QHC Quorum Health Corporation

On March 19, 2018, Quorum Health Corporation (the “Company” and “us”) received notice from Community Health Systems, Inc. (“CHS”) that CHS was seeking to terminate, effective September 30, 2018 (or earlier if agreed by the parties), the Shared Services Transition Services Agreement, dated April 29, 2016, by and between Revenue Cycle Service Center, LLC and QHCCS, LLC (the “SSC TSA”) and the Computer and Data Processing Transition Services Agreement, dated April 29, 2016, by and between CHSPSC, LLC and QHCCS, LLC (the “IT TSA”), as a result of alleged breaches by the Company of the SSC TSA and IT TSA. The notice from CHS also provides that CHS is willing, at the Company’s option, to discuss terminating, effective September 30, 2018, the Receivables Collection Agreement, the Eligibility Screening Services Agreement, and the Billing and Collection Agreement, each dated April 29, 2016. Collectively, these transition services agreements were established by CHS in connection with our spin-off from CHS on April 29, 2016 and define services to be provided by CHS to the Company. The transition services agreements generally have five-year terms and include, among others, the provision for services related to information technology, payroll processing, certain human resources functions, patient eligibility screening, billing, collections and other revenue management services.

As previously disclosed, on August 4, 2017, we received a demand for arbitration from CHS seeking payment of certain amounts withheld by us pursuant to the SSC TSA and IT TSA. We contend that the amounts are not payable to CHS and were not properly billed by CHS under the agreements. The matter is pending before the American Arbitration Association. CHS seeks payment of approximately $9.0 million relating to these two transition services agreements. We intend to vigorously contest the charges as not payable to CHS under the transition services agreements and have made a counterclaim for termination of the agreements as well as substantial damages we believe we have suffered as a result of the transition services agreements and other actions taken by CHS in connection with the spin-off. The arbitration has been scheduled for June 18-29, 2018. A decision is expected by early August 2018.    

-END-