Fair Value Measurements

3 Months Ended

Mar. 31, 2020

Our financial assets and liabilities that are measured at fair value on a recurring basis are as follows (in millions):



			Fair Value Measurements at Reporting Date Using
As of March 31, 2020	Fair Value		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Valuation Technique ⁽¹⁾
Other long-term assets:
Equity securities	$	61.8	$	—	$	61.8	$	—	M
Debt securities	9.4		9.4		—		—		M
Redeemable noncontrolling interests	34.0		—		—		34.0		I
As of December 31, 2019
Other long-term assets:
Equity securities	$	63.5	$	—	$	63.5	$	—	M
Debt securities	12.6		12.6		—		—		M
Redeemable noncontrolling interests	239.6		—		—		239.6		I

⁽¹⁾ The three valuation techniques are: market approach (M), cost approach (C), and income approach (I).

The decrease in Redeemable noncontrolling interests from December 31, 2019 to March, 31, 2020 primarily resulted from the final purchase of equity interests in Holdings from management investors discussed in Note 4, Redeemable Noncontrolling Interests.

The fair values of our financial assets and liabilities are determined as follows:


•	Equity and Debt securities - The fair values of our equity and debt securities are determined based on quoted market prices in active markets or quoted prices, dealer quotations, or alternative pricing sources supported by observable inputs in markets that are not considered to be active.

•

Redeemable noncontrolling interests - The fair value of the Redeemable noncontrolling interests related to our home health segment was determined using the product of a twelve-month adjusted EBITDA measure and a specified median market price multiple based on a basket of public home health companies and transactions, after adding cash and deducting indebtedness that included the outstanding principal balance under any intercompany notes. To determine the fair value of the Redeemable noncontrolling interests in our joint venture hospitals, we use the applicable hospitals’ projected operating results and cash flows discounted using a rate that reflects market participant assumptions for the applicable facilities. The projected operating results use management’s best estimates of economic and market conditions over the forecasted periods including assumptions for pricing and volume, operating expenses, and capital expenditures.

In addition, there are assets and liabilities that are not required to be measured at fair value on a recurring basis. However, these assets may be recorded at fair value as a result of impairment charges or other adjustments made to the carrying value of the applicable assets. During the three months ended March 31, 2020 and March 31, 2019, we did not record any material gains or losses related to these assets.

As discussed in Note 1, Summary of Significant Accounting Policies, “Fair Value Measurements,” to the consolidated financial statements accompanying the 2019 Form 10‑K, the carrying value equals fair value for our financial instruments that are not included in the table below and are classified as current in our condensed consolidated balance sheets. The carrying amounts and estimated fair values for all of our other financial instruments are presented in the following table (in millions):



	As of March 31, 2020				As of December 31, 2019
	Carrying Amount		Estimated Fair Value		Carrying Amount		Estimated Fair Value
Long-term debt:
Advances under revolving credit facility	$	350.0	$	350.0	$	45.0	$	45.0
Term loan facilities	261.9		263.3		265.2		266.6
5.125% Senior Notes due 2023	297.5		298.5		297.3		306.6
5.75% Senior Notes due 2024	697.5		703.5		697.3		708.8
5.75% Senior Notes due 2025	345.8		344.3		345.6		369.7
4.50% Senior Notes due 2028	491.9		491.3		491.7		519.4
4.75% Senior Notes due 2030	491.8		496.1		491.7		520.0
Other notes payable	44.5		44.5		44.7		44.7
Financial commitments:
Letters of credit	—		36.7		—		38.9

Fair values for our long-term debt and financial commitments are determined using inputs, including quoted prices in nonactive markets, that are observable either directly or indirectly, or Level 2 inputs within the fair value hierarchy. See Note 1, Summary of Significant Accounting Policies, “Fair Value Measurements,” to the consolidated financial statements accompanying the 2019 Form 10‑K.

- Definition

The entire disclosure for the fair value of financial instruments (as defined), including financial assets and financial liabilities (collectively, as defined), and the measurements of those instruments as well as disclosures related to the fair value of non-financial assets and liabilities. Such disclosures about the financial instruments, assets, and liabilities would include: (1) the fair value of the required items together with their carrying amounts (as appropriate); (2) for items for which it is not practicable to estimate fair value, disclosure would include: (a) information pertinent to estimating fair value (including, carrying amount, effective interest rate, and maturity, and (b) the reasons why it is not practicable to estimate fair value; (3) significant concentrations of credit risk including: (a) information about the activity, region, or economic characteristics identifying a concentration, (b) the maximum amount of loss the entity is exposed to based on the gross fair value of the related item, (c) policy for requiring collateral or other security and information as to accessing such collateral or security, and (d) the nature and brief description of such collateral or security; (4) quantitative information about market risks and how such risks are managed; (5) for items measured on both a recurring and nonrecurring basis information regarding the inputs used to develop the fair value measurement; and (6) for items presented in the financial statement for which fair value measurement is elected: (a) information necessary to understand the reasons for the election, (b) discussion of the effect of fair value changes on earnings, (c) a description of [similar groups] items for which the election is made and the relation thereof to the balance sheet, the aggregate carrying value of items included in the balance sheet that are not eligible for the election; (7) all other required (as defined) and desired information.

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