FAIR VALUE MEASUREMENTS

Assets and Liabilities Measured at Fair Value on a Recurring Basis

The following table provides a summary of the recognized assets and liabilities that are measured at fair value on a recurring basis:



			Basis of Fair Value Measurements
			Quoted Prices in Active Markets for Identical Assets / Liabilities		Significant Other Observable Inputs		Significant Unobservable Inputs
June 30, 2017	Total		Level 1		Level 2		Level 3
Assets:
Trading securities	$	54	$	54	$	—	$	—
Cash surrender value of life insurance policies	34		—		34		—
Available-for-sale equity securities	3		3		—		—
Total	$	91	$	57	$	34	$	—

Liabilities:
Deferred compensation liabilities	$	96	$	—	$	96	$	—
Interest rate swaps	77		—		77		—
Contingent consideration	1		—		—		1
Total	$	174	$	—	$	173	$	1



			Basis of Fair Value Measurements
December 31, 2016	Total		Level 1		Level 2		Level 3
Assets:
Trading securities	$	51	$	51	$	—	$	—
Cash surrender value of life insurance policies	32		—		32		—
Available-for-sale equity securities	3		3		—		—
Total	$	86	$	54	$	32	$	—

Liabilities:
Deferred compensation liabilities	$	91	$	—	$	91	$	—
Interest rate swaps	88		—		88		—
Contingent consideration	3		—		—		3
Total	$	182	$	—	$	179	$	3

A full description regarding the Company's fair value measurements is contained in Note 7 to the consolidated financial statements in the Company's 2016 Annual Report on Form 10-K.

The Company offers certain employees the opportunity to participate in non-qualified supplemental deferred compensation plans. A participant's deferrals, together with Company matching credits, are invested in a variety of participant-directed stock and bond mutual funds that are classified as trading securities. The trading securities are classified within Level 1 because the changes in the fair value of these securities are measured using quoted prices in active markets based on the market price per unit multiplied by the number of units held, exclusive of any transaction costs. A corresponding adjustment for changes in fair value of the trading securities is also reflected in the changes in fair value of the deferred compensation obligation. The deferred compensation liabilities are classified within Level 2 because their inputs are derived principally from observable market data by correlation to the trading securities.

The Company offers certain employees the opportunity to participate in a non-qualified deferred compensation program. A participant's deferrals, together with Company matching credits, are “invested” at the direction of the employee in a hypothetical portfolio of investments which are tracked by an administrator. The Company purchases life insurance policies, with the Company named as beneficiary of the policies, for the purpose of funding the program's liability. Changes in the cash surrender value of the life insurance policies are based upon earnings and changes in the value of the underlying investments. Changes in the fair value of the deferred compensation obligation are derived using quoted prices in active markets based on the market price per unit multiplied by the number of units. The cash surrender value and the deferred compensation obligations are classified within Level 2 because their inputs are derived principally from observable market data by correlation to the hypothetical investments.

The fair value measurements of the Company's interest rate swaps classified within Level 2 of the fair value hierarchy are model-derived valuations as of a given date in which all significant inputs are observable in active markets including certain financial information and certain assumptions regarding past, present and future market conditions.

Investment in available-for-sale equity securities represents an investment in registered shares of a publicly-held company. The Company's investment in available-for-sale equity securities is classified within Level 1 of the fair value hierarchy because the fair value is obtained from quoted prices in an active market.

In April 2014, and as further discussed in Note 5 to the consolidated financial statements in the Company's 2016 Annual Report on Form 10-K, the Company completed the acquisition of Steward Health Care Systems, LLC's laboratory outreach business. In connection with the acquisition, the Company initially recorded a contingent consideration liability of $4 million. The contingent consideration liability was classified within Level 3 measured at fair value using a probability weighted and discounted cash flow method. This measurement was based on externally obtained inputs and management's probability assessments of the occurrence of triggering events, appropriately discounted considering the uncertainties associated with the obligations, as well as the likelihood of the seller's compliance with a non-compete agreement. The initial probability estimate of the occurrence of such triggering events associated with the amounts the Company could be obligated to pay in future periods was between 5% and 95%. The probability-weighted cash flows were then discounted using a discount rate of 2.8%. The remaining $1 million of contingent consideration is expected to be paid in 2018.

The carrying amounts of cash and cash equivalents, accounts receivable and accounts payable and accrued expenses approximate fair value based on the short maturities of these instruments. As of June 30, 2017 and December 31, 2016, the fair value of the Company’s debt was estimated at $4.0 billion and $3.9 billion, respectively. Principally all of the Company's debt is classified within Level 1 of the fair value hierarchy because the fair value of the debt is estimated based on rates currently offered to the Company with identical terms and maturities, using quoted active market prices and yields, taking into account the underlying terms of the debt instruments.