Investor Contact:  

Michael J. Culotta

Executive Vice President

and Chief Financial Officer

(615) 221-3502

Three Months Ended June 30,

2017

2016

% of

% of

$  Amount

Revenues

$  Amount

Revenues

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

$

585,215

$

598,163

Provision for bad debts

55,069

68,426

Net operating revenues

530,146

100.0

%

529,737

100.0

%

Operating costs and expenses:

Salaries and benefits

265,309

50.0

%

264,886

50.0

%

Supplies

64,112

12.1

%

64,136

12.1

%

Other operating expenses ^(a)

157,613

29.8

%

163,185

30.8

%

Depreciation and amortization

20,586

3.9

%

31,463

5.9

%

Rent

12,152

2.3

%

12,545

2.4

%

Electronic health records incentives earned

(1,777

)

(0.3

)%

(4,247

)

(0.8

)%

Legal, professional and settlement costs

3,934

0.7

%

5,447

1.0

%

Impairment of long-lived assets and goodwill

12,900

2.4

%

250,400

47.3

%

Loss (gain) on sale of hospitals, net

(4,321

)

(0.8

)%

—

—

%

Transaction costs related to the Spin-off

—

—

%

1,177

0.2

%

Total operating costs and expenses

530,508

100.1

%

788,992

148.9

%

Income (loss) from operations

(362

)

(0.1

)%

(259,255

)

(48.9

)%

Interest expense, net

30,458

5.7

%

29,276

5.6

%

Income (loss) before income taxes

(30,820

)

(5.8

)%

(288,531

)

(54.5

)%

Provision for (benefit from) income taxes

(245

)

—

%

(44,565

)

(8.4

)%

Net income (loss) ^(b)

(30,575

)

(5.8

)%

(243,966

)

(46.1

)%

Less: Net income (loss) attributable to noncontrolling interests

55

—

%

1,095

0.2

%

Net income (loss) attributable to Quorum Health Corporation

$

(30,630

)

(5.8

)%

$

(245,061

)

(46.3

)%

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

Basic and diluted ^(c)

$

(1.09

)

$

(8.63

)

Weighted-average shares outstanding:

Basic and diluted ^(d)

28,145,215

28,412,720

Six Months Ended June 30,

2017

2016

% of

% of

$  Amount

Revenues

$  Amount

Revenues

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

$

1,173,160

$

1,212,647

Provision for bad debts

115,374

133,359

Net operating revenues

1,057,786

100.0

%

1,079,288

100.0

%

Operating costs and expenses:

Salaries and benefits

529,911

50.1

%

521,748

48.3

%

Supplies

127,934

12.1

%

127,797

11.8

%

Other operating expenses ^(a)

321,037

30.4

%

327,648

30.5

%

Depreciation and amortization

42,706

4.0

%

62,620

5.8

%

Rent

24,254

2.3

%

25,094

2.3

%

Electronic health records incentives earned

(4,229

)

(0.4

)%

(8,455

)

(0.8

)%

Legal, professional and settlement costs

4,469

0.4

%

5,688

0.5

%

Impairment of long-lived assets and goodwill

16,200

1.5

%

250,400

23.2

%

Loss (gain) on sale of hospitals, net

(5,191

)

(0.5

)%

—

—

%

Transaction costs related to the Spin-off

31

—

%

4,912

0.5

%

Total operating costs and expenses

1,057,122

99.9

%

1,317,452

122.1

%

Income (loss) from operations

664

0.1

%

(238,164

)

(22.1

)%

Interest expense, net

57,988

5.5

%

56,728

5.2

%

Income (loss) before income taxes

(57,324

)

(5.4

)%

(294,892

)

(27.3

)%

Provision for (benefit from) income taxes

456

0.1

%

(46,239

)

(4.3

)%

Net income (loss) ^(b)

(57,780

)

(5.5

)%

(248,653

)

(23.0

)%

Less: Net income (loss) attributable to noncontrolling interests

411

—

%

1,410

0.2

%

Net income (loss) attributable to Quorum Health Corporation

$

(58,191

)

(5.5

)%

$

(250,063

)

(23.2

)%

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

Basic and diluted ^(c)

$

(2.08

)

$

(8.80

)

Weighted-average shares outstanding:

Basic and diluted ^(d)

27,977,738

28,412,389

Three Months Ended June 30,

2017

2016

Variance

% Variance

Consolidated and combined:

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

3,168

3,579

(411

)

(11.5

)%

Admissions ^(f)

22,270

23,618

(1,348

)

(5.7

)%

Adjusted admissions ^(g)

55,634

58,942

(3,308

)

(5.6

)%

Emergency room visits ^(h)

167,575

182,301

(14,726

)

(8.1

)%

Medicare case mix index ⁽ⁱ⁾

1.43

1.38

0.05

3.6

%

Same-facility: ^(j)

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

3,168

3,168

—

—

%

Admissions ^(f)

22,270

22,617

(347

)

(1.5

)%

Adjusted admissions ^(g)

55,634

55,730

(96

)

(0.2

)%

Emergency room visits ^(h)

167,575

171,779

(4,204

)

(2.4

)%

Medicare case mix index ⁽ⁱ⁾

1.41

1.39

0.02

1.4

%

Six Months Ended June 30,

2017

2016

Variance

% Variance

Consolidated and combined:

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

3,168

3,579

(411

)

(11.5

)%

Admissions ^(f)

45,926

48,610

(2,684

)

(5.5

)%

Adjusted admissions ^(g)

112,501

118,746

(6,245

)

(5.3

)%

Emergency room visits ^(h)

340,514

367,235

(26,721

)

(7.3

)%

Medicare case mix index ⁽ⁱ⁾

1.41

1.37

0.04

2.9

%

Same-facility: ^(j)

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

3,168

3,168

—

—

%

Admissions ^(f)

45,708

46,550

(842

)

(1.8

)%

Adjusted admissions ^(g)

111,763

112,346

(583

)

(0.5

)%

Emergency room visits ^(h)

338,464

345,973

(7,509

)

(2.2

)%

Medicare case mix index ⁽ⁱ⁾

1.40

1.38

0.02

1.4

%

June 30,

December 31,

2017

2016

ASSETS

Current assets:

Cash and cash equivalents

$

22,405

$

25,455

Patient accounts receivable, net of allowance for doubtful accounts of $340,197 and $360,796 at June 30, 2017 and December 31, 2016, respectively

409,217

380,685

Inventories

54,269

58,124

Prepaid expenses

27,641

23,028

Due from third-party payors

97,172

116,235

Current assets of hospitals held for sale

5,813

1,502

Other current assets

48,329

57,942

Total current assets

664,846

662,971

Property and equipment, at cost

1,436,407

1,519,975

Less:  Accumulated depreciation and amortization

(724,929

)

(786,075

)

Total property and equipment, net

711,478

733,900

Goodwill

409,781

416,833

Intangible assets, net

77,694

84,982

Long-term assets of hospitals held for sale

14,381

6,851

Other long-term assets

109,321

88,833

Total assets

$

1,987,501

$

1,994,370

LIABILITIES AND EQUITY

Current liabilities:

Current maturities of long-term debt

$

1,649

$

5,683

Accounts payable

170,862

169,684

Accrued liabilities:

Accrued salaries and benefits

94,381

98,803

Accrued interest

10,142

19,915

Due to third-party payors

38,881

42,537

Current liabilities of hospitals held for sale

1,391

492

Other current liabilities

47,163

53,268

Total current liabilities

364,469

390,382

Long-term debt

1,284,721

1,241,142

Deferred income tax liabilities, net

31,729

31,474

Other long-term liabilities

141,756

108,996

Total liabilities

1,822,675

1,771,994

Redeemable noncontrolling interests

5,614

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; 30,297,524 shares issued and outstanding at June 30, 2017, and 29,482,050 shares issued and outstanding at December 31, 2016

3

3

Additional paid-in capital

541,774

537,911

Accumulated other comprehensive income (loss)

(2,518

)

(2,760

)

Accumulated deficit

(392,217

)

(334,026

)

Total Quorum Health Corporation stockholders' equity

147,042

201,128

Nonredeemable noncontrolling interests

12,170

14,441

Total equity

159,212

215,569

Total liabilities and equity

$

1,987,501

$

1,994,370

Three Months Ended June 30,

Six Months Ended June 30,

2017

2016

2017

2016

Cash flows from operating activities:

Net income (loss)

$

(30,575

)

$

(243,966

)

$

(57,780

)

$

(248,653

)

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

Depreciation and amortization

20,586

31,463

42,706

62,620

Non-cash interest expense

700

729

1,430

729

Provision for (benefit from) deferred income taxes

(346

)

(47,451

)

255

(47,451

)

Stock-based compensation expense

2,531

1,897

5,328

1,897

Impairment of long-lived assets and goodwill

12,900

250,400

16,200

250,400

Loss (gain) on sale of hospitals, net

(4,321

)

—

(5,191

)

—

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

7,042

8,901

11,254

16,891

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

—

4,642

(3,651

)

4,642

Other non-cash expense (income), net

47

(33

)

5

(587

)

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

Patient accounts receivable, net

(13,186

)

4,911

(30,349

)

(7,211

)

Due from and due to third-party payors, net

4,366

(6,538

)

15,407

5,355

Inventories, prepaid expenses and other current assets

8,942

5,103

(7,732

)

2,277

Accounts payable and accrued liabilities

(36,773

)

36,072

1,292

29,129

Long-term assets and liabilities, net

606

(9,334

)

1,871

(8,845

)

Net cash provided by (used in) operating activities

(27,481

)

36,796

(8,955

)

61,193

Cash flows from investing activities:

Capital expenditures for property and equipment

(15,925

)

(20,367

)

(39,142

)

(33,207

)

Capital expenditures for software

(1,663

)

(1,278

)

(3,169

)

(3,804

)

Acquisitions, net of cash acquired

(1,887

)

—

(1,887

)

—

Proceeds from the sale of hospitals

15,874

—

20,156

—

Other investing activities

—

492

—

1,402

Net cash provided by (used in) investing activities

(3,601

)

(21,153

)

(24,042

)

(35,609

)

Cash flows from financing activities:

Borrowings (repayments) of revolving credit facilities, net

(28,000

)

—

50,000

—

Borrowings of long-term debt

72

1,255,500

72

1,255,520

Repayments of long-term debt

(4,738

)

(3,188

)

(11,847

)

(4,277

)

Increase (decrease) in Due to Parent, net

—

31,669

—

25,183

Payments of debt issuance costs

(2,891

)

(28,003

)

(2,938

)

(28,003

)

Cash paid to Parent related to the Spin-off

—

(1,217,336

)

—

(1,217,336

)

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

(461

)

27

(1,489

)

27

Cash distributions to noncontrolling investors

(37

)

(163

)

(3,851

)

(2,647

)

Purchases of shares from noncontrolling investors

—

—

—

(12

)

Net cash provided by (used in) financing activities

(36,055

)

38,506

29,947

28,455

Net change in cash and cash equivalents

(67,137

)

54,149

(3,050

)

54,039

Cash and cash equivalents at beginning of period

89,542

996

25,455

1,106

Cash and cash equivalents at end of period

$

22,405

$

55,145

$

22,405

$

55,145

(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 $11.3 million of net operating revenues less $2.7 million of provider taxes for the three months ended June 30, 2016. The Company recognized $22.3 million of net operating revenues less $5.4 million of provider taxes for the six months ended June 30, 2016. There were no comparative amounts recorded in the 2017 periods, as discussed below.

(b)

EBITDA is a non-GAAP financial measure that consists of net income (loss) before interest, income taxes, depreciation and amortization. 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 EBITDA of hospitals divested in December 2016 and in 2017. 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 June 30,

Six Months Ended June 30,

2017

2016

2017

2016

Net income (loss)

$

(30,575

)

$

(243,966

)

$

(57,780

)

$

(248,653

)

Interest expense, net

30,458

29,276

57,988

56,728

Provision for (benefit from) income taxes

(245

)

(44,565

)

456

(46,239

)

Depreciation and amortization

20,586

31,463

42,706

62,620

EBITDA

20,224

(227,792

)

43,370

(175,544

)

Legal, professional and settlement costs

3,934

5,447

4,469

5,688

Impairment of long-lived assets and goodwill

12,900

250,400

16,200

250,400

Loss (gain) on sale of hospitals, net

(4,321

)

—

(5,191

)

—

Transaction costs related to the Spin-off

—

1,177

31

4,912

Post-spin headcount reductions

1,693

—

1,693

—

Adjusted EBITDA

34,430

29,232

60,572

85,456

Negative EBITDA of divested hospitals

4,716

6,060

6,652

9,427

Adjusted EBITDA, Adjusted for Divestitures

$

39,146

$

35,292

$

67,224

$

94,883

(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 June 30,

Six Months Ended June 30,

2017

2016

2017

2016

(per share - basic and diluted)

Earnings (loss) per share attributable to Quorum Health Corporation stockholders, as reported

$

(1.09

)

$

(8.63

)

$

(2.08

)

$

(8.80

)

Adjustments:

Legal, professional and settlement costs

0.14

0.16

0.16

0.17

Impairment of long-lived assets and goodwill

0.45

7.46

0.58

7.43

Loss (gain) on sale of hospitals, net

(0.15

)

—

0.02

—

Transaction costs related to the Spin-off

—

0.04

—

0.15

Post-spin headcount reductions

0.06

—

0.06

—

Net operating losses of divested hospitals

0.17

0.15

0.24

0.28

Earnings (loss) per share attributable to Quorum Health Corporation stockholders, excluding adjustments

$

(0.42

)

$

(0.82

)

$

(1.02

)

$

(0.77

)

(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 and six months ended June 30, 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.

(j)

Same-facility financial and operating data includes hospitals that are owned and leased during all periods. Same-facility operating results have been adjusted to exclude the operating results of Sandhills Regional Medical Center, Barrow Regional Medical Center and Cherokee Medical Center which were sold on December 1, 2016, December 31, 2016 and March 31, 2017, respectively. Same-facility operating results includes the operating results of Trinity Hospital of Augusta, since this hospital was not sold until June 30, 2017.

•

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 significant changes to the Affordable Care Act, its implementation or its interpretation, efforts to repeal the Affordable Care Act, 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 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.