Investor Contact:  

Michael J. Culotta

Executive Vice President

and Chief Financial Officer

(615) 221-3502

Three Months Ended March 31,

2017

2016

% of

% of

$  Amount

Revenues

$  Amount

Revenues

Operating revenues, net of contractual allowances and discounts ^(a)

$

587,945

$

614,484

Provision for bad debts

60,305

64,933

Net operating revenues

527,640

100.0

%

549,551

100.0

%

Operating costs and expenses:

Salaries and benefits

264,602

50.1

%

256,862

46.7

%

Supplies

63,822

12.1

%

63,661

11.6

%

Other operating expenses ^(a)

163,424

31.1

%

164,463

30.0

%

Depreciation and amortization

22,120

4.2

%

31,157

5.7

%

Rent

12,102

2.3

%

12,549

2.3

%

Electronic health records incentives earned

(2,452

)

(0.5

)%

(4,208

)

(0.8

)%

Legal, professional and settlement costs

535

0.1

%

241

—

%

Impairment of long-lived assets and goodwill

3,300

0.6

%

—

—

%

Loss (gain) on sale of hospitals, net

(870

)

(0.2

)%

—

—

%

Transaction costs related to the Spin-off

31

—

%

3,735

0.7

%

Total operating costs and expenses

526,614

99.8

%

528,460

96.2

%

Income (loss) from operations

1,026

0.2

%

21,091

3.8

%

Interest expense, net

27,530

5.2

%

27,452

5.0

%

Income (loss) before income taxes

(26,504

)

(5.0

)%

(6,361

)

(1.2

)%

Provision for (benefit from) income taxes

701

0.2

%

(1,674

)

(0.3

)%

Net income (loss)

(27,205

)

(5.2

)%

(4,687

)

(0.9

)%

Less: Net income (loss) attributable to noncontrolling interests

356

—

%

315

—

%

Net income (loss) attributable to Quorum Health Corporation ^(b)

$

(27,561

)

(5.2

)%

$

(5,002

)

(0.9

)%

Earnings (loss) per share attributable to Quorum Health Corporation stockholders:

Basic and diluted ^(c)

$

(0.99

)

$

(0.18

)

Weighted-average shares outstanding:

Basic and diluted ^(d)

27,800,597

28,412,054

Three Months Ended March 31,

2017

2016

Variance

% Variance

Consolidated and combined:

Number of licensed beds at end of period ^(e)

3,399

3,577

(178

)

(5.0

)%

Admissions ^(f)

23,656

24,992

(1,336

)

(5.3

)%

Adjusted admissions ^(g)

56,860

59,801

(2,941

)

(4.9

)%

Emergency room visits ^(h)

172,939

184,934

(11,995

)

(6.5

)%

Medicare case mix index ⁽ⁱ⁾

1.39

1.37

0.02

1.1

%

Same-facility:

Number of licensed beds at end of period ^(e)

3,399

3,487

(88

)

(2.5

)%

Admissions ^(f)

23,656

24,134

(478

)

(2.0

)%

Adjusted admissions ^(g)

56,859

57,308

(449

)

(0.8

)%

Emergency room visits ^(h)

172,939

176,050

(3,111

)

(1.8

)%

Medicare case mix index ⁽ⁱ⁾

1.39

1.37

0.02

1.1

%

March 31,

December 31,

2017

2016

ASSETS

Current assets:

Cash and cash equivalents

$

89,542

$

25,455

Patient accounts receivable, net of allowance for doubtful accounts of $357,197 and $360,796 at March 31, 2017 and December 31, 2016, respectively

396,030

380,685

Inventories

53,368

58,124

Prepaid expenses

22,595

23,028

Due from third-party payors

106,380

116,235

Current assets of hospitals held for sale

9,067

1,502

Other current assets

62,529

57,942

Total current assets

739,511

662,971

Property and equipment, at cost

1,435,272

1,519,975

Less:  Accumulated depreciation and amortization

(714,908

)

(786,075

)

Total property and equipment, net

720,364

733,900

Goodwill

408,580

416,833

Intangible assets, net

76,529

84,982

Long-term assets of hospitals held for sale

26,773

6,851

Other long-term assets

109,953

88,833

Total assets

$

2,081,710

$

1,994,370

LIABILITIES AND EQUITY

Current liabilities:

Current maturities of long-term debt

$

1,664

$

5,683

Accounts payable

174,880

169,684

Accrued liabilities:

Accrued salaries and benefits

98,130

98,803

Accrued interest

31,206

19,915

Due to third-party payors

43,723

42,537

Current liabilities of hospitals held for sale

2,351

492

Other current liabilities

49,532

53,268

Total current liabilities

401,486

390,382

Long-term debt

1,317,985

1,241,142

Deferred income tax liabilities, net

32,075

31,474

Other long-term liabilities

136,916

108,996

Total liabilities

1,888,462

1,771,994

Redeemable noncontrolling interests

6,279

6,807

Equity:

Quorum Health Corporation stockholders' equity:

Preferred stock, $0.0001 par value per share, 100,000,000 shares authorized, none issued

—

—

Common stock, $0.0001 par value per share, 300,000,000 shares authorized; 30,203,170 shares issued and outstanding at March 31, 2017, and 29,482,050 shares issued and outstanding at December 31, 2016

3

3

Additional paid-in capital

539,727

537,911

Accumulated other comprehensive income (loss)

(2,638

)

(2,760

)

Accumulated deficit

(361,587

)

(334,026

)

Total Quorum Health Corporation stockholders' equity

175,505

201,128

Nonredeemable noncontrolling interests

11,464

14,441

Total equity

186,969

215,569

Total liabilities and equity

$

2,081,710

$

1,994,370

Three Months Ended March 31,

2017

2016

Cash flows from operating activities:

Net income (loss)

$

(27,205

)

$

(4,687

)

Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:

Depreciation and amortization

22,120

31,157

Non-cash interest expense

730

—

Provision for (benefit from) deferred income taxes

601

—

Stock-based compensation expense

2,797

—

Impairment of long-lived assets and goodwill

3,300

—

Loss (gain) on sale of hospitals, net

(870

)

—

Changes in reserves for self-insurance claims, net of payments

4,212

7,990

Changes in reserves for legal, professional and settlement costs, net of payments

(3,651

)

—

Other non-cash expense (income), net

(42

)

(554

)

Changes in operating assets and liabilities, net of acquisitions and divestitures:

Patient accounts receivable, net

(17,163

)

(12,122

)

Due from and due to third-party payors, net

11,041

12,339

Inventories, prepaid expenses and other current assets

(16,674

)

(2,589

)

Accounts payable and accrued liabilities

38,065

(7,626

)

Long-term assets and liabilities, net

1,265

489

Net cash provided by (used in) operating activities

18,526

24,397

Cash flows from investing activities:

Capital expenditures for property and equipment

(23,217

)

(12,840

)

Capital expenditures for software

(1,506

)

(2,526

)

Proceeds from the sale of hospitals

4,282

—

Proceeds from other asset sales

—

858

Other investing activities

—

52

Net cash provided by (used in) investing activities

(20,441

)

(14,456

)

Cash flows from financing activities:

Borrowings (repayments) of revolving credit facilities, net

78,000

—

Borrowings of long-term debt

—

20

Repayments of long-term debt

(7,109

)

(1,089

)

Increase (decrease) in Due to Parent, net

—

(6,486

)

Payments of debt issuance costs

(47

)

—

Cancellation of restricted stock awards for payroll tax withholdings on vested shares

(1,028

)

—

Cash distributions to noncontrolling investors

(3,814

)

(2,484

)

Purchases of shares from noncontrolling investors

—

(12

)

Net cash provided by (used in) financing activities

66,002

(10,051

)

Net change in cash and cash equivalents

64,087

(110

)

Cash and cash equivalents at beginning of period

25,455

1,106

Cash and cash equivalents at end of period

$

89,542

$

996

(a)

The California Department of Health Care Services implemented the HQAF program, imposing a fee on certain general and acute care California hospitals. Revenues generated from these fees provide funding for the non-federal supplemental payments to California hospitals that serve California’s Medicaid (“Medi-Cal”) and uninsured patients. Under the most recent phase of the program, covering the period January 2014 through December 2016, the Company recognized $11.0 million of net operating revenues less $2.7 million of provider taxes for the three months ended March 31, 2016.

(b)

EBITDA is a non-GAAP financial measure that consists of net income (loss) attributable to Quorum Health Corporation before interest, income taxes, depreciation and amortization and after adding back net income (loss) attributable to noncontrolling interests. Adjusted EBITDA, also a non-GAAP financial measure, is EBITDA adjusted to add back the effect of certain legal, professional and settlement costs, impairment of long-lived assets and goodwill, net loss (gain) on sale of hospitals and transaction costs related to the Spin-off.  The Company uses Adjusted EBITDA as a measure of financial performance. Adjusted EBITDA is a key measure used by the Company’s management to assess the operating performance of its hospital operations business and to make decisions on the allocation of resources. Additionally, management utilizes Adjusted EBITDA in assessing the Company’s consolidated results of operations and in comparing the Company’s results of operations between periods. Adjusted EBITDA, Adjusted for Divestitures, also a non-GAAP financial measure, is further retrospectively adjusted to exclude the effect of negative EBITDA of hospitals divested. The Company has presented Adjusted EBITDA and Adjusted EBITDA, Adjusted for Divestitures in this press release because it believes these measures provide investors and other users of the Company’s financial statements with additional information about how the Company’s management assesses its results of operations.

Three Months Ended March 31,

2017

2016

Net income (loss) attributable to Quorum Health Corporation

$

(27,561

)

$

(5,002

)

Net income (loss) attributable to noncontrolling interests

356

315

Interest expense, net

27,530

27,452

Provision for (benefit from) income taxes

701

(1,674

)

Depreciation and amortization

22,120

31,157

EBITDA

23,146

52,248

Legal, professional and settlement costs

535

241

Impairment of long-lived assets and goodwill

3,300

—

Loss (gain) on sale of hospitals, net

(870

)

—

Transaction costs related to the Spin-off

31

3,735

Adjusted EBITDA

26,142

56,224

Negative EBITDA of divested hospitals

696

3,385

Adjusted EBITDA, Adjusted for Divestitures

$

26,838

$

59,609

(c)

The following table reconciles net income (loss) attributable to Quorum Health Corporation, as reported and on a per share basis, with the adjustments described herein:

Three Months Ended March 31,

2017

2016

(per share - basic and diluted)

Earnings (loss) per share attributable to Quorum Health Corporation

stockholders, as reported

$

(0.99

)

$

(0.18

)

Adjustments:

Legal, professional and settlement costs

0.02

0.01

Impairment of long-lived assets and goodwill

0.12

—

Loss (gain) on sale of hospitals, net

(0.03

)

—

Transaction costs related to the Spin-off

—

0.10

Net operating losses of divested hospitals

0.03

0.14

Earnings (loss) per share attributable to Quorum Health Corporation

stockholders, excluding adjustments

$

(0.85

)

$

0.07

(d)

For comparative purposes, the Company used 28,412,054 shares as the number of weighted-average shares to calculate basic and diluted earnings per share for periods prior to the Spin-off. This number represents the number of shares issued on the Spin-off date. Due to the net loss attributable to Quorum Health Corporation in the three months ended March 31, 2017, no incremental shares are included in diluted earnings per share for this period, because the effect of the incremental shares would be anti-dilutive. No incremental shares were considered for any periods prior to the Spin-off.

(e)

Licensed beds are the number of beds for which the appropriate state agency licenses a hospital, regardless of whether the beds are actually available for patient use.

(f)

Admissions represent the number of patients admitted for inpatient services.

(g)

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

(h)

Emergency room visits represent the number of patients registered and treated in the Company’s emergency rooms.

(i)

Medicare case mix index is a relative value assigned to a diagnosis-related group of inpatients 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.

•

general economic and business conditions, both nationally and in the regions in which the Company operates;

•

risks associated with the Company’s substantial indebtedness, leverage and debt service obligations, including its ability to comply with its debt covenants, including its senior credit facility, as amended;

•

the ability to achieve operating and financial targets and to control the costs of providing services if patient volumes are lower than expected;

•

the ability to achieve the anticipated benefits of the Spin-off;

•

the impact of the 2016 federal elections, which may lead to the repeal of or significant changes to the Affordable Care Act, its implementation or its interpretation, as well as changes in other federal, state or local laws or regulations affecting the healthcare industry;

•

the success and long-term viability of healthcare insurance exchanges, which may be impacted by whether a sufficient number of payors participate, as well as the impact of the 2016 federal elections on the Affordable Care Act;

•

the extent to which states support or implement changes to Medicaid programs, utilize healthcare insurance exchanges or alter the provision of healthcare to state residents through regulation or otherwise;

•

the extent to which regulatory and economic changes occur in Illinois, where a material portion of the Company’s revenues are concentrated;

•

demographic changes;

•

the failure to comply with governmental regulations;

•

the impact of certain outsourcing functions, and the ability of Community Health Systems, Inc., as provider of the Company’s billing and collection services pursuant to the transition services agreements, to timely and appropriately bill and collect;

•

the potential adverse impact of known and unknown government investigations, internal investigations, investor demands for investigation, audits, and federal and state false claims act litigation and other legal proceedings, including the recent shareholder litigation against the Company and certain of its officers and threats of litigation, as well as the significant costs and attention from management required to address such matters;

•

the ability, where appropriate, to enter into, maintain and comply with 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 reimbursement rates paid by federal or state healthcare programs, including Medicare and Medicaid, or commercial payors, and the timeliness of reimbursement payments;

•

any potential impairments in the carrying values of long-lived assets and goodwill or the shortening of the useful lives of long-lived assets;

•

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 lower collectability levels which may result from, among other things, self-pay growth in states that have not expanded Medicaid and difficulties in collecting payments for which patients are responsible, including co-pays and deductibles;

•

the efforts of healthcare insurers, providers and others to contain healthcare costs, including the trend toward treatment of patients in less acute or specialty healthcare settings and the increased emphasis on value-based purchasing;

•

the Company’s ongoing ability to demonstrate meaningful use of certified electronic health records technology and recognize income for the related Medicare or Medicaid incentive payments, to the extent such payments have not expired;

•

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

•

liabilities and other claims asserted against the Company, including self-insured malpractice claims;

•

competition;

•

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

•

changes in medical or other technology;

•

changes in U.S. generally accepted accounting principles, including the impact of adopting newly issued accounting standards;

•

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

•

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

•

the impact of seasonal or severe weather conditions or earthquakes;

•

the ability to obtain adequate levels of professional and general liability and workers’ compensation liability insurance;

•

the effects related to outbreaks of infectious diseases;

•

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

•

the ability to manage effectively the Company’s arrangements with third-party vendors for key non-clinical business functions and services;

•

the ability to maintain certain accreditations at the Company’s existing facilities and any future facilities the Company may acquire; and

•

the other risk factors set forth in the Company’s other public filings with the Securities and Exchange Commission.