allowance for doubtful accounts follows (dollars in thousands):

	June 30, 2016					December 31, 2015
	Amount		% of Total			Amount		% of Total
Third-parties	$	1,831,940		74.5	%	$	1,688,138		72.6	%
Self-pay		626,662		25.5	%		638,694		27.4	%
Total accounts receivable, gross	$	2,458,602		100.0	%	$	2,326,832		100.0	%

Accounts receivable are reduced by an allowance for amounts that could become uncollectible in the future.  The Company estimates the allowance for doubtful accounts by reserving a percentage of all self-pay accounts receivable without regard to aging category, based on collection history, adjusted for expected recoveries and any anticipated changes in trends. The Company’s ability to estimate the allowance for doubtful accounts is not significantly impacted by the aging of accounts receivable, as management believes that substantially all of the risk exists at the point in time such accounts are identified as self-pay. The percentage used to reserve for self-pay accounts receivable is based on the Company’s collection history. For insured receivables, which are the non-self-pay receivables, the Company estimates the allowance for doubtful accounts based on historical collection rates for the uncontractualized portion of all accounts aging over 365 days from the date of patient discharge.  In general, allowances for insured receivables are an immaterial percentage of the Company’s total accounts receivable. The Company collects substantially all of its third-party insured receivables, which include receivables from governmental agencies.  

A summary of the changes in the allowance for doubtful accounts follows (in thousands):

	Six Months Ended
	June 30, 2016
Balance at beginning of period	$	346,507
Provision for bad debts		133,359
Amounts written off, net of recoveries		(142,613	)
Balance at end of period	$	337,253

Collections are impacted by the economic ability of patients to pay and the effectiveness of CHS’ collection efforts, including their current policies on collections, and the ability of the Company to further attempt collection efforts. Billings and collections are outsourced to CHS under the transition service agreements that were put in place with the Spin-off Transaciton.  See Note 16 – Related Party Transactions for additional information on these agreements.  Significant changes in payor mix, centralized business office operations, economic conditions or trends in federal and state governmental healthcare coverage, among others, could affect the Company’s estimates of accounts receivable collectability. The Company also continually reviews its overall allowance adequacy by monitoring historical cash collections as a percentage of trailing net operating revenues after the provision for bad debts, as well as by analyzing current period net operating revenues and admissions by payor classification, aged accounts receivable by payor, days revenue outstanding, the composition of self-pay receivables between pure self-pay patients and the patient responsibility portion of third-party insured receivables, and the impact of recent acquisitions and dispositions.

11

Concentration of Credit Risk

The Company grants unsecured credit to its patients, most of which reside in the service area of the Company’s hospitals and affiliated facilities and are insured under third-party payor agreements. Because of the economic diversity of the Company’s markets and non-governmental third-party payors, Medicare represents the only significant concentration of credit risk from payors. Accounts receivable, net of contractual allowances, from Medicare were $75.4 million and $67.7 million, or 10.3% and 9.2% of total consolidated and combined patient accounts receivable, net, as of June 30, 2016 and December 31, 2015, respectively.

The Company’s revenues are particularly sensitive to regulatory and economic changes in certain states where the Company generates significant revenues. Accordingly, any changes in the current demographic, economic, competitive or regulatory conditions in certain states in which our revenues are significant could have an adverse effect on the Company’s results of operations, financial condition or cash flows. Changes to the Medicaid and other government-managed payor programs, including reductions in reimbursement rates or delays in reimbursement payments under state supplemental or other programs, in these states could also have a similar adverse effect.

A summary of the states in which the Company generates more than 5% of total net patient revenues before the provision for bad debts, as determined based on the six months ended June 30, 2016 and 2015, follows (dollars in thousands):

		Six Months Ended June 30,
	Number of	2016					2015
	Hospitals	$ Amount		% of Total			$  Amount		% of Total
Illinois	9	$	399,049		34.5	%	$	405,390		35.1	%
Oregon	1		104,810		9.0	%		92,962		8.0	%
Georgia	4		107,469		9.3	%		113,055		9.8	%
California	2		101,562		8.8	%		104,397		9.0	%
Kentucky	3		59,375		5.1	%		63,406		5.5	%

Other Operating Expenses

A summary of the major components of other operating expenses follows (in thousands):

	Three Months Ended June 30,				Six Months Ended June 30,
	2016		2015		2016		2015
Purchased services	$	62,477	$	59,041	$	124,218	$	116,406
Taxes and insurance		34,261		31,534		69,567		59,339
Medical specialist fees		25,182		20,579		49,532		40,267
Repairs and maintenance		10,730		11,562		21,966		23,296
Utilities		7,001		7,038		14,156		14,367
Management fees from Parent		2,966		9,048		11,792		17,964
Other miscellaneous operating expenses		20,568		20,009		36,417		39,412
Total other operating expenses	$	163,185	$	158,811	$	327,648	$	311,051

The Company began recording costs associated with the transition services agreements and other ancillary agreements with CHS following the Spin-off Transaction in accordance with the terms of these agreements.  These costs, which primarily include the costs of providing information technology, patient billing and collections and payroll services, are included in purchased services in the table above.  Prior to the Spin-off Transaction, CHS allocated costs for these services to QHC, which were also included in purchased services during the carve-out period.

Prior to the Spin-off Transaction, QHC recorded a monthly corporate management fee from CHS that represented a portion of CHS’ corporate office costs and was included in other operating expenses prior to the Spin-off Transaction.  The costs for corporate office functions are primarily included in salaries and benefits expenses following the Spin-off Transaction.  See Note 16 – Related Party Transactions for additional information on the allocated costs from CHS.

General and Administrative Costs

Substantially all of the Company’s operating costs and expenses are “cost of revenues” items.  Operating expenses that could be classified as general and administrative by the Company are costs related to corporate office functions, including, but not limited to tax, treasury, audit, risk management, legal, investor relations and human resources. These costs are primarily salaries and benefits expenses associated with corporate office functions.   General and administrative costs of the Company were $11.7 million and $11.1 million during the three months ended June 30, 2016 and 2015, respectively, and $23.7 million and $22.1 million during the six

12

months ended June 30, 2016 and 2015, respectively.  Prior to the Spin-off Transaction, the majority of these costs were allocations from CHS.  See Note 16 – Related Party Transactions for additional information on the allocated costs from CHS.

Electronic Health Records Incentives Earned

Pursuant to the Health Information Technology for Economic and Clinical Health Act (“HITECH”), the Company is eligible to receive incentive payments under the Medicare and Medicaid programs for its eligible hospitals and physician clinics that demonstrate meaningful use of certified Electronic Health Records (“EHR”) technology.  Each of the Company’s eligible hospitals and physician clinics have completed the initial adoption phase of EHR implementation and are currently in the process of implementing the remaining two phases.EHR incentive payments are subject to audit and potential recoupment if it is determined that the applicable meaningful use standards were not met and are also subject to retrospective adjustment because the cost report data upon which the incentive payments are based are further subject to audit.

The Company utilizes a gain contingency model to recognize EHR incentive payments.  When the recognition criteria have been fully met, the Company recognizes the income from EHR incentives payments as a part of other operating costs and expenses in the consolidated and combined statements of income. Medicaid EHR incentive payments are calculated based on prior period Medicare cost report information available at the time when eligible hospitals demonstrate meaningful use of certified EHR technology. Medicare EHR incentive payments are calculated when eligible hospitals demonstrate meaningful use of certified EHR technology and the information for the applicable full Medicare cost report year to determine the final incentive payment is available.  In some instances, the Company may receive estimated Medicare EHR incentive payments prior to when the Medicare cost report information used to determine the final incentive payment is available. In these instances, recognition of the income from EHR incentive payments is deferred until all recognition criteria are met.  The Company recognizes receivables for EHR incentive payments that have been earned, but are uncollected at period end, as other current assets in the consolidated and combined balance sheets.  The receivables are adjusted for any known audit or retrospective adjustments related to prior periods.   Deferred revenue from EHR incentive payments is recorded in other current liabilities in the consolidated and combined balance sheets.

The Company incurs both capital expenditures and operating expenses in connection with the implementation of EHR technology initiatives. The amount and timing of these expenditures does not directly correlate with the timing of the Company’s receipt or recognition of EHR incentive payments as earned.  As the Company completes its full implementation of certified EHR technology in accordance with all three phases of the program, its EHR incentive payments will decline and ultimately end.

A summary of activity related to EHR incentives follows (in thousands):

	Three Months Ended June 30,						Six Months Ended June 30,
	2016			2015			2016			2015
Electronic health records incentives receivable at beginning of period	$	5,885		$	6,822		$	11,227		$	12,204
Electronic health records incentives earned		608			1,236			4,816			4,775
Cash incentive payments received		(5,124	)		(1,396	)		(12,749	)		(8,220	)
Adjustments to receivable based on final cost report settlement or audit		604			(814	)		(1,321	)		(2,911	)
Electronic health records incentives receivable at end of period	$	1,973		$	5,848		$	1,973		$	5,848
Deferred revenue related to electronic health records incentives at beginning of period	$	(4,693	)	$	(10,183	)	$	-		$	(14,351	)
Cash received and deferred during period		-			-			(4,693	)		-
Recognition of deferred incentives as earned		3,639			6,388			3,639			10,556
Deferred revenue related to electronic health records incentives at end of period	$	(1,054	)	$	(3,795	)	$	(1,054	)	$	(3,795	)
Total electronic health records incentives earned during period	$	4,247		$	7,624		$	8,455		$	15,331
Total cash incentive payments received during period		5,124			1,396			17,442			8,220

Legal and Settlement Costs

Legal and settlement costs in the consolidated and combined statements of income primarily includes legal costs and related settlements, if any, related to regulatory claims, government investigations into reimbursement payments and claims associated with QHR’s hospital management contracts.

13

Transaction Costs Related to the Spin-off

Transaction costs related to the spin-off consists of QHC’s portion of the costs to effect the Spin-off Transaction and the costs associated with forming a new company. These costs include audit, management advisory and consulting costs, investment advisory costs, legal expenses and other miscellaneous costs.

Income Taxes

The Company accounts for income taxes using the asset and liability method. Under this method, deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. The Company assesses the likelihood that deferred tax assets will be recovered from future taxable income. To the extent the Company believes that recovery is not likely, a valuation allowance is established. To the extent the Company establishes a valuation allowance or increases this allowance, the related expense is included in the provision for income taxes in the consolidated and combined statements of income. The Company classifies interest and penalties, if any, related to its tax positions as a component of income tax expense.  See Note 10 – Income Taxes for information on the use of the separate return method of accounting for income taxes that was used by the Company during the carve-out period and the impact of the consummation of the Spin-off Transaction on income taxes.

Comprehensive Income (Loss)

Comprehensive income (loss) is net income (loss) plus the change in equity of a Company during the period from transactions and other events or circumstances from non-owner sources.  The Company’s only source of other comprehensive income consists of pension costs related to an acquired defined benefit pension plan at one of its hospitals and a supplemental employee retirement plan.

Cash and Cash Equivalents

Cash includes cash on hand and cash with banks.  Cash equivalents are short-term, highly liquid investments with a maturity of three months or less from the date acquired and are subject to an insignificant risk of change in value.

Inventories

Inventories, primarily consisting of medical supplies and drugs, are stated at the lower of cost or market on a first-in, first-out basis.

Other Current Assets

Other current assets consists of the current portion of the receivables from CHS related to professional and general liability and workers’ compensation insurance reserves that were indemnified by CHS in connection with the Spin-off Transaction, non-patient accounts receivable primarily related to QHR, receivables related to electronic health records incentives and other miscellaneous current assets.

Property and Equipment

Purchases of property and equipment are recorded at cost. Property and equipment acquired in a business combination are recorded at estimated fair value.  Routine maintenance and repairs are expensed as incurred.  Expenditures that increase capacities or extend useful lives are capitalized.  The Company capitalizes interest related to financing of major capital additions with the respective asset.  Depreciation is recognized using the straight-line method over the estimated useful life of an asset. The Company depreciates land improvements over 3 to 20 years, buildings and improvements over 5 to 40 years, and equipment and fixtures over 3 to 18 years.  The Company also leases certain facilities and equipment under capital lease obligations. These assets are amortized on a straight-line basis over the lesser of the lease term or the remaining useful life of the asset.

Goodwill

The Company’s hospital operations and QHR’s hospital management advisory and consulting services operations meet the criteria to be classified as reporting units for goodwill.  Goodwill was initially determined for QHC’s hospital operations reporting unit based on a relative fair value approach as of September 30, 2013 (CHS’ goodwill impairment testing date). Additional goodwill was allocated on a similar basis for four hospitals acquired by CHS in 2014 and included in the group of hospitals spun-off to QHC.  For the QHR reporting unit, goodwill was allocated based on the amount recorded by CHS at the time of its acquisition in 2007. All subsequent goodwill generated from hospital, physician practice or other ancillary business acquisitions was recorded at fair value at the time of acquisition.

Goodwill arising from business combinations is not amortized. Goodwill is evaluated for impairment at the same time every year and when an event occurs or circumstances change that, more likely than not, reduce the fair value of the reporting unit below its carrying value. There is a two-step method for determining goodwill impairment. Step one is to compare the fair value of the reporting

14

unit with the unit’s carrying amount, including goodwill. If this test indicates the fair value is less than the carrying value, then step two is required to compare the implied fair value of the reporting unit’s goodwill with the carrying value of the reporting unit’s goodwill. See Note 5 – Goodwill and Intangible Assets, which includes a discussion of the impairment charges recorded in the consolidated and combined statements of income for the three and six months ended June 30, 2016.  The Company performs its annual testing of impairment for goodwill in the fourth quarter of each year.  The fair value of the related reporting units is estimated using both a discounted cash flow model as well as a multiple model based on earnings before interest, taxes, depreciation and amortization. The cash flow forecasts are adjusted by an appropriate discount rate based on the Company’s best estimate of a market participant’s weighted-average cost of capital. Both models are based on the Company’s best estimate of future revenues and operating costs and are reconciled to the Company’s consolidated market capitalization, with consideration of the amount a potential acquirer would be required to pay, in the form of a control premium, in order to gain sufficient ownership to set policies, direct operations and control management decisions of the Company.

Intangible Assets

The Company’s intangible assets primarily consists of purchase and development costs of software for internal use and contract-based intangible assets, including physician guarantee contracts, medical licenses, hospital management contracts, non-compete agreements and certificates of need. There are no expected residual values related to the Company’s intangible assets.  Capitalized software costs are generally amortized over three years, except for software costs for significant system conversions, which are amortized over 8 to 10 years.  Capitalized software costs that are in the development stage are not amortized until the related projects are complete.  Assets established for physician guarantee contracts, hospital management contracts, non-compete agreements and certificates of need are amortized over the life of the individual contracts.  Tradenames and medical licenses are not amortized.

Impairment of Long-Lived Assets

Whenever an event occurs or changes in circumstances indicate that the carrying values of certain long-lived assets may be impaired, the Company projects the undiscounted cash flows expected to be generated by these assets. If the projections indicate that the carrying values are not expected to be recovered, such amounts are reduced to their estimated fair value based on a quoted market price, if available, or an estimated value based on valuation techniques available in the circumstances.  See Note 3 – Hospitals Held for Sale and Impairment of Long-Lived Assets related to impairment charges recorded in the consolidated and combined statements of income for the three and six months ended June 30, 2016.

Other Long-Term Assets

Other long-term assets consists of the long-term portion of the receivables from CHS related to professional and general liability and workers’ compensation insurance reserves that were indemnified by CHS in connection with the Spin-off Transaction, deposits, investments in unconsolidated subsidiaries and other miscellaneous long-term assets.

Other Current Liabilities

Other current liabilities consists of the current portion of professional and general and workers’ compensation insurance reserves, including the portion indemnified by CHS in connection with the Spin-off Transaction, property tax accruals, legal accruals, deferred revenue related to electronic health records incentives, physician guarantees and other miscellaneous current liabilities.  

Insurance Reserves

As part of the business of owning and operating hospitals, the Company is subject to legal actions alleging liability on its part. To mitigate a portion of this risk, the Company maintains insurance exceeding a self-insured retention level for these types of claims. The Company’s self-insurance reserves reflect the current estimate of all outstanding losses, including incurred but not reported losses, based upon actuarial calculations as of period end. The loss estimates included in the actuarial calculations may change in the future based upon updated facts and circumstances. The Company’s insurance expense includes the actuarially determined estimate of losses for the current year, including claims incurred but not reported, the change in the estimate of losses for prior years based upon actual claims development experience as compared to prior actuarial projections, the insurance premiums for losses in excess of the Company’s self-insured retention levels, the administrative costs of the insurance programs, and interest expense related to the discounted portion of the liability.  The Company’s reserves for professional liability claims are based upon semi-annual actuarial calculations, taking into consideration historical claims data, demographic considerations, severity factors and other actuarial assumptions, which are discounted to present value. The reserves for self-insured claims have been discounted based on the Company’s risk-free interest rate that corresponds to the period when the self-insured claims are incurred and projected to be paid.

See Note 17 – Commitments and Contingencies for information related to the portion of the Company’s insurance reserves for professional and general liability and workers’ compensation liability that are indemnified by CHS and the related accounting treatment and presentation in the consolidated and combined financial statements.  

15

Self-Insured Medical Benefits

The Company is self-insured for substantially all of the medical benefits of its employees.  The Company maintains a liability for its current estimate of incurred but not reported employee health claims based upon an annual actuarial calculation.  The undiscounted reserve for self-insured employee health benefits was $12.4 million as of June 30, 2016 and is included in employee compensation liabilities in the consolidated and combined balance sheets.  Expense each period is based on the actual claims received during the period plus any adjustment to the liability.

Prior to the Spin-off Transaction, QHC was allocated employee health expense, as part of the monthly corporate overhead charges from CHS, which was determined based on claims made by QHC employees during the period plus an estimate for the change in liability related to QHC employee health claims incurred but not reported.  The liability was included in Due to Parent, net, in the consolidated and combined balance sheets as the related employee health insurance policy was owned by CHS.  Employee health expense is included in salaries and benefits expenses in the consolidated and combined statements of income for all periods. See Note 16 – Related Party Transactions for additional information on all corporate overhead costs from CHS prior to the Spin-off Transaction.

Debt Issuance Costs and Discounts

The Company adopted Accounting Standards Update 2015-03 on January 1, 2016 which requires the presentation of debt issuance costs as a reduction of the debt liability on the balance sheet, consistent with the accounting for debt discounts.  Amortization of debt issuance costs and debt discounts are each recorded as non-cash interest expense over the life of the respective debt instrument.

Due to Parent, Net

Prior to the Spin-off Transaction, Due to Parent, net, in the consolidated and combined balance sheets represented the Company’s liability to CHS for the accumulation of (1) CHS’ historical investment in QHC, (2) liabilities established related to the cost allocations from CHS to QHC, (3) interest charged by CHS on the monthly outstanding Due to Parent, net balance, (4) the net effect of transactions between CHS and QHC, and (5) the net effect of cash transfers from QHC to CHS under CHS’ centralized cash management program. In connection with the Spin-off Transaction, certain liabilities were transferred through Due to Parent, net to the Company, pursuant to the Separation and Distribution Agreement, and the remaining balance was settled in the form of a non-cash capital contribution to the Company.  See Note 1 – Description of the Business and Spin-off Transaction and Note 16 – Related Party Transactions for additional information on the Spin-off Transaction and related party transactions with CHS.  

Assets and Liabilities of Hospitals Held for Sale

The Company reports assets that meet the criteria for classification as held for sale separately from other assets on the consolidated and combined balance sheets.  Generally, assets that meet the criteria include those in which the carrying amount will be settled principally through a sale transaction rather than through continuing use.  The asset must be available for immediate sale in its present condition, subject to usual or customary terms, and the sale must be probable to occur in the next 12 months.  Similarly, the liabilities of a disposal group are classified as held for sale upon meeting these criteria.  Immediately following classification as held for sale, the Company remeasures these assets and liabilities and adjusts the value to the lesser of the carrying amount or fair value less costs to sell.  The assets and liabilities classified as held for sale are no longer depreciated or amortized into expense.  See Note 3 – Hospitals Held for Sale and Impairment of Long-Lived Assets related to certain hospitals classified as held for sale as of June 30, 2016.

Stock-Based Compensation

In connection with the Spin-off Transaction, the Company issued QHC restricted stock awards to all CHS restricted stock award holders as of the Record Date.  Each holder of CHS restricted stock awards received one QHC restricted stock award for every four CHS restricted stock awards held.  In addition, QHC employees that held CHS restricted stock awards were allowed to continue to hold the CHS awards under the same terms and conditions that existed prior to the Spin-off Transaction, excluding certain shares granted on March 1, 2016 which were canceled in connection with the Spin-off Transaction.  The unrecognized compensation expense related to the vesting of the CHS restricted stock awards held by QHC employees was transferred to QHC with the Spin-off Transaction.  As a result, the Company is responsible for recording stock-based compensation expense attributable to the unvested portion of CHS restricted stock awards held by QHC employees and the unvested portion of all QHC restricted stock awards held by its employees, consisting of both QHC awards issued on the Record Date and additional awards granted under the Quorum Health Corporation 2016 Stock Award Plan (the “2016 Stock Award Plan”) following the Spin-off Transaction.  See Note 14 – Stock-Based Compensation.

Benefit Plans

Following the Spin-off Transaction, the Company maintains various benefit plans, including defined contribution plans, a defined benefit plan and deferred compensation plans, for which certain of the Company’s subsidiaries are the plan sponsors.  The rights and obligations of these plans were transferred from CHS to the Company in connection with the Spin-off Transaction, pursuant to the Separation and Distribution Agreement. Prior to the Spin-off Transaction, QHC was allocated a portion of CHS’ benefit costs under its defined contribution plans, based on specific identification for plans associated with QHC hospitals and QHC’s proportional

16

share of employees covered under all other applicable plans.  The expense was recorded as salaries and benefits in the consolidated and combined statements of income, and the cumulative liability for these benefit costs was recorded in Due to Parent, net, in the consolidated and combined balance sheets and transferred to the Company in the Spin-off Transaction.

QHC recognizes the unfunded liability of its defined benefit plan in other long-term liabilities in the consolidated and combined balance sheets and unrecognized gains (losses) and prior service credits (costs) as changes in other comprehensive income (loss).  The measurement date of the plan’s assets and liabilities coincides with the Company’s year-end.  The Company’s pension benefit obligation is measured using actuarial calculations that incorporate discount rates, rate of compensation increases and expected long-term returns on plan assets and that consider expected age of retirement and mortality.  The Company records pension benefit costs related to all of its plans as salaries and benefits costs in the consolidated and combined statements of income.

Fair Value of Financial Instruments

The Company utilizes the U.S. GAAP fair value hierarchy for measurement of fair value related to its financial instruments.  The fair value hierarchy distinguishes between market participant assumptions based on market data obtained from sources independent of the reporting entity (observable inputs that are classified within Levels 1 and 2 of the hierarchy) and the reporting entity’s own assumption about market participant assumptions (unobservable inputs classified within Level 3 of the hierarchy).  The inputs used to measure fair value are classified into the following fair value hierarchy:

· Level 1 - Quoted market prices in active markets for identical assets and liabilities.

· Level 2 - Observable market-based inputs or unobservable inputs that are corroborated by market data.

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

Segment Reporting

The principal business of the Company is to provide healthcare services through its hospitals and affiliated facilities. The Company’s only other line of business is the hospital management advisory and consulting services it provides through QHR. The Company has determined that its hospital operations business meets the criteria for separate segment reporting.  The financial information for QHR’s business does not meet the quantitative thresholds for separate segment reporting, and therefore has been combined with the Company’s corporate functions into the all other reportable segment.  See Note 13 – Segments.

Accounting Standards Not Yet Adopted

In May 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2014-09, which outlines a single comprehensive model for recognizing revenue and supersedes most existing revenue recognition guidance, including guidance specific to the healthcare industry. This ASU provides companies the option of applying a full or modified retrospective approach upon adoption. This ASU is effective for fiscal years beginning after December 15, 2017 with early adoption permitted for annual periods beginning after December 15, 2016. The Company expects to adopt this ASU on January 1, 2018 and is currently evaluating its plan for adoption and the impact on its revenue recognition policies, procedures and control framework and the resulting impact on its consolidated and combined results of operations, financial position and cash flows.

In February 2016, the FASB issued ASU 2016-02, which amends the accounting for leases, requiring lessees to recognize most leases on their balance sheet with a right-of-use asset and a lease liability. Leases will be classified as either finance or operating leases, which will impact the expense recognition of such leases over the lease term. The ASU also modifies the lease classification criteria for lessors and eliminates some of the real estate leasing guidance previously applied for certain leasing transactions. This ASU is effective for fiscal years beginning after December 15, 2018, with early adoption permitted. The Company expects to adopt this ASU on January 1, 2019.  Because of the number of leases we utilize to support operations, the adoption of this ASU is expected to have a significant impact on the Company’s consolidated and combined results of operations, financial position and cash flows.  The Company is currently evaluating the quantitative and qualitative factors that will impact the Company as part of the adoption of this ASU, as well as any changes to its leasing strategy because of the changes to the accounting and recognition of leases.

In March 2016, the FASB issued ASU 2016-09, which was issued to simplify some of the accounting guidance for share-based compensation. Among the areas impacted by the amendments in this ASU is the accounting for income taxes related to share-based payments, accounting for forfeitures, classification of awards as equity or liabilities and classification on the statement of cash flows. This ASU is effective for fiscal years beginning after December 15, 2016, with early adoption permitted. The Company expects to adopt this ASU on January 1, 2017. Management is evaluating the impact that the adoption of this ASU will have on its consolidated and combined financial position, results of operations and cash flows.

17

NOTE 3 – HOSPITALS HELD FOR SALE AND IMPAIRMENT OF LONG-LIVED ASSETS

The Company’s business strategy includes an ongoing strategic review of its hospitals for possible divestitures based upon an analysis of financial performance, current competitive conditions, expected demographic trends, joint venture opportunities and capital allocation requirements.  The Company anticipates that it may divest certain hospitals in the next 12 to 18 months.

As of June 30, 2016, the Company has received letters of intent from potential buyers related to certain hospitals, and as a result, reclassified certain assets and liabilities of those hospitals as held for sale on its consolidated and combined balance sheet.  As a result of management’s decision to divest these hospitals and evaluate other hospitals for divestiture, the Company analyzed the long-lived assets of all of its hospitals to test for impairment. The Company recorded $45.4 million of impairment charges in the consolidated and combined statements of income during the three months ended June 30, 2016.  These impairment charges included $9.8 million for property and equipment and $4.4 million for capitalized software costs related to hospitals held for sale and $31.2 million for property and equipment related to hospitals held and used.  The carrying amounts of long-lived assets, including those classified as held for sale, are reported net of impairment charges in the consolidated and combined balance sheet as of June 30, 2016. The Company evaluated the estimated relative fair value of the hospitals held for sale in relation to the overall fair value of its hospital reporting unit as of September 30, 2015, the date of its last goodwill impairment analysis, resulting in a goodwill impairment charge of $5.0 million. The Company recorded an additional $200 million estimate of goodwill impairment. See Note 5 – Goodwill and Intangible Assets for additional information related to goodwill impairment charges.

NOTE 4 – PROPERTY AND EQUIPMENT

A summary of property and equipment follows (in thousands):

	June 30,			December 31,
	2016			2015
Property and equipment, at cost:
Land and improvements	$	95,631		$	100,053
Building and improvements		814,376			853,853
Equipment and fixtures		599,634			616,667
Construction in progress		40,110			33,080
Total property and equipment, at cost		1,549,751			1,603,653
Less:  Accumulated depreciation and amortization		(732,719	)		(723,404	)
Total property and equipment, net	$	817,032		$	880,249

Depreciation expense was $22.5 million for each of the three months ended June 30, 2016 and 2015 and $44.9 million and $45.5 million for the six months ended June 30, 2016 and 2015, respectively.  See Note 5 – Goodwill and Intangible Assets for information on amortization expense recorded for property and equipment held under capital lease obligations.  The total amount of assets held under capital lease obligations was $28.5 million and $23.4 million, at cost, at June 30, 2016 and December 31, 2015, respectively, and $26.9 million and $22.4 million, net of accumulated amortization, at June 30, 2016 and December 31, 2015, respectively.

On June 30, 2016, the Company reduced the carrying value of property and equipment at certain hospitals that the Company is currently marketing for sale and at certain underperforming hospitals that are part of its ongoing operations.  See Note 3 – Hospitals Held for Sale and Impairment of Long-Lived Assets for additional information on the impairment recorded in the consolidated and combined statements of income for the three and six months ended June 30, 2016.

Purchases of property and equipment that were accrued in accounts payable as of June 30, 2016 and December 31, 2015 were $8.3 million and $7.0 million, respectively.

18

NOTE 5– GOODWILL AND INTANGIBLE ASSETS

Goodwill

A summary of changes in goodwill follows (in thousands):

	Six Months Ended
	June 30, 2016
Balance at beginning of period	$	541,704
Acquisitions		86
Impairment		(205,000	)
Balance at end of period	$	336,790

Goodwill related to the hospital operations reporting unit, after giving effect to the impairment charges discussed below, was $303.5 million and $508.4 million as of June 30, 2016 and December 31, 2015, respectively. Goodwill related to the hospital management advisory and consulting services reporting unit was $33.3 million at both June 30, 2016 and December 31, 2015.

The Company reclassified assets and liabilities at certain of its hospitals as held for sale on its consolidated and combined balance sheet at June 30, 2016. As a result, the Company evaluated the estimated relative fair value of the hospitals held for sale in relation to the overall fair value of its hospital reporting unit as of September 30, 2015, the date of its last goodwill impairment analysis, and recognized goodwill impairment of $5.0 million. See Note 3 – Hospitals Held for Sale and Impairment of Long-Lived Assets for additional information related to the hospitals held for sale.  

In addition, the Company identified certain indicators of impairment requiring an interim goodwill impairment evaluation. Those indicators were primarily the Company’s market capitalization as compared to the carrying value of equity and a decrease in the estimated future earnings of the Company. The Company performed a calculation of fair value in step one of the impairment test, which indicated that the carrying value of the hospital operations reporting unit exceeded its fair value. An initial step two calculation has been performed to determine the implied value of goodwill in a hypothetical purchase price allocation. The Company recorded an impairment charge of $200 million to goodwill, in addition to the $5.0 million discussed above, based on its current best estimate of fair value and the resulting implied goodwill related to its hospital reporting unit. As permitted under U.S. GAAP, this amount represents an estimate of the implied goodwill in the step two evaluation until that process can be finalized, which the Company expects to complete during the third quarter of 2016. Any increases or decreases in the fair value and resulting implied value of goodwill will be recorded when the evaluation is complete, and such changes could be material. Factors that could impact the final determination of fair value include, but are not limited to, a further decline in market capitalization, changes in the estimated fair values of the individual hospital assets and liabilities or changes in projected future earnings and net cash flows.

19

Intangible Assets

A summary of intangible assets follows (in thousands):

	June 30,			December 31,
	2016			2015
Finite-lived intangible assets:
Capitalized software costs:
Cost	$	189,368		$	194,941
Accumulated amortization		(107,095	)		(98,004	)
Capitalized software costs, net		82,273			96,937
Physician guarantee contracts:
Cost		12,327			16,594
Accumulated amortization		(6,355	)		(9,560	)
Physician guarantee contracts, net		5,972			7,034
Other finite-lived intangible assets:
Cost		42,073			43,275
Accumulated amortization		(29,849	)		(29,351	)
Other finite-lived intangible assets, net		12,224			13,924
Total finite-lived intangible assets:
Cost		243,768			254,810
Accumulated amortization		(143,299	)		(136,915	)
Total finite-lived intangible assets, net	$	100,469		$	117,895
Indefinite-lived intangible assets:
Tradenames	$	4,000		$	4,000
Medical licenses and other indefinite-lived intangible assets		4,975			7,355
Total indefinite-lived intangible assets	$	8,975		$	11,355
Total intangible assets:
Cost	$	252,743		$	266,165
Accumulated amortization		(143,299	)		(136,915	)
Total intangible assets, net	$	109,444		$	129,250

As of June 30, 2016, the Company had $2.2 million of capitalized software costs that are currently in the development stage and will begin amortization once the software projects are complete and ready for their intended use.

Amortization Expense

A summary of amortization expense follows (in thousands):

	Three Months Ended June 30,				Six Months Ended June 30,
	2016		2015		2016		2015
Amortization of finite-lived intangible assets:
Capitalized software costs	$	6,730	$	6,754	$	13,325	$	13,464
Physician guarantee contracts		902		1,275		1,613		1,991
Other finite-lived intangible assets		759		813		1,516		1,645
Total amortization expense related to finite-lived intangible assets		8,391		8,842		16,454		17,100
Amortization of property and equipment assets held under capital lease obligations		610		605		1,293		1,235
Total amortization expense	$	9,001	$	9,447	$	17,747	$	18,335

As of June 30, 2016, the weighted-average remaining amortization period of the Company’s intangible assets subject to amortization, except for capitalized software costs and physician guarantee contracts, was approximately 5.9 years.

20

Total estimated future amortization expense for the next five years and thereafter related to the intangible assets follows (in thousands):

	June 30,
	2016
Remainder of 2016	$	14,498
2017		25,418
2018		14,285
2019		12,668
2020		12,288
Thereafter		21,312
Total estimated future amortization expense	$	100,469

NOTE 6 – LONG-TERM DEBT

A summary of long-term debt follows (in thousands):

	June 30,			December 31,
	2016			2015
Senior Credit Facility:
Revolving Credit Facility, maturing 2021	$	-		$	-
Term Loan Facility, maturing 2022		877,800			-
ABL Credit Facility, maturing 2021		-			-
Senior Notes, maturing 2023		400,000			-
Unamortized debt issuance costs and discounts		(51,348	)		-
Capital lease obligations		25,500			22,323
Other debt		978			1,092
Total debt		1,252,930			23,415
Less:  Current maturities of long-term debt		(16,271	)		(7,915	)
Total long-term debt	$	1,236,659		$	15,500
Due to Parent, net	$	-		$	1,800,908

In connection with the Spin-off Transaction, the Company entered into two credit agreements and issued senior notes.  In addition, the indebtedness with CHS, which was classified on the consolidated and combined balance sheets as Due to Parent, net, was fully settled.  See Note 1 – Description of the Business and Spin-off Transaction and Note 16 – Related Party Transactions for additional information on the use of proceeds from the new debt instruments and the settlement of Due to Parent, net.

Senior Credit Facility

On April 29, 2016, the Company entered into a credit agreement (the “CS Agreement”), among the Company, the lenders party thereto and Credit Suisse AG, Cayman Islands Branch (“Credit Suisse”), as administrative agent and collateral agent. The CS Agreement provides for an $880 million senior secured term loan facility (the “Term Loan Facility”) and a $100 million senior secured revolving credit facility (the “Revolving Credit Facility” and, together with the Term Loan Facility, the “Senior Credit Facility”). The available borrowings from the Revolving Credit Facility will be used for working capital and general corporate purposes.  As of June 30, 2016, the Company had no borrowings outstanding on the Revolving Credit Facility and had $3.1 million of letters of credit outstanding that were primarily related to the self-insured retention levels of professional and general liability and workers’ compensation insurance as security for the payment of claims.

The Term Loan Facility was issued at a discount of $17.6 million, or 98% of par value, and has a maturity date of April 29, 2022, subject to customary acceleration events and repayment, extension or refinancing. Interest under the Term Loan Facility accrues, at the option of the Company, at adjusted LIBOR, subject to statutory reserves and a floor of 1%, plus 5.75% or the alternate base rate plus 4.75%. Interest under the Revolving Credit Facility accrues, at the option of the Company, at adjusted LIBOR, subject to statutory reserves and a floor of 0%, plus 2.75% or the alternate base rate plus 1.75%. The Revolving Credit Facility has a maturity date of April 29, 2021, subject to certain customary acceleration events and repayment, extension or refinancing.  The effective interest rate on the Term Loan Facility was 7.64% as of June 30, 2016.

21

Under the terms of the CS Agreement, the maximum Secured Net Leverage Ratio permitted under the CS Agreement, as determined based on 12 month trailing EBITDA, follows:

	Maximum
	Secured Net
Period	Leverage Ratio
Period from April 29, 2016 to June 30, 2017	4.50 to 1.00
Period from July 1, 2017 to June 30, 2018	4.25 to 1.00
Period from July 1, 2018 and thereafter	4.00 to 1.00

As of June 30, 3016, the Company had a Secured Net Leverage Ratio of 3.67 to 1.0 implying additional borrowing capacity of $181.2 million.

ABL Credit Facility

On April 29, 2016, the Company entered into an ABL Credit Agreement (the “UBS Agreement,” and together with the CS Agreement, collectively, the “Credit Agreements”), among the Company, the lenders party thereto and UBS AG, Stamford Branch (“UBS”), as administrative agent and collateral agent. The UBS Agreement provides for a $125 million senior secured asset-based revolving credit facility (the “ABL Credit Facility”). The available borrowings from the ABL Credit Facility will be used for working capital and general corporate purposes.  As of June 30, 2016, the Company had no borrowings outstanding on the ABL Credit Facility.

The ABL Credit Facility has a maturity date of April 29, 2021, subject to customary acceleration events and repayment, extension or refinancing. Interest under the ABL Credit Facility accrues, at the option of the Company, at a base rate or LIBOR, subject to statutory reservesand a floor of 0%,except that all swingline borrowings will accrue interest based on the base rate, plus an applicable margin determined by the average excess availability under the ABL Credit Facility for the fiscal quarter immediately preceding the date of determination. The applicable margin ranges from 1.75% to 2.25% for LIBOR advances and from 0.75% to 1.25% for base rate advances.

The ABL Credit Facility has a “Covenant Trigger Event” definition that requires the Company to maintain excess availability under the ABL Credit Facility equal to or greater than the greater of (i) $12.5 million and (ii) 10% of the aggregate commitments under the ABL Credit Facility.  At June 30, 2016, the Company had excess availability of $122.1 million.  If a Covenant Trigger Event occurs, then the Company is required to maintain a minimum Consolidated Fixed Charge Ratio of 1.10 to 1.00 until such time that a Covenant Trigger Event is no longer continuing. In addition, if excess availability under the ABL Credit Facility were to fall below the greater of (i) 12.5% of the aggregate commitments under the ABL Credit Facility and (ii) $15.0 million, then a “Cash Dominion Event” would be triggered upon which the lenders could assume control of the Company’s cash.

Credit Agreement Covenants

In addition to the specific covenants described above, the Credit Agreements contain customary negative covenants, which limit the Company’s ability to incur additional indebtedness, create liens, make investments, make restricted payments, including dividends and distributions, and specified payments on other indebtedness, transfer of assets and merge or acquire assets, among other things.  They include customary events of default, including payment defaults, material breaches of representations and warranties, covenant defaults, default on other material indebtedness, customary Employee Retirement Income Security Act (“ERISA”)events of default, bankruptcy and insolvency, material judgments, invalidity of liens on collateral, change of control or cessation of business. The Credit Agreements also contain customary affirmative covenants and representations and warranties.

Senior Notes

On April 22, 2016, QHC issued $400 million aggregate principal amount of 11.625% Senior Notes due 2023, pursuant to the Indenture. The Senior Notes were issued at a discount of $6.9 million, or 1.734%, in a private placement and are senior unsecured obligations of the Company guaranteed on a senior basis by certain of the Company’s subsidiaries (the “Guarantors”).  The Senior Notes mature on April 15, 2023 and bear interest at a rate of 11.625% per annum, payable semi-annually in arrears on April 15 and October 15 of each year, beginning on October 15, 2016.  Interest on the Senior Notes accrues from the date of original issuance and is calculated on the basis of a 360-day year comprised of twelve 30-day months.  The effective interest rate on the Senior Notes was 12.471% as of June 30, 2016.

The Indenture contains covenants that, among other things, limit the ability of the Company and certain of its subsidiaries to incur or guarantee additional indebtedness, pay dividends or make other restricted payments, make certain investments, create or incur certain liens, sell assets and subsidiary stock, transfer all or substantially all of its assets or enter into merger or consolidation transactions.

On April 22, 2016, in connection with the issuance of the Senior Notes, the Company entered into a Registration Rights Agreement. The terms of the Registration Rights Agreement require the Company to (i) file with the Securities and Exchange Commission a registration statement with respect to an offer to exchange the Senior Notes for a new issue of debt securities registered

22

under the Securities Act of 1933, as amended (the “Exchange Offer”), with terms identical to those of the Senior Notes (except for provisions relating to the transfer restrictions and payment of additional interest) and cause the Exchange Offer to be completed within 365 days following the closing of the issuance of the Senior Notes, (ii) keep the Exchange Offer open for at least 30 business days (or longer if required by applicable law) and (iii) in certain circumstances, file a shelf registration statement for the resale of the Senior Notes by some or all of the holders thereof, in lieu of an exchange offer to such holders. If the Company and the Guarantors fail to satisfy their registration obligations, the Company will be required to pay additional interest to the holders of Senior Notes, the transfer of which remains restricted, reflecting typical market terms.  

On and after April 15, 2019, QHC is entitled, at its option, to redeem all or a portion of the Senior Notes upon not less than 30 nor more than 60 days notice, at the following redemption prices, plus accrued and unpaid interest, if any, to the redemption date.  The redemption prices are expressed as a percentage of the principal amount on the redemption date.  Holders of record on the relevant record date have the right to receive interest due on the relevant interest payment date.  In addition, prior to April 15, 2019, the Company may redeem some or all of the Senior Notes at a price equal to 100% of the principal amount thereof, plus accrued and unpaid interest, if any, plus a “make whole” premium, as set forth in the Indenture.  The Company is entitled to redeem up to 35% of the aggregate principal amount of the Senior Notes until April 15, 2019 with the net proceeds from certain equity offerings at the redemption price set forth in the Indenture.  

A summary of the redemption dates and prices follows:

	Redemption
Period	Prices
Period from April 15, 2019 to April 14, 2020		108.719	%
Period from April 15, 2020 to April 14, 2021		105.813	%
Period from April 15, 2021 to April 14, 2022		102.906	%
Period from April 15, 2022 to April 15, 2023		100.000	%

Debt Issuance Costs and Discounts

A summary of debt issuance costs and discounts follows (in thousands):

	June 30,			December 31,
	2016			2015
Debt issuance costs	$	28,003		-
Debt discounts		24,536		-
Total debt issuance costs and discounts at origination		52,539			-
Less:  Amortization of debt issuance costs and discounts		(1,191	)	-
Total unamortized debt issuance costs and discounts	$	51,348		$	-

Prior to the Spin-off Transaction, the Company had no capitalized costs for debt issuance, discounts or premiums.

Capital Lease Obligations and Other Debt

The Company’s debt arising from capital lease obligations primarily relates to the deferred financing obligation associated with its new corporate office in Brentwood, Tennessee.  As of June 30, 2016, this capital lease obligation was $18.0 million.  The remainder of the Company’s capital lease obligations relate to property and equipment at its hospitals and corporate office.  Other debt consists of physician loans and miscellaneous notes payable to banks.  See Note 17 – Commitments and Contingencies for additional information on the corporate office lease.

23

Debt Maturities

A summary of debt maturities for the next five years and thereafter follows (in thousands):

	June 30,
	2016
Remainder of 2016	$	11,087
2017		10,268
2018		10,411
2019		10,047
2020		10,145
Thereafter		1,252,320
Total debt, excluding debt issuance costs and discounts	$	1,304,278

Interest Expense, Net

A summary of the components of interest expense, net, follows (in thousands):

	Three Months Ended June 30,						Six Months Ended June 30,
	2016			2015			2016		2015
Senior Credit Facility:
Revolving Credit Facility	$	85		$	-		$	85	$	-
Term Loan Facility		10,432			-			10,432		-
ABL Credit Facility		82			-			82		-
Senior Notes		8,914			-			8,914		-
Amortization of debt issuance costs and discounts		1,191			-			1,191		-
All other interest expense (income), net		(359	)		(182	)		210		237
Total interest expense, net, from long-term debt		20,345			(182	)		20,914		237
Due to Parent, net		8,931			24,010			35,814		49,393
Total interest expense, net	$	29,276		$	23,828		$	56,728	$	49,630

NOTE 7 – OTHER LONG-TERM LIABILITIES

A summary of other long-term liabilities follows (in thousands):

	June 30,		December 31,
	2016		2015
Professional and general liability insurance reserves	$	87,250	$	77,423
Workers' compensation liability insurance reserves		19,690		20,507
Benefit plan liabilities		12,702		3,376
Deferred rent		3,986		3,770
Other miscellaneous long-term liabilities		3,247		3,065
Total other long-term liabilities	$	126,875	$	108,141

See Note 17 – Commitments and Contingencies for additional information about the Company’s insurance reserves.

NOTE 8 – FAIR VALUE OF FINANCIAL INSTRUMENTS

The carrying amounts of the Company’s cash and cash equivalents, patient accounts receivable and accounts payable approximate their fair values due to the short-term maturity of these financial instruments.

The Company recorded impairment charges related to property and equipment, capitalized software and goodwill as of June 30, 2016, as discussed in Note 3 – Hospitals Held for Sale and Impairment of Long-Lived Assets and Note 5 – Goodwill and Intangible Assets. The assessment of fair value was based on Level 3 inputs as the valuation methodologies used to determine impairment was based on internal projections and unobservable inputs. The portion of impairment related to hospital assets held for sale was

24

determined based on Level 2 inputs as the valuation methodologies used to determine impairment took into consideration letters of intent received on these hospitals.

A summary of the carrying amounts and estimated fair values of the Company’s long-term debt follows (in thousands):

	June 30, 2016				December 31, 2015
	Carrying		Estimated		Carrying		Estimated
	Amount		Fair Value		Amount		Fair Value
Revolving Credit Facility	$	-	$	-	$	-	$	-
Term Loan Facility		877,800		880,548		—		—
ABL Credit Facility		—		—		—		—
Senior Notes		400,000		404,752		—		—
Other debt		26,478		26,478		23,415		23,415
Total long-term debt, excluding debt issuance costs and discounts	$	1,304,278	$	1,311,778	$	23,415	$	23,415

The Company considers its long-term debt instruments to be measured based on Level 2 inputs.  Information about the valuation methodologies used in the determination of the fair values for the Company’s long-term debt instruments follows:

· Credit facilities.  The estimated fair value is based on publicly available trading activity and supported with information from the Company’s lending institutions regarding relevant pricing for trading activity.

· Senior notes.  The estimated fair value is based on the closing market price for these notes.

· All other debt.  The carrying amounts of the Company’s debt instruments, including capital lease obligations, physician loans and miscellaneous notes payable to banks, approximate their estimated fair values due to the nature of these obligations.

NOTE 9 – EQUITY

Preferred Stock

In connection with the Spin-off Transaction, the Company authorized 100,000,000 shares of preferred stock, par value of $0.0001 per share.  No shares have been issued as of June 30, 2016.  The Company’s Board of Directors (the “Board”) has the discretion, subject to limitations prescribed by Delaware law and by its amended and restated certificate of incorporation, to determine the rights, preferences, privileges and restrictions, including voting rights, dividend rights, conversion rights, redemption privileges and liquidation preferences, of each series of preferred stock, when and if issued.

Common Stock

In connection with the Spin-off Transaction, the Company authorized 300,000,000 shares of common stock, par value of $0.0001 per share, and issued 28,412,054 shares of common stock on April 29, 2016 to CHS stockholders of record on the Record Date, or April 22, 2016.  The common stock began “regular-way” trading on the NYSE on May 3, 2016, under the ticker symbol “QHC”.  As of June 30, 2016, the Company had 29,489,247 shares of common stock, issued and outstanding.

Holders of the Company’s common stock are entitled to one vote for each share held of record on all matters on which stockholders may vote.  Holders of the Company’s common stock will not have cumulative voting rights in the election of directors.  There are no preemptive rights, conversion, redemption or sinking fund provisions applicable to the common stock.  In the event of liquidation, dissolution or winding up, holders of common stock are entitled to share ratably in the assets available for distribution. Delaware law prohibits the Company from paying any dividends unless it has capital surplus or net profits available for this purpose. In addition, the Company’s Credit Agreements impose restrictions on its ability to pay dividends.

Additional Paid-in Capital

In connection with the Spin-off Transaction, the Company issued common stock, as described above, to CHS stockholders.  In addition and pursuant to the Separation and Distribution Agreement, CHS contributed capital, in excess of par value of common stock, of $518.5 million in lieu of a cash settlement payment related to the remaining intercompany indebtedness with CHS and the Parent’s equity attributable to CHS.  See Note 1 – Description of the Business and Spin-off Transaction for a summary of the transactions that occurred on April 29, 2016 to effect the Spin-off Transaction.

25

Accumulated Deficit

Accumulated deficit of the Company, as shown on the consolidated and combined balance sheet as of June 30, 2016, represents the Company’s cumulative net losses since the Spin-off Transaction date.  The cumulative losses of the Company prior to the Spin-off Transaction were included in Due to Parent, net, in the consolidated and combined balance sheets.

Parent’s Equity

Prior to the Spin-off Transaction, the redemption of shares and changes in valuation of redeemable shares of noncontrolling interests investments were accounted for as Parent’s equity in the consolidated and combined balance sheets.  Parent’s Equity was reclassified as additional paid-in capital in connection with the Spin-off Transaction.

NOTE 10 – INCOME TAXES

The Company, or one of its subsidiaries, is subject to U.S. federal income tax and income tax of multiple state jurisdictions.  The Company provides for income taxes based on the enacted tax laws and rates in jurisdictions in which it conducts its operations.  Prior to the Spin-off Transaction, the Company was included in the consolidated federal, state and local income tax returns filed by CHS and calculated for the purpose of carve-out financial statements using the “separate return method.”  The Company deemed the amounts that it would have paid to or received from the U.S. Internal Revenue Service and certain state jurisdictions, had QHC not been a member of CHS’ consolidated tax group, to be immediately settled with CHS through Due to Parent, net, in the consolidated and combined balance sheets. The Company will file its own consolidated federal, state and local income tax returns after the Spin-off Transaction.

The Company’s effective tax rates were 15.4% and 39.7% for the three months ended June 30, 2016 and 2015, respectively, and 15.7% and 34.1% for the six months ended June 30, 2016 and 2015, respectively.  The decrease in the Company’s effective tax rate for both the three and six months ended June 30, 2016, when compared to the three and six months ended June 30, 2015, was primarily due to the pre-tax losses in these periods and the impact of the non-deductible expenses for goodwill impairment and certain Spin-off Transaction costs in the respective 2016 periods, with no comparable expenses in the respective 2015 periods.

The Company’s total net deferred tax liabilities increased to $55.3 million as of June 30, 2016 compared to $41.0 million as of December 31, 2015, a $14.3 million increase. This increase was primarily due to $61.7 million of adjustments to the deferred tax assets and liabilities for changes in estimates between amounts that will be realized by the Company on a stand-alone basis compared to those calculated under the separate return method, including $39.5 million of increase attributable to net operating loss and credit carryforwards not realizable by QHC as they were previously recognized by CHS, and changes in estimates for the impact of other assets or liabilities that were transferred to the Company from CHS through Due to Parent, net, on or just prior to the spin-off date.  This amount was partially offset by $47.4 million of deferred tax benefit recorded on the Company’s pre-tax loss for the period following the Spin-off Transaction as QHC will file on a stand-alone basis now that the spin-off is complete.

In the ordinary course of business there is the inherent uncertainty in quantifying the Company’s income tax positions.  The Company assesses its income tax positions and records tax benefits for all tax years subject to examination based upon management’s evaluation of the facts, circumstances, and information available at the reporting date. The Company is not aware of any unrecognized tax benefits; and therefore it has not recorded any such amounts for the three and six months ended June 30, 2016 and 2015.

NOTE 11 – EARNINGS PER SHARE

A summary of the computation of basic and diluted earnings per share follows (dollars in thousands, except per share amounts):

	Three Months Ended June 30,					Six Months Ended June 30,
	2016			2015		2016			2015
Numerator:
Net income (loss)	$	(243,966	)	$	2,205	$	(248,653	)	$	8,029
Less: Net income attributable to noncontrolling interests		1,095			775		1,410			400
Net income (loss) attributable to Quorum Health Corporation		(245,061	)		1,430		(250,063	)		7,629
Denominator:
Weighted-average common shares outstanding - basic and diluted		28,412,720			28,412,054		28,412,389			28,412,054
Basic and diluted earnings (loss) per share attributable to Quorum Health Corporation stockholders	$	(8.63	)	$	0.05	$	(8.80	)	$	0.27

26

For comparative purposes, the Company used 28,412,054 shares as the amount of shares outstanding for all periods prior to the Spin-off Transaction, including the period from January 1, 2016 to April 28, 2016, in calculating basic and diluted earnings per share.  This number of shares represents the number of shares issued on the Spin-off Transaction date. Due to the net loss attributable to Quorum Health Corporation in the three and six months ended June 30, 2016, no incremental shares are included in diluted earnings per share for these periods because the effect of the 460,661 dilutive shares would be anti-dilutive. No incremental shares were considered for all periods prior to the Spin-off Transaction.

NOTE 12 – ADDITIONAL CASH FLOW INFORMATION

A summary of significant non-cash transactions related to the consolidated and combined balance sheets follows (in thousands):

	Three Months Ended June 30,				Six Months Ended June 30,
	2016		2015		2016		2015
Transfer of liabilities from Parent	$	16,596	$	-	$	16,596	$	-
Non-cash capital contribution from Parent		518,518		-		518,518		-
Property and equipment acquired under capital leases and deferred financing obligations		3,097		658		5,120		658

See Note 1 – Description of the Business and Spin-off Transaction for additional information on the related party transactions in the table above.

NOTE 13 – SEGMENTS

The Company operates in two distinct operating segments, consisting of its hospital operations business and its management advisory and consulting services business.  The hospital operations segment includes the operations of the Company’s general acute care hospitals and related healthcare entities that provide inpatient and outpatient healthcare services.  The hospital management advisory and consulting services segment includes the operations of QHR.  Only the hospital operations segment meets the criteria as a separate reportable segment.  The financial information for QHR has been combined with the Company’s corporate functions and reported below as part of the all other reportable segment.

A summary of financial information related to segments follows (in thousands):

	Three Months Ended June 30,				Six Months Ended June 30,
	2016		2015		2016		2015
Net operating revenues:
Hospital operations	$	508,906	$	515,428	$	1,036,317	$	1,039,621
All other		20,831		22,924		42,971		46,348
Total net operating revenues	$	529,737	$	538,352	$	1,079,288	$	1,085,969
Adjusted EBITDA:
Hospital operations	$	26,457	$	55,953	$	75,396	$	118,645
All other		2,775		3,672		10,060		7,009
Total Adjusted EBITDA	$	29,232	$	59,625	$	85,456	$	125,654

	June 30,		December 31,
	2016		2015
Assets:
Hospital operations	$	1,906,376	$	2,256,557
All other		195,983		38,299
Total assets	$	2,102,359	$	2,294,856

27

A reconciliation of Adjusted EBITDA to net income (loss) follows (in thousands):

	Three Months Ended June 30,						Six Months Ended June 30,
	2016			2015			2016			2015
Adjusted EBITDA	$	29,232		$	59,625		$	85,456		$	125,654
Interest expense, net		(29,276	)		(23,828	)		(56,728	)		(49,630	)
Benefit from (provision for) income taxes		44,565			(1,451	)		46,239			(4,156	)
Depreciation and amortization		(31,463	)		(32,141	)		(62,620	)		(63,839	)
Legal and settlement costs		(5,447	)		—			(5,688	)		—
Impairment of-long-lived assets and goodwill		(250,400	)		—			(250,400	)		—
Transaction costs related to spin-off		(1,177	)		—			(4,912	)		—
Net income (loss)	$	(243,966	)	$	2,205		$	(248,653	)	$	8,029

NOTE 14 – STOCK-BASED COMPENSATION

On April 1, 2016, the Company adopted the Quorum Health Corporation 2016 Stock Award Plan (“2016 Stock Award Plan”).  The Company filed a Registration Statement on Form S-8 on April 29, 2016 to register 4,700,000 shares of QHC common stock that may be issued under the plan.  

On May 3, 2016, the Compensation Committee of the Board of Directors (the “Compensation Committee”) granted 460,000 performance-based restricted stock awards to the Company’s executive officers, pursuant to the 2016 Stock Award Plan and a performance-based restricted stock award agreement. If the performance-based objectives are attained in accordance with the targets set forth in the performance-based restricted stock award agreement, the restrictions on the restricted stock awards will lapse on each of the first three anniversaries of the grant date.  

On May 3, 2016, the Compensation Committee granted 551,005 time-vested restricted stock awards to certain employees of the Company.  The grants were made pursuant to the 2016 Stock Award Plan and a restricted stock award agreement.  The restrictions on the time-vested restricted stock awards will lapse on each of the first three anniversaries of the grant date, except for 106,005 restricted stock awards, referred to by the Company as recoupment awards, which have a different vesting period.  The recoupment awards were issued to a select group of QHC employees that were granted restricted stock awards by CHS on March 1, 2016.  Pursuant to the Separation and Distribution Agreement, two-thirds of the shares granted to the QHC employee group on this grant date were canceled by CHS in connection with the Spin-off Transaction.  The recoupment awards were issued by QHC and included in the May 3, 2016 grant of QHC restricted stock awards for the purpose of restoring the benefit previously provided by CHS to this employee group.  Restrictions on the recoupment awards lapse in equal installments on the second and third anniversaries of the grant date.

On May 3, 2016, the Board, upon recommendation of its Compensation Committee and its Governance and Nominating Committee, granted 10,000 time-vested restricted stock awards to each of its non-employee directors. The grants were made pursuant to the 2016 Stock Award Plan and a director restricted stock award agreement. The restriction on the time-vested restricted stock awards will lapse on the first anniversary of the grant date.

As defined in the Separation and Distribution Agreement, QHC and CHS employees who held CHS restricted stock awards on the Record Date received QHC restricted stock awards for the number of whole shares, rounded down, of QHC common stock that they would have received as a shareholder of CHS as if the underlying CHS stock were unrestricted on the Record Date, except, that with respect to a portion of CHS restricted stock awards granted to any QHC employees on March 1, 2016, as discussed above, which were cancelled and forfeited on the Spin-off Transaction date. The QHC restricted stock awards received by QHC and CHS employees in connection with the Spin-off Transaction vest on the same terms as the CHS restricted stock awards to which they relate through the continued service by such employees with their respective employer, either QHC or CHS.  CHS restricted stock awards were adjusted by increasing the number of shares of CHS stock subject to restricted stock awards by an amount of whole shares, rounded down, necessary to preserve the intrinsic value of such awards at the spin-off date.  QHC did not issue any stock options as part of the distribution of shares to holders of CHS stock options.

Following the Spin-off Transaction, the Company began recording stock-based compensation expense, which is included in salaries and benefits in the consolidated and combined statements of income, related to the vesting of QHC restricted stock awards issued to QHC employees on the Spin-off Transaction date, CHS restricted stock awards held by QHC employees on the Spin-off Transaction date and restricted stock awards granted by QHC on May 3, 2016.  Prior to the Spin-off Transaction, an estimated portion of CHS’ stock-based compensation expense was allocated to QHC through the monthly corporate management fee from CHS, which was recorded in other operating expenses in the consolidated and combined statements of income, and therefore was not included in stock-based compensation expense in the table below.  The estimated costs which were allocated to QHC from CHS were $0.6 million

28

and $1.9 million for the three months ended June 30, 2016 and 2015, respectively, and $2.3 million and $3.8 million for the six months ended June 30, 2016 and 2015, respectively.  

A summary of stock-based compensation expense follows (in thousands):

	Three Months Ended June 30,				Six Months Ended June 30,
	2016		2015		2016		2015
Stock-based compensation resulting from the spin-off transaction	$	809	$	-	$	809	$	-
Stock-based compensation related to grants following the spin-off transaction		1,088		—		1,088		—
Total stock-based compensation expense	$	1,897	$	-	$	1,897	$	-

As of June 30, 2016, the Company had unrecognized stock-based compensation expense related to the outstanding unvested QHC and CHS restricted stock awards held by QHC employees as of the Spin-off Transaction date and the QHC restricted stock awards granted subsequent to the Spin-off Transaction of $5.1 million and $12.2 million, respectively.

A summary of the activity related to remaining unvested QHC restricted stock awards held by QHC and CHS employees as of the Spin-off Transaction date follows:

	QHC Awards Distributed in Spin-Off Transaction
	QHC Employees			CHS Employees			Total
Unvested restricted stock awards at Spin-off Transaction date		54,321			638,088			692,409
Vested		(336	)		(1,684	)		(2,020	)
Forfeited		(164	)		(3,648	)		(3,812	)
Unvested restricted stock awards at end of period		53,821			632,756			686,577

A summary of the activity related to QHC unvested restricted stock awards granted subsequent to the Spin-off Transaction date follows:

	QHC Awards Granted
	Subsequent to Spin-off Transaction
			Weighted-
			Average
			Grant Date
	Shares		Fair Value
Unvested restricted stock awards at beginning of period		-	$	-
Granted		1,081,005		12.77
Vested		-		-
Forfeited		-		-
Unvested restricted stock awards at end of period		1,081,005	$	12.77

NOTE 15 – EMPLOYEE BENEFIT PLANS

Following the Spin-off Transaction, the Company maintains various benefit plans, including defined contribution plans, a defined benefit plan and deferred compensation plans, for which certain of the Company’s subsidiaries are the plan sponsors.  The rights and obligations of these plans were transferred from CHS in connection with the Spin-off Transaction, pursuant to the Separation and Distribution Agreement. The Quorum Health Retirement Savings Plan (the “RSP”) is a defined contribution plan established on January 1, 2016 by CHS in anticipation of the Spin-off Transaction. Prior to the Spin-off Transaction, the cumulative liability for these benefit costs was recorded in Due to Parent, net, in the consolidated and combined balance sheets.  The assets and liabilities under this plan were transferred to QHC in connection with the Spin-off Transaction. The RSP covers the majority of the employees at the Company’s subsidiaries. Total expense to the Company under all defined contribution plans was $3.7 million and $3.1 million for the three months ended June 30, 2016 and 2015, respectively, and $7.0 million and $6.8 million for the six months ended June 30, 2016 and 2015, respectively.  The benefit costs associated with the RSP are recorded as salaries and benefits expense in the consolidated and combined statements of income for all periods.

Certain of the Company’s employees participate in CHS’ unfunded deferred compensation plans that allow participants to defer receipt of a portion of their compensation.  The current election period for those employees will continue under the CHS plan through

29

December 31, 2016, at which time, the corresponding plan assets and liabilities will be transferred to a new plan to be established by QHC, pursuant to the Employee Matters Agreement (“EMA”). The estimated liability under these plans at June 30, 2016 was approximately $25 million.

On April 1, 2016, the Board adopted the Quorum Health Corporation Supplemental Executive Retirement Plan (the “Original SERP Plan”). Pursuant to the EMA between the Company and CHS, the Company assumed all liabilities for all obligations under the Original SERP Plan for the benefits of QHC employees, as defined in the EMA, except that no additional benefits were to accrue under the Original SERP Plan following the Spin-off Transaction. The accrued benefit liability for the Original SERP Plan that was transferred to the Company in connection with the Spin-off Transaction was $6.0 million and is included in other long-term liabilities on the consolidated and combined balance sheet.  There were no assets transferred to the Company related to the Original SERP Plan in connection with the Spin-off Transaction.

On May 24, 2016, the Board, upon recommendation of the Compensation Committee, approved the Company’s Amended and Restated Supplemental Executive Retirement Plan (the “Amended and Restated SERP”), in order to accrue additional benefits with respect to QHC Employees who otherwise qualify as “Participants” under the Amended and Restated SERP.  The Amended and Restated SERP is a noncontributory non-qualified deferred compensation plan under Section 409A of the Internal Revenue Code. The Company uses a December 31 measurement date for the benefit obligations and a January 1 measurement date for its net periodic costs for the Amended and Restated SERP. The benefit costs under both SERP plans were $0.4 million and $0.5 million for the three and six months ended June 30, 2016, respectively, and are included in salaries and benefits in the consolidated and combined statements of income.  The accrued benefit liability for the Amended and Restated SERP was $9.2 million as of June 30, 2016 and is included in other long-term liabilities on the consolidated and combined balance sheet. The weighted-average assumptions used for determining net periodic benefit costs were a discount rate of 3.2% and an annual compensation increase of 3.0%.

QHC provides benefits to employees at one of its hospitals through a defined benefit plan (the “Pension Plan”). The Pension Plan provides benefits to covered individuals satisfying certain age and service requirements. Employer contributions to the Pension Plan are in accordance with the minimum funding requirements of the Employee Retirement Income Security Act of 1974 (“ERISA”), as amended. The Company expects to make contributions to the Pension Plan for the full year 2016 of $0.2 million. The Company uses a December 31 measurement date for the benefit obligations and a January 1 measurement date for its net periodic benefit costs for the Pension Plan. Variances from actuarially assumed rates will result in increases or decreases in benefit obligations, net periodic cost and funding requirements in future periods. The weighted-average assumptions used for determining the net periodic benefit costs for the year ended December 31, 2015 were a discount rate of 3.75%, an annual salary increase of 3.0% and the expected long-term rate of return on assets of 7.0%. Benefits expense related to the Pension Plan was $0.1 million and $0.1 million for the three months ended June 30, 2016 and 2015, respectively, and $0.1 million and $0.2 million for the six months ended June 30, 2016 and 2015, respectively. QHC recognizes the unfunded liability of its defined benefit plan in other long-term liabilities in the consolidated and combined balance sheets and unrecognized gains (losses) and prior service credits (costs) as changes in other comprehensive income (loss).  The accrued benefit liability for the Pension Plan totaled $1.0 million at June 30, 2016.

NOTE 16 – RELATED PARTY TRANSACTIONS

CHS was a related party to QHC prior to the Spin-off Transaction.  The significant transactions and balances with CHS prior to the Spin-off Transaction and the agreements between QHC and CHS as of and subsequent to the Spin-off Transaction are described below.

Carve-Out from Parent

Historically, QHC was managed and operated in the normal course of business with all other hospitals and affiliates of CHS. Accordingly, for the purposes of the carve-out financial statements related to the Spin-off Transaction, a combined opening balance sheet for the QHC hospitals and QHR was established that included the assets and liabilities of QHC hospitals, as reported by CHS, and a net liability to CHS, referred to as Due to Parent, net, for the net investment held by CHS for contributing these net assets.  The operating results of the QHC hospitals and QHR prior to the Spin-off Transaction were derived from the CHS operating results for the QHC hospitals.  In addition, certain corporate overhead costs were allocated to QHC from CHS during the carve-out period for the purpose of estimating QHC’s share of these expenses.

Allocated Costs from CHS during the Carve-Out Period

CHS allocated costs to QHC during the carve-out period for a portion of its corporate overhead costs and any other costs related to QHC hospitals and QHR that were paid by CHS or covered by an agreement, policy or contract owned by CHS.

30

A summary of allocated costs to QHC from CHS follows (in thousands):

	Three Months Ended June 30,				Six Months Ended June 30,
	2016		2015		2016		2015
Insurance costs	$	10,486	$	32,043	$	44,246	$	66,521
Management fees from Parent		2,966		9,048		11,792		17,964
All other allocated costs		5,305		11,587		25,021		29,175
Total related party operating costs and expenses	$	18,757	$	52,678	$	81,059	$	113,660

The allocation of insurance costs from CHS primarily included costs for self-insurance estimates and third-party policies related to employee health, professional liability and workers’ compensation coverage.  Insurance costs were primarily allocated to QHC based on claims history of the QHC hospitals, as determined on an individual hospital level.  Corporate management fees were allocated to QHC for certain corporate functions of CHS, including services such as, among others, executive and divisional management, treasury, accounting, risk management, legal, procurement, human resources, information technology support and other administrative support services.  These corporate overhead costs were allocated to QHC using a ratio based on the number of licensed beds at each QHC hospital in proportion to CHS’ total licensed beds.  This methodology is comparable to how CHS allocates corporate overhead costs to all of its hospitals through a management fee charge that eliminates in consolidation.  All other allocated costs included any other costs allocated to QHC hospitals or QHR and that were not part of management fees.  These costs were allocated to QHC using ratios based on revenues, expenses or licensed beds.  If possible, allocations were made on a specific identification basis.

Following the Spin-off Transaction, the Company began performing corporate functions using internal resources or purchased services, certain of which are being provided by CHS pursuant to the transition services agreements and other ancillary agreements.  See the section on Agreements with CHS Related to the Spin-off Transaction below.

Due to Parent, Net

Prior to the Spin-off Transaction, Due to Parent, net, in the consolidated and combined balance sheets represented the Company’s cumulative liability to CHS for the net assets of QHC hospitals and QHR, as well as an allocation of costs for corporate functions.  See Note 1 – Description of the Business and Spin-off Transaction and the Due to Parent, net, accounting policy in Note 2 – Basis of Presentation and Significant Accounting Policies for additional information on the types of transactions settled through Due to Parent, net, during the carve-out period and the transactions that occurred to settle the liability in connection with the Spin-off Transaction.

During the carve-out period, QHC was charged interest on a monthly basis by CHS on the amount of Due to Parent, net, outstanding at the end of each month.  Interest rates were variable and ranged from 4% to 7% during the carve-out period.  Interest expense incurred on the Due to Parent, net, was recorded as an increase in the Due to Parent, net, liability and was deemed settled each month.  The total amount of related party interest expense arising from the liability with CHS was $8.9 million and $24.0 million for the three months ended June 30, 2016 and 2015, respectively, and $35.8 million and $49.4 million for the six months ended June 30, 2016 and 2015, respectively.

Agreements with CHS Related to the Spin-off Transaction

On April 29, 2016, the Company entered into certain agreements with CHS that allocated between the Company and CHS the various assets, employees, liabilities and obligations (including investments, property, employee benefits and tax-related assets and liabilities) that comprise the separate companies and governed or govern certain relationships between and activities of the Company and CHS for a period of time after the Spin-off Transaction.

The agreements were as follows:

· Separation and Distribution Agreement.  This agreement governed the principal actions of both the Company and CHS that needed to be taken in connection with the Spin-off Transaction. It also sets forth other agreements that govern certain aspects of the Company’s relationship with CHS following the Spin-off Transaction.

· Tax Matters Agreement.  This agreement governs respective rights, responsibilities and obligations of the Company and CHS after the Spin-off Transaction with respect to tax liabilities and benefits, tax attributes, tax contests and other tax sharing regarding U.S. federal, state and local income taxes, other tax matters and related tax returns.

· Employee Matters Agreement.  This agreement governs certain compensation and employee benefit obligations with respect to the current and former employees and non-employee directors of both the Company and CHS. It also allocated liabilities and responsibilities relating to employment matters, employee compensation and benefit plans and programs as of the Spin-off Transaction date.

31

In addition to the agreements referenced above, the Company entered into certain transition services agreements and other ancillary agreements with CHS defining agreed upon services to be provided by CHS to certain or all QHC hospitals, as determined by each agreement, to begin immediately following the Spin-off Transaction date.

A summary of the major provisions of the transition services agreements follows:

· Computer and Data Processing Transition Services Agreement. This agreement defines services to be provided by CHS for information technology infrastructure, support and maintenance. Services include, but are not limited to, operational support for various applications, oversight, maintenance and information technology support services, such as helpdesk, product support, network monitoring, data center operations, service ticket management and vendor relations. Fees are based on both a fixed charge for labor costs, as well as direct charges for all third party vendor contracts entered into by CHS on QHC’s behalf.

· Eligibility Screening Services Agreement.  This agreement defines services to be provided by CHS for financial and program criteria screening related to Medicaid or other program eligibility for pure self-pay patients.  Fees are based on a fixed charge for each hospital receiving services.

· Shared Services Centers Transition Services Agreement.  This agreement defines services to be provided by CHS related to billing and collections utilizing CHS shared service centers.  Services include, but are not limited to, billing and receivables management, statement processing, denials management, cash posting, patient customer service, and credit balance and other account research.  In addition, it provides for patient pre-arrival services, including pre-registration, insurance verification, scheduling and charge estimates.  Fees are based on a percentage of cash collections each month.

· Receivables Collection Agreement (PASI).  This agreement defines services to be provided by CHS related to accounts receivable collections of both active and bad debt accounts of the Company’s hospitals.  Services include, but are not limited to, self-pay collections, insurance follow-up, collection letters and calls, payment arrangements, payment posting, dispute resolution and credit balance research.  Fees are based on the type of service and are calculated based on a percentage of recoveries.

· Billing and Collection Agreement (PPSI). This agreement defines services to be provided by CHS related to accounts receivable collections of certain accounts receivable generated in the performance of professional services rendered by the Company’s physician and mid-level providers and certain clinics. Services include, but are not limited to, self-pay collections, insurance follow-up, collection letters and calls, payment arrangements, payment posting, dispute resolution and credit balance research. Fees are based on the type of service and are calculated based on a percentage of recoveries.

· Employee Service Center/HRIS Transition Services Agreement. This agreement defines services to be provided by CHS related to payroll processing and human resources information systems support.  Fees are based on a fixed charge per employee headcount per month.

The total amount of expenses incurred by the Company under our transition service agreements with CHS following the Spin-off Transaction combined with the allocations from CHS for these same services prior to the Spin-off Transaction were $17.8 million and $16.0 million for the three months ended June 30, 2016 and 2015, respectively, and $34.1 million and $31.4 million for the six months ended June 30, 2016 and 2015, respectively. The agreements each have terms of five years.

NOTE 17 - COMMITMENTS AND CONTINGENCIES

Legal Matters

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

In connection with the Spin-off Transaction, CHS agreed to indemnify QHC for certain liabilities relating to outcomes or events occurring prior to the closing of the Spin-off Transaction, including (i) certain claims and proceedings known to be outstanding on or prior to the closing date of the Spin-off Transaction and (ii) certain claims, proceedings and investigations by governmental authorities or private plaintiffs related to activities occurring at or related to our healthcare facilities prior to the closing date of the Spin-off Transaction, but only to the extent, in the case of clause (ii), that such claims are covered by insurance policies maintained by CHS, including professional and general liability and workers’ compensation liability. In this regard, CHS will continue to be responsible

32

for certain Health Management Associates, Inc. legal matters covered by its contingent value rights agreement that relate to the portion of CHS’ business now held by QHC. Notwithstanding the foregoing, CHS is not indemnifying QHC in respect of any claims or proceedings arising out of, or related to, the business operations of QHR at any time or its compliance with the Corporate Integrity Agreement (“CIA”) with the United States Department of Health and Human Services Office of the Inspector General (“OIG”).  Subsequent to the Spin-off Transaction, the OIG entered into an “Assumption of CIA Liability Letter” with the Company reiterating the applicability of the CIA to certain of the Company’s hospitals, although the OIG declined to enter into a separate agreement with the Company.

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

Commercial Litigation and Other Lawsuits

· Quorum Health Resources, LLC v. Hancock Medical Center.This matter is an arbitration claim and counterclaim for breach of contract and negligence arising out of a Management Services Agreement between QHR and the hospital. Arbitration in this case began on April 11, 2016 and concluded on April 22, 2016. On July 28, 2016, the arbitrator returned an Interim Award in favor of Hancock Medical Center on various claims at issue in the arbitration. The net total award was $9.4 million payable by QHR to Hancock Medical Center. The Company accrued for this Interim Award in other long-term liabilities on its consolidated and combined balance sheet as of June 30, 2016. Both parties filed a motion for reconsideration of the Interim Award. In addition, the parties may seek attorney’s fees and costs prior to the arbitrator issuing a Final Award. The award is subject to a self-insured retention and excess insurance arrangements.

Government Investigations

For all legal matters below, the Company cannot at this time assess what the outcome may be and is further unable to determine any estimate of loss or range of loss. Because the matters below are at a preliminary stage and other factors, there are not sufficient facts available to make these assessments.

· Tooele, Utah – Physician Compensation. On May 5, 2016, the Company’s hospital in Tooele, Utah received a Civil Investigative Demand (“CID”) from the Office of the United States Attorney in Salt Lake City, Utah concerning allegations that the hospital and clinic corporation submitted or caused to be submitted false claims to the government for services referred by physicians with whom the hospital and clinic had inappropriate financial relationships, which allegedly violated federal law. The CID requested records and documentation concerning physician compensation. The Company is fully cooperating with this investigation.

· Blue Island, Illinois – Patient Status. On October 9, 2015, the Company’s hospital in Blue Island, Illinois received a CID from the Office of the United States Attorney in Chicago, Illinois concerning allegations of upcoding observation and other outpatient services and improperly falsifying inpatient admission orders. The CID requested medical records and documentation concerning status change, from observation to inpatient. The Company is fully cooperating with this investigation.

Insurance Reserves

As part of the business of owning and operating hospitals, the Company is subject to potential professional and general liability and workers’ compensation liability claims or other legal actions alleging liability on its part.  The Company is also subject to similar liabilities related to its QHR business.

Prior to the Spin-off Transaction, CHS provided professional and general liability insurance and workers’ compensation insurance to QHC and indemnified QHC from losses under these insurance arrangements related to its hospital operations business. The liabilities for claims related to QHC’s hospital operations business were determined based on an actuarial study of QHC’s operations and historical claims experience at its hospitals. Corresponding receivables from CHS were established to reflect the indemnification by CHS for each of these liabilities for claims that related to events and circumstances that occurred prior to the Spin-off Transaction date.

After the Spin-off Transaction, QHC entered its own professional and general liability insurance and workers’ compensation insurance arrangements to mitigate the risk for claims exceeding its self-insured retention level.  The Company’s self-insured retention level for professional and general liability claims is $5 million per claim and its self-insured retention level for workers’ compensation claims is $0.5 million per claim.  The Company maintains separate insurance arrangements related to its subsidiary, QHR, due to the

33

differing nature of this business.  The self-insured retention level for QHR is $6 million for professional and general liability insurance and it maintains a guaranteed cost program for workers’ compensation insurance.

A summary of the Company’s insurance reserves related to professional and general liability claims and workers’ compensation claims, separated between those which have been indemnified by CHS and those that relate to the Company’s self-insurance risks, follows (in thousands):

	June 30, 2016
	Current		Long-Term		Current		Long-Term
	Receivable		Receivable		Liability		Liability
Professional and general liability:
Insurance reserves indemnified by CHS, Inc.	$	21,488	$	69,028	$	21,488	$	69,028
All other self-insurance reserves		—		8,826		—		18,222
Total insurance reserves for professional and general liability		21,488		77,854		21,488		87,250
Workers' compensation liability:
Insurance reserves indemnified by CHS, Inc.		5,972		19,690		5,972		19,690
All other self-insurance reserves		—		—		708		—
Total insurance reserves for workers' compensation liability		5,972		19,690		6,680		19,690
Total self-insurance reserves	$	27,460	$	97,544	$	28,168	$	106,940
	December 31, 2015
	Current		Long-Term		Current		Long-Term
	Receivable		Receivable		Liability		Liability
Professional and general liability:
Insurance reserves indemnified by CHS, Inc.	$	21,120	$	72,412	$	21,120	$	72,412
All other self-insurance reserves		—		4,077		—		5,011
Total insurance reserves for professional and general liability		21,120		76,489		21,120		77,423
Workers' compensation liability:
Insurance reserves indemnified by CHS, Inc.		8,314		20,507		8,314		20,507
All other self-insurance reserves		—		—		—		—
Total insurance reserves for workers' compensation liability		8,314		20,507		8,314		20,507
Total self-insurance reserves	$	29,434	$	96,996	$	29,434	$	97,930

The receivables from CHS are included in other current assets and other long-term assets on the consolidated and combined balance sheets and the liabilities are included in other current liabilities for the current portion of professional and general liability claims, employee compensation liabilities for the current portion of workers’ compensation claims, and other long-term liabilities for the long-term portions of both claims liabilities.

Physician Recruiting Commitments

As part of its physician recruitment strategy, the Company provides income guarantee agreements to certain physicians who agree to relocate to its communities and commit to remain in practice there. Under such agreements, the Company is required to make payments to the physicians in excess of the amounts they earned in their practice up to the amount of the income guarantee. The income guarantee periods over which the Company agrees to subsidize a physician’s income are typically one year and the commitment periods over which the physician agrees to practice in the designated community are typically three years.  Payments are recoverable by the Company under the terms of the agreements from physicians who do not fulfill their commitment period.  At June 30, 2016, the maximum potential amount of future payments under these guarantees in excess of the liabilities recorded was $3.6 million.

Construction and Capital Commitments

Springfield, Oregon Patient Tower. The Company is building a new patient tower and expanding its surgical capacity at its hospital in Springfield, Oregon.  As of June 30, 2016, the Company has incurred a total of $27.6 million of costs for this project, of which $10.3 million and $17.2 million of costs were recorded during the three and six months ended June 30, 2016, respectively. The total estimated construction costs of this project, including equipment costs, could be up to $88 million.  The project is expected to be completed in late 2017 or early 2018.

34

QHC Corporate Office.  In November 2015, the Company’s subsidiary, QHR, entered into an agreement with a developer (the “Combined Agreement”) to construct the corporate office for QHC in Brentwood, Tennessee.  The Combined Agreement included four separate lease agreements that relate to three different phases of the project and a fourth lease that consolidates and, upon commencement, terminates the initial three lease agreements. The Company has recorded the ongoing costs associated with this project as they are incurred as a direct financing obligation.  As of June 30, 2016, the Company has recorded a total of $19.3 million of costs for this project, of which $2.9 million and $4.9 million were recorded during the three and six months ended June 30, 2016, respectively. These project costs are included as additions to property and equipment and long-term debt in the consolidated and combined balance sheets and as assets acquired under capital lease obligations in Note 12 – Additional Cash Flow Information.  The project is expected to be completed in the third quarter of 2016.

NOTE 18 - SUBSEQUENT EVENTS

On July 28, 2016, an Interim Award of $9.4 million was announced in favor of Hancock Medical Center in Quorum Health Resources, LLC v. Hancock Medical Center. Both parties filed a motion for reconsideration of the Interim Award. The Company accrued the liability in other long-term liabilities in the consolidated and combined balance sheet as of June 30, 2016.  See Note 17 – Commitments and Contingencies for additional information on this legal matter.

35

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

You should read the following discussion of our results of operations, financial condition and cash flows, together with the unaudited condensed consolidated and combined financial statements and the accompanying notes included in this quarterly report on Form 10-Q, as well as the audited combined financials statements and accompanying notes, and additionally the sections entitled “Business” and “Risk Factors,” as of December 31, 2015 and for the three years ended December 31, 2015, included in our Information Statement (“Information Statement”) attached as an exhibit to the Registration Statement on Form 10, as amended, initially filed with the Securities and Exchange Commission (“SEC”) on September 4, 2015 and declared effective on April 4, 2016 (“Form 10”).  The financial information discussed below and included in our Information Statement may not necessarily reflect what our results of operations, financial condition and cash flows would have been had we been a stand-alone company for the entirety of the periods presented herein or what our results of operations, financial condition and cash flows may be in the future.  Except as otherwise indicated or unless the context otherwise requires, all references in this quarterly report on Form 10-Q to “we,” “our,” “us,” “QHC” and the “Company” refer to the consolidated and combined business operations of the hospitals and Quorum Health Resources, LLC (“QHR”) that CHS spun off to Quorum Health Corporation on April 29, 2016.  Additionally, all references to “CHS” and “Parent” refer to Community Health Systems, Inc. and its consolidated subsidiaries.

Forward Looking Statements

Some of the matters discussed in this quarterly report on Form 10-Q include forward-looking statements.  Statements that are predictive in nature, that depend upon or refer to future events or conditions or that include words such as “expects,” “anticipates,” “intends,” “plans,” “believes,” “estimates,” “thinks,” and similar expressions are forward-looking statements. These statements involve known and unknown risks, uncertainties and other factors that may cause our actual results and performance to be materially different from any future results or performance expressed or implied by these forward-looking statements.

These factors include, but are not limited to, the following:

· general economic and business conditions, both nationally and in the regions in which we operate;

· implementation, effect of and changes to adopted and potential federal and state healthcare reform legislation and other federal, state or local laws or regulations affecting the healthcare industry;

· the extent to which states support increases, decreases or other changes in Medicaid programs, implement healthcare exchanges or alter the provision of healthcare to state residents through regulation or otherwise;

· the success and long-term viability of health insurance exchanges, which may be impacted by whether a sufficient number of payors participate;

· risks associated with our substantial indebtedness, leverage and debt service obligations;

· demographic changes;

· changes in, or the failure to comply with, governmental regulations;

· potential adverse impact of known and unknown government investigations, audits, and federal and state false claims act litigation and other legal proceedings;

· our ability, where appropriate, to enter into and maintain provider arrangements with payors and the terms of these arrangements, which may be further impacted by the increasing consolidation of health insurers and managed care companies;

· changes in, or the failure to comply with contract terms with payors and changes in reimbursement rates paid by federal or state healthcare programs or commercial payors;

· any potential impairments in the carrying value of goodwill, other intangible assets, or other long-lived assets, or changes in the useful lives of other intangible assets;

· changes in inpatient or outpatient Medicare and Medicaid payment levels;

· the effects related to the continued implementation of the sequestration spending reductions and the potential for future deficit reduction legislation;

· increases in the amount and risk of collectability of patient accounts receivable, including the impact of the implementation of ICD-10 and decreases in collectability which may result from, among other things, self-pay growth in states that have not expanded Medicaid and difficulties in recovering payments for which patients are responsible, including co-pays and deductibles;

36

· the efforts of insurers, healthcare providers and others to contain healthcare costs, including the trend toward value-based purchasing;  

· our ongoing ability to demonstrate meaningful use of certified electronic health record technology and recognize income for the related Medicare or Medicaid incentive payments;

· increases in wages as a result of inflation or competition for highly technical positions and rising supply and drug costs due to market pressure from pharmaceutical companies and new product releases;

· liabilities and other claims asserted against us, including self-insured malpractice claims;

· competition;

· our ability to attract and retain, at reasonable employment costs, qualified personnel, key management, physicians, nurses and other healthcare workers;

· trends toward treatment of patients in less acute or specialty healthcare settings, including surgery centers or specialty hospitals;

· changes in medical or other technology;

· changes in U.S. generally accepted accounting principles (“U.S. GAAP”);

· the availability and terms of capital to fund additional acquisitions or replacement facilities or other capital expenditures;

· our ability to successfully make acquisitions or complete divestitures and the timing thereof, our ability to complete any such acquisitions or divestitures on desired terms or at all, and our ability to realize the intended benefits from any such acquisitions or divestitures;

· our ability to successfully integrate any acquired hospitals, or to recognize expected synergies from acquisitions;

· the impact of seasonal severe weather conditions;

· our ability to obtain adequate levels of general and professional liability insurance;

· timeliness of reimbursement payments received under government programs;

· effects related to outbreaks of infectious diseases;

· the impact of external, criminal cyber-attacks or security breaches;

· the anticipated and unanticipated effects that the completion of the Spin-off Transaction on April 29, 2016 had on our business and our ability to achieve the anticipated benefits of the spin-off;

· our ability to manage effectively our arrangements with third-party vendors for key non-clinical business functions and services;

· our ability to maintain certain accreditations at our existing facilities and any future facilities we may acquire;

· the impact of certain outsourcing functions, and the ability of CHS, as provider of our billing and collection services pursuant to the transition services agreements to timely and appropriately bill and collect;

· an increase in costs associated with the increase in the number of employed physicians; and

· the risk factors included in Part II, Item 1A of this quarterly report on Form 10-Q and those included in our other public filings with the SEC.

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

Overview

As of June 30, 2016, we owned or leased a diversified portfolio of 38 hospitals across 16 states with an aggregate of 3,579 licensed beds.  Our hospitals offer a variety of services involving a broad range of general hospital healthcare services and outpatient

37

healthcare services, including general acute care, emergency room, general and specialty surgery, critical care, internal medicine, obstetrics, diagnostic services, psychiatric and rehabilitation services.  For the hospitals that we own and operate, we are paid for our services by governmental agencies, private insurers and directly by the patients we serve. Over 95% of our net operating revenues are attributable to its hospital operations business.  We also operate QHR, a leading hospital management advisory and consulting services business. For our hospital management advisory and consulting services business, we are paid by the non-affiliated hospitals utilizing our services.

Spin-off from CHS

On April 29, 2016, CHS completed the spin-off of 38 hospitals, including their affiliated businesses, and QHR to form Quorum Health Corporation (“the Spin-off Transaction”) through the distribution of 100% of QHC’s common stock to CHS stockholders of record as of the close of business on April 22, 2016 (the “Record Date”).  Each CHS stockholder received a distribution of one share of our common stock for every four shares of CHS common stock held on the Record Date plus cash in lieu of fractional shares and CHS received cash proceeds of $1.2 billion. Our common stock began “regular-way” trading on the New York Stock Exchange (“NYSE”) under the ticker symbol “QHC” on May 2, 2016.

In connection with the Spin-off Transaction, QHC and CHS entered into various agreements on April 29, 2016 that governed or continue to govern various aspects of the Spin-Off Transaction including, among others, the transfer of employees, assets and liabilities to QHC, the settlement of the Due to Parent, net liability to CHS, the contribution of capital to QHC and the terms of various transition services and other activities that will be provided by CHS for approximately five years following the closing of the Spin-off Transaction.  See Note 16 – Related Party Transactions in the accompanying consolidated and combined financial statements for additional information on these agreements.

In connection with the Spin-off Transaction, QHC issued $400 million in aggregate principal amount of 11.625% Senior Notes due 2023 (the “Senior Notes”) on April 22, 2016 and entered into a credit agreement on April 29, 2016, consisting of an $880 million senior secured term loan facility (the “Term Loan Facility”) and a $100 million senior secured revolving credit facility (the “Revolving Credit Facility,” and together with the Term Loan Facility, the “Senior Credit Facility”). In addition, QHC entered into a $125 million senior secured asset-based revolving credit facility (the “ABL Credit Facility”).  The net offering proceeds of the Senior Notes, together with the net borrowings under the Term Loan Facility, were used to pay $1.2 billion of the cash proceeds to CHS, as mentioned above, and to pay our fees and expenses related to the Spin-off Transaction.  See Note 6 – Long-Term Debt in the accompanying consolidated and combined financial statements for additional information on these debt instruments.

In connection with the Spin-off Transaction, CHS contributed $518.5 million in additional paid-in capital to us and made a cash contribution of $13.5 million, consisting of $20.0 million of cash to be used for initial funding of our working capital, reduced by $6.5 million for the difference in estimated and actual financing transaction fees that occurred as described above.

See Note 1 – Description of the Business and Spin-off Transaction in the accompanying consolidated and combined financial statements for additional information on the transactions that occurred in the consummation of the Spin-off Transaction.

Basis of Presentation

Prior to our separation from CHS, QHC did not operate as a separate company and stand-alone financial statements were not historically prepared; however, QHC was comprised of certain stand-alone legal entities for which discrete financial information was available under CHS’ ownership.  Our accompanying consolidated and combined financial statements include amounts and disclosures for QHC that have been derived from the consolidated financial statements and accounting records of CHS for the periods prior to the Spin-off Transaction in combination with the amounts and disclosures related to the stand-alone financial statements and accounting records of QHC after the Spin-off Transaction.  See Note 16 – Related Party Transactions in the accompanying consolidated and combined financial statements for additional information on the carve-out of financial information from CHS.

The consolidated and combined statements of income for the three and six months ended June 30, 2016 and 2015, as presented herein, include expense allocations for certain corporate functions provided by CHS to QHC, including, but not limited to, executive and divisional management, employee benefits administration, treasury, accounting, risk management, audit, legal, procurement, human resources, information technology support and other administrative support services.  These expenses were allocated to QHC based on direct usage or benefit where identifiable, with the remainder allocated to QHC using ratios based on revenues, expenses or licensed beds.  Following the Spin-off Transaction, we began performing corporate functions using internal resources or purchased services, certain of which are being provided by CHS pursuant to the transition services agreements and other ancillary agreements.  

CHS uses a centralized approach to cash management and to financing its operations, including the operations of QHC.  For the periods prior to the Spin-off Transaction, cash and cash equivalents were swept to the CHS corporate accounts and transactions between QHC and CHS were accounted for through Due to Parent, net.  This liability to CHS was settled in full on the transaction date, in part by a cash payment of $1.2 billion utilizing net proceeds from the debt issuances that occurred in connection with the Spin-off Transaction, and the remainder was extinguished and reclassified as a capital contribution to QHC.  See Note 9 – Equity in the accompanying consolidated and combined financial statements for additional information on the equity established in connection with

38

the Spin-off Transaction.  Following the Spin-off Transaction, QHC established its own depository and disbursement cash accounts with various banks.

Certain reclassifications were made in our consolidated and combined financial statements as of June 30, 2016 that have been applied retroactively to all prior periods.  These reclassifications had no effect on our results of operations, financial position or cash flows included in previously issued combined financial statements.  See the Reclassifications policy in Note 2 – Basis of Presentation and Significant Accounting Policies in the accompanying consolidated and combined financial statements for additional information.

Financial Overview

Net operating revenues for the three months ended June 30, 2016 totaled $529.7 million compared to $538.4 million for the three months ended June 30, 2015, a 1.6% decrease.  Net operating revenues for the three months ended June 30, 2015 were negatively impacted by an $11.1 million unfavorable contractual adjustment resulting from an Illinois cost report settlement which was recorded in 2014 and reversed in the second quarter of 2015 due to contract negotiations that were finalized in that quarter. Loss from operations for the three months ended June 30, 2016 was $(259.3) million, compared with income from operations of $27.5 million for the three months ended June 30, 2015.  The results for the three months ended June 30, 2016 included $250.4 million of impairment to long-lived assets and goodwill resulting from an ongoing strategic review of our owned and leased hospitals to identify divestiture candidates that fit our business strategy as well as an estimated goodwill impairment charge resulting from step one of our interim goodwill impairment evaluation, $1.2 million of transaction costs related to our spin-off from CHS, $5.4 million of legal and settlement costs primarily related to a QHR matter and $2.5 million of increased costs resulting from the transition services agreements with CHS executed on the spin-off date.  Our operating results for the three months ended June 30, 2016 reflect a 3.4% decrease in total admissions and a 2.5% decrease in total adjusted admissions compared with the same period in 2015.

Net operating revenues for the six months ended June 30, 2016 totaled $1,079.3 million compared to $1,086.0 million for the six months ended June 30, 2015, a 0.6% decrease.  Net operating revenues for the six months ended June 30, 2015 included the $11.1 million unfavorable contractual adjustment as noted above. Loss from operations for the six months ended June 30, 2016 was $(238.2) million, compared with income from operations of $61.8 million for the six months ended June 30, 2015. The results for the six months ended June 30, 2016 included the $250.4 million of impairment to long-lived assets and goodwill as noted above, $4.9 million of transaction costs related to our spin-off from CHS, $5.7 million of legal and settlement costs primarily related to a QHR matter and $3.5 million of increased costs resulting from the transition services agreements with CHS executed on the spin-off date. Our operating results for the six months ended June 30, 2016 reflect a 2.8% decrease in total admissions and a 0.8% decrease in total adjusted admissions compared with the same period in 2015.

Strategic Initiatives

Our business strategy includes an ongoing strategic review of our hospitals for possible divestitures based upon an analysis of financial performance, current competitive conditions, expected demographic trends, joint venture opportunities and capital allocation requirements.  As part of this strategy, we engage in initiatives, among others, to divest of underperforming assets, reduce our debt and refine our portfolio to a more sustainable group of hospitals with higher operating margins.  We anticipate that we may divest certain of our hospitals in the next 12 to 18 months.

As of June 30, 2016, we have received letters of intent from potential buyers related to certain hospitals, and as a result, have reclassified certain assets and liabilities of those hospitals as held for sale on our consolidated and combined balance sheet as of June 30, 2016.  As a result of management’s decision to divest these hospitals and potentially divest other hospitals, we analyzed our long-lived assets and goodwill for impairment.  As a result of this testing, we recorded $45.4 million of impairment related to property, equipment and capitalized software costs and $205.0 million of impairment to goodwill in the consolidated and combined statements of income for the three and six months ended June 30, 2016.  Our strategic review is ongoing, and we may be unable to divest any or all of these hospitals or realize proceeds from the sale of these hospitals.  In addition, we may have further impairment charges to both our asset values and goodwill as we continue to assess our hospitals for possible divestitures.

Healthcare Reform

Healthcare reform laws, particularly the Patient Protection and Affordable Care Act, as amended by the Health Care and Education Reconciliation Act of 2010 (“Healthcare Reform Law”), change how healthcare services are delivered and reimbursed through expanded coverage of uninsured individuals, reduced growth in Medicare program spending and reductions in Medicare and Medicaid Disproportionate Share Hospital payments, and the establishment of programs in which reimbursement is tied to quality and care coordination. In addition, the Healthcare Reform Law reforms certain aspects of health insurance and contains provisions intended to strengthen fraud and abuse enforcement. The Healthcare Reform Law is expanding patient coverage through a combination of public program expansion and private sector health insurance and other reforms. Most of the provisions of the Healthcare Reform Law that seek to decrease the number of uninsured became effective January 1, 2014. However, the ongoing effect of the Healthcare Reform Law is uncertain as a result of a number of factors, including the 2016 federal election, efforts to repeal, expand or otherwise revise the law and uncertainty regarding how many states will ultimately implement the Medicaid expansion provisions of the law.

39

Electronic Health Record Incentives

Pursuant to the Health Information Technology for Economic and Clinical Health Act (“HITECH”), we are eligible to receive incentive payments under the Medicare and Medicaid programs for eligible hospitals and physician clinics that demonstrate meaningful use of certified Electronic Health Records (“EHR”) technology.  Each of our eligible hospitals and physician clinics has completed the initial adoption phase of EHR implementation and are currently in the process of implementing the remaining two phases.   EHR incentive payments are subject to audit and potential recoupment if it is determined that the applicable meaningful use standards were not met and are also subject to retrospective adjustment because the cost report data upon which the incentive payments are based are further subject to audit.

Although we believe that our hospital facilities are currently in compliance with the meaningful use standards, there can be no assurance that all of our facilities will remain in compliance and therefore not be subject to the HITECH penalty provisions.  We recognized $4.2 million and $7.6 million for the three months ended June 30, 2016 and 2015, respectively, and $8.5 million and $15.3 million for the six months ended June 30, 2016 and 2015, respectively, in our consolidated and combined statements of income as a reduction to operating costs and expenses.  We incur both capital expenditures and operating expenses in connection with the implementation of EHR technology initiatives. The amount and timing of these expenditures does not directly correlate with the timing of the receipt of EHR payments or the recognition of EHR incentives as earned.  As we move toward our full implementation of certified EHR technology in accordance with all three phases of the program, our EHR incentives will decline and ultimately end.  We expect our EHR incentives earned for the full year of 2016 will be in the range of $11 million to $12 million compared to $26 million for the year ended December 31, 2015.

40

Sources of Revenues

A summary of our operating revenues by payor source follows (dollars in thousands):

	Three Months Ended June 30,
	2016					2015
	$  Amount		% of Total			$  Amount		% of Total			Change in $			Change in %
Medicare	$	167,549		28.0	%	$	156,649		25.7	%	$	10,900			2.3	%
Medicaid		113,283		18.9	%		103,972		17.1	%		9,311			1.8	%
Managed care and commercial		230,595		38.6	%		259,984		42.7	%		(29,389	)		-4.1	%
Self-pay		59,171		9.9	%		57,181		9.4	%		1,990			0.5	%
Non-patient		27,565		4.6	%		30,850		5.1	%		(3,285	)		-0.5	%
Total net operating revenues, before provision for bad debts	$	598,163		100.0	%	$	608,636		100.0	%	$	(10,473	)
	Six Months Ended June 30,
	2016					2015
	$  Amount		% of Total			$  Amount		% of Total			Change in $			Change in %
Medicare	$	343,083		28.3	%	$	331,373		27.3	%	$	11,710			1.0	%
Medicaid		216,351		17.8	%		208,306		17.1	%		8,045			0.7	%
Managed care and commercial		474,879		39.2	%		495,752		40.8	%		(20,873	)		-1.6	%
Self-pay		123,925		10.2	%		120,095		9.9	%		3,830			0.3	%
Non-patient		54,409		4.5	%		59,582		4.9	%		(5,173	)		-0.4	%
Total net operating revenues, before provision for bad debts	$	1,212,647		100.0	%	$	1,215,108		100.0	%	$	(2,461	)
	Three Months Ended
	June 30, 2016					March 31, 2016
	$  Amount		% of Total			$  Amount		% of Total			Change in $			Change in %
Medicare	$	167,549		28.0	%	$	175,534		28.6	%	$	(7,985	)		-0.6	%
Medicaid		113,283		18.9	%		103,068		16.8	%		10,215			2.1	%
Managed care and commercial		230,595		38.6	%		244,284		39.8	%		(13,689	)		-1.2	%
Self-pay		59,171		9.9	%		64,754		10.5	%		(5,583	)		-0.6	%
Non-patient		27,565		4.6	%		26,844		4.3	%		721			0.3	%
Total net operating revenues, before provision for bad debts	$	598,163		100.0	%	$	614,484		100.0	%	$	(16,321	)

As shown above, we receive a substantial portion of our operating revenues from the Medicare and Medicaid programs. The managed care and commercial portion of our operating revenues includes revenues from insurance companies, managed care plans and workers’ compensation carriers. As of June 30, 2016, Medicare Managed Care Advantage Plans have been reclassified from managed care and commercial revenues to Medicare revenues for all periods presented in the tables above.  Self-pay revenues are the portion of our operating revenues derived from patients who do not have any form of health insurance coverage and the patient responsibility portion from patients who have health insurance coverage. Non-patient revenues include our operating revenues from the hospital management advisory and consulting services provided by QHR, rental income and hospital cafeteria sales. In the future, we expect revenues received from the Medicare and Medicaid programs to increase due to the general aging of the population. In addition, Healthcare Reform Law has increased and is expected to continue to increase the number of insured patients in states that have expanded Medicaid, which in turn, is expected to reduce the percentage of revenues from self-pay patients. We have a much higher collectability rate associated with our historical collections of insured receivables than with our self-pay receivables.

Amounts we receive for the treatment of patients covered by Medicare, Medicaid and non-governmental payors are generally less than the standard billing rates. We account for the differences between the estimated program reimbursement rates and the standard billing rates as contractual allowance adjustments, which we deduct from gross revenues to arrive at net operating revenues. These reimbursement programs are complex and subject to interpretations of payor-specific contractual agreements and regulations

41

that are frequently changing. Contractual allowances are recorded based on management’s best estimates in the period in which services are performed and a payment methodology is established with the patient.  Revisions to estimates are recorded in the periods in which they become known and final settlements, including those related to cost report settlements under the Medicare and Medicaid programs, are subject to adjustment based on administrative review and audit by third parties. For example, enforcement of the “two-midnight rule,” which subjects in-patient hospital stays of less than two midnights to medical review on a case-by-case basis beginning in 2016 may result in future reductions in the rate of reimbursement through the Medicare program.

Cost report settlements under reimbursement programs with Medicare, Medicaid and other managed care plans are estimated and recorded in the period the related services are performed and are adjusted in future periods, as needed, until the final cost report settlements are determined. Contractual allowance adjustments related to previous program reimbursement estimates and final cost report settlements unfavorably impacted net revenues by $2.5 million and $11.2 million during the three months ended June 30, 2016 and 2015, respectively, and $4.4 million and $11.7 million during the six months ended June 30, 2016 and 2015, respectively.  The adjustments in the three and six months ended June 30, 2015 periods include the unfavorable impact of an $11.1 million Illinois cost report settlement which was recorded in 2014 and reversed in the second quarter of 2015 due to contract negotiations that were finalized in that quarter.  See Third Party Reimbursements in the Critical Accounting Policies section below for a summary of amounts due from and due to third-party payors for previous program reimbursement estimates and final cost report settlements.

Currently, several states utilize supplemental payment programs, including disproportionate share programs, for the purpose of providing reimbursement to providers to offset a portion of the costs of providing care to Medicaid and indigent patients. These programs are designed with input from Centers for Medicare and Medicaid Services (“CMS”) and are funded with a combination of state and federal resources, including, in certain instances, taxes or fees levied on the providers. Similar programs are also being considered by other states. The programs are generally authorized for a specified period of time and require CMS’s approval to be extended. CMS has indicated that it will take into account a state’s status with respect to expanding its Medicaid program in considering whether to extend these programs. We are unable to predict whether or on what terms CMS will extend these programs in the states in which we operate. Some of these programs are scheduled to expire in 2016.  

We recognize operating revenues and related costs of revenues in the period in which amounts are estimable and collection is reasonably assured. The revenue earned under state supplemental payment programs is included in net operating revenues and included as Medicaid revenues in the payor sources tables above, and the expenses associated with the programs, including taxes, fees and other program-related costs (collectively, “provider taxes”), are included in other operating expenses in the consolidated and combined statements of income.

The table below summarizes the impact on income (loss) from operations related to state supplemental payment programs (in thousands):

	Three Months Ended				Six Months Ended				Three Months Ended
	June 30,		June 30,		June 30,		June 30,		June 30,		March 31,
	2016		2015		2016		2015		2016		2016
State supplemental payment programs:
Revenues	$	55,105	$	49,838	$	107,320	$	105,217	$	55,105	$	52,215
Expenses		18,604		19,324		38,030		38,493		18,604		19,426
Total operating income from state supplemental payment programs	$	36,501	$	30,514	$	69,290	$	66,724	$	36,501	$	32,789

Results of Operations

A summary of our results of operations, including certain financial and operating data for the three and six months ended June 30, 2016 and 2015, is included below.  The definitions of certain terms used throughout the remainder of Item 2 on Management’s Discussion and Analysis of Financial Condition and Results of Operations follows:

Combined and Consolidated - Our financial statements include amounts and disclosures that have been derived from the consolidated financial statements and accounting records of CHS for the periods prior to the completion of the Spin-off Transaction in combination with the amounts and disclosures related to the stand-alone financial statements and accounting records of QHC after the Spin-off Transaction.

Same-Facility - Same-facility financial and operating data includes hospitals that are owned or leased during all periods presented as part of the Management Discussion and Analysis of Financial Condition and Results of Operations included in the Quarterly Report on Form 10-Q.  For all periods presented in this Quarterly Report on Form 10-Q, our same-facility operating results are the same as our consolidated and combined operating results; and therefore, we have not separately reported this information in the current Quarterly Report on Form 10-Q.

42

Admissions - Admissions represent the number of patients admitted for inpatient services.

Adjusted Admissions - Adjusted Admissions is computed by multiplying admissions by gross patient revenues and then dividing that number by gross inpatient revenues.

Emergency Room Visits - Emergency room visits represent the number of patients registered and treated in our emergency rooms.

Medicare Case Mix Index - Medicare case mix index is a relative value assigned to a diagnosis-related group of patients that is used in determining the allocation of resources necessary to treat the patients in that group. Medicare case mix index is calculated as the average case mix index for all Medicare admissions during the period.

Hospital Man-Hours per Adjusted Admission - Hospital man-hours per Adjusted Admission is calculated as total paid employed and contract labor hours divided by Adjusted Admissions. It is used by management as a measure of productivity.

Days Revenue Outstanding - Days revenue outstanding approximates the average collection period for patient accounts receivable.  It is calculated by dividing net patient accounts receivable at the end of the period by average net operating revenues per day for the most recent three months.  Net patient accounts receivable excludes the amounts reclassified to due from and due to third-party payors related to final cost report settlements and state supplemental payment programs. See Reclassifications in Note 2 – Basis of Presentation and Significant Accounting Policies in the accompanying consolidated and combined financial statements.

Three Months Ended June 30, 2016 Compared to Three Months Ended June 30, 2015

A summary of our results of operations, both in dollars and as a percentage of net operating revenues, follows (dollars in thousands):

	Three Months Ended June 30,
	2016						2015
				% of						% of
	Amount			Revenues			Amount			Revenues
Operating revenues, net of contractual allowances and discounts	$	598,163					$	608,636
Provision for bad debts		68,426						70,284
Net operating revenues		529,737			100.0	%		538,352			100.0	%
Operating costs and expenses:
Salaries and benefits		264,886			50.0	%		253,812			47.1	%
Supplies		64,136			12.1	%		61,663			11.5	%
Other operating expenses		163,185			30.8	%		158,811			29.5	%
Depreciation and amortization		31,463			5.9	%		32,141			6.0	%
Rent		12,545			2.4	%		12,065			2.2	%
Electronic health records incentives earned		(4,247	)		-0.8	%		(7,624	)		-1.4	%
Legal and settlement costs		5,447			1.0	%		-			0.0	%
Impairment of long-lived assets and goodwill		250,400			47.3	%		-			0.0	%
Transaction costs related to the spin-off		1,177			0.2	%		-			0.0	%
Total operating costs and expenses		788,992			148.9	%		510,868			94.9	%
Income (loss) from operations		(259,255	)		-48.9	%		27,484			5.1	%
Interest expense, net		29,276			5.6	%		23,828			4.4	%
Income (loss) before income taxes		(288,531	)		-54.5	%		3,656			0.7	%
Provision for (benefit from) income taxes		(44,565	)		-8.4	%		1,451			0.3	%
Net income (loss)		(243,966	)		-46.1	%		2,205			0.4	%
Less: Net income attributable to noncontrolling interests		1,095			0.2	%		775			0.1	%
Net income (loss) attributable to Quorum Health Corporation	$	(245,061	)		-46.3	%	$	1,430			0.3	%

43

Revenues

The following table provides information on our net operating revenues (dollars in thousands):

	Three Months Ended June 30,
	2016		2015		Variance			% Variance
Consolidated and combined:
Operating revenues, net of contractual allowances and discounts	$	598,163	$	608,636	$	(10,473	)		-1.7	%
Provision for bad debts		68,426		70,284		(1,858	)		-2.6	%
Total net operating revenues	$	529,737	$	538,352	$	(8,615	)		-1.6	%
Net operating revenues per Adjusted Admission	$	8,987	$	8,907	$	80			0.9	%
Net patient revenues per Adjusted Admission	$	9,681	$	9,559	$	122			1.3	%

The following table provides information on certain drivers of our net operating revenues:

	Three Months Ended June 30,
	2016		2015		Variance			% Variance
Consolidated and combined:
Number of licensed beds		3,579		3,592		(13	)		-0.4	%
Admissions		23,618		24,442		(824	)		-3.4	%
Adjusted Admissions		58,942		60,444		(1,502	)		-2.5	%
Emergency room visits		182,301		184,487		(2,186	)		-1.2	%
Medicare case mix index		1.38		1.35		0.03			2.2	%

Net operating revenues for the three months ended June 30, 2016 decreased $8.6 million compared to the three months ended June 30, 2015.  This decrease was further impacted by an $11.1 million unfavorable contractual adjustment resulting from an Illinois cost report settlement which was recorded in 2014 and reversed in the second quarter of 2015 due to contract negotiations that were finalized in that quarter. Excluding the impact of this unfavorable item in the three months ended June 30, 2015, the decline in net operating revenues was $19.7 million.  We experienced declines in Admissions, Adjusted Admissions, Emergency room visits, and surgical cases with growth in outpatient registrations. More specifically, we noted declines in obstetrics cases, predominately due to fewer births, as well as cardiology and cardiovascular gastroenterology cases, and respiratory cases as a result of a lighter flu season, offset by an increase in orthopedic cases. We were also impacted by a payor mix shift from managed care and commercial to Medicare, Medicaid and self-pay payors, which typically pay at lower rates.  Our overall net operating revenues decline was due, in part, to a decrease of approximately $7 million in net operating revenues of certain underperforming hospitals that we are currently evaluating as divestiture candidates.  Non-patient revenues decreased $3.3 million in the three months ended June 30, 2016 compared to the 2015 period primarily due to less managed contracts and consulting services related to our QHR business in the 2016 period.

Provision for Bad Debts

The provision for bad debts was 13.0% and 13.1%, as a percentage of net operating revenues, for the three months ended June 30, 2016 when compared to the three months ended June 30, 2015.

Salaries and Benefits

The following table provides information on our salaries and benefits expenses (dollars in thousands):

	Three Months Ended June 30,
	2016		2015		Variance		% Variance
Consolidated and combined:
Salaries and benefits	$	264,886	$	253,812	$	11,074		4.4	%
Salaries and benefits per Adjusted Admission	$	4,494	$	4,199	$	295		7.0	%
Hospital Man-Hours per Adjusted Admission		103.9		102.9		1.0		1.0	%

Salaries and benefits increased $11.1 million during the three months ended June 30, 2016 compared to the three months ended June 30, 2015 primarily due to a shift in corporate salaries and benefits from an allocation of corporate management fees as a result of the Spin-off Transaction on April 29, 2016.  Prior to the Spin-off Transaction, corporate management fees for corporate functions of CHS were allocated to QHC, including services such as, among others, executive and divisional management, treasury, accounting, risk management, legal, procurement, human resources, information technology support and other administrative support services.  These corporate management fees were included in other operating expenses.  For the three months ended June 30, 2016, we had approximately two months of salaries and benefits expense related to our corporate office, resulting in a $6.5 million increase

44

compared to the three months ended June 30, 2015. Included in this increase was stock-based compensation expense of $1.9 million for QHC and CHS restricted stock awards held at the time of the Spin-off Transaction and QHC restricted stock awards granted after the Spin-off Transaction.  We also had approximately $3.5 million of additional medical benefits costs following the Spin-off Transaction that resulted from additional liability for estimated claims under our new employee health plan.

Supplies

The following table provides information on our supplies expense (dollars in thousands):

	Three Months Ended June 30,
	2016		2015		Variance		% Variance
Consolidated and combined:
Supplies	$	64,136	$	61,663	$	2,473		4.0	%
Supplies per Adjusted Admission	$	1,088	$	1,020	$	68		6.7	%

Supplies expense increased $2.5 million during the three months ended June 30, 2016 compared to the three months ended June 30, 2015. The decline in supplies expense as a result of lower patient service volumes was offset by a reduction in rebates and administrative fee reimbursements from the renegotiated contract with our group purchasing organization in connection with the Spin-off Transaction, which resulted in an unfavorable impact of $1.6 million on supplies expense.

Other Operating Expenses

The following table provides information on our other operating expenses (dollars in thousands):

	Three Months Ended June 30,
	2016		2015		Variance			% Variance
Consolidated and combined:
Purchased services	$	62,477	$	59,041	$	3,436			5.8	%
Taxes and insurance		34,261		31,534		2,727			8.6	%
Medical specialist fees		25,182		20,579		4,603			22.4	%
Repairs and maintenance		10,730		11,562		(832	)		-7.2	%
Utilities		7,001		7,038		(37	)		-0.5	%
Management fees from Parent		2,966		9,048		(6,082	)		-67.2	%
Other miscellaneous operating expenses		20,568		20,009		559			2.8	%
Total other operating expenses	$	163,185	$	158,811	$	4,374			2.8	%

Other operating expenses increased $4.4 million for the three months ended June 30, 2016 compared to the three months ended June 30, 2015 primarily due to increases in purchased services, taxes and insurance and medical specialist fees.  The purchased services increase was primarily driven by the increased costs of the transition services agreements, increases in contract labor and the costs of becoming a public company.  The costs of the transition services agreements and amounts allocated from CHS increased $1.8 million for the three months ended June 30, 2016 compared to amounts allocated by CHS for the same period in 2015. We estimate the annual costs of the transition services agreements to be approximately $9 million to $10 million higher than amounts previously allocated by CHS prior to the Spin-off Transaction. The increase in taxes and insurance was primarily due to $2.1 million of Illinois tax credits that were recorded in the three months ended June 30, 2015 with no comparable credits in the three months ended June 30, 2016.  Medical specialist fees increased as a result of renegotiated contracts related to emergency room services and subsidies to various third parties, including hospitalists.

Depreciation and Amortization

Depreciation and amortization expense decreased $0.7 million during the three months ended June 30, 2016 compared to the three months ended June 30, 2015.  As a percentage of net operating revenues, depreciation and amortization was comparable for these periods.

Rent

Rent expense increased $0.5 million during the three months ended June 30, 2016 compared to the three months ended June 30, 2015.  As a percentage of net operating revenues, rent expense was comparable for these periods.

Electronic Health Records Incentives Earned

Electronic health records incentives earned decreased $3.4 million for the three months ended June 30, 2016 compared to the three months ended June 30, 2015 primarily due to the decrease in activity as we move closer toward full implementation of EHR.  

45

See the Revenues section above and Note 2 – Basis of Presentation and Significant Accounting Policies in the accompanying consolidated and combined financial statements for additional information on EHR.

Legal and Settlement Costs

Legal and settlement costs of $5.4 million were recognized during the three months ended June 30, 2016 primarily related to estimated costs associated with a QHR matter.  See Note 17 – Commitments and Contingencies in the accompanying consolidated and combined financial statements.

Impairment of Long-Lived Assets and Goodwill

Impairment of long-lived assets and goodwill of $250.4 million in the three months ended June 30, 2016 included $45.4 million of impairment to reduce certain long-lived asset values in property, equipment and capitalized software based on management’s decision to divest certain hospitals and evaluate other hospitals for divestiture. As of June 30, 2016, we reclassified certain assets and liabilities of hospitals for which we have received letters of intent from potential buyers to held for sale in our consolidated and combined balance sheet as of June 30, 2016.  Furthermore, we evaluated the estimated relative fair value of the hospitals held for sale in relation to the overall fair value of our hospital reporting unit as of September 30, 2015, the date of our last goodwill impairment analysis, and recognized goodwill impairment charges of $5.0 million in the three months ended June 30, 2016. In addition, we recorded a goodwill impairment charge of $200.0 million which represents management’s best estimate of fair value and the resulting implied goodwill related to our hospital reporting unit in step two of our interim goodwill impairment evaluation. Any increases or decreases in the fair value and resulting implied value of goodwill will be recorded when the evaluation is complete, and such changes could be material.

Interest Expense, Net

The following table provides information on interest expense, net (in thousands):

	Three Months Ended June 30,
	2016			2015
Senior Credit Facility:
Revolving Credit Facility	$	85		$	-
Term Loan Facility		10,432			-
ABL Credit Facility		82			-
Senior Notes		8,914			-
Amortization of debt issuance costs and discounts		1,191			-
All other interest expense (income), net		(359	)		(182	)
Total interest expense, net, from long-term debt		20,345			(182	)
Due to Parent, net		8,931			24,010
Total interest expense, net	$	29,276		$	23,828

Interest expense, net increased $5.4 million for the three months ended June 30, 2016 compared to the three months ended June 30, 2015 primarily due to the new debt structure put in place in connection with the Spin-off Transaction.  Historically, we were charged interest on the amounts due to CHS at various rates ranging from 4% to 7%.  Interest computations on this indebtedness were based on the outstanding balance of Due to Parent, net at the end of each month.  This debt was extinguished on April 29, 2016.  Interest expense for the period following the Spin-off Transaction is calculated based on the terms of the credit agreements and senior notes. The effective interest rates for our Senior Credit Facility and Senior Notes were approximately 7.6% and 12.5%, respectively, at June 30, 2016. See Liquidity and Capital Resources below and Note 6 – Long-Term Debt in the accompanying consolidated and combined financial statements for additional information on our new indebtedness.

Provision for (Benefit from) Income Taxes

The provision for income taxes was an income tax benefit of $44.6 million for the three months ended June 30, 2016 and income tax expense of $1.5 million for the three months ended June 30, 2015.  Our effective tax rates were 15.4% and 39.7% for the three months ended June 30, 2016 and 2015, respectively.  The decrease in our effective tax rate was primarily due to our pre-tax loss in the 2016 period and the impact of the increase in non-deductible expenses for goodwill impairment and certain Spin-off Transaction costs in the 2016 period.

Net Income (Loss) Attributable to Noncontrolling Interests

Net income (loss) attributable to noncontrolling interests increased $0.3 million for the three months ended June 30, 2016 compared to the three months ended June 30, 2015.  As a percentage of net operating revenues, net income (loss) attributable to noncontrolling interests was comparable for these periods.

46

Six Months Ended June 30, 2016 Compared to Six Months Ended June 30, 2015

A summary of our results of operations, both in dollars and as a percentage of net operating revenues, follows (dollars in thousands):

	Six Months Ended June 30,
	2016						2015
				% of						% of
	Amount			Revenues			Amount			Revenues
Operating revenues, net of contractual allowances and discounts	$	1,212,647					$	1,215,108
Provision for bad debts		133,359						129,139
Net operating revenues		1,079,288			100.0	%		1,085,969			100.0	%
Operating costs and expenses:
Salaries and benefits		521,748			48.3	%		513,878			47.3	%
Supplies		127,797			11.8	%		126,215			11.6	%
Other operating expenses		327,648			30.5	%		311,051			28.6	%
Depreciation and amortization		62,620			5.8	%		63,839			5.9	%
Rent		25,094			2.3	%		24,502			2.3	%
Electronic health records incentives earned		(8,455	)		-0.8	%		(15,331	)		-1.4	%
Legal and settlement costs		5,688			0.5	%		-			0.0	%
Impairment of long-lived assets and goodwill		250,400			23.2	%		-			0.0	%
Transaction costs related to the spin-off		4,912			0.5	%		-			0.0	%
Total operating costs and expenses		1,317,452			122.1	%		1,024,154			94.3	%
Income (loss) from operations		(238,164	)		-22.1	%		61,815			5.7	%
Interest expense, net		56,728			5.2	%		49,630			-4.6	%
Income (loss) before income taxes		(294,892	)		-27.3	%		12,185			1.1	%
Provision for (benefit from) income taxes		(46,239	)		-4.3	%		4,156			0.4	%
Net income (loss)		(248,653	)		-23.0	%		8,029			0.7	%
Less: Net income attributable to noncontrolling interests		1,410			0.2	%		400			0.0	%
Net income (loss) attributable to Quorum Health Corporation	$	(250,063	)		-23.2	%	$	7,629			0.7	%

Revenues

The following table provides information on our net operating revenues (dollars in thousands):  

	Six Months Ended June 30,
	2016		2015		Variance			% Variance
Consolidated and combined:
Operating revenues, net of contractual allowances and discounts	$	1,212,647	$	1,215,108	$	(2,461	)		-0.2	%
Provision for bad debts		133,359		129,139		4,220			3.3	%
Total net operating revenues	$	1,079,288	$	1,085,969	$	(6,681	)		-0.6	%
Net operating revenues per Adjusted Admission	$	9,089	$	9,068	$	21			0.2	%
Net patient revenues per Adjusted Admission	$	9,754	$	9,649	$	105			1.1	%

The following table provides information on certain drivers of our net operating revenues:

	Six Months Ended June 30,
	2016		2015		Variance			% Variance
Consolidated and combined:
Number of licensed beds		3,579		3,592		(13	)		-0.4	%
Admissions		48,610		49,990		(1,380	)		-2.8	%
Adjusted Admissions		118,746		119,760		(1,014	)		-0.8	%
Emergency room visits		367,235		363,359		3,876			1.1	%
Medicare case mix index		1.37		1.35		0.02			1.5	%

Net operating revenues for the six months ended June 30, 2016 decreased $6.7 million compared to the six months ended June 30, 2015.  This decrease was further impacted by the $11.1 million unfavorable contractual adjustment resulting from the Illinois cost

47

report settlement described in the three months ended June 30, 2016 discussion above.  Excluding the impact of this reversal, the decline in net operating revenues was $17.8 million for the 2016 period when compared to the 2015 period.  We experienced declines in Admissions, Adjusted Admissions and surgical cases, partially offset by increases in Emergency room visits, outpatient registrations and an extra day of business in the 2016 period for leap year day. More specifically, we noted declines in obstetrics cases, predominately due to fewer births, as well as cardiology and cardiovascular gastroenterology cases, and respiratory cases as a result of a lighter flu season, offset by an increase in orthopedic cases. Our payor mix negatively impacted net operating revenues due to the shift from managed care and commercial to Medicare, Medicaid and self-pay payors, which typically pay at lower rates.  Our overall net operating revenues decline was due, in part, to a decrease of approximately $11 million in the net operating revenues of certain underperforming hospitals that we are currently evaluating as divestiture candidates. Non-patient revenues decreased $5.2 million in the six months ended June 30, 2016 compared to the 2015 period primarily due to  less managed contracts and consulting services related to the QHR business in the 2016 period.

Provision for Bad Debts

The provision for bad debts increased $4.2 million primarily due to a $1.8 million increase to the allowance for doubtful accounts resulting from the most recent hindsight analysis completed in the first quarter of 2016.  The remainder of the increase was due, in part, to the increase in self-pay revenues in the 2016 period when compared to the 2015 period.

Salaries and Benefits

The following table provides information on our salaries and benefits expenses (dollars in thousands):

	Six Months Ended June 30,
	2016		2015		Variance			% Variance
Consolidated and combined:
Salaries and benefits	$	521,748	$	513,878	$	7,870			1.5	%
Salaries and benefits per Adjusted Admission	$	4,394	$	4,291	$	103			2.4	%
Hospital man-hours per Adjusted Admission		103.0		103.8		(0.8	)		-0.8	%

Salaries and benefits increased $7.9 million during the six months ended June 30, 2016 compared to the six months ended June 30, 2015 primarily due to a shift in corporate salaries and benefits from an allocation of corporate management fees as a result of the Spin-off Transaction on April 29, 2016.  Prior to the Spin-off Transaction, corporate management fees for corporate functions of CHS were allocated to QHC, as described above.  For the six months ended June 30, 2016, we had approximately two months of salaries and benefits expense related to our corporate office resulting in a $6.5 million increase compared to the six months ended June 30, 2015. Included in this increase was stock-based compensation expense of $1.9 million for QHC and CHS restricted stock awards held at the time of the Spin-off Transaction and QHC restricted stock awards granted after the Spin-off Transaction.  We also had approximately $3.5 million of additional medical benefits costs following the Spin-off Transaction that resulted from additional liability for estimated claims under our new employee health plan.

Supplies

The following table provides information on our supplies expense (dollars in thousands):

	Six Months Ended June 30,
	2016		2015		Variance		% Variance
Consolidated and combined:
Supplies	$	127,797	$	126,215	$	1,582		1.3	%
Supplies per Adjusted Admission	$	1,076	$	1,054	$	22		2.1	%

Supplies expense increased $1.6 million during the six months ended June 30, 2016 compared to the six months ended June 30, 2015. The decline in supplies expense as a result of lower patient service volumes was offset by a reduction in rebates and administrative fee reimbursements from the renegotiated contract with our group purchasing organization in connection with the Spin-off Transaction, which resulted in an unfavorable impact of $1.6 million on supplies expense.

48

Other Operating Expenses

The following table provides information on our other operating expenses (dollars in thousands):

	Six Months Ended June 30,
	2016		2015		Variance			% Variance
Consolidated and combined:
Purchased services	$	124,218	$	116,406	$	7,812			6.7	%
Taxes and insurance		69,567		59,339		10,228			17.2	%
Medical specialist fees		49,532		40,267		9,265			23.0	%
Repairs and maintenance		21,966		23,296		(1,330	)		-5.7	%
Utilities		14,156		14,367		(211	)		-1.5	%
Management fees from Parent		11,792		17,964		(6,172	)		-34.4	%
Other miscellaneous operating expenses		36,417		39,412		(2,995	)		-7.6	%
Total other operating expenses	$	327,648	$	311,051	$	16,597			5.3	%

Other operating expenses increased $16.6 million for the six months ended June 30, 2016 compared to the six months ended June 30, 2015 primarily due to increases in purchased services, taxes and insurance and medical specialist fees. The purchased services increase was primarily driven by the increased costs of the transition services agreements, increases in contract labor and the costs of becoming a public company. The costs of the transition services agreements and amounts allocated from CHS increased $2.7 million for the six months ended June 30, 2016 compared to amounts allocated by CHS for the same period in 2015. We estimate the annual costs of the transition services agreements to be approximately $9 million to $10 million higher than amounts previously allocated by CHS prior to the Spin-off Transaction.The increase in taxes and insurance was primarily due to $7.7 million of Illinois tax credits that were recorded in the six months ended June 30, 2015 with no comparable credits in the six months ended June 30, 2016. Medical specialist fees increased as a result of renegotiated contracts related to emergency room services and subsidies to various third parties, including hospitalists.

Depreciation and Amortization

Depreciation and amortization expense decreased $1.2 million during the six months ended June 30, 2016 compared to the six months ended June 30, 2015.  As a percentage of net operating revenues, depreciation and amortization was comparable for these periods.

Rent

Rent expense increased $0.6 million during the six months ended June 30, 2016 compared to the six months ended June 30, 2015.  As a percentage of net operating revenues, rent expense was comparable for these periods.

Electronic Health Records Incentives Earned

Electronic health records incentives earned decreased $6.9 million for the six months ended June 30, 2016 compared to the six months ended June 30, 2015 primarily due to the decrease in activity as we move closer toward full implementation of EHR.  See the Revenues section above and Note 2 – Basis of Presentation and Significant Accounting Policies in the accompanying consolidated and combined financial statements for additional information on EHR.

Legal and Settlement Costs

Legal and settlement costs of $5.7 million were recognized during the six months ended June 30, 2016 related to estimated costs associated with a QHR matter. See Note 17 – Commitments and Contingencies in the accompanying consolidated and combined financial statements.

Impairment of Long-Lived Assets and Goodwill

Impairment of long-lived assets and goodwill of $250.4 million for the six months ended June 30, 2016 included $45.4 million of impairment to reduce certain long-lived asset values and $205.0 million of goodwill impairment, as described in the three months ended June 30, 2016 and 2015 discussion above.

49

Interest Expense, Net

The following table provides information on interest expense, net (in thousands):

	Six Months Ended June 30,
	2016		2015
Senior Credit Facility:
Revolving Credit Facility	$	85	$	-
Term Loan Facility		10,432		-
ABL Credit Facility		82		-
Senior Notes		8,914		-
Amortization of debt issuance costs and discounts		1,191		-
All other interest expense (income), net		210		237
Total interest expense, net, from long-term debt		20,914		237
Due to Parent, net		35,814		49,393
Total interest expense, net	$	56,728	$	49,630

Interest expense, net increased $7.1 million for the six months ended June 30, 2016 compared to the six months ended June 30, 2015 primarily due to the new debt structure put in place in connection with the Spin-off Transaction, as described above. The effective interest rates for our senior credit facility and senior notes were approximately 7.6% and 12.5%, respectively, at June 30, 2016. See Liquidity and Capital Resources below and Note 6 – Long-Term Debt in our accompanying consolidated and combined financial statements for additional information on our new indebtedness.

Provision for (Benefit from) Income Taxes

The provision for income taxes was an income tax benefit of $46.2 million for the six months ended June 30, 2016 and income tax expense of $4.2 million for the six months ended June 30, 2015.  Our effective tax rates were 15.7% and 34.1% for the six months ended June 30, 2016 and 2015, respectively.  The decrease in our effective tax rate was primarily due to our pre-tax loss in the 2016 period and the impact of the increase in non-deductible expenses for goodwill impairment and certain Spin-off Transaction costs in the 2016 period.

Net Income (Loss) Attributable to Noncontrolling Interests

Net income (loss) attributable to noncontrolling interests increased $1.0 million for the six months ended June 30, 2016 compared to the six months ended June 30, 2015.  As a percentage of net operating revenues, net income (loss) attributable to noncontrolling interests was comparable for these periods.

Three Months Ended June 30, 2016 Compared to Three Months Ended March 31, 2016

We have disclosed a comparison of our operating results on a sequential quarter basis below because we believe that this information is meaningful in the second quarter due to the impact the Spin-off Transaction, transition services agreements and divestiture candidates that we are able to target now that we are an independent company.

50

A summary of our results of operations, both in dollars and as a percentage of net operating revenues, follows (dollars in thousands):

	Three Months Ended
	June 30, 2016						March 31, 2016
				% of						% of
	Amount			Revenues			Amount			Revenues
Operating revenues, net of contractual allowances and discounts	$	598,163					$	614,484
Provision for bad debts		68,426						64,933
Net operating revenues		529,737			100.0	%		549,551			100.0	%
Operating costs and expenses:
Salaries and benefits		264,886			50.0	%		256,862			46.7	%
Supplies		64,136			12.1	%		63,661			11.6	%
Other operating expenses		163,185			30.8	%		164,463			30.0	%
Depreciation and amortization		31,463			5.9	%		31,157			5.7	%
Rent		12,545			2.4	%		12,549			2.3	%
Electronic health records incentives earned		(4,247	)		-0.8	%		(4,208	)		-0.8	%
Legal and settlement costs		5,447			1.0	%		241			0.0	%
Impairment of long-lived assets and goodwill		250,400			47.3	%		-			0.0	%
Transaction costs related to the spin-off		1,177			0.2	%		3,735			0.7	%
Total operating costs and expenses		788,992			148.9	%		528,460			96.2	%
Income (loss) from operations		(259,255	)		-48.9	%		21,091			3.8	%
Interest expense, net		29,276			5.6	%		27,452			5.0	%
Income (loss) before income taxes		(288,531	)		-54.5	%		(6,361	)		-1.2	%
Provision for (benefit from) income taxes		(44,565	)		-8.4	%		(1,674	)		-0.3	%
Net income (loss)		(243,966	)		-46.1	%		(4,687	)		-0.9	%
Less: Net income attributable to noncontrolling interests		1,095			0.2	%		315			0.0	%
Net income (loss) attributable to Quorum Health Corporation	$	(245,061	)		-46.3	%	$	(5,002	)		-0.9	%

Revenues

The following table provides information on our net operating revenues (dollars in thousands):  

	Three Months Ended
	June 30, 2016		March 31, 2016		Variance			% Variance
Consolidated and combined:
Operating revenues, net of contractual allowances and discounts	$	598,163	$	614,484	$	(16,321	)		-2.7	%
Provision for bad debts		68,426		64,933		3,493			5.4	%
Total net operating revenues	$	529,737	$	549,551	$	(19,814	)		-3.6	%
Net operating revenues per Adjusted Admission	$	8,987	$	9,190	$	(203	)		-2.2	%
Net patient revenues per Adjusted Admission	$	9,681	$	9,827	$	(146	)		-1.5	%

The following table provides information on certain drivers of our net operating revenues:

	Three Months Ended
	June 30, 2016		March 31, 2016		Variance			% Variance
Consolidated and combined:
Number of licensed beds		3,579		3,577		2			0.1	%
Admissions		23,618		24,992		(1,374	)		-5.5	%
Adjusted Admissions		58,942		59,801		(859	)		-1.4	%
Emergency room visits		182,301		184,934		(2,633	)		-1.4	%
Medicare case mix index		1.38		1.36		0.0			1.5	%

Net operating revenues for the three months ended June 30, 2016 decreased $19.8 million compared to the three months ended March 31, 2016.  On a sequential quarter basis, we experienced declines in Admissions, Adjusted Admissions, Emergency Room Visits and outpatient registrations, and additionally lower inpatient volumes, partially offset by increased outpatient services. More

51

specifically, we noted declines in obstetrics cases, predominately due to fewer births, as well as cardiology and cardiovascular gastroenterology cases, and respiratory cases as a result of a lighter flu season, offset by an increase in orthopedic cases. In addition, we experienced declines in each payor category, as a percentage of net operating revenues, in the second quarter of 2016 when compared to the first quarter, except in Medicaid, which is typically a lower pay rate category.  Our overall net operating revenues decline was due, in part, to a decrease of approximately $5 million in the net operating revenues of certain underperforming hospitals that we are currently evaluating as divestiture candidates.

Provision for Bad Debts

The provision for bad debts increased $3.5 million, or 5.4% for the three months ended June 30, 2016 compared to the three months ended March 31, 2016, primarily due to a $1.8 million increase to the allowance for doubtful accounts resulting from the most recent hindsight analysis completed in the first quarter of 2016.  

Salaries and Benefits

The following table provides information on our salaries and benefits expenses (dollars in thousands):

	Three Months Ended
	June 30, 2016		March 31, 2016		Variance		% Variance
Consolidated and combined:
Salaries and benefits	$	264,886	$	256,862	$	8,024		3.1	%
Salaries and benefits per Adjusted Admission	$	4,494	$	4,295	$	199		4.6	%
Hospital man-hours per Adjusted Admission		103.9		102.1		1.8		1.8	%

Salaries and benefits increased $8.0 million during the three months ended June 30, 2016 compared to the three months ended March 31, 2016 primarily due to a shift in corporate salaries and benefits from an allocation of corporate management fees as a result of the Spin-off Transaction on April 29, 2016.  Prior to the Spin-off Transaction, corporate management fees for corporate functions of CHS were allocated to QHC hospitals, including services such as, among others, executive and divisional management, treasury, accounting, risk management, legal, procurement, human resources, information technology support and other administrative support services.  These corporate management fees were included in other operating expenses.  For the three months ended June 30, 2016, we had approximately two months of salaries and benefits expense related to our corporate office resulting in a $6.5 million increase compared to the three months ended March 31, 2016. Included in this increase was stock-based compensation expense of $1.9 million for QHC and CHS restricted stock awards held at the time of the Spin-off Transaction and QHC restricted stock awards granted after the Spin-off Transaction.  We also had approximately $3.5 million of additional medical benefits costs following the Spin-off Transaction that resulted from additional liability for estimated claims under our new employee health plan.

Supplies

The following table provides information on our supplies expense (dollars in thousands):

	Three Months Ended
	June 30, 2016		March 31, 2016		Variance		% Variance
Consolidated and combined:
Supplies	$	64,136	$	63,661	$	475		0.7	%
Supplies per Adjusted Admission	$	1,088	$	1,065	$	23		2.2	%

Supplies expense was comparable for the three months ended June 30, 2016 to the three months ended March 31, 2016.  The decline in supplies expense as a result of lower patient service volumes was offset by a reduction in rebates and administrative fee reimbursements from the renegotiated contract with our group purchasing organization in connection with the Spin-off Transaction, which resulted in an unfavorable impact of $1.5 million on supplies expense.

52

Other Operating Expenses

The following table provides information on our other operating expenses (dollars in thousands):

	Three Months Ended
	June 30, 2016		March 31, 2016		Variance			% Variance
Consolidated and combined:
Purchased services	$	62,477	$	61,741	$	736			1.2	%
Taxes and insurance		34,261		35,306		(1,045	)		-3.0	%
Medical specialist fees		25,182		24,350		832			3.4	%
Repairs and maintenance		10,730		11,236		(506	)		-4.5	%
Utilities		7,001		7,155		(154	)		-2.2	%
Management fees from Parent		2,966		8,826		(5,860	)		-66.4	%
Other miscellaneous operating expenses		20,568		15,849		4,719			29.8	%
Total other operating expenses	$	163,185	$	164,463	$	(1,278	)		-0.8	%

Other operating expenses decreased $1.3 million for the three months ended June 30, 2016 compared to the three months ended March 31, 2016 primarily due to the fact that we had three months of allocations from CHS for corporate office functions in the first quarter and only one month in the second quarter.  The majority of these costs are now recorded as salaries and benefits since we became an independent company.  We had a partially offsetting increase in purchased services for the second quarter compared to the first quarter primarily due to the incremental costs associated with the transition services agreements. The costs of the transition services agreements and amounts allocated from CHS increased $1.5 million for the three months ended June 30, 2016 compared to amounts allocated by CHS for the three months ended March 31, 2016. We estimate the annual costs of the transition services agreements to be approximately $9 million to $10 million higher than amounts previously allocated by CHS prior to the Spin-off Transaction. Medical specialist fees increased as a result of increased subsidies related to emergency room services and hospitalists as previously discussed.

Depreciation and Amortization

Depreciation and amortization expense increased $0.3 million during the three months ended June 30, 2016 compared to the three months ended March 31, 2016.

Rent

Rent expense was $12.5 million for each the three months ended June 30, 2016 and March 31, 2016. As a percentage of net operating revenues, rent expense was comparable for both periods.

Electronic Health Records Incentives Earned

Electronic health records incentives earned were comparable for the three months ended June 30, 2016 and the three months ended March 31, 2016.  We anticipate that our total incentives earned for the full year 2016 will be approximately $11 to $12 million.  

Legal and Settlement Costs

Legal and settlement costs increased $5.2 million to $5.4 million in the three months ended June 30, 2016 primarily related to estimated costs associated with a QHR matter. See Note 17 – Commitments and Contingencies in the accompanying consolidated and combined financial statements.

Impairment of Long-Lived Assets and Goodwill

Impairment of long-lived assets and goodwill of $250.4 million in the three months ended June 30, 2016 included $45.4 million of impairment to reduce certain long-lived asset values and $205.0 million of goodwill impairment as described above.

53

Interest Expense, Net

The following table provides information on interest expense, net (in thousands):

	Three Months Ended
	June 30, 2016			March 31, 2016
Senior Credit Facility:
Revolving Credit Facility	$	85		$	-
Term Loan Facility		10,432			-
ABL Credit Facility		82			-
Senior Notes		8,914			-
Amortization of debt issuance costs and discounts		1,191			-
All other interest expense (income), net		(359	)		569
Total interest expense, net, from long-term debt		20,345			569
Due to Parent, net		8,931			26,883
Total interest expense, net	$	29,276		$	27,452

Interest expense, net increased $1.8 million for the three months ended June 30, 2016 compared to the three months ended March 31, 2016 primarily due to the new debt structure put in place in connection with the Spin-off Transaction on April 29, 2016, as described above. The effective interest rates for our senior credit facility and senior notes were approximately 7.6% and 12.5%, respectively, at June 30, 2016. See Liquidity and Capital Resources below and Note 6 – Long-Term Debt in the accompanying consolidated and combined financial statements for additional information on our new indebtedness.

Provision for (Benefit from) Income Taxes

We had an income tax benefit of $44.6 million in the three months ended June 30, 2016 compared to $1.7 million in the three months ended March 31, 2016.  Our effective tax rates were 15.4% and 26.3% for the three months ended June 30, 2016 and March 31, 2016, respectively.

Net Income (Loss) Attributable to Noncontrolling Interests

Net income (loss) attributable to noncontrolling interests increased $0.8 million for the three months ended June 30, 2016 compared to the three months ended March 31, 2016.  As a percentage of net operating revenues, net income (loss) attributable to noncontrolling interests was comparable for these periods.

Liquidity and Capital Resources

Liquidity and Capital Resources Outlook

Our primary sources of liquidity are cash flows from operations and availability under our revolving credit facilities.  We believe that these amounts will be adequate to service our existing debt, and finance internal growth and fund capital expenditures over the next 12 months and into the foreseeable future.  We are currently in the process of completing a strategic review of our hospitals for possible divestitures over the next 12 to 18 months based upon analysis of financial performance, current competitive conditions, expected demographic trends, joint venture opportunities and capital allocation requirements. We have received letters of intent from potential buyers related to certain hospitals. Our divestitures activity is consistent with our business strategy, which we discuss in the Information Statement Summary section of the Form 10, which includes, among other initiatives, engaging in initiatives to divest of underperforming assets, reduce our debt and refine our portfolio to a more sustainable group of hospitals with higher operating margins. Our strategic review is ongoing, and we may be unable to divest any or all of these hospitals or realize proceeds from the sale of these hospitals. We currently anticipate that the proceeds from any divestitures we make of underperforming hospitals will be used to reduce our debt.  

Our business strategy also includes seeking opportunities for growth through larger acquisitions; however, this may require additional financing, which will require consideration of our existing debt covenants and limitations on incurring future debt.  See Note 6 – Long-Term Debt and Note 17 – Commitments and Contingencies in our accompanying consolidated and combined financial statements for additional information on our indebtedness and significant commitments and contingencies, respectively.

The financial measure of free operating cash flow, which is not a U.S. GAAP measure, is an important liquidity measure for us. Our computation of free operating cash flow consists of net cash flows provided by operating activities reduced by capital expenditures for property, equipment and software.  We believe that free operating cash flow is useful to investors and management as a measure of our ability to generate cash and to repay and incur additional debt. Free operating cash flow does not fully reflect our ability to freely deploy generated cash, as it does not reflect required debt payments or other fixed obligations. Computations of free

54

operating cash flow may differ from company to company.  As a result, we believe that free operating cash flow should be used as a complement to, and in conjunction with, our consolidated and combined statements of cash flows.

Our statement of cash flows for the three and six months ended June 30, 2016 when compared to the 2015 periods, respectively, are significantly impacted by the completion of the Spin-off Transaction on April 29, 2016.  Following the Spin-off Transaction, we own and manage our own cash depository and disbursement accounts, whereas all of our cash activity was managed through Due to Parent, net under CHS’ cash management program prior to the Spin-off Transaction.  Our statement of cash flows for the three and six months ended June 30, 2016 includes the one month and four month periods, respectively, prior to the Spin-off Transaction on a similar basis to the 2015 period.  

Three Months Ended June 30, 2016 Compared to Three Months Ended June 30, 2015

A summary of our cash flows follows (in thousands):

	Three Months Ended June 30,
	2016			2015			$ Variance
Net cash provided by operating activities	$	36,796		$	56,346		$	(19,550	)
Net cash used in investing activities		(21,153	)		(13,097	)		(8,056	)
Net cash provided by (used in) financing activities		38,506			(48,072	)		86,578
Net change in cash and cash equivalents	$	54,149		$	(4,823	)	$	58,972

The following table provides additional information on our cash flows, including free operating cash flow (in thousands):

	Three Months Ended June 30,
	2016			2015			$ Variance
Net cash provided by operating activities	$	36,796		$	56,346		$	(19,550	)
Capital expenditures for property, equipment and software		(21,645	)		(12,135	)		(9,510	)
Total free operating cash flow		15,151			44,211			(29,060	)
Acquisitions, net of cash acquired		-			(2,012	)		2,012
Proceeds from sales of property and equipment		-			2,917			(2,917	)
Borrowings of long-term debt		1,255,500			75			1,255,425
Repayments of long-term debt		(3,188	)		(340	)		(2,848	)
Increase (decrease) in Due to Parent, net		31,669			(42,939	)		74,608
Increase (decrease) in receivables facility, net		-			(2,854	)		2,854
Payments of debt issuance costs		(28,003	)		-			(28,003	)
Cash paid to Parent in spin-off transaction		(1,217,336	)		-			(1,217,336	)
All other transactions		356			(3,881	)		4,237
Net change in cash and cash equivalents	$	54,149		$	(4,823	)	$	58,972

Net cash provided by operating activities was $36.8 million for the three months ended June 30, 2016 compared to $56.3 million for the three months ended June 30, 2015, a decrease of $19.6 million. Net cash provided by operating activities was impacted by a $246.2 million decrease in net income for the 2016 period when compared to the 2015 period; however this decrease was due, in part, to non-cash expenses attributable to the period following the Spin-off Transaction that did not exist in the 2015 period.  These incremental non-cash expenses were $0.7 million of non-cash interest expense primarily for amortization of debt issuance costs and discounts, $1.9 million of stock-based compensation expense, $250.4 million related to impairment charges and $5.4 million related to self-insurance reserves, partially offset by $47.5 million of deferred tax benefit.

The net increase in cash flows from operating assets and liabilities when comparing the three months ended June 30, 2016 to the three months ended June 30, 2015 was $15.2 million.  The primary drivers of this change that relate to the Spin-off Transaction include approximately $20.0 million increase in accounts payable, primarily due to our independent management of cash, $19.3 million related to accrued interest on our new debt structure and $3.5 million of employee health insurance accrual related to our new medical benefits plan.  These amounts were partially offset by unusual favorability in the 2015 three month period from collections of receivables that built up in 2014 and were collected in 2015 related to Illinois and California state supplemental payment programs and a system conversion in 2014 at one of our hospitals.

Net cash used in investing activities increased $8.1 million to $21.2 million in the three months ended June 30, 2016 from $13.1 million in the three months ended June 30, 2015. Our expenditures for property and equipment increased $9.9 million primarily due to approximately $10 million of costs incurred in the 2016 period for the construction of the patient tower and expanded surgical capacity at our Springfield, Oregon hospital.  Payments for acquisitions in the 2015 period of $2.0 million related to the purchase of a

55

diagnostic imaging center in the Springfield, Oregon market where our hospital is located.  We also received proceeds from the sale of a building near one of our hospitals in the 2015 period of $2.7 million with no comparable property sales in the 2016 period.

Net cash provided by financing activities was $38.5 million for the three months ended June 30, 2016 compared to net cash used in financing activities of $48.1 million in the three months ended June 30, 2015.  In connection with the Spin-off Transaction on April 29, 2016, we borrowed $880 million under the Term Loan Facility and issued $400 million of Senior Notes.  The proceeds received under these borrowings were reduced by $24.5 million of discounts related to this debt.  We paid $1.2 billion to CHS from the debt proceeds as part of the settlement of our Due to Parent, net liability with CHS.  We made payments on the Term Loan Facility of $2.2 million through June 30, 2016.  The increase in Due to Parent, net for the three months ended June 30, 2016 only related to the period prior to the Spin-off Transaction, whereas in the 2015 period, it related to the full three month period.  In addition, the 2015 period included the sweep of our cash earned in operations to CHS through June 30, 2015 as part of their centralized cash management program, which is reflected as a cash outflow in financing activities.  The increase of $2.9 million in the borrowings under the receivables facility with CHS in the 2015 period was offset in Due to Parent, net with a corresponding receivable.  Cash distributions to our noncontrolling interests partners were $1.1 million higher in the 2015 period when compared to the 2016 period.

Six Months Ended June 30, 2016 Compared to Six Months Ended June 30, 2015

A summary of our cash flows follows (in thousands):

	Six Months Ended June 30,
	2016			2015			$ Variance
Net cash provided by operating activities	$	61,193		$	22,696		$	38,497
Net cash used in investing activities		(35,609	)		(25,358	)		(10,251	)
Net cash provided by financing activities		28,455			1,329			27,126
Net change in cash and cash equivalents	$	54,039		$	(1,333	)	$	55,372

The following table provides additional information on our cash flows, including free operating cash flow (in thousands):

	Six Months Ended June 30,
	2016			2015			$ Variance
Net cash provided by operating activities	$	61,193		$	22,696		$	38,497
Capital expenditures for property, equipment and software		(37,011	)		(23,071	)		(13,940	)
Total free operating cash flow		24,182			(375	)		24,557
Acquisitions, net of cash acquired		-			(2,012	)		2,012
Proceeds from sales of property and equipment		858			3,017			(2,159	)
Borrowings of long-term debt		1,255,520			135			1,255,385
Repayments of long-term debt		(4,277	)		(736	)		(3,541	)
Increase (decrease) in Due to Parent, net		25,183			9,261			15,922
Increase (decrease) in receivables facility, net		-			(5,187	)		5,187
Payments of debt issuance costs		(28,003	)		-			(28,003	)
Cash paid to Parent in spin-off transaction		(1,217,336	)		-			(1,217,336	)
All other transactions		(2,088	)		(5,436	)		3,348
Net change in cash and cash equivalents	$	54,039		$	(1,333	)	$	55,372

Net cash provided by operating activities was $61.2 million for the six months ended June 30, 2016 compared to $22.7 million for the six months ended June 30, 2015, an increase of $38.5 million. Net cash provided by operating activities was impacted by a $256.7 million decrease in net income for the 2016 period when compared to the 2015 period; however this decrease was due, in part, to non-cash expenses attributable to the period following the Spin-off Transaction that did not exist in the 2015 period as discussed in the three month comparison above. These incremental non-cash expenses were $0.7 million of non-cash interest expense primarily for the amortization of debt issuance costs and discounts, $1.9 million of stock-based compensation expense, $250.4 million related to impairment charges and $5.4 million related to self-insurance reserves, partially offset by $47.5 million of deferred tax benefit.

The net increase in cash flows from operating assets and liabilities when comparing the six months ended June 30, 2016 to the six months ended June 30, 2015 was $84.5 million.  The impacts from the Spin-off Transaction described in the three month cash flow comparison above similarly impacted the six month 2016 period, including approximately $25 million of increased accounts payable, primarily due to our independent management of cash for the last two months of the 2016 period, $19.3 million of accrued interest on our debt structure and $11.5 million of employee health insurance accrual related to our new medical benefits plan. The other primary drivers of this change include the negative impact on cash flows from operations in the 2015 period from $26.4 million of legal settlement payments and $23.6 million of additional payroll payments primarily due to an additional pay period in the 2015 period compared to the 2016 period.  In addition, we had $14.5 million of positive impact on cash flows in the 2016 period compared to the

56

2015 period from the change in the receivables and deferred revenue related to EHR incentives. These amounts were partially offset by unusual favorability in the 2015 six month period from collections of receivables that built up in 2014 and were collected in 2015 related to Illinois and California state supplemental payment programs and a system conversion in 2014 at one of our hospitals.

Net cash used in investing activities increased $10.3 million to $35.6 million in the six months ended June 30, 2016 from $25.4 million in the six months ended June 30, 2015.  Our expenditures for property and equipment increased $12.8 million primarily due to costs incurred in the 2016 period of $17.2 million for the construction of the patient tower and expanded surgical capacity at our Springfield, Oregon hospital. A portion of these costs were transferred to us at the Spin-off Transaction closing through Due to Parent, net and therefore are not included in the cash outlay.  Payments for acquisitions include $2.0 million related to the purchase of a diagnostic imaging center in Springfield, Oregon, as discussed in the three month comparison above, and proceeds of $2.7 million from the sale of a building near one of our hospitals in the 2015 period, also discussed above.

Net cash provided by financing activities increased $27.1 million to $28.5 million for the six months ended June 30, 2016 from $1.3 million in the six months ended June 30, 2015.  The same transactions discussed in the three month comparison above related to the Spin-off Transaction, which occurred on April 29, 2016, impacted the six month cash flow comparison.  We borrowed $880 million under the Term Loan Facility and issued $400 million of Senior Notes, reduced by $24.5 million of discounts related to this debt.  We paid $1.2 billion to CHS from the debt proceeds as part of the settlement of our Due to Parent, net liability with CHS.  We made payments on the Term Loan Facility of $2.2 million through June 30, 2016.  The increase in Due to Parent, net for the six months ended June 30, 2016 only related to the four month period prior to the Spin-off Transaction, whereas in the 2015 period, it related to the full six month period.  In addition, the 2015 period included the sweep of our cash earned in operations to CHS as part of their centralized cash management program through June 30, 2015.  The increase in borrowings of $5.2 million under the receivables facility with CHS in the 2015 period was offset in Due to Parent, net with a corresponding receivable.  Cash distributions to our noncontrolling interests partners were $1.2 million higher in the 2016 period when compared to the 2015 period.

Capital Expenditures

Total cash expenditures, on a combined basis for property and equipment and the costs of purchasing and developing software, were $37.0 million and $23.1 million for the six months ended June 30, 2016 and 2015, respectively.  During the six months ended June 30, 2016, our capital expenditures included $17.2 million of costs related to our Springfield, Oregon hospital.  All other cash expenditures for property, equipment and software during the six month periods ended June 30, 2016 and 2015 related to purchases of equipment, minor renovations at our facilities, furniture and fixtures for our corporate headquarters and investment in information systems infrastructure.

We are building a new patient tower and expanding the surgical capacity at our hospital in Springfield, Oregon.  As of June 30, 2016, we have incurred a total of $27.6 million of capitalized costs for this project, of which $10.3 million and $17.2 million of costs were recorded during the three and six months ended June 30, 2016, respectively.  The total estimated construction costs of this project, including equipment costs, could be up to $88 million. The project is expected to be completed in late 2017 or early 2018.

We moved into a new corporate office in May 2016 just after the completion of the Spin-off Transaction.  In November 2015, our subsidiary, QHR, entered into an agreement with a developer (the “Combined Agreement”) related to the construction of this office space, and this agreement met the requirements for recording a deferred financing obligation during the construction phase.  The Combined Agreement included four separate lease agreements that related to three different phases of the project and a fourth lease that would consolidate and, upon commencement, terminate the initial three lease agreements.   As of June 30, 2016, we had incurred a total of $19.3 million of capitalized costs for this project, of which $2.9 million and $4.9 million of costs were recorded during the three and six months ended June 30, 2016, respectively.  The final phase of construction is expected to be completed in the third quarter of 2016.  See Note 17 – Commitments and Contingencies to the accompanying consolidated and combined financial statements for additional information.

Capital Resources

Net working capital was $322.3 million and $334.0 million as of June 30, 2016 and December 31, 2015, respectively. The primary driver of the $11.7 million decrease relates to changes in cash management following the Spin-off Transaction, which increased our liabilities for accounts payable and accrued interest, partially offset by an increase in cash. Prior to the Spin-off Transaction, our cash from operations was swept to CHS through Due to Parent, net on the consolidated and combined balance sheets under their centralized cash management program.

57

A summary of activity related to our long-term debt, net of debt issuance costs and discounts, follows (in thousands):

	Six Months Ended June 30, 2016
	Total			Borrowings											Assets
	Debt			of			Repayments			Payments			Amortization		Acquired		Total
	at			Long-Term			of			of Debt			of Debt		Under		Debt
	Beginning			Debt, Net			Long-Term			Issuance			Issuance		Capital		at End
	of Period			of Discounts			Debt			Costs			Costs		Leases		of Period
Senior Credit Facility:
Revolving Credit Facility, maturing 2021	$	-		$	-		$	-		$	-		$	-	$	-	$	-
Term Loan Facility, maturing 2022		-			880,000			(2,200	)		-			-		-		877,800
ABL Credit Facility, maturing 2021		-			-			-			-			-		-		-
Senior Notes, maturing 2023		-			400,000			-			-			-		-		400,000
Unamortized debt issuance costs and discounts		-			(24,536	)		-			(28,003	)		1,191		-		(51,348	)
Capital lease obligations		22,323			-			(1,943	)		-			-		5,120		25,500
Other debt		1,092			56			(170	)		-			-		-		978
Total debt		23,415			1,255,520			(4,313	)		(28,003	)		1,191		5,120		1,252,930
Less:  Current maturities of long-term debt		(7,915	)															(16,271	)
Total long-term debt	$	15,500		$	1,255,520		$	(4,313	)	$	(28,003	)	$	1,191	$	5,120	$	1,236,659

In connection with the Spin-off Transaction, we entered into two credit agreements and issued senior notes.  In addition, the indebtedness with CHS, which was classified on the consolidated and combined balance sheets as Due to Parent, net was fully settled.  See Note 1 – Description of the Business and Spin-off Transaction and Note 16 – Related Party Transactions in our accompanying consolidated and combined financial statements for additional information on the use of proceeds from the new debt instruments and the settlement of Due to Parent, net.

A summary of our long-term debt, allocated between fixed and variable debt, follows (dollars in thousands):

	June 30, 2016
			% of
	Amount		Total Debt
Fixed	$	426,478		32.7	%
Variable		877,800		67.3	%
Total debt, excluding debt issuance costs and discounts	$	1,304,278		100.0	%

Senior Credit Facility

On April 29, 2016, we entered into a credit agreement (the “CS Agreement”), among us, the lenders party thereto and Credit Suisse AG, Cayman Islands Branch (“Credit Suisse”), as administrative agent and collateral agent. The CS Agreement provides for an $880 million senior secured term loan facility (the “Term Loan Facility”) and a $100 million senior secured revolving credit facility (the “Revolving Credit Facility” and, together with the Term Loan Facility, the “Senior Credit Facility”). The available borrowings from the Revolving Credit Facility will be used for working capital and general corporate purposes.  As of June 30, 2016, we had no borrowings outstanding on the Revolving Credit Facility and had $3.1 million of letters of credit outstanding that were primarily related to the self-insured retention levels of professional and general liability and workers’ compensation insurance as security for the payment of claims.

The Term Loan Facility was issued at a discount of $17.6 million, or 98% of par value, and has a maturity date of April 29, 2022 subject to customary acceleration events and repayment, extension or refinancing. Interest under the Term Loan Facility accrues, at our option, at adjusted LIBOR, subject to statutory reserves and a floor of 1%, plus 5.75% or the alternate base rate plus 4.75%. Interest under the Revolving Credit Facility accrues, at our option, at adjusted LIBOR, subject to statutory reserves and a floor of 0%, plus 2.75% or the alternate base rate plus 1.75%. The Revolving Credit Facility has a maturity date of April 29, 2021, subject to certain customary acceleration events and repayment, extension or refinancing.  The effective interest rate on the Term Loan Facility was 7.64% as of June 30, 2016.

58

Under the terms of the CS Agreement, the maximum Secured Net Leverage Ratio permitted under the CS Agreement, as determined based on 12 month trailing EBITDA, follows:

	Maximum
	Secured Net
Period	Leverage Ratio
Period from April 29, 2016 to June 30, 2017	4.50 to 1.00
Period from July 1, 2017 to June 30, 2018	4.25 to 1.00
Period from July 1, 2018 and thereafter	4.00 to 1.00

As of June 30, 3016, we had a Secured Net Leverage Ratio of 3.67 to 1.0 implying additional borrowing capacity of $181.2 million.

ABL Credit Facility

On April 29, 2016, we entered into an ABL Credit Agreement (the “UBS Agreement,” and together with the CS Agreement, collectively, the “Credit Agreements”), among us, the lenders party thereto and UBS AG, Stamford Branch (“UBS”), as administrative agent and collateral agent. The UBS Agreement provides for a $125 million senior secured asset-based revolving credit facility (the “ABL Credit Facility”). The available borrowings from the ABL Credit Facility will be used for working capital and general corporate purposes.  As of June 30, 2016, we had no borrowings outstanding on the ABL Credit Facility.

The ABL Credit Facility has a maturity date of April 29, 2021, subject to customary acceleration events and repayment, extension or refinancing. Interest under the ABL Credit Facility accrues, at our option, at a base rate or LIBOR, subject to statutory reserves and a floor of 0%, except that all swingline borrowings will accrue interest based on the base rate, plus, an applicable margin determined by the average excess availability under the ABL Credit Facility for the fiscal quarter immediately preceding the date of determination. The applicable margin ranges from 1.75% to 2.25% for LIBOR advances and from 0.75% to 1.25% for base rate advances.

The ABL Credit Facility has a “Covenant Trigger Event” definition that requires us to maintain excess availability under the ABL Credit Facility equal to or greater than the greater of (i) $12.5 million and (ii) 10% of the aggregate commitments under the ABL Credit Facility.  At June 30, 2016, we had excess availability of $122.1 million.  If a Covenant Trigger Event occurs, then we are required to maintain a minimum Consolidated Fixed Charge Ratio of 1.10 to 1.00 until such time that a Covenant Trigger Event is no longer continuing. In addition, if excess availability under the ABL Credit Facility were to fall below the greater of (i) 12.5% of the aggregate commitments under the ABL Credit Facility and (ii) $15.0 million, then a “Cash Dominion Event” would be triggered upon which the lenders could assume control of our cash.

Credit Agreement Covenants

In addition to the specific covenants described above, the Credit Agreements contain customary negative covenants, which limit our ability to incur additional indebtedness, create liens, make investments, make restricted payments, including dividends and distributions, and specified payments on other indebtedness, transfer of assets and  merge or acquire assets, among other things.  They include customary events of default, including payment defaults, material breaches of representations and warranties, covenant defaults, default on other material indebtedness, customary Employee Retirement Income Security Act (“ERISA”)events of default, bankruptcy and insolvency, material judgments, invalidity of liens on collateral, change of control or cessation of business. The Credit Agreements also contain customary affirmative covenants and representations and warranties.

Senior Notes

On April 22, 2016, we issued $400 million aggregate principal amount of 11.625% Senior Notes due 2023, pursuant to the Indenture. The Senior Notes were issued at a discount of $6.9 million, or 1.734%, in a private placement and are senior unsecured obligations guaranteed on a senior basis by certain of our subsidiaries (the “Guarantors”).  The Senior Notes mature on April 15, 2023 and bear interest at a rate of 11.625% per annum, payable semi-annually in arrears on April 15 and October 15 of each year, beginning on October 15, 2016.  Interest on the Senior Notes accrues from the date of original issuance and is calculated on the basis of a 360-day year comprised of twelve 30-day months.  The effective interest rate on the Senior Notes was 12.471% as of June 30, 2016.

The Indenture contains covenants that, among other things, limit us and certain of our subsidiaries to incur or guarantee additional indebtedness, pay dividends or make other restricted payments, make certain investments, create or incur certain liens, sell assets and subsidiary stock, transfer all or substantially all of our assets or enter into merger or consolidation transactions.

On April 22, 2016, in connection with the issuance of the Senior Notes, we entered into a Registration Rights Agreement. The terms of the Registration Rights Agreement require us to (i) file with the Securities and Exchange Commission a registration statement with respect to an offer to exchange the Senior Notes for a new issue of debt securities registered under the Securities Act of 1933, as amended (the “Exchange Offer”), with terms identical to those of the Senior Notes (except for provisions relating to the transfer restrictions and payment of additional interest) and cause the Exchange Offer to be completed within 365 days following the closing

59

of the issuance of the Senior Notes, (ii) keep the Exchange Offer open for at least 30 business days (or longer if required by applicable law) and (iii) in certain circumstances, file a shelf registration statement for the resale of the Senior Notes by some or all of the holders thereof, in lieu of an exchange offer to such holders. If we and our Guarantors fail to satisfy their registration obligations, we will be required to pay additional interest to the holders of Senior Notes the transfer of which remains restricted, reflecting typical market terms.

On and after April 15, 2019, we are entitled, at our option, to redeem all or a portion of the Senior Notes upon not less than 30 nor more than 60 days’ notice, at the following redemption prices, plus accrued and unpaid interest, if any, to the redemption date.  The redemption prices are expressed as a percentage of the principal amount on the redemption date. Holders of record on the relevant record date have the right to receive interest due on the relevant interest payment date. In addition, prior to April 15, 2019, we may redeem some or all of the Senior Notes at a price equal to 100% of the principal amount thereof, plus accrued and unpaid interest, if any, plus a “make whole” premium, as set forth in the Indenture.  We are entitled to redeem up to 35% of the aggregate principal amount of the Senior Notes until April 15, 2019 with the net proceeds from certain equity offerings at the redemption price set forth in the Indenture.

A summary of the redemption dates and prices follows:

	Redemption
Period	Prices
Period from April 15, 2019 to April 14, 2020		108.719	%
Period from April 15, 2020 to April 14, 2021		105.813	%
Period from April 15, 2021 to April 14, 2022		102.906	%
Period from April 15, 2022 to April 15, 2023		100.000	%

Debt Issuance Costs and Discounts

A summary of debt issuance costs and discounts follows (in thousands):

	June 30,			December 31,
	2016			2015
Debt issuance costs	$	28,003		-
Debt discounts		24,536		-
Total debt issuance costs and discounts at origination		52,539			-
Less:  Amortization of debt issuance costs and discounts		(1,191	)	-
Total unamortized debt issuance costs and discounts	$	51,348		$	-

Prior to the Spin-off Transaction, we had no capitalized costs for debt issuance, discounts or premiums.

Capital Lease Obligations and Other Debt

Debt from capital lease obligations primarily relates to the deferred financing obligation associated with our new corporate office in Brentwood, Tennessee.  As of June 30, 2016, this capital lease obligation was $18.0 million.  The remainder of our capital lease obligations primarily relate to property and equipment at our hospitals and corporate office.  Other miscellaneous long-term debt consists of physician loans and miscellaneous notes payable to banks.  See Note 17 – Commitments and Contingencies in our accompanying consolidated and combined financial statements for additional information on the corporate office lease.

Debt Maturities

A summary of our debt maturities for the next five years and thereafter follows (in thousands):

	June 30,
	2016
Remainder of 2016	$	11,087
2017		10,268
2018		10,411
2019		10,047
2020		10,145
Thereafter		1,252,320
Total debt, excluding debt issuance costs and discounts	$	1,304,278

60

Contractual Obligations

In April 2016, we entered into two credit agreements and issued senior notes in connection with the Spin-off Transaction.  The terms and maturities of the related debt agreements are fully described in the Capital Resources section above and in Note 6 – Long-Term Debt in our accompanying consolidated and combined financial statements.

We expect to complete the final phase of construction of our new corporate office in the third quarter of 2016.  Upon completion, we will enter into a consolidated lease agreement associated with this building that replaces the three temporary agreements that each covered a phase of the overall construction project for this building.  We have incurred a total of $19.3 million of costs related to the overall construction project, of which $4.9 million of these costs were incurred during the six months ended June 30, 2016 and have been added to our financing obligation included in long-term debt on the consolidated and combined balance sheet as of June 30, 2016. There have been no other material changes to our contractual obligations during the six months ended June 30, 2016.

Off-Balance Sheet Arrangements

As of June 30, 2016, we had $3.1 million of letters of credit outstanding that were primarily related to the self-insured retention level of professional and general liability insurance and workers’ compensation insurance as security for the payment of claims.

Critical Accounting Policies

The preparation of financial statements in accordance with U.S. GAAP requires us to make estimates and judgments that affect the reported amounts and related disclosures. Actual results may differ from these estimates under different assumptions or conditions.

Critical accounting policies are defined as those that are reflective of significant judgments and uncertainties, and potentially result in materially different results under different assumptions and conditions.  The following discussion of our critical accounting estimates and judgments is not intended to be a comprehensive list of all our accounting policies that require estimates, but is limited to those that involve a higher degree of judgment and complexity.  We believe the current assumptions and other considerations used to estimate amounts in our consolidated and combined financial statements are appropriate. If actual results differ from these assumptions and considerations, the resulting impact could have a material adverse effect on our consolidated and combined results of operations and financial condition.

Third-Party Reimbursements

The net realizable amount of patient service revenues due from third-party payors is subject to complexities and interpretations of payor-specific contractual agreements and governmental regulations that are frequently changing.  The Medicare and Medicaid programs, which are the source for the majority of our operating revenues, are highly complex programs to administer and subject to interpretation of federal and state-specific reimbursement rates, new legislation and final cost report settlements.  Contractual allowances, or differences in standard billing rates and the payments derived from contractual terms with governmental and non-governmental third–party payors, are recorded based on management’s best estimates in the period in which services are performed and a payment methodology is established with the patient.  Recorded estimates for past contractual allowances are subject to change, in large part, due to ongoing contract negotiations and regulation changes, which is typical in the healthcare industry.  Revisions to estimates are recorded in the periods in which they become known and may be subject to further revisions. All hospital contractual allowance calculations are reviewed on a monthly basis by management to ensure reasonableness and accuracy.

We use a third-party automated contractual allowance system to calculate our contractual allowances.  The contractual allowances are calculated based on historical paid claims data by payor classification, which is uploaded into the system each month.  The key assumptions used in the system to calculate the current period estimated contractual allowances are the estimated contractual reimbursement percentage, which is also based on payor classification, and the historical paid claims data. The contractual allowance system does maintain patient account level information as it estimates an average contractual allowance by payor classification. Due to the complexities involved in these estimates, actual reimbursement payments we receive from third-party payors could be different from the amounts we estimate and record. If the actual contractual reimbursement percentage under government programs and managed care contracts differed by 1% from our estimated reimbursement percentage, net income (loss) for the six months ended June 30, 2016 would have changed by approximately $13.1 million, and net accounts receivable at June 30, 2016 would have changed by approximately $18.3 million.

Cost report settlements under reimbursement programs with Medicare, Medicaid and other managed care plans are estimated and recorded in the period the related services are performed and are adjusted in future periods, as needed, until the final cost report settlements are determined.These previous program reimbursements and final cost report settlements are included in due from and due to third-party payors in the consolidated and combined balance sheets, respectively.  Contractual allowance adjustments related to final cost report settlements and previous program reimbursement estimates unfavorably impacted net operating revenues by $2.5 million and $11.2 million for the three months ended June 30, 2016 and 2015, respectively, and $4.4 million and $11.7 million for the six months ended June 30, 2016 and 2015, respectively.  Contractual adjustments in the three and six months ended June 30, 2015

61

periods included the unfavorable impact of an $11.1 million Illinois cost report settlement which was recorded in 2014 and reversed in the second quarter of 2015 due to contract negotiations that were finalized in that quarter.

Currently, several states utilize supplemental payment programs, including disproportionate share programs, for the purpose of providing reimbursement to providers to offset a portion of the cost of providing care to Medicaid and indigent patients. These programs are designed with input from CMS and funded with a combination of federal and state resources, including, in certain instances, taxes or fees levied on the providers. Similar programs are also currently being considered by other states.  These amounts are included in due from and due to third-party payors in the consolidated and combined balance sheets, respectively.  Previously, amounts due from third parties related to these programs were included in patient accounts receivable, and the provider taxes owed were included in other current liabilities in the consolidated and combined balance sheets.  See the Reclassifications accounting policy in Note 2 – Basis of Presentation and Significant Accounting Policies in the accompanying consolidated and combined financial statements for additional information on reclassification adjustments as of June 30, 2016.

The following table summarizes the components of amounts due from and due to third-party payors, as presented in the consolidated and combined balance sheets (in thousands):

	June 30,		December 31,
	2016		2015
Amounts due from third-party payors:
Previous program reimbursements and final cost report settlements	$	29,438	$	33,732
State supplemental payment programs		87,327		77,074
Total amounts due from third-party payors	$	116,765	$	110,806
Amounts due to third-party payors:
Previous program reimbursements and final cost report settlements	$	31,961	$	21,015
State supplemental payment programs		9,253		9,088
Total amounts due to third party payors	$	41,214	$	30,103

After a program is approved and fully authorized by the appropriate state legislative or governmental agency, we recognize revenue and related expenses based on the terms of the program in the period in which amounts are estimable and revenue collection is reasonably assured.  The revenue earned under these programs is included in net operating revenues, and the provider taxes associated with the programs are included in other operating expenses in the consolidated and combined statements of income.

The table below summarizes the impact on income (loss) from operations related to these state supplemental payment programs (in thousands):

	Three Months Ended June 30,				Six Months Ended June 30,
	2016		2015		2016		2015
State supplemental payment programs:
Revenues	$	55,105	$	49,838	$	107,320	$	105,217
Expenses		18,604		19,324		38,030		38,493
Total operating income from state supplemental payment programs	$	36,501	$	30,514	$	69,290	$	66,724

Allowance for Doubtful Accounts

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

We estimate the allowance for doubtful accounts by reserving a percentage of all self-pay receivables without regard to aging category, based on collection history, adjusted for expected recoveries and any anticipated changes in trends. Our ability to estimate the allowance for doubtful accounts is not impacted by the aging of accounts receivable as we believe that substantially all of the risk exists at the point in time such accounts are identified as self-pay. For all other non-self-pay payor categories, we reserve an estimated amount based on historical collection rates for the uncontractualized portion of all accounts aging over 365 days from the date of discharge. These amounts represent an immaterial percentage of our out accounts receivable. We believe that we collect substantially all of our third-party insured receivables, which include receivables from governmental agencies.

62

Collections are impacted by the economic ability of patients to pay and the effectiveness of CHS’ collection efforts, including their current policies on collections, and our ability to further attempt collection.  Billings and collections are outsourced to CHS under the transition services agreements that were put in place with the Spin-off Transaction.  See Note 16 – Related Party Transactions in our accompanying consolidated and combined financial statements for additional information on these agreements.  Significant changes in payor mix, business office operations, economic conditions or trends in federal and state governmental healthcare coverage, among others, could affect our collection of accounts receivable and are considered in our estimates of accounts receivable collectability. If the actual collection percentage differed by 1% from our estimated collection percentage as a result of a change in expected recoveries, net income (loss) for the six months ended June 30, 2016 would have changed by approximately $4.5 million, and net accounts receivable at June 30, 2016 would have changed by approximately $6.3 million. We also continually review our overall allowance adequacy by monitoring historical cash collections as a percentage of trailing net operating revenues after the provision for bad debts, as well as by analyzing current period net operating revenues and admissions by payor classification, days revenue outstanding, the composition of self-pay receivables between pure self-pay patients and the patient responsibility portion of third-party insured receivables and the impact of recent acquisitions or dispositions.

Our policy is to write off gross accounts receivable if the balance is under $10.00 or when such amounts are placed with outside collection agencies. We believe this policy accurately reflects our ongoing collection efforts and is consistent with industry practices. We had approximately $428.4 million and $436.9 million of past due patient account balances at June 30, 2016 and December 31, 2015, respectively, being pursued by various outside collection agencies. We expect to collect less than 3%, net of estimated collection fees, of the amounts being pursued by outside collection agencies. As these amounts have been written-off, they are not included in our gross accounts receivable or our allowance for doubtful accounts. Collections on amounts previously written off are recognized as a reduction to bad debt expense when received. However, we take into consideration estimated collections of these future amounts written off in evaluating the reasonableness of our allowance for doubtful accounts.

Days revenue outstanding, excluding amounts due from and due to third-party payors, was 68 days and 64 days as of June 30, 2016 and December 31, 2015, respectively. Additionally, a portion of the estimate for the allowance for doubtful accounts includes an adjustment for expected recoveries on self-pay accounts receivable that have aged over 365 days. This estimate of future recoveries represented approximately 6 days as of June 30, 2016.

A summary of the components of accounts receivable before contractual allowances, discounts and allowance for doubtful accounts follows (dollars in thousands):

	June 30, 2016					December 31, 2015
	Amount		% of Total			Amount		% of Total
Third-parties	$	1,831,940		74.5	%	$	1,688,138		72.6	%
Self-pay		626,662		25.5	%		638,694		27.4	%
Total accounts receivable, gross	$	2,458,602		100.0	%	$	2,326,832		100.0	%

For self-pay receivables, the combined total for contractual allowances, discounts and the allowance for doubtful accounts that reduces these receivables to their net carrying amount as recorded in the consolidated and combined balance sheets was $537.0 million and $535.3 million as of June 30, 2016 and December 31, 2015, respectively.  If the self-pay receivables that have been written off, but where collections are still being pursued by outside collection agencies, were included in both the gross self-pay receivables and the allowances specified above, the percentage of combined allowances to total self-pay receivables would have been 91.5% and 90.4% at June 30, 2016 and December 31, 2015, respectively.

Goodwill

Our hospital operations and hospital management advisory and consulting services operations meet the criteria to be classified as reporting units for goodwill. Goodwill related to our hospital operations reporting unit was $303.5 million and $508.4 million as of June 30, 2016 and December 31, 2015, respectively. Goodwill related to our hospital management advisory and consulting services reporting unit was $33.3 million at both June 30, 2016 and December 31, 2015.

We reclassified assets and liabilities at certain of our hospitals as held for sale on our consolidated and combined balance sheet at June 30, 2016. As a result, we evaluated the estimated relative fair value of the hospitals held for sale in relation to the overall fair value of the hospital reporting unit as of September 30, 2015, the date of our last goodwill impairment analysis, and recognized goodwill impairment of $5.0 million. See Note 3 – Hospitals Held for Sale and Impairment of Long-Lived Assets in our accompanying consolidated and combined financial statements for additional information related to the hospitals held for sale.

In addition, we identified certain indicators of impairment requiring an interim goodwill impairment evaluation. Those indicators were primarily our market capitalization as compared to the carrying value of equity and a decrease in the estimated future earnings of the Company. We performed a calculation of fair value in step one of the impairment test, which indicated that the carrying value of the hospital operations reporting unit exceeded its fair value. An initial step two calculation has been performed to determine the implied value of goodwill in a hypothetical purchase price allocation. We recorded a non-cash impairment charge of

63

$200 million to goodwill, in addition to the $5.0 million discussed above, based on our current best estimate of fair value and resulting implied goodwill related to the hospital reporting unit. This amount represents an estimate of the implied goodwill in the step two evaluation until that process can be finalized, which we expect to complete during the third quarter of 2016. Any increases or decreases in the fair value and resulting implied value of goodwill will be recorded when the evaluation is complete, and such changes could be material. Factors that could impact the final determination of fair value include a further decline in market capitalization, changes in the estimated fair values of the individual hospital assets and liabilities or changes in projected future earnings and net cash flows.

Impairment of Long-Lived Assets

Whenever an event occurs or changes in circumstances indicate that the carrying values of certain long-lived assets may be impaired, we project the undiscounted cash flows expected to be generated by these assets. If the projections indicate that the carrying values are not expected to be recovered, such amounts are reduced to their estimated fair value based on a quoted market price, if available, or an estimated value based on valuation techniques available in the circumstances.

We recorded $45.4 million of impairment charges related to property, equipment, and capitalized software in the consolidated and combined statements of income for the three and six months ended June 30, 2016.  The carrying values of long-lived assets, including those classified as held for sale, are reported net of these impairment charges in the consolidated and combined balance sheet as of June 30, 2016.  See Note 3 – Hospitals Held for Sale and Impairment of Long-Lived Assets in our accompanying consolidated and combined financial statements for additional information on the divestitures.

Insurance Reserves for Professional and General Liability

As part of the business of owning and operating hospitals, we are subject to legal actions alleging liability on its part. To mitigate a portion of this risk, we maintain insurance exceeding a self-insured retention level for these types of claims. Our self-insurance reserves reflect the current estimate of all outstanding losses, including incurred but not reported losses, based upon actuarial calculations as of period end. The loss estimates included in the actuarial calculations may change in the future based upon updated facts and circumstances. Our insurance expense includes the actuarially determined estimate of losses for the current year, including claims incurred but not reported, the change in the estimate of losses for prior years based upon actual claims development experience as compared to prior actuarial projections, the insurance premiums for losses in excess of our self-insured retention levels, the administrative costs of the insurance programs, and interest expense related to the discounted portion of the liability. Our reserves for professional and general liability claims are based upon semi-annual actuarial calculations, taking into consideration historical claims data, demographic considerations, severity factors and other actuarial assumptions, which are discounted to present value. The reserves for self-insured claims have been discounted based on our risk-free interest rate that corresponds to the period when the self-insured claims are incurred and projected to be paid.

A portion of our reserves for professional and general liability claims relates to incurred but not report claims prior to the Spin-off Transaction.  We recorded an offsetting receivable from CHS related to these claims, which are fully indemnified.

Income Taxes

The breadth of our operations and the complexity of tax regulations require assessments of uncertainties and judgments in estimating the income taxes that we will ultimately pay. The final income taxes paid are dependent upon many factors, including negotiations with taxing authorities in various jurisdictions, outcomes of tax litigation and resolution of disputes arising from federal and state tax audits in the normal course of business.

The provision for income taxes is determined using the asset and liability approach of accounting for income taxes. Under this approach, deferred taxes represent the future tax consequences expected to occur when the reported amounts of assets and liabilities are recovered or paid. The provision for income taxes represents income taxes paid or payable for the current year plus the change in deferred income taxes during the year. Deferred income taxes result from differences between the financial and tax basis of our assets and liabilities and are adjusted for changes in tax rates and tax laws when changes are enacted.

Valuation allowances are recorded to reduce deferred income tax assets when it is more likely than not that a tax benefit will not be realized. We record a valuation allowance to reduce our deferred tax assets to the amount that is more likely than not to be realized.  In the ordinary course of business there is the inherent uncertainty in quantifying our income tax positions.  We assess our income tax positions and record tax benefits for all tax years subject to examination based upon management’s evaluation of the facts, circumstances, and information available at the reporting date.  For those tax positions where it is more likely than not that a tax benefit will be sustained, we have recorded the largest amount of tax benefit with a greater than 50% likelihood of being realized upon ultimate settlement with a taxing authority that has full knowledge of all relevant information.  For those income tax positions where it is not more likely than not that a tax benefit will be sustained, no tax benefit has been recognized in the financial statements.  We record interest and penalties (net of any applicable tax benefit) related to income taxes as a component of the provision for income taxes in our consolidated and combined statements of income.

64

See Note 10 – Income Taxes in our accompanying consolidated and combined financial statements for additional information on the use of the separate return method of accounting for income taxes that we used during the carve-out period and the impact of the consummation of the Spin-off Transaction on income taxes.

Accounting Standards Not Yet Adopted

In May 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2014-09, which outlines a single comprehensive model for recognizing revenue and supersedes most existing revenue recognition guidance, including guidance specific to the healthcare industry. This ASU provides companies the option of applying a full or modified retrospective approach upon adoption. This ASU is effective for fiscal years beginning after December 15, 2017 with early adoption permitted for annual periods beginning after December 15, 2016. We expect to adopt this ASU on January 1, 2018 and are currently evaluating our plan for adoption and the impact on our revenue recognition policies, procedures and control framework and the resulting impact on our consolidated and combined results of operations, financial position and cash flows.

In February 2016, the FASB issued ASU 2016-02, which amends the accounting for leases, requiring lessees to recognize most leases on their balance sheet with a right-of-use asset and a lease liability. Leases will be classified as either finance or operating leases, which will impact the expense recognition of such leases over the lease term. The ASU also modifies the lease classification criteria for lessors and eliminates some of the real estate leasing guidance previously applied for certain leasing transactions. This ASU is effective for fiscal years beginning after December 15, 2018, with early adoption permitted. We expect to adopt this ASU on January 1, 2019.  Because of the number of leases we utilize to support our operations, the adoption of this ASU is expected to have a significant impact on our consolidated and combined results of operations, financial position and cash flows.  We are currently evaluating the quantitative and qualitative factors that will impact us as part of the adoption of this ASU, as well as any changes to our leasing strategy because of the changes to the accounting and recognition of leases.

In March 2016, the FASB issued ASU 2016-09, which was issued to simplify some of the accounting guidance for share-based compensation. Among the areas impacted by the amendments in this ASU is the accounting for income taxes related to share-based payments, accounting for forfeitures, classification of awards as equity or liabilities, and classification on the statement of cash flows. This ASU is effective for fiscal years beginning after December 15, 2016, with early adoption permitted. We expect to adopt this ASU on January 1, 2017. Management is evaluating the impact that the adoption of this ASU will have on our consolidated and combined  results of operations, financial position and cash flows.

Item 3.  Quantitative and Qualitative Disclosures about Market Risk

We are exposed to market risk associated with changes in interest rates on our variable rate long-term debt.  In connection with the Spin-off Transaction, on April 29, 2016, we entered into two credit agreements, the Senior Credit Facility and the ABL Credit Facility, that subject us to variable interest rates.  As of June 30, 2016, we had outstanding principal amount of debt under these credit agreements totaling $877.8 million, excluding unamortized debt issuance costs and discounts of $51.3 million.  Recognizing the 1% floor on our Term Loan Facility and excluding amortization, if the variable rates on this debt were 100 basis points higher than the LIBOR rates applicable to selected borrowings during the three month and one year periods following the Spin-off Transaction date, our net income would have decreased by $1.4 million, or $0.05 per diluted share, and $5.6 million, or $0.20 per diluted share, for the respective periods. We do not currently have any derivative or hedging arrangements, or other known exposures, to changes in interest rates.

Item 4.  Controls and Procedures

Our Chief Executive Officer and Chief Financial Officer, with the participation of other members of management, have evaluated the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e)) under the Securities and Exchange Act of 1934, as amended, as of the end of the period covered by this quarterly report on Form 10-Q.  Based on such evaluations, our Chief Executive Officer and Chief Financial Officer concluded that, as of such date, our disclosure controls and procedures were effective (at the reasonable assurance level) to ensure that the information required to be included in this report has been recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms and to ensure that the information required to be included in this report was accumulated and communicated to management, including our Chief Executive Officer and Chief Financial Officer, to allow timely decisions regarding required disclosure.

There have been no changes in our internal control over financial reporting during the three months ended June 30, 2016 that have materially affected or are reasonably likely to materially affect our internal controls over financial reporting.

65

PART II - OTHER INFORMATION

Item 1.  Legal Proceedings

We are subject to lawsuits and other legal matters arising in the ordinary course of their business, including claims of damages for personal injuries, medical malpractice, breach of hospital management contracts, breach of other contracts, wrongful restriction of or interference with physicians’ staffing privileges and other employment-related claims.  In certain of these claims, plaintiffs request payment for damages, including punitive damages that may not be covered by our insurance policies.

Healthcare facilities are also subject to the regulation and oversight of various state and federal governmental agencies. The healthcare industry has seen numerous ongoing investigations related to compliance and billing practices and hospitals, in particular, continue to be the subject of governmental fraud and abuse programs and a primary enforcement target for the Department of Health and Human Services Office of Inspector General (“OIG”) and the Department of Justice (“DOJ”). From time to time, we detect issues of non-compliance with federal healthcare laws pertaining to claims submission and reimbursement practices or financial relationships with physicians.  We avail ourselves of various mechanisms to address potential overpayments arising out of these issues, including repayment of claims, rebilling of claims, and participation in voluntary disclosure protocols offered by CMS and the OIG. Participating in voluntary repayments and voluntary disclosure protocols can have the potential for significant settlement obligations or even enforcement action.  Additionally, under the federal False Claims Act, private parties have the right to bring qui tam, or “whistleblower,” suits against healthcare facilities that submit false claims for payments to, or improperly retain overpayments from, governmental payors.  Some states have adopted similar state whistleblower and false claims provisions. Qui tam or “whistleblower” actions initiated under the civil False Claims Act may be pending but placed under seal by the court to comply with the False Claims Act’s requirements for filing such suits. As a result, they could be proceeding without our knowledge. Certain of our healthcare facilities have received, and from time to time, other healthcare facilities may receive, inquiries or subpoenas from fiscal intermediaries, and federal and state agencies.  Any proceedings against us may involve potentially substantial amounts as well as the possibility of civil, criminal, or administrative fines, penalties, or other sanctions, which could be material. Settlements of suits involving Medicare and Medicaid issues routinely require both monetary payments as well as corporate integrity agreements. Depending on how the underlying conduct is interpreted by the inquiring or investigating federal or state agency, the resolution could have a material adverse effect on our financial position, results of operations and liquidity.

In connection with the Spin-Off Transaction, CHS agreed to indemnify us for certain liabilities relating to outcomes or events occurring prior to the closing of the Spin-off, including (i) certain claims and proceedings known to be outstanding on or prior to the closing date of the Spin-off Transaction and (ii) certain claims, proceedings and investigations by governmental authorities or private plaintiffs related to activities occurring at or related to our healthcare facilities prior to the closing date of the Spin-off Transaction, but only to the extent, in the case of clause (ii), that such claims are covered by insurance policies maintained by CHS, including professional and general liability and employment practices insurance.  Additionally, CHS will continue to be responsible for certain Health Management Associates, Inc. legal matters covered by its contingent value rights agreement that relate to the portion of CHS’ business now held by us. Notwithstanding the foregoing, CHS will not indemnify us in respect of any claims or proceedings arising out of or related to the business operations of QHR at any time or our compliance with the Corporate Integrity Agreement (“CIA”) with the OIG.  Subsequent to the Spin-off Transaction, the OIG entered into an “Assumption of CIA Liability Letter” with us reiterating the applicability of the CIA to certain of our hospitals, although the OIG declined to enter into a separate agreement with us. See below for additional information on the terms of the CIA.

We do not control and cannot predict with certainty the progress or final outcome of discussions with government agencies, investigations and legal proceedings against us.  Therefore, the final amounts paid to resolve such matters, claims and obligations could be material and could materially differ from amounts currently recorded, if any.  Any such changes in our estimates or any adverse judgments could materially adversely impact our future results of operations and cash flows.

We have included a discussion of legal proceedings below, some, or all, of which may not be required to be disclosed in this Part II, Item 1 under SEC rules due to the nature of our business; however, we believe that the discussion of these open legal matters may provide useful information to security holders or other readers of this Quarterly Report on Form 10-Q.  The proceedings discussed below do not include claims and lawsuits covered by professional and general liability or employment practices insurance and risk retention programs, none of which claims or lawsuits would in any event be required to be disclosed in this Part II, Item 1 under SEC rules. The legal matters referenced below are also discussed in Note 17 – Commitments and Contingencies to the accompanying consolidated and combined financial statements.

Commercial Litigation and Other Lawsuits

· Quorum Health Resources, LLC v. Hancock Medical Center. Arbitration claim and counterclaim are currently pending for breach of contract and negligence arising out of a Management Services Agreement between QHR and the hospital. Arbitration in this case began on April 11, 2016 and concluded on April 22, 2016. On July 28, 2016, the arbitrator returned an Interim Award in favor of Hancock Medical Center on various claims at issue in the arbitration. The net total award was $9.4 million payable by QHR to Hancock Medical Center. We accrued for this Interim Award in other long-

66

term liabilities on our consolidated and combined balance sheet as of June 30, 2016. Both parties filed a motion for reconsideration of the Interim Award.  In addition, the parties may seek attorney’s fees and costs prior to the arbitrator issuing a Final Award. The award is subject to a self-insured retention and excess insurance arrangements. 

Government Investigations

For all legal matters below, we cannot at this time assess what the outcome may be and is further unable to determine any estimate of loss or range of loss. Because the matters below are at a preliminary stage and other factors, there are not sufficient facts available to make these assessments.

· Tooele, Utah – Physician Compensation. On May 5, 2016, our hospital in Tooele, Utah received a Civil Investigative Demand (“CID”) from the Office of the United States Attorney in Salt Lake City, Utah concerning allegations that the hospital and clinic corporation submitted or caused to be submitted false claims to the government for services referred by physicians with whom the hospital and clinic had inappropriate financial relationships which allegedly violated federal law. The CID requests records and documentation concerning physician compensation. We are fully cooperating with this investigation.

· Blue Island, Illinois – Patient Status. On October 9, 2015, our hospital in Blue Island, Illinois received a CID from the Office of the United States Attorney in Chicago, Illinois concerning allegations of upcoding observation and other outpatient services and improperly falsifying inpatient admission orders. The CID requests medical records and documentation concerning status change, from observation to inpatient. We are fully cooperating with this investigation. 

Terms of the Corporate Integrity Agreement

As of August 4, 2014, CHS was bound by the terms of a Corporate Integrity Agreement with the OIG arising from a civil settlement with the U.S. Department of Justice, other federal agencies and identified relators that concluded previously announced investigations and litigation related to short stay admissions through emergency departments at certain of their affiliated hospitals. The OIG has required QHC to be bound by the same terms of the CHS CIA as of the date of the Spin-off Transaction for the remainder of the 5-year compliance term required of CHS.

The compliance measures and reporting and auditing requirements contained in the CIA include:

· continuing the duties and activities of the Corporate Compliance Officer, Corporate Compliance Work Group, and Facility Compliance Officers and committees;

· maintaining a written Code of Conduct, which sets forth our commitment to full compliance with all statutes, regulations, and guidelines applicable to federal healthcare programs;

· maintaining written policies and procedures addressing the operation of our Compliance Program, including adherence to medical necessity and admissions standards for inpatient hospital stays;

· continuing general compliance training;

· providing specific training for appropriate personnel on billing, case management and clinical documentation;

· engaging an independent third party to perform an annual review of our compliance with the CIA;

· continuing the Confidential Disclosure Program and hotline to enable employees or others to disclose issues or questions regarding possible inappropriate policies or behavior;

· continuing the screening program to ensure that we do not hire or engage employees or contractors who are ineligible persons for federal healthcare programs;

· reporting any material deficiency which resulted in an overpayment to us by a federal healthcare program; and

· submitting annual reports to the OIG which describe in detail the operations of the corporate Compliance Program.

Material, uncorrected violations of the CIA could lead to the suspension or disbarment from participation in Medicare, Medicaid and other federal and state healthcare programs and repayment obligations. In addition, QHC is subject to possible civil penalties for failure to substantially comply with the terms of the CIA, including stipulated penalties ranging from $1,000 to $2,500 per day. QHC is also subject to a stipulated penalty of $50,000 for each false certification made by QHC or on QHC’s behalf in connection with reports required under the CIA. The CIA increases the amount of information QHC must provide to the federal government regarding our healthcare practices and our compliance with federal regulations.

67

Item 1A.  Risk Factors

The following risk factors, as disclosed below, are risk factors that are in addition to those disclosed in our Registration Statement on Form 10, as amended, that was declared effective on April 4, 2016.

We cannot provide any assurances that our corporate development activities will achieve their business goals or the cost and service synergies we expect.

Our business strategy includes engaging in and seeking strategic acquisition and divestiture opportunities.    We cannot provide any assurances that these transactions will achieve our business goals or the cost and service synergies we expect.  With respect to acquisitions, we may not be able to identify suitable candidates, consummate transactions on terms that are favorable to us, or achieve expected returns, synergies or other benefits in a timely manner or at all.  Companies or operations acquired or joint ventures created may not be profitable or may not achieve the profitability that justifies the investments made. With respect to divestitures of assets or businesses, we may encounter difficulties in finding acquirers or alternative exit strategies on terms that are favorable to us, which could delay the accomplishment of our strategic objectives.  In addition, our divestiture activities have required, and may require in the future, for us to recognize impairment charges or to agree to contractual restrictions that limit our ability to reenter the applicable market, which may be material.

Our corporate development activities may present financial and operational risks, including diversion of management attention from existing core businesses and the integration or separation of personnel and financial and other systems. Future acquisitions could also result in potentially dilutive issuances of equity securities, the incurrence of additional debt, contingent liabilities and amortization expenses related to certain intangible assets, and increased operating expenses, any of which could adversely affect our results of operations and financial condition.

We are subject to a variety of operational, legal and financial risks associated with outsourcing functions to third parties.

We have outsourced to CHS, through various transition services agreements, certain services including, among others, services related to information technology, payroll processing and other human resource functions, patient eligibility screening, receivables, billing and collections and other revenue management services and support.  We take steps to monitor and regulate the performance of any parties in which we delegate services; however, the transition services agreements with CHS were executed in connection with the Spin-off Transaction, based upon certain business and financial assumptions.  As a newly independent company, we may re-analyze and reassess certain of the transition services agreements. To the extent the current transition services agreements do not conform to our analysis and we determine that any of the transition services agreements are not a benefit to us in their current form, our ability to renegotiate, rescind or reform any or all of the agreements may be limited or non-existent, and our business could be materially adversely affected.

Arrangements with third-party service providers may make our operations vulnerable if vendors fail to satisfy their obligations to us as a result of their performance, changes in their own operations, financial condition, or other matters outside of our control.  We may also face legal, financial or reputational harm for the actions or omissions of such providers, and we may not have effective recourse against the providers for those harms. Effective management, development and implementation of our outsourcing strategies are important to our business and strategy. If there are delays or difficulties in enhancing business processes or our third party providers do not perform as anticipated, we may not fully realize on a timely basis the anticipated economic and other benefits of the outsourcing projects or other relationships we enter into with key vendors, which could result in substantial costs, divert management’s attention from other strategic activities, negatively affect employee morale or create other operational or financial problems for us. Terminating or transitioning arrangements with key vendors could result in additional costs and a risk of operational delays, potential errors and possible control issues as a result of the termination or during the transition phase, any of which could adversely affect our results of operations and financial condition.

Item 6.  Exhibits

The information required by this Item is set forth in the Index to Exhibits that follows the signatures page of this quarterly report on Form 10-Q.

68

SIGNATURES

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

QUORUM HEALTH CORPORATION (Registrant)
By:	/s/ Thomas D. Miller
	Thomas D. Miller
	President, Chief Executive Officer
	and Director
	(principal executive officer)
By:	/s/ Michael J. Culotta
	Michael J. Culotta
	Executive Vice President and
	Chief Financial Officer
	(principal financial officer and principal accounting officer)

Date: August 10, 2016

69

Index to Exhibits

No.	Description
2.1	Separation and Distribution Agreement, dated as of April 29, 2016, by and between Community Health Systems, Inc. and Quorum Health Corporation (incorporated by reference to Exhibit 2.1 to the Company’s Current Report on Form 8-K filed with the SEC on May 2, 2016) (File No. 001-37550).
2.2	Tax Matters Agreement, dated as of April 29, 2016, by and between Community Health Systems, Inc. and Quorum Health Corporation (incorporated by reference to Exhibit 2.2 to the Company’s Current Report on Form 8-K filed with the SEC on May 2, 2016) (File No. 001-37550).
2.3	Employee Matters Agreement, dated as of April 29, 2016, by and between Community Health Systems, Inc. and Quorum Health Corporation (incorporated by reference to Exhibit 2.3 to the Company’s Current Report on Form 8-K filed with the SEC on May 2, 2016) (File No. 001-37550).
2.4	Computer and Data Processing Transition Services Agreement, dated as of April 29, 2016, by and between CHSPSC, LLC and QHCCS, LLC (incorporated by reference to Exhibit 2.4 to the Company’s Current Report on Form 8-K filed with the SEC on May 2, 2016) (File No. 001-37550).
2.5	Receivables Collection Agreement (PASI), dated as of April 29, 2016, by and between Professional Account Services, Inc. and QHCCS, LLC (incorporated by reference to Exhibit 2.5 to the Company’s Current Report on Form 8-K filed with the SEC on May 2, 2016) (File No. 001-37550).
2.6	Billing and Collection Agreement (PPSI), dated as of April 29, 2016, by and between Physician Practice Support, LLC and QHCCS, LLC (incorporated by reference to Exhibit 2.6 to the Company’s Current Report on Form 8-K filed with the SEC on May 2, 2016) (File No. 001-37550).
2.7	Eligibility Screening Services Agreement, dated as of April 29, 2016, by and between Eligibility Screening Services, LLC and QHCCS, LLC (incorporated by reference to Exhibit 2.7 to the Company’s Current Report on Form 8-K filed with the SEC on May 2, 2016) (File No. 001-37550).
2.8	Employee Service Center/HRIS Transition Services Agreement, dated as of April 29, 2016, by and between CHSPSC, LLC and QHCCS, LLC (incorporated by reference to Exhibit 2.8 to the Company’s Current Report on Form 8-K filed with the SEC on May 2, 2016) (File No. 001-37550).
2.9	Shared Services Center Transition Services Agreement, dated as of April 29, 2016, by and between Revenue Cycle Service Center, LLC and QHCCS, LLC (incorporated by reference to Exhibit 2.9 to the Company’s Current Report on Form 8-K filed with the SEC on May 2, 2016) (File No. 001-37550).
2.10	Supplemental Medicaid Program Services Agreement, dated as of April 29, 2016, by and between CHSPSC, LLC and QHCCS, LLC (incorporated by reference to Exhibit 2.10 to the Company’s Current Report on Form 8-K filed with the SEC on May 2, 2016) (File No. 001-37550).
2.11	Short-Term Transition Services Agreement, dated as of April 29, 2016, by and between CHSPSC, LLC and QHCCS, LLC (incorporated by reference to Exhibit 2.11 to the Company’s Current Report on Form 8-K filed with the SEC on May 2, 2016) (File No. 001-37550).
3.1	Amended and Restated Certificate of Incorporation of Quorum Health Corporation (incorporated by reference to Exhibit 3.1 to the Company’s Current Report on Form 8-K filed with the SEC on May 2, 2016) (File No. 001-37550).
3.2	Amended and Restated By-Laws of Quorum Health Corporation (incorporated by reference to Exhibit 3.2 to the Company’s Current Report on Form 8-K filed with the SEC on May 2, 2016) (File No. 001-37550).
4.1	Indenture, dated as of April 22, 2016, by and between Quorum Health Corporation and Regions Bank, as trustee (incorporated by reference to Exhibit 4.1 to the Company’s Current Report on Form 8-K filed with the SEC on April 22, 2016) (File No. 001-37550).
4.2	Supplemental Indenture, dated as of April 29, 2016, by and among Quorum Health Corporation, the guarantors party thereto and Regions Bank, as trustee (incorporated by reference to Exhibit 4.1 to the Company’s Current Report on Form 8-K filed with the SEC on May 2, 2016) (File No. 001-37550).

70

No.	Description
4.3	Registration Rights Agreement, dated as of April 22, 2016, by and between Quorum Health Corporation and Credit Suisse Securities (USA) LLC, as representative of the initial purchasers (incorporated by reference to Exhibit 4.2 to the Company’s Current Report on Form 8-K filed with the SEC on April 22, 2016) (File No. 001-37550).
4.4	Registration Rights Agreement Joinder, dated as of April 29, 2016, by and between the guarantors party thereto and Credit Suisse Securities (USA) LLC, as representative of the initial purchasers (incorporated by reference to Exhibit 4.2 to the Company’s Current Report on Form 8-K filed with the SEC on May 2, 2016) (File No. 001-37550).
4.5	Form of 11.625% Senior Notes due 2023 (incorporated by reference to Exhibit 4.3 to the Company’s Current Report on Form 8-K filed with the SEC on April 22, 2016) (File No. 001-37550).
10.1	Credit Agreement, dated as of April 29, 2016, by and among Quorum Health Corporation, the lenders party thereto and Credit Suisse AG, as Administrative Agent and Collateral Agent (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed with the SEC on May 2, 2016) (File No. 001-37550).
10.2	ABL Credit Agreement, dated as of April 29, 2016, by and among Quorum Health Corporation, the lenders party thereto and UBS AG, Stamford Branch, as Administrative Agent, Collateral Agent and Swingline Lender (incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K filed with the SEC on May 2, 2016) (File No. 001-37550).
10.3†	Quorum Health Corporation 2016 Stock Award Plan (incorporated by reference to Exhibit 10.3 to the Company’s Current Report on Form 8-K filed with the SEC on May 2, 2016) (File No. 001-37550).
10.4†	Form of Restricted Stock Award Agreement (incorporated by reference to Exhibit 10.4 to the Company’s Quarterly  Report on Form 10-Q for the quarter ended March 31, 2016 filed with the SEC on May 11, 2016) (File No. 001-37550).
10.5†	Form of Director Restricted Stock Award Agreement (incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K filed with the SEC on May 6, 2016) (File No. 001-37550).
10.6†	Form of Performance-Based Restricted Stock Award Agreement (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed with the SEC on May 6, 2016) (File No. 001-37550).
10.7†	Quorum Health Corporation 2016 Employee Performance Incentive Plan (incorporated by reference to Exhibit 10.5 to the Company’s Current Report on Form 8-K filed with the SEC on May 2, 2016) (File No. 001-37550).
10.8†	Quorum Health Corporation Supplemental Executive Retirement Plan (incorporated by reference to Exhibit 10.6 to the Company’s Current Report on Form 8-K filed with the SEC on May 2, 2016) (File No. 001-37550).
10.9†	Change in Control Severance Agreement, dated December 31, 2008, by and among Community Health Systems, Inc., CHSPSC, LLC (formerly Community Health Systems Professional Services Corporation) and Thomas D. Miller (incorporated by reference to Exhibit 10.4 to Amendment No. 2 to the Company’s Registration Statement on Form 10 filed with the SEC on November 20, 2015) (File No. 001-37550).
10.10†	Change in Control Severance Agreement, dated December 31, 2008, by and among Community Health Systems, Inc., CHSPSC, LLC (formerly Community Health Systems Professional Services Corporation) and Martin D. Smith (incorporated by reference to Exhibit 10.5 to Amendment No. 2 to the Company’s Registration Statement on Form 10 filed with the SEC on November 20, 2015) (File No. 001-37550).
10.11†	Form of Indemnification Agreement for Directors and Executive Officers (incorporated by reference to Exhibit 10.9 to the Company’s Current Report on Form 8-K filed with the SEC on May 2, 2016) (File No. 001-37550).
10.12*†	Quorum Health Corporation Amended and Restated Supplemental Executive Retirement Plan.
31.1*	Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2*	Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

71

No.	Description
32.1**	Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2**	Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101.INS***	XBRL Instance Document.
101.SCH***	XBRL Taxonomy Extension Schema.
101.CAL***	XBRL Taxonomy Extension Calculation Linkbase.
101.DEF***	XBRL Taxonomy Extension Definition Linkbase.
101.LAB***	XBRL Taxonomy Extension Label Linkbase.
101.PRE***	XBRL Taxonomy Extension Presentation Linkbase.

* Filed herewith.

** Furnished herewith.

† Indicates a management contract or compensation plan or arrangement.

72

EX-10.12

Exhibit 10.12

QUORUM HEALTH CORPORATION

amended and restated

SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN

TABLE OF CONTENTS

Page

1.	Purpose		4
2.	Definitions and Construction		4
	2.1	Definitions	4
	2.2	Captions; Section References	8
	2.3	Severability	8
3.	Administration		8
	3.1	The Committee	8
	3.2	Authority of the Committee	8
	3.3	Decisions Binding	8
	3.4	Plan Administrator	8
	3.5	Costs and Expenses	9
	3.6	Indemnification	9
4.	Participation in the Plan		9
	4.1	Notification of Participation	9
	4.2	Termination of Participation	9
5.	Benefits UPon separation from service or death		9
	5.1	Normal Retirement Benefit	9
	5.2	Early Retirement Benefit	10
	5.3	Disability Benefit	10
	5.4	Death Benefit	11
6.	Benefits Upon Change in Control		11
	6.1	Change in Control Benefit	11
	6.2	Participants Under Age 55	11
	6.3	Additional Years of Service	11
	6.4	Certain Terminations of Employment	11
7.	Beneficiaries		12
8.	Rabbi Trust		12
9.	Withholding		12
10.	Modification and Termination		12
	10.1	Amendment and Termination	12

- i -

TABLE OF CONTENTS

(continued)

Page

	10.2	Effect on Participants	12
	10.3	No Obligation to Continue Plan	12
11.	Claims and Review Procedures		13
12.	Miscellaneous Provisions		13
	12.1	Non-Transferability	13
	12.2	Payment of Benefits	13
	12.3	No Rights of Employment	13
	12.4	Applicable Law	13
	12.5	Payment to Minors	14
EXHIBIT A   Date of Hire for Certain Plan Participants			15

QUORUM HEALTH CORPORATION

amended and restated

SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN

WHEREAS, as of April 28, 2016, Quorum Health Corporation (“QHC” or the “Company”) was a wholly owned subsidiary of CHS/Community Health Systems, Inc. which maintained that certain CHS/Community Health Systems, Inc. Amended and Restated Supplemental Executive Retirement Plan (the “CHS SERP”);

WHEREAS, to effectuate the separation of certain hospitals and related business operations from other hospitals and businesses owned and/or operated by Community Health Systems, Inc. (“CHS”), CHS and the Company entered into a Separation and Distribution Agreement dated as of April 29, 2016 which provided for, among other things, the contribution from CHS to QHC of certain assets, the assumption by QHC of certain liabilities from CHS, and the distribution by CHS of all of the common stock of QHC owned by CHS to CHS’s shareholders (the “Distribution”);

WHEREAS, pursuant to that certain Employee Matters Agreement entered into between CHS and QHC in connection with the Distribution (the “EMA”), QHC established this Quorum Health Corporation Supplemental Executive Retirement Plan (the “Original Plan”) to be effective as of April 29, 2016 (the “Effective Date”);

WHEREAS, pursuant to the EMA, QHC assumed all liabilities for all obligations under the CHS SERP for the benefits of QHC Employees (as defined in the EMA), except that no additional benefits were to accrue under the Original Plan;

WHEREAS, the Company has determined to amend and restate the Original Plan (such amendment and restatement, the “Plan”) in order to continue to accrue additional benefits with respect to QHC Employees who otherwise qualify as “Participants” under the Plan, in such a manner that the compensation and service recognized under the QHC SERP with respect to a Participant who was previously employed by CHS or one of its subsidiaries (together, the “CHS Group”) prior to the Distribution shall be credited and recognized for all applicable purposes under this Plan as though it were compensation from QHC or one of its subsidiaries (together, the “QHC Group”).

WHEREAS, the Original Plan shall be amended and restated as the Quorum Health Corporation Amended and Restated Supplemental Executive Retirement Plan, effective as of May 24, 2016, except as otherwise stated herein.

- 3 -

NOW, THEREFORE, the Plan shall provide as follows:

 1. Purpose.  The purpose of this Plan is to advance the interests of the Company by encouraging officers and other key employees of the Company and its subsidiaries who will largely be responsible for the long-term success and development of Company to continue their employment with the Company and its subsidiaries by providing retirement benefits for them. The Plan is also intended to assist the Company and its subsidiaries in attracting and retaining such employees and stimulating their efforts on behalf of the Company and its subsidiaries.    

 2. Definitions and Construction.

2.1 Definitions.  As used in the Plan, terms defined parenthetically immediately after their use shall have the respective meanings provided by such definitions, and the following words and phrases shall have the meanings specified below (in either case, such terms shall apply equally to both the singular and plural forms of the terms defined), unless a different meaning is plainly required by the context:

(a) “Actuarial Equivalent” shall mean a benefit of equivalent value calculated based on the Uninsured Pensioners 1994 Mortality Table including Projections to 2003 using 50% of the Male Rates and 50% of the Female Rates as prescribed for qualified retirement plans under the General Agreement on Trades and Tariffs (GATT) and a discount rate equal to the average yield on 10-Year Treasury Bonds for the twenty-four (24) months preceding the last day of the previous month (as determined by the Committee in good faith), but in no event greater than 4% per annum.

(b) “Annual Retirement Benefit” shall mean an amount equal to a Participant’s Final Average Earnings multiplied by the lesser of (i) 60%, or (ii) a percentage equal to 2% multiplied by the Participant’s years of Service.

(c) “Beneficiary” shall mean the person or persons designated by a Participant pursuant to Section 7 to receive the benefits to which a Participant is entitled upon the death of a Participant.

(d) “Board” shall mean the Board of Directors of the Company.

(e) “Change in Control” shall mean the occurrence of any of the following events, but only to the extent such event would constitute a change in the ownership or effective control of QHC, or in the ownership of a substantial portion of the assets of QHC, as set forth in Code Section 409A(a)(2)(A)(v) and defined in regulations promulgated by the U.S. Department of Treasury thereunder:

(1) An acquisition (other than directly from QHC) of any voting securities of QHC (“Voting Securities”) by any Person (as the term person is used for purposes of Section 13(d) or 14(d) of the Securities Exchange Act of 1934, as amended (“Exchange Act”)) immediately after which such Person has Beneficial Ownership (within the meaning of Rule 13d-3 promulgated under the Exchange Act) of more than 50% of the then-outstanding shares of Common Stock of QHC (“Shares”) or the combined voting power of QHC’ then-outstanding Voting Securities; provided, however, in determining whether a Change in Control has occurred pursuant to this Section 2.1(f)(1), Shares or Voting Securities which are acquired in

- 4 -

a Non-Control Acquisition (as hereinafter defined) shall not constitute an acquisition that would cause a Change in Control. A “Non-Control Acquisition” shall mean an acquisition by (i) an employee benefit plan (or a trust forming a part thereof) maintained by the Company or any Subsidiary, (ii) QHC or any Subsidiary, or (iii) any Person in connection with a Non-Control Transaction (as hereinafter defined);

(2) The individuals who, as of the date hereof, are members of the Board of QHC (“Incumbent Board”), cease for any reason to constitute at least a majority of the members of the Board of QHC or, following a Merger (as hereinafter defined) that results in QHC having a Parent Corporation (as hereinafter defined), the board of directors of the ultimate Parent Corporation; provided, however, that if the election, or nomination for election, by the QHC common stockholders, of any new director was approved by a vote of at least two-thirds of the Incumbent Board of QHC, such new director shall, for purposes of the Plan, be considered as a member of the Incumbent Board of QHC; provided further, however, that no individual shall be considered a member of the Incumbent Board of QHC if such individual initially assumed office as a result of either an actual or threatened Election Contest (as described in Rule 14a-11 promulgated under the Exchange Act) or other actual or threatened solicitation of proxies or consents by or on behalf of a Person other than the Board of QHC (“Proxy Contest”), including by reason of any agreement intended to avoid or settle any Election Contest or Proxy Contest; or

(3) The consummation of:

(A) A merger, consolidation or reorganization with or into the Company or in which securities of the Company are issued (“Merger”), unless such Merger, is a Non-Control Transaction. A Non-Control Transaction shall mean a Merger where:

(i) the stockholders of QHC immediately before such Merger own, directly or indirectly, immediately following such Merger, at least 50% of the combined voting power of the outstanding voting securities of (x) the corporation resulting from such Merger (“Surviving Corporation”), if 50% or more of the combined voting power of the then outstanding voting securities of the Surviving Corporation is not Beneficially Owned, directly or indirectly, by another Person (“Parent Corporation”), or (y) if there are one or more Parent Corporations, the ultimate Parent Corporation; and

(ii) the individuals who were members of the Incumbent Board of QHC immediately prior to the execution of the agreement providing for such Merger, constitute at least a majority of the members of the board of directors of (x) the Surviving Corporation, if there is no Parent Corporation, or (y) if there are one or more Parent Corporations, the ultimate Parent Corporation.

(B) A complete liquidation or dissolution of QHC; or

(C) The sale or other disposition of all, or substantially all, of the assets of QHC to any Person (other than a transfer to a Subsidiary or under conditions that would constitute a Non-Control Transaction with the disposition of assets being regarded as a Merger for this purpose or the distribution to the QHC’ stockholders of the stock of a Subsidiary or any other assets).

- 5 -

Notwithstanding the foregoing, a Change in Control shall not be deemed to occur solely because any Person (“Subject Person”) acquired Beneficial Ownership of more than the permitted amount of the then-outstanding Shares or Voting Securities as a result of the acquisition of Shares or Voting Securities by QHC which, by reducing the number of Shares or Voting Securities then-outstanding, increases the proportional number of shares Beneficially Owned by the Subject Person, provided that if a Change in Control would occur (but for the operation of this sentence) as a result of the acquisition of Shares or Voting Securities by QHC, and after such share acquisition by QHC the Subject Person becomes the Beneficial Owner of any additional Shares or Voting Securities which increases the percentage of the then-outstanding Shares or Voting Securities Beneficially Owned by the Subject Person, then a Change in Control shall occur.

(f) “Code” shall mean the Internal Revenue Code of 1986, as amended from time to time, or any successor thereto.

(g) “Committee” shall mean the Compensation Committee of the Board of QHC.

(h) “Compensation” shall mean only the salary plus the bonus paid to a Participant.

(i) “Disabled Participant” shall mean any Participant who has been credited with five years of Service and who Separates from Service by reason of being Totally and Permanently Disabled.

(j) “Early Retirement Date” shall mean the date a Participant has been credited with at least five years of Service and is at least 55 years old.

(k) “ERISA” shall mean the Employee Retirement Income Security Act of 1974, as amended.

(l) “Final Average Earnings” shall mean an amount equal to (i) the sum of a Participant’s Compensation for the highest three years out of the last five full years of Service preceding a Participant’s termination of employment with the Company and its Subsidiaries, divided by (ii) three.

(m) “Key Employee” shall mean an employee (other than an Officer) of the Company or a Subsidiary who has been selected by the Committee to be a Participant.

(n) “Monthly Retirement Income” shall mean a monthly income computed as provided in the Plan.

(o) “Normal Retirement Date” shall mean the day of a Participant’s 65^th birthday.

(p) “Officer” shall mean all employees of the Company or a Subsidiary who have been duly elected as officers of QHC by the Board of QHC, unless specially designated by the Committee not to be a Participant.

(q) “Participant” shall mean any Officer or Key Employee.

(r) “Primary Insurance Amount” as of any date shall mean the monthly amount of Social Security old age and survivor disability insurance benefits received or receivable by a Participant

- 6 -

commencing at the Participant’s unreduced Social Security retirement age. The amount will be calculated based on the Social Security Act in effect as of the date of calculation, without regard to any dependent benefits.

(s) “Rabbi Trust” shall mean the trust to be established by the Company in accordance with the provisions of Section 8.

(t) “Retired Participant” shall mean any Participant who has ceased to be an employee of the Company or a Subsidiary and who is entitled to receive a benefit under Section 5 of the Plan.

(u) “Separation from Service” or “Separate from Service” means a separation from service as set forth in Code Section 409A(a)(2)(A)(i) and defined in regulations promulgated by the U.S. Department of Treasury thereunder, provided, however, that a Participant shall not be deemed to have Separated from Service on account of a leave of absence until the first date immediately following the end of a 29-month period of leave (if the employment relationship is not terminated sooner) where such leave is due to any medically determinable physical or mental impairment that can be expected to result in death or can be expected to last for a continuous period of not less than six months and where such impairment causes the Participant to be unable to perform the duties of his or her position of employment or any substantially similar position of employment.

(v) “Service” shall mean one of the following: (i) in the case of an Officer, all years and completed months of service with the Company, any Subsidiary, or any member of the CHS Group, whether before or after the adoption of the Plan, from the date determined by the Committee but not beginning earlier than January 1, 1997 (as indicated for some Participants in Exhibit A hereto) or, in the alternative, if the Committee so specifies for a designated Participant, additional years and months of service, provided, however, such additional years and months of service shall not exceed two years for every year of completed service and two months for every one month of completed service with the Company, any Subsidiary or any member of the CHS Group but not beginning before January 1, 1997, and (ii) in the case of an Officer or Key Employee who became a Participant after April 29, 2016, all years and completed months of service with the Company, any Subsidiary, or any member of the CHS Group following the date the person becomes a Participant (or such other date determined by the Committee). If a Participant’s name is not listed on Exhibit A, such Participant’s Service shall begin on the date described in clause (ii) above.

(w) “Specified Employee” means “specified employee” as defined in Code Section 409A(a)(2)(B)(i) and the regulations promulgated by the U.S. Department of Treasury thereunder.  For purposes of the preceding sentence, “specified employee” means a “key employee” of the Company as defined in Code Section 416(i) without regard to paragraph (5) thereof.  A Participant shall be a “key employee” of the Company if the Participant meets the requirements of Code Section 416(i)(1)(A)(i), (ii) or (iii) (applied in accordance with the regulations thereunder and disregarding Code Section 416(i)(5)) at any time during any 12-month period ending on December 31 (the “Identification Date”).  If a Participant is a “key employee” of the Company as of the Identification Date, the Participant shall be treated as a Specified Employee for the 12-month period beginning on the first day of the fourth month following the Identification Date.

- 7 -

(x) “Subsidiary” shall mean, with respect to the Company, any corporation or other entity of which a majority of its voting power, equity securities or equity interests is owned, directly or indirectly, by the Company.

(y) “Total and Permanent Disability” shall mean a physical or mental condition that renders a Participant eligible for disability benefits under the long-term disability insurance program in effect at the Company on the date of this amendment and restatement of the Plan, even if such Participant no longer participates in such long-term disability program on the date such physical or mental condition occurs.  

2.2 Captions; Section References.  Section titles or captions contained in the Plan are inserted only as a matter of convenience and reference, and in no way define, limit, extend or describe the scope of the Plan, or the intent of any provision hereof. All references herein to Sections shall refer to Sections of the Plan unless the context clearly requires otherwise.

2.3 Severability.  If any provision of the Plan, or the application thereof to any person, entity or circumstances, shall be invalid or unenforceable to any extent, the remainder of the Plan, and the application of such provision to other persons, entities or circumstances, shall not be affected thereby and the Plan shall be enforced to the greatest extent permitted by law.

 3. Administration.

3.1 The Committee.  The Plan shall be administered by the Committee. The Committee shall meet at such times and places as it determines and may meet through a telephone or video conference call.

3.2 Authority of the Committee.  Subject to the provisions of the Plan, the Committee shall have full authority to:

(a) Select Key Employees;

(b) Construe and interpret the Plan;

(c) Establish, amend and rescind rules and regulations for the Plan’s administration; and

(d) Make all other determinations which may be necessary or advisable for the administration of the Plan.

To the extent permitted by law, the Committee may delegate its authority as identified hereunder.

3.3 Decisions Binding.  All determinations and decisions made by the Committee pursuant to the provisions of the Plan, and all related orders or resolutions of the Board, shall be final, conclusive and binding upon all persons, including the Company, its stockholders, employees, Participants and their estates and Beneficiaries.

3.4 Plan Administrator. For purposes of ERISA, the Committee is the Plan administrator. Any claim for benefits under the Plan shall be made in writing to the Committee. The Committee and the claimant shall follow the claims procedures set forth in Department of Labor Regulation §2560.503-1.

- 8 -

3.5Costs and Expenses.  In discharging its duties under the Plan, the Committee may employ such counsel, accountants and consults as it deems necessary or appropriate. The Company shall pay all costs of such third parties and any other expenses incurred by the Committee with respect to the Plan.

3.6 Indemnification.  No member of the Committee, nor any officer or employee acting on behalf of the Committee, the Company or its Subsidiaries shall be personally liable for any action, determination or interpretation taken or made in good faith with respect to the Plan, and all members of the Committee, and each and every officer or employee of the Company or its Subsidiaries acting on their behalf, shall, to the extent permitted by law, be fully indemnified and protected by the Company with respect to any such action, determination or interpretation.

 4. Participation in the Plan.

4.1 Notification of Participation.  Each Officer and Key Employee shall be notified that such person is a Participant under the Plan.

4.2 Termination of Participation.  A Participant who ceases to be an Officer or a Key Employee of the Company (as determined by the Committee), or who terminates employment with the Company and all Subsidiaries for any reason other than death or Total and Permanent Disability, shall not be entitled to any benefits hereunder unless that change of status occurs after the Participant has reached their Early Retirement Date.

 5. Benefits Upon Separation from Service or Death.

5.1 Normal Retirement Benefit.  A Participant who has been credited with at least five years of Service and Separates from Service by reason of retirement on or after the Participant’s Normal Retirement Date shall receive a single lump-sum payment, commencing on the day immediately following the date that is six (6) months after the date of the Participant’s Separation from Service, in an amount that is the Actuarial Equivalent of a Monthly Retirement Income equal to:

(i)  one-twelfth of the Participant’s Annual Retirement Benefit, reduced by

(ii)  the Primary Insurance Amount.

Notwithstanding the foregoing, a Participant may instead elect, at any time, to receive the benefit calculated under this Section 5.1 as an amount that is the Actuarial Equivalent of the Monthly Retirement Income as calculated pursuant to this Section 5.1 above as of the later of the Participant’s Eligibility Date (as defined below) or the Participant’s Election Date (as defined below), with interest thereon until such Participant’s Separation from Service in an amount equal to the average yield on 10-Year Treasury Bonds for the twenty-four (24) months preceding, calculated and compounded on a quarterly basis, but in no event greater than 4% per annum.  For the sake of clarity, an election described in this paragraph made by a Participant who does not become an Eligible Participant (as defined below) shall be disregarded and such Participant shall receive the benefit, if any, to which such Participant is otherwise entitled under this Plan.  For purposes hereof, (i) an “Eligible Participant” is a Participant who has attained the Normal Retirement Date (i.e., has reached the age of 65) and has completed or been credited with at least twenty-five (25) years of Service, (ii) the “Eligibility Date” is the date a Participant becomes an

- 9 -

Eligible Participant and (iii) the “Election Date” is the date a Participant makes the election described in this paragraph.  An election made pursuant to this paragraph shall be made in writing delivered to the Secretary of the QHC/Community Health Systems, Inc. and once made, shall be final and irrevocable. For the avoidance of doubt, an election made pursuant to this paragraph shall not accelerate the payment date of the Normal Retirement Benefit.

If a Participant who has had a Separation from Service and is entitled to a Normal Retirement Benefit under this Section 5.1 dies prior to the date of such payment, such payment shall be made, instead, to the Participant’s Beneficiary on the date that it otherwise would have been made to the Participant, or as soon as administratively feasible thereafter within the same taxable year (or, if later, by the 15th day of the third calendar month following the date the payment otherwise would have been made to the Participant, provided that neither the Participant nor Beneficiary shall be permitted, directly or indirectly, to designate the taxable year of payment).

5.2 Early Retirement Benefit.   A Participant who Separates from Service by reason of retirement after attaining age 55 and who has been credited with at least five years of Service shall receive a single lump-sum payment, commencing on the day immediately following the date that is six (6) months after the date of the Participant’s Separation from Service, in an amount that is the Actuarial Equivalent of a Monthly Retirement Income computed in the manner set forth in Section 5.1, except that the amount set forth in Section 5.1 shall be reduced by two/twelfths of one percent (.001667) of that amount for each month that payments commence prior to the Participant’s Normal Retirement Date.  The reduction referred to in the immediately preceding sentence shall not apply in the event of a Change in Control.  If a Participant who has had a Separation from Service and is entitled to an Early Retirement Benefit under this Section 5.2 dies prior to the date of such payment, such payment shall be made, instead, to the Participant’s Beneficiary on the date that it otherwise would have been made to the Participant, or as soon as administratively feasible thereafter within the same taxable year (or, if later, by the 15th day of the third calendar month following the date the payment otherwise would have been made to the Participant, provided that neither the Participant nor Beneficiary shall be permitted, directly or indirectly, to designate the taxable year of payment).

5.3 Disability Benefit.

(a) A Disabled Participant shall receive a single lump-sum payment, commencing on the later of (i) the day immediately following the date that is six (6) months after the date of the Participant’s Separation from Service by reason of becoming Totally and Permanently Disabled, or (ii) the first day of the month following the Participant’s 55^th birthday, in an amount that is the Actuarial Equivalent of a Monthly Retirement Income computed in the manner set forth in Section 5.1.  This benefit shall be payable at the time prescribed in this Section 5.3(a) regardless of whether the Participant recovers from the disability before payment is due.

(b) If a Disabled Participant dies before the payment of the benefit described in Section 5.3(a), a death benefit shall be payable to the Disabled Participant’s Beneficiary.  Such death benefit shall be a single lump-sum payment equal to the Actuarial Equivalent present value of a Monthly Retirement Income as of the Participant’s date of death, computed in accordance with the provisions of Section 5.3(a).  Such death benefit shall be paid to the Participant’s Beneficiary no later than ninety (90) days after the date of death (provided that neither the Participant nor Beneficiary shall be permitted, directly or indirectly, to designate the taxable year of payment).

- 10 -

5.4 Death Benefit.  If a Participant who has been credited with five or more years of Service dies prior to incurring a Separation from Service, a single, lump-sum death benefit shall be paid to the deceased Participant’s Beneficiary.  Such death benefit shall be the Actuarial Equivalent of the Participant’s Monthly Retirement Income as of the Participant’s date of death, computed in the same manner as provided in Section 5.3(a) in the case of a Disabled Participant.  Such death benefit shall be paid to the deceased Participant’s Beneficiary no later than ninety (90) days after the date of death (provided that neither the Participant nor Beneficiary shall be permitted, directly or indirectly, to designate the taxable year of payment).

 6. Benefits Upon Change in Control.

6.1 Change in Control Benefit. In the event of a Change in Control, the benefit of any Participant with five years or more of Service but not yet otherwise entitled to a benefit under the other provisions of this Plan shall be fully vested and shall be paid out as soon as administratively feasible but no later than ninety (90) days after the Change in Control (provided that the Participant shall not be permitted, directly or indirectly, to designate the taxable year of payment) in a single lump-sum payment pursuant to the applicable provisions in Section 5.  Upon such payment to all Participants, the Plan shall terminate.

6.2 Participants Under Age 55.  Any Participant who has been credited with five years or more years of Service on the date of the Change in Control who is under age 55 will be deemed to be age 55 solely for purposes of determining if the Participant is eligible for benefits under the Plan but, in computing the lump sum payment provided for in Section 6.1 and the applicable provisions of Section 5, the Monthly Retirement Income shall be deemed payable based upon the Participant’s actual age on the date of the Change in Control.

6.3 Additional Years of Service. All Participants who have been credited with five years or more of Service as of a Change in Control will be credited with an additional three years of Service as a result of a Change in Control.

6.4 Certain Terminations of Employment. If a Participant’s employment is terminated by the Company prior to the date of a Change in Control, but the Participant reasonably demonstrates to the satisfaction of the Committee that the termination (i) was at the request of a third party who has indicated an intention to, or has taken steps reasonably calculated to, effect a Change in Control, or (ii) otherwise arose in connection with, or in anticipation of, a Change in Control which has been threatened or proposed, such termination shall be deemed to have occurred after a Change in Control for purposes of the Plan, provided a Change in Control actually occurs. Such a Participant shall be entitled to receive the same benefits under the Plan as if the Participant had been an employee of the Company or a Subsidiary on the date the Change in Control actually occurs.  Notwithstanding  the foregoing, no payment under this Section 6.4 shall be made before the date that is six (6) months after the date of the Participant’s actual Separation from Service.

- 11 -

 7.Beneficiaries.  Each Participant shall have the right, by giving written notice to the Committee on such form as the Committee shall adopt, to designate a Beneficiary or Beneficiaries to receive payments which become available under the Plan should the Participant die. A Participant may change the designated Beneficiary by filing a new beneficiary designation form with the Committee. If a Participant dies and has not designated a Beneficiary, or if the Beneficiary predeceases the Participant, the estate of the deceased Participant shall be deemed to be the Beneficiary.

 8. Rabbi Trust.  The Company may establish a Rabbi Trust with a commercial bank or other financial or trust institution of which the Company would be considered the owner for Federal income tax purposes. The Rabbi Trust would be established to provide a source of funds to enable the Company to make payments to the Participants and their Beneficiaries pursuant to the terms of the Plan and would be administered in a manner consistent with the requirements of Code Section 409A.  Once the Rabbi Trust is established, payments to which Participants are entitled under the terms of the Plan shall be paid out of the Rabbi Trust to the extent of the assets therein. The assets of the Rabbi Trust will be subject to the claims of general creditors of the Company.

 9. Withholding.  The Company shall have the right to withhold from the payments to be made to any Participant or Beneficiary hereunder all amounts required to be so withheld under applicable law.

 10. Modification and Termination.

10.1 Amendment and Termination.  The Company reserves the right at any time, by action of the Board, to modify or amend, in whole or in part, any or all of the provisions of the Plan, or to terminate the Plan.  In the event of Plan termination, benefits shall be payable at the time and in the manner provided in Sections 5 and 6; however, the Company may accelerate the time and form of payment pursuant to a termination and liquidation of the Plan in accordance with Code Section 409A and the regulations thereunder.

10.2 Effect on Participants. Notwithstanding the provisions of Section 10.1, no amendment, modification or termination of the Plan shall adversely affect:

(a) The Monthly Retirement Income of any Participant, or the Beneficiary of any Participant, who has Separated from Service or died prior thereto.

(b) The right of any Participant then employed by the Company or a Subsidiary who has been credited with at least five years of Service to receive upon death, Separation from Service (including Separation from Service by reason of Total and Permanent Disability) or Change in Control, the benefit to which such person would have been entitled under the Plan prior to the amendment, modification or termination, provided, however, that the Company may accelerate the time and form of payment pursuant to a termination and liquidation of the Plan in accordance with Code Section 409A and the regulations thereunder.

10.3 No Obligation to Continue Plan.  Although it is the intention of the Company that the Plan shall be continued indefinitely, the Plan is entirely voluntary on the part of the Company, and the continuance of the Plan is not a contractual obligation of the Company.

- 12 -

 11.Claims and Review Procedures.  The Committee shall establish and maintain reasonable procedures governing the filing of claims, notification of benefit determinations, and appeal of adverse benefit determinations in accordance with applicable law.  Such procedures shall provide for adequate notice in writing to any Participant or Beneficiary whose claim for benefits under the Plan has been denied, setting forth the specific reasons for such denial and written in a manner calculated to be understood by the Participant or Beneficiary.  Such procedures shall also afford a reasonable opportunity to any Participant or Beneficiary whose claim for benefits has been denied for a full and fair review by the Committee of the decision denying the claim.  

 12. Miscellaneous Provisions.

12.1 Non-Transferability. Neither the interest of a Participant or any other person in the Plan, nor the benefits payable hereunder, shall be subject to the claim of creditors of a Participant or their Beneficiaries and will not be subject to attachment, garnishment or any other legal process. Neither a Participant nor a Beneficiary may assign, sell, pledge or otherwise encumber any of their beneficial interest in the Plan, nor shall any such benefits be in any manner liable for, or subject to, the deeds, contracts, liabilities, engagements or torts of any Participant or their Beneficiary. All such payments and rights thereto are expressly declared to be non-assignable and non-transferable, and in the event of any attempted assignment or transfer (whether voluntary or involuntary) by a Participant or a Beneficiary, the Company shall have no further liability hereunder to such Participant or Beneficiary.

12.2 Payment of Benefits. The rights of Participants and Beneficiaries to receive payments under the Plan shall constitute only a general claim against the Company and will not be a lien or claim on any specific assets of the Company.

12.3 No Rights of Employment.  The Plan shall not be deemed to constitute a contract of employment between a Participant and the Company or a Subsidiary. Nothing contained in the Plan shall be deemed to give any Participant the right to be retained in the employment of the Company or a Subsidiary. The Plan shall not interfere in any way with the Company’s or a Subsidiary’s right to discharge a Participant at any time, regardless of the effect which such discharge would have upon such Participant under the Plan, and such actions by the Company or a Subsidiary in discharging any Participant shall not be deemed a breach of contract, nor give rise to any rights or actions in favor of such Participant.

12.4 Applicable Law. The Plan shall be governed by, and construed in accordance with, the laws of the State of Tennessee without regard to its conflict of laws rules. It is intended that the Plan be an unfunded plan maintained primarily for the purpose of providing deferred compensation for a select group of highly compensated employees of the Company. As such, the Plan is intended to be exempt from certain otherwise applicable provisions of Title I of ERISA, and any ambiguities in construction shall be resolved in favor of an interpretation which will effectuate such intention.  The Plan is intended to comply with Code Section 409A and the Treasury Regulations promulgated thereunder as applicable to nonqualified deferred compensation plans and shall be construed in furtherance of such intent. Although the Company intends to administer the Plan so that the payment of benefits will comply with the requirements of Section 409A of the Code, the Company does not warrant that any benefit under the Plan will qualify for favorable tax treatment under Section 409A of the Code or any other provision of federal, state, local or foreign law. The Company shall not be liable to any Participant for any tax, interest, or penalties that Participant might owe as a result of the participation or payment of any benefit under the Plan. 

- 13 -

12.5Payment to Minors.  In making any payment to or for the benefit of any minor or incompetent Beneficiary, the Committee, in its sole, absolute and uncontrolled discretion, may, but need not, make such payment to a legal or natural guardian or other relative of such minor or court appointed committee of such incompetent, or to any adult with whom such minor or incompetent temporarily or permanently resides, and the receipt by such guardian, committee, relative or other person shall be a complete discharge of the Company, without any responsibility on its part or on the part of the Committee to see to the application thereof.

IN WITNESS WHEREOF, the Company has caused the Plan to be executed by its duly authorized officer to be effective as of the 24th day of May, 2016, being the date the Board approved the Plan.

QUORUM HEALTH CORPORATION
By:	/s/ Michael Culotta
Title:	Executive Vice President and
	Chief Financial Officer

- 14 -

EXHIBIT A

Date Of Hire (OR SERVICE COMMENCEMENT DATE) For

Plan ParticipantS (AS OF may 1, 2016)

Employee	Date of Hire/Initial Participation
Tom Miller	July 5, 2007
Michael Culotta	May 1, 2016
James Doucette	December 18, 2000
Marty Smith	December 10, 2008
Matt Hayes	May 1, 2016
Shaheed Koury	May  1, 2016

- 15 -

EX-31.1

Exhibit 31.1

CERTIFICATION PURSUANT TO SECTION 302 OF THE

SARBANES-OXLEY ACT OF 2002

I, Thomas D. Miller, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Quorum Health Corporation;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and we have:

a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

c) disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors:

a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

/s/  Thomas D. Miller

Thomas D. Miller

President, Chief Executive Officer

and Director

Date: August 10, 2016

EX-31.2

Exhibit 31.2

CERTIFICATION PURSUANT TO SECTION 302 OF THE

SARBANES-OXLEY ACT OF 2002

I, Michael J. Culotta, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Quorum Health Corporation;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and we have:

a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

c) disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors:

a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

/s/  Michael J. Culotta

Michael J. Culotta

Executive Vice President and

Chief Financial Officer

Date: August 10, 2016

EX-32.1

Exhibit 32.1

CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT

TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of Quorum Health Corporation (the “Company”) on Form 10-Q for the period ended June 30, 2016, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Thomas D. Miller, President, Chief Executive Officer and Director of the Company, certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that:

(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

/s/  Thomas D. Miller

Thomas D. Miller

President, Chief Executive Officer

and Director

August 10, 2016

EX-32.2

Exhibit 32.2

CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT

TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of Quorum Health Corporation (the “Company”) on Form 10-Q for the period ended June 30, 2016, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Michael J. Culotta, Executive Vice President and Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that:

(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

/s/  Michael J. Culotta

Michael J. Culotta

Executive Vice President and

Chief Financial Officer

August 10, 2016

XML

Document and Entity Information - shares	6 Months Ended
	Jun. 30, 2016	Aug. 08, 2016
Document And Entity Information [Abstract]
Entity Registrant Name	QUORUM HEALTH CORPORATION
Entity Central Index Key	0001650445
Document Type	10-Q
Document Period End Date	Jun. 30, 2016
Document Fiscal Year Focus	2016
Document Fiscal Period Focus	Q2
Current Fiscal Year End Date	--12-31
Trading Symbol	QHC
Amendment Flag	false
Entity Filer Category	Non-accelerated Filer
Entity Common Stock, Shares Outstanding		29,487,497

XML

CONDENSED CONSOLIDATED AND COMBINED STATEMENTS OF INCOME (LOSS) (Unaudited) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2016	Jun. 30, 2015	Jun. 30, 2016	Jun. 30, 2015
Income Statement [Abstract]
Operating revenues, net of contractual allowances and discounts	$ 598,163	$ 608,636	$ 1,212,647	$ 1,215,108
Provision for bad debts	68,426	70,284	133,359	129,139
Net operating revenues	529,737	538,352	1,079,288	1,085,969
Operating costs and expenses:
Salaries and benefits	264,886	253,812	521,748	513,878
Supplies	64,136	61,663	127,797	126,215
Other operating expenses	163,185	158,811	327,648	311,051
Depreciation and amortization	31,463	32,141	62,620	63,839
Rent	12,545	12,065	25,094	24,502
Electronic health records incentives earned	(4,247)	(7,624)	(8,455)	(15,331)
Legal and settlement costs	5,447	0	5,688	0
Impairment of long-lived assets and goodwill	250,400	0	250,400	0
Transaction costs related to the spin-off	1,177	0	4,912	0
Total operating costs and expenses	788,992	510,868	1,317,452	1,024,154
Income (loss) from operations	(259,255)	27,484	(238,164)	61,815
Interest expense, net	29,276	23,828	56,728	49,630
Income (loss) before income taxes	(288,531)	3,656	(294,892)	12,185
Provision for (benefit from) income taxes	(44,565)	1,451	(46,239)	4,156
Net income (loss)	(243,966)	2,205	(248,653)	8,029
Less: Net income attributable to noncontrolling interests	1,095	775	1,410	400
Net income (loss) attributable to Quorum Health Corporation	$ (245,061)	$ 1,430	$ (250,063)	$ 7,629
Earnings (loss) per share attributable to Quorum Health Corporation stockholders:
Basic and diluted	$ (8.63)	$ 0.05	$ (8.80)	$ 0.27
Weighted-average common shares outstanding:
Basic and diluted	28,412,720	28,412,054	28,412,389	28,412,054

XML

CONDENSED CONSOLIDATED AND COMBINED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (Unaudited) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2016	Jun. 30, 2015	Jun. 30, 2016	Jun. 30, 2015
Statement Of Income And Comprehensive Income [Abstract]
Net income (loss)	$ (243,966)	$ 2,205	$ (248,653)	$ 8,029
Amortization and recognition of unrecognized pension cost components, net of income taxes	(3,810)	0	(3,810)	0
Comprehensive income (loss)	(247,776)	2,205	(252,463)	8,029
Less: Comprehensive income attributable to noncontrolling interests	1,095	775	1,410	400
Comprehensive income (loss) attributable to Quorum Health Corporation	$ (248,871)	$ 1,430	$ (253,873)	$ 7,629

XML

CONDENSED CONSOLIDATED AND COMBINED BALANCE SHEETS (Unaudited) - USD ($) $ in Thousands	Jun. 30, 2016	Dec. 31, 2015
Current assets:
Cash and cash equivalents	$ 55,145	$ 1,106
Patient accounts receivable, net of allowance for doubtful accounts of $337,253 and $346,507 at June 30, 2016 and December 31, 2015, respectively	394,120	390,890
Inventories	57,059	60,542
Prepaid expenses	23,306	16,030
Due from third-party payors	116,765	110,806
Current assets of hospitals held for sale	7,918	0
Other current assets	49,506	59,011
Total current assets	703,819	638,385
Property and equipment, at cost	1,549,751	1,603,653
Less: Accumulated depreciation and amortization	(732,719)	(723,404)
Total property and equipment, net	817,032	880,249
Goodwill	336,790	541,704
Intangible assets, net	109,444	129,250
Long-term assets of hospitals held for sale	21,225	0
Other long-term assets	114,049	105,268
Total assets	2,102,359	2,294,856
Current liabilities:
Current maturities of long-term debt	16,271	7,915
Accounts payable	148,627	138,483
Accrued liabilities:
Accrued salaries and benefits	105,737	82,620
Accrued interest	19,283	0
Due to third-party payors	41,214	30,103
Current liabilities of hospitals held for sale	2,256	0
Other current liabilities	48,129	45,255
Total current liabilities	381,517	304,376
Long-term debt	1,236,659	15,500
Due to Parent, net	0	1,800,908
Deferred income tax liabilities, net	55,297	41,030
Other long-term liabilities	126,875	108,141
Total liabilities	1,800,348	2,269,955
Redeemable noncontrolling interests	8,360	8,958
Quorum Health Corporation stockholders' equity:
Preferred stock, $0.0001 par value per share, 100,000,000 shares authorized, none issued at June 30, 2016	0	0
Common stock, $0.0001 par value per share, 300,000,000 shares authorized, 29,489,247 shares issued and outstanding at June 30, 2016	3	0
Additional paid-in capital	520,336	0
Accumulated other comprehensive loss	(3,810)	0
Accumulated deficit	(234,951)	0
Total Quorum Health Corporation stockholders' equity	281,578	0
Parent's equity	0	3,184
Nonredeemable noncontrolling interests	12,073	12,759
Total equity	293,651	15,943
Total liabilities and equity	$ 2,102,359	$ 2,294,856

XML

CONDENSED CONSOLIDATED AND COMBINED BALANCE SHEETS (Parenthetical) (Unaudited) - USD ($) $ in Thousands	Jun. 30, 2016	Apr. 29, 2016	Dec. 31, 2015
Statement Of Financial Position [Abstract]
Allowance for doubtful patient accounts	$ 337,253		$ 346,507
Preferred stock, par value	$ 0.0001
Preferred stock, shares authorized	100,000,000
Preferred stock, shares issued	0
Common stock, par value	$ 0.0001
Common stock, shares authorized	300,000,000
Common stock, shares issued	29,489,247
Common stock, shares outstanding	29,489,247	28,412,054

XML

CONDENSED CONSOLIDATED AND COMBINED STATEMENT OF EQUITY (Unaudited) - 6 months ended Jun. 30, 2016 - USD ($) $ in Thousands	Total	Redeemable Noncontrolling Interests [Member]	Common Stock [Member]	Additional Paid-In Capital [Member]	Accumulated Other Comprehensive Loss [Member]	Accumulated Deficit [Member]	Parent [Member]	Nonredeemable Noncontrolling Interests [Member]
Redeemable noncontrolling interests, beginning balance at Dec. 31, 2015	$ 8,958	$ 8,958
Stockholders' equity, beginning balance at Dec. 31, 2015	15,943						$ 3,184	$ 12,759
Comprehensive income (loss)	(252,167)	(296)			$ (3,810)	$ (234,951)	(15,112)	1,706
Transfers to Parent (prior to spin-off transaction)	15,112						15,112
Changes in equity on spin-off transaction date	515,384		$ 3	$ 518,518			(3,137)
Changes in equity on spin-off transaction date, shares			28,412,054
Stock-based compensation expense	1,897			1,897
Stock-based compensation expense, shares			1,078,005
Cancellation of restricted stock awards for payroll tax withholdings on vesting shares	(28)			(28)
Cancellation of restricted stock awards for payroll tax withholdings on vesting shares, shares			(812)
Cash distributions to noncontrolling investors	(2,392)	(255)						(2,392)
Purchases of shares from noncontrolling investors	19	(31)					19
Adjustments to redemption value of redeemable noncontrolling interests investments	(117)	117		(51)			$ (66)
Reclassifications of noncontrolling interests investments		(133)
Redeemable noncontrolling interests, ending balance at Jun. 30, 2016	8,360	$ 8,360
Stockholders' equity, ending balance at Jun. 30, 2016	$ 293,651		$ 3	$ 520,336	$ (3,810)	$ (234,951)		$ 12,073
Stockholders' equity, ending balance, shares at Jun. 30, 2016	29,489,247		29,489,247

XML

CONDENSED CONSOLIDATED AND COMBINED STATEMENTS OF CASH FLOWS (Unaudited) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2016	Jun. 30, 2015	Jun. 30, 2016	Jun. 30, 2015
Cash flows from operating activities:
Net income (loss)	$ (243,966)	$ 2,205	$ (248,653)	$ 8,029
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depreciation and amortization	31,463	32,141	62,620	63,839
Non-cash interest expense	729	0	729	0
Benefit from deferred income taxes	(47,451)	0	(47,451)	0
Stock-based compensation expense	1,897	0	1,897	0
Impairment of long-lived assets and goodwill	250,400	0	250,400	0
Non-cash changes in self-insurance reserves	5,418	0	5,418	0
Other non-cash income, net	(33)	(1,137)	(587)	(1,508)
Changes in operating assets and liabilities, net of acquisitions:
Patient accounts receivable, net	4,911	17,642	(7,211)	16,830
Due to and due from third-party payors, net	(4,745)	17,218	5,355	1,748
Inventories, prepaid expenses and other current assets	5,103	4,127	2,277	7,585
Accounts payable and accrued liabilities	33,234	(16,073)	36,074	(73,902)
Long-term assets and liabilities, net	(164)	223	325	75
Net cash provided by operating activities	36,796	56,346	61,193	22,696
Cash flows from investing activities:
Capital expenditures for property and equipment	(20,367)	(10,471)	(33,207)	(20,410)
Capital expenditures for software	(1,278)	(1,664)	(3,804)	(2,661)
Acquisitions, net of cash acquired	0	(2,012)	0	(2,012)
Proceeds from sales of property and equipment	0	2,917	858	3,017
Other investing activities	492	(1,867)	544	(3,292)
Net cash used in investing activities	(21,153)	(13,097)	(35,609)	(25,358)
Cash flows from financing activities:
Borrowings of long-term debt	1,255,500	75	1,255,520	135
Repayments of long-term debt	(3,188)	(340)	(4,277)	(736)
Increase (decrease) in Due to Parent, net	31,669	(42,939)	25,183	9,261
Increase (decrease) in receivables facility, net	0	(2,854)	0	(5,187)
Payments of debt issuance costs	(28,003)	0	(28,003)	0
Cash paid to Parent in spin-off transaction	(1,217,336)	0	(1,217,336)	0
Cancellation of restricted stock awards for payroll tax withholdings on vesting shares	27	0	27	0
Cash distributions to noncontrolling investors	(163)	(1,292)	(2,647)	(1,422)
Purchases of shares from noncontrolling investors	0	(722)	(12)	(722)
Net cash provided by (used in) financing activities	38,506	(48,072)	28,455	1,329
Net change in cash and cash equivalents	54,149	(4,823)	54,039	(1,333)
Cash and cash equivalents at beginning of period	996	6,049	1,106	2,559
Cash and cash equivalents at end of period	55,145	1,226	55,145	1,226
Supplemental cash flow information:
Interest payments, net	8,894	23,828	36,347	49,630
Income tax payments, net of refunds (after spin-off transaction)	$ 34	$ 0	$ 34	$ 0

XML

Description of the Business and Spin-Off Transaction

6 Months Ended

Jun. 30, 2016

Organization Consolidation And Presentation Of Financial Statements [Abstract]

Description of the Business and Spin-off Transaction

NOTE 1 – DESCRIPTION OF THE BUSINESS AND SPIN-OFF TRANSACTION

Description of the Business

The principal business of Quorum Health Corporation (“QHC” or the “Company”) is to provide general hospital healthcare and other outpatient services in its markets across the United States. As of June 30, 2016, the Company owned or leased 38 hospitals with 3,579 licensed beds in 16 states. The Company provides outpatient healthcare services through its hospitals and affiliated facilities, including urgent care centers, diagnostic and imaging centers, physician clinics and surgery centers. The Company’s wholly-owned subsidiary, Quorum Health Resources, LLC (“QHR”), provides management advisory and consulting services to non-affiliated hospitals located throughout the United States.  Over 95% of the Company’s net operating revenues are attributable to its hospital operations business.

Description of the Spin-off Transaction

On April 29, 2016, Community Health Systems, Inc. (“CHS” or “Parent” when referring to the carve-out period prior to April 29, 2016) completed the spin-off of 38 hospitals, including their affiliated facilities, and QHR to form Quorum Health Corporation through the distribution of 100% of the common stock of QHC, issued at a par value of $0.0001 per share, to CHS stockholders of record as of the close of business on April 22, 2016 (the “Record Date”) and cash proceeds to CHS of $1.2 billion (the “Spin-off Transaction”).  Each CHS stockholder received a distribution of one share of QHC common stock for every four shares of CHS common stock held as of the Record Date plus cash in lieu of fractional shares. Quorum Health Corporation began regular-way trading on the New York Stock Exchange (“NYSE”) under the ticker symbol “QHC” on May 2, 2016.

In connection with the Spin-off Transaction, QHC and CHS entered into a Separation and Distribution Agreement, a Tax Matters Agreement and an Employee Matters Agreement on April 29, 2016, which, collectively, governed or continue to govern the allocation of employees, assets and liabilities that were transferred to QHC from CHS, including but not limited to investments, working capital, property and equipment, employee benefits and deferred tax assets and liabilities.  In addition, QHC and CHS entered into various transition services agreements and other ancillary agreements, which govern certain relationships and activities of QHC and CHS for a period of five years following the Spin-off Transaction.  See Note 16 – Related Party Transactions for additional information on the agreements that exist between QHC and CHS after the Spin-off Transaction.

In connection with the Spin-off Transaction, QHC issued $400 million in aggregate principal amount of 11.625% Senior Notes due 2023 (the “Senior Notes”) on April 22, 2016, pursuant to an indenture (the “Indenture”) by and between the Company and Regions Bank, as Trustee.  The Senior Notes were issued at a discount of $6.9 million, or 1.734%.  The gross offering proceeds of the Senior Notes were deposited into a segregated escrow account at the closing of the offering on April 22, 2016.  On April 29, 2016, the Company entered into a credit agreement (the “Senior Credit Facility”) consisting of an $880 million senior secured term loan facility (the “Term Loan Facility”), which was issued at a discount of $17.6 million, or 98% of par value, and a $100 million senior secured revolving credit facility (the “Revolving Credit Facility”).  In addition, the Company entered into a $125 million senior secured asset-based revolving credit facility (the “ABL Credit Facility”) on April 29, 2016.  The net offering proceeds of the Senior Notes were released to QHC from the escrow account on April 29, 2016.  The net offering proceeds of the Senior Notes, together with the net borrowings under the Term Loan Facility, were used to pay $1.2 billion of the cash proceeds to CHS, as mentioned above, and to pay the Company’s fees and expenses related to the Spin-off Transaction.  The cash proceeds paid to CHS were characterized as a one-time, tax-free cash distribution.

In connection with the Spin-off Transaction, CHS contributed $518.5 million of additional paid-in capital to QHC and made a $13.5 million cash contribution, pursuant to the Separation and Distribution Agreement.  This contribution consisted of $20.0 million of cash contributed to fund a portion of QHC’s initial working capital, reduced by $6.5 million for the difference in estimated and actual financing transaction fees related to the Spin-off Transaction.

A summary of the major transactions that occurred on April 29, 2016 to effect the spin-off of QHC as a newly formed, independent company were as follows (dollars in thousands):

										Additional
	Long-Term		Due to			Common Stock				Paid-in			Parent's
	Debt		Parent, Net			Shares		Amount		Capital			Equity
Balance at April 29, 2016 (prior to spin-off transaction)	$	24,179	$	1,811,034			—	$	-	$	-		$	3,137
Borrowings of long-term debt, net of debt issuance costs and discounts		1,230,819		—			—		—		—			—
Cash proceeds paid to Parent		—		(1,217,336	)		—		—		—			—
Transfer of liabilities from Parent		—		(16,596	)		—		—		—			—
Net deferred tax liability resulting from spin-off transaction				(61,718	)
Non-cash capital contribution from Parent		—		(515,384	)		—		—		518,521			(3,137	)
Distribution of common stock		—		—			27,719,645		3		(3	)		—
Distribution of restricted stock awards		—		—			692,409		—		—			—
Balance at April 29, 2016 (after spin-off transaction)	$	1,254,998	$	-			28,412,054	$	3	$	518,518		$	-

A summary of the liabilities transferred to QHC from CHS just prior to the consummation of the Spin-off Transaction, previously included in Due to Parent, net, were as follows (in thousands): 

	April 29,
	2016
Accounts payable for capital expenditures	$	8,422
Benefit plan liabilities		5,964
Other liabilities		2,210
Total liabilities transferred from Parent	$	16,596

XML

Basis of Presentation and Significant Accounting Policies

6 Months Ended

Jun. 30, 2016

Accounting Policies [Abstract]

Basis of Presentation and Significant Accounting Policies

NOTE 2 - BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

The condensed consolidated and combined financial statements and accompanying notes of the Company presented herein have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”). These financial statements should be read in conjunction with the Company’s Registration Statement on Form 10, as amended, initially filed with the Securities and Exchange Commission (“SEC”) on September 4, 2015 and declared effective on April 4, 2016 (the “Form 10”), which includes combined financial statements and accompanying notes as of December 31, 2015 and 2014 and for each of the three years ended December 31, 2015, 2014 and 2013.  In the opinion of the Company’s management, the condensed consolidated and combined financial information presented herein includes all adjustments necessary to present fairly the results of operations, financial position and cash flows of the Company for the interim periods presented.  Results of operations for interim periods should not be considered indicative of the results of operations expected for the full year. Certain information and disclosures have been condensed or omitted as presented herein and as permitted by the rules and regulations of the SEC for interim period presentation. The Company’s management believes the financial statements and disclosures presented herein are adequate in order to make the information not misleading.

Prior to its separation from CHS on April 29, 2016, QHC did not operate as a separate company and stand-alone financial statements were not historically prepared; however, QHC was comprised of certain stand-alone legal entities for which discrete financial information was available under CHS’ ownership. The accompanying consolidated and combined financial statements include amounts and disclosures for QHC that have been derived from the consolidated financial statements and accounting records of CHS for the periods prior to the Spin-off Transaction in combination with the amounts and disclosures related to the stand-alone financial statements and accounting records of QHC after the Spin-off Transaction.  The accompanying consolidated and combined financial statements may not necessarily be indicative of the results of operations, financial position and cash flows of QHC in the future or those that would have occurred had the Company operated on a stand-alone basis during the entirety of the periods presented herein.  See Note 16 – Related Party Transactions for additional information on the carve-out of financial information from CHS.

Principles of Consolidation and Combination

The consolidated and combined financial statements include the accounts of the Company and its subsidiaries in which it holds either a direct or indirect ownership of a majority voting interest. These investments in less-than-wholly-owned consolidated subsidiaries of QHC are presented separately in the equity component of the consolidated and combined balance sheets to distinguish between the interests of QHC and the interests of the noncontrolling investors. Revenues and expenses from these subsidiaries are included in the respective individual line items of the Company’s consolidated and combined statements of income, and net income is presented both in total and separately to show the amounts attributable to the Company and the amounts attributable to the  interests of the noncontrolling investors.  Noncontrolling interests that are redeemable, or may become redeemable at a fixed or determinable price at the option of the holder or upon the occurrence of an event outside of the control of the Company, are presented in mezzanine equity on the consolidated and combined balance sheets.

 All significant intercompany transactions and accounts of the Company are eliminated in consolidation.  Additionally, all significant transactions with CHS that occurred prior to the Spin-off Transaction have been included in the consolidated and combined balance sheets within Due to Parent, net. This liability to CHS was settled in the Spin-off Transaction.

Reclassifications

Certain prior period amounts have been reclassified to conform to the current period presentation as follows:

The Company reclassified third-party final cost report settlement receivables and state supplemental payment program receivables to amounts due from and due to third-party payors on its consolidated and combined balance sheets. Third-party final cost report settlement receivables were previously classified as other current assets, and the cost report settlement liabilities were previously classified as other current liabilities. Accounts receivable from state supplemental payment programs were previously classified as patient accounts receivable, and the amounts owed related to these programs was classified as other current liabilities. The Company believes the current presentation helps distinguish between amounts due related to a specific patient service and amounts due from or owed by the Company related to state supplemental payment programs.

The Company reclassified intangible assets to present them separately on its consolidated and combined balance sheets for all periods presented. Previously, these amounts were classified as a component of other long-term assets. The Company believes that this presentation helps distinguish the portion of other long-term assets which are intangible assets.

The Company reclassified equity in earnings of unconsolidated subsidiaries to other operating expenses in the consolidated and combined statements of income. Previously, these amounts were classified as non-operating income. These amounts are immaterial to the Company. This change in classification has no effect on the Company’s results of operations or cash flows included in previously issued consolidated and combined financial statements.

Use of Estimates

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

Revenues and Accounts Receivable

Revenue Recognition

The Company recognizes revenues from patient services at its hospitals and affiliated facilities in the period services are performed and reports these revenues at their net realizable amount expected to be collected from patients and third-party payors. The amounts that the Company collects for patient services are generally less than established billing rates, or standard billing charges, due to contractual agreements with third-party payors, governmental programs that require reduced billing rates, discounts offered as incentives for payment, and a portion related to bad debts.  The Company recognizes revenues related to its QHR business when management advisory and consulting services are provided and reports these revenues at their net realizable amount expected to be collected from the non-affiliated hospital clients.

A summary of the components of operating revenues before the provision for bad debts follows (in thousands):

	Three Months Ended June 30,						Six Months Ended June 30,
	2016			2015			2016			2015
Operating revenues	$	3,042,786		$	2,923,172		$	6,123,439		$	5,771,609
Less:  Contractual allowances		(2,335,554	)		(2,224,369	)		(4,696,589	)		(4,383,729	)
Less:  Discounts		(109,069	)		(90,167	)		(214,203	)		(172,772	)
Total operating revenues, net of contractual allowances and discounts	$	598,163		$	608,636		$	1,212,647		$	1,215,108

Payor Sources

The primary sources of payment for patient healthcare services are third-party payors, including federal and state agencies administering the Medicare and Medicaid programs, other governmental agencies, managed care health plans, commercial insurance companies, workers’ compensation carriers and employers.  Self-pay revenues are the portion of patient service revenues derived from patients that do not have health insurance coverage and the patient responsibility portion of services that is not covered by health insurance plans.  Non-patient revenues include revenues from QHR’s hospital management advisory and consulting services business, rental income and hospital cafeteria sales.

A summary of operating revenues by payor source follows (dollars in thousands):

	Three Months Ended June 30,
	2016					2015
	$  Amount		% of Total			$  Amount		% of Total
Medicare	$	167,549		28.0	%	$	156,649		25.7	%
Medicaid		113,283		18.9	%		103,972		17.1	%
Managed care and commercial		230,595		38.6	%		259,984		42.7	%
Self-pay		59,171		9.9	%		57,181		9.4	%
Non-patient		27,565		4.6	%		30,850		5.1	%
Total operating revenues, net of contractual allowances and discounts	$	598,163		100.0	%	$	608,636		100.0	%
	Six Months Ended June 30,
	2016					2015
	$  Amount		% of Total			$  Amount		% of Total
Medicare	$	343,083		28.3	%	$	331,373		27.3	%
Medicaid		216,351		17.8	%		208,306		17.1	%
Managed care and commercial		474,879		39.2	%		495,752		40.8	%
Self-pay		123,925		10.2	%		120,095		9.9	%
Non-patient		54,409		4.5	%		59,582		4.9	%
Total operating revenues, net of contractual allowances and discounts	$	1,212,647		100.0	%	$	1,215,108		100.0	%

As of June 30, 2016, the Company began classifying its revenues related to Medicare Managed Care Advantage Plans as Medicare revenues.  As a result, the Company retroactively reclassified these amounts from managed care and commercial revenues to Medicare revenues for all periods presented in the tables above.  The revenues from Medicare Managed Care Advantage Plans that were reclassified were $43.4 million and $35.5 million for the three months ended June 30, 2016 and 2015, respectively, and $85.1 million and $72.1 million for the six months ended June 30, 2016 and 2015, respectively.

Contractual Allowances and Discounts

The net realizable amount of patient service revenues due from third-party payors is subject to complexities and interpretations of payor-specific contractual agreements and governmental regulations that are frequently changing.  The Medicare and Medicaid programs, which represent a large portion of the Company’s operating revenues, are highly complex programs to administer and subject to interpretation of federal and state-specific reimbursement rates, new legislation and final cost report settlements.  Contractual allowances, or differences in standard billing rates and the payments derived from contractual terms with governmental and non-governmental third–party payors, are recorded based on management’s best estimates in the period in which services are performed and a payment methodology is established with the patient.  Recorded estimates for past contractual allowances are subject to change, in large part, due to ongoing contract negotiations and regulation changes, which is typical in the healthcare industry.  Revisions to estimates are recorded in the periods in which they become known and may be subject to further revisions.  Self-pay and other payor discounts are incentives offered to uninsured or underinsured payors to reduce their costs of healthcare services with the purpose of maximizing the Company’s collection efforts.

Third-Party Program Reimbursements

Cost report settlements under reimbursement programs with Medicare, Medicaid and other managed care plans are estimated and recorded in the period the related services are performed and are adjusted in future periods, as needed, until the final cost report settlements are determined.These previous program reimbursements and final cost report settlements are included in due from and due to third-party payors in the consolidated and combined balance sheets.  Previously, these amounts were a component of other current assets and other current liabilities in the consolidated and combined balance sheets. Contractual adjustments related to previous program reimbursements and final cost report settlements unfavorably impacted revenues by $2.5 million and $11.2 million during the three months ended June 30, 2016 and 2015, respectively, and $4.4 million and $11.7 million during the six months ended June 30, 2016 and 2015, respectively.  Contractual adjustments in the three and six months ended June 30, 2015 periods include the unfavorable impact of an $11.1 million Illinois cost report settlement which was recorded in 2014 and reversed in the second quarter of 2015 due to contract negotiations that were finalized in that quarter.

Currently, several states utilize supplemental payment programs, including disproportionate share programs, for the purpose of providing reimbursement to providers to offset a portion of the cost of providing care to Medicaid and indigent patients. These programs are designed with input from Centers for Medicare and Medicaid Services (“CMS”) and funded with a combination of federal and state resources, including, in certain instances, taxes, fees or other program costs (collectively, “provider taxes”) levied on the providers. Similar programs are also currently being considered by other states. These amounts are included in due from and due to third-party payors in the consolidated and combined balance sheets, respectively.  Previously, amounts due from third parties related to these programs were included in patient accounts receivable, and the provider taxes owed were included in other current liabilities in the consolidated and combined balance sheets.  See the Reclassifications accounting policy above for additional information on reclassification adjustments made by the Company as of June 30, 2016.

The following table summarizes the components of amounts due from and due to third-party payors, as presented in the consolidated and combined balance sheets (in thousands):

	June 30,		December 31,
	2016		2015
Amounts due from third-party payors:
Previous program reimbursements and final cost report settlements	$	29,438	$	33,732
State supplemental payment programs		87,327		77,074
Total amounts due from third-party payors	$	116,765	$	110,806
Amounts due to third-party payors:
Previous program reimbursements and final cost report settlements	$	31,961	$	21,015
State supplemental payment programs		9,253		9,088
Total amounts due to third party payors	$	41,214	$	30,103

After a state supplemental payment program is approved and fully authorized by the appropriate state legislative or governmental agency, the Company recognizes revenue and related expenses based on the terms of the program in the period in which amounts are estimable and revenue collection is reasonably assured.  The revenues earned by the Company under these programs are included in net operating revenues and the expenses associated with these programs are included in other operating expenses in the consolidated and combined statements of income.

The table below summarizes the impact on income (loss) from operations related to state supplemental payment programs (in thousands):

	Three Months Ended June 30,				Six Months Ended June 30,
	2016		2015		2016		2015
State supplemental payment programs:
Revenues	$	55,105	$	49,838	$	107,320	$	105,217
Expenses		18,604		19,324		38,030		38,493
Total operating income from state supplemental payment programs	$	36,501	$	30,514	$	69,290	$	66,724

Charity Care

In the ordinary course of business, the Company provides services to patients who are financially unable to pay for hospital care. The related charges for those patients who are financially unable to pay and that otherwise do not qualify for reimbursement from a governmental program are classified as charity care. The Company determines amounts that qualify for charity care primarily based on the patient’s household income relative to the poverty level guidelines established by the federal government. The Company’s policy is to not pursue collections for such amounts; therefore, the related charges are recorded in operating revenues at the standard billing rates and fully offset in contractual allowances.  The gross amounts of charity care revenues were $7.0 million and $6.3 million for the three months ended June 30, 2016 and 2015, respectively, and $14.8 million and $13.3 million for the six months ended June 30, 2016 and 2015, respectively.

The estimated cost of providing charity care services is determined using a ratio of cost to gross charges and applying this ratio to the gross charges associated with providing care to charity patients for the period.  The Company recorded charity care costs of $1.2 million and $1.1 million for the three months ended June 30, 2016 and 2015, respectively, and $2.4 million and $2.3 million for the six months ended June 30, 2016 and 2015, respectively.  To the extent the Company receives reimbursement through any of the various governmental assistance programs in which it participates to subsidize its care of indigent patients, the Company does not include these patients’ charges in its cost of care provided under its charity care program. 

Accounts Receivable and Allowance for Doubtful Accounts

Substantially all of the Company’s receivables are related to providing healthcare services to patients at its hospitals and affiliated businesses.  As of June 30, 2016, the Company retroactively reclassified receivables related to state supplemental payment programs from patient accounts receivable to due from and due to third-party payors in the consolidated and combined balance sheet.  The net amounts reclassified were $78.1 million and $68.0 million as of June 30, 2016 and December 31, 2015, respectively. See the Reclassifications accounting policy above for additional information on reclassification adjustments made by the Company as of June 30, 2016.

A summary of the components of accounts receivable before contractual allowances, discounts and allowance for doubtful accounts follows (dollars in thousands):

	June 30, 2016					December 31, 2015
	Amount		% of Total			Amount		% of Total
Third-parties	$	1,831,940		74.5	%	$	1,688,138		72.6	%
Self-pay		626,662		25.5	%		638,694		27.4	%
Total accounts receivable, gross	$	2,458,602		100.0	%	$	2,326,832		100.0	%

Accounts receivable are reduced by an allowance for amounts that could become uncollectible in the future. The Company estimates the allowance for doubtful accounts by reserving a percentage of all self-pay accounts receivable without regard to aging category, based on collection history, adjusted for expected recoveries and any anticipated changes in trends. The Company’s ability to estimate the allowance for doubtful accounts is not significantly impacted by the aging of accounts receivable, as management believes that substantially all of the risk exists at the point in time such accounts are identified as self-pay. The percentage used to reserve for self-pay accounts receivable is based on the Company’s collection history. For insured receivables, which are the non-self-pay receivables, the Company estimates the allowance for doubtful accounts based on historical collection rates for the uncontractualized portion of all accounts aging over 365 days from the date of patient discharge.  In general, allowances for insured receivables are an immaterial percentage of the Company’s total accounts receivable. The Company collects substantially all of its third-party insured receivables, which include receivables from governmental agencies.  

A summary of the changes in the allowance for doubtful accounts follows (in thousands):

	Six Months Ended
	June 30, 2016
Balance at beginning of period	$	346,507
Provision for bad debts		133,359
Amounts written off, net of recoveries		(142,613	)
Balance at end of period	$	337,253

Collections are impacted by the economic ability of patients to pay and the effectiveness of CHS’ collection efforts, including their current policies on collections, and the ability of the Company to further attempt collection efforts. Billings and collections are outsourced to CHS under the transition service agreements that were put in place with the Spin-off Transaciton.  See Note 16 – Related Party Transactions for additional information on these agreements.  Significant changes in payor mix, centralized business office operations, economic conditions or trends in federal and state governmental healthcare coverage, among others, could affect the Company’s estimates of accounts receivable collectability. The Company also continually reviews its overall allowance adequacy by monitoring historical cash collections as a percentage of trailing net operating revenues after the provision for bad debts, as well as by analyzing current period net operating revenues and admissions by payor classification, aged accounts receivable by payor, days revenue outstanding, the composition of self-pay receivables between pure self-pay patients and the patient responsibility portion of third-party insured receivables, and the impact of recent acquisitions and dispositions.

Concentration of Credit Risk

The Company grants unsecured credit to its patients, most of which reside in the service area of the Company’s hospitals and affiliated facilities and are insured under third-party payor agreements. Because of the economic diversity of the Company’s markets and non-governmental third-party payors, Medicare represents the only significant concentration of credit risk from payors. Accounts receivable, net of contractual allowances, from Medicare were $75.4 million and $67.7 million, or 10.3% and 9.2% of total consolidated and combined patient accounts receivable, net, as of June 30, 2016 and December 31, 2015, respectively.

The Company’s revenues are particularly sensitive to regulatory and economic changes in certain states where the Company generates significant revenues. Accordingly, any changes in the current demographic, economic, competitive or regulatory conditions in certain states in which our revenues are significant could have an adverse effect on the Company’s results of operations, financial condition or cash flows. Changes to the Medicaid and other government-managed payor programs, including reductions in reimbursement rates or delays in reimbursement payments under state supplemental or other programs, in these states could also have a similar adverse effect.

A summary of the states in which the Company generates more than 5% of total net patient revenues before the provision for bad debts, as determined based on the six months ended June 30, 2016 and 2015, follows (dollars in thousands):

		Six Months Ended June 30,
	Number of	2016					2015
	Hospitals	$  Amount		% of Total			$  Amount		% of Total
Illinois	9	$	399,049		34.5	%	$	405,390		35.1	%
Oregon	1		104,810		9.0	%		92,962		8.0	%
Georgia	4		107,469		9.3	%		113,055		9.8	%
California	2		101,562		8.8	%		104,397		9.0	%
Kentucky	3		59,375		5.1	%		63,406		5.5	%

Other Operating Expenses

A summary of the major components of other operating expenses follows (in thousands):

	Three Months Ended June 30,				Six Months Ended June 30,
	2016		2015		2016		2015
Purchased services	$	62,477	$	59,041	$	124,218	$	116,406
Taxes and insurance		34,261		31,534		69,567		59,339
Medical specialist fees		25,182		20,579		49,532		40,267
Repairs and maintenance		10,730		11,562		21,966		23,296
Utilities		7,001		7,038		14,156		14,367
Management fees from Parent		2,966		9,048		11,792		17,964
Other miscellaneous operating expenses		20,568		20,009		36,417		39,412
Total other operating expenses	$	163,185	$	158,811	$	327,648	$	311,051

The Company began recording costs associated with the transition services agreements and other ancillary agreements with CHS following the Spin-off Transaction in accordance with the terms of these agreements.  These costs, which primarily include the costs of providing information technology, patient billing and collections and payroll services, are included in purchased services in the table above.  Prior to the Spin-off Transaction, CHS allocated costs for these services to QHC, which were also included in purchased services during the carve-out period.

Prior to the Spin-off Transaction, QHC recorded a monthly corporate management fee from CHS that represented a portion of CHS’ corporate office costs and was included in other operating expenses prior to the Spin-off Transaction.  The costs for corporate office functions are primarily included in salaries and benefits expenses following the Spin-off Transaction.  See Note 16 – Related Party Transactions for additional information on the allocated costs from CHS.

General and Administrative Costs

Substantially all of the Company’s operating costs and expenses are “cost of revenues” items.  Operating expenses that could be classified as general and administrative by the Company are costs related to corporate office functions, including, but not limited to tax, treasury, audit, risk management, legal, investor relations and human resources. These costs are primarily salaries and benefits expenses associated with corporate office functions.   General and administrative costs of the Company were $11.7 million and $11.1 million during the three months ended June 30, 2016 and 2015, respectively, and $23.7 million and $22.1 million during the six months ended June 30, 2016 and 2015, respectively.  Prior to the Spin-off Transaction, the majority of these costs were allocations from CHS.  See Note 16 – Related Party Transactions for additional information on the allocated costs from CHS.

Electronic Health Records Incentives Earned

Pursuant to the Health Information Technology for Economic and Clinical Health Act (“HITECH”), the Company is eligible to receive incentive payments under the Medicare and Medicaid programs for its eligible hospitals and physician clinics that demonstrate meaningful use of certified Electronic Health Records (“EHR”) technology.  Each of the Company’s eligible hospitals and physician clinics have completed the initial adoption phase of EHR implementation and are currently in the process of implementing the remaining two phases.EHR incentive payments are subject to audit and potential recoupment if it is determined that the applicable meaningful use standards were not met and are also subject to retrospective adjustment because the cost report data upon which the incentive payments are based are further subject to audit.

The Company utilizes a gain contingency model to recognize EHR incentive payments.  When the recognition criteria have been fully met, the Company recognizes the income from EHR incentives payments as a part of other operating costs and expenses in the consolidated and combined statements of income. Medicaid EHR incentive payments are calculated based on prior period Medicare cost report information available at the time when eligible hospitals demonstrate meaningful use of certified EHR technology. Medicare EHR incentive payments are calculated when eligible hospitals demonstrate meaningful use of certified EHR technology and the information for the applicable full Medicare cost report year to determine the final incentive payment is available.  In some instances, the Company may receive estimated Medicare EHR incentive payments prior to when the Medicare cost report information used to determine the final incentive payment is available. In these instances, recognition of the income from EHR incentive payments is deferred until all recognition criteria are met.  The Company recognizes receivables for EHR incentive payments that have been earned, but are uncollected at period end, as other current assets in the consolidated and combined balance sheets.  The receivables are adjusted for any known audit or retrospective adjustments related to prior periods.   Deferred revenue from EHR incentive payments is recorded in other current liabilities in the consolidated and combined balance sheets.

The Company incurs both capital expenditures and operating expenses in connection with the implementation of EHR technology initiatives. The amount and timing of these expenditures does not directly correlate with the timing of the Company’s receipt or recognition of EHR incentive payments as earned.  As the Company completes its full implementation of certified EHR technology in accordance with all three phases of the program, its EHR incentive payments will decline and ultimately end.

A summary of activity related to EHR incentives follows (in thousands):

	Three Months Ended June 30,						Six Months Ended June 30,
	2016			2015			2016			2015
Electronic health records incentives receivable at beginning of period	$	5,885		$	6,822		$	11,227		$	12,204
Electronic health records incentives earned		608			1,236			4,816			4,775
Cash incentive payments received		(5,124	)		(1,396	)		(12,749	)		(8,220	)
Adjustments to receivable based on final cost report settlement or audit		604			(814	)		(1,321	)		(2,911	)
Electronic health records incentives receivable at end of period	$	1,973		$	5,848		$	1,973		$	5,848
Deferred revenue related to electronic health records incentives at beginning of period	$	(4,693	)	$	(10,183	)	$	-		$	(14,351	)
Cash received and deferred during period		-			-			(4,693	)		-
Recognition of deferred incentives as earned		3,639			6,388			3,639			10,556
Deferred revenue related to electronic health records incentives at end of period	$	(1,054	)	$	(3,795	)	$	(1,054	)	$	(3,795	)
Total electronic health records incentives earned during period	$	4,247		$	7,624		$	8,455		$	15,331
Total cash incentive payments received during period		5,124			1,396			17,442			8,220

Legal and Settlement Costs

Legal and settlement costs in the consolidated and combined statements of income primarily includes legal costs and related settlements, if any, related to regulatory claims, government investigations into reimbursement payments and claims associated with QHR’s hospital management contracts.

Transaction Costs Related to the Spin-off

Transaction costs related to the spin-off consists of QHC’s portion of the costs to effect the Spin-off Transaction and the costs associated with forming a new company. These costs include audit, management advisory and consulting costs, investment advisory costs, legal expenses and other miscellaneous costs.

Income Taxes

The Company accounts for income taxes using the asset and liability method. Under this method, deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. The Company assesses the likelihood that deferred tax assets will be recovered from future taxable income. To the extent the Company believes that recovery is not likely, a valuation allowance is established. To the extent the Company establishes a valuation allowance or increases this allowance, the related expense is included in the provision for income taxes in the consolidated and combined statements of income. The Company classifies interest and penalties, if any, related to its tax positions as a component of income tax expense.  See Note 10 – Income Taxes for information on the use of the separate return method of accounting for income taxes that was used by the Company during the carve-out period and the impact of the consummation of the Spin-off Transaction on income taxes.

Comprehensive Income (Loss)

Comprehensive income (loss) is net income (loss) plus the change in equity of a Company during the period from transactions and other events or circumstances from non-owner sources.  The Company’s only source of other comprehensive income consists of pension costs related to an acquired defined benefit pension plan at one of its hospitals and a supplemental employee retirement plan.

Cash and Cash Equivalents

Cash includes cash on hand and cash with banks.  Cash equivalents are short-term, highly liquid investments with a maturity of three months or less from the date acquired and are subject to an insignificant risk of change in value.

Inventories

Inventories, primarily consisting of medical supplies and drugs, are stated at the lower of cost or market on a first-in, first-out basis.

Other Current Assets

Other current assets consists of the current portion of the receivables from CHS related to professional and general liability and workers’ compensation insurance reserves that were indemnified by CHS in connection with the Spin-off Transaction, non-patient accounts receivable primarily related to QHR, receivables related to electronic health records incentives and other miscellaneous current assets.

Property and Equipment

Purchases of property and equipment are recorded at cost. Property and equipment acquired in a business combination are recorded at estimated fair value.  Routine maintenance and repairs are expensed as incurred.  Expenditures that increase capacities or extend useful lives are capitalized.  The Company capitalizes interest related to financing of major capital additions with the respective asset.  Depreciation is recognized using the straight-line method over the estimated useful life of an asset. The Company depreciates land improvements over 3 to 20 years, buildings and improvements over 5 to 40 years, and equipment and fixtures over 3 to 18 years.  The Company also leases certain facilities and equipment under capital lease obligations. These assets are amortized on a straight-line basis over the lesser of the lease term or the remaining useful life of the asset.

Goodwill

The Company’s hospital operations and QHR’s hospital management advisory and consulting services operations meet the criteria to be classified as reporting units for goodwill.  Goodwill was initially determined for QHC’s hospital operations reporting unit based on a relative fair value approach as of September 30, 2013 (CHS’ goodwill impairment testing date). Additional goodwill was allocated on a similar basis for four hospitals acquired by CHS in 2014 and included in the group of hospitals spun-off to QHC.  For the QHR reporting unit, goodwill was allocated based on the amount recorded by CHS at the time of its acquisition in 2007. All subsequent goodwill generated from hospital, physician practice or other ancillary business acquisitions was recorded at fair value at the time of acquisition.

Goodwill arising from business combinations is not amortized. Goodwill is evaluated for impairment at the same time every year and when an event occurs or circumstances change that, more likely than not, reduce the fair value of the reporting unit below its carrying value. There is a two-step method for determining goodwill impairment. Step one is to compare the fair value of the reporting unit with the unit’s carrying amount, including goodwill. If this test indicates the fair value is less than the carrying value, then step two is required to compare the implied fair value of the reporting unit’s goodwill with the carrying value of the reporting unit’s goodwill. See Note 5 – Goodwill and Intangible Assets, which includes a discussion of the impairment charges recorded in the consolidated and combined statements of income for the three and six months ended June 30, 2016.  The Company performs its annual testing of impairment for goodwill in the fourth quarter of each year.  The fair value of the related reporting units is estimated using both a discounted cash flow model as well as a multiple model based on earnings before interest, taxes, depreciation and amortization. The cash flow forecasts are adjusted by an appropriate discount rate based on the Company’s best estimate of a market participant’s weighted-average cost of capital. Both models are based on the Company’s best estimate of future revenues and operating costs and are reconciled to the Company’s consolidated market capitalization, with consideration of the amount a potential acquirer would be required to pay, in the form of a control premium, in order to gain sufficient ownership to set policies, direct operations and control management decisions of the Company.

Intangible Assets

The Company’s intangible assets primarily consists of purchase and development costs of software for internal use and contract-based intangible assets, including physician guarantee contracts, medical licenses, hospital management contracts, non-compete agreements and certificates of need. There are no expected residual values related to the Company’s intangible assets.  Capitalized software costs are generally amortized over three years, except for software costs for significant system conversions, which are amortized over 8 to 10 years.  Capitalized software costs that are in the development stage are not amortized until the related projects are complete.  Assets established for physician guarantee contracts, hospital management contracts, non-compete agreements and certificates of need are amortized over the life of the individual contracts.  Tradenames and medical licenses are not amortized.

Impairment of Long-Lived Assets

Whenever an event occurs or changes in circumstances indicate that the carrying values of certain long-lived assets may be impaired, the Company projects the undiscounted cash flows expected to be generated by these assets. If the projections indicate that the carrying values are not expected to be recovered, such amounts are reduced to their estimated fair value based on a quoted market price, if available, or an estimated value based on valuation techniques available in the circumstances.  See Note 3 – Hospitals Held for Sale and Impairment of Long-Lived Assets related to impairment charges recorded in the consolidated and combined statements of income for the three and six months ended June 30, 2016.

Other Long-Term Assets

Other long-term assets consists of the long-term portion of the receivables from CHS related to professional and general liability and workers’ compensation insurance reserves that were indemnified by CHS in connection with the Spin-off Transaction, deposits, investments in unconsolidated subsidiaries and other miscellaneous long-term assets.

Other Current Liabilities

Other current liabilities consists of the current portion of professional and general and workers’ compensation insurance reserves, including the portion indemnified by CHS in connection with the Spin-off Transaction, property tax accruals, legal accruals, deferred revenue related to electronic health records incentives, physician guarantees and other miscellaneous current liabilities.  

Insurance Reserves

As part of the business of owning and operating hospitals, the Company is subject to legal actions alleging liability on its part. To mitigate a portion of this risk, the Company maintains insurance exceeding a self-insured retention level for these types of claims. The Company’s self-insurance reserves reflect the current estimate of all outstanding losses, including incurred but not reported losses, based upon actuarial calculations as of period end. The loss estimates included in the actuarial calculations may change in the future based upon updated facts and circumstances. The Company’s insurance expense includes the actuarially determined estimate of losses for the current year, including claims incurred but not reported, the change in the estimate of losses for prior years based upon actual claims development experience as compared to prior actuarial projections, the insurance premiums for losses in excess of the Company’s self-insured retention levels, the administrative costs of the insurance programs, and interest expense related to the discounted portion of the liability.  The Company’s reserves for professional liability claims are based upon semi-annual actuarial calculations, taking into consideration historical claims data, demographic considerations, severity factors and other actuarial assumptions, which are discounted to present value. The reserves for self-insured claims have been discounted based on the Company’s risk-free interest rate that corresponds to the period when the self-insured claims are incurred and projected to be paid.

See Note 17 – Commitments and Contingencies for information related to the portion of the Company’s insurance reserves for professional and general liability and workers’ compensation liability that are indemnified by CHS and the related accounting treatment and presentation in the consolidated and combined financial statements.  

Self-Insured Medical Benefits

The Company is self-insured for substantially all of the medical benefits of its employees.  The Company maintains a liability for its current estimate of incurred but not reported employee health claims based upon an annual actuarial calculation.  The undiscounted reserve for self-insured employee health benefits was $12.4 million as of June 30, 2016 and is included in employee compensation liabilities in the consolidated and combined balance sheets.  Expense each period is based on the actual claims received during the period plus any adjustment to the liability.

Prior to the Spin-off Transaction, QHC was allocated employee health expense, as part of the monthly corporate overhead charges from CHS, which was determined based on claims made by QHC employees during the period plus an estimate for the change in liability related to QHC employee health claims incurred but not reported.  The liability was included in Due to Parent, net, in the consolidated and combined balance sheets as the related employee health insurance policy was owned by CHS.  Employee health expense is included in salaries and benefits expenses in the consolidated and combined statements of income for all periods.  See Note 16 – Related Party Transactions for additional information on all corporate overhead costs from CHS prior to the Spin-off Transaction.

Debt Issuance Costs and Discounts

The Company adopted Accounting Standards Update 2015-03 on January 1, 2016 which requires the presentation of debt issuance costs as a reduction of the debt liability on the balance sheet, consistent with the accounting for debt discounts.  Amortization of debt issuance costs and debt discounts are each recorded as non-cash interest expense over the life of the respective debt instrument.

Due to Parent, Net

Prior to the Spin-off Transaction, Due to Parent, net, in the consolidated and combined balance sheets represented the Company’s liability to CHS for the accumulation of (1) CHS’ historical investment in QHC, (2) liabilities established related to the cost allocations from CHS to QHC, (3) interest charged by CHS on the monthly outstanding Due to Parent, net balance, (4) the net effect of transactions between CHS and QHC, and (5) the net effect of cash transfers from QHC to CHS under CHS’ centralized cash management program. In connection with the Spin-off Transaction, certain liabilities were transferred through Due to Parent, net to the Company, pursuant to the Separation and Distribution Agreement, and the remaining balance was settled in the form of a non-cash capital contribution to the Company.  See Note 1 – Description of the Business and Spin-off Transaction and Note 16 – Related Party Transactions for additional information on the Spin-off Transaction and related party transactions with CHS.  

Assets and Liabilities of Hospitals Held for Sale

The Company reports assets that meet the criteria for classification as held for sale separately from other assets on the consolidated and combined balance sheets.  Generally, assets that meet the criteria include those in which the carrying amount will be settled principally through a sale transaction rather than through continuing use.  The asset must be available for immediate sale in its present condition, subject to usual or customary terms, and the sale must be probable to occur in the next 12 months.  Similarly, the liabilities of a disposal group are classified as held for sale upon meeting these criteria.  Immediately following classification as held for sale, the Company remeasures these assets and liabilities and adjusts the value to the lesser of the carrying amount or fair value less costs to sell.  The assets and liabilities classified as held for sale are no longer depreciated or amortized into expense.  See Note 3 – Hospitals Held for Sale and Impairment of Long-Lived Assets related to certain hospitals classified as held for sale as of June 30, 2016.

Stock-Based Compensation

In connection with the Spin-off Transaction, the Company issued QHC restricted stock awards to all CHS restricted stock award holders as of the Record Date.  Each holder of CHS restricted stock awards received one QHC restricted stock award for every four CHS restricted stock awards held.  In addition, QHC employees that held CHS restricted stock awards were allowed to continue to hold the CHS awards under the same terms and conditions that existed prior to the Spin-off Transaction, excluding certain shares granted on March 1, 2016 which were canceled in connection with the Spin-off Transaction.  The unrecognized compensation expense related to the vesting of the CHS restricted stock awards held by QHC employees was transferred to QHC with the Spin-off Transaction.  As a result, the Company is responsible for recording stock-based compensation expense attributable to the unvested portion of CHS restricted stock awards held by QHC employees and the unvested portion of all QHC restricted stock awards held by its employees, consisting of both QHC awards issued on the Record Date and additional awards granted under the Quorum Health Corporation 2016 Stock Award Plan (the “2016 Stock Award Plan”) following the Spin-off Transaction.  See Note 14 – Stock-Based Compensation.

Benefit Plans

Following the Spin-off Transaction, the Company maintains various benefit plans, including defined contribution plans, a defined benefit plan and deferred compensation plans, for which certain of the Company’s subsidiaries are the plan sponsors.  The rights and obligations of these plans were transferred from CHS to the Company in connection with the Spin-off Transaction, pursuant to the Separation and Distribution Agreement. Prior to the Spin-off Transaction, QHC was allocated a portion of CHS’ benefit costs under its defined contribution plans, based on specific identification for plans associated with QHC hospitals and QHC’s proportional share of employees covered under all other applicable plans.  The expense was recorded as salaries and benefits in the consolidated and combined statements of income, and the cumulative liability for these benefit costs was recorded in Due to Parent, net, in the consolidated and combined balance sheets and transferred to the Company in the Spin-off Transaction.

QHC recognizes the unfunded liability of its defined benefit plan in other long-term liabilities in the consolidated and combined balance sheets and unrecognized gains (losses) and prior service credits (costs) as changes in other comprehensive income (loss).  The measurement date of the plan’s assets and liabilities coincides with the Company’s year-end.  The Company’s pension benefit obligation is measured using actuarial calculations that incorporate discount rates, rate of compensation increases and expected long-term returns on plan assets and that consider expected age of retirement and mortality.  The Company records pension benefit costs related to all of its plans as salaries and benefits costs in the consolidated and combined statements of income.

Fair Value of Financial Instruments

The Company utilizes the U.S. GAAP fair value hierarchy for measurement of fair value related to its financial instruments.  The fair value hierarchy distinguishes between market participant assumptions based on market data obtained from sources independent of the reporting entity (observable inputs that are classified within Levels 1 and 2 of the hierarchy) and the reporting entity’s own assumption about market participant assumptions (unobservable inputs classified within Level 3 of the hierarchy).  The inputs used to measure fair value are classified into the following fair value hierarchy:

· Level 1 - Quoted market prices in active markets for identical assets and liabilities.

· Level 2 - Observable market-based inputs or unobservable inputs that are corroborated by market data.

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

Segment Reporting

The principal business of the Company is to provide healthcare services through its hospitals and affiliated facilities. The Company’s only other line of business is the hospital management advisory and consulting services it provides through QHR. The Company has determined that its hospital operations business meets the criteria for separate segment reporting.  The financial information for QHR’s business does not meet the quantitative thresholds for separate segment reporting, and therefore has been combined with the Company’s corporate functions into the all other reportable segment.  See Note 13 – Segments.

Accounting Standards Not Yet Adopted

In May 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2014-09, which outlines a single comprehensive model for recognizing revenue and supersedes most existing revenue recognition guidance, including guidance specific to the healthcare industry. This ASU provides companies the option of applying a full or modified retrospective approach upon adoption. This ASU is effective for fiscal years beginning after December 15, 2017 with early adoption permitted for annual periods beginning after December 15, 2016. The Company expects to adopt this ASU on January 1, 2018 and is currently evaluating its plan for adoption and the impact on its revenue recognition policies, procedures and control framework and the resulting impact on its consolidated and combined results of operations, financial position and cash flows.

In February 2016, the FASB issued ASU 2016-02, which amends the accounting for leases, requiring lessees to recognize most leases on their balance sheet with a right-of-use asset and a lease liability. Leases will be classified as either finance or operating leases, which will impact the expense recognition of such leases over the lease term. The ASU also modifies the lease classification criteria for lessors and eliminates some of the real estate leasing guidance previously applied for certain leasing transactions. This ASU is effective for fiscal years beginning after December 15, 2018, with early adoption permitted. The Company expects to adopt this ASU on January 1, 2019.  Because of the number of leases we utilize to support operations, the adoption of this ASU is expected to have a significant impact on the Company’s consolidated and combined results of operations, financial position and cash flows.  The Company is currently evaluating the quantitative and qualitative factors that will impact the Company as part of the adoption of this ASU, as well as any changes to its leasing strategy because of the changes to the accounting and recognition of leases.

In March 2016, the FASB issued ASU 2016-09, which was issued to simplify some of the accounting guidance for share-based compensation. Among the areas impacted by the amendments in this ASU is the accounting for income taxes related to share-based payments, accounting for forfeitures, classification of awards as equity or liabilities and classification on the statement of cash flows. This ASU is effective for fiscal years beginning after December 15, 2016, with early adoption permitted. The Company expects to adopt this ASU on January 1, 2017. Management is evaluating the impact that the adoption of this ASU will have on its consolidated and combined financial position, results of operations and cash flows.

XML

Hospitals Held for Sale and Impairment of Long-Lived Assets

6 Months Ended

Jun. 30, 2016

Assets Held For Sale [Abstract]

Hospitals Held for Sale and Impairment of Long-Lived Assets

NOTE 3 – HOSPITALS HELD FOR SALE AND IMPAIRMENT OF LONG-LIVED ASSETS

The Company’s business strategy includes an ongoing strategic review of its hospitals for possible divestitures based upon an analysis of financial performance, current competitive conditions, expected demographic trends, joint venture opportunities and capital allocation requirements.  The Company anticipates that it may divest certain hospitals in the next 12 to 18 months.

As of June 30, 2016, the Company has received letters of intent from potential buyers related to certain hospitals, and as a result, reclassified certain assets and liabilities of those hospitals as held for sale on its consolidated and combined balance sheet.  As a result of management’s decision to divest these hospitals and evaluate other hospitals for divestiture, the Company analyzed the long-lived assets of all of its hospitals to test for impairment. The Company recorded $45.4 million of impairment charges in the consolidated and combined statements of income during the three months ended June 30, 2016.  These impairment charges included $9.8 million for property and equipment and $4.4 million for capitalized software costs related to hospitals held for sale and $31.2 million for property and equipment related to hospitals held and used.  The carrying amounts of long-lived assets, including those classified as held for sale, are reported net of impairment charges in the consolidated and combined balance sheet as of June 30, 2016. The Company evaluated the estimated relative fair value of the hospitals held for sale in relation to the overall fair value of its hospital reporting unit as of September 30, 2015, the date of its last goodwill impairment analysis, resulting in a goodwill impairment charge of $5.0 million. The Company recorded an additional $200 million estimate of goodwill impairment. See Note 5 – Goodwill and Intangible Assets for additional information related to goodwill impairment charges.

XML

Property and Equipment

6 Months Ended

Jun. 30, 2016

Property Plant And Equipment [Abstract]

Property and Equipment

NOTE 4 – PROPERTY AND EQUIPMENT

A summary of property and equipment follows (in thousands):

	June 30,			December 31,
	2016			2015
Property and equipment, at cost:
Land and improvements	$	95,631		$	100,053
Building and improvements		814,376			853,853
Equipment and fixtures		599,634			616,667
Construction in progress		40,110			33,080
Total property and equipment, at cost		1,549,751			1,603,653
Less:  Accumulated depreciation and amortization		(732,719	)		(723,404	)
Total property and equipment, net	$	817,032		$	880,249

Depreciation expense was $22.5 million for each of the three months ended June 30, 2016 and 2015 and $44.9 million and $45.5 million for the six months ended June 30, 2016 and 2015, respectively.  See Note 5 – Goodwill and Intangible Assets for information on amortization expense recorded for property and equipment held under capital lease obligations.  The total amount of assets held under capital lease obligations was $28.5 million and $23.4 million, at cost, at June 30, 2016 and December 31, 2015, respectively, and $26.9 million and $22.4 million, net of accumulated amortization, at June 30, 2016 and December 31, 2015, respectively.

On June 30, 2016, the Company reduced the carrying value of property and equipment at certain hospitals that the Company is currently marketing for sale and at certain underperforming hospitals that are part of its ongoing operations.  See Note 3 – Hospitals Held for Sale and Impairment of Long-Lived Assets for additional information on the impairment recorded in the consolidated and combined statements of income for the three and six months ended June 30, 2016.

Purchases of property and equipment that were accrued in accounts payable as of June 30, 2016 and December 31, 2015 were $8.3 million and $7.0 million, respectively.

XML

Goodwill and Intangible Assets

6 Months Ended

Jun. 30, 2016

Goodwill And Intangible Assets Disclosure [Abstract]

Goodwill and Intangible Assets

NOTE 5– GOODWILL AND INTANGIBLE ASSETS

Goodwill

A summary of changes in goodwill follows (in thousands):

	Six Months Ended
	June 30, 2016
Balance at beginning of period	$	541,704
Acquisitions		86
Impairment		(205,000	)
Balance at end of period	$	336,790

Goodwill related to the hospital operations reporting unit, after giving effect to the impairment charges discussed below, was $303.5 million and $508.4 million as of June 30, 2016 and December 31, 2015, respectively. Goodwill related to the hospital management advisory and consulting services reporting unit was $33.3 million at both June 30, 2016 and December 31, 2015.

The Company reclassified assets and liabilities at certain of its hospitals as held for sale on its consolidated and combined balance sheet at June 30, 2016. As a result, the Company evaluated the estimated relative fair value of the hospitals held for sale in relation to the overall fair value of its hospital reporting unit as of September 30, 2015, the date of its last goodwill impairment analysis, and recognized goodwill impairment of $5.0 million. See Note 3 – Hospitals Held for Sale and Impairment of Long-Lived Assets for additional information related to the hospitals held for sale.  

In addition, the Company identified certain indicators of impairment requiring an interim goodwill impairment evaluation. Those indicators were primarily the Company’s market capitalization as compared to the carrying value of equity and a decrease in the estimated future earnings of the Company. The Company performed a calculation of fair value in step one of the impairment test, which indicated that the carrying value of the hospital operations reporting unit exceeded its fair value. An initial step two calculation has been performed to determine the implied value of goodwill in a hypothetical purchase price allocation. The Company recorded an impairment charge of $200 million to goodwill, in addition to the $5.0 million discussed above, based on its current best estimate of fair value and the resulting implied goodwill related to its hospital reporting unit. As permitted under U.S. GAAP, this amount represents an estimate of the implied goodwill in the step two evaluation until that process can be finalized, which the Company expects to complete during the third quarter of 2016. Any increases or decreases in the fair value and resulting implied value of goodwill will be recorded when the evaluation is complete, and such changes could be material. Factors that could impact the final determination of fair value include, but are not limited to, a further decline in market capitalization, changes in the estimated fair values of the individual hospital assets and liabilities or changes in projected future earnings and net cash flows.

Intangible Assets

A summary of intangible assets follows (in thousands):

	June 30,			December 31,
	2016			2015
Finite-lived intangible assets:
Capitalized software costs:
Cost	$	189,368		$	194,941
Accumulated amortization		(107,095	)		(98,004	)
Capitalized software costs, net		82,273			96,937
Physician guarantee contracts:
Cost		12,327			16,594
Accumulated amortization		(6,355	)		(9,560	)
Physician guarantee contracts, net		5,972			7,034
Other finite-lived intangible assets:
Cost		42,073			43,275
Accumulated amortization		(29,849	)		(29,351	)
Other finite-lived intangible assets, net		12,224			13,924
Total finite-lived intangible assets:
Cost		243,768			254,810
Accumulated amortization		(143,299	)		(136,915	)
Total finite-lived intangible assets, net	$	100,469		$	117,895
Indefinite-lived intangible assets:
Tradenames	$	4,000		$	4,000
Medical licenses and other indefinite-lived intangible assets		4,975			7,355
Total indefinite-lived intangible assets	$	8,975		$	11,355
Total intangible assets:
Cost	$	252,743		$	266,165
Accumulated amortization		(143,299	)		(136,915	)
Total intangible assets, net	$	109,444		$	129,250

As of June 30, 2016, the Company had $2.2 million of capitalized software costs that are currently in the development stage and will begin amortization once the software projects are complete and ready for their intended use.

Amortization Expense

A summary of amortization expense follows (in thousands):

	Three Months Ended June 30,				Six Months Ended June 30,
	2016		2015		2016		2015
Amortization of finite-lived intangible assets:
Capitalized software costs	$	6,730	$	6,754	$	13,325	$	13,464
Physician guarantee contracts		902		1,275		1,613		1,991
Other finite-lived intangible assets		759		813		1,516		1,645
Total amortization expense related to finite-lived intangible assets		8,391		8,842		16,454		17,100
Amortization of property and equipment assets held under capital lease obligations		610		605		1,293		1,235
Total amortization expense	$	9,001	$	9,447	$	17,747	$	18,335

As of June 30, 2016, the weighted-average remaining amortization period of the Company’s intangible assets subject to amortization, except for capitalized software costs and physician guarantee contracts, was approximately 5.9 years.

Total estimated future amortization expense for the next five years and thereafter related to the intangible assets follows (in thousands):

	June 30,
	2016
Remainder of 2016	$	14,498
2017		25,418
2018		14,285
2019		12,668
2020		12,288
Thereafter		21,312
Total estimated future amortization expense	$	100,469

XML

Long-Term Debt

6 Months Ended

Jun. 30, 2016

Debt Disclosure [Abstract]

Long-Term Debt

NOTE 6 – LONG-TERM DEBT

A summary of long-term debt follows (in thousands):

	June 30,			December 31,
	2016			2015
Senior Credit Facility:
Revolving Credit Facility, maturing 2021	$	-		$	-
Term Loan Facility, maturing 2022		877,800			-
ABL Credit Facility, maturing 2021		-			-
Senior Notes, maturing 2023		400,000			-
Unamortized debt issuance costs and discounts		(51,348	)		-
Capital lease obligations		25,500			22,323
Other debt		978			1,092
Total debt		1,252,930			23,415
Less:  Current maturities of long-term debt		(16,271	)		(7,915	)
Total long-term debt	$	1,236,659		$	15,500
Due to Parent, net	$	-		$	1,800,908

In connection with the Spin-off Transaction, the Company entered into two credit agreements and issued senior notes.  In addition, the indebtedness with CHS, which was classified on the consolidated and combined balance sheets as Due to Parent, net, was fully settled.  See Note 1 – Description of the Business and Spin-off Transaction and Note 16 – Related Party Transactions for additional information on the use of proceeds from the new debt instruments and the settlement of Due to Parent, net.

Senior Credit Facility

On April 29, 2016, the Company entered into a credit agreement (the “CS Agreement”), among the Company, the lenders party thereto and Credit Suisse AG, Cayman Islands Branch (“Credit Suisse”), as administrative agent and collateral agent. The CS Agreement provides for an $880 million senior secured term loan facility (the “Term Loan Facility”) and a $100 million senior secured revolving credit facility (the “Revolving Credit Facility” and, together with the Term Loan Facility, the “Senior Credit Facility”). The available borrowings from the Revolving Credit Facility will be used for working capital and general corporate purposes.  As of June 30, 2016, the Company had no borrowings outstanding on the Revolving Credit Facility and had $3.1 million of letters of credit outstanding that were primarily related to the self-insured retention levels of professional and general liability and workers’ compensation insurance as security for the payment of claims.

The Term Loan Facility was issued at a discount of $17.6 million, or 98% of par value, and has a maturity date of April 29, 2022, subject to customary acceleration events and repayment, extension or refinancing. Interest under the Term Loan Facility accrues, at the option of the Company, at adjusted LIBOR, subject to statutory reserves and a floor of 1%, plus 5.75% or the alternate base rate plus 4.75%. Interest under the Revolving Credit Facility accrues, at the option of the Company, at adjusted LIBOR, subject to statutory reserves and a floor of 0%, plus 2.75% or the alternate base rate plus 1.75%. The Revolving Credit Facility has a maturity date of April 29, 2021, subject to certain customary acceleration events and repayment, extension or refinancing.  The effective interest rate on the Term Loan Facility was 7.64% as of June 30, 2016.

Under the terms of the CS Agreement, the maximum Secured Net Leverage Ratio permitted under the CS Agreement, as determined based on 12 month trailing EBITDA, follows:

	Maximum
	Secured Net
Period	Leverage Ratio
Period from April 29, 2016 to June 30, 2017	4.50 to 1.00
Period from July 1, 2017 to June 30, 2018	4.25 to 1.00
Period from July 1, 2018 and thereafter	4.00 to 1.00

As of June 30, 3016, the Company had a Secured Net Leverage Ratio of 3.67 to 1.0 implying additional borrowing capacity of $181.2 million.

ABL Credit Facility

On April 29, 2016, the Company entered into an ABL Credit Agreement (the “UBS Agreement,” and together with the CS Agreement, collectively, the “Credit Agreements”), among the Company, the lenders party thereto and UBS AG, Stamford Branch (“UBS”), as administrative agent and collateral agent. The UBS Agreement provides for a $125 million senior secured asset-based revolving credit facility (the “ABL Credit Facility”). The available borrowings from the ABL Credit Facility will be used for working capital and general corporate purposes.  As of June 30, 2016, the Company had no borrowings outstanding on the ABL Credit Facility.

The ABL Credit Facility has a maturity date of April 29, 2021, subject to customary acceleration events and repayment, extension or refinancing. Interest under the ABL Credit Facility accrues, at the option of the Company, at a base rate or LIBOR, subject to statutory reservesand a floor of 0%,except that all swingline borrowings will accrue interest based on the base rate, plus an applicable margin determined by the average excess availability under the ABL Credit Facility for the fiscal quarter immediately preceding the date of determination. The applicable margin ranges from 1.75% to 2.25% for LIBOR advances and from 0.75% to 1.25% for base rate advances.

The ABL Credit Facility has a “Covenant Trigger Event” definition that requires the Company to maintain excess availability under the ABL Credit Facility equal to or greater than the greater of (i) $12.5 million and (ii) 10% of the aggregate commitments under the ABL Credit Facility.  At June 30, 2016, the Company had excess availability of $122.1 million.  If a Covenant Trigger Event occurs, then the Company is required to maintain a minimum Consolidated Fixed Charge Ratio of 1.10 to 1.00 until such time that a Covenant Trigger Event is no longer continuing. In addition, if excess availability under the ABL Credit Facility were to fall below the greater of (i) 12.5% of the aggregate commitments under the ABL Credit Facility and (ii) $15.0 million, then a “Cash Dominion Event” would be triggered upon which the lenders could assume control of the Company’s cash.

Credit Agreement Covenants

In addition to the specific covenants described above, the Credit Agreements contain customary negative covenants, which limit the Company’s ability to incur additional indebtedness, create liens, make investments, make restricted payments, including dividends and distributions, and specified payments on other indebtedness, transfer of assets and merge or acquire assets, among other things.  They include customary events of default, including payment defaults, material breaches of representations and warranties, covenant defaults, default on other material indebtedness, customary Employee Retirement Income Security Act (“ERISA”)events of default, bankruptcy and insolvency, material judgments, invalidity of liens on collateral, change of control or cessation of business. The Credit Agreements also contain customary affirmative covenants and representations and warranties.

Senior Notes

On April 22, 2016, QHC issued $400 million aggregate principal amount of 11.625% Senior Notes due 2023, pursuant to the Indenture. The Senior Notes were issued at a discount of $6.9 million, or 1.734%, in a private placement and are senior unsecured obligations of the Company guaranteed on a senior basis by certain of the Company’s subsidiaries (the “Guarantors”).  The Senior Notes mature on April 15, 2023 and bear interest at a rate of 11.625% per annum, payable semi-annually in arrears on April 15 and October 15 of each year, beginning on October 15, 2016.  Interest on the Senior Notes accrues from the date of original issuance and is calculated on the basis of a 360-day year comprised of twelve 30-day months.  The effective interest rate on the Senior Notes was 12.471% as of June 30, 2016.

The Indenture contains covenants that, among other things, limit the ability of the Company and certain of its subsidiaries to incur or guarantee additional indebtedness, pay dividends or make other restricted payments, make certain investments, create or incur certain liens, sell assets and subsidiary stock, transfer all or substantially all of its assets or enter into merger or consolidation transactions.

On April 22, 2016, in connection with the issuance of the Senior Notes, the Company entered into a Registration Rights Agreement. The terms of the Registration Rights Agreement require the Company to (i) file with the Securities and Exchange Commission a registration statement with respect to an offer to exchange the Senior Notes for a new issue of debt securities registered under the Securities Act of 1933, as amended (the “Exchange Offer”), with terms identical to those of the Senior Notes (except for provisions relating to the transfer restrictions and payment of additional interest) and cause the Exchange Offer to be completed within 365 days following the closing of the issuance of the Senior Notes, (ii) keep the Exchange Offer open for at least 30 business days (or longer if required by applicable law) and (iii) in certain circumstances, file a shelf registration statement for the resale of the Senior Notes by some or all of the holders thereof, in lieu of an exchange offer to such holders. If the Company and the Guarantors fail to satisfy their registration obligations, the Company will be required to pay additional interest to the holders of Senior Notes, the transfer of which remains restricted, reflecting typical market terms.  

On and after April 15, 2019, QHC is entitled, at its option, to redeem all or a portion of the Senior Notes upon not less than 30 nor more than 60 days notice, at the following redemption prices, plus accrued and unpaid interest, if any, to the redemption date.  The redemption prices are expressed as a percentage of the principal amount on the redemption date.  Holders of record on the relevant record date have the right to receive interest due on the relevant interest payment date.  In addition, prior to April 15, 2019, the Company may redeem some or all of the Senior Notes at a price equal to 100% of the principal amount thereof, plus accrued and unpaid interest, if any, plus a “make whole” premium, as set forth in the Indenture.  The Company is entitled to redeem up to 35% of the aggregate principal amount of the Senior Notes until April 15, 2019 with the net proceeds from certain equity offerings at the redemption price set forth in the Indenture.

A summary of the redemption dates and prices follows:

	Redemption
Period	Prices
Period from April 15, 2019 to April 14, 2020		108.719	%
Period from April 15, 2020 to April 14, 2021		105.813	%
Period from April 15, 2021 to April 14, 2022		102.906	%
Period from April 15, 2022 to April 15, 2023		100.000	%

Debt Issuance Costs and Discounts

A summary of debt issuance costs and discounts follows (in thousands):

	June 30,			December 31,
	2016			2015
Debt issuance costs	$	28,003		-
Debt discounts		24,536		-
Total debt issuance costs and discounts at origination		52,539			-
Less:  Amortization of debt issuance costs and discounts		(1,191	)	-
Total unamortized debt issuance costs and discounts	$	51,348		$	-

Prior to the Spin-off Transaction, the Company had no capitalized costs for debt issuance, discounts or premiums.

Capital Lease Obligations and Other Debt

The Company’s debt arising from capital lease obligations primarily relates to the deferred financing obligation associated with its new corporate office in Brentwood, Tennessee.  As of June 30, 2016, this capital lease obligation was $18.0 million.  The remainder of the Company’s capital lease obligations relate to property and equipment at its hospitals and corporate office.  Other debt consists of physician loans and miscellaneous notes payable to banks.  See Note 17 – Commitments and Contingencies for additional information on the corporate office lease.

Debt Maturities

A summary of debt maturities for the next five years and thereafter follows (in thousands):

	June 30,
	2016
Remainder of 2016	$	11,087
2017		10,268
2018		10,411
2019		10,047
2020		10,145
Thereafter		1,252,320
Total debt, excluding debt issuance costs and discounts	$	1,304,278

Interest Expense, Net

A summary of the components of interest expense, net, follows (in thousands):

	Three Months Ended June 30,						Six Months Ended June 30,
	2016			2015			2016		2015
Senior Credit Facility:
Revolving Credit Facility	$	85		$	-		$	85	$	-
Term Loan Facility		10,432			-			10,432		-
ABL Credit Facility		82			-			82		-
Senior Notes		8,914			-			8,914		-
Amortization of debt issuance costs and discounts		1,191			-			1,191		-
All other interest expense (income), net		(359	)		(182	)		210		237
Total interest expense, net, from long-term debt		20,345			(182	)		20,914		237
Due to Parent, net		8,931			24,010			35,814		49,393
Total interest expense, net	$	29,276		$	23,828		$	56,728	$	49,630

XML

Other Long-Term Liabilities

6 Months Ended

Jun. 30, 2016

Other Liabilities Disclosure [Abstract]

Other Long-Term Liabilities

NOTE 7 – OTHER LONG-TERM LIABILITIES

A summary of other long-term liabilities follows (in thousands):

	June 30,		December 31,
	2016		2015
Professional and general liability insurance reserves	$	87,250	$	77,423
Workers' compensation liability insurance reserves		19,690		20,507
Benefit plan liabilities		12,702		3,376
Deferred rent		3,986		3,770
Other miscellaneous long-term liabilities		3,247		3,065
Total other long-term liabilities	$	126,875	$	108,141

See Note 17 – Commitments and Contingencies for additional information about the Company’s insurance reserves.

XML

Fair Value of Financial Instruments

6 Months Ended

Jun. 30, 2016

Fair Value Disclosures [Abstract]

Fair Value of Financial Instruments

NOTE 8 – FAIR VALUE OF FINANCIAL INSTRUMENTS

The carrying amounts of the Company’s cash and cash equivalents, patient accounts receivable and accounts payable approximate their fair values due to the short-term maturity of these financial instruments.

The Company recorded impairment charges related to property and equipment, capitalized software and goodwill as of June 30, 2016, as discussed in Note 3 – Hospitals Held for Sale and Impairment of Long-Lived Assets and Note 5 – Goodwill and Intangible Assets. The assessment of fair value was based on Level 3 inputs as the valuation methodologies used to determine impairment was based on internal projections and unobservable inputs. The portion of impairment related to hospital assets held for sale was determined based on Level 2 inputs as the valuation methodologies used to determine impairment took into consideration letters of intent received on these hospitals.

A summary of the carrying amounts and estimated fair values of the Company’s long-term debt follows (in thousands):

	June 30, 2016				December 31, 2015
	Carrying		Estimated		Carrying		Estimated
	Amount		Fair Value		Amount		Fair Value
Revolving Credit Facility	$	-	$	-	$	-	$	-
Term Loan Facility		877,800		880,548		—		—
ABL Credit Facility		—		—		—		—
Senior Notes		400,000		404,752		—		—
Other debt		26,478		26,478		23,415		23,415
Total long-term debt, excluding debt issuance costs and discounts	$	1,304,278	$	1,311,778	$	23,415	$	23,415

The Company considers its long-term debt instruments to be measured based on Level 2 inputs.  Information about the valuation methodologies used in the determination of the fair values for the Company’s long-term debt instruments follows:

· Credit facilities.  The estimated fair value is based on publicly available trading activity and supported with information from the Company’s lending institutions regarding relevant pricing for trading activity.

· Senior notes.  The estimated fair value is based on the closing market price for these notes.

· All other debt.  The carrying amounts of the Company’s debt instruments, including capital lease obligations, physician loans and miscellaneous notes payable to banks, approximate their estimated fair values due to the nature of these obligations.

XML

Equity

6 Months Ended

Jun. 30, 2016

Equity [Abstract]

Equity

NOTE 9 – EQUITY

Preferred Stock

In connection with the Spin-off Transaction, the Company authorized 100,000,000 shares of preferred stock, par value of $0.0001 per share.  No shares have been issued as of June 30, 2016.  The Company’s Board of Directors (the “Board”) has the discretion, subject to limitations prescribed by Delaware law and by its amended and restated certificate of incorporation, to determine the rights, preferences, privileges and restrictions, including voting rights, dividend rights, conversion rights, redemption privileges and liquidation preferences, of each series of preferred stock, when and if issued.

Common Stock

In connection with the Spin-off Transaction, the Company authorized 300,000,000 shares of common stock, par value of $0.0001 per share, and issued 28,412,054 shares of common stock on April 29, 2016 to CHS stockholders of record on the Record Date, or April 22, 2016.  The common stock began “regular-way” trading on the NYSE on May 3, 2016, under the ticker symbol “QHC”.  As of June 30, 2016, the Company had 29,489,247 shares of common stock, issued and outstanding.

Holders of the Company’s common stock are entitled to one vote for each share held of record on all matters on which stockholders may vote.  Holders of the Company’s common stock will not have cumulative voting rights in the election of directors.  There are no preemptive rights, conversion, redemption or sinking fund provisions applicable to the common stock.  In the event of liquidation, dissolution or winding up, holders of common stock are entitled to share ratably in the assets available for distribution. Delaware law prohibits the Company from paying any dividends unless it has capital surplus or net profits available for this purpose. In addition, the Company’s Credit Agreements impose restrictions on its ability to pay dividends.

Additional Paid-in Capital

In connection with the Spin-off Transaction, the Company issued common stock, as described above, to CHS stockholders.  In addition and pursuant to the Separation and Distribution Agreement, CHS contributed capital, in excess of par value of common stock, of $518.5 million in lieu of a cash settlement payment related to the remaining intercompany indebtedness with CHS and the Parent’s equity attributable to CHS.  See Note 1 – Description of the Business and Spin-off Transaction for a summary of the transactions that occurred on April 29, 2016 to effect the Spin-off Transaction.

Accumulated Deficit

Accumulated deficit of the Company, as shown on the consolidated and combined balance sheet as of June 30, 2016, represents the Company’s cumulative net losses since the Spin-off Transaction date.  The cumulative losses of the Company prior to the Spin-off Transaction were included in Due to Parent, net, in the consolidated and combined balance sheets.

Parent’s Equity

Prior to the Spin-off Transaction, the redemption of shares and changes in valuation of redeemable shares of noncontrolling interests investments were accounted for as Parent’s equity in the consolidated and combined balance sheets.  Parent’s Equity was reclassified as additional paid-in capital in connection with the Spin-off Transaction.

XML

Income Taxes

6 Months Ended

Jun. 30, 2016

Income Tax Disclosure [Abstract]

Income Taxes

NOTE 10 – INCOME TAXES

The Company, or one of its subsidiaries, is subject to U.S. federal income tax and income tax of multiple state jurisdictions.  The Company provides for income taxes based on the enacted tax laws and rates in jurisdictions in which it conducts its operations.  Prior to the Spin-off Transaction, the Company was included in the consolidated federal, state and local income tax returns filed by CHS and calculated for the purpose of carve-out financial statements using the “separate return method.”  The Company deemed the amounts that it would have paid to or received from the U.S. Internal Revenue Service and certain state jurisdictions, had QHC not been a member of CHS’ consolidated tax group, to be immediately settled with CHS through Due to Parent, net, in the consolidated and combined balance sheets. The Company will file its own consolidated federal, state and local income tax returns after the Spin-off Transaction.

The Company’s effective tax rates were 15.4% and 39.7% for the three months ended June 30, 2016 and 2015, respectively, and 15.7% and 34.1% for the six months ended June 30, 2016 and 2015, respectively.  The decrease in the Company’s effective tax rate for both the three and six months ended June 30, 2016, when compared to the three and six months ended June 30, 2015, was primarily due to the pre-tax losses in these periods and the impact of the non-deductible expenses for goodwill impairment and certain Spin-off Transaction costs in the respective 2016 periods, with no comparable expenses in the respective 2015 periods.

The Company’s total net deferred tax liabilities increased to $55.3 million as of June 30, 2016 compared to $41.0 million as of December 31, 2015, a $14.3 million increase. This increase was primarily due to $61.7 million of adjustments to the deferred tax assets and liabilities for changes in estimates between amounts that will be realized by the Company on a stand-alone basis compared to those calculated under the separate return method, including $39.5 million of increase attributable to net operating loss and credit carryforwards not realizable by QHC as they were previously recognized by CHS, and changes in estimates for the impact of other assets or liabilities that were transferred to the Company from CHS through Due to Parent, net, on or just prior to the spin-off date.  This amount was partially offset by $47.4 million of deferred tax benefit recorded on the Company’s pre-tax loss for the period following the Spin-off Transaction as QHC will file on a stand-alone basis now that the spin-off is complete.

In the ordinary course of business there is the inherent uncertainty in quantifying the Company’s income tax positions.  The Company assesses its income tax positions and records tax benefits for all tax years subject to examination based upon management’s evaluation of the facts, circumstances, and information available at the reporting date. The Company is not aware of any unrecognized tax benefits; and therefore it has not recorded any such amounts for the three and six months ended June 30, 2016 and 2015.

XML

Earnings Per Share

6 Months Ended

Jun. 30, 2016

Earnings Per Share [Abstract]

Earnings Per Share

NOTE 11 – EARNINGS PER SHARE

A summary of the computation of basic and diluted earnings per share follows (dollars in thousands, except per share amounts):

	Three Months Ended June 30,					Six Months Ended June 30,
	2016			2015		2016			2015
Numerator:
Net income (loss)	$	(243,966	)	$	2,205	$	(248,653	)	$	8,029
Less: Net income attributable to noncontrolling interests		1,095			775		1,410			400
Net income (loss) attributable to Quorum Health Corporation		(245,061	)		1,430		(250,063	)		7,629
Denominator:
Weighted-average common shares outstanding - basic and diluted		28,412,720			28,412,054		28,412,389			28,412,054
Basic and diluted earnings (loss) per share attributable to Quorum Health Corporation stockholders	$	(8.63	)	$	0.05	$	(8.80	)	$	0.27

For comparative purposes, the Company used 28,412,054 shares as the amount of shares outstanding for all periods prior to the Spin-off Transaction, including the period from January 1, 2016 to April 28, 2016, in calculating basic and diluted earnings per share.  This number of shares represents the number of shares issued on the Spin-off Transaction date. Due to the net loss attributable to Quorum Health Corporation in the three and six months ended June 30, 2016, no incremental shares are included in diluted earnings per share for these periods because the effect of the 460,661 dilutive shares would be anti-dilutive. No incremental shares were considered for all periods prior to the Spin-off Transaction.

XML

Additional Cash Flow Information

6 Months Ended

Jun. 30, 2016

Significant Non Cash Transactions [Abstract]

Additional Cash Flow Information

NOTE 12 – ADDITIONAL CASH FLOW INFORMATION

A summary of significant non-cash transactions related to the consolidated and combined balance sheets follows (in thousands):

	Three Months Ended June 30,				Six Months Ended June 30,
	2016		2015		2016		2015
Transfer of liabilities from Parent	$	16,596	$	-	$	16,596	$	-
Non-cash capital contribution from Parent		518,518		-		518,518		-
Property and equipment acquired under capital leases and deferred financing obligations		3,097		658		5,120		658

See Note 1 – Description of the Business and Spin-off Transaction for additional information on the related party transactions in the table above.

XML

Segments

6 Months Ended

Jun. 30, 2016

Segment Reporting [Abstract]

Segments

NOTE 13 – SEGMENTS

The Company operates in two distinct operating segments, consisting of its hospital operations business and its management advisory and consulting services business.  The hospital operations segment includes the operations of the Company’s general acute care hospitals and related healthcare entities that provide inpatient and outpatient healthcare services.  The hospital management advisory and consulting services segment includes the operations of QHR.  Only the hospital operations segment meets the criteria as a separate reportable segment.  The financial information for QHR has been combined with the Company’s corporate functions and reported below as part of the all other reportable segment.

A summary of financial information related to segments follows (in thousands):

	Three Months Ended June 30,				Six Months Ended June 30,
	2016		2015		2016		2015
Net operating revenues:
Hospital operations	$	508,906	$	515,428	$	1,036,317	$	1,039,621
All other		20,831		22,924		42,971		46,348
Total net operating revenues	$	529,737	$	538,352	$	1,079,288	$	1,085,969
Adjusted EBITDA:
Hospital operations	$	26,457	$	55,953	$	75,396	$	118,645
All other		2,775		3,672		10,060		7,009
Total Adjusted EBITDA	$	29,232	$	59,625	$	85,456	$	125,654

	June 30,		December 31,
	2016		2015
Assets:
Hospital operations	$	1,906,376	$	2,256,557
All other		195,983		38,299
Total assets	$	2,102,359	$	2,294,856

A reconciliation of Adjusted EBITDA to net income (loss) follows (in thousands):

	Three Months Ended June 30,						Six Months Ended June 30,
	2016			2015			2016			2015
Adjusted EBITDA	$	29,232		$	59,625		$	85,456		$	125,654
Interest expense, net		(29,276	)		(23,828	)		(56,728	)		(49,630	)
Benefit from (provision for) income taxes		44,565			(1,451	)		46,239			(4,156	)
Depreciation and amortization		(31,463	)		(32,141	)		(62,620	)		(63,839	)
Legal and settlement costs		(5,447	)		—			(5,688	)		—
Impairment of-long-lived assets and goodwill		(250,400	)		—			(250,400	)		—
Transaction costs related to spin-off		(1,177	)		—			(4,912	)		—
Net income (loss)	$	(243,966	)	$	2,205		$	(248,653	)	$	8,029

XML

Stock-Based Compensation

6 Months Ended

Jun. 30, 2016

Disclosure Of Compensation Related Costs Sharebased Payments [Abstract]

Stock-Based Compensation

NOTE 14 – STOCK-BASED COMPENSATION

On April 1, 2016, the Company adopted the Quorum Health Corporation 2016 Stock Award Plan (“2016 Stock Award Plan”).  The Company filed a Registration Statement on Form S-8 on April 29, 2016 to register 4,700,000 shares of QHC common stock that may be issued under the plan.  

On May 3, 2016, the Compensation Committee of the Board of Directors (the “Compensation Committee”) granted 460,000 performance-based restricted stock awards to the Company’s executive officers, pursuant to the 2016 Stock Award Plan and a performance-based restricted stock award agreement. If the performance-based objectives are attained in accordance with the targets set forth in the performance-based restricted stock award agreement, the restrictions on the restricted stock awards will lapse on each of the first three anniversaries of the grant date.  

On May 3, 2016, the Compensation Committee granted 551,005 time-vested restricted stock awards to certain employees of the Company.  The grants were made pursuant to the 2016 Stock Award Plan and a restricted stock award agreement.  The restrictions on the time-vested restricted stock awards will lapse on each of the first three anniversaries of the grant date, except for 106,005 restricted stock awards, referred to by the Company as recoupment awards, which have a different vesting period.  The recoupment awards were issued to a select group of QHC employees that were granted restricted stock awards by CHS on March 1, 2016.  Pursuant to the Separation and Distribution Agreement, two-thirds of the shares granted to the QHC employee group on this grant date were canceled by CHS in connection with the Spin-off Transaction.  The recoupment awards were issued by QHC and included in the May 3, 2016 grant of QHC restricted stock awards for the purpose of restoring the benefit previously provided by CHS to this employee group.  Restrictions on the recoupment awards lapse in equal installments on the second and third anniversaries of the grant date.

On May 3, 2016, the Board, upon recommendation of its Compensation Committee and its Governance and Nominating Committee, granted 10,000 time-vested restricted stock awards to each of its non-employee directors. The grants were made pursuant to the 2016 Stock Award Plan and a director restricted stock award agreement. The restriction on the time-vested restricted stock awards will lapse on the first anniversary of the grant date.

As defined in the Separation and Distribution Agreement, QHC and CHS employees who held CHS restricted stock awards on the Record Date received QHC restricted stock awards for the number of whole shares, rounded down, of QHC common stock that they would have received as a shareholder of CHS as if the underlying CHS stock were unrestricted on the Record Date, except, that with respect to a portion of CHS restricted stock awards granted to any QHC employees on March 1, 2016, as discussed above, which were cancelled and forfeited on the Spin-off Transaction date. The QHC restricted stock awards received by QHC and CHS employees in connection with the Spin-off Transaction vest on the same terms as the CHS restricted stock awards to which they relate through the continued service by such employees with their respective employer, either QHC or CHS.  CHS restricted stock awards were adjusted by increasing the number of shares of CHS stock subject to restricted stock awards by an amount of whole shares, rounded down, necessary to preserve the intrinsic value of such awards at the spin-off date.  QHC did not issue any stock options as part of the distribution of shares to holders of CHS stock options.

Following the Spin-off Transaction, the Company began recording stock-based compensation expense, which is included in salaries and benefits in the consolidated and combined statements of income, related to the vesting of QHC restricted stock awards issued to QHC employees on the Spin-off Transaction date, CHS restricted stock awards held by QHC employees on the Spin-off Transaction date and restricted stock awards granted by QHC on May 3, 2016.  Prior to the Spin-off Transaction, an estimated portion of CHS’ stock-based compensation expense was allocated to QHC through the monthly corporate management fee from CHS, which was recorded in other operating expenses in the consolidated and combined statements of income, and therefore was not included in stock-based compensation expense in the table below.  The estimated costs which were allocated to QHC from CHS were $0.6 million and $1.9 million for the three months ended June 30, 2016 and 2015, respectively, and $2.3 million and $3.8 million for the six months ended June 30, 2016 and 2015, respectively.  

A summary of stock-based compensation expense follows (in thousands):

	Three Months Ended June 30,				Six Months Ended June 30,
	2016		2015		2016		2015
Stock-based compensation resulting from the spin-off transaction	$	809	$	-	$	809	$	-
Stock-based compensation related to grants following the spin-off transaction		1,088		—		1,088		—
Total stock-based compensation expense	$	1,897	$	-	$	1,897	$	-

As of June 30, 2016, the Company had unrecognized stock-based compensation expense related to the outstanding unvested QHC and CHS restricted stock awards held by QHC employees as of the Spin-off Transaction date and the QHC restricted stock awards granted subsequent to the Spin-off Transaction of $5.1 million and $12.2 million, respectively.

A summary of the activity related to remaining unvested QHC restricted stock awards held by QHC and CHS employees as of the Spin-off Transaction date follows:

	QHC Awards Distributed in Spin-Off Transaction
	QHC Employees			CHS Employees			Total
Unvested restricted stock awards at Spin-off Transaction date		54,321			638,088			692,409
Vested		(336	)		(1,684	)		(2,020	)
Forfeited		(164	)		(3,648	)		(3,812	)
Unvested restricted stock awards at end of period		53,821			632,756			686,577

A summary of the activity related to QHC unvested restricted stock awards granted subsequent to the Spin-off Transaction date follows:

	QHC Awards Granted
	Subsequent to Spin-off Transaction
			Weighted-
			Average
			Grant Date
	Shares		Fair Value
Unvested restricted stock awards at beginning of period		-	$	-
Granted		1,081,005		12.77
Vested		-		-
Forfeited		-		-
Unvested restricted stock awards at end of period		1,081,005	$	12.77

XML

Employee Benefit Plans

6 Months Ended

Jun. 30, 2016

Compensation And Retirement Disclosure [Abstract]

Employee Benefit Plans

NOTE 15 – EMPLOYEE BENEFIT PLANS

Following the Spin-off Transaction, the Company maintains various benefit plans, including defined contribution plans, a defined benefit plan and deferred compensation plans, for which certain of the Company’s subsidiaries are the plan sponsors.  The rights and obligations of these plans were transferred from CHS in connection with the Spin-off Transaction, pursuant to the Separation and Distribution Agreement. The Quorum Health Retirement Savings Plan (the “RSP”) is a defined contribution plan established on January 1, 2016 by CHS in anticipation of the Spin-off Transaction. Prior to the Spin-off Transaction, the cumulative liability for these benefit costs was recorded in Due to Parent, net, in the consolidated and combined balance sheets.  The assets and liabilities under this plan were transferred to QHC in connection with the Spin-off Transaction. The RSP covers the majority of the employees at the Company’s subsidiaries. Total expense to the Company under all defined contribution plans was $3.7 million and $3.1 million for the three months ended June 30, 2016 and 2015, respectively, and $7.0 million and $6.8 million for the six months ended June 30, 2016 and 2015, respectively.  The benefit costs associated with the RSP are recorded as salaries and benefits expense in the consolidated and combined statements of income for all periods.

Certain of the Company’s employees participate in CHS’ unfunded deferred compensation plans that allow participants to defer receipt of a portion of their compensation.  The current election period for those employees will continue under the CHS plan through December 31, 2016, at which time, the corresponding plan assets and liabilities will be transferred to a new plan to be established by QHC, pursuant to the Employee Matters Agreement (“EMA”). The estimated liability under these plans at June 30, 2016 was approximately $25 million.

On April 1, 2016, the Board adopted the Quorum Health Corporation Supplemental Executive Retirement Plan (the “Original SERP Plan”). Pursuant to the EMA between the Company and CHS, the Company assumed all liabilities for all obligations under the Original SERP Plan for the benefits of QHC employees, as defined in the EMA, except that no additional benefits were to accrue under the Original SERP Plan following the Spin-off Transaction. The accrued benefit liability for the Original SERP Plan that was transferred to the Company in connection with the Spin-off Transaction was $6.0 million and is included in other long-term liabilities on the consolidated and combined balance sheet.  There were no assets transferred to the Company related to the Original SERP Plan in connection with the Spin-off Transaction.

On May 24, 2016, the Board, upon recommendation of the Compensation Committee, approved the Company’s Amended and Restated Supplemental Executive Retirement Plan (the “Amended and Restated SERP”), in order to accrue additional benefits with respect to QHC Employees who otherwise qualify as “Participants” under the Amended and Restated SERP.  The Amended and Restated SERP is a noncontributory non-qualified deferred compensation plan under Section 409A of the Internal Revenue Code. The Company uses a December 31 measurement date for the benefit obligations and a January 1 measurement date for its net periodic costs for the Amended and Restated SERP. The benefit costs under both SERP plans were $0.4 million and $0.5 million for the three and six months ended June 30, 2016, respectively, and are included in salaries and benefits in the consolidated and combined statements of income.  The accrued benefit liability for the Amended and Restated SERP was $9.2 million as of June 30, 2016 and is included in other long-term liabilities on the consolidated and combined balance sheet. The weighted-average assumptions used for determining net periodic benefit costs were a discount rate of 3.2% and an annual compensation increase of 3.0%.

QHC provides benefits to employees at one of its hospitals through a defined benefit plan (the “Pension Plan”). The Pension Plan provides benefits to covered individuals satisfying certain age and service requirements. Employer contributions to the Pension Plan are in accordance with the minimum funding requirements of the Employee Retirement Income Security Act of 1974 (“ERISA”), as amended. The Company expects to make contributions to the Pension Plan for the full year 2016 of $0.2 million. The Company uses a December 31 measurement date for the benefit obligations and a January 1 measurement date for its net periodic benefit costs for the Pension Plan. Variances from actuarially assumed rates will result in increases or decreases in benefit obligations, net periodic cost and funding requirements in future periods. The weighted-average assumptions used for determining the net periodic benefit costs for the year ended December 31, 2015 were a discount rate of 3.75%, an annual salary increase of 3.0% and the expected long-term rate of return on assets of 7.0%. Benefits expense related to the Pension Plan was $0.1 million and $0.1 million for the three months ended June 30, 2016 and 2015, respectively, and $0.1 million and $0.2 million for the six months ended June 30, 2016 and 2015, respectively. QHC recognizes the unfunded liability of its defined benefit plan in other long-term liabilities in the consolidated and combined balance sheets and unrecognized gains (losses) and prior service credits (costs) as changes in other comprehensive income (loss).  The accrued benefit liability for the Pension Plan totaled $1.0 million at June 30, 2016.

XML

Related Party Transactions

6 Months Ended

Jun. 30, 2016

Related Party Transactions [Abstract]

Related Party Transactions

NOTE 16 – RELATED PARTY TRANSACTIONS

CHS was a related party to QHC prior to the Spin-off Transaction.  The significant transactions and balances with CHS prior to the Spin-off Transaction and the agreements between QHC and CHS as of and subsequent to the Spin-off Transaction are described below.

Carve-Out from Parent

Historically, QHC was managed and operated in the normal course of business with all other hospitals and affiliates of CHS. Accordingly, for the purposes of the carve-out financial statements related to the Spin-off Transaction, a combined opening balance sheet for the QHC hospitals and QHR was established that included the assets and liabilities of QHC hospitals, as reported by CHS, and a net liability to CHS, referred to as Due to Parent, net, for the net investment held by CHS for contributing these net assets.  The operating results of the QHC hospitals and QHR prior to the Spin-off Transaction were derived from the CHS operating results for the QHC hospitals.  In addition, certain corporate overhead costs were allocated to QHC from CHS during the carve-out period for the purpose of estimating QHC’s share of these expenses.

Allocated Costs from CHS during the Carve-Out Period

CHS allocated costs to QHC during the carve-out period for a portion of its corporate overhead costs and any other costs related to QHC hospitals and QHR that were paid by CHS or covered by an agreement, policy or contract owned by CHS.

A summary of allocated costs to QHC from CHS follows (in thousands):

	Three Months Ended June 30,				Six Months Ended June 30,
	2016		2015		2016		2015
Insurance costs	$	10,486	$	32,043	$	44,246	$	66,521
Management fees from Parent		2,966		9,048		11,792		17,964
All other allocated costs		5,305		11,587		25,021		29,175
Total related party operating costs and expenses	$	18,757	$	52,678	$	81,059	$	113,660

The allocation of insurance costs from CHS primarily included costs for self-insurance estimates and third-party policies related to employee health, professional liability and workers’ compensation coverage.  Insurance costs were primarily allocated to QHC based on claims history of the QHC hospitals, as determined on an individual hospital level.  Corporate management fees were allocated to QHC for certain corporate functions of CHS, including services such as, among others, executive and divisional management, treasury, accounting, risk management, legal, procurement, human resources, information technology support and other administrative support services.  These corporate overhead costs were allocated to QHC using a ratio based on the number of licensed beds at each QHC hospital in proportion to CHS’ total licensed beds.  This methodology is comparable to how CHS allocates corporate overhead costs to all of its hospitals through a management fee charge that eliminates in consolidation.  All other allocated costs included any other costs allocated to QHC hospitals or QHR and that were not part of management fees.  These costs were allocated to QHC using ratios based on revenues, expenses or licensed beds.  If possible, allocations were made on a specific identification basis.

Following the Spin-off Transaction, the Company began performing corporate functions using internal resources or purchased services, certain of which are being provided by CHS pursuant to the transition services agreements and other ancillary agreements.  See the section on Agreements with CHS Related to the Spin-off Transaction below.

Due to Parent, Net

Prior to the Spin-off Transaction, Due to Parent, net, in the consolidated and combined balance sheets represented the Company’s cumulative liability to CHS for the net assets of QHC hospitals and QHR, as well as an allocation of costs for corporate functions.  See Note 1 – Description of the Business and Spin-off Transaction and the Due to Parent, net, accounting policy in Note 2 – Basis of Presentation and Significant Accounting Policies for additional information on the types of transactions settled through Due to Parent, net, during the carve-out period and the transactions that occurred to settle the liability in connection with the Spin-off Transaction.

During the carve-out period, QHC was charged interest on a monthly basis by CHS on the amount of Due to Parent, net, outstanding at the end of each month.  Interest rates were variable and ranged from 4% to 7% during the carve-out period.  Interest expense incurred on the Due to Parent, net, was recorded as an increase in the Due to Parent, net, liability and was deemed settled each month.  The total amount of related party interest expense arising from the liability with CHS was $8.9 million and $24.0 million for the three months ended June 30, 2016 and 2015, respectively, and $35.8 million and $49.4 million for the six months ended June 30, 2016 and 2015, respectively.

Agreements with CHS Related to the Spin-off Transaction

On April 29, 2016, the Company entered into certain agreements with CHS that allocated between the Company and CHS the various assets, employees, liabilities and obligations (including investments, property, employee benefits and tax-related assets and liabilities) that comprise the separate companies and governed or govern certain relationships between and activities of the Company and CHS for a period of time after the Spin-off Transaction.

The agreements were as follows:

· Separation and Distribution Agreement.  This agreement governed the principal actions of both the Company and CHS that needed to be taken in connection with the Spin-off Transaction. It also sets forth other agreements that govern certain aspects of the Company’s relationship with CHS following the Spin-off Transaction.

· Tax Matters Agreement.  This agreement governs respective rights, responsibilities and obligations of the Company and CHS after the Spin-off Transaction with respect to tax liabilities and benefits, tax attributes, tax contests and other tax sharing regarding U.S. federal, state and local income taxes, other tax matters and related tax returns.

· Employee Matters Agreement.  This agreement governs certain compensation and employee benefit obligations with respect to the current and former employees and non-employee directors of both the Company and CHS. It also allocated liabilities and responsibilities relating to employment matters, employee compensation and benefit plans and programs as of the Spin-off Transaction date.

In addition to the agreements referenced above, the Company entered into certain transition services agreements and other ancillary agreements with CHS defining agreed upon services to be provided by CHS to certain or all QHC hospitals, as determined by each agreement, to begin immediately following the Spin-off Transaction date.

A summary of the major provisions of the transition services agreements follows:

· Computer and Data Processing Transition Services Agreement. This agreement defines services to be provided by CHS for information technology infrastructure, support and maintenance. Services include, but are not limited to, operational support for various applications, oversight, maintenance and information technology support services, such as helpdesk, product support, network monitoring, data center operations, service ticket management and vendor relations. Fees are based on both a fixed charge for labor costs, as well as direct charges for all third party vendor contracts entered into by CHS on QHC’s behalf.

· Eligibility Screening Services Agreement.  This agreement defines services to be provided by CHS for financial and program criteria screening related to Medicaid or other program eligibility for pure self-pay patients.  Fees are based on a fixed charge for each hospital receiving services.

· Shared Services Centers Transition Services Agreement.  This agreement defines services to be provided by CHS related to billing and collections utilizing CHS shared service centers.  Services include, but are not limited to, billing and receivables management, statement processing, denials management, cash posting, patient customer service, and credit balance and other account research.  In addition, it provides for patient pre-arrival services, including pre-registration, insurance verification, scheduling and charge estimates.  Fees are based on a percentage of cash collections each month.

· Receivables Collection Agreement (PASI).  This agreement defines services to be provided by CHS related to accounts receivable collections of both active and bad debt accounts of the Company’s hospitals.  Services include, but are not limited to, self-pay collections, insurance follow-up, collection letters and calls, payment arrangements, payment posting, dispute resolution and credit balance research.  Fees are based on the type of service and are calculated based on a percentage of recoveries.

· Billing and Collection Agreement (PPSI). This agreement defines services to be provided by CHS related to accounts receivable collections of certain accounts receivable generated in the performance of professional services rendered by the Company’s physician and mid-level providers and certain clinics. Services include, but are not limited to, self-pay collections, insurance follow-up, collection letters and calls, payment arrangements, payment posting, dispute resolution and credit balance research. Fees are based on the type of service and are calculated based on a percentage of recoveries.

· Employee Service Center/HRIS Transition Services Agreement. This agreement defines services to be provided by CHS related to payroll processing and human resources information systems support.  Fees are based on a fixed charge per employee headcount per month.

The total amount of expenses incurred by the Company under our transition service agreements with CHS following the Spin-off Transaction combined with the allocations from CHS for these same services prior to the Spin-off Transaction were $17.8 million and $16.0 million for the three months ended June 30, 2016 and 2015, respectively, and $34.1 million and $31.4 million for the six months ended June 30, 2016 and 2015, respectively. The agreements each have terms of five years.

XML

Commitments and Contingencies

6 Months Ended

Jun. 30, 2016

Commitments And Contingencies Disclosure [Abstract]

Commitments and Contingencies

NOTE 17 - COMMITMENTS AND CONTINGENCIES

Legal Matters

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

In connection with the Spin-off Transaction, CHS agreed to indemnify QHC for certain liabilities relating to outcomes or events occurring prior to the closing of the Spin-off Transaction, including (i) certain claims and proceedings known to be outstanding on or prior to the closing date of the Spin-off Transaction and (ii) certain claims, proceedings and investigations by governmental authorities or private plaintiffs related to activities occurring at or related to our healthcare facilities prior to the closing date of the Spin-off Transaction, but only to the extent, in the case of clause (ii), that such claims are covered by insurance policies maintained by CHS, including professional and general liability and workers’ compensation liability. In this regard, CHS will continue to be responsible for certain Health Management Associates, Inc. legal matters covered by its contingent value rights agreement that relate to the portion of CHS’ business now held by QHC. Notwithstanding the foregoing, CHS is not indemnifying QHC in respect of any claims or proceedings arising out of, or related to, the business operations of QHR at any time or its compliance with the Corporate Integrity Agreement (“CIA”) with the United States Department of Health and Human Services Office of the Inspector General (“OIG”).  Subsequent to the Spin-off Transaction, the OIG entered into an “Assumption of CIA Liability Letter” with the Company reiterating the applicability of the CIA to certain of the Company’s hospitals, although the OIG declined to enter into a separate agreement with the Company.

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

Commercial Litigation and Other Lawsuits

· Quorum Health Resources, LLC v. Hancock Medical Center.This matter is an arbitration claim and counterclaim for breach of contract and negligence arising out of a Management Services Agreement between QHR and the hospital. Arbitration in this case began on April 11, 2016 and concluded on April 22, 2016. On July 28, 2016, the arbitrator returned an Interim Award in favor of Hancock Medical Center on various claims at issue in the arbitration. The net total award was $9.4 million payable by QHR to Hancock Medical Center. The Company accrued for this Interim Award in other long-term liabilities on its consolidated and combined balance sheet as of June 30, 2016. Both parties filed a motion for reconsideration of the Interim Award. In addition, the parties may seek attorney’s fees and costs prior to the arbitrator issuing a Final Award. The award is subject to a self-insured retention and excess insurance arrangements.

Government Investigations

For all legal matters below, the Company cannot at this time assess what the outcome may be and is further unable to determine any estimate of loss or range of loss. Because the matters below are at a preliminary stage and other factors, there are not sufficient facts available to make these assessments.

· Tooele, Utah – Physician Compensation. On May 5, 2016, the Company’s hospital in Tooele, Utah received a Civil Investigative Demand (“CID”) from the Office of the United States Attorney in Salt Lake City, Utah concerning allegations that the hospital and clinic corporation submitted or caused to be submitted false claims to the government for services referred by physicians with whom the hospital and clinic had inappropriate financial relationships, which allegedly violated federal law. The CID requested records and documentation concerning physician compensation. The Company is fully cooperating with this investigation.

· Blue Island, Illinois – Patient Status. On October 9, 2015, the Company’s hospital in Blue Island, Illinois received a CID from the Office of the United States Attorney in Chicago, Illinois concerning allegations of upcoding observation and other outpatient services and improperly falsifying inpatient admission orders. The CID requested medical records and documentation concerning status change, from observation to inpatient. The Company is fully cooperating with this investigation.

Insurance Reserves

As part of the business of owning and operating hospitals, the Company is subject to potential professional and general liability and workers’ compensation liability claims or other legal actions alleging liability on its part.  The Company is also subject to similar liabilities related to its QHR business.

Prior to the Spin-off Transaction, CHS provided professional and general liability insurance and workers’ compensation insurance to QHC and indemnified QHC from losses under these insurance arrangements related to its hospital operations business. The liabilities for claims related to QHC’s hospital operations business were determined based on an actuarial study of QHC’s operations and historical claims experience at its hospitals. Corresponding receivables from CHS were established to reflect the indemnification by CHS for each of these liabilities for claims that related to events and circumstances that occurred prior to the Spin-off Transaction date.

After the Spin-off Transaction, QHC entered its own professional and general liability insurance and workers’ compensation insurance arrangements to mitigate the risk for claims exceeding its self-insured retention level.  The Company’s self-insured retention level for professional and general liability claims is $5 million per claim and its self-insured retention level for workers’ compensation claims is $0.5 million per claim.  The Company maintains separate insurance arrangements related to its subsidiary, QHR, due to the differing nature of this business.  The self-insured retention level for QHR is $6 million for professional and general liability insurance and it maintains a guaranteed cost program for workers’ compensation insurance.

A summary of the Company’s insurance reserves related to professional and general liability claims and workers’ compensation claims, separated between those which have been indemnified by CHS and those that relate to the Company’s self-insurance risks, follows (in thousands):

	June 30, 2016
	Current		Long-Term		Current		Long-Term
	Receivable		Receivable		Liability		Liability
Professional and general liability:
Insurance reserves indemnified by CHS, Inc.	$	21,488	$	69,028	$	21,488	$	69,028
All other self-insurance reserves		—		8,826		—		18,222
Total insurance reserves for professional and general liability		21,488		77,854		21,488		87,250
Workers' compensation liability:
Insurance reserves indemnified by CHS, Inc.		5,972		19,690		5,972		19,690
All other self-insurance reserves		—		—		708		—
Total insurance reserves for workers' compensation liability		5,972		19,690		6,680		19,690
Total self-insurance reserves	$	27,460	$	97,544	$	28,168	$	106,940
	December 31, 2015
	Current		Long-Term		Current		Long-Term
	Receivable		Receivable		Liability		Liability
Professional and general liability:
Insurance reserves indemnified by CHS, Inc.	$	21,120	$	72,412	$	21,120	$	72,412
All other self-insurance reserves		—		4,077		—		5,011
Total insurance reserves for professional and general liability		21,120		76,489		21,120		77,423
Workers' compensation liability:
Insurance reserves indemnified by CHS, Inc.		8,314		20,507		8,314		20,507
All other self-insurance reserves		—		—		—		—
Total insurance reserves for workers' compensation liability		8,314		20,507		8,314		20,507
Total self-insurance reserves	$	29,434	$	96,996	$	29,434	$	97,930

The receivables from CHS are included in other current assets and other long-term assets on the consolidated and combined balance sheets and the liabilities are included in other current liabilities for the current portion of professional and general liability claims, employee compensation liabilities for the current portion of workers’ compensation claims, and other long-term liabilities for the long-term portions of both claims liabilities.

Physician Recruiting Commitments

As part of its physician recruitment strategy, the Company provides income guarantee agreements to certain physicians who agree to relocate to its communities and commit to remain in practice there. Under such agreements, the Company is required to make payments to the physicians in excess of the amounts they earned in their practice up to the amount of the income guarantee. The income guarantee periods over which the Company agrees to subsidize a physician’s income are typically one year and the commitment periods over which the physician agrees to practice in the designated community are typically three years.  Payments are recoverable by the Company under the terms of the agreements from physicians who do not fulfill their commitment period.  At June 30, 2016, the maximum potential amount of future payments under these guarantees in excess of the liabilities recorded was $3.6 million.

Construction and Capital Commitments

Springfield, Oregon Patient Tower. The Company is building a new patient tower and expanding its surgical capacity at its hospital in Springfield, Oregon.  As of June 30, 2016, the Company has incurred a total of $27.6 million of costs for this project, of which $10.3 million and $17.2 million of costs were recorded during the three and six months ended June 30, 2016, respectively. The total estimated construction costs of this project, including equipment costs, could be up to $88 million.  The project is expected to be completed in late 2017 or early 2018.

QHC Corporate Office.  In November 2015, the Company’s subsidiary, QHR, entered into an agreement with a developer (the “Combined Agreement”) to construct the corporate office for QHC in Brentwood, Tennessee.  The Combined Agreement included four separate lease agreements that relate to three different phases of the project and a fourth lease that consolidates and, upon commencement, terminates the initial three lease agreements. The Company has recorded the ongoing costs associated with this project as they are incurred as a direct financing obligation.  As of June 30, 2016, the Company has recorded a total of $19.3 million of costs for this project, of which $2.9 million and $4.9 million were recorded during the three and six months ended June 30, 2016, respectively. These project costs are included as additions to property and equipment and long-term debt in the consolidated and combined balance sheets and as assets acquired under capital lease obligations in Note 12 – Additional Cash Flow Information.  The project is expected to be completed in the third quarter of 2016.

XML

Subsequent Events

6 Months Ended

Jun. 30, 2016

Subsequent Events [Abstract]

Subsequent Events

NOTE 18 - SUBSEQUENT EVENTS

On July 28, 2016, an Interim Award of $9.4 million was announced in favor of Hancock Medical Center in Quorum Health Resources, LLC v. Hancock Medical Center. Both parties filed a motion for reconsideration of the Interim Award. The Company accrued the liability in other long-term liabilities in the consolidated and combined balance sheet as of June 30, 2016.  See Note 17 – Commitments and Contingencies for additional information on this legal matter.

XML

Basis of Presentation and Significant Accounting Policies (Policies)

6 Months Ended

Jun. 30, 2016

Accounting Policies [Abstract]

Basis of Presentation (Policies)

Basis of Presentation

The condensed consolidated and combined financial statements and accompanying notes of the Company presented herein have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”). These financial statements should be read in conjunction with the Company’s Registration Statement on Form 10, as amended, initially filed with the Securities and Exchange Commission (“SEC”) on September 4, 2015 and declared effective on April 4, 2016 (the “Form 10”), which includes combined financial statements and accompanying notes as of December 31, 2015 and 2014 and for each of the three years ended December 31, 2015, 2014 and 2013.  In the opinion of the Company’s management, the condensed consolidated and combined financial information presented herein includes all adjustments necessary to present fairly the results of operations, financial position and cash flows of the Company for the interim periods presented.  Results of operations for interim periods should not be considered indicative of the results of operations expected for the full year. Certain information and disclosures have been condensed or omitted as presented herein and as permitted by the rules and regulations of the SEC for interim period presentation. The Company’s management believes the financial statements and disclosures presented herein are adequate in order to make the information not misleading.

Prior to its separation from CHS on April 29, 2016, QHC did not operate as a separate company and stand-alone financial statements were not historically prepared; however, QHC was comprised of certain stand-alone legal entities for which discrete financial information was available under CHS’ ownership. The accompanying consolidated and combined financial statements include amounts and disclosures for QHC that have been derived from the consolidated financial statements and accounting records of CHS for the periods prior to the Spin-off Transaction in combination with the amounts and disclosures related to the stand-alone financial statements and accounting records of QHC after the Spin-off Transaction.  The accompanying consolidated and combined financial statements may not necessarily be indicative of the results of operations, financial position and cash flows of QHC in the future or those that would have occurred had the Company operated on a stand-alone basis during the entirety of the periods presented herein.  See Note 16 – Related Party Transactions for additional information on the carve-out of financial information from CHS.

Principles of Consolidation and Combination (Policies)

Principles of Consolidation and Combination

The consolidated and combined financial statements include the accounts of the Company and its subsidiaries in which it holds either a direct or indirect ownership of a majority voting interest. These investments in less-than-wholly-owned consolidated subsidiaries of QHC are presented separately in the equity component of the consolidated and combined balance sheets to distinguish between the interests of QHC and the interests of the noncontrolling investors. Revenues and expenses from these subsidiaries are included in the respective individual line items of the Company’s consolidated and combined statements of income, and net income is presented both in total and separately to show the amounts attributable to the Company and the amounts attributable to the  interests of the noncontrolling investors.  Noncontrolling interests that are redeemable, or may become redeemable at a fixed or determinable price at the option of the holder or upon the occurrence of an event outside of the control of the Company, are presented in mezzanine equity on the consolidated and combined balance sheets.

 All significant intercompany transactions and accounts of the Company are eliminated in consolidation.  Additionally, all significant transactions with CHS that occurred prior to the Spin-off Transaction have been included in the consolidated and combined balance sheets within Due to Parent, net. This liability to CHS was settled in the Spin-off Transaction.

Reclassifications (Policies)

Reclassifications

Certain prior period amounts have been reclassified to conform to the current period presentation as follows:

The Company reclassified third-party final cost report settlement receivables and state supplemental payment program receivables to amounts due from and due to third-party payors on its consolidated and combined balance sheets. Third-party final cost report settlement receivables were previously classified as other current assets, and the cost report settlement liabilities were previously classified as other current liabilities. Accounts receivable from state supplemental payment programs were previously classified as patient accounts receivable, and the amounts owed related to these programs was classified as other current liabilities. The Company believes the current presentation helps distinguish between amounts due related to a specific patient service and amounts due from or owed by the Company related to state supplemental payment programs.

The Company reclassified intangible assets to present them separately on its consolidated and combined balance sheets for all periods presented. Previously, these amounts were classified as a component of other long-term assets. The Company believes that this presentation helps distinguish the portion of other long-term assets which are intangible assets.

The Company reclassified equity in earnings of unconsolidated subsidiaries to other operating expenses in the consolidated and combined statements of income. Previously, these amounts were classified as non-operating income. These amounts are immaterial to the Company. This change in classification has no effect on the Company’s results of operations or cash flows included in previously issued consolidated and combined financial statements.

Use of Estimates (Policies)

Use of Estimates

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

Revenue Recognition (Policies)

Revenue Recognition

The Company recognizes revenues from patient services at its hospitals and affiliated facilities in the period services are performed and reports these revenues at their net realizable amount expected to be collected from patients and third-party payors. The amounts that the Company collects for patient services are generally less than established billing rates, or standard billing charges, due to contractual agreements with third-party payors, governmental programs that require reduced billing rates, discounts offered as incentives for payment, and a portion related to bad debts.  The Company recognizes revenues related to its QHR business when management advisory and consulting services are provided and reports these revenues at their net realizable amount expected to be collected from the non-affiliated hospital clients.

Payor Sources

The primary sources of payment for patient healthcare services are third-party payors, including federal and state agencies administering the Medicare and Medicaid programs, other governmental agencies, managed care health plans, commercial insurance companies, workers’ compensation carriers and employers.  Self-pay revenues are the portion of patient service revenues derived from patients that do not have health insurance coverage and the patient responsibility portion of services that is not covered by health insurance plans.  Non-patient revenues include revenues from QHR’s hospital management advisory and consulting services business, rental income and hospital cafeteria sales.

As of June 30, 2016, the Company began classifying its revenues related to Medicare Managed Care Advantage Plans as Medicare revenues.  As a result, the Company retroactively reclassified these amounts from managed care and commercial revenues to Medicare revenues for all periods presented in the tables above.  The revenues from Medicare Managed Care Advantage Plans that were reclassified were $43.4 million and $35.5 million for the three months ended June 30, 2016 and 2015, respectively, and $85.1 million and $72.1 million for the six months ended June 30, 2016 and 2015, respectively.

Contractual Allowances and Discounts

The net realizable amount of patient service revenues due from third-party payors is subject to complexities and interpretations of payor-specific contractual agreements and governmental regulations that are frequently changing.  The Medicare and Medicaid programs, which represent a large portion of the Company’s operating revenues, are highly complex programs to administer and subject to interpretation of federal and state-specific reimbursement rates, new legislation and final cost report settlements.  Contractual allowances, or differences in standard billing rates and the payments derived from contractual terms with governmental and non-governmental third–party payors, are recorded based on management’s best estimates in the period in which services are performed and a payment methodology is established with the patient.  Recorded estimates for past contractual allowances are subject to change, in large part, due to ongoing contract negotiations and regulation changes, which is typical in the healthcare industry.  Revisions to estimates are recorded in the periods in which they become known and may be subject to further revisions.  Self-pay and other payor discounts are incentives offered to uninsured or underinsured payors to reduce their costs of healthcare services with the purpose of maximizing the Company’s collection efforts.

Third-Party Program Reimbursements

Cost report settlements under reimbursement programs with Medicare, Medicaid and other managed care plans are estimated and recorded in the period the related services are performed and are adjusted in future periods, as needed, until the final cost report settlements are determined.These previous program reimbursements and final cost report settlements are included in due from and due to third-party payors in the consolidated and combined balance sheets.  Previously, these amounts were a component of other current assets and other current liabilities in the consolidated and combined balance sheets. Contractual adjustments related to previous program reimbursements and final cost report settlements unfavorably impacted revenues by $2.5 million and $11.2 million during the three months ended June 30, 2016 and 2015, respectively, and $4.4 million and $11.7 million during the six months ended June 30, 2016 and 2015, respectively.  Contractual adjustments in the three and six months ended June 30, 2015 periods include the unfavorable impact of an $11.1 million Illinois cost report settlement which was recorded in 2014 and reversed in the second quarter of 2015 due to contract negotiations that were finalized in that quarter.

Currently, several states utilize supplemental payment programs, including disproportionate share programs, for the purpose of providing reimbursement to providers to offset a portion of the cost of providing care to Medicaid and indigent patients. These programs are designed with input from Centers for Medicare and Medicaid Services (“CMS”) and funded with a combination of federal and state resources, including, in certain instances, taxes, fees or other program costs (collectively, “provider taxes”) levied on the providers. Similar programs are also currently being considered by other states. These amounts are included in due from and due to third-party payors in the consolidated and combined balance sheets, respectively.  Previously, amounts due from third parties related to these programs were included in patient accounts receivable, and the provider taxes owed were included in other current liabilities in the consolidated and combined balance sheets.  See the Reclassifications accounting policy above for additional information on reclassification adjustments made by the Company as of June 30, 2016.

After a state supplemental payment program is approved and fully authorized by the appropriate state legislative or governmental agency, the Company recognizes revenue and related expenses based on the terms of the program in the period in which amounts are estimable and revenue collection is reasonably assured.  The revenues earned by the Company under these programs are included in net operating revenues and the expenses associated with these programs are included in other operating expenses in the consolidated and combined statements of income.

Charity Care

In the ordinary course of business, the Company provides services to patients who are financially unable to pay for hospital care. The related charges for those patients who are financially unable to pay and that otherwise do not qualify for reimbursement from a governmental program are classified as charity care. The Company determines amounts that qualify for charity care primarily based on the patient’s household income relative to the poverty level guidelines established by the federal government. The Company’s policy is to not pursue collections for such amounts; therefore, the related charges are recorded in operating revenues at the standard billing rates and fully offset in contractual allowances.  The gross amounts of charity care revenues were $7.0 million and $6.3 million for the three months ended June 30, 2016 and 2015, respectively, and $14.8 million and $13.3 million for the six months ended June 30, 2016 and 2015, respectively.

The estimated cost of providing charity care services is determined using a ratio of cost to gross charges and applying this ratio to the gross charges associated with providing care to charity patients for the period.  The Company recorded charity care costs of $1.2 million and $1.1 million for the three months ended June 30, 2016 and 2015, respectively, and $2.4 million and $2.3 million for the six months ended June 30, 2016 and 2015, respectively.  To the extent the Company receives reimbursement through any of the various governmental assistance programs in which it participates to subsidize its care of indigent patients, the Company does not include these patients’ charges in its cost of care provided under its charity care program. 

Accounts Receivable and Allowance for Doubtful Accounts (Policies)

Accounts Receivable and Allowance for Doubtful Accounts

Substantially all of the Company’s receivables are related to providing healthcare services to patients at its hospitals and affiliated businesses.  As of June 30, 2016, the Company retroactively reclassified receivables related to state supplemental payment programs from patient accounts receivable to due from and due to third-party payors in the consolidated and combined balance sheet.  The net amounts reclassified were $78.1 million and $68.0 million as of June 30, 2016 and December 31, 2015, respectively. See the Reclassifications accounting policy above for additional information on reclassification adjustments made by the Company as of June 30, 2016.

Accounts receivable are reduced by an allowance for amounts that could become uncollectible in the future. The Company estimates the allowance for doubtful accounts by reserving a percentage of all self-pay accounts receivable without regard to aging category, based on collection history, adjusted for expected recoveries and any anticipated changes in trends. The Company’s ability to estimate the allowance for doubtful accounts is not significantly impacted by the aging of accounts receivable, as management believes that substantially all of the risk exists at the point in time such accounts are identified as self-pay. The percentage used to reserve for self-pay accounts receivable is based on the Company’s collection history. For insured receivables, which are the non-self-pay receivables, the Company estimates the allowance for doubtful accounts based on historical collection rates for the uncontractualized portion of all accounts aging over 365 days from the date of patient discharge.  In general, allowances for insured receivables are an immaterial percentage of the Company’s total accounts receivable. The Company collects substantially all of its third-party insured receivables, which include receivables from governmental agencies.  

Collections are impacted by the economic ability of patients to pay and the effectiveness of CHS’ collection efforts, including their current policies on collections, and the ability of the Company to further attempt collection efforts. Billings and collections are outsourced to CHS under the transition service agreements that were put in place with the Spin-off Transaciton.  See Note 16 – Related Party Transactions for additional information on these agreements.  Significant changes in payor mix, centralized business office operations, economic conditions or trends in federal and state governmental healthcare coverage, among others, could affect the Company’s estimates of accounts receivable collectability. The Company also continually reviews its overall allowance adequacy by monitoring historical cash collections as a percentage of trailing net operating revenues after the provision for bad debts, as well as by analyzing current period net operating revenues and admissions by payor classification, aged accounts receivable by payor, days revenue outstanding, the composition of self-pay receivables between pure self-pay patients and the patient responsibility portion of third-party insured receivables, and the impact of recent acquisitions and dispositions.

Concentration of Credit Risk (Policies)

Concentration of Credit Risk

The Company grants unsecured credit to its patients, most of which reside in the service area of the Company’s hospitals and affiliated facilities and are insured under third-party payor agreements. Because of the economic diversity of the Company’s markets and non-governmental third-party payors, Medicare represents the only significant concentration of credit risk from payors. Accounts receivable, net of contractual allowances, from Medicare were $75.4 million and $67.7 million, or 10.3% and 9.2% of total consolidated and combined patient accounts receivable, net, as of June 30, 2016 and December 31, 2015, respectively.

The Company’s revenues are particularly sensitive to regulatory and economic changes in certain states where the Company generates significant revenues. Accordingly, any changes in the current demographic, economic, competitive or regulatory conditions in certain states in which our revenues are significant could have an adverse effect on the Company’s results of operations, financial condition or cash flows. Changes to the Medicaid and other government-managed payor programs, including reductions in reimbursement rates or delays in reimbursement payments under state supplemental or other programs, in these states could also have a similar adverse effect.

Other Operating Expenses (Policies)

Other Operating Expenses

The Company began recording costs associated with the transition services agreements and other ancillary agreements with CHS following the Spin-off Transaction in accordance with the terms of these agreements.  These costs, which primarily include the costs of providing information technology, patient billing and collections and payroll services, are included in purchased services in the table above.  Prior to the Spin-off Transaction, CHS allocated costs for these services to QHC, which were also included in purchased services during the carve-out period.

Prior to the Spin-off Transaction, QHC recorded a monthly corporate management fee from CHS that represented a portion of CHS’ corporate office costs and was included in other operating expenses prior to the Spin-off Transaction.  The costs for corporate office functions are primarily included in salaries and benefits expenses following the Spin-off Transaction.  See Note 16 – Related Party Transactions for additional information on the allocated costs from CHS.

General and Administrative Costs (Policies)

General and Administrative Costs

Substantially all of the Company’s operating costs and expenses are “cost of revenues” items.  Operating expenses that could be classified as general and administrative by the Company are costs related to corporate office functions, including, but not limited to tax, treasury, audit, risk management, legal, investor relations and human resources. These costs are primarily salaries and benefits expenses associated with corporate office functions.   General and administrative costs of the Company were $11.7 million and $11.1 million during the three months ended June 30, 2016 and 2015, respectively, and $23.7 million and $22.1 million during the six months ended June 30, 2016 and 2015, respectively.  Prior to the Spin-off Transaction, the majority of these costs were allocations from CHS.  See Note 16 – Related Party Transactions for additional information on the allocated costs from CHS.

Electronic Health Records Incentives Earned (Policies)

Electronic Health Records Incentives Earned

Pursuant to the Health Information Technology for Economic and Clinical Health Act (“HITECH”), the Company is eligible to receive incentive payments under the Medicare and Medicaid programs for its eligible hospitals and physician clinics that demonstrate meaningful use of certified Electronic Health Records (“EHR”) technology.  Each of the Company’s eligible hospitals and physician clinics have completed the initial adoption phase of EHR implementation and are currently in the process of implementing the remaining two phases.EHR incentive payments are subject to audit and potential recoupment if it is determined that the applicable meaningful use standards were not met and are also subject to retrospective adjustment because the cost report data upon which the incentive payments are based are further subject to audit.

The Company utilizes a gain contingency model to recognize EHR incentive payments.  When the recognition criteria have been fully met, the Company recognizes the income from EHR incentives payments as a part of other operating costs and expenses in the consolidated and combined statements of income. Medicaid EHR incentive payments are calculated based on prior period Medicare cost report information available at the time when eligible hospitals demonstrate meaningful use of certified EHR technology. Medicare EHR incentive payments are calculated when eligible hospitals demonstrate meaningful use of certified EHR technology and the information for the applicable full Medicare cost report year to determine the final incentive payment is available.  In some instances, the Company may receive estimated Medicare EHR incentive payments prior to when the Medicare cost report information used to determine the final incentive payment is available. In these instances, recognition of the income from EHR incentive payments is deferred until all recognition criteria are met.  The Company recognizes receivables for EHR incentive payments that have been earned, but are uncollected at period end, as other current assets in the consolidated and combined balance sheets.  The receivables are adjusted for any known audit or retrospective adjustments related to prior periods.   Deferred revenue from EHR incentive payments is recorded in other current liabilities in the consolidated and combined balance sheets.

The Company incurs both capital expenditures and operating expenses in connection with the implementation of EHR technology initiatives. The amount and timing of these expenditures does not directly correlate with the timing of the Company’s receipt or recognition of EHR incentive payments as earned.  As the Company completes its full implementation of certified EHR technology in accordance with all three phases of the program, its EHR incentive payments will decline and ultimately end.

Legal Costs (Policies)

Legal and Settlement Costs

Legal and settlement costs in the consolidated and combined statements of income primarily includes legal costs and related settlements, if any, related to regulatory claims, government investigations into reimbursement payments and claims associated with QHR’s hospital management contracts.

Legal Matters

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

In connection with the Spin-off Transaction, CHS agreed to indemnify QHC for certain liabilities relating to outcomes or events occurring prior to the closing of the Spin-off Transaction, including (i) certain claims and proceedings known to be outstanding on or prior to the closing date of the Spin-off Transaction and (ii) certain claims, proceedings and investigations by governmental authorities or private plaintiffs related to activities occurring at or related to our healthcare facilities prior to the closing date of the Spin-off Transaction, but only to the extent, in the case of clause (ii), that such claims are covered by insurance policies maintained by CHS, including professional and general liability and workers’ compensation liability. In this regard, CHS will continue to be responsible for certain Health Management Associates, Inc. legal matters covered by its contingent value rights agreement that relate to the portion of CHS’ business now held by QHC. Notwithstanding the foregoing, CHS is not indemnifying QHC in respect of any claims or proceedings arising out of, or related to, the business operations of QHR at any time or its compliance with the Corporate Integrity Agreement (“CIA”) with the United States Department of Health and Human Services Office of the Inspector General (“OIG”).  Subsequent to the Spin-off Transaction, the OIG entered into an “Assumption of CIA Liability Letter” with the Company reiterating the applicability of the CIA to certain of the Company’s hospitals, although the OIG declined to enter into a separate agreement with the Company.

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

Transaction Costs Related to the Spin-off (Policies)

Transaction Costs Related to the Spin-off

Transaction costs related to the spin-off consists of QHC’s portion of the costs to effect the Spin-off Transaction and the costs associated with forming a new company. These costs include audit, management advisory and consulting costs, investment advisory costs, legal expenses and other miscellaneous costs.

Income Taxes (Policies)

Income Taxes

The Company accounts for income taxes using the asset and liability method. Under this method, deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. The Company assesses the likelihood that deferred tax assets will be recovered from future taxable income. To the extent the Company believes that recovery is not likely, a valuation allowance is established. To the extent the Company establishes a valuation allowance or increases this allowance, the related expense is included in the provision for income taxes in the consolidated and combined statements of income. The Company classifies interest and penalties, if any, related to its tax positions as a component of income tax expense.  See Note 10 – Income Taxes for information on the use of the separate return method of accounting for income taxes that was used by the Company during the carve-out period and the impact of the consummation of the Spin-off Transaction on income taxes.

Comprehensive Income (Loss) (Policies)

Comprehensive Income (Loss)

Comprehensive income (loss) is net income (loss) plus the change in equity of a Company during the period from transactions and other events or circumstances from non-owner sources.  The Company’s only source of other comprehensive income consists of pension costs related to an acquired defined benefit pension plan at one of its hospitals and a supplemental employee retirement plan.

Cash and Cash Equivalents (Policies)

Cash and Cash Equivalents

Cash includes cash on hand and cash with banks.  Cash equivalents are short-term, highly liquid investments with a maturity of three months or less from the date acquired and are subject to an insignificant risk of change in value.

Inventories (Policies)

Inventories

Inventories, primarily consisting of medical supplies and drugs, are stated at the lower of cost or market on a first-in, first-out basis.

Property and Equipment (Policies)

Property and Equipment

Purchases of property and equipment are recorded at cost. Property and equipment acquired in a business combination are recorded at estimated fair value.  Routine maintenance and repairs are expensed as incurred.  Expenditures that increase capacities or extend useful lives are capitalized.  The Company capitalizes interest related to financing of major capital additions with the respective asset.  Depreciation is recognized using the straight-line method over the estimated useful life of an asset. The Company depreciates land improvements over 3 to 20 years, buildings and improvements over 5 to 40 years, and equipment and fixtures over 3 to 18 years.  The Company also leases certain facilities and equipment under capital lease obligations. These assets are amortized on a straight-line basis over the lesser of the lease term or the remaining useful life of the asset.

Goodwill (Policies)

Goodwill

The Company’s hospital operations and QHR’s hospital management advisory and consulting services operations meet the criteria to be classified as reporting units for goodwill.  Goodwill was initially determined for QHC’s hospital operations reporting unit based on a relative fair value approach as of September 30, 2013 (CHS’ goodwill impairment testing date). Additional goodwill was allocated on a similar basis for four hospitals acquired by CHS in 2014 and included in the group of hospitals spun-off to QHC.  For the QHR reporting unit, goodwill was allocated based on the amount recorded by CHS at the time of its acquisition in 2007. All subsequent goodwill generated from hospital, physician practice or other ancillary business acquisitions was recorded at fair value at the time of acquisition.

Goodwill arising from business combinations is not amortized. Goodwill is evaluated for impairment at the same time every year and when an event occurs or circumstances change that, more likely than not, reduce the fair value of the reporting unit below its carrying value. There is a two-step method for determining goodwill impairment. Step one is to compare the fair value of the reporting unit with the unit’s carrying amount, including goodwill. If this test indicates the fair value is less than the carrying value, then step two is required to compare the implied fair value of the reporting unit’s goodwill with the carrying value of the reporting unit’s goodwill. See Note 5 – Goodwill and Intangible Assets, which includes a discussion of the impairment charges recorded in the consolidated and combined statements of income for the three and six months ended June 30, 2016.  The Company performs its annual testing of impairment for goodwill in the fourth quarter of each year.  The fair value of the related reporting units is estimated using both a discounted cash flow model as well as a multiple model based on earnings before interest, taxes, depreciation and amortization. The cash flow forecasts are adjusted by an appropriate discount rate based on the Company’s best estimate of a market participant’s weighted-average cost of capital. Both models are based on the Company’s best estimate of future revenues and operating costs and are reconciled to the Company’s consolidated market capitalization, with consideration of the amount a potential acquirer would be required to pay, in the form of a control premium, in order to gain sufficient ownership to set policies, direct operations and control management decisions of the Company.

Intangible Assets (Policies)

Intangible Assets

The Company’s intangible assets primarily consists of purchase and development costs of software for internal use and contract-based intangible assets, including physician guarantee contracts, medical licenses, hospital management contracts, non-compete agreements and certificates of need. There are no expected residual values related to the Company’s intangible assets.  Capitalized software costs are generally amortized over three years, except for software costs for significant system conversions, which are amortized over 8 to 10 years.  Capitalized software costs that are in the development stage are not amortized until the related projects are complete.  Assets established for physician guarantee contracts, hospital management contracts, non-compete agreements and certificates of need are amortized over the life of the individual contracts.  Tradenames and medical licenses are not amortized.

Impairment of Long-Lived Assets (Policies)

Impairment of Long-Lived Assets

Whenever an event occurs or changes in circumstances indicate that the carrying values of certain long-lived assets may be impaired, the Company projects the undiscounted cash flows expected to be generated by these assets. If the projections indicate that the carrying values are not expected to be recovered, such amounts are reduced to their estimated fair value based on a quoted market price, if available, or an estimated value based on valuation techniques available in the circumstances.  See Note 3 – Hospitals Held for Sale and Impairment of Long-Lived Assets related to impairment charges recorded in the consolidated and combined statements of income for the three and six months ended June 30, 2016.

Insurance Reserves (Policies)

Insurance Reserves

As part of the business of owning and operating hospitals, the Company is subject to legal actions alleging liability on its part. To mitigate a portion of this risk, the Company maintains insurance exceeding a self-insured retention level for these types of claims. The Company’s self-insurance reserves reflect the current estimate of all outstanding losses, including incurred but not reported losses, based upon actuarial calculations as of period end. The loss estimates included in the actuarial calculations may change in the future based upon updated facts and circumstances. The Company’s insurance expense includes the actuarially determined estimate of losses for the current year, including claims incurred but not reported, the change in the estimate of losses for prior years based upon actual claims development experience as compared to prior actuarial projections, the insurance premiums for losses in excess of the Company’s self-insured retention levels, the administrative costs of the insurance programs, and interest expense related to the discounted portion of the liability.  The Company’s reserves for professional liability claims are based upon semi-annual actuarial calculations, taking into consideration historical claims data, demographic considerations, severity factors and other actuarial assumptions, which are discounted to present value. The reserves for self-insured claims have been discounted based on the Company’s risk-free interest rate that corresponds to the period when the self-insured claims are incurred and projected to be paid.

See Note 17 – Commitments and Contingencies for information related to the portion of the Company’s insurance reserves for professional and general liability and workers’ compensation liability that are indemnified by CHS and the related accounting treatment and presentation in the consolidated and combined financial statements.  

Self-Insured Medical Benefits

The Company is self-insured for substantially all of the medical benefits of its employees.  The Company maintains a liability for its current estimate of incurred but not reported employee health claims based upon an annual actuarial calculation.  The undiscounted reserve for self-insured employee health benefits was $12.4 million as of June 30, 2016 and is included in employee compensation liabilities in the consolidated and combined balance sheets.  Expense each period is based on the actual claims received during the period plus any adjustment to the liability.

Prior to the Spin-off Transaction, QHC was allocated employee health expense, as part of the monthly corporate overhead charges from CHS, which was determined based on claims made by QHC employees during the period plus an estimate for the change in liability related to QHC employee health claims incurred but not reported.  The liability was included in Due to Parent, net, in the consolidated and combined balance sheets as the related employee health insurance policy was owned by CHS.  Employee health expense is included in salaries and benefits expenses in the consolidated and combined statements of income for all periods.  See Note 16 – Related Party Transactions for additional information on all corporate overhead costs from CHS prior to the Spin-off Transaction.

Debt Issuance Costs and Discounts (Policies)

Debt Issuance Costs and Discounts

The Company adopted Accounting Standards Update 2015-03 on January 1, 2016 which requires the presentation of debt issuance costs as a reduction of the debt liability on the balance sheet, consistent with the accounting for debt discounts.  Amortization of debt issuance costs and debt discounts are each recorded as non-cash interest expense over the life of the respective debt instrument.

Due to Parent, Net (Policies)

Due to Parent, Net

Prior to the Spin-off Transaction, Due to Parent, net, in the consolidated and combined balance sheets represented the Company’s liability to CHS for the accumulation of (1) CHS’ historical investment in QHC, (2) liabilities established related to the cost allocations from CHS to QHC, (3) interest charged by CHS on the monthly outstanding Due to Parent, net balance, (4) the net effect of transactions between CHS and QHC, and (5) the net effect of cash transfers from QHC to CHS under CHS’ centralized cash management program. In connection with the Spin-off Transaction, certain liabilities were transferred through Due to Parent, net to the Company, pursuant to the Separation and Distribution Agreement, and the remaining balance was settled in the form of a non-cash capital contribution to the Company.  See Note 1 – Description of the Business and Spin-off Transaction and Note 16 – Related Party Transactions for additional information on the Spin-off Transaction and related party transactions with CHS.  

Assets and Liabilities of Hospitals Held for Sale (Policies)

Assets and Liabilities of Hospitals Held for Sale

The Company reports assets that meet the criteria for classification as held for sale separately from other assets on the consolidated and combined balance sheets.  Generally, assets that meet the criteria include those in which the carrying amount will be settled principally through a sale transaction rather than through continuing use.  The asset must be available for immediate sale in its present condition, subject to usual or customary terms, and the sale must be probable to occur in the next 12 months.  Similarly, the liabilities of a disposal group are classified as held for sale upon meeting these criteria.  Immediately following classification as held for sale, the Company remeasures these assets and liabilities and adjusts the value to the lesser of the carrying amount or fair value less costs to sell.  The assets and liabilities classified as held for sale are no longer depreciated or amortized into expense.  See Note 3 – Hospitals Held for Sale and Impairment of Long-Lived Assets related to certain hospitals classified as held for sale as of June 30, 2016.

Stock-Based Compensation (Policies)

Stock-Based Compensation

In connection with the Spin-off Transaction, the Company issued QHC restricted stock awards to all CHS restricted stock award holders as of the Record Date.  Each holder of CHS restricted stock awards received one QHC restricted stock award for every four CHS restricted stock awards held.  In addition, QHC employees that held CHS restricted stock awards were allowed to continue to hold the CHS awards under the same terms and conditions that existed prior to the Spin-off Transaction, excluding certain shares granted on March 1, 2016 which were canceled in connection with the Spin-off Transaction.  The unrecognized compensation expense related to the vesting of the CHS restricted stock awards held by QHC employees was transferred to QHC with the Spin-off Transaction.  As a result, the Company is responsible for recording stock-based compensation expense attributable to the unvested portion of CHS restricted stock awards held by QHC employees and the unvested portion of all QHC restricted stock awards held by its employees, consisting of both QHC awards issued on the Record Date and additional awards granted under the Quorum Health Corporation 2016 Stock Award Plan (the “2016 Stock Award Plan”) following the Spin-off Transaction.  See Note 14 – Stock-Based Compensation.

Benefit Plans (Policies)

Benefit Plans

Following the Spin-off Transaction, the Company maintains various benefit plans, including defined contribution plans, a defined benefit plan and deferred compensation plans, for which certain of the Company’s subsidiaries are the plan sponsors.  The rights and obligations of these plans were transferred from CHS to the Company in connection with the Spin-off Transaction, pursuant to the Separation and Distribution Agreement. Prior to the Spin-off Transaction, QHC was allocated a portion of CHS’ benefit costs under its defined contribution plans, based on specific identification for plans associated with QHC hospitals and QHC’s proportional share of employees covered under all other applicable plans.  The expense was recorded as salaries and benefits in the consolidated and combined statements of income, and the cumulative liability for these benefit costs was recorded in Due to Parent, net, in the consolidated and combined balance sheets and transferred to the Company in the Spin-off Transaction.

QHC recognizes the unfunded liability of its defined benefit plan in other long-term liabilities in the consolidated and combined balance sheets and unrecognized gains (losses) and prior service credits (costs) as changes in other comprehensive income (loss).  The measurement date of the plan’s assets and liabilities coincides with the Company’s year-end.  The Company’s pension benefit obligation is measured using actuarial calculations that incorporate discount rates, rate of compensation increases and expected long-term returns on plan assets and that consider expected age of retirement and mortality.  The Company records pension benefit costs related to all of its plans as salaries and benefits costs in the consolidated and combined statements of income.

Fair Value of Financial Instruments (Policies)

Fair Value of Financial Instruments

The Company utilizes the U.S. GAAP fair value hierarchy for measurement of fair value related to its financial instruments.  The fair value hierarchy distinguishes between market participant assumptions based on market data obtained from sources independent of the reporting entity (observable inputs that are classified within Levels 1 and 2 of the hierarchy) and the reporting entity’s own assumption about market participant assumptions (unobservable inputs classified within Level 3 of the hierarchy).  The inputs used to measure fair value are classified into the following fair value hierarchy:

· Level 1 - Quoted market prices in active markets for identical assets and liabilities.

· Level 2 - Observable market-based inputs or unobservable inputs that are corroborated by market data.

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

Segment Reporting (Policies)

Segment Reporting

The principal business of the Company is to provide healthcare services through its hospitals and affiliated facilities. The Company’s only other line of business is the hospital management advisory and consulting services it provides through QHR. The Company has determined that its hospital operations business meets the criteria for separate segment reporting.  The financial information for QHR’s business does not meet the quantitative thresholds for separate segment reporting, and therefore has been combined with the Company’s corporate functions into the all other reportable segment.  See Note 13 – Segments.

Accounting Standards Not Yet Adopted (Policies)

Accounting Standards Not Yet Adopted

In May 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2014-09, which outlines a single comprehensive model for recognizing revenue and supersedes most existing revenue recognition guidance, including guidance specific to the healthcare industry. This ASU provides companies the option of applying a full or modified retrospective approach upon adoption. This ASU is effective for fiscal years beginning after December 15, 2017 with early adoption permitted for annual periods beginning after December 15, 2016. The Company expects to adopt this ASU on January 1, 2018 and is currently evaluating its plan for adoption and the impact on its revenue recognition policies, procedures and control framework and the resulting impact on its consolidated and combined results of operations, financial position and cash flows.

In February 2016, the FASB issued ASU 2016-02, which amends the accounting for leases, requiring lessees to recognize most leases on their balance sheet with a right-of-use asset and a lease liability. Leases will be classified as either finance or operating leases, which will impact the expense recognition of such leases over the lease term. The ASU also modifies the lease classification criteria for lessors and eliminates some of the real estate leasing guidance previously applied for certain leasing transactions. This ASU is effective for fiscal years beginning after December 15, 2018, with early adoption permitted. The Company expects to adopt this ASU on January 1, 2019.  Because of the number of leases we utilize to support operations, the adoption of this ASU is expected to have a significant impact on the Company’s consolidated and combined results of operations, financial position and cash flows.  The Company is currently evaluating the quantitative and qualitative factors that will impact the Company as part of the adoption of this ASU, as well as any changes to its leasing strategy because of the changes to the accounting and recognition of leases.

In March 2016, the FASB issued ASU 2016-09, which was issued to simplify some of the accounting guidance for share-based compensation. Among the areas impacted by the amendments in this ASU is the accounting for income taxes related to share-based payments, accounting for forfeitures, classification of awards as equity or liabilities and classification on the statement of cash flows. This ASU is effective for fiscal years beginning after December 15, 2016, with early adoption permitted. The Company expects to adopt this ASU on January 1, 2017. Management is evaluating the impact that the adoption of this ASU will have on its consolidated and combined financial position, results of operations and cash flows.

XML

Description of the Business and Spin-Off Transaction (Tables)

6 Months Ended

Jun. 30, 2016

Organization Consolidation And Presentation Of Financial Statements [Abstract]

Summary of Transactions to Effect the Spin-Off Transaction

A summary of the major transactions that occurred on April 29, 2016 to effect the spin-off of QHC as a newly formed, independent company were as follows (dollars in thousands):

										Additional
	Long-Term		Due to			Common Stock				Paid-in			Parent's
	Debt		Parent, Net			Shares		Amount		Capital			Equity
Balance at April 29, 2016 (prior to spin-off transaction)	$	24,179	$	1,811,034			—	$	-	$	-		$	3,137
Borrowings of long-term debt, net of debt issuance costs and discounts		1,230,819		—			—		—		—			—
Cash proceeds paid to Parent		—		(1,217,336	)		—		—		—			—
Transfer of liabilities from Parent		—		(16,596	)		—		—		—			—
Net deferred tax liability resulting from spin-off transaction				(61,718	)
Non-cash capital contribution from Parent		—		(515,384	)		—		—		518,521			(3,137	)
Distribution of common stock		—		—			27,719,645		3		(3	)		—
Distribution of restricted stock awards		—		—			692,409		—		—			—
Balance at April 29, 2016 (after spin-off transaction)	$	1,254,998	$	-			28,412,054	$	3	$	518,518		$	-

Summary of Liabilities Transferred from Parent

A summary of the liabilities transferred to QHC from CHS just prior to the consummation of the Spin-off Transaction, previously included in Due to Parent, net, were as follows (in thousands): 

	April 29,
	2016
Accounts payable for capital expenditures	$	8,422
Benefit plan liabilities		5,964
Other liabilities		2,210
Total liabilities transferred from Parent	$	16,596

XML

Basis of Presentation and Significant Accounting Policies (Tables)

6 Months Ended

Jun. 30, 2016

Accounting Policies [Abstract]

Summary of Components of Operating Revenues Before Provision for Bad Debts

A summary of the components of operating revenues before the provision for bad debts follows (in thousands):

	Three Months Ended June 30,						Six Months Ended June 30,
	2016			2015			2016			2015
Operating revenues	$	3,042,786		$	2,923,172		$	6,123,439		$	5,771,609
Less:  Contractual allowances		(2,335,554	)		(2,224,369	)		(4,696,589	)		(4,383,729	)
Less:  Discounts		(109,069	)		(90,167	)		(214,203	)		(172,772	)
Total operating revenues, net of contractual allowances and discounts	$	598,163		$	608,636		$	1,212,647		$	1,215,108

Summary of Operating Revenues by Payor Source

A summary of operating revenues by payor source follows (dollars in thousands):

	Three Months Ended June 30,
	2016					2015
	$  Amount		% of Total			$  Amount		% of Total
Medicare	$	167,549		28.0	%	$	156,649		25.7	%
Medicaid		113,283		18.9	%		103,972		17.1	%
Managed care and commercial		230,595		38.6	%		259,984		42.7	%
Self-pay		59,171		9.9	%		57,181		9.4	%
Non-patient		27,565		4.6	%		30,850		5.1	%
Total operating revenues, net of contractual allowances and discounts	$	598,163		100.0	%	$	608,636		100.0	%
	Six Months Ended June 30,
	2016					2015
	$  Amount		% of Total			$  Amount		% of Total
Medicare	$	343,083		28.3	%	$	331,373		27.3	%
Medicaid		216,351		17.8	%		208,306		17.1	%
Managed care and commercial		474,879		39.2	%		495,752		40.8	%
Self-pay		123,925		10.2	%		120,095		9.9	%
Non-patient		54,409		4.5	%		59,582		4.9	%
Total operating revenues, net of contractual allowances and discounts	$	1,212,647		100.0	%	$	1,215,108		100.0	%

Summary of Components of Amounts Due from and Due to Third-Party Payors

The following table summarizes the components of amounts due from and due to third-party payors, as presented in the consolidated and combined balance sheets (in thousands):

	June 30,		December 31,
	2016		2015
Amounts due from third-party payors:
Previous program reimbursements and final cost report settlements	$	29,438	$	33,732
State supplemental payment programs		87,327		77,074
Total amounts due from third-party payors	$	116,765	$	110,806
Amounts due to third-party payors:
Previous program reimbursements and final cost report settlements	$	31,961	$	21,015
State supplemental payment programs		9,253		9,088
Total amounts due to third party payors	$	41,214	$	30,103

Summary of Impact on Consolidated and Combined Statements of Income (Loss) Related to State Supplemental Payment Programs

The table below summarizes the impact on income (loss) from operations related to state supplemental payment programs (in thousands):

	Three Months Ended June 30,				Six Months Ended June 30,
	2016		2015		2016		2015
State supplemental payment programs:
Revenues	$	55,105	$	49,838	$	107,320	$	105,217
Expenses		18,604		19,324		38,030		38,493
Total operating income from state supplemental payment programs	$	36,501	$	30,514	$	69,290	$	66,724

Summary of Components of Accounts Receivable Before Contractual Allowances Discounts and Allowance for Doubtful Accounts

A summary of the components of accounts receivable before contractual allowances, discounts and allowance for doubtful accounts follows (dollars in thousands):

	June 30, 2016					December 31, 2015
	Amount		% of Total			Amount		% of Total
Third-parties	$	1,831,940		74.5	%	$	1,688,138		72.6	%
Self-pay		626,662		25.5	%		638,694		27.4	%
Total accounts receivable, gross	$	2,458,602		100.0	%	$	2,326,832		100.0	%

Summary of Changes in Allowance for Doubtful Accounts

A summary of the changes in the allowance for doubtful accounts follows (in thousands):

	Six Months Ended
	June 30, 2016
Balance at beginning of period	$	346,507
Provision for bad debts		133,359
Amounts written off, net of recoveries		(142,613	)
Balance at end of period	$	337,253

Summary of States in Which Company Generates More Than 5% of its Total Revenues

A summary of the states in which the Company generates more than 5% of total net patient revenues before the provision for bad debts, as determined based on the six months ended June 30, 2016 and 2015, follows (dollars in thousands):

		Six Months Ended June 30,
	Number of	2016					2015
	Hospitals	$  Amount		% of Total			$  Amount		% of Total
Illinois	9	$	399,049		34.5	%	$	405,390		35.1	%
Oregon	1		104,810		9.0	%		92,962		8.0	%
Georgia	4		107,469		9.3	%		113,055		9.8	%
California	2		101,562		8.8	%		104,397		9.0	%
Kentucky	3		59,375		5.1	%		63,406		5.5	%

Summary of Major Components of Other Operating Expenses

A summary of the major components of other operating expenses follows (in thousands):

	Three Months Ended June 30,				Six Months Ended June 30,
	2016		2015		2016		2015
Purchased services	$	62,477	$	59,041	$	124,218	$	116,406
Taxes and insurance		34,261		31,534		69,567		59,339
Medical specialist fees		25,182		20,579		49,532		40,267
Repairs and maintenance		10,730		11,562		21,966		23,296
Utilities		7,001		7,038		14,156		14,367
Management fees from Parent		2,966		9,048		11,792		17,964
Other miscellaneous operating expenses		20,568		20,009		36,417		39,412
Total other operating expenses	$	163,185	$	158,811	$	327,648	$	311,051

Summary of Activity Related to Electronic Health Records Incentives

A summary of activity related to EHR incentives follows (in thousands):

	Three Months Ended June 30,						Six Months Ended June 30,
	2016			2015			2016			2015
Electronic health records incentives receivable at beginning of period	$	5,885		$	6,822		$	11,227		$	12,204
Electronic health records incentives earned		608			1,236			4,816			4,775
Cash incentive payments received		(5,124	)		(1,396	)		(12,749	)		(8,220	)
Adjustments to receivable based on final cost report settlement or audit		604			(814	)		(1,321	)		(2,911	)
Electronic health records incentives receivable at end of period	$	1,973		$	5,848		$	1,973		$	5,848
Deferred revenue related to electronic health records incentives at beginning of period	$	(4,693	)	$	(10,183	)	$	-		$	(14,351	)
Cash received and deferred during period		-			-			(4,693	)		-
Recognition of deferred incentives as earned		3,639			6,388			3,639			10,556
Deferred revenue related to electronic health records incentives at end of period	$	(1,054	)	$	(3,795	)	$	(1,054	)	$	(3,795	)
Total electronic health records incentives earned during period	$	4,247		$	7,624		$	8,455		$	15,331
Total cash incentive payments received during period		5,124			1,396			17,442			8,220

XML

Property and Equipment (Tables)

6 Months Ended

Jun. 30, 2016

Property Plant And Equipment [Abstract]

Summary of Property and Equipment

A summary of property and equipment follows (in thousands):

	June 30,			December 31,
	2016			2015
Property and equipment, at cost:
Land and improvements	$	95,631		$	100,053
Building and improvements		814,376			853,853
Equipment and fixtures		599,634			616,667
Construction in progress		40,110			33,080
Total property and equipment, at cost		1,549,751			1,603,653
Less:  Accumulated depreciation and amortization		(732,719	)		(723,404	)
Total property and equipment, net	$	817,032		$	880,249

XML

Goodwill and Intangible Assets (Tables)

6 Months Ended

Jun. 30, 2016

Goodwill And Intangible Assets Disclosure [Abstract]

Summary of Changes in Goodwill

A summary of changes in goodwill follows (in thousands):

	Six Months Ended
	June 30, 2016
Balance at beginning of period	$	541,704
Acquisitions		86
Impairment		(205,000	)
Balance at end of period	$	336,790

Summary of Intangible Assets

A summary of intangible assets follows (in thousands):

	June 30,			December 31,
	2016			2015
Finite-lived intangible assets:
Capitalized software costs:
Cost	$	189,368		$	194,941
Accumulated amortization		(107,095	)		(98,004	)
Capitalized software costs, net		82,273			96,937
Physician guarantee contracts:
Cost		12,327			16,594
Accumulated amortization		(6,355	)		(9,560	)
Physician guarantee contracts, net		5,972			7,034
Other finite-lived intangible assets:
Cost		42,073			43,275
Accumulated amortization		(29,849	)		(29,351	)
Other finite-lived intangible assets, net		12,224			13,924
Total finite-lived intangible assets:
Cost		243,768			254,810
Accumulated amortization		(143,299	)		(136,915	)
Total finite-lived intangible assets, net	$	100,469		$	117,895
Indefinite-lived intangible assets:
Tradenames	$	4,000		$	4,000
Medical licenses and other indefinite-lived intangible assets		4,975			7,355
Total indefinite-lived intangible assets	$	8,975		$	11,355
Total intangible assets:
Cost	$	252,743		$	266,165
Accumulated amortization		(143,299	)		(136,915	)
Total intangible assets, net	$	109,444		$	129,250

Summary of Amortization Expense

A summary of amortization expense follows (in thousands):

	Three Months Ended June 30,				Six Months Ended June 30,
	2016		2015		2016		2015
Amortization of finite-lived intangible assets:
Capitalized software costs	$	6,730	$	6,754	$	13,325	$	13,464
Physician guarantee contracts		902		1,275		1,613		1,991
Other finite-lived intangible assets		759		813		1,516		1,645
Total amortization expense related to finite-lived intangible assets		8,391		8,842		16,454		17,100
Amortization of property and equipment assets held under capital lease obligations		610		605		1,293		1,235
Total amortization expense	$	9,001	$	9,447	$	17,747	$	18,335

Summary of Future Estimated Amortization Expense

Total estimated future amortization expense for the next five years and thereafter related to the intangible assets follows (in thousands):

	June 30,
	2016
Remainder of 2016	$	14,498
2017		25,418
2018		14,285
2019		12,668
2020		12,288
Thereafter		21,312
Total estimated future amortization expense	$	100,469

XML

Long-Term Debt (Tables)

6 Months Ended

Jun. 30, 2016

Debt Disclosure [Abstract]

Summary of Long Term Debt

A summary of long-term debt follows (in thousands):

	June 30,			December 31,
	2016			2015
Senior Credit Facility:
Revolving Credit Facility, maturing 2021	$	-		$	-
Term Loan Facility, maturing 2022		877,800			-
ABL Credit Facility, maturing 2021		-			-
Senior Notes, maturing 2023		400,000			-
Unamortized debt issuance costs and discounts		(51,348	)		-
Capital lease obligations		25,500			22,323
Other debt		978			1,092
Total debt		1,252,930			23,415
Less:  Current maturities of long-term debt		(16,271	)		(7,915	)
Total long-term debt	$	1,236,659		$	15,500
Due to Parent, net	$	-		$	1,800,908

Summary of Maximum Secured Net Leverage Ratio Permitted Under Credit Facility

Under the terms of the CS Agreement, the maximum Secured Net Leverage Ratio permitted under the CS Agreement, as determined based on 12 month trailing EBITDA, follows:

	Maximum
	Secured Net
Period	Leverage Ratio
Period from April 29, 2016 to June 30, 2017	4.50 to 1.00
Period from July 1, 2017 to June 30, 2018	4.25 to 1.00
Period from July 1, 2018 and thereafter	4.00 to 1.00

Summary of Redemption Dates and Prices of Senior Notes

A summary of the redemption dates and prices follows:

	Redemption
Period	Prices
Period from April 15, 2019 to April 14, 2020		108.719	%
Period from April 15, 2020 to April 14, 2021		105.813	%
Period from April 15, 2021 to April 14, 2022		102.906	%
Period from April 15, 2022 to April 15, 2023		100.000	%

Summary of Debt Issuance Costs and Discounts

A summary of debt issuance costs and discounts follows (in thousands):

	June 30,			December 31,
	2016			2015
Debt issuance costs	$	28,003		-
Debt discounts		24,536		-
Total debt issuance costs and discounts at origination		52,539			-
Less:  Amortization of debt issuance costs and discounts		(1,191	)	-
Total unamortized debt issuance costs and discounts	$	51,348		$	-

Summary of Debt Maturities for Next Five Years and Thereafter

A summary of debt maturities for the next five years and thereafter follows (in thousands):

	June 30,
	2016
Remainder of 2016	$	11,087
2017		10,268
2018		10,411
2019		10,047
2020		10,145
Thereafter		1,252,320
Total debt, excluding debt issuance costs and discounts	$	1,304,278

Summary of Components of Interest Expense, Net

A summary of the components of interest expense, net, follows (in thousands):

	Three Months Ended June 30,						Six Months Ended June 30,
	2016			2015			2016		2015
Senior Credit Facility:
Revolving Credit Facility	$	85		$	-		$	85	$	-
Term Loan Facility		10,432			-			10,432		-
ABL Credit Facility		82			-			82		-
Senior Notes		8,914			-			8,914		-
Amortization of debt issuance costs and discounts		1,191			-			1,191		-
All other interest expense (income), net		(359	)		(182	)		210		237
Total interest expense, net, from long-term debt		20,345			(182	)		20,914		237
Due to Parent, net		8,931			24,010			35,814		49,393
Total interest expense, net	$	29,276		$	23,828		$	56,728	$	49,630

XML

Other Long-Term Liabilities (Tables)

6 Months Ended

Jun. 30, 2016

Other Liabilities Disclosure [Abstract]

Summary of Other Long-Term Liabilities

A summary of other long-term liabilities follows (in thousands):

	June 30,		December 31,
	2016		2015
Professional and general liability insurance reserves	$	87,250	$	77,423
Workers' compensation liability insurance reserves		19,690		20,507
Benefit plan liabilities		12,702		3,376
Deferred rent		3,986		3,770
Other miscellaneous long-term liabilities		3,247		3,065
Total other long-term liabilities	$	126,875	$	108,141

XML

Fair Value of Financial Instruments (Tables)

6 Months Ended

Jun. 30, 2016

Fair Value Disclosures [Abstract]

Summary of Carrying Amounts and Estimated Fair Values of Long-Term Debt Instruments

A summary of the carrying amounts and estimated fair values of the Company’s long-term debt follows (in thousands):

	June 30, 2016				December 31, 2015
	Carrying		Estimated		Carrying		Estimated
	Amount		Fair Value		Amount		Fair Value
Revolving Credit Facility	$	-	$	-	$	-	$	-
Term Loan Facility		877,800		880,548		—		—
ABL Credit Facility		—		—		—		—
Senior Notes		400,000		404,752		—		—
Other debt		26,478		26,478		23,415		23,415
Total long-term debt, excluding debt issuance costs and discounts	$	1,304,278	$	1,311,778	$	23,415	$	23,415

XML

Earnings Per Share (Tables)

6 Months Ended

Jun. 30, 2016

Earnings Per Share [Abstract]

Summary of Computation of Basic and Diluted Earnings Per Share

A summary of the computation of basic and diluted earnings per share follows (dollars in thousands, except per share amounts):

	Three Months Ended June 30,					Six Months Ended June 30,
	2016			2015		2016			2015
Numerator:
Net income (loss)	$	(243,966	)	$	2,205	$	(248,653	)	$	8,029
Less: Net income attributable to noncontrolling interests		1,095			775		1,410			400
Net income (loss) attributable to Quorum Health Corporation		(245,061	)		1,430		(250,063	)		7,629
Denominator:
Weighted-average common shares outstanding - basic and diluted		28,412,720			28,412,054		28,412,389			28,412,054
Basic and diluted earnings (loss) per share attributable to Quorum Health Corporation stockholders	$	(8.63	)	$	0.05	$	(8.80	)	$	0.27

XML

Additional Cash Flow Information (Tables)

6 Months Ended

Jun. 30, 2016

Significant Non Cash Transactions [Abstract]

Summary of Significant Non-Cash Transactions Related to Consolidated and Combined Balance Sheets

A summary of significant non-cash transactions related to the consolidated and combined balance sheets follows (in thousands):

	Three Months Ended June 30,				Six Months Ended June 30,
	2016		2015		2016		2015
Transfer of liabilities from Parent	$	16,596	$	-	$	16,596	$	-
Non-cash capital contribution from Parent		518,518		-		518,518		-
Property and equipment acquired under capital leases and deferred financing obligations		3,097		658		5,120		658

XML

Segments (Tables)

6 Months Ended

Jun. 30, 2016

Segment Reporting [Abstract]

Summary of Financial Information Related to Segments

A summary of financial information related to segments follows (in thousands):

	Three Months Ended June 30,				Six Months Ended June 30,
	2016		2015		2016		2015
Net operating revenues:
Hospital operations	$	508,906	$	515,428	$	1,036,317	$	1,039,621
All other		20,831		22,924		42,971		46,348
Total net operating revenues	$	529,737	$	538,352	$	1,079,288	$	1,085,969
Adjusted EBITDA:
Hospital operations	$	26,457	$	55,953	$	75,396	$	118,645
All other		2,775		3,672		10,060		7,009
Total Adjusted EBITDA	$	29,232	$	59,625	$	85,456	$	125,654

	June 30,		December 31,
	2016		2015
Assets:
Hospital operations	$	1,906,376	$	2,256,557
All other		195,983		38,299
Total assets	$	2,102,359	$	2,294,856

Summary of Reconciliation of Adjusted EBITDA to Net Income (Loss)

A reconciliation of Adjusted EBITDA to net income (loss) follows (in thousands):

	Three Months Ended June 30,						Six Months Ended June 30,
	2016			2015			2016			2015
Adjusted EBITDA	$	29,232		$	59,625		$	85,456		$	125,654
Interest expense, net		(29,276	)		(23,828	)		(56,728	)		(49,630	)
Benefit from (provision for) income taxes		44,565			(1,451	)		46,239			(4,156	)
Depreciation and amortization		(31,463	)		(32,141	)		(62,620	)		(63,839	)
Legal and settlement costs		(5,447	)		—			(5,688	)		—
Impairment of-long-lived assets and goodwill		(250,400	)		—			(250,400	)		—
Transaction costs related to spin-off		(1,177	)		—			(4,912	)		—
Net income (loss)	$	(243,966	)	$	2,205		$	(248,653	)	$	8,029

XML

Stock-Based Compensation (Tables)

6 Months Ended

Jun. 30, 2016

Summary of Stock-Based Compensation Expense

A summary of stock-based compensation expense follows (in thousands):

	Three Months Ended June 30,				Six Months Ended June 30,
	2016		2015		2016		2015
Stock-based compensation resulting from the spin-off transaction	$	809	$	-	$	809	$	-
Stock-based compensation related to grants following the spin-off transaction		1,088		—		1,088		—
Total stock-based compensation expense	$	1,897	$	-	$	1,897	$	-

QHC Awards Distributed in Spin-Off Transaction [Member]

Summary of Activity Related to Unvested Restricted Stock Awards

A summary of the activity related to remaining unvested QHC restricted stock awards held by QHC and CHS employees as of the Spin-off Transaction date follows:

	QHC Awards Distributed in Spin-Off Transaction
	QHC Employees			CHS Employees			Total
Unvested restricted stock awards at Spin-off Transaction date		54,321			638,088			692,409
Vested		(336	)		(1,684	)		(2,020	)
Forfeited		(164	)		(3,648	)		(3,812	)
Unvested restricted stock awards at end of period		53,821			632,756			686,577

QHC Restricted Stock Awards Granted Following Spin-off Transaction [Member]

Summary of Activity Related to Unvested Restricted Stock Awards

A summary of the activity related to QHC unvested restricted stock awards granted subsequent to the Spin-off Transaction date follows:

	QHC Awards Granted
	Subsequent to Spin-off Transaction
			Weighted-
			Average
			Grant Date
	Shares		Fair Value
Unvested restricted stock awards at beginning of period		-	$	-
Granted		1,081,005		12.77
Vested		-		-
Forfeited		-		-
Unvested restricted stock awards at end of period		1,081,005	$	12.77

XML

Related Party Transactions (Tables)

6 Months Ended

Jun. 30, 2016

Related Party Transactions [Abstract]

Summary of Allocated Costs from Parent

A summary of allocated costs to QHC from CHS follows (in thousands):

	Three Months Ended June 30,				Six Months Ended June 30,
	2016		2015		2016		2015
Insurance costs	$	10,486	$	32,043	$	44,246	$	66,521
Management fees from Parent		2,966		9,048		11,792		17,964
All other allocated costs		5,305		11,587		25,021		29,175
Total related party operating costs and expenses	$	18,757	$	52,678	$	81,059	$	113,660

XML

Commitments and Contingencies (Tables)

6 Months Ended

Jun. 30, 2016

Commitments And Contingencies Disclosure [Abstract]

Summary of Insurance Reserves Related to Professional and General Liability Claims and Workers’ Compensation Claims

A summary of the Company’s insurance reserves related to professional and general liability claims and workers’ compensation claims, separated between those which have been indemnified by CHS and those that relate to the Company’s self-insurance risks, follows (in thousands):

	June 30, 2016
	Current		Long-Term		Current		Long-Term
	Receivable		Receivable		Liability		Liability
Professional and general liability:
Insurance reserves indemnified by CHS, Inc.	$	21,488	$	69,028	$	21,488	$	69,028
All other self-insurance reserves		—		8,826		—		18,222
Total insurance reserves for professional and general liability		21,488		77,854		21,488		87,250
Workers' compensation liability:
Insurance reserves indemnified by CHS, Inc.		5,972		19,690		5,972		19,690
All other self-insurance reserves		—		—		708		—
Total insurance reserves for workers' compensation liability		5,972		19,690		6,680		19,690
Total self-insurance reserves	$	27,460	$	97,544	$	28,168	$	106,940
	December 31, 2015
	Current		Long-Term		Current		Long-Term
	Receivable		Receivable		Liability		Liability
Professional and general liability:
Insurance reserves indemnified by CHS, Inc.	$	21,120	$	72,412	$	21,120	$	72,412
All other self-insurance reserves		—		4,077		—		5,011
Total insurance reserves for professional and general liability		21,120		76,489		21,120		77,423
Workers' compensation liability:
Insurance reserves indemnified by CHS, Inc.		8,314		20,507		8,314		20,507
All other self-insurance reserves		—		—		—		—
Total insurance reserves for workers' compensation liability		8,314		20,507		8,314		20,507
Total self-insurance reserves	$	29,434	$	96,996	$	29,434	$	97,930

XML

Description of the Business and Spin-Off Transaction (Narrative) (Details)			6 Months Ended
	Apr. 29, 2016 USD ($) Hospital $ / shares shares	Apr. 22, 2016 USD ($)	Jun. 30, 2016 USD ($) Hospital bed state $ / shares	Dec. 31, 2015 USD ($)
Description Of Business And Spin Off Transaction [Line Items]
Number of hospitals owned or leased | Hospital			38
Number of licensed beds | bed			3,579
Number of States in which Entity Operates | state			16
Common stock, par value | $ / shares			$ 0.0001
Cash proceeds paid to Parent	$ 1,217,336,000
Debt Instrument, Unamortized Discount			$ 24,536,000	$ 0
Additional Paid-In Capital [Member]
Description Of Business And Spin Off Transaction [Line Items]
Non-cash capital contribution from Parent	518,521,000
Senior Notes, maturing 2023 [Member]
Description Of Business And Spin Off Transaction [Line Items]
Debt Instrument, Face Amount		$ 400,000,000
Debt Instrument, Interest Rate, Stated Percentage		11.625%
Debt Instrument, Unamortized Discount		$ 6,936,000
Debt instrument issue discount percentage		1.734%
ABL Credit Facility, maturing 2021 [Member]
Description Of Business And Spin Off Transaction [Line Items]
Line of Credit Facility, Maximum Borrowing Capacity	125,000,000
Senior Credit Facility [Member] | Term Loan Facility, maturing 2022 [Member]
Description Of Business And Spin Off Transaction [Line Items]
Debt Instrument, Face Amount	880,000,000
Debt Instrument, Unamortized Discount	$ 17,600,000
Term Facility Issued Percentage on Par Value	98.00%
Senior Credit Facility [Member] | Revolving Credit Facility, maturing 2021 [Member]
Description Of Business And Spin Off Transaction [Line Items]
Line of Credit Facility, Maximum Borrowing Capacity	$ 100,000,000
Spin-off from CHS [Member]
Description Of Business And Spin Off Transaction [Line Items]
Number of hospitals owned or leased | Hospital	38
Percentage ownership of number of stock shares held by the parent	100.00%
Common stock, par value | $ / shares	$ 0.0001
Record date for stockholders of the parent to be eligible to receive share distribution in spin-off transaction	Apr. 22, 2016
Number of shares distributed to each stockholder in spin-off transaction | shares	1
Number of shares held by each stockholder of the parent used to determine share distribution in spin-off transaction | shares	4
Cash contribution from parent	$ 13,500,000
Cash contribution from parent for initial working capital	20,000,000
Differences in estimated and actual financing transaction fees for the Spin-off Transaction	$ 6,500,000
Sales Revenue, Segment [Member] | Segment Concentration Risk [Member] | Hospital Operations Reporting Unit [Member]
Description Of Business And Spin Off Transaction [Line Items]
Concentration risk, percentage			95.00%

XML

Description of the Business and Spin-Off Transaction - Summary of Transactions to Effect the Spin-Off Transaction (Details) $ in Thousands	Apr. 29, 2016 USD ($) shares
Description Of Business And Spin Off Transaction [Line Items]
Long-Term Debt, balance at April 29, 2016 (prior to spin-off transaction)	$ 24,179
Borrowings of long-term debt, net of debt issuance costs and discounts	1,230,819
Long-Term Debt, balance at April 29, 2016 (after spin-off transaction)	1,254,998
Due to Parent, Net, balance at April 29, 2016 (prior to spin-off transaction)	1,811,034
Cash proceeds paid to Parent	(1,217,336)
Transfer of liabilities from Parent	(16,596)
Net deferred tax liability resulting from spin-off transaction	(61,718)
Non-cash capital contribution from Parent	(515,384)
Due to Parent, Net, balance at April 29, 2016 (after spin-off transaction)	$ 0
Stockholders' equity, ending balance, shares | shares	28,412,054
Common Stock [Member]
Description Of Business And Spin Off Transaction [Line Items]
Stockholders' equity, beginning balance	$ 0
Stockholders' equity, beginning balance, shares | shares	0
Distribution of common stock	$ 3
Distribution of common stock, shares | shares	27,719,645
Distribution of restricted stock awards	$ 0
Distribution of restricted stock awards, shares | shares	692,409
Stockholders' equity, ending balance	$ 3
Stockholders' equity, ending balance, shares | shares	28,412,054
Additional Paid-In Capital [Member]
Description Of Business And Spin Off Transaction [Line Items]
Stockholders' equity, beginning balance	$ 0
Non-cash capital contribution from Parent	518,521
Distribution of common stock	(3)
Stockholders' equity, ending balance	518,518
Parent [Member]
Description Of Business And Spin Off Transaction [Line Items]
Stockholders' equity, beginning balance	3,137
Non-cash capital contribution from Parent	(3,137)
Stockholders' equity, ending balance	$ 0

XML

Description of the Business and Spin-Off Transaction - Summary of Liabilities Transferred from Parent (Details) $ in Thousands	Apr. 29, 2016 USD ($)
Description Of Business And Spin Off Transaction [Line Items]
Total liabilities transferred from Parent	$ 16,596
Accounts Payable for Capital Expenditures [Member]
Description Of Business And Spin Off Transaction [Line Items]
Total liabilities transferred from Parent	8,422
Benefit Plan Liabilities [Member]
Description Of Business And Spin Off Transaction [Line Items]
Total liabilities transferred from Parent	5,964
Other Liabilities [Member]
Description Of Business And Spin Off Transaction [Line Items]
Total liabilities transferred from Parent	$ 2,210

XML

Basis of Presentation and Significant Accounting Policies (Summary of Components of Operating Revenues Before Provision for Bad Debts) (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2016	Jun. 30, 2015	Jun. 30, 2016	Jun. 30, 2015
Health Care Organizations [Abstract]
Operating revenues	$ 3,042,786	$ 2,923,172	$ 6,123,439	$ 5,771,609
Less: Contractual allowances	(2,335,554)	(2,224,369)	(4,696,589)	(4,383,729)
Less: Discounts	(109,069)	(90,167)	(214,203)	(172,772)
Total operating revenues, net of contractual allowances and discounts	$ 598,163	$ 608,636	$ 1,212,647	$ 1,215,108

XML

Basis of Presentation and Significant Accounting Policies (Summary of Operating Revenues by Payor Source) (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2016	Jun. 30, 2015	Jun. 30, 2016	Jun. 30, 2015
Health Care Organization Receivable And Revenue Disclosures [Line Items]
Total operating revenues, net of contractual allowances and discounts, Amount	$ 598,163	$ 608,636	$ 1,212,647	$ 1,215,108
Sales Revenue, Net [Member] | Payor Concentration Risk [Member]
Health Care Organization Receivable And Revenue Disclosures [Line Items]
Concentration risk, percentage	100.00%	100.00%	100.00%	100.00%
Medicare [Member]
Health Care Organization Receivable And Revenue Disclosures [Line Items]
Total operating revenues, net of contractual allowances and discounts, Amount	$ 167,549	$ 156,649	$ 343,083	$ 331,373
Medicare [Member] | Sales Revenue, Net [Member] | Payor Concentration Risk [Member]
Health Care Organization Receivable And Revenue Disclosures [Line Items]
Concentration risk, percentage	28.00%	25.70%	28.30%	27.30%
Medicaid [Member]
Health Care Organization Receivable And Revenue Disclosures [Line Items]
Total operating revenues, net of contractual allowances and discounts, Amount	$ 113,283	$ 103,972	$ 216,351	$ 208,306
Medicaid [Member] | Sales Revenue, Net [Member] | Payor Concentration Risk [Member]
Health Care Organization Receivable And Revenue Disclosures [Line Items]
Concentration risk, percentage	18.90%	17.10%	17.80%	17.10%
Managed Care and Commercial [Member]
Health Care Organization Receivable And Revenue Disclosures [Line Items]
Total operating revenues, net of contractual allowances and discounts, Amount	$ 230,595	$ 259,984	$ 474,879	$ 495,752
Managed Care and Commercial [Member] | Sales Revenue, Net [Member] | Payor Concentration Risk [Member]
Health Care Organization Receivable And Revenue Disclosures [Line Items]
Concentration risk, percentage	38.60%	42.70%	39.20%	40.80%
Self-Pay [Member]
Health Care Organization Receivable And Revenue Disclosures [Line Items]
Total operating revenues, net of contractual allowances and discounts, Amount	$ 59,171	$ 57,181	$ 123,925	$ 120,095
Self-Pay [Member] | Sales Revenue, Net [Member] | Payor Concentration Risk [Member]
Health Care Organization Receivable And Revenue Disclosures [Line Items]
Concentration risk, percentage	9.90%	9.40%	10.20%	9.90%
Non-Patient [Member]
Health Care Organization Receivable And Revenue Disclosures [Line Items]
Total operating revenues, net of contractual allowances and discounts, Amount	$ 27,565	$ 30,850	$ 54,409	$ 59,582
Non-Patient [Member] | Sales Revenue, Net [Member] | Payor Concentration Risk [Member]
Health Care Organization Receivable And Revenue Disclosures [Line Items]
Concentration risk, percentage	4.60%	5.10%	4.50%	4.90%

XML

Basis of Presentation and Significant Accounting Policies (Narrative) (Details) - USD ($)	3 Months Ended		6 Months Ended		12 Months Ended
	Jun. 30, 2016	Jun. 30, 2015	Jun. 30, 2016	Jun. 30, 2015	Dec. 31, 2015
Revenues and Accounts Receivable [Abstract]
Increase (decrease) in net operating revenues during period for contractual adjustments related to final cost report settlements on previous program reimbursements	$ (2,500,000)	$ (11,200,000)	$ (4,400,000)	$ (11,700,000)
Operating revenues	3,042,786,000	2,923,172,000	6,123,439,000	5,771,609,000
Charity care costs	1,200,000	1,100,000	2,400,000	2,300,000
Concentration of Credit Risk [Abstract]
Accounts receivable, net of contractual allowances	394,120,000		394,120,000		$ 390,890,000
General and Administrative Costs [Abstract]
General and administrative costs	11,700,000	11,100,000	23,700,000	22,100,000
Intangible Assets [Abstract]
Acquired finite-lived intangible asset, residual value	0		0
Self-Insured Medical Benefits [Abstract]
Undiscounted reserve for self-insured employee health benefits	12,400,000		$ 12,400,000
Restricted Stock [Member]
Stock-Based Compensation [Abstract]
Shares distributed to each stockholder in spin off transaction for every four shares held			1
Shares held by each stockholder of parent used to receive one share distribution in spin off transaction			4
Capitalized Internal Use Software, Except Significant System Conversions [Member]
Intangible Assets [Abstract]
Finite-lived intangible assets, useful life			3 years
Accounts Receivable [Member] | Credit Concentration Risk [Member]
Concentration of Credit Risk [Abstract]
Concentration risk, percentage			100.00%		100.00%
Minimum [Member]
Revenues and Accounts Receivable [Abstract]
Number of days from date of discharge in which company establishes doubtful accounts reserve on non-self pay payor receivables			365 days
Minimum [Member] | Capitalized Internal Use Software, Significant System Conversions [Member]
Intangible Assets [Abstract]
Finite-lived intangible assets, useful life			8 years
Minimum [Member] | Land Improvements [Member]
Long-Lived Assets [Abstract]
Estimated useful life of asset			3 years
Minimum [Member] | Buildings and Improvements [Member]
Long-Lived Assets [Abstract]
Estimated useful life of asset			5 years
Minimum [Member] | Equipment and Fixtures [Member]
Long-Lived Assets [Abstract]
Estimated useful life of asset			3 years
Maximum [Member] | Capitalized Internal Use Software, Significant System Conversions [Member]
Intangible Assets [Abstract]
Finite-lived intangible assets, useful life			10 years
Maximum [Member] | Land Improvements [Member]
Long-Lived Assets [Abstract]
Estimated useful life of asset			20 years
Maximum [Member] | Buildings and Improvements [Member]
Long-Lived Assets [Abstract]
Estimated useful life of asset			40 years
Maximum [Member] | Equipment and Fixtures [Member]
Long-Lived Assets [Abstract]
Estimated useful life of asset			18 years
Illinois [Member]
Revenues and Accounts Receivable [Abstract]
Increase (decrease) in net operating revenues during period for contractual adjustments related to final cost report settlements on previous program reimbursements		(11,100,000)		(11,100,000)
Operating revenues			$ 399,049,000	405,390,000
Medicare [Member]
Concentration of Credit Risk [Abstract]
Accounts receivable, net of contractual allowances	75,400,000		$ 75,400,000		$ 67,700,000
Medicare [Member] | Accounts Receivable [Member] | Credit Concentration Risk [Member]
Concentration of Credit Risk [Abstract]
Concentration risk, percentage			10.30%		9.20%
Medicare [Member] | Revenues [Member]
Revenues and Accounts Receivable [Abstract]
Prior period reclassification adjustment	43,400,000	35,500,000	$ 85,100,000	72,100,000
Charity Care [Member]
Revenues and Accounts Receivable [Abstract]
Operating revenues	$ 7,000,000	$ 6,300,000	14,800,000	$ 13,300,000
State Supplemental Payment Programs [Member] | Due from Third-Party Payors [Member]
Revenues and Accounts Receivable [Abstract]
Prior period reclassification adjustment			$ 78,100,000		$ 68,000,000

XML

Basis of Presentation and Significant Accounting Policies (Summary of Components of Amounts Due from and Due to Third-Party Payors) (Details) - USD ($) $ in Thousands	Jun. 30, 2016	Dec. 31, 2015
Health Care Organization Receivable And Revenue Disclosures [Line Items]
Due from third-party payors	$ 116,765	$ 110,806
Due to third-party payors	41,214	30,103
Previous Program Reimbursements and Final Cost Report Settlements [Member]
Health Care Organization Receivable And Revenue Disclosures [Line Items]
Due from third-party payors	29,438	33,732
Due to third-party payors	31,961	21,015
State Supplemental Payment Programs [Member]
Health Care Organization Receivable And Revenue Disclosures [Line Items]
Due from third-party payors	87,327	77,074
Due to third-party payors	$ 9,253	$ 9,088

XML

Basis of Presentation and Significant Accounting Policies (Summary of Impact on Consolidated and Combined Statements of Income (Loss) Related to State Supplemental Payment Programs) (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2016	Jun. 30, 2015	Jun. 30, 2016	Jun. 30, 2015
Health Care Organization Receivable And Revenue Disclosures [Line Items]
Revenues	$ 529,737	$ 538,352	$ 1,079,288	$ 1,085,969
Expenses	788,992	510,868	1,317,452	1,024,154
Income (loss) from operations	(259,255)	27,484	(238,164)	61,815
State Supplemental Payment Programs [Member]
Health Care Organization Receivable And Revenue Disclosures [Line Items]
Revenues	55,105	49,838	107,320	105,217
Expenses	18,604	19,324	38,030	38,493
Income (loss) from operations	$ 36,501	$ 30,514	$ 69,290	$ 66,724

XML

Basis of Presentation and Significant Accounting Policies (Summary of Components of Accounts Receivable Before Contractual Allowances Discounts and Allowance for Doubtful Accounts) (Details) - USD ($) $ in Thousands	6 Months Ended	12 Months Ended
	Jun. 30, 2016	Dec. 31, 2015
Accounts Notes And Loans Receivable [Line Items]
Total accounts receivable gross, Amount	$ 2,458,602	$ 2,326,832
Accounts Receivable [Member] | Credit Concentration Risk [Member]
Accounts Notes And Loans Receivable [Line Items]
Concentration risk, percentage	100.00%	100.00%
Third-Parties [Member]
Accounts Notes And Loans Receivable [Line Items]
Total accounts receivable gross, Amount	$ 1,831,940	$ 1,688,138
Third-Parties [Member] | Accounts Receivable [Member] | Credit Concentration Risk [Member]
Accounts Notes And Loans Receivable [Line Items]
Concentration risk, percentage	74.50%	72.60%
Self-Pay [Member]
Accounts Notes And Loans Receivable [Line Items]
Total accounts receivable gross, Amount	$ 626,662	$ 638,694
Self-Pay [Member] | Accounts Receivable [Member] | Credit Concentration Risk [Member]
Accounts Notes And Loans Receivable [Line Items]
Concentration risk, percentage	25.50%	27.40%

XML

Basis of Presentation and Significant Accounting Policies (Summary of Changes in Allowance for Doubtful Accounts) (Details) $ in Thousands	6 Months Ended
	Jun. 30, 2016 USD ($)
Accounting Policies [Abstract]
Balance at beginning of period	$ 346,507
Provision for bad debts	133,359
Amounts written off, net of recoveries	(142,613)
Balance at end of period	$ 337,253

XML

Basis of Presentation and Significant Accounting Policies (Summary of States in Which Company Generates More Than 5% of its Total Revenues) (Details) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2016 USD ($)	Jun. 30, 2015 USD ($)	Jun. 30, 2016 USD ($) Hospital	Jun. 30, 2015 USD ($)
Concentration Risk [Line Items]
Total net operating revenues before the provision for bad debts, Amount	$ 3,042,786	$ 2,923,172	$ 6,123,439	$ 5,771,609
Illinois [Member]
Concentration Risk [Line Items]
Number of Hospitals | Hospital			9
Total net operating revenues before the provision for bad debts, Amount			$ 399,049	405,390
Oregon [Member]
Concentration Risk [Line Items]
Number of Hospitals | Hospital			1
Total net operating revenues before the provision for bad debts, Amount			$ 104,810	92,962
Georgia [Member]
Concentration Risk [Line Items]
Number of Hospitals | Hospital			4
Total net operating revenues before the provision for bad debts, Amount			$ 107,469	113,055
California [Member]
Concentration Risk [Line Items]
Number of Hospitals | Hospital			2
Total net operating revenues before the provision for bad debts, Amount			$ 101,562	104,397
Kentucky [Member]
Concentration Risk [Line Items]
Number of Hospitals | Hospital			3
Total net operating revenues before the provision for bad debts, Amount			$ 59,375	$ 63,406
Sales Revenue, Net [Member] | Illinois [Member] | Geographic Concentration Risk [Member]
Concentration Risk [Line Items]
Concentration risk, percentage			34.50%	35.10%
Sales Revenue, Net [Member] | Oregon [Member] | Geographic Concentration Risk [Member]
Concentration Risk [Line Items]
Concentration risk, percentage			9.00%	8.00%
Sales Revenue, Net [Member] | Georgia [Member] | Geographic Concentration Risk [Member]
Concentration Risk [Line Items]
Concentration risk, percentage			9.30%	9.80%
Sales Revenue, Net [Member] | California [Member] | Geographic Concentration Risk [Member]
Concentration Risk [Line Items]
Concentration risk, percentage			8.80%	9.00%
Sales Revenue, Net [Member] | Kentucky [Member] | Geographic Concentration Risk [Member]
Concentration Risk [Line Items]
Concentration risk, percentage			5.10%	5.50%

XML

Basis of Presentation and Significant Accounting Policies (Summary of Major Components of Other Operating Expenses) (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2016	Jun. 30, 2015	Jun. 30, 2016	Jun. 30, 2015
Other Operating Expenses [Line Items]
Taxes and insurance	$ 34,261	$ 31,534	$ 69,567	$ 59,339
Repairs and maintenance	10,730	11,562	21,966	23,296
Utilities	7,001	7,038	14,156	14,367
Other miscellaneous operating expenses	20,568	20,009	36,417	39,412
Total other operating expenses	163,185	158,811	327,648	311,051
Purchased Services [Member]
Other Operating Expenses [Line Items]
Professional fees	62,477	59,041	124,218	116,406
Medical Specialist Fees [Member]
Other Operating Expenses [Line Items]
Professional fees	25,182	20,579	49,532	40,267
Management Fees [Member]
Other Operating Expenses [Line Items]
Other operating expenses	$ 2,966	$ 9,048	$ 11,792	$ 17,964

XML

Basis of Presentation and Significant Accounting Policies (Summary of Activity Related to Electronic Health Records Incentives) (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2016	Jun. 30, 2015	Jun. 30, 2016	Jun. 30, 2015
Electronic Health Records Incentives Receivable [Abstract]
Electronic health records incentives receivable at beginning of period	$ 5,885	$ 6,822	$ 11,227	$ 12,204
Electronic health records incentives earned	608	1,236	4,816	4,775
Cash incentive payments received	(5,124)	(1,396)	(12,749)	(8,220)
Adjustments to receivable based on final cost report settlement or audit	604	(814)	(1,321)	(2,911)
Electronic health records incentives receivable at end of period	1,973	5,848	1,973	5,848
Deferred revenue related to electronic health records incentives at beginning of period	(4,693)	(10,183)		(14,351)
Cash received and deferred during period			(4,693)
Recognition of deferred incentives as earned	3,639	6,388	3,639	10,556
Deferred revenue related to electronic health records incentives at end of period	(1,054)	(3,795)	(1,054)	(3,795)
Total electronic health records incentives earned during period	4,247	7,624	8,455	15,331
Total cash incentive payments received during period	$ 5,124	$ 1,396	$ 17,442	$ 8,220

XML

Hospitals Held for Sale and Impairment of Long-Lived Assets (Narrative) (Details) - USD ($) $ in Thousands	3 Months Ended	6 Months Ended
	Jun. 30, 2016	Jun. 30, 2016
Long Lived Assets Held For Sale [Line Items]
Impairment of long-lived assets	$ 45,400
Goodwill impairment charge		$ 205,000
Hospital Operations Reporting Unit [Member]
Long Lived Assets Held For Sale [Line Items]
Goodwill impairment charge	200,000
Hospitals Held for Sale [Member]
Long Lived Assets Held For Sale [Line Items]
Goodwill impairment charge	5,000
Hospitals Held for Sale [Member] | Property and Equipment [Member]
Long Lived Assets Held For Sale [Line Items]
Impairment of long-lived assets	9,800
Hospitals Held for Sale [Member] | Capitalized Software Costs [Member]
Long Lived Assets Held For Sale [Line Items]
Impairment of long-lived assets	4,400
Hospitals Held and Used [Member] | Property and Equipment [Member]
Long Lived Assets Held For Sale [Line Items]
Impairment of long-lived assets	$ 31,200

XML

Property and Equipment (Summary of Property and Equipment) (Details) - USD ($) $ in Thousands	Jun. 30, 2016	Dec. 31, 2015
Property Plant And Equipment [Line Items]
Total property and equipment, at cost	$ 1,549,751	$ 1,603,653
Less: Accumulated depreciation and amortization	(732,719)	(723,404)
Total property and equipment, net	817,032	880,249
Land and Improvements [Member]
Property Plant And Equipment [Line Items]
Total property and equipment, at cost	95,631	100,053
Building and improvements [Member]
Property Plant And Equipment [Line Items]
Total property and equipment, at cost	814,376	853,853
Equipment and Fixtures [Member]
Property Plant And Equipment [Line Items]
Total property and equipment, at cost	599,634	616,667
Construction in progress [Member]
Property Plant And Equipment [Line Items]
Total property and equipment, at cost	$ 40,110	$ 33,080

XML

Property and Equipment (Narrative) (Details) - USD ($) $ in Millions	3 Months Ended		6 Months Ended		12 Months Ended
	Jun. 30, 2016	Jun. 30, 2015	Jun. 30, 2016	Jun. 30, 2015	Dec. 31, 2015
Property Plant And Equipment [Abstract]
Depreciation expense	$ 22.5	$ 22.5	$ 44.9	$ 45.5
Assets held under capital lease obligations, at cost	28.5		28.5		$ 23.4
Assets held under capital lease obligations, net of accumulated amortization	$ 26.9		26.9		22.4
Purchases of property and equipment accrued in accounts payable			$ 8.3		$ 7.0

XML

Goodwill and Intangible Assets (Summary of Changes in Goodwill) (Details) $ in Thousands	6 Months Ended
	Jun. 30, 2016 USD ($)
Goodwill And Intangible Assets Disclosure [Abstract]
Goodwill, beginning balance	$ 541,704
Acquisitions	86
Impairment	(205,000)
Goodwill, ending balance	$ 336,790

XML

Goodwill and Intangible Assets (Goodwill Narrative) (Details) - USD ($) $ in Thousands	3 Months Ended	6 Months Ended
	Jun. 30, 2016	Jun. 30, 2016	Dec. 31, 2015
Goodwill [Line Items]
Goodwill	$ 336,790	$ 336,790	$ 541,704
Goodwill impairment charge		205,000
Hospitals Held for Sale [Member]
Goodwill [Line Items]
Goodwill impairment charge	5,000
Hospital Operations Reporting Unit [Member]
Goodwill [Line Items]
Goodwill	303,500	303,500	508,400
Goodwill impairment charge	200,000
Hospital Management Advisory and Consulting Services Reporting Unit [Member]
Goodwill [Line Items]
Goodwill	$ 33,300	$ 33,300	$ 33,300

XML

Goodwill and Intangible Assets (Summary of Intangible Assets ) (Details) - USD ($) $ in Thousands	Jun. 30, 2016	Dec. 31, 2015
Finite-Lived and Indefinite-Lived Intangible Assets [Line Items]
Cost	$ 243,768	$ 254,810
Accumulated amortization	(143,299)	(136,915)
Total finite-lived intangible assets, net	100,469	117,895
Total indefinite-lived intangible assets	8,975	11,355
Total intangible assets, gross	252,743	266,165
Total intangible assets, net	109,444	129,250
Trade Names [Member]
Finite-Lived and Indefinite-Lived Intangible Assets [Line Items]
Total indefinite-lived intangible assets	4,000	4,000
Medical Licenses and Other Indefinite-Lived Intangible Assets [Member]
Finite-Lived and Indefinite-Lived Intangible Assets [Line Items]
Total indefinite-lived intangible assets	4,975	7,355
Capitalized Software Costs [Member]
Finite-Lived and Indefinite-Lived Intangible Assets [Line Items]
Cost	189,368	194,941
Accumulated amortization	(107,095)	(98,004)
Total finite-lived intangible assets, net	82,273	96,937
Physician Guarantee Contracts [Member]
Finite-Lived and Indefinite-Lived Intangible Assets [Line Items]
Cost	12,327	16,594
Accumulated amortization	(6,355)	(9,560)
Total finite-lived intangible assets, net	5,972	7,034
Other Finite-Lived Intangible Assets [Member]
Finite-Lived and Indefinite-Lived Intangible Assets [Line Items]
Cost	42,073	43,275
Accumulated amortization	(29,849)	(29,351)
Total finite-lived intangible assets, net	$ 12,224	$ 13,924

XML

Goodwill and Intangible Assets (Intangible Assets Narrative) (Details) - USD ($) $ in Thousands	Jun. 30, 2016	Dec. 31, 2015
Finite-Lived Intangible Assets [Line Items]
Finite-lived intangible assets, gross	$ 243,768	$ 254,810
Capitalized Software Costs in Development Stage [Member]
Finite-Lived Intangible Assets [Line Items]
Finite-lived intangible assets, gross	$ 2,200

XML

Goodwill and Intangible Assets (Summary of Amortization Expense) (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2016	Jun. 30, 2015	Jun. 30, 2016	Jun. 30, 2015
Finite-Lived Intangible Assets [Line Items]
Total amortization expense related to finite-lived intangible assets	$ 8,391	$ 8,842	$ 16,454	$ 17,100
Amortization of property and equipment assets held under capital lease obligations	610	605	1,293	1,235
Total amortization expense	9,001	9,447	17,747	18,335
Capitalized Software Costs [Member]
Finite-Lived Intangible Assets [Line Items]
Total amortization expense related to finite-lived intangible assets	6,730	6,754	13,325	13,464
Physician Guarantee Contracts [Member]
Finite-Lived Intangible Assets [Line Items]
Total amortization expense related to finite-lived intangible assets	902	1,275	1,613	1,991
Other Finite-Lived Intangible Assets [Member]
Finite-Lived Intangible Assets [Line Items]
Total amortization expense related to finite-lived intangible assets	$ 759	$ 813	$ 1,516	$ 1,645

XML

Goodwill and Intangible Assets (Amortization Expense Narrative) (Details)	6 Months Ended
	Jun. 30, 2016
Intangible Assets Except Software Costs and Physician Guarantee Contracts [Member]
Finite-Lived Intangible Assets [Line Items]
Finite-lived intangible assets, useful life	5 years 10 months 24 days

XML

Goodwill and Intangible Assets (Summary of Future Estimated Amortization Expense) (Details) - USD ($) $ in Thousands	Jun. 30, 2016	Dec. 31, 2015
Goodwill And Intangible Assets Disclosure [Abstract]
Remainder of 2016	$ 14,498
2017	25,418
2018	14,285
2019	12,668
2020	12,288
Thereafter	21,312
Total finite-lived intangible assets, net	$ 100,469	$ 117,895

XML

Long-Term Debt (Summary of Long-Term Debt (Details) - USD ($)	Jun. 30, 2016	Apr. 29, 2016	Apr. 28, 2016	Apr. 27, 2016	Dec. 31, 2015
Debt Instrument [Line Items]
Total debt, excluding debt issuance costs and discounts	$ 1,304,278,000				$ 23,415,000
Unamortized debt issuance costs and discounts	(51,348,000)		$ 0		0
Capital lease obligations	25,500,000				22,323,000
Other debt	978,000				1,092,000
Total debt	1,252,930,000				23,415,000
Less: Current maturities of long-term debt	(16,271,000)				(7,915,000)
Long-term debt	1,236,659,000				15,500,000
Due to Parent, net	0	$ 0		$ 1,811,034,000	1,800,908,000
Senior Notes, maturing 2023 [Member]
Debt Instrument [Line Items]
Total debt, excluding debt issuance costs and discounts	400,000,000				0
ABL Credit Facility, maturing 2021 [Member]
Debt Instrument [Line Items]
Total debt, excluding debt issuance costs and discounts	0				0
Senior Credit Facility [Member] | Revolving Credit Facility, maturing 2021 [Member]
Debt Instrument [Line Items]
Total debt, excluding debt issuance costs and discounts	0				0
Senior Credit Facility [Member] | Term Loan Facility, maturing 2022 [Member]
Debt Instrument [Line Items]
Total debt, excluding debt issuance costs and discounts	$ 877,800,000				$ 0

XML

Long-Term Debt (Narrative) (Details)	6 Months Ended
	Jun. 30, 2016 USD ($) Agreement	Apr. 28, 2016 USD ($)	Dec. 31, 2015 USD ($)
Debt Disclosure [Abstract]
Number of agreement | Agreement	2
Capitalized costs for debt issuance, discounts or premium | $	$ (51,348,000)	$ 0	$ 0

XML

Long-Term Debt (Senior Credit Facility Narrative) (Details) - USD ($)		6 Months Ended
	Apr. 29, 2016	Jun. 30, 2016	Dec. 31, 2015
Debt Instrument [Line Items]
Debt Instrument, Unamortized Discount		$ 24,536,000	$ 0
Senior Credit Facility [Member]
Debt Instrument [Line Items]
Letters of credit outstanding		3,100,000
Additional borrowing capacity		$ 181,200,000
Senior Credit Facility [Member] | Maximum [Member]
Debt Instrument [Line Items]
Secured net leverage ratio		3.67
Senior Credit Facility [Member] | Term Loan Facility, maturing 2022 [Member]
Debt Instrument [Line Items]
Debt Instrument, Face Amount	$ 880,000,000
Debt Instrument, Unamortized Discount	$ 17,600,000
Term Facility Issued Percentage on Par Value	98.00%
Debt Instrument, Maturity Date	Apr. 29, 2022
Debt Instrument, Interest Rate, Effective Percentage		7.64%
Senior Credit Facility [Member] | Term Loan Facility, maturing 2022 [Member] | London Interbank Offered Rate (LIBOR) [Member]
Debt Instrument [Line Items]
Debt Instrument, Basis Spread on Variable Rate	5.75%
Derivative, Floor Interest Rate	1.00%
Senior Credit Facility [Member] | Term Loan Facility, maturing 2022 [Member] | Alternate Base Rate [Member]
Debt Instrument [Line Items]
Debt Instrument, Basis Spread on Variable Rate	4.75%
Senior Credit Facility [Member] | Revolving Credit Facility, maturing 2021 [Member]
Debt Instrument [Line Items]
Line of Credit Facility, Maximum Borrowing Capacity	$ 100,000,000
Line of credit, outstanding balance		$ 0
Line of Credit Facility, Maturity Date	Apr. 29, 2021
Senior Credit Facility [Member] | Revolving Credit Facility, maturing 2021 [Member] | London Interbank Offered Rate (LIBOR) [Member]
Debt Instrument [Line Items]
Debt Instrument, Basis Spread on Variable Rate	2.75%
Derivative, Floor Interest Rate	0.00%
Senior Credit Facility [Member] | Revolving Credit Facility, maturing 2021 [Member] | Alternate Base Rate [Member]
Debt Instrument [Line Items]
Debt Instrument, Basis Spread on Variable Rate	1.75%

XML

Long-Term Debt (Maximum Secured Net Leverage Ratio Permitted) (Details) - Senior Credit Facility [Member] - Maximum [Member]	Jun. 30, 2016
Debt Instrument [Line Items]
Secured net leverage ratio	3.67
Period from April 29,2016 to June 30, 2017 [Member]
Debt Instrument [Line Items]
Secured net leverage ratio	4.50
Period from July 1,2017 to June 30, 2018 [Member]
Debt Instrument [Line Items]
Secured net leverage ratio	4.25
Period from July 1, 2018 and thereafter [Member]
Debt Instrument [Line Items]
Secured net leverage ratio	4.00

XML

Long-Term Debt (ABL Credit Facility Narrative) (Details) - ABL Credit Facility, maturing 2021 [Member] - USD ($)	Apr. 29, 2016	Jun. 30, 2016
Debt Instrument [Line Items]
Line of Credit Facility, Maximum Borrowing Capacity	$ 125,000,000
Line of credit, outstanding balance		$ 0
Line of Credit Facility, Maturity Date	Apr. 29, 2021
Covenant Trigger Event, minimum required excess availability amount		$ 12,500,000
Covenant Trigger Event, minimum required excess availability as percentage of aggregate commitments		10.00%
Credit facility, excess availability amount		$ 122,100,000
Minimum Consolidated Fixed Charge Ratio required to be maintained if covenant trigger event occurs		1.10
Cash Dominion Trigger Event, minimum required excess availability as percentage of aggregate commitments		12.50%
Cash Dominion Trigger Event, minimum required excess availability amount		$ 15,000,000
London Interbank Offered Rate (LIBOR) [Member]
Debt Instrument [Line Items]
Derivative, Floor Interest Rate	0.00%
London Interbank Offered Rate (LIBOR) [Member] | Minimum [Member]
Debt Instrument [Line Items]
Debt Instrument, Basis Spread on Variable Rate	1.75%
London Interbank Offered Rate (LIBOR) [Member] | Maximum [Member]
Debt Instrument [Line Items]
Debt Instrument, Basis Spread on Variable Rate	2.25%
Base Rate [Member] | Minimum [Member]
Debt Instrument [Line Items]
Debt Instrument, Basis Spread on Variable Rate	0.75%
Base Rate [Member] | Maximum [Member]
Debt Instrument [Line Items]
Debt Instrument, Basis Spread on Variable Rate	1.25%

XML

Long-Term Debt (Senior Notes Narrative) (Details) - USD ($)		6 Months Ended
	Apr. 22, 2016	Jun. 30, 2016	Dec. 31, 2015
Debt Instrument [Line Items]
Debt Instrument, Unamortized Discount		$ 24,536,000	$ 0
Senior Notes, maturing 2023 [Member]
Debt Instrument [Line Items]
Debt Instrument, Face Amount	$ 400,000,000
Debt Instrument, Interest Rate, Stated Percentage	11.625%
Debt Instrument, Unamortized Discount	$ 6,936,000
Debt instrument issue discount percentage	1.734%
Debt Instrument, Maturity Date	Apr. 15, 2023
Debt Instrument, Payment Terms		Payable semi-annually in arrears on April 15 and October 15 of each year, beginning on October 15, 2016.
Debt Instrument, Frequency of Periodic Payment		semi-annually
Debt Instrument, Date of First Required Payment	Oct. 15, 2016
Debt Instrument, Interest Rate, Effective Percentage		12.471%
Debt Instrument, Redemption Price Percentage		100.00%
Debt Instrument, Percentage of Principal Amount Redeemed		35.00%

XML

Long-Term Debt (Summary of Redemption Dates and Prices of Senior Notes) (Details) - Senior Notes, maturing 2023 [Member]	6 Months Ended
	Jun. 30, 2016
Debt Instrument Redemption [Line Items]
Debt Instrument, Redemption Price Percentage	100.00%
Period from April 15, 2019 to April 14, 2020 [Member]
Debt Instrument Redemption [Line Items]
Debt Instrument, Redemption Price Percentage	108.719%
Period from April 15, 2020 to April 14, 2021 [Member]
Debt Instrument Redemption [Line Items]
Debt Instrument, Redemption Price Percentage	105.813%
Period from April 15, 2021 to April 14, 2022 [Member]
Debt Instrument Redemption [Line Items]
Debt Instrument, Redemption Price Percentage	102.906%
Period from April 15, 2022 to April 15, 2023 [Member]
Debt Instrument Redemption [Line Items]
Debt Instrument, Redemption Price Percentage	100.00%

XML

Long-Term Debt (Summary of Redemption Dates and Prices of Senior Notes) (Parenthetical) (Details) - Senior Notes, maturing 2023 [Member]	6 Months Ended
	Jun. 30, 2016
Period from April 15, 2019 to April 14, 2020 [Member]
Debt Instrument Redemption [Line Items]
Debt Instrument, Redemption Period, Start Date	Apr. 15, 2019
Debt Instrument, Redemption Period, End Date	Apr. 14, 2020
Period from April 15, 2020 to April 14, 2021 [Member]
Debt Instrument Redemption [Line Items]
Debt Instrument, Redemption Period, Start Date	Apr. 15, 2020
Debt Instrument, Redemption Period, End Date	Apr. 14, 2021
Period from April 15, 2021 to April 14, 2022 [Member]
Debt Instrument Redemption [Line Items]
Debt Instrument, Redemption Period, Start Date	Apr. 15, 2021
Debt Instrument, Redemption Period, End Date	Apr. 14, 2022
Period from April 15, 2022 to April 15, 2023 [Member]
Debt Instrument Redemption [Line Items]
Debt Instrument, Redemption Period, Start Date	Apr. 15, 2022
Debt Instrument, Redemption Period, End Date	Apr. 15, 2023

XML

Long-Term Debt (Summary of Debt Issuance Costs and Discounts) (Details) - USD ($)	Jun. 30, 2016	Apr. 28, 2016	Dec. 31, 2015
Long Term Debt And Capital Lease Obligations [Abstract]
Debt issuance costs	$ 28,003,000		$ 0
Debt discounts	24,536,000		0
Total debt issuance costs and discounts at origination	52,539,000		0
Less: Amortization of debt issuance costs and discounts	(1,191,000)		0
Total unamortized debt issuance costs and discounts	$ 51,348,000	$ 0	$ 0

XML

Long-Term Debt (Capital Lease Obligations and Other Debt Narrative) (Details) - USD ($) $ in Thousands	Jun. 30, 2016	Dec. 31, 2015
Debt Instrument [Line Items]
Capital lease obligations	$ 25,500	$ 22,323
New Corporate Office [Member] | Brentwood, Tennessee [Member]
Debt Instrument [Line Items]
Capital lease obligations	$ 18,000

XML

Long-Term Debt (Summary of Debt Maturities for Next Five Years and Thereafter) (Details) - USD ($) $ in Thousands	Jun. 30, 2016	Apr. 29, 2016	Apr. 27, 2016
Long Term Debt And Capital Lease Obligations [Abstract]
Remainder of 2016	$ 11,087
2017	10,268
2018	10,411
2019	10,047
2020	10,145
Thereafter	1,252,320
Total debt, excluding debt issuance costs and discounts	$ 1,304,278	$ 1,254,998	$ 24,179

XML

Long-Term Debt (Summary of Components of Interest Expense, Net) (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2016	Jun. 30, 2015	Jun. 30, 2016	Jun. 30, 2015
Debt Instrument [Line Items]
Amortization of debt issuance costs and discounts	$ 1,191		$ 1,191
All other interest expense (income), net	(359)	$ (182)	210	$ 237
Total interest expense, net	29,276	23,828	56,728	49,630
Due to Parent, net	8,931	24,010	35,814	49,393
Senior Notes, maturing 2023 [Member]
Debt Instrument [Line Items]
Interest expense	8,914		8,914
ABL Credit Facility, maturing 2021 [Member]
Debt Instrument [Line Items]
Interest expense	82		82
Senior Credit Facility [Member] | Revolving Credit Facility, maturing 2021 [Member]
Debt Instrument [Line Items]
Interest expense	85		85
Senior Credit Facility [Member] | Term Loan Facility, maturing 2022 [Member]
Debt Instrument [Line Items]
Interest expense	10,432		10,432
Interest Expense Portion From Long Term Debt [Member]
Debt Instrument [Line Items]
Total interest expense, net	$ 20,345	$ (182)	$ 20,914	$ 237

XML

Other Long-Term Liabilities (Summary of Other Long-Term Liabilities) (Details) - USD ($) $ in Thousands	Jun. 30, 2016	Dec. 31, 2015
Other Liabilities Noncurrent [Line Items]
Benefit plan liabilities	$ 12,702	$ 3,376
Deferred rent	3,986	3,770
Other miscellaneous long-term liabilities	3,247	3,065
Total other long-term liabilities	126,875	108,141
Professional and General Liability Insurance [Member]
Other Liabilities Noncurrent [Line Items]
Insurance reserves for professional and general liability, long-term liability	87,250	77,423
Workers Compensation Liability Insurance [Member]
Other Liabilities Noncurrent [Line Items]
Insurance reserve for workers' compensation liability, long-term liability	$ 19,690	$ 20,507

XML

Fair Value Of Financial Instruments (Summary of Carrying Amounts and Estimated Fair Values of Debt Instruments) (Details) - USD ($) $ in Thousands	Jun. 30, 2016	Dec. 31, 2015
Fair Value Balance Sheet Grouping Financial Statement Captions [Line Items]
Total long-term debt, excluding debt issuance costs and discounts, Carrying Amount	$ 1,304,278	$ 23,415
Total long-term debt, excluding debt issuance costs and discounts, Estimated Fair Value	1,311,778	23,415
ABL Credit Facility, maturing 2021 [Member]
Fair Value Balance Sheet Grouping Financial Statement Captions [Line Items]
Total long-term debt, excluding debt issuance costs and discounts, Carrying Amount	0	0
Total long-term debt, excluding debt issuance costs and discounts, Estimated Fair Value	0	0
Senior Notes, maturing 2023 [Member]
Fair Value Balance Sheet Grouping Financial Statement Captions [Line Items]
Total long-term debt, excluding debt issuance costs and discounts, Carrying Amount	400,000	0
Total long-term debt, excluding debt issuance costs and discounts, Estimated Fair Value	404,752	0
Other debt [Member]
Fair Value Balance Sheet Grouping Financial Statement Captions [Line Items]
Total long-term debt, excluding debt issuance costs and discounts, Carrying Amount	26,478	23,415
Total long-term debt, excluding debt issuance costs and discounts, Estimated Fair Value	26,478	23,415
Senior Credit Facility [Member] | Revolving Credit Facility, maturing 2021 [Member]
Fair Value Balance Sheet Grouping Financial Statement Captions [Line Items]
Total long-term debt, excluding debt issuance costs and discounts, Carrying Amount	0	0
Total long-term debt, excluding debt issuance costs and discounts, Estimated Fair Value	0	0
Senior Credit Facility [Member] | Term Loan Facility, maturing 2022 [Member]
Fair Value Balance Sheet Grouping Financial Statement Captions [Line Items]
Total long-term debt, excluding debt issuance costs and discounts, Carrying Amount	877,800	0
Total long-term debt, excluding debt issuance costs and discounts, Estimated Fair Value	$ 880,548	$ 0

XML

Equity (Narrative) (Details) - USD ($) $ / shares in Units, $ in Thousands	Jun. 30, 2016	Apr. 29, 2016	Dec. 31, 2015
Class Of Stock [Line Items]
Preferred stock, shares authorized	100,000,000
Preferred stock, par value	$ 0.0001
Preferred stock, shares issued	0
Common stock, shares authorized	300,000,000
Common stock, shares issued	29,489,247
Common stock, shares outstanding	29,489,247	28,412,054
Common stock, par value	$ 0.0001
Additional paid-in capital	$ 520,336		$ 0
Spin-off from CHS [Member]
Class Of Stock [Line Items]
Preferred stock, shares authorized	100,000,000
Preferred stock, par value	$ 0.0001
Preferred stock, shares issued	0
Common stock, shares authorized		300,000,000
Common stock, shares issued	29,489,247	28,412,054
Common stock, shares outstanding	29,489,247
Common stock, par value		$ 0.0001
Additional paid-in capital	$ 518,500

XML

Income Taxes (Narrative) (Details) - USD ($)	3 Months Ended		6 Months Ended
	Jun. 30, 2016	Jun. 30, 2015	Jun. 30, 2016	Jun. 30, 2015	Dec. 31, 2015
Income Tax Disclosure [Abstract]
Effective Income Tax Rate, Continuing Operations	15.40%	39.70%	15.70%	34.10%
Deferred income tax liabilities, net	$ 55,297,000		$ 55,297,000		$ 41,030,000
Increase (decrease) in deferred income taxes			14,300,000
Adjustments to deferred tax assets and liabilities for changes in estimates			61,700,000
Net operating loss and credit carryforwards	39,500,000		39,500,000
deferred tax benefit	47,451,000	$ 0	47,451,000	$ 0
Increase ( decrease) in unrecognized tax benefit	$ 0	$ 0	$ 0	$ 0

XML

Earnings Per Share (Summary of Computation of Basic and Diluted Earnings Per Share) (Details) - USD ($) $ / shares in Units, $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2016	Jun. 30, 2015	Jun. 30, 2016	Jun. 30, 2015
Numerator:
Net income (loss)	$ (243,966)	$ 2,205	$ (248,653)	$ 8,029
Less: Net income attributable to noncontrolling interests	1,095	775	1,410	400
Net income (loss) attributable to Quorum Health Corporation	$ (245,061)	$ 1,430	$ (250,063)	$ 7,629
Denominator:
Weighted-average common shares outstanding - basic and diluted	28,412,720	28,412,054	28,412,389	28,412,054
Basic and diluted earnings (loss) per share attributable to Quorum Health Corporation stockholders	$ (8.63)	$ 0.05	$ (8.80)	$ 0.27

XML

Earnings Per Share (Narrative) (Details) - shares		3 Months Ended	6 Months Ended
	Apr. 27, 2016	Jun. 30, 2016	Jun. 30, 2016	Apr. 29, 2016
Earnings Per Share [Abstract]
Common stock, shares outstanding		29,489,247	29,489,247	28,412,054
Anti-dilutive shares excluded in diluted earnings per share		460,661	460,661
Dilutive Shares	0	0	0

XML

Additional Cash Flow Information (Summary of Significant NonCash Transactions Related to Consolidated and Combined Balance Sheets) (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2016	Jun. 30, 2015	Jun. 30, 2016	Jun. 30, 2015
Significant Non Cash Transactions [Abstract]
Transfer of liabilities from Parent	$ 16,596	$ 0	$ 16,596	$ 0
Non-cash capital contribution from Parent	518,518	0	518,518	0
Property and equipment acquired under capital leases and deferred financing obligations	$ 3,097	$ 658	$ 5,120	$ 658

XML

Segments (Narrative) (Details)	6 Months Ended
	Jun. 30, 2016 segment
Segment Reporting [Abstract]
Number of operating segments	2

XML

Segments (Summary of Financial Information Related to Segments) (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2016	Jun. 30, 2015	Jun. 30, 2016	Jun. 30, 2015	Dec. 31, 2015
Segment Reporting Information [Line Items]
Total net operating revenues	$ 529,737	$ 538,352	$ 1,079,288	$ 1,085,969
Total adjusted EBITDA	29,232	59,625	85,456	125,654
Total assets	2,102,359		2,102,359		$ 2,294,856
Hospital Operations Reporting Unit [Member]
Segment Reporting Information [Line Items]
Total net operating revenues	508,906	515,428	1,036,317	1,039,621
Total adjusted EBITDA	26,457	55,953	75,396	118,645
Total assets	1,906,376		1,906,376		2,256,557
All Other [Member]
Segment Reporting Information [Line Items]
Total net operating revenues	20,831	22,924	42,971	46,348
Total adjusted EBITDA	2,775	$ 3,672	10,060	$ 7,009
Total assets	$ 195,983		$ 195,983		$ 38,299

XML

Segments (Summary of Reconciliation of Adjusted EBITDA to Net Income (Loss)) (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2016	Jun. 30, 2015	Jun. 30, 2016	Jun. 30, 2015
Segment Reporting [Abstract]
Total adjusted EBITDA	$ 29,232	$ 59,625	$ 85,456	$ 125,654
Interest expense, net	(29,276)	(23,828)	(56,728)	(49,630)
Benefit from (provision for) income taxes	44,565	(1,451)	46,239	(4,156)
Depreciation and amortization	(31,463)	(32,141)	(62,620)	(63,839)
Legal and settlement costs	(5,447)	0	(5,688)	0
Impairment of-long-lived assets and goodwill	(250,400)	0	(250,400)	0
Transaction costs related to spin-off	(1,177)	0	(4,912)	0
Net income (loss)	$ (243,966)	$ 2,205	$ (248,653)	$ 8,029

XML

Stock-Based Compensation (Narrative) (Details) - USD ($) $ in Thousands		2 Months Ended	3 Months Ended		6 Months Ended
	May 03, 2016	Jun. 30, 2016	Jun. 30, 2016	Jun. 30, 2015	Jun. 30, 2016	Jun. 30, 2015	Apr. 29, 2016
Community Health Systems, Inc [Member] | Corporate Allocations [Member]
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Share based compensation expense included in corporate management fee			$ 18,757	$ 52,678	$ 81,059	$ 113,660
Community Health Systems, Inc [Member] | Corporate Allocations [Member] | Share-based Compensation Expense Included in Corporate Management Fee [Member]
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Share based compensation expense included in corporate management fee			600	$ 1,900	2,300	$ 3,800
QHC and CHS Restricted Stock Awards Held By QHC Employees as of Spin-off Transaction Date [Member]
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Unrecognized stock-based compensation expense		$ 5,100	5,100		5,100
QHC Restricted Stock Awards Granted Following Spin-off Transaction [Member]
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Restricted stock units, shares granted		1,081,005
Unrecognized stock-based compensation expense		$ 12,200	$ 12,200		$ 12,200
2016 Stock Award Plan [Member]
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Common stock that may be issued under stock award plan							4,700,000
2016 Stock Award Plan [Member] | Restricted Stock [Member] | Performance-Based Vesting [Member] | Executive Officers [Member]
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Restricted stock units, shares granted	460,000
Share-based compensation, vesting period	3 years
2016 Stock Award Plan [Member] | Restricted Stock [Member] | Time-Based Vesting [Member] | Certain Employees, in Total [Member]
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Restricted stock units, shares granted	551,005
Share-based compensation, vesting period	3 years
2016 Stock Award Plan [Member] | Restricted Stock [Member] | Time-Based Vesting [Member] | Non-Employee Director, Individual [Member]
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Restricted stock units, shares granted	10,000
Share-based compensation, vesting description					The restriction on the time-vested restricted stock awards will lapse on the first anniversary of the grant date.
2016 Stock Award Plan [Member] | Restricted Stock, Recoupment Awards [Member] | Time-Based Vesting [Member] | Certain Employees, in Total [Member]
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Restricted stock units, shares granted	106,005
Share-based compensation, vesting description					Restrictions on the recoupment awards lapse in equal installments on the second and third anniversaries of the grant date.

XML

Stock-Based Compensation (Summary of Stock-Based Compensation Expense) (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2016	Jun. 30, 2015	Jun. 30, 2016	Jun. 30, 2015
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Total stock-based compensation expense	$ 1,897	$ 0	$ 1,897	$ 0
Resulting from Spin-off Transaction [Member]
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Total stock-based compensation expense	809	0	809	0
Related to Grants Following Spin-off Transaction [Member]
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Total stock-based compensation expense	$ 1,088	$ 0	$ 1,088	$ 0

XML

Stock-Based Compensation (Summary of Activity Related to Unvested Restricted Stock Awards) (Details) - $ / shares	2 Months Ended
	Jun. 30, 2016	Apr. 29, 2016
QHC Awards Distributed in Spin-Off Transaction [Member]
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Unvested restricted stock awards at beginning of period, Shares	692,409
Vested, Shares	(2,020)
Forfeited, Shares	(3,812)
Unvested restricted stock awards at end of period, Shares	686,577
QHC Awards Distributed in Spin-Off Transaction [Member] | QHC Employees [Member]
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Unvested restricted stock awards at beginning of period, Shares	54,321
Vested, Shares	(336)
Forfeited, Shares	(164)
Unvested restricted stock awards at end of period, Shares	53,821
QHC Awards Distributed in Spin-Off Transaction [Member] | CHS Employees [Member]
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Unvested restricted stock awards at beginning of period, Shares	638,088
Vested, Shares	(1,684)
Forfeited, Shares	(3,648)
Unvested restricted stock awards at end of period, Shares	632,756
QHC Restricted Stock Awards Granted Following Spin-off Transaction [Member]
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Unvested restricted stock awards at beginning of period, Shares	0
Vested, Shares	0
Forfeited, Shares	0
Unvested restricted stock awards at end of period, Shares	1,081,005
Granted, Shares	1,081,005
Unvested restricted stock awards at beginning of period, Weighted Average Grant Date Fair Value	$ 12.77	$ 0
Granted, Weighted Average Grant Date Fair Value	12.77
Vested, Weighted Average Grant Date Fair Value	0
Forfeited, Weighted Average Grant Date Fair Value	$ 0

XML

Employee Benefit Plans (Narrative) (Details) $ in Millions	3 Months Ended		6 Months Ended		12 Months Ended
	Jun. 30, 2016 USD ($)	Jun. 30, 2015 USD ($)	Jun. 30, 2016 USD ($) Hospital	Jun. 30, 2015 USD ($)	Dec. 31, 2015	Apr. 01, 2016 USD ($)
Defined Benefit Plan Disclosure [Line Items]
Defined contribution plan, total expense	$ 3.7	$ 3.1	$ 7.0	$ 6.8
Estimated deferred compensation liability	25.0		25.0
Pension Plan [Member]
Defined Benefit Plan Disclosure [Line Items]
Benefits expense	0.1	$ 0.1	$ 0.1	$ 0.2
Weighted- average assumptions used in determining net periodic cost, discount rate					3.75%
Weighted- average assumptions used in determining net periodic cost, annual compensation increase					3.00%
Number of Hospitals | Hospital			1
Defined benefit plan, contributions by employer			$ 0.2
Weighted- average assumptions used in determining net periodic cost, expected long-term rate on return on assets					7.00%
Accrued benefit liability	1.0		1.0
Original SERP Plan [Member]
Defined Benefit Plan Disclosure [Line Items]
Benefits expense	0.4		$ 0.5
Weighted- average assumptions used in determining net periodic cost, discount rate			3.20%
Weighted- average assumptions used in determining net periodic cost, annual compensation increase			3.00%
Original SERP Plan [Member] | Other long-term liabilities [Member]
Defined Benefit Plan Disclosure [Line Items]
Accrued benefit liability						$ 6.0
Amended and Restated SERP Plan [Member]
Defined Benefit Plan Disclosure [Line Items]
Benefits expense	0.4		$ 0.5
Weighted- average assumptions used in determining net periodic cost, discount rate			3.20%
Weighted- average assumptions used in determining net periodic cost, annual compensation increase			3.00%
Amended and Restated SERP Plan [Member] | Other long-term liabilities [Member]
Defined Benefit Plan Disclosure [Line Items]
Accrued benefit liability	$ 9.2		$ 9.2

XML

Related Party Transactions (Summary of Allocated Costs from Parent) (Details) - Community Health Systems, Inc [Member] - Allocated Costs from CHS during the Carve-Out Period [Member] - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2016	Jun. 30, 2015	Jun. 30, 2016	Jun. 30, 2015
Related Party Transaction [Line Items]
Other operating expenses	$ 18,757	$ 52,678	$ 81,059	$ 113,660
Insurance Costs [Member]
Related Party Transaction [Line Items]
Other operating expenses	10,486	32,043	44,246	66,521
Management Fees from Parent [Member]
Related Party Transaction [Line Items]
Other operating expenses	2,966	9,048	11,792	17,964
All Other Allocated Costs [Member]
Related Party Transaction [Line Items]
Other operating expenses	$ 5,305	$ 11,587	$ 25,021	$ 29,175

XML

Related Party Transactions (Narrative) (Details) - USD ($) $ in Thousands		3 Months Ended		6 Months Ended
	Apr. 29, 2016	Jun. 30, 2016	Jun. 30, 2015	Jun. 30, 2016	Jun. 30, 2015
Related Party Transaction [Line Items]
Due to Parent, net		$ 8,931	$ 24,010	$ 35,814	$ 49,393
Community Health Systems, Inc [Member]
Related Party Transaction [Line Items]
Due to Parent, net		8,900	24,000	35,800	49,400
Community Health Systems, Inc [Member] | Transition Services Agreements and Allocation from Parent Prior to Spin-Off [Member]
Related Party Transaction [Line Items]
Total expenses incurred and allocation from parent		$ 17,800	$ 16,000	$ 34,100	$ 31,400
Community Health Systems, Inc [Member] | Transition Services Agreements
Related Party Transaction [Line Items]
Terms of transitional service agreements	5 years
Community Health Systems, Inc [Member] | Minimum [Member]
Related Party Transaction [Line Items]
Related party transaction, rate				4.00%
Community Health Systems, Inc [Member] | Maximum [Member]
Related Party Transaction [Line Items]
Related party transaction, rate				7.00%

XML

Commitments and Contingencies (Narrative) (Details) $ in Thousands		3 Months Ended	6 Months Ended
	Jul. 28, 2016 USD ($)	Jun. 30, 2016 USD ($) Agreement Phase	Jun. 30, 2016 USD ($) Agreement Phase	Dec. 31, 2015 USD ($)
Other Commitments [Line Items]
Property and equipment, at cost		$ 1,549,751	$ 1,549,751	$ 1,603,653
Property Name, Patient Tower in Springfield, Oregon Hospital [Member] | Asset Under Construction [Member] | Construction and Capital Commitments [Member]
Other Commitments [Line Items]
Property and equipment, at cost		27,600	27,600
Construction costs incurred during the period		10,300	17,200
Total estimated construction costs, including equipment costs		88,000	$ 88,000
Expected project to be completed period			Late 2017 or early 2018
Property Name, Corporate Office [Member] | Asset Under Construction [Member] | Construction and Capital Commitments [Member]
Other Commitments [Line Items]
Expected project to be completed period			third quarter of 2016
Cost recorded related to direct financing obligation		19,300	$ 19,300
Cost recorded during the period related to direct financing obligation		$ 2,900	$ 4,900
Number of separate lease agreements | Agreement		4	4
Number of project phases | Phase		3	3
Physician Recruiting Commitments, Income Guarantee [Member]
Other Commitments [Line Items]
Maximum potential amount of future payments in excess of liabilities recorded		$ 3,600	$ 3,600
Guarantee period			1 year
Commitment periods over which physician agrees to practice in designated community			3 years
Professional and General Liability Insurance [Member]
Other Commitments [Line Items]
Self-insured retention level		5,000	$ 5,000
Workers Compensation Liability Insurance [Member]
Other Commitments [Line Items]
Self-insured retention level		500	500
Quorum Health Resources [Member] | Professional and General Liability Insurance [Member]
Other Commitments [Line Items]
Self-insured retention level		$ 6,000	$ 6,000
Subsequent Event [Member] | Quorum Health Resources [Member] | Hancock Medical Center [Member]
Other Commitments [Line Items]
Total litigation award payable	$ 9,400

XML

Commitments and Contingencies - (Summary of Insurance Reserves Related to Professional and General Liability Claims and Workers Compensation Claims) (Details) - USD ($) $ in Thousands	Jun. 30, 2016	Dec. 31, 2015
Loss Contingencies [Line Items]
Total self-insurance reserves, current receivable	$ 27,460	$ 29,434
Total self-insurance reserves, long-term receivable	97,544	96,996
Total self-insurance reserves, current liability	28,168	29,434
Total self-insurance reserves, long-term liability	106,940	97,930
Professional and General Liability Insurance [Member]
Loss Contingencies [Line Items]
Insurance reserves for professional and general liability, current receivable	21,488	21,120
Insurance reserves for professional and general liability, long-term receivable	77,854	76,489
Insurance reserves for professional and general liability, current liability	21,488	21,120
Insurance reserves for professional and general liability, long-term liability	87,250	77,423
Professional and General Liability Insurance [Member] | Insurance Reserves Indemnified By CHS, Inc. [Member]
Loss Contingencies [Line Items]
Insurance reserves for professional and general liability, current receivable	21,488	21,120
Insurance reserves for professional and general liability, long-term receivable	69,028	72,412
Insurance reserves for professional and general liability, current liability	21,488	21,120
Insurance reserves for professional and general liability, long-term liability	69,028	72,412
Professional and General Liability Insurance [Member] | All Other Self-insurance Reserves [Member]
Loss Contingencies [Line Items]
Insurance reserves for professional and general liability, current receivable	0	0
Insurance reserves for professional and general liability, long-term receivable	8,826	4,077
Insurance reserves for professional and general liability, current liability	0	0
Insurance reserves for professional and general liability, long-term liability	18,222	5,011
Workers Compensation Liability Insurance [Member]
Loss Contingencies [Line Items]
Insurance reserve for workers' compensation liability, current receivable	5,972	8,314
Insurance reserve for workers' compensation liability, long-term receivable	19,690	20,507
Insurance reserve for workers' compensation liability, current liability	6,680	8,314
Insurance reserve for workers' compensation liability, long-term liability	19,690	20,507
Workers Compensation Liability Insurance [Member] | Insurance Reserves Indemnified By CHS, Inc. [Member]
Loss Contingencies [Line Items]
Insurance reserve for workers' compensation liability, current receivable	5,972	8,314
Insurance reserve for workers' compensation liability, long-term receivable	19,690	20,507
Insurance reserve for workers' compensation liability, current liability	5,972	8,314
Insurance reserve for workers' compensation liability, long-term liability	19,690	20,507
Workers Compensation Liability Insurance [Member] | All Other Self-insurance Reserves [Member]
Loss Contingencies [Line Items]
Insurance reserve for workers' compensation liability, current receivable	0	0
Insurance reserve for workers' compensation liability, long-term receivable	0	0
Insurance reserve for workers' compensation liability, current liability	708	0
Insurance reserve for workers' compensation liability, long-term liability	$ 0	$ 0

XML

Subsequent Events (Narrative) (Details) $ in Millions	Jul. 28, 2016 USD ($)
Subsequent Event [Member] | Quorum Health Resources [Member] | Hancock Medical Center [Member]
Subsequent Event [Line Items]
Total litigation award payable	$ 9.4