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Quorum Health Corporation Announces Second Quarter 2018 Financial and Operating Results

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Quorum Health Corporation (NYSE:QHC) (the "Company") today announced
its financial and operating results for the three and six months ended
June 30, 2018.

Second Quarter 2018 Financial and Operating Results

The Company's financial and operating results for the three months ended
June 30, 2018 reflect the following:

  • Net operating revenues decreased $57.5 million to $472.6 million,
    compared to $530.1 million for the same period in 2017. The $57.5
    million decline in the net operating revenues for the quarter was
    primarily attributable to a $73.1 million decrease from the hospitals
    sold or closed subsequent to the prior period, partially offset by a
    $7.9 million increase related to revenues from the California Hospital
    Quality Assurance Fee ("HQAF") program, of which there were no
    comparable revenues in the same 2017 period. Excluding the divested
    hospitals of $73.1 million and the California HQAF revenues of $7.9
    million, net operating revenues increased $7.7 million in the three
    months ended June 30, 2018 compared to the same period in 2017,
    primarily due to an improved payor mix and an increase in rate and
    acuity.
  • Net income (loss) was $(25.9) million compared to $(30.6) million for
    the same period in 2017. The net loss for the three months ended June
    30, 2018 was impacted by $3.3 million of costs related to the closure
    of one hospital and $4.1 million in severance related to headcount
    reductions.
  • Net loss attributable to Quorum Health Corporation was $(26.6)
    million, or $(0.92) per share, compared to $(30.6) million, or $(1.09)
    per share, for the same period in 2017.
  • On a same-facility basis, as defined in footnote (k), admissions
    decreased 3.0%, adjusted admissions decreased 1.8% and net operating
    revenues per adjusted admission increased 5.3% compared to the same
    period in 2017.
  • Adjusted EBITDA was $36.3 million compared to $34.4 million for the
    same period in 2017.
  • Adjusted EBITDA, Adjusted for Divestitures, which is further adjusted
    to exclude the effect of EBITDA of hospitals either sold or closed as
    of June 30, 2018, was $39.6 million compared to $43.4 million for the
    same period in 2017.

The Company's financial and operating results for the six months ended
June 30, 2018 reflect the following:

  • Net operating revenues decreased $98.3 million to $959.5 million,
    compared to $1,057.8 million for the same period in 2017. The $98.3
    million decline in the net operating revenues for the six months was
    primarily attributable to a $133.7 million decrease from the divested
    hospitals, partially offset by a $15.8 million increase related to
    revenues from the HQAF program as discussed above. Excluding the
    divested hospitals of $133.7 million and the California HQAF revenues
    of $15.8 million, net operating revenues increased $19.6 million in
    the six months ended June 30, 2018 compared to the same period in
    2017, primarily due to favorable payor mix and an increase in rate and
    acuity.
  • Net income (loss) was $(124.4) million compared to $(57.8) million for
    the same period in 2017. The net loss for the six months ended June
    30, 2018 was impacted by $39.8 million of impairment of long-lived
    assets, $17.1 million of costs related to the closure of one hospital,
    $8.1 million of net losses on the sale of two hospitals and $6.0
    million in severance related to headcount reductions.
  • Net loss attributable to Quorum Health Corporation was $(125.6)
    million, or $(4.37) per share, compared to $(58.2) million, or $(2.08)
    per share, for the same period in 2017.
  • On a same-facility basis, admissions decreased 1.3%, adjusted
    admissions decreased 0.4% and net operating revenues per adjusted
    admission increased 4.3% compared to the same period in 2017.
  • Adjusted EBITDA was $54.7 million compared to $60.6 million for the
    same period in 2017.
  • Adjusted EBITDA, Adjusted for Divestitures, which is further adjusted
    to exclude the effect of EBITDA of hospitals either sold or closed as
    of June 30, 2018, was $66.4 million compared to $74.3 million for the
    same period in 2017.

Divestiture Program

The Company also provided an update on its divestiture program. To date,
the Company has received $84.8 million in total net proceeds from
divestitures, which includes $8.0 million of proceeds held in escrow,
and used $74.9 million to pay down the Company's term loan under its
Senior Credit Facility. The Company remains focused on completing
divestitures with additional proceeds of $165 million to $215 million by
the end of 2019. As of August 8, 2018, the Company has signed a
definitive agreement to divest one facility and has signed letters of
intent ("LOIs") to divest six facilities. Although the definitive
agreement is subject to customary approvals and closing conditions and
the LOIs are not definitive, and no assurance can be provided as to the
likelihood or timing of these turning into completed transactions, the
signed definitive agreement and signed LOIs represent potential net
proceeds to the Company of approximately $115 million.

Financial Outlook

The Company's guidance for Adjusted EBITDA, Adjusted for Divestitures
for the year ending December 31, 2018 remains unchanged from the
Company's first quarter release at a range of $145 million to $165
million. The Company has updated its financial outlook by reducing its
guidance for net operating revenues for the year ending December 31,
2018 from a range of $1.925 billion to $1.975 billion to a range of
$1.875 billion to $1.925 billion. This reduction is primarily a result
of the Company's continued efforts to execute on its divestiture
strategy as well as efforts to improve its operating margins by
discontinuing underperforming service lines, managed Medicaid contracts
and provider relationships.

These projections are based on the Company's historical operating
performance, current economic, demographic and regulatory trends and
other assumptions that the Company believes are reasonable at this time.
The 2018 guidance should be considered in conjunction with the
assumptions included herein and in the Company's first quarter press
release. The Company will update its guidance for any divestitures that
are completed during the remainder of 2018. See "Forward-Looking
Statements" below for a list of factors that could affect the future
results of the Company or the healthcare industry generally.

A reconciliation of the Company's projected 2018 Adjusted EBITDA,
Adjusted for Divestitures, a forward-looking non-GAAP financial measure,
to net income (loss), the most directly comparable U.S. GAAP financial
measure, is omitted from this press 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 items required for such reconciliation without
unreasonable effort, including interest expense, provision for (benefit
from) income taxes and other adjustments that would be necessary to
prepare a forward-looking statement of net income (loss) in accordance
with U.S. GAAP. For the same reasons, the Company is unable to address
the probable significance of the unavailable information.

About Quorum Health Corporation

The principal business of Quorum Health Corporation is to provide
hospital and outpatient healthcare services in its markets across the
United States. As of June 30, 2018, the Company owned or leased 28
hospitals in rural and mid-sized markets located across 14 states and
licensed for 2,649 beds. Through Quorum Health Resources LLC, a
wholly-owned subsidiary, the Company provides hospital management
advisory and healthcare consulting services to non-affiliated hospitals
across the country. 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 9, 2018, at 10:00 a.m. Central time, 11:00 a.m. Eastern, to
review operating and financial results for the three and six months
ended June 30, 2018. 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 30 days. Copies of this press release and the Company's
Current Report on Form 8-K (including this press release) are available
on the Company's website at www.quorumhealth.com.

 
 
 
 
 

QUORUM HEALTH CORPORATION
UNAUDITED CONDENSED
CONSOLIDATED STATEMENTS OF INCOME (LOSS)

(In
Thousands, Except Earnings per Share and Shares)

 
        Three Months Ended June 30,
2018     2017
    % of     % of
$ Amount Revenues $ Amount Revenues
   
Operating revenues (a) $ 585,215
Provision for bad debts (b)   55,069    
Net operating revenues $ 472,632 100.0 %   530,146   100.0 %
Operating costs and expenses:
Salaries and benefits 232,631 49.2 % 265,309 50.0 %
Supplies 52,897 11.2 % 64,112 12.1 %
Other operating expenses (a) 144,456 30.6 % 157,613 29.8 %
Depreciation and amortization 17,142 3.6 % 20,586 3.9 %
Rent 11,358 2.4 % 12,152 2.3 %
Electronic health records incentives earned (445 ) (0.1 )% (1,777 ) (0.3 )%
Legal, professional and settlement costs 5,417 1.1 % 3,934 0.7 %
Impairment of long-lived assets and goodwill % 12,900 2.4 %
Loss (gain) on sale of hospitals, net 307 0.1 % (4,321 ) (0.8 )%
Loss on closure of hospitals, net 3,338 0.7 % %
Transaction costs related to the Spin-off     %     %
Total operating costs and expenses   467,101   98.8 %   530,508   100.1 %
Income (loss) from operations 5,531 1.2 % (362 ) (0.1 )%
Interest expense, net   31,926   6.8 %   30,458   5.7 %
Income (loss) before income taxes (26,395 ) (5.6 )% (30,820 ) (5.8 )%
Provision for (benefit from) income taxes   (454 )   (0.1 )%   (245 )   %
Net income (loss) (c) (25,941 ) (5.5 )% (30,575 ) (5.8 )%
Less: Net income (loss) attributable to noncontrolling interests   665   0.1 %   55   %
Net income (loss) attributable to Quorum Health Corporation $ (26,606 )   (5.6 )% $ (30,630 )   (5.8 )%
 
Earnings (loss) per share attributable to Quorum Health Corporation
stockholders:
Basic and diluted (d) $ (0.92 ) $ (1.09 )
Weighted-average shares outstanding:
Basic and diluted   28,995,564   28,145,215
 

 

 
 
 
 
 
 

QUORUM HEALTH CORPORATION
UNAUDITED CONDENSED
CONSOLIDATED STATEMENTS OF INCOME (LOSS)

(In
Thousands, Except Earnings per Share and Shares)

 
        Six Months Ended June 30,
2018     2017
    % of     % of
$ Amount Revenues $ Amount Revenues
   
Operating revenues (a) $ 1,173,160
Provision for bad debts (b)   115,374    
Net operating revenues $ 959,452 100.0 %   1,057,786   100.0 %
Operating costs and expenses:
Salaries and benefits 479,631 50.0 % 529,911 50.1 %
Supplies 111,783 11.7 % 127,934 12.1 %
Other operating expenses (a) 297,194 31.0 % 321,037 30.4 %
Depreciation and amortization 35,403 3.7 % 42,706 4.0 %
Rent 23,890 2.5 % 24,254 2.3 %
Electronic health records incentives earned (586 ) (0.1 )% (4,229 ) (0.4 )%
Legal, professional and settlement costs 8,830 0.9 % 4,469 0.4 %
Impairment of long-lived assets and goodwill 39,760 4.1 % 16,200 1.5 %
Loss (gain) on sale of hospitals, net 8,122 0.8 % (5,191 ) (0.5 )%
Loss on closure of hospitals, net 17,084 1.8 % %
Transaction costs related to the Spin-off     %   31   %
Total operating costs and expenses   1,021,111   106.4 %   1,057,122   99.9 %
Income (loss) from operations (61,659 ) (6.4 )% 664 0.1 %
Interest expense, net   62,857   6.6 %   57,988   5.5 %
Income (loss) before income taxes (124,516 ) (13.0 )% (57,324 ) (5.4 )%
Provision for (benefit from) income taxes   (88 )   %   456   0.1 %
Net income (loss) (c) (124,428 ) (13.0 )% (57,780 ) (5.5 )%
Less: Net income (loss) attributable to noncontrolling interests   1,146   0.1 %   411   %
Net income (loss) attributable to Quorum Health Corporation $ (125,574 )   (13.1 )% $ (58,191 )   (5.5 )%
 
Earnings (loss) per share attributable to Quorum Health Corporation
stockholders:
Basic and diluted (d) $ (4.37 ) $ (2.08 )
Weighted-average shares outstanding:
Basic and diluted   28,726,445   27,977,738
 

 

 
 
 
 
 
 

QUORUM HEALTH CORPORATION
UNAUDITED CONSOLIDATED
SELECTED OPERATING DATA

 
        Three Months Ended June 30,
2018       2017       Variance     % Variance
       
Consolidated:
Number of licensed beds at end of period (e) 2,649 3,168 (519 ) (16.4 )%
Admissions (f) 18,200 22,270 (4,070 ) (18.3 )%
Adjusted admissions (g) 45,551 55,634 (10,083 ) (18.1 )%
Total surgeries (h) 19,114 26,954 (7,840 ) (29.1 )%
Emergency room visits (i) 135,389 167,575 (32,186 ) (19.2 )%
Medicare case mix index (j) 1.44 1.43 0.01 0.7 %
 
Same-facility: (k)
Number of licensed beds at end of period (e) 2,649 2,675 (26 ) (1.0 )%
Admissions (f) 18,200 18,761 (561 ) (3.0 )%
Adjusted admissions (g) 45,551 46,408 (857 ) (1.8 )%
Total surgeries (h) 19,114 19,741 (627 ) (3.2 )%
Emergency room visits (i) 135,389 136,215 (826 ) (0.6 )%
Medicare case mix index (j) 1.44 1.40 0.04 2.9 %
 
 
 
Six Months Ended June 30,
2018 2017 Variance % Variance
 
Consolidated:
Number of licensed beds at end of period (e) 2,649 3,168 (519 ) (16.4 )%
Admissions (f) 38,749 45,926 (7,177 ) (15.6 )%
Adjusted admissions (g) 94,779 112,501 (17,722 ) (15.8 )%
Total surgeries (h) 39,701 52,902 (13,201 ) (25.0 )%
Emergency room visits (i) 289,186 340,514 (51,328 ) (15.1 )%
Medicare case mix index (j) 1.44 1.41 0.03 2.1 %
 
Same-facility: (k)
Number of licensed beds at end of period (e) 2,649 2,675 (26 ) (1.0 )%
Admissions (f) 37,634 38,120 (486 ) (1.3 )%
Adjusted admissions (g) 91,902 92,272 (370 ) (0.4 )%
Total surgeries (h) 37,770 38,372 (602 ) (1.6 )%
Emergency room visits (i) 276,271 273,912 2,359 0.9 %
Medicare case mix index (j) 1.43 1.40 0.03 2.1 %
 

 

 
 
 
 
 
 

QUORUM HEALTH CORPORATION
UNAUDITED CONDENSED
CONSOLIDATED BALANCE SHEETS

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

 
        June 30,     December 31,
2018 2017
ASSETS
Current assets:
Cash and cash equivalents $ 2,822 $ 5,617
Patient accounts receivable, net of allowance for doubtful accounts
of $352,509 at December 31, 2017
327,480 343,145
Inventories 46,780 53,459
Prepaid expenses 25,364 21,167
Due from third-party payors 69,189 97,202
Current assets of hospitals held for sale 8,112
Other current assets   45,442   47,440
Total current assets   517,077   576,142
Property and equipment, at cost 1,335,404 1,405,184
Less: Accumulated depreciation and amortization   (730,623 )   (729,905 )
Total property and equipment, net   604,781   675,279
Goodwill 401,456 409,229
Intangible assets, net 53,445 64,850
Long-term assets of hospitals held for sale 7,734
Other long-term assets   87,824   95,607
Total assets $ 1,664,583 $ 1,828,841
LIABILITIES AND EQUITY
Current liabilities:
Current maturities of long-term debt $ 1,733 $ 1,855
Accounts payable 154,575 171,250
Accrued liabilities:
Accrued salaries and benefits 82,125 77,803
Accrued interest 10,221 10,466
Due to third-party payors 40,670 47,705
Current liabilities of hospitals held for sale 2,577
Other current liabilities   45,912   43,687
Total current liabilities 335,236 355,343
Long-term debt 1,197,679 1,212,035
Deferred income tax liabilities, net 7,799 7,774
Other long-term liabilities   130,163   137,954
Total liabilities   1,670,877   1,713,106
Redeemable noncontrolling interests   2,301   2,325
Equity:
Quorum Health Corporation stockholders' equity (deficit):
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; 30,898,710 shares issued and outstanding at June 30,
2018, and 30,294,895 shares issued and outstanding at December 31,
2017
3 3
Additional paid-in capital 552,511 549,610
Accumulated other comprehensive income (loss) (2,031 ) (1,956 )
Accumulated deficit   (573,790 )   (448,216 )
Total Quorum Health Corporation stockholders' equity (deficit) (23,307 ) 99,441
Nonredeemable noncontrolling interests   14,712   13,969
Total equity (deficit)   (8,595 )   113,410
Total liabilities and equity $ 1,664,583 $ 1,828,841
 

 

 
 
 
 
 
 

QUORUM HEALTH CORPORATION
UNAUDITED CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOWS

(In Thousands)

 
        Three Months Ended June 30,     Six Months Ended June 30,
2018     2017 2018     2017
 
Cash flows from operating activities:
Net income (loss) $ (25,941 ) $ (30,575 ) $ (124,428 ) $ (57,780 )
Adjustments to reconcile net income (loss) to net cash provided by
(used in) operating activities:
Depreciation and amortization 17,142 20,586 35,403 42,706
Non-cash interest expense, net 2,723 700 4,534 1,430
Provision for (benefit from) deferred income taxes (511 ) (346 ) 25 255
Stock-based compensation expense 2,756 2,531 5,220 5,328
Impairment of long-lived assets and goodwill 12,900 39,760 16,200
Loss (gain) on sale of hospitals, net 307 (4,321 ) 8,122 (5,191 )
Non-cash portion of loss on hospital closures 1,089 6,394
Changes in reserves for self-insurance claims, net of payments 4,355 7,042 10,380 11,254
Changes in reserves for legal, professional and settlement costs,
net of payments
(3,651 )
Other non-cash expense (income), net 56 47 7 5
Changes in operating assets and liabilities, net of acquisitions and
divestitures:
Patient accounts receivable, net 19,645 (13,186 ) 21,074 (30,349 )
Due from and due to third-party payors, net 19,761 4,366 20,978 15,407
Inventories, prepaid expenses and other current assets (1,519 ) 8,942 (229 ) (7,732 )
Accounts payable and accrued liabilities (19,301 ) (36,773 ) (9,714 ) 1,292
Long-term assets and liabilities, net   (3,368 )   606   (2,925 )   1,871
Net cash provided by (used in) operating activities   17,194   (27,481 )   14,601   (8,955 )
 
Cash flows from investing activities:
Capital expenditures for property and equipment (10,791 ) (15,925 ) (25,319 ) (39,142 )
Capital expenditures for software (531 ) (1,663 ) (1,044 ) (3,169 )
Acquisitions, net of cash acquired (26 ) (1,887 ) (58 ) (1,887 )
Proceeds from the sale of hospitals 507 15,874 39,170 20,156
Other investing activities, net   52     249  
Net cash provided by (used in) investing activities   (10,789 )   (3,601 )   12,998   (24,042 )
 
Cash flows from financing activities:
Borrowings under revolving credit facilities 115,000 130,000 247,000 302,000
Repayments under revolving credit facilities (119,000 ) (158,000 ) (233,000 ) (252,000 )
Borrowings of long-term debt 55 72 67 72
Repayments of long-term debt (30,820 ) (4,738 ) (31,447 ) (11,847 )
Payments of debt issuance costs (2,891 ) (2,268 ) (2,938 )
Cancellation of restricted stock awards for payroll tax withholdings
on vested shares
(1,309 ) (461 ) (1,943 ) (1,489 )
Cash distributions to noncontrolling investors     (37 )   (803 )   (3,851 )
Net cash provided by (used in) financing activities   (36,074 )   (36,055 )   (22,394 )   29,947
 
Net change in cash, cash equivalents and restricted cash (29,669 ) (67,137 ) 5,205 (3,050 )
Cash, cash equivalents and restricted cash at beginning of period   40,491   89,542   5,617   25,455
Cash, cash equivalents and restricted cash at end of period $ 10,822 $ 22,405 $ 10,822 $ 22,405
 

 

 

FOOTNOTES TO UNAUDITED FINANCIAL STATEMENTS AND SELECTED
OPERATING DATA

 
(a)   The California Department of Health Care Services administers 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 Phase V of the program, the Company
recognized $7.9 million of net operating revenues less $2.1 million
of provider taxes for the three months ended June 30, 2018 with no
corresponding amounts in the three months ended June 30, 2017. For
the six months ended June 30, 2018, the Company recognized $15.8
million of net operating revenues less $4.2 million of provider
taxes with no corresponding amounts in the six months ended June 30,
2017. The revenues and fees paid for the full year 2017 were
recognized in the fourth quarter of 2017 when CMS approved the
program.
 
(b) On January 1, 2018, the Company adopted ASC Topic 606 "Revenue from
Contracts with Customers" using the modified retrospective method as
of January 1, 2018. Results for reporting periods beginning after
January 1, 2018 are presented under Topic 606, while prior period
amounts are not adjusted and continue to be reported in accordance
with the Company's historic accounting under Topic 605. Prior to the
adoption of ASC Topic 606, a significant portion of the Company's
allowance for doubtful accounts related to self-pay patients, as
well as co-pays and deductibles owed to the Company by patients with
insurance. Under ASC 606, the estimated allowance for these patients
are generally considered a direct reduction to net operating
revenues rather than as a provision for bad debts.
 
(c) 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, net loss on closure of hospitals,
transition of transition services agreements ("TSAs"), transition
costs related to the Spin-off, and post-spin headcount reductions
and executive severance. 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 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 adjusted to exclude the effect of
EBITDA of hospitals either sold or closed as of June 30, 2018. 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.
 
Adjusted EBITDA and Adjusted EBITDA, Adjusted for Divestitures are
not measurements of financial performance under U.S. GAAP. These
calculations should not be considered in isolation or as a
substitute for net income, operating income or any other measure
calculated in accordance with U.S. GAAP. The items excluded from
Adjusted EBITDA and Adjusted EBITDA, Adjusted for Divestitures are
significant components in understanding and evaluating the Company's
financial performance. The Company believes such adjustments are
appropriate, as the magnitude and frequency of such items can vary
significantly and are not related to the assessment of the Company's
normal operating performance. Additionally, the Company's
calculation of Adjusted EBITDA and Adjusted EBITDA, Adjusted for
Divestitures may not be comparable to similarly titled measures
reported by other companies.
 

The following table reconciles Adjusted EBITDA and Adjusted
EBITDA, Adjusted for Divestitures, each as defined above, to net
income (loss), the most directly comparable U.S. GAAP financial
measure, as derived directly from the Company's consolidated
statements of income for the respective periods (in thousands):

 
    Three Months Ended June 30,   Six Months Ended June 30,
2018   2017 2018   2017
 
Net income (loss) $ (25,941 ) $ (30,575 ) $ (124,428 ) $ (57,780 )
Interest expense, net 31,926 30,458 62,857 57,988
Provision for (benefit from) income taxes (454 ) (245 ) (88 ) 456
Depreciation and amortization   17,142     20,586     35,403     42,706  
EBITDA 22,673 20,224 (26,256 ) 43,370
Legal, professional and settlement costs 5,417 3,934 8,830 4,469
Impairment of long-lived assets and goodwill 12,900 39,760 16,200
Loss (gain) on sale of hospitals, net 307 (4,321 ) 8,122 (5,191 )
Loss on closure of hospitals, net 3,338 17,084
Transition of transition services agreements 520 1,237
Transaction costs related to the Spin-off 31
Post-spin headcount reductions and executive severance   4,068     1,693     5,966     1,693  
Adjusted EBITDA 36,323 34,430 54,743 60,572
Negative EBITDA of divested hospitals   3,324     8,998     11,701     13,767  
Adjusted EBITDA, Adjusted for Divestitures $ 39,647   $ 43,428   $ 66,444   $ 74,339  
 
 

(d) 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,
2018 2017 2018

2017

(per share - basic and diluted) (per share - basic and diluted)
 
Earnings (loss) per share attributable to Quorum Health Corporation
stockholders, as reported
$ (0.92 ) $ (1.09 ) $ (4.37

)

$

(2.08

)

Adjustments:
Legal, professional and settlement costs 0.18 0.14 0.31 0.16
Impairment of long-lived assets and goodwill 0.45 1.38 0.58
Loss (gain) on sale of hospitals, net 0.01 (0.15 ) 0.28 (0.19 )
Loss on closure of hospitals, net 0.11 0.59
Transition of transition services agreements 0.02 0.04
Transaction costs related to the Spin-off
Post-spin headcount reductions and executive severance 0.14 0.21
Net operating losses of divested hospitals   0.11     0.32     0.41     0.67  
Earnings (loss) per share attributable to Quorum Health Corporation
stockholders, excluding adjustments
$ (0.35 ) $ (0.33 ) $ (1.15

)

$

(0.86

)

 
(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 are computed by multiplying admissions by gross
patient revenues and then dividing that number by gross inpatient
revenues.
 
(h) Total surgeries represent the number of inpatient and outpatient
surgeries.
 
(i) Emergency room visits represent the number of patients registered
and treated in the Company's emergency rooms.
 
(j) 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.
 
(k) Same-facility financial and operating data excludes hospitals that
were sold prior to and as of the end of the current reporting
period. Same-facility operating results have been adjusted to
exclude the operating results of Sandhills Regional Medical Center,
Barrow Regional Medical Center, Cherokee Medical Center, Trinity
Hospital of Augusta, Lock Haven Hospital, Sunbury Community
Hospital, L.V. Stabler Memorial Hospital, Affinity Medical Center,
Vista Medical Center West and Clearview Regional Medical Center
which were sold or closed on December 1, 2016, December 31, 2016,
March 31, 2017, June 30, 2017, September 30, 2017, September 30,
2017, October 31, 2017, February 11, 2018, March 1, 2018 and March
31, 2018, respectively.
 

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, but are not limited to, the following:

  • 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 Company's ability to successfully make acquisitions or complete
    divestitures and the timing thereof, its ability to complete any such
    acquisitions or divestitures on desired terms or at all, and its
    ability to realize the intended benefits from any such acquisitions or
    divestitures;
  • changes in reimbursement methodologies and rates paid by federal or
    state healthcare programs, including Medicare and Medicaid, or
    commercial payors, and the timeliness of reimbursement payments,
    including delays in certain states in which the Company operates;
  • 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 impact of changes made to the Affordable Care Act, the potential
    for repeal or additional 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;
  • 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 and difficulties in
    collecting payments for which patients are responsible, including
    co-pays and deductibles;
  • competition;
  • changes in medical or other technology;
  • 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 costs associated with terminating the transition services
    agreements with Community Health Systems, Inc., including the related
    arbitration proceeding, as well as the additional costs and risks
    associated with any operational problems, delays in collections from
    payors, and errors and control issues during the termination and
    transition process, and the Company's ability to realize the intended
    benefits from terminating the transition services agreements;
  • the impact of certain outsourcing functions, and the ability of CHS,
    as provider of the Company's billing and collection services pursuant
    to the transition services agreements, to timely and appropriately
    bill and collect;
  • the Company's ability to manage effectively its arrangements with
    third-party vendors for key non-clinical business functions and
    services;
  • the Company's ability to achieve operating and financial targets and
    to control the costs of providing services if patient volumes are
    lower than expected;
  • the Company's ability to achieve and realize the operational and
    financial benefits expected from its margin improvement program;
  • the effects related to outbreaks of infectious diseases;
  • the Company's ability to attract and retain, at reasonable employment
    costs, qualified personnel, key management, physicians, nurses and
    other healthcare workers;
  • the impact of seasonal or severe weather conditions or earthquakes;
  • 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;
  • the Company's ongoing ability to demonstrate meaningful use of
    certified EHR technology, including meeting interoperability
    objectives, and avoid related penalties and recognize income for the
    related Medicare or Medicaid incentive payments, to the extent such
    payments have not expired;
  • the efforts of healthcare insurers, providers, large employer groups
    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 failure to comply with governmental regulations;
  • the Company's ability, where appropriate, to enter into, maintain and
    comply with provider arrangements with payors and the terms of these
    arrangements, which may be impacted by the increasing consolidation of
    health insurers and managed care companies and vertical integration
    efforts involving payors and healthcare providers;
  • the potential adverse impact of known and unknown government
    investigations, internal investigations, audits, and federal and state
    false claims act litigation and other legal proceedings, including the
    shareholder and creditor litigations 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;
  • liabilities and other claims asserted against the Company, including
    self-insured malpractice claims;
  • the impact of cyber-attacks or security breaches, including, but not
    limited to, the compromise of the Company's facilities and
    confidential patient data, potential harm to patients, remediation and
    other expenses, potential liability under HIPAA and consumer
    protection laws, federal and state governmental inquiries, and damage
    to the Company's reputation;
  • the Company's ability to utilize its income tax loss carryforwards and
    risks associated with the Tax Cuts and Jobs Act of 2017;
  • the Company's ability to maintain certain accreditations at its
    existing facilities and any future facilities it may acquire;
  • the success and long-term viability of healthcare insurance exchanges
    and potential changes to the beneficiary enrollment process;
  • 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 timing and amount of cash flows related to the California HQAF
    Program, as well as the potential for retroactive adjustments for
    prior year payments;
  • the effects related to the continued implementation of the
    sequestration spending reductions and the potential for future deficit
    reduction legislation;
  • changes in U.S. generally accepted accounting principles, including
    the impacts of adopting newly issued accounting standards;
  • the availability and terms of capital to fund acquisitions,
    replacement facilities or other capital expenditures;
  • the Company's ability to obtain adequate levels of professional and
    general liability and workers' compensation liability insurance; and
  • the other risk factors set forth in the Company's other public filings
    with the Securities and Exchange Commission.

Although the Company believes that these forward-looking statements are
based on 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 cautions 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.

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