Quorum closes investigation into spinoff from CHS: 6 things to know

Brentwood, Tenn.-based Quorum Health Corp.'s board has completed its independent investigation related to its spinoff from Franklin, Tenn.-based Community Health Systems last year.

 Here are six things to know about the investigation.

1. The probe comes after Q Investments, a Fort Worth, Texas-based hedge fund, sent a letter to Quorum's board last October, asking the board to conduct an independent investigation into potentially unlawful financial projections related to Quorum's spinoff from CHS.

2. Q Investments claimed CHS knew the initial guidance used to market Quorum to investors was wrong. According to the October letter, CHS provided inflated EBITDA guidance to potential Quorum investors in late March 2016 and used the guidance to attract equity investors and market Quorum's more than $1.2 billion of primary debt financings.

3. Earlier this year, Quorum's board hired outside counsel to conduct an independent investigation into whether the company gave adequate disclosures to its investors prior to its separation from CHS.

4. For the investigation, outside counsel interviewed 15 Quorum officers, directors and employees, as well as outside advisors who assisted the company with the asset impairment taken in the second quarter of 2016. The probe also involved analysis of Securities and Exchange Commission filings, financial models and budgets, investor conference transcripts, transitional service agreements and 12,000 emails and other documents.

5. After reviewing outside counsel's findings, Quorum decided not to assert legal claims against CHS or its officers. On Wednesday, Quorum said the investigation did not produce conclusive evidence of fraud or intentional misconduct by CHS. "Rather, the facts arising from the investigation suggest (at a minimum) several bases for questioning CHS' operational competence in connection with the planning and execution of the spin-off, and the formulation of financial projections," said Quorum.

6. The letter Q Investments sent to Quorum in October suggested members of Quorum's management team may have been complicit in improper conduct by CHS. Quorum said the investigation produced no evidence that would support bringing legal claims against its management team. 

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