Financial Analysis

13. CONTINGENCIES 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 matters will have a material adverse effect on the consolidated financial position or liquidity of the Company. However, in light of the inherent uncertainties involved in pending legal, regulatory and governmental matters, some of which are beyond the Companys 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 be material to the Companys results of operations or cash flows for any particular reporting period. 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 los …

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The Companys net operating revenues for the three and six months ended June 30, 2026 and 2025 have been presented in the following table based on an allocation of the estimated transaction price with the patient between the primary patient classification of insurance coverage (in millions): Three Months Ended Six Months Ended June 30, June 30, 2026 2025 2026 2025 Medicare $ 446 $ 542 $ 959 $ 1,132 Medicare Managed Care 527 547 1,101 1,150 Medicaid 520 545 1,016 1,022 Managed Care and other third-party payors 1,293 1,481 2,643 2,950 Self-pay 39 18 71 38 Total $ 2,825 $ 3,133 $ 5,790 $ 6,292 …

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2. ACCOUNTING FOR STOCK-BASED COMPENSATION Stock-based compensation awards have been granted under the Community Health Systems, Inc. Amended and Restated 2009 Stock Option and Award Plan, which was most recently amended and restated as of March 12, 2025 and most recently approved by the Companys stockholders at the annual meeting of stockholders held on May 13, 2025 (the 2009 Plan). The 2009 Plan provides for the grant of incentive stock options intended to qualify under Section 422 of the Internal Revenue Code and for the grant of stock options which do not so qualify, stock appreciation rights, restricted stock, restricted stock units (RSUs), performance-based shares or units and other share awards. Persons eligible to receive grants under the 2009 Plan include the Companys directors, officers, employees and consultants. To date, all options granted under the 2009 Plan have been nonqualified stock options for tax purposes. Generally, these options vest in one-third increments on each of the first three anniversaries of the option grant date and expire on the tenth anniversary of the option grant date. The exercise price of all options granted under the 2009 Plan is equal to the fair value of the Companys common stock on the option grant date. As of June 30, 2026 , 7,564,580 shares of unissued common stock were reserved for future grants under the 2009 Plan. The following table reflects the impact of total compensation expense related to stock-based equity plans on the repo …

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7. FAIR VALUE OF FINANCIAL INSTRUMENTS The fair value of financial instruments has been estimated by the Company using available market information as of June 30, 2026 and December 31, 2025, and valuation methodologies considered appropriate. The estimates presented in the table below are not necessarily indicative of amounts the Company could realize in a current market exchange (in millions): June 30, 2026 December 31, 2025 Carrying Estimated Fair Carrying Estimated Fair Amount Value Amount Value Assets: Cash and cash equivalents $ 149 $ 149 $ 260 $ 260 Investments in equity securities 86 86 79 79 Available-for-sale debt securities 246 246 226 226 Trading securities 5 5 5 5 Liabilities: 6% Senior Notes due 2028 42 40 42 35 6% Senior Secured Notes due 2029 632 639 630 644 5% Senior Secured Notes due 2030 1,484 1,448 1,479 1,442 4% Senior Secured Notes due 2031 688 634 1,055 942 10% Senior Secured Notes due 2032 1,541 1,671 1,992 2,188 10% Senior Secured Notes due 2033 698 762 698 741 9% Senior Secured Notes due 2034 1,763 1,869 1,762 1,881 6% Junior-Priority Secured Notes due 2029 1,197 1,227 1,189 1,108 6% Junior-Priority Secured Notes due 2030 1,188 1,101 1,183 985 ABL Facility and other debt 48 48 21 21 The carrying value of the Companys long-term debt in the above table is presented net of unamortized deferred debt issuance costs. The estimated fair value is determined using the methodologies discussed below in accordance with accounting standards related to the determin …

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4. GOODWILL The changes in the carrying amount of goodwill for the six months ended June 30, 2026 are as follows (in millions): Balance, at December 31, 2025 Goodwill $ 6,130 Accumulated impairment losses ( 2,814 ) 3,316 Goodwill acquired as part of acquisitions 101 Goodwill allocated to hospitals divested or held-for-sale (as applicable) ( 189 ) Balance, at June 30, 2026 Goodwill 6,042 Accumulated impairment losses ( 2,814 ) $ 3,228 Goodwill is allocated to each identified reporting unit, which is defined as an operating segment or one level below the operating segment (referred to as a component of the entity). Management has determined that the Companys operating segment meets the criteria to be classified as a reporting unit. Goodwill is evaluated for impairment annually 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. The Company performed its last annual goodwill impairment evaluation during the fourth quarter of 2025 using an October 31, 2025 measurement date, which indicated no impairment. The determination of fair value in the Companys goodwill impairment analysis is based on an estimate of fair value for the reporting unit utilizing known and estimated inputs at the evaluation date. Some of those inputs include, but are not limited to, the most recent price of the Companys common stock and fair value of long-term debt, the Companys recent financial results, estimates of …

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5. INCOME TAXES The total amount of unrecognized benefit that would affect the effective tax rate, if recognized, was $ 46 million at June 30, 2026. A total of $ 10 million of interest and penalties is included in the amount of the liability for uncertain tax positions at June 30, 2026. It is the Companys policy to recognize interest and penalties related to unrecognized benefits in its condensed consolidated statements of income as income tax expense. The Companys income tax returns for the 2021 and 2022 tax years are under examination by the Internal Revenue Service. The Company believes the result of this examination will not be material to its consolidated results of operations or consolidated financial position. The Company has extended the federal statute of limitations through March 31, 2028 for Community Health Systems, Inc. for the tax periods ended December 31, 2021 and 2022. The Companys provision for income taxes was $ 76 million and $ 118 million for the three months ended June 30, 2026 and 2025 , respectively, and $ 165 million and $ 160 million for the six months ended June 30, 2026 and 2025 , respectively. The Companys effective tax rates were 42.2 % and 26.9 % for the three months ended June 30, 2026 and 2025 , respectively, and 67.6 % and 31.7 % for the six months ended June 30, 2026 and 2025, respectively. The decrease in the provision for income taxes and the change in the effective tax rate for the three months ended June 30, 2026, compared to the same pe …

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"New Accounting Pronouncements . In September 2025, the Financial Accounting Standards Board issued Accounting Standards Update (ASU) 2025-06, Intangibles - Goodwill and Other - Internal-Use Software (Topic 350): Targeted Improvements to the Accounting for Internal-Use Software. This ASU modifies the criteria for when software costs may be capitalized by eliminating consideration of software project development stages and by enhancing guidance for the ""probable-to-complete"" threshold. This ASU is effective for annual reporting periods beginning after December 15, 2027, and interim periods within those annual reporting periods. Early adoption of this ASU is permitted. The Company is currently evaluating the impact that adoption of this ASU will have on its condensed consolidated financial statements. The Company has evaluated all other recently issued, but not yet effective, ASUs and does not expect the eventual adoption of such ASUs to have a material impact on its consolidated financial position or results of operations."

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12. SEGMENT INFORMATION The Company is principally engaged in the provision of healthcare services, including a broad range of general and specialized hospital healthcare services and outpatient services. Services are delivered within hospitals that the Company owns or operates as well as related healthcare entities that exist to support and supplement services provided in their associated hospital, including, for example, physician practices, urgent care centers, freestanding emergency departments, occupational medicine clinics, imaging centers, cancer centers and ambulatory surgery centers. The Company has a single reportable segment represented by hospital operations, which includes its general acute care hospitals and related healthcare entities that provide inpatient and outpatient healthcare services. The Company defined its single reportable segment consistent with the manner in which internally reported financial information is regularly reviewed by the Companys chief executive officer, who is the Companys chief operating decision maker (CODM). Resources are allocated and financial performance is assessed on a consolidated basis. The CODM does not review assets at a different level or category than the amounts disclosed in the condensed consolidated balance sheets. The Companys CODM uses net income, as presented in the condensed consolidated statements of income, to assess performance and allocate resources. Net income is used in the annual budgeting process as well a …

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10. STOCKHOLDERS DEFICIT Authorized capital shares of the Company include 400,000,000 shares of capital stock consisting of 300,000,000 shares of common stock and 100,000,000 shares of preferred stock. Each of the aforementioned classes of capital stock has a par value of $ 0.01 per share. Shares of preferred stock, none of which were outstanding as of June 30, 2026, may be issued in one or more series having such rights, preferences and other provisions as determined by the Board of Directors without approval by the holders of common stock. The Company is a holding company, which operates through its subsidiaries. The ABL Facility and the indentures governing each series of the Companys outstanding notes contain various covenants under which the assets of the subsidiaries of the Company are subject to certain restrictions relating to, among other matters, dividends and distributions, as referenced in the paragraph below. The ABL Facility and the indentures governing each series of the Companys outstanding notes restrict the Companys subsidiaries from, among other matters, paying dividends and making distributions to the Company, which thereby limits the Companys ability to pay dividends and/or repurchase stock. As of June 30, 2026, under the most restrictive test in these agreements (and subject to certain exceptions), the Company has approximately $ 300 million of capacity to pay permitted dividends and/or repurchase shares of stock or make other restricted payments. The sc …

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