CYH Community Health Systems Inc

PROPOSAL 3 — ADVISORY VOTE ON THE FREQUENCY OF AN ADVISORY VOTE ON EXECUTIVE COMPENSATION

In addition to providing stockholders with the opportunity to cast an advisory vote on executive compensation, the Company this year, as required by Section 14A of the Exchange Act, is providing stockholders with an advisory vote on whether the advisory vote on executive compensation should be held every one, two or three years. Consistent with the views of our stockholders expressed in 2011 when we previously held an advisory vote on the frequency of an advisory vote on executive compensation, we have held an advisory vote on executive compensation every year since 2011.

The Board believes that a frequency of “every one year” for the advisory vote on executive compensation continues to be the optimal interval for conducting and responding to a “say on pay” vote. In formulating this recommendation, the Board believes that current best corporate governance practices favor an annual advisory vote, and that an annual advisory vote will allow our stockholders to provide us with their direct input on our compensation philosophy, policies and practices with respect to our named executive officers on a more timely and consistent basis than the biennial and triennial alternatives. In addition, the Board believes that the annual advisory vote allows the Board and Compensation Committee the opportunity to evaluate compensation decisions in light of this annual feedback from our stockholders in a manner that is consistent with our policy of seeking regular dialogue with our stockholders on corporate governance and executive compensation matters.

Stockholders will not be voting to approve or disapprove the Board’s recommendation. Instead, stockholders will be provided the opportunity to choose among four options (holding the vote every one, two, or three years, or abstaining from selecting any particular interval) when voting in response to the resolution set forth below:

“RESOLVED, that the option of every one year, two years, or three years that receives the highest number of votes cast for this resolution will be the preferred frequency with which the Company is to provide shareholders with the opportunity to vote to approve the compensation of named executive officers, as disclosed pursuant to the compensation disclosure rules of the Securities and Exchange Commission.”

The Company will consider stockholders to have expressed a non-binding preference for the option that receives the most votes.

Although this advisory vote on the frequency of the “say on pay” vote is non-binding, the Board and the Compensation Committee will take into account the outcome of the vote when considering the frequency of future advisory votes on executive compensation.

THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT YOU VOTE FOR THE OPTION OF “EVERY ONE YEAR,” ON AN ADVISORY BASIS, FOR FUTURE ADVISORY VOTES ON EXECUTIVE COMPENSATION.

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EXECUTIVE COMPENSATION

Compensation Discussion and Analysis

Introduction

As a leader in the hospital sector of the healthcare industry, one of the nation’s largest and most dynamic industries, the Company must ensure that it attracts and retains the leadership and managerial talent needed to sustain its position in this rapidly changing industry. To remain competitive in the Company’s financial, capital and business markets, growth in earnings and profitability are paramount objectives of the Company’s strategy. We believe these strategic imperatives are fundamental points of alignment between stockholder value and the compensation of executive management. In recent years, stockholders have focused on year-over-year stock price performance as a key measure of stockholder-executive compensation alignment. Accordingly, we include total stockholder return as a component in the annual incentive compensation plans for the Company’s Chief Executive Officer and Chief Financial Officer.

In 2016, the Company was focused on its previously disclosed portfolio rationalization and deleveraging plan as well as expense reduction efforts. Further, the Company was focused on the expansion of service lines that the Company believes have the greatest growth potential, including orthopedics, neuroscience, cardiovascular care, women’s health and cancer care. The Company believes that these efforts will ultimately result in a stronger Company. Despite the progress made in these areas, the Company did not meet several of its financial expectations in 2016, as initially set forth in the Company’s earnings release issued in February 2016 and as subsequently adjusted to reflect the removal from the 2016 operating results of 38 hospitals and Quorum Health Resources as a result of the spin-off of Quorum Health Corporation as well as the sale of the Company’s minority equity interests in five hospitals located in Las Vegas, Nevada, all of which occurred during the second quarter of 2016 (the “Adjusted 2016 Performance Objectives”). Consistent with the Company’s pay-for-performance philosophy, this resulted in the annual cash incentive compensation and total compensation paid to our named executive officers for 2016 being significantly less than the target cash incentive award that could have been earned if the Company had achieved all of its financial goals. In addition, as a result of the Company’s practice of granting executives approximately the same number of restricted shares each year (absent any change in responsibility, competitive positioning as compared to the peers, etc.), the value of these awards has been greatly reduced due to our stock price declines in 2015 and 2016, as compared to the value of the awards made in prior years.

Executive Summary

Compensation Program Objectives and Best Practices

The primary objectives of the Company’s executive compensation program are to:

Provide market competitive pay levels, compensation programs and incentive plan designs, all of which are underpinned by our strong pay for performance philosophy;

Attract and retain seasoned professionals with demonstrated abilities to capitalize on growth opportunities in both same-store and new markets (both geographic and business line);

Incorporate short-term and long-term components that align the interests of executive management with stockholders while also appropriately incentivizing our executives to drive Company performance and maximize value; and

Adhering to rigorous expense management in an environment of ethical and compliant behavior.

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Our executive compensation program has been designed, reviewed and modified over time to conform to governance best practices and to respond to investor concerns regarding pay practices. For example, the Company, over the years, has implemented the following policies:

A more detailed discussion of these policies and actions can be found on the following pages.

Over the years, we have continued to adapt elements of the program, as appropriate, taking into account stockholder expectations and feedback in order to ensure that our executive compensation program continues to be structured in an optimal manner.

Key 2016 Compensation Decisions

In 2016, our performance fell below our financial targets, which significantly impacted the compensation paid to our named executive officers. As a result, the following compensation-related decisions were made for 2016:

Annual cash incentive compensation achieved for 2016 was significantly below target : Annual cash incentive compensation paid to our named executive officers for 2016 was significantly less than the cash incentive award that could have been earned if the Company had achieved all of its financial goals. For example, our Chief Executive Officer received only 13% of his maximum cash incentive award attainable for 2016.

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Revised performance criteria for 2016 performance-based restricted stock awards : In response to feedback received from our stockholders, we increased the level of achievement required to earn the 2016 performance-based restricted stock awards. For 2016, we replaced the attainment of 75% of the low-end target range of projected earnings per share (as had been used in prior years) with the attainment of 90% of the low-end target range of Adjusted EBITDA. As a result, the performance criteria for 2016 performance-based restricted stock awards required the satisfaction of one of two performance measures: (i) the attainment of 90% of the low-end target range of 2016 Adjusted EBITDA; or (ii) the attainment of 90% of the low-end target range of 2016 net operating revenue (the net operating revenue performance measure was unchanged from prior years), both as based on the Adjusted 2016 Performance Objectives.

Significant decline in grant value of 2016 performance-based restricted stock awards : From 2014 through 2016, we granted our named executive officers the same number of shares of performance-based restricted stock each year (absent any change in responsibility, competitive positioning as compared to the peers, etc.). As an example, our Chief Executive Officer received 150,000 performance-based restricted shares in each of 2014, 2015 and 2016 — thus, the value of performance-based restricted stock awarded to the Chief Executive Officer and other executives is aligned with that of the gains or losses experienced by stockholders. As such, the value of the Chief Executive Officer’s 2016 performance-based restricted stock award as of the date it was granted was 68% less than the value of his 2015 performance-based restricted stock grant as of the date it was granted.

No salary increases : Our Chief Executive Officer and Chief Financial Officer and our then-serving Chief Operating Officer did not receive any increases in their respective base salaries for 2016 compared to 2015.

The chart below reflects the alignment of our Chief Executive Officer’s annual compensation to the Company’s failure to achieve its financial goals and the decline in the price of the Company’s stock. It demonstrates our belief that the compensation of our executives is aligned with our stockholders’ interests.

Please see, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in the Company’s 2016 Annual Report on Form 10-K filed on February 21, 2017, for more details about the Company’s recent performance.

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Stockholder Outreach and Responsiveness to Feedback

2015 Stockholder Outreach Efforts and 2016 Program Changes

During 2015, we spoke with and received feedback regarding executive compensation and/or other matters from stockholders that held approximately 78% of our shares outstanding at that time. In response to this feedback, we revised the performance criteria used for 2016 performance-based restricted stock awards, as discussed above, to increase the level of achievement required to earn the performance-based restricted stock awards – replacing 75% of the low-end target range of projected earnings per share (as had been used in prior years) with the attainment of 90% of the low-end target range of Adjusted EBITDA. As a result, the performance criteria for 2016 performance-based restricted stock awards required the satisfaction of one of two performance measures, (i) the attainment of 90% of the low-end target range of 2016 Adjusted EBITDA; or (ii) the attainment of 90% of the low-end target range of 2016 net operating revenue, both as based on the Adjusted 2016 Performance Objectives.

2016 Stockholder Outreach Efforts and 2017 Program Changes

We remain committed to a continuing dialogue between stockholders and the Company to fully understand and consider stockholder concerns on executive compensation and other topics that are important to our stockholders. We evaluated and responded to the results of the advisory vote on our executive compensation at our 2016 Annual Meeting of Stockholders, which took place in May 2016, after incentive compensation targets were set and annual restricted stock grants were awarded for 2016. Following our 2016 Annual Meeting, we undertook a thorough re-evaluation of our executive compensation program going forward in light of this vote and current trends in public company pay practices. As a result of that evaluation, our Compensation Committee and management, in consultation with Mercer, proposed several changes to our executive compensation program for 2017. We consulted with stockholders that held a majority of our shares outstanding at that time and solicited their feedback on our existing executive compensation program as well as the proposed changes. Moreover, the members of our independent Compensation Committee and our other outside directors were available to speak directly with these stockholders if desired. Our Compensation Committee considered the feedback and suggestions we received in light of both market best practices and what we believe to be necessary to execute a best-in-class compensation program that successfully addresses our senior executive talent attraction and retention needs.

After considering all of the feedback and market perspectives, our Compensation Committee made the following changes to our executive compensation program for 2017:

Revised annual cash incentive compensation methodology : For 2017, the total cash incentive compensation bonus opportunity for each of our named executive officers has been revised to provide for a lower incentive compensation bonus target opportunity for fully achieving the Company’s targeted financial goals. The target cash incentive bonus opportunity, absent specified performance improvements or overachievement, has been reduced by 30 percentage points for our Chief Executive Officer (from 265% to 235%) and Chief Financial Officer (from 165% to 135%), 25 percentage points for our Chief Operating Officer (from 165% to 140%), and 15 percentage points for our Division Presidents (from 130% to 115%). In response to feedback received in our engagement with our stockholders, we have also incorporated substantial progress toward the Company’s previously disclosed portfolio rationalization and deleveraging plan as a component of the non-financial performance strategic and operational improvement goals under our annual cash incentive program. The 2017 cash incentive bonus opportunities for our Chief Executive Officer and our Chief Financial Officer continue to include a component for relative Total Shareholder Return Percentile Rank.

Revised long-term incentive methodology : Our named executive officers were granted one-half of their 2017 long-term incentive awards in the form of performance-based restricted stock with three-year (rather than one-year) performance targets. The attainment of a pre-determined level of Cumulative Same-Store Adjusted EBITDA Growth during the three-year period beginning January 1, 2017 and ending December 31, 2019 (the “Performance Period”) is weighted 80%, and the attainment of a pre-determined level of Cumulative Adjusted EPS during the Performance Period is weighted 20%. The other half of the long-term incentive awards granted to each named executive officer was in the form of time-based restricted stock that will vest in one-third increments on each of the first three anniversaries of the grant date.

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No salary increases : Our Chief Executive Officer and Chief Financial Officer did not receive any increase in their base salary for 2017.

Overall, these proposed changes to our executive compensation plan were generally supported by the stockholders with whom we spoke.

Going forward, we will continue to evaluate our executive compensation program in light of stockholder feedback, governance best practices, regulatory requirements, economic and industry factors, and competitive considerations. We will make changes, as applicable, that both ensure the alignment between the interests of our stockholders and our executives and reflect industry-leading executive compensation programs.

2016 Guiding Principles and Compensation Framework

The core goals applied by the Company in implementing its executive compensation program for 2016 were to provide a mix of compensation vehicles that generated a compensation package that is competitive with an appropriate peer group, provides for the attainment of performance and growth objectives from both a short-term and long-term perspective, aligns the interests of executive management with stockholders, and retains and attracts valuable executive talent.

The guiding principles used by the Company during 2016 included:

An overall targeted mix of compensation elements that is competitive with our selected peer group companies (see below for a discussion of our peer group);

Annual target incentive cash compensation that is at risk, performance-based, and tied to the attainment of the Company’s growth objectives;

Long-term incentive awards of stock-based compensation that are predominately performance-based and, accordingly, are at risk and further align the interests of executive management with our stockholders; and

Provision of longer range savings, retirement, and other benefits, including appropriate perquisites, to encourage the retention of the most experienced and talented executives through their most productive and valuable years of employment service.

The Company believes that the flexibility to make upward or downward adjustments as needed for individual performance, unusual market fluctuations, or extraordinary performance considerations, provides consistency and predictability to the Company’s executives and alignment of interests and transparency to the Company’s investors. Variations in pay levels for executives are based on factors such as internal equity, level of responsibility, individual performance, and Company performance.

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Components of our 2016 Executive Compensation Program

Peer Group

In accordance with the process described above, the Company utilized a benchmark peer group in connection with determining the executive compensation for the named executive officers.

The Company regularly reviews the composition of its peer group to ensure comparability between the Company and its peer group. The 2016 peer group included the other four major hospital management companies. In addition, given the limited number of large, publicly-traded hospital management companies, the peer group also included 16 other companies in the healthcare facilities, healthcare services, healthcare distribution, insurance or managed care areas. Molina Healthcare, Inc. replaced Catamaran Corporation in the Company’s 2016 peer group following the latter company’s acquisition during 2015. There were no other changes to the Company’s peer group for 2016. The 20 companies included in the 2016 peer group analysis are:

In selecting the peer group companies, consideration was given to revenue, market capitalization, enterprise value and number of employees of each company, while being sensitive to the positioning of the Company in relation to the peer group medians. The goal was to have the Company fit within the middle of the peer group (i.e., between the 25 ^th and the 75 ^th percentile) with respect to these metrics if possible. Based on 2015 data, the Company was near the 50th percentile of this peer group in terms of revenue, near the 55 ^th percentile in terms of enterprise value, and, as the result of the decline in the Company’s stock price in the fourth quarter of 2015, near the 20 ^th percentile in terms of market capitalization. Our Compensation Committee believes that the Company’s peer group continues to align the Company with the competitive market for talent for our key executives.

Base Salary

Base salary, as its name implies, is the basic element of the employment relationship, designed to compensate the executive for his or her day-to-day performance of duties. The amount of base salary distinguishes individuals’ level and responsibility within the organization. Exceptional performance and contribution to the growth and greater success of the organization are rewarded through other compensation elements, and for this reason, the benchmark target for base salary for each of our executive officers is set at a market-competitive level relative to our peer group as identified above when considering each executive’s role and responsibilities, as well as individual performance.

The base salaries of the Chief Executive Officer and the other named executive officers were reviewed by the Compensation Committee in early 2016 as part of its annual review. The Compensation Committee determined that there would be no change to the base salaries of the Chief Executive Officer, the Chief Financial Officer and the then-serving Chief Operating Officer for 2016. The base salary for each of the named executive officers for 2015 and 2016 is set forth in the table below. In May 2016, the Compensation Committee approved an additional increase to the base salary of Mr. Hingtgen as a result of his promotion to Executive Vice President of Operations and the

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corresponding changes to his role and responsibilities. At that time, the Compensation Committee also approved an additional increase to the base salary of Mr. Portacci as a result of his additional job responsibilities due to the realignment of the Company’s operating divisions following the spin-off of Quorum Health Corporation.

In September 2016, the Compensation Committee approved an additional increase to Mr. Hingtgen’s base salary as a result of his promotion to Chief Operating Officer, effective September 1, 2016, and the additional changes to his role and responsibilities.

Annual Cash Incentive Compensation

Annual cash incentive compensation awards to the named executive officers are made pursuant to the Company’s 2004 Employee Performance Incentive Plan (“EPIP”), as most recently amended and restated in February 2014 and approved by our stockholders in May 2014. Annual cash incentive compensation awards are intended to align employees’ interests with the goals and strategic initiatives established by the Company and to reward employees for their contributions during the period to which the incentive award relates. Annual cash incentive compensation awards’ targets are typically expressed as a percentage of the individual’s base salary.

Annual cash incentive compensation awards are “at risk” as they are subject to the attainment of specific goals. For each named executive officer, the individual’s target plan includes two or more budgeted goals, and for each goal, different award amounts may be earned depending on the level at which that goal is attained, (i.e., an underachievement and overachievement opportunity). The Company’s goals based on budgeted operating performance as noted below were each within the range of the Company’s Adjusted 2016 Performance Objectives. The Company did not undertake a statistical analysis to quantify how difficult it would be to achieve the relevant targets used to determine cash incentive compensation awards. However, at the time the target levels were set, the Compensation Committee believed that achieving such target levels, although challenging, was possible with significant effort from the named executive officers. Accordingly, the likelihood of the named executive officers achieving their respective target levels was not known and historically, in any given year, not all of the target levels have been fully achieved. The Compensation Committee determined that it was appropriate to set rigorous financial targets used to determine the cash incentive

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compensation awards in order to motivate the named executive officers to meet the Company’s business goals and to align named executive officers’ interests with the goals and strategic initiatives established by the Company.

For 2016, the Company’s Adjusted 2016 Performance Objectives were as follows:

The Adjusted EBITDA target was $2.735 billion (with a minimum of $2.461 billion, which would have yielded 50% of bonus amount linked to this objective),

The Continuing Operations EPS target was $2.95 per share (with a minimum of $2.65, which would have yielded 50% of bonus amount linked to this objective), and

The Net Revenues target was $18.300 billion (with a minimum of $16.470 billion, which would have yielded 50% of the bonus amount linked to this objective).

Additional division-specific goals were based upon certain financial and operational results of the hospitals within each respective division.

For 2016, the Company’s financial performance in relation to its Adjusted 2016 Performance Objectives was achieved as follows: Company Adjusted EBITDA — 81%; Continuing Operations EPS — 16%; and Net Revenue — 100%. Individual Division Presidents’ goal attainment varied depending upon the operations within the applicable division as set forth in the table on page 39 of this Proxy Statement.

Each goal target was scaled to achieve a partial award for less than targeted performance or above target award for exceptional performance. For example, for each 1% decrease in the Company’s achievement of a particular objective, the award percentage linked to that objective would be reduced by 5%, so that at 90% of target attainment, 50% of the bonus amount linked to this objective would have been paid. Where the Company’s achievement was below 90% of target attainment, none of the bonus amount linked to that objective would have been paid. This is further illustrated below:

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On the other hand, if the target for an objective had been exceeded, each named executive officer would have received an additional 1% of their base salary for each 1% over the target, limited to a maximum amount of overachievement for each objective and subject to the plan maximum for the individual officer.

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The 2016 cash incentive opportunities for our Chief Executive Officer and our Chief Financial Officer included a component for Total Shareholder Return Percentile Rank in accordance with the following table:

“Total Shareholder Return Percentile Rank” means the relative growth of the Company’s price per share of Common Stock compared to the “TSR comparison group.” The “TSR comparison group” consists of the following companies (which includes the following four major hospital management companies: HCA Holdings, Inc., Tenet Healthcare Corporation, Universal Health Services, Inc., Kindred Healthcare, Inc., LifePoint Health, Inc., and HealthSouth Corporation.

For 2016, the Company’s Total Shareholder Return was below the 30 ^th percentile for Total Shareholder Return among the TSR comparison group, and accordingly neither our Chief Executive Officer nor our Chief Financial Officer received any portion of their target cash incentive compensation allocated to this component.

The Company’s failure to achieve many of its targeted goals in 2016 resulted in below target cash incentive compensation paid to our named executive officers for 2016. The Chief Executive Officer and Chief Financial Officer earned 13% and 15%, respectively, of their maximum cash incentive award attainable for 2016. For each component of the non-equity incentive plan compensation, the targeted award and attained award, expressed as a percentage of base salary, for each named executive officer along with the maximum incentive award attainable are set forth in the table below:

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As shown above, effective September 1, 2016, in conjunction with Mr. Hingtgen’s promotion to President and Chief Operating Officer and the corresponding changes to his role and responsibilities, the Compensation Committee established revised performance goals and a corresponding incentive compensation plan for Mr. Hingtgen for the period from September 1, 2016 through December 31, 2016, which was tied to achieving the then most recent 2016 fiscal year guidance for volume, revenue, and earnings growth as set forth in the Company’s earnings release issued on August 2, 2016, and expressed as a percentage of Mr. Hingtgen’s base salary for that period. The targeted award and attained award expressed as a percentage of Mr. Hingtgen’s base salary from September 1, 2016 through December 31, 2016, along with the maximum incentive award attainable for that period, are set forth in the table above.

In addition to bonus compensation earned under the EPIP, (i) both Mr. Hingtgen and Mr. Portacci received $15,000 in bonus compensation in 2016 for their leadership in the completion of certain transactions at hospitals within their respective division at the time, and (ii) Mr. Hingtgen also received a $75,000 one-time bonus in 2016 for the effective execution of an operational improvement plan during the fourth quarter of 2015 for the hospitals for which he previously served as Division President.

Long-term Incentives

Long-term incentives comprise a very important part of the Company’s executive compensation program. Equity awards are designed to reward the executives for their longer-term contributions to the success and growth of the Company and are directly linked to maximizing stockholder value. They also serve as a key retention tool.

Equity-based incentive awards are made pursuant to the Company’s 2009 Stock Option and Award Plan, as most recently amended and restated in March 2016 and approved by our stockholders in May 2016 (the “2009 Plan”). This plan provides for a wide variety of stock-based compensation awards, including incentive stock options, non-qualified stock options, stock appreciation rights, restricted stock, performance awards and other share-based awards. The Company has historically only made awards in the form of non-qualified stock options and restricted stock, as these types of awards are most consistently used by the Company’s peer group and are thus deemed to provide the most competitive compensation element for long-term incentive compensation.

The Company believes annual grants that create an appropriate (i.e., market competitive) mix of compensation elements more directly and effectively align the interests of management with those of stockholders. The named executive officers’ restricted stock awards are subject to performance-based restrictions; these awards would be forfeited in their entirety if the performance measures for the relevant calendar year are not attained. To the extent that performance measures for the grants in a given year are attained, such grants would then be subject to time-based restrictions, which lapse in one-third increments on each of the first three anniversaries of the grant date.

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Prior to 2016, performance-based restricted stock awards to the named executive officers required the satisfaction of one of two performance measures, either 75% of the low-end target range of earnings per share from continuing operations for the year in which the award was made, or the attainment of 90% of the low-end target range of net operating revenue for the year in which the award was made, both as projected in our earnings release in February of that year. Taking into account feedback from stockholders, the Company revised the performance criteria used for 2016 performance-based restricted stock awards, intending to increase the level of achievement required to earn such awards by replacing the attainment of 75% of the low-end target range of projected earnings per share with the attainment of 90% of the low-end target range of Adjusted EBITDA. As a result, the performance criteria for 2016 performance-based restricted stock awards required the satisfaction of one of two performance measures, either the attainment of 90% of the low-end target range of 2016 Adjusted EBITDA, or the attainment of 90% of the low-end target range of 2016 net operating revenue, both as based on the Adjusted 2016 Performance Objectives. In March 2016, we made an annual grant of performance-based restricted stock to each of our named executive officers, which had performance criteria consistent with this revised framework as noted above. These awards would have been forfeited in their entirety if neither target was attained, but, since the net operating revenue target was attained, the performance-based criteria were met and the awards’ time-based restrictions lapse in one-third increments on each of the first three anniversaries of the grant date.

In recent years, we have granted executives the same number of performance-based restricted shares each year (absent any change in responsibility, competitive positioning as compared to the peers, etc.). As an example, our Chief Executive Officer received 150,000 performance-based restricted shares in each of 2014, 2015 and 2016 – thus, the value of performance-based restricted stock awarded to the Chief Executive Officer and other executives has been aligned with that of the gains/losses experienced by our stockholders. On their respective dates of grant, the value of our Chief Executive Officer’s 2016 performance-based restricted stock award was 68% less than the value of the grant awarded in 2015.

In addition to an annual grant of performance-based restricted stock in March 2016, Mr. Hingtgen received an additional grant of 50,000 shares of non-performance-based restricted stock on October 1, 2016 in conjunction with his promotion to Chief Operating Officer in recognition of his increased job scope and responsibilities. This grant will vest in one-third increments on each of the first three anniversaries of the grant date. The Compensation Committee believes that this award will also serve as a long-term retention device as Mr. Hingtgen must remain employed with the Company through each of the vesting dates in order to receive the shares vesting on each of those dates.

Changes to Executive Compensation Program for 2017

Following the advisory vote on our executive compensation at our 2016 Annual Meeting of Stockholders, our Compensation Committee and management, in consultation with Mercer, responded by undertaking a thorough re-evaluation of our executive compensation program in light of current trends in public company pay practices, including seeking additional feedback from our stockholders. As a result, our Compensation Committee has made several important changes to the executive compensation program for 2017 intended to further emphasize the Company’s pay for performance philosophy and to ensure that our executive compensation program continues to conform to governance best practices and to investor concerns regarding pay practices:

These baseline target reductions do not include potential amounts that could be earned for overachievement on financial goals or with respect to non-financial strategic and operational improvement goals. Also, in response to feedback received in our engagement with our

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stockholders, substantial progress toward the Company’s previously disclosed portfolio rationalization and deleveraging plan is one component of the non-financial strategic and operational improvement goals; other components of these goals include various metrics related to the successful achievement of our business plan for 2017.

We will continue to monitor market best practices and thoughtfully consider stockholder feedback in future years with respect to potential changes to our executive compensation programs.

Benefits

The Company’s named executive officers are each eligible to participate in the Company’s customary qualified benefit plans for health, dental, vision, life insurance, long-term disability and retirement savings (401(k)). The named executive officers are eligible to participate in these plans on the same basis (i.e., benefits, premium amounts and co-payment deductibles) as all other full-time employees of the Company. The Company’s named executive officers also participate in or receive additional benefits described below, which are competitive with the benefits provided to executives of other companies.

Retirement and Deferred Compensation Benefits

The Company’s named executive officers also participate in executive compensation arrangements available only to specified officers of the Company and certain key employees of its subsidiaries. These plans include the Supplemental Executive Retirement Plan (the “SERP”), the Supplemental 401(k) Plan and the Deferred Compensation Plan, each of which is a non-qualified plan under the IRC. The benefits under these plans are made available to the named executive officers to encourage and reward their continued service through their most productive years.

We believe that the provision of a retirement benefit is necessary to remain competitive with the Company’s peer group, and is thus an important element for the recruitment and retention of executives. Effective January 1, 2003, while the Company’s stock ownership and the Board of Directors were controlled by affiliates of Forstmann Little & Co., the Company adopted the SERP for the benefit of our officers and key employees of our subsidiaries. This plan is a non-contributory non-qualified defined benefit plan that provides for the payment of benefits from the general funds of the Company. The Compensation Committee of our Board of Directors administers this plan and all determinations and decisions made by the Compensation Committee are final, conclusive and binding upon all participants. In particular, the defined benefit provided under the SERP is intended to supplement the incentives provided by the other elements of the executive compensation program, for which the maximum provision of benefits is limited to three years.

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The SERP generally provides that, when a participant retires after his or her normal retirement date (age 65), he or she will be entitled to receive a single lump-sum payment based on the actuarially-determined monthly income payment based on a monthly calculation of (i) the participant’s Annual Retirement Benefit, reduced by (ii) the participant’s monthly amount of Social Security old age and survivor disability insurance benefits payable to the participant commencing at his or her unreduced Social Security retirement age (the “Social Security Benefit”).

For this purpose, the “Annual Retirement Benefit” means an amount equal to the sum of the participant’s compensation for the highest three years out of the last five full years of service preceding the participant’s termination of employment, divided by three, then multiplied by the lesser of (i) 60% or (ii) a percentage equal to 2% multiplied by the participant’s years of service. Employees who retire prior to the normal retirement date or with fewer than 30 years of service receive a reduced benefit. Generally, named executive officers receive one year of credited service for each year of actual service. In March 2004, the then Compensation Committee of the Board of Directors, in an effort to achieve peer pay equality using a mechanism that would also maximize retention, caused the SERP to be amended to credit both Mr. Smith and Mr. Cash with two years of service for each year of actual service. This change occurred at a time when the Company was controlled by affiliates of Forstmann Little & Co. (through the ownership of greater than 46,000,000 shares of the Company’s Common Stock) and all members of the Board of Directors and the Compensation Committee were nominated by Forstmann Little & Co. None of the Forstmann Little & Co. affiliates continued to serve on the Board of Directors or its committees following the sale of their position in the Company during 2004. In 2008, the Compensation Committee and the Board voted to amend the SERP to terminate this practice after 25 years of service had been credited. Since reaching 25 years of credited service, Mr. Smith and Mr. Cash have each received one year of credited service for each year of actual service. Mr. Smith, having reached his maximum number of 30 years of credited service and Mr. Cash, having reached his approximate maximum number of years of credited service, have elected in accordance with the plan provisions to have their benefit frozen, effective in July 2014, with future increases for interest earned based on the 24-month average yield on 10-Year Treasury Bonds. Messrs. Smith and Cash will earn no additional service credit.

In the event of a change in control of the Company, all participants who have been credited with five or more years of service will be credited with an additional three years of service (not to exceed the maximum of 30 years of service) for purposes of determining the benefit. In addition, the benefit accrued by any such participant will become fully vested and be paid out as soon as administratively feasible in a single lump sum payment following such change in control. Upon such payment to all participants, the SERP will terminate.

The Company’s named executive officers are also eligible to participate in and contribute to the Company’s non-qualified Deferred Compensation Plan. Employees’ voluntary contributions to this plan are tax deferred, but are subject to the claims of the general creditors of the Company. A separate supplemental 401(k) plan also exists, but employees are no longer eligible to contribute additional amounts to the non-qualified Supplemental 401(k) Plan. The individual asset balances remaining in this plan are eligible for investment earnings to the named executive officers and employees. These plans do not play a significant role in the Company’s executive compensation program. Effective since 2009, no Company contributions are made to the Deferred Compensation Plan and the named executive officers are limited to the matching provisions of the tax-qualified 401(k) plan.

Perquisites

The Company provides limited perquisites to its named executive officers and operates under the belief that benefits of a personal nature or those which are not available to the other employees of the Company should be funded from the executives’ personal funds. The Company believes that the supplemental benefits that it does provide to the named executive officers are reasonable when compared to the peer group and other similarly-sized companies and are appropriate additional items of compensation for these individuals.

Group-term life insurance (or a combination of group-term life insurance and individually-owned policies) is provided for each of the named executive officers in an amount equal to four times the individual’s base salary.

The Company operates aircraft to facilitate the operation and management of its business. The Board of Directors has adopted a policy that requires the Chief Executive Officer to use the Company’s aircraft for both his business and personal travel. From time to time, the other named executive officers are also permitted to use the Company’s aircraft for their personal use. The incremental cost of

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personal air travel attributable to each named executive officer’s personal aircraft usage has been included in the Summary Compensation table below. In addition, named executive officers are taxed on the income attributable to their personal use of company aircraft based on Internal Revenue Service guidelines and are not grossed up by the company.

Employment Contracts; Change in Control Severance Agreements

None of the Company’s executive officers have a written employment agreement with the Company or any of its subsidiaries. Since 2007, each officer of the Company, including each of the named executive officers (collectively, the “Covered Executives”), has been a party to a change in control severance agreement (a “CIC Agreement”) with the Company. The CIC Agreements are considered “double trigger” agreements and require both the occurrence of a change in control of the Company and a termination of employment for any cash severance benefits to become payable. The CIC Agreements provide for certain compensation and benefits in the event of termination of a Covered Executive’s employment during the period following a change in control of the Company (as defined in the CIC Agreements), (A) by the Company, other than as a result of the Covered Executive’s death or disability within thirty-six (36) months of the change in control or (B) by the Covered Executive, upon the happening of certain “good reason” events within twenty-four (24) months of the change in control, including (i) certain changes in the Covered Executive’s title, position, responsibilities or duties, (ii) a reduction in the Covered Executive’s base salary, (iii) certain changes in the Covered Executive’s principal location of work, (iv) the failure of the Company to perform its obligations under or to continue in effect any material compensation or benefit plan, or (v) certain other employer actions that would cause the Covered Executive to lose the benefits of the CIC Agreement. The thirty-six (36) and twenty-four (24) month time periods described in the preceding sentence apply to the CIC Agreements for the Company’s Chief Executive Officer, Chief Financial Officer, Chief Operating Officer, the Presidents, the Executive Vice Presidents, Division Presidents and each Senior Vice President. For the CIC Agreements with each Vice President of the Company, the applicable time periods are twenty-four (24) and twelve (12) months, respectively. CIC Agreements entered into since 2009 do not contain any tax “gross-up” provisions.

Compensation and benefits payable under the CIC Agreements include, in the event of a qualifying termination of employment, a lump sum payment equal to the sum of (a) unpaid base pay, (b) accrued but unused paid vacation or sick pay and unreimbursed business expenses, (c) any other compensation or benefits in accordance with the terms of the Company’s existing plans and programs, (d) a pro rata portion of the incentive bonus that would have been earned by the Covered Executive for the year of termination based on actual performance, and (e) a lump sum equal to the sum of three (3) times (two (2) times, in the case of each Vice President of the Company) the sum of base salary and the greater of (A) the highest incentive bonus earned during any of the three (3) fiscal years prior to the fiscal year in which the Covered Executive’s termination of employment occurs or, if greater, the three fiscal years prior to the fiscal year in which a change in control occurs and (B) the target incentive bonus for the fiscal year in which the Covered Executive’s termination of employment occurs assuming the performance objectives were met in full. The Covered Executives will also be entitled to continuation of certain health and welfare benefits for thirty-six (36) months following termination (twenty-four (24) months in the case of each Vice President) and reimbursement of up to $25,000 for outplacement counseling and related benefits.

In addition, the Covered Executives with agreements entered into before 2009 will be entitled to receive certain “gross up” payments to offset any excise tax imposed by Section 4999 of the IRC on any payment or distribution by the Company to or for their benefit, including under any stock option, restricted stock or other agreement, plan or program; provided, however, that if a reduction in such payments or distributions by 10% or less would cause no excise tax to be payable, then the payments and distributions to the Covered Executive will be reduced by that amount and no excise tax gross up payment will be paid. As noted above, CIC Agreements entered into since 2009 do not contain any tax “gross-up” provisions.

The Company’s executive officers are employees of the Company’s indirect, wholly-owned subsidiary, CHSPSC, LLC, and hold the same elected officer titles with this entity as they do with the Company.

Termination of Service and Severance Arrangements

The Company’s severance policy provides that the named executive officers are entitled to receive twenty-four (24) months of their base salary upon a qualifying termination under the severance policy. In addition, upon a termination without cause, each of the named executive officers would be entitled to receive a pro-rated portion of their cash incentive compensation for the year of termination (based on

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actual results, when determined) and under their restricted stock award agreements, the lapse schedule is fully accelerated. Upon termination, the named executive officers are entitled to continuation health insurance coverage under the Consolidated Omnibus Budget Reconciliation Act by so electing and paying the then active employee premium amount. The period of this benefit is equal to the number of months of severance payment, i.e., twenty-four (24) months for the named executive officers.

As described on page 44 of this Proxy Statement, each of the named executive officers is party to a CIC Agreement, which provides severance benefits only upon both a change in control of the Company and qualifying termination of employment. In the event that a named executive officer is entitled to receive payment pursuant to his or her CIC Agreement, that executive officer will not be eligible to participate in the Company’s severance policy.

In addition to the benefits payable under the life insurance policy or the long-term disability policy described above, in the event a named executive officer dies or is permanently disabled while in the employ of the Company, vesting is fully accelerated for all grants under the Company’s 2009 Plan.

Executive Compensation Policies

Stock Ownership Policies

The Community Health Systems Stock Ownership Guidelines align the interests of its directors and executive officers with the interests of stockholders and promote the Company’s commitment to sound corporate governance. The guidelines apply to the Company’s non-management directors and the following officers, in the indicated multiples of either an officer’s base salary or a non-management director’s annual cash stipends, as applicable, at the time the participant becomes subject to the guidelines:

Company officers and directors subject to these guidelines are expected to achieve their respective ownership levels within five (5) years of becoming subject to the guidelines (and an additional five (5) years in the event of a promotion to a higher guideline). Once achieved, ownership of the guideline amount must be maintained for as long as the individual is subject to these Stock Ownership Guidelines. Until such time as a Company officer or director satisfies the Stock Ownership Guidelines, that individual will also be required to hold, for at least one year, 100% of the shares received upon the exercise of stock options and upon the vesting of full value stock awards, including but not limited to restricted stock awards and restricted stock units, in each case net of those shares required to pay the exercise price and any taxes due upon exercise or vesting.

Stock that counts towards satisfaction of the Company’s Stock Ownership Guidelines includes: (i) Common Stock held outright by the participant or his or her immediate family members living in the same household; (ii) restricted stock and restricted stock units issued and held as part of an executive officer’s or director’s long-term compensation, whether or not vested; (iii) Common Stock underlying vested Community Health Systems, Inc. stock options; and (iv) Common Stock acquired on stock option exercises that the participant continues to hold. The Governance and Nominating Committee of the Board of Directors reviews each participant’s progress and compliance with the applicable guidelines and may grant any hardship waivers or exceptions (e.g., in the event of a divorce) as it deems necessary and appropriate. Pursuant to the Company’s Stock Ownership Guidelines, until those individuals satisfy the Stock Ownership Guidelines, they will be required to hold, for at least one year, 100% of the shares received upon the exercise of stock options and upon the vesting of full value stock awards, including but not limited to restricted stock awards and restricted stock units, in each case net of those shares required to pay the exercise price and any taxes due upon exercise or vesting.

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Compensation “Clawback” Policy

In February 2009, the Board of Directors adopted a policy (the “Clawback Policy”) requiring that, in certain circumstances, the elected officers of the Company reimburse the Company for the amount and/or value of performance-based cash, stock or equity-based awards received by such elected officers, and/or gains realized by such elected officers in connection with these awards. The circumstances triggering this recoupment require a determination by the Board of Directors, or an appropriate committee of the Board of Directors, that fraud by an elected officer materially contributed to the Company having to restate all or a portion of its financial statements. The Board of Directors or the appropriate committee is granted the right to determine, in its discretion, the action necessary to remedy the misconduct. In determining what remedies to pursue, the Board or committee will take into account all relevant factors, including consideration of fairness and equity, and may require reimbursement to the extent the value transferred to the elected officer can be reasonably attributed to the reduction in the restated financial statements and the amount of the award would have been lower than the amount actually paid, granted or realized.

In February 2017, in accordance with the terms of the Settlement Agreement, the Board of Directors revised the Clawback Policy to require that, in the event of a restatement of the Company’s financial statements required under the applicable statutes, rules and regulations of the SEC, the Company will, to the extent permitted by applicable law, require the Company’s Chief Executive Officer and Chief Financial Officer to reimburse the Company for any performance-based cash, stock or equity-based award paid or granted to, or gains realized (such as through the exercise of stock options or sale of equity securities) by the Chief Executive Officer and Chief Financial Officer, to the extent that the amount of such cash, stock or equity-based award or realized gain during the two (2) year period preceding the date of the restatement exceeded the amounts that would have been paid, granted or realized under the Company’s financial statement(s), as restated. This requirement applies to all awards paid or granted to these individuals from the date of its adoption by the Board.

The Company intends to impose such additional recoupment obligations as are necessary to ensure continuing compliance with other applicable laws including compliance with final SEC clawback rules to be adopted under the Dodd-Frank Act once such final rules have been adopted.

Prohibition on Pledging and Speculative Stock Transactions

The Company considers it inappropriate for any director or executive officer to enter into speculative transactions involving the Company’s securities. Therefore, the Company’s insider trading policy prohibits directors and executive officers from trading in any put or engaging in any short sale or other hedging transaction (including a short sale “against the box”) or equity swap of Company securities, or trading in any call or other derivative on Company securities. The insider trading policy also prohibits any director or executive officer from pledging Company securities, including holding such securities in a margin account. On a case-by-case basis, the Trading Compliance Committee, consisting of the Chief Financial Officer and the General Counsel, may approve an exception to the prohibition on pledging Company securities as collateral for a loan (not including margin debt) where the director or executive officer clearly demonstrates the financial capacity to repay the loan without resorting to the pledged securities.

Oversight of the Executive Compensation Program

The Compensation Committee of the Board of Directors oversees the Company’s executive compensation program. Each of the Compensation Committee members is fully independent of management and has never served as an employee or officer of the Company or its subsidiaries. In addition to meeting the independence requirements of the NYSE and NASDAQ, each member of the Compensation Committee is an “outside director” for purposes of Section 162(m) of the Internal Revenue Code (“IRC”) and is a “non-employee director” for purposes of Section 16(b) of the Exchange Act.

Risk Assessment of Executive Compensation

The Compensation Committee, with management and the Compensation Committee’s independent executive compensation consultant, Mercer Human Resources Consulting, regularly assesses the risk levels of the Company’s executive compensation program. As part of this

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assessment, the Compensation Committee reviews the Company’s compensation programs for certain design features identified by the Compensation Committee and its advisors as having the potential to encourage excessive risk-taking, and considers the Company’s compensation programs in light of the Company’s key enterprise and business strategy risks. The Compensation Committee believes that the Company’s compensation programs are designed so that they do not include compensation mix overly weighted toward annual incentives, highly leveraged short-term incentives, uncapped or “all or nothing” bonus payouts or unreasonable performance goals. The Compensation Committee also noted several design features of the Company’s cash and equity incentive programs that the Compensation Committee believes reduce the likelihood of excessive risk-taking, including the use of multiple balanced performance metrics, maximum payouts at levels deemed appropriate, a carefully considered peer group to assure the Company’s compensation practices are measured and appropriately competitive, multi-year vesting schedules for equity awards, and significant long-term incentives that promote longer-term goals and reward sustainable stock, financial and operating performance, especially when combined with the Company’s executive stock ownership guidelines. Additionally, the Company’s executive compensation “clawback” policy allows the Company to recover bonus payments and certain equity awards under certain circumstances, and compliance and ethical behaviors of the Company’s executive officers are factors considered in all performance and bonus assessments. Based on its assessment, the Compensation Committee believes that the Company’s compensation programs do not motivate risk-taking that could reasonably be expected to have a materially adverse effect on the Company. These principles are reviewed annually as a part of the overall enterprise risk assessment.

Tax Considerations

Section 162(m) of the IRC limits the Company’s ability to deduct certain compensation in excess of $1 million paid to the Company’s Chief Executive Officer and to certain of the Company’s other named executive officers. This limitation does not apply to compensation that constitutes under applicable regulations “qualified performance-based compensation.” The Company aims to design the performance-based compensation paid to its named executive officers so that it will satisfy the requirements for deductibility under Section 162(m). The Compensation Committee considers Section 162(m) when making compensation decisions, but other considerations, such as providing the Company’s named executive officers with competitive and adequate incentives to remain with the Company and increase the Company’s business operations, financial performance and prospects, as well as rewarding extraordinary contributions, also significantly factor into the Compensation Committee’s decisions. In this regard, the Compensation Committee believes that stockholder interests are best served if it retains discretion and flexibility in awarding compensation to the Company’s named executive officers. The Compensation Committee has approved and may approve payment of compensation that is outside the deductibility limitation of Section 162(m).

Financial Accounting Standards Board Accounting Standards Codification Topic 718 (“ASC 718”)

ASC 718 requires a public company to measure the cost of employee services received in exchange for an award of equity instruments based on the grant date fair value of the award. The Company’s equity awards to the named executive officers are structured to comply with the requirements of ASC 718. To maintain the appropriate equity accounting treatment, the Company takes such accounting treatment into consideration when designing and implementing its compensation programs.

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Executive Compensation Tables

Summary Compensation Table

The following table includes information regarding our named executive officers’ total compensation earned during the years ended December 31, 2016, 2015 and 2014 (except to the extent that any of these individuals did not serve as an executive officer during any such year). This table is prepared in accordance with SEC rules which require that equity awards be valued based on the grant date fair value of such awards, and there can be no assurance regarding the extent to which the value of such stock-based compensation reflected in the table below (including performance-based restricted stock) will be realized by any executive.