Empire Health Services Strategic Partnership

April 21, 2008

EHS Reaches Another Milestone in Regulatory Review Process

Spokane, Wash.--Subsidiaries of Community Health Systems (CHS), with the concurrence of Empire Health Services (EHS), submitted a response on Friday, April 18, 2008, to the Department of Health’s request for supplemental information as a part of the State’s review of the certificate of need and conversion applications. The submission is another step in the regulatory review process underway for the proposed sale of Deaconess and Valley Hospitals.

Included in this response was an amendment agreed to by CHS and EHS that changes two key aspects of the original Asset Purchase Agreement. It extends the termination date of the agreement from April 10, 2008 to October 31, 2008 and it reduces the purchase price from $172 million to $156 million, which includes working capital. The amendment also allows for CHS to complete the purchase, even under varying financial performance from EHS by allowing for additional adjustments to the purchase price if EHS’ financial position declines.

“We are pleased to have reached this milestone in the regulatory process and look forward to a successful completion. Our goal is to preserve and enhance the EHS healthcare system for the benefit of the community and CHS will be a strong partner in doing so,” said Ron McKay, Empire Health Services’ Board Chair. He continued, “The $16 million change in purchase price reflects EHS’ financial performance in 2007, which fell well below expectations. The reality is the asset value of the hospitals has declined since we initiated negotiations with CHS.”

Additionally, the current national capital markets have been substantially weakened as a result of the sub prime mortgage crisis and its ripple effects in the banking industry. This dynamic has caused a market-wide reduction in valuations of hospitals and increased the conservatism necessary to make acquisitions successful.

In February 2008, EHS implemented a performance improvement plan to improve its financial situation including operating expense and staff reductions. These actions, combined with increased patient volumes, stabilized and improved EHS’ first quarter financial performance.

The $156 million purchase price is still well within the range of fair market value that was determined a year ago when EHS began examining their options and it remains very attractive in the current capital environment. Other aspects of the Asset Purchase Agreement between EHS and CHS, including several beneficial commitments for the Spokane community, remain the same:

o Commitment to invest at least $100 million over the next five years in facilities and technology improvements across the EHS system.

o Commitment to hire all active EHS employees at the time of close, at compensation amounts consistent with amounts provided by EHS and recognizing periods of service with EHS for benefits purposes

o With the guidance and endorsement of the EHS board, adoption of a charity care policy that maintains and strengthens EHS’ current policy.

o Commitment to local leadership and guidance of the hospital, including a community board of directors, significant local physician involvement and leadership, and a management team based in Spokane.

In addition, the net proceeds from the sale will still go to fund an independent, community-run foundation at the time the sale closes. The $156 million purchase price would equate to approximately $84 million for the foundation.

Spokane, Washington based Empire Health Services is a not-for-profit, multi-service healthcare system providing inpatient and outpatient services to the Spokane community, Eastern Washington and the surrounding three-state region as well as bordering Canadian provinces.

January 14, 2008

EHS Sale Process Advances with State

Applications filed with State begin regulatory overview process

Spokane—The sale by Empire Health Services (EHS) of its two hospitals moves forward with the filing of several applications by subsidiaries of Community Health Systems, Inc. (CHS). The filings with the Washington State Department of Health (DOH) and the Washington State Office of the Attorney General (AG) initiate the regulatory oversight process, which is anticipated to last several months.

EHS and CHS signed an asset purchase agreement in October 2007, effectively agreeing upon terms of a purchase between the parties. The DOH and AG will now review the conditions of the sale that will transfer ownership of Deaconess Medical Center and Valley Hospital to CHS, a leading operator of acute care hospitals in communities throughout the country.

"The application triggers another significant milestone in the process," said EHS Board Chair Ron McKay. "We continue to be impressed with CHS throughout this process and know they are a great fit for Spokane. They are committed to high quality patient care, recruiting talented staff and physicians and ensuring the hospitals remain vital partners to the Spokane community."

The October 2007 asset purchase agreement between EHS and CHS includes several beneficial commitments for the Spokane community, including:

Commitment to invest at least $100 million over the next five years in facilities and technology improvements across the EHS system.

With the guidance and endorsement of the EHS board, adoption of a charity care policy that maintains and strengthens the current EHS policy.

Commitment to hire all EHS employees at the time of close, honoring their rate of pay and seniority level.

Commitment to local leadership and guidance of the hospital, including a community board of directors, local physician involvement and leadership, and a management team based in Spokane.

Located in the Nashville, Tennessee, suburb of Franklin, Community Health Systems is a leading operator of acute care hospitals in communities throughout the country. Through its subsidiaries, the company currently owns, leases or operates more than 125 hospitals in 28 states and one hospital in Ireland. Its hospitals offer a broad range of inpatient and outpatient medical and surgical services.

November 14, 2007

Community Health Systems Files to Acquire Deaconess and Valley Hospitals

Spokane—Empire Health Services (EHS) announced today that Community Health Systems recently filed two letters of intent (LOI) with the Washington State Department of Health (DOH) to acquire Deaconess and Valley Hospitals.

The LOI proposes an estimated purchase price for both Deaconess and Valley Hospitals. However, these prices only represent that portion of the final purchase price which is allocable to the hospitals and does not represent the portion that is allocable to other assets of EHS. The net proceeds of the sale, which are estimated to be approximately $100 million, will ultimately endow an independent, community-run health foundation.

The LOI details an estimated price for Deaconess Medical Center totaling $129,239,208, which includes the assumption of certain long-term liabilities. The proposed purchase price for Valley Hospital and Medical Center totals $38,536,303, which includes the assumption of certain long-term liabilities.

“The LOI represents another important step towards securing the long-term future of our hospitals,” said Ronald McKay, president of the Empire Health Services Board of Directors. “There are still many steps and processes that need to be completed before a sale is final.”

As statutory requirements detail, the LOI will be followed by additional filings after the next 30 days. CHS will submit to DOH a Certificate of Need (CON) application for each Hospital and a Hospital Conversion application..

The CON triggers DOH’s formal review, followed by a DOH decision about whether to approve the Certificate of Need. The Hospital Conversion application requires approval by both the DOH and the state Attorney General’s office.

Spokane, Washington based Empire Health Services is a not-for-profit, multi-service healthcare system providing inpatient and outpatient resources to the Spokane community, Eastern Washington and the surrounding three-state region as well bordering Canadian provinces.

Located in the Nashville, Tennessee, suburb of Franklin, Community Health Systems is a leading operator of acute care hospitals in communities throughout the country. Through its subsidiaries, the company currently owns, leases or operates more than 130 hospitals in 28 states and one hospital in Ireland. Its hospitals offer a broad range of inpatient and outpatient medical and surgical services.

October 10th, 2007

Empire Health Services Signs Purchase Agreement

with a Subsidiary of Community Health Systems, Inc.

Agreement includes $100 million in investment for Deaconess and Valley Medical Centers

Spokane—Empire Health Services (EHS) has signed an asset purchase agreement with a subsidiary of Community Health Systems, Inc. (CHS), a national leader in the healthcare industry. The agreement provides for the buyer to acquire the assets of both Deaconess and Valley Medical Centers and Valley Outpatient Surgery Center, and is an important step toward ensuring long-term stability for the hospital system and maintaining healthcare choices in the Inland Northwest. The agreement must be approved by the Washington State Office of the Attorney General and the Washington State Department of Health.

The agreement was reached after a comprehensive strategic partner search led by the EHS Board of Directors. The Board’s goal was to ensure the financial stability of Deaconess and Valley Medical Centers and to attract investment to the system that will benefit patient care delivery for patients, physicians, EHS employees and the region at large.

“This is a monumental day for the community, and one we are proud to announce,” says EHS Board Chair Ron McKay. “CHS is the clear choice because it has an outstanding industry reputation for quality patient care delivery, supporting its staff and physicians, and fostering a tradition of community service and collaboration. The agreement will have a tremendous positive impact on the Inland Northwest and will result in an unprecedented investment into our hospital system and our regional health care economy.”

As part of its search for a strategic partner, the EHS board of directors created a strict set of criteria for assessing potential partners. The criteria included alignment with EHS’s culture of providing high quality patient care, supporting its excellent staff and physicians, maintaining a tradition of community services and collaboration and providing a commitment to charity care.

CHS emerged as the organization best able to fulfill the criteria. The asset purchase agreement between EHS and the buyer includes the following:

· Commitment to invest at least $100 million over the next five years to facilities and technology improvements across the EHS system.

· Commitment to dedicate significant resources to recruit new physicians needed in the community.

· With the guidance and endorsement of the EHS board, adoption of a charity care policy that is more beneficial than the current EHS policy.

· Commitment to hire all EHS employees in good standing at the time of close, honoring their rate of pay and seniority level.

· Commitment to continue community collaborations with Inland Northwest Health Services, which includes Information Resource Management, the information technology division.

· Commitment to local leadership and guidance of the hospital, and will utilize a community board of directors, local physician involvement and leadership, and a management team based in Spokane.

“We are pleased to reach this agreement and we look forward to working with the dedicated employees, healthcare professionals and local leadership of Empire Health,” says Community Health Systems Professional Services Corporation President for Division IV Operations William S. Hussey. “We have been consistently impressed with the Spokane Community and look forward to becoming and integral part of this vibrant area.”

The asset purchase agreement does not finalize the sale. The Washington State Department of Health and the Attorney General must still review and approve the agreement. That process is expected to begin later this year. As EHS and CHS move through that regulatory process, more specific details of the Asset Purchase Agreement will become available.

Located in the Nashville, Tennessee, suburb of Franklin, Community Health Systems is a leading operator of acute care hospitals in communities throughout the country. Through its subsidiaries, the company currently owns, leases or operates more than 130 hospitals in 28 states and one hospital in Ireland. Its hospitals offer a broad range of inpatient and outpatient medical and surgical services.

###

June 14, 2007

Empire Health Services Signs Letter of Intent with a Subsidiary of Community Health Systems Final agreement would bring significant capital investment to Deaconess and Valley Hospitals

Spokane—Empire Health Services (EHS) has signed a non-binding letter of intent that would provide for the transition of ownership of EHS' assets to a subsidiary of Community Health Systems, Inc. (CHS) of Franklin, Tennessee. The letter of intent expresses both parties’ intent to pursue a purchase, but is not a final agreement of sale. EHS, which operates Deaconess Medical Center, Valley Hospital and Medical Center and FirstCare urgent care centers, and CHS now enter into a period of mutual due diligence.

“The board is seeking a strong, strategic partner to ensure that we can continue providing the high quality healthcare for the next one hundred years,” says Ronald F. McKay, EHS Board Chair. “CHS shares our culture of high quality care and believes in investing in local hospitals to help them grow and thrive. CHS has a proven track record of supporting local communities, maintaining strong relationships with physicians and operating excellent facilities.”

During the due diligence process, details about a final agreement will be further defined and guided by key elements of the non-binding letter of intent including:

Significant capital investment in EHS hospital facilities, technology and programs.
The ability to accelerate progress toward the Board’s goal of making EHS a national leader in patient, physician and employee safety and satisfaction.
The continuation of EHS charity care policies, or substantially similar charity care policies, and continued participation in community-based health programs.
The guidance of local leadership through a community board of trustees, local physician involvement and leadership as well as a management team based in Spokane.

With the proper regulator approvals and the execution of the final agreement, the Board intends to create an independent, community-run health foundation that will receive the net proceeds from the sale for the sole use of benefiting the greater Spokane community.

Today’s announcement launches the next step in a due diligence process that will determine whether a mutually beneficial partnership is desired by both parties. If a definitive agreement is reached it would need to be reviewed by the Washington State Department of Health and the State Attorney General.

“We are committed to making the best choice for EHS’ employees, physicians, volunteers and for the broader community,” says Jeff A. Nelson, EHS CEO. “We are enthusiastic about Community Health Systems and the resources and expertise they would bring to our community – helping EHS accelerate our goal of becoming a national leader in quality care and ensuring that our region has a strong two-hospital system for the future.”

Located in the Nashville, Tennessee, suburb of Franklin, Community Health Systems is a leading operator of acute care hospitals in communities throughout the country. Through its subsidiaries, the Company currently owns, leases or operates 80 hospitals in 23 states. Its hospitals offer a broad range of inpatient and outpatient medical and surgical services.