Quorum Health Corporation Announces Second Quarter 2016 Operating Results and Updated 2016 Guidance

BRENTWOOD, Tenn.--(BUSINESS WIRE)--Quorum Health Corporation (NYSE: QHC) (the “Company”) today announced financial and operating results for the three and six months ended June 30, 2016.

On April 29, 2016, Community Health Systems, Inc. (“CHS”) completed the spin-off of the Company, comprised of 38 affiliated hospitals and related outpatient services in 16 states, together with Quorum Health Resources, LLC (“QHR”), a subsidiary providing management advisory and consulting services to non-affiliated hospitals (the “Spin-off Transaction”). Following the Spin-off Transaction, the Company became an independent public company and its common stock began regular-way trading on the New York Stock Exchange (“NYSE”) on May 2, 2016.

Net operating revenues for the three months ended June 30, 2016 totaled $529.7 million compared to $538.4 million for the same period in 2015, a 1.6% decrease. Loss from operations for the three months ended June 30, 2016 was $(259.3) million, compared with income from operations of $27.5 million in the same period in 2015. The operating results for the three months ended June 30, 2016 include $250.4 million of impairment to long-lived assets and goodwill, as discussed below, $1.2 million of transaction costs related to the Spin-off Transaction, and $5.4 million of legal and settlement costs primarily related to a QHR matter. Adjusted EBITDA for the three months ended June 30, 2016 was $29.2 million compared to $59.6 million for the same period in 2015. The 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 loss attributable to Quorum Health Corporation for the three months ended June 30, 2016 was $(245.1) million, or $(8.63) per share, compared with net income attributable to Quorum Health Corporation of $1.4 million, or $0.05 per share, for the same period in 2015. The net loss attributed to the impairment charge for the three months ended June 30, 2016 was $(216.1) million or $(7.61) per share.

Net operating revenues for the six months ended June 30, 2016 totaled $1,079.3 million compared to $1,086.0 million for the same period in 2015, a 0.6% decrease. 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 same period in 2015. The results for the six months ended June 30, 2016 include $250.4 million of impairment to long-lived assets and goodwill, as discussed below, $4.9 million of transaction costs related to the Spin-off Transaction and $5.7 million of legal and settlement costs primarily related to a QHR matter. Adjusted EBITDA for the six months ended June 30, 2016 was $85.5 million compared to $125.7 million for the same period in 2015. The combined 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. Net loss attributable to Quorum Health Corporation for the six months ended June 30, 2016 was $(250.1) million, or $(8.80) per share, compared with net income attributable to Quorum Health Corporation of $7.6 million, or $0.27 per share, for the same period in 2015. The net loss attributed to the impairment charge for the six months ended June 30, 2016 was $(216.1) million or $(7.61) per share.

The Company recorded non-cash impairment charges of $250.4 million during the three months ended June 30, 2016, which included $45.4 million to reduce certain long-lived asset values in property, equipment and software and $5.0 million in goodwill based on management’s decision to divest certain hospitals and evaluate other hospitals for divestiture. In addition, the Company recorded a goodwill impairment charge of $200 million relating to the carryover allocation of goodwill at the time of the Spin-off Transaction, which represents management’s best estimate of fair value and the resulting implied goodwill related to its hospital reporting unit in step two of its interim goodwill impairment evaluation. Increases or decreases in fair value and the resulting implied value of goodwill will be recorded when the evaluation is complete, and such changes could be material.

Net cash provided by operating activities for the three and six months ended June 30, 2016 was $36.8 million and $61.2 million compared to $56.3 million and $22.7 million for the same periods in 2015.

Adjusted EBITDA, a non-GAAP financial measure, is EBITDA adjusted to exclude the impact of net income (loss) attributable to noncontrolling interests, expenses related to certain legal and settlement costs, impairment of long-lived assets and goodwill, and transaction costs related to the spin-off. For information regarding why the Company believes Adjusted EBITDA presents useful information to investors and a reconciliation of Adjusted EBITDA to net cash provided by operating activities, see footnote (b) to the Financial Highlights, Financial Statements and Selected Operating Data below.

Commenting on the results, Thomas D. Miller, president and chief executive officer of Quorum Health Corporation, said, “Our first 100 days brought the visibility we needed to better support hospitals moving forward. We are focused on identifying and developing the growth we need through physician recruiting and expanding services in our markets. We have been very impressed with the local support from physicians and staff to make our hospitals vital within their communities. The strategic review of our hospitals and other operations will be ongoing to identify additional opportunities for cost efficiencies. We are committed to divesting underperforming assets and paying down our debt. We have already received letters of intent on certain facilities, and we currently anticipate that some sales should be completed in the fourth quarter. But I must stress that, despite any other activities, we will never lose our focus on quality. Although our operating performance fell short of expectations for the quarter, we want to emphasize that our management team and local operators are pursuing initiatives to both reduce costs and increase our readiness for growth opportunities, including selected acquisitions. We continue to believe that our continued operating discipline, coupled with strong and capable hospital and physician leadership, will unlock new opportunities as we execute on our vision of improving health in every community we serve.”

About Quorum Health Corporation

The principal business of Quorum Health Corporation 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, licensed for 3,579 beds in 16 states. The Company also provides additional outpatient services at urgent care centers, imaging centers and surgery centers. Furthermore, through QHR, the Company provides management advisory and consulting services to non-affiliated general acute care hospitals located throughout the United States. Over 95% of the Company’s net operating revenues are attributable to its hospital operations business.

The Company’s headquarters are located in Brentwood, Tennessee, a suburb south of Nashville. Shares in Quorum Health Corporation are traded on the NYSE under the symbol “QHC.” More information about the Company can be found on its website at www.quorumhealth.com.

Quorum Health Corporation will hold a conference call on Thursday, August 11, 2016, at 10:00 a.m. Central, 11:00 a.m. Eastern, to review financial and operating results for the three and six months ended June 30, 2016. Investors will have the opportunity to listen to a live internet broadcast of the conference call by clicking on the Investor Relations link of the Company’s website at www.quorumhealth.com. To listen to the live call, please go to the website at least 15 minutes early to register, download and install any necessary audio software. For those who cannot listen to the live broadcast, a replay will be available shortly after the call and will continue to be available for approximately thirty days. Copies of this press release and conference call slide show, as well as the Company’s Current Report on Form 8-K (including this press release), will be available on the Company’s website at www.quorumhealth.com.

Regulation FD Disclosure

Set forth below is selected information concerning the Company’s financial outlook for the year ending December 31, 2016. These projections update selected guidance issued on May 11, 2016, and are based on the Company’s historical operating performance, current trends and other assumptions that the Company believes are reasonable at this time. The 2016 guidance should be considered in conjunction with the assumptions included herein. See “Forward-Looking Statements” below for a list of factors that could affect the future results of the Company or the healthcare industry generally.

The Company expects net operating revenues for the year ending December 31, 2016 to range from $2.15 billion to $2.20 billion and expects Adjusted EBITDA for the year ending December 31, 2016 to range from $175 million to $200 million. Adjusted EBITDA includes an estimate of approximately $10 million for non-cash stock-based compensation expense, a portion of which was allocated from CHS prior to the spin-off on April 29, 2016, and includes the impact of estimated incremental expenses associated with being an independent, public company following the completion of the spin-off. The guidance does not give effect to any potential hospital divestitures or acquisitions by the Company subsequent to the spin-off.

A reconciliation of the Company’s projected 2016 Adjusted EBITDA, a forward-looking non-GAAP financial measure, to the most directly comparable GAAP financial measure is omitted from this release because the Company is unable to provide such reconciliation without unreasonable effort. This inability results from the inherent difficulty in forecasting generally and in quantifying certain projected amounts that are necessary for such reconciliation. In particular, sufficient information is not available to calculate certain adjustments required for such reconciliation without unreasonable effort that would be necessary to prepare a forward-looking statement of cash flows prepared in accordance with U.S. GAAP. For the same reasons, the Company is unable to address the probable significance of the unavailable information.

QUORUM HEALTH CORPORATION FINANCIAL HIGHLIGHTS (Unaudited) (In Thousands, Except Per Share Amounts and Shares)
	Three Months Ended June 30,					Six Months Ended June 30,
	2016			2015		2016			2015
Net operating revenues	$	529,737		$	538,352	$	1,079,288		$	1,085,969
Income (loss) from operations		(259,255	)		27,484		(238,164	)		61,815
Net income (loss) attributable to Quorum Health Corporation		(245,061	)		1,430		(250,063	)		7,629
Basic and diluted earnings (loss) per common share attributable to Quorum Health Corporation stockholders	$	(8.63	)	$	0.05	$	(8.80	)	$	0.27
Basic and diluted weighted-average number of common shares outstanding^(a)		28,412,720			28,412,054		28,412,389			28,412,054
Net cash provided by operating activities	$	36,796		$	56,346	$	61,193		$	22,696
Adjusted EBITDA^(b)		29,232			59,625		85,456			125,654
For footnotes, see pages 9-10.

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,
	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	%
Earnings (loss) per share attributable to Quorum Health Corporation stockholders:
Basic and diluted	$	(8.63	)				$	0.05
Weighted-average common shares outstanding:
Basic and diluted		28,412,720						28,412,054
For footnotes, see pages 9-10.

QUORUM HEALTH CORPORATION CONDENSED CONSOLIDATED AND COMBINED STATEMENTS OF INCOME (LOSS) (Unaudited) (In Thousands, Except Per Share Amounts and Shares)
	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	%
Earnings (loss) per share attributable to Quorum Health Corporation stockholders:
Basic and diluted	$	(8.80	)				$	0.27
Weighted-average common shares outstanding:
Basic and diluted		28,412,389						28,412,054
For footnotes, see pages 9-10.

QUORUM HEALTH CORPORATION CONSOLIDATED AND COMBINED SELECTED OPERATING DATA (Unaudited)
	Three Months Ended June 30,
	2016		2015		Variance			% Variance
Number of licensed beds at end of period^(c)		3,579		3,592		(13	)		-0.4	%
Admissions^(d)		23,618		24,442		(824	)		-3.4	%
Adjusted Admissions ^(e)		58,942		60,444		(1,502	)		-2.5	%
Patient days during period^(f)		94,899		96,847		(1,948	)		-2.0	%
Average length of stay (days)^(g)		4.0		4.0
Medicare case mix index^(h)		1.38		1.35		0.03			2.2	%
	Six Months Ended June 30,
	2016		2015		Variance			% Variance
Number of licensed beds at end of period^(c)		3,579		3,592		(13	)		-0.4	%
Admissions^(d)		48,610		49,990		(1,380	)		-2.8	%
Adjusted Admissions^(e)		118,746		119,760		(1,014	)		-0.8	%
Patient days during period^(f)		195,600		201,357		(5,757	)		-2.9	%
Average length of stay (days)^(g)		4.0		4.0
Medicare case mix index^(h)		1.37		1.35		0.02			1.5	%
For footnotes, see pages 9-10.

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
For footnotes, see pages 9-10.

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			-
For footnotes, see pages 9-10.

FOOTNOTES TO FINANCIAL HIGHLIGHTS, FINANCIAL STATEMENTS AND SELECTED OPERATING DATA
(a)	For comparative purposes, the Company used 28,412,054 shares as the weighted-average shares to calculate basic and diluted EPS for periods prior to the Spin-off Transaction. 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.
(b)	EBITDA is a non-GAAP financial measure which consists of net income attributable to Quorum Health Corporation before interest, income taxes, depreciation and amortization. Adjusted EBITDA, also a non-GAAP financial measure, is EBITDA adjusted to exclude the impact of net income (loss) attributable to noncontrolling interests, expenses related to certain legal settlements and related costs, impairment of long-lived assets and goodwill, and transaction costs related to the spin-off. The Company uses Adjusted EBITDA as a measure of liquidity. The Company has also presented Adjusted EBITDA in this press release because it believes it provides investors with additional information about the Company’s ability to incur and service debt and make capital expenditures.
	Adjusted EBITDA is not a measurement of financial performance or liquidity under U.S. GAAP. It should not be considered in isolation or as a substitute for net income, operating income, cash flows from operating, investing or financing activities or any other measure calculated in accordance with U.S. GAAP. The items excluded from Adjusted EBITDA are significant components in understanding and evaluating financial performance and liquidity. This calculation of Adjusted EBITDA may not be comparable to similarly titled measures reported by other companies.
	The following table reconciles Adjusted EBITDA, as defined, to net cash provided by operating activities, the most directly comparable U.S. GAAP financial measure, as derived directly from the Company’s condensed consolidated and combined financial statements for the respective periods (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
Interest expense, net		29,276			23,828			56,728			49,630
Provision (benefit) for income taxes		(44,565	)		1,451			(46,239	)		4,156
Depreciation and amortization		31,463			32,141			62,620			63,839
EBITDA		(227,792	)		59,625			(175,544	)		125,654
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			-
Adjusted EBITDA	$	29,232		$	59,625		$	85,456		$	125,654
Adjusted EBITDA:	$	29,232		$	59,625		$	85,456		$	125,654
Stock-based compensation expense^(i)		1,897			-			1,897			-
Non-cash changes in insurance reserves for claims ^(j)		5,418			-			5,418			-
Other non-cash income, net		(33	)		(1,137	)		(587	)		(1,508	)
Interest settled in Due to Parent, net		(9,264	)		(23,828	)		(36,716	)		(49,630	)
Income taxes settled in Due to Parent, net		(2,886	)		(1,451	)		(1,212	)		(4,156	)
Accrued interest expense on term loan facility and senior notes		(19,283	)		-			(19,283	)		-
Legal and settlement costs		(5,447	)		-			(5,688	)		-
Transaction costs related to the spin-off		(1,177	)		-			(4,912	)		-
Changes in operating assets and liabilities, net of acquisitions		38,339			23,137			36,820			(47,664	)
Net cash provided by operating activities	$	36,796		$	56,346		$	61,193		$	22,696

(c)	Licensed beds are the number of beds for which the appropriate state agency licenses a facility, regardless of whether the beds are actually available for patient use.
(d)	Admissions represent the number of patients admitted for inpatient services.
(e)	Adjusted Admissions is computed by multiplying admissions by gross patient revenues and then dividing that number by gross inpatient revenues.
(f)	A patient day represents the total count of admitted inpatients as of midnight.
(g)	Average length of stay in days is calculated by dividing the number of patient days, as defined above, by the number of Admissions in the period.
(h)	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.
(i)	Following the Spin-off Transaction, the Company began recording stock-based compensation expense 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 and QHC restricted stock awards granted by the Company on May 3, 2016. Prior to the Spin-off Transaction, an estimated portion of CHS’ stock compensation expense was allocated to QHC through the corporate management fee from CHS, and was not included as a non-cash add-back to net cash provided by operating activities. The estimated costs included in corporate management fees charged by 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.
(j)	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.

Forward-Looking Statements

This press release contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, Section 21E of the Securities Exchange Act of 1934, as amended, and the Private Securities Litigation Reform Act of 1995 that involve risk and uncertainties. All statements in this press release other than statements of historical fact, including statements regarding projections, expected operating results, and other events 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. Although the Company believes that these forward-looking statements are based on reasonable assumptions, these assumptions are inherently subject to significant economic and competitive uncertainties and contingencies, which are difficult or impossible to predict accurately and may be beyond the control of the Company. Accordingly, the Company cannot give any assurance that its expectations will in fact occur and cautions that actual results may differ materially from those in the forward-looking statements. A number of factors could affect the future results of the Company or the healthcare industry generally and could cause the Company’s expected results to differ materially from those expressed in this press release.

These factors include, among other things:

• general economic and business conditions, both nationally and in the regions in which the Company operates;
• 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;
• the 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;
• the efforts of insurers, healthcare providers and others to contain healthcare costs, including the trend toward value-based purchasing;
• the 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;

• the Company’s 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;
• 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 ability to successfully integrate any acquired hospitals, or to recognize expected synergies from acquisitions;
• the impact of seasonal severe weather conditions;
• the 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 the Company’s business and the ability to achieve the anticipated benefits of the spin-off;
• the ability to manage effectively 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 that it may acquire;
• the impact of certain outsourcing functions, and the ability of CHS, as provider of the Company’s billing and collections 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 the Company’s other public filings with the Securities and Exchange Commission.

Although the Company believes 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 its control. Accordingly, the Company cannot give any assurance that its 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. The Company undertakes 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.