13. LEASES

The Company utilizes operating and finance leases for the use of certain hospitals, medical office buildings, and medical equipment. All lease agreements generally require the Company to pay maintenance, repairs, property taxes and insurance costs, which are variable amounts based on actual costs incurred during each applicable period. Such costs are not included in the determination of the ROU asset or lease liability. Variable lease cost also includes escalating rent payments that are not fixed at commencement but are based on an index that is determined in future periods over the lease term based on changes in the Consumer Price Index or other measure of cost inflation. Most leases include one or more options to renew the lease at the end of the initial term, with renewal terms that generally extend the lease at the then market rate of rental payment. Certain leases also include an option to buy the underlying asset at or a short time prior to the termination of the lease. All such options are at the Company’s discretion and are evaluated at the commencement of the lease, with only those that are reasonably certain of exercise included in determining the appropriate lease term. The components of lease cost and rent expense for the three months ended March 31, 2019 are as follows (in millions):


	Three Months Ended
Lease Cost	March 31, 2019
Operating lease cost:
Operating lease cost	$	48
Short-term rent expense		30
Variable lease cost		3
Sublease income		(1)
Total operating lease cost	$	80

Finance lease cost:
Amortization of right-of-use assets	$	3
Interest on finance lease liabilities		2
Total finance lease cost	$	5

Supplemental balance sheet information related to leases was as follows (in millions):


	Balance Sheet Classification	March 31, 2019
Operating Leases:
Operating Lease ROU Assets	Other assets, net	$	623

Finance Leases:
Finance Lease ROU Assets	Property and equipment		187
Accumulated amortization	Accumulated depreciation and amortization		(57)
Current finance lease liabilities	Current maturities of long-term debt		8
Long-term finance lease liabilities	Long-term debt		118

Supplemental cash flow and other information related to leases as of and for the three months ended March 31, 2019 are as follows (dollars in millions):


	Three Months Ended
Other information	March 31, 2019
Cash paid for amounts included in the measurement
of lease liabilities:
Operating cash flows from operating leases	$	35
Operating cash flows from finance leases		2
Financing cash flows from finance leases		3
Right-of-use assets obtained in exchange for new
finance lease liabilities		1
Right-of-use assets obtained in exchange for new
operating lease liabilities		15
Weighted-average remaining lease term:
Operating leases		6 years
Finance leases		20 years
Weighted-average discount rate:		9.3	%
Operating leases		5.7	%
Finance leases

On December 22, 2016, the Company completed the sale and leaseback of ten medical office buildings for net proceeds of $159 million to HCP, Inc. The buildings, with a combined total of 756,183 square feet, are located in five states and support a wide array of diagnostic, medical and surgical services in an outpatient setting for the respective nearby hospitals. Because of the Company’s continuing involvement in these leased buildings, the transaction did not qualify for sale treatment and the related leases have been recorded as financing obligations in the Company’s condensed consolidated balance sheet at December 31, 2018. Upon adoption of ASC 842 on January 1, 2019, the Company reevaluated the classification of these financing arrangements utilizing the new accounting requirements for sale-leasebacks in ASC 842, concluding that these financing arrangements continue to not qualify for sale treatment and therefore should continue to be classified as financing obligations. At March 31, 2019, six of these financing obligations remain outstanding and are included in the table below, with the other four divested in conjunction with the sale of the related hospital entity.

Commitments relating to noncancellable operating and finance leases and financing obligations for each of the next five years and thereafter are as follows (in millions):


					Financing
Year Ending December 31,	Operating		Finance		Obligations
2019 (remaining nine months)	$	157	$	12	$	7
2020		170		12		7
2021		123		11		7
2022		100		10		7
2023		79		16		7
Thereafter		231		164		119
Total minimum future payments		860		225		154
Less: Imputed interest		(222)		(99)		(52)
Total liabilities		638		126		102
Less: Current portion		(143)		(8)		(3)
Long-term liabilities	$	495	$	118	$	99

As previously disclosed in our 2018 Annual Report on Form 10-K, which followed the lease accounting prior to adoption of ASC 842, future commitments relating to noncancellable operating and capital leases and financing obligations for the five years and period thereafter as of December 31, 2018 were as follows (in millions):


					Financing
Year Ending December 31,	Operating (1)		Capital		Obligations
2019	$	188	$	12	$	12
2020		157		10		9
2021		121		8		10
2022		98		7		10
2023		79		14		10
Thereafter		234		121		106
Total minimum future payments	$	877		172		157
Less: Imputed interest				(80)		(18)
Total capital lease and financing obligations				92		139
Less: Current portion				(8)		(5)
Long-term capital lease and financing obligations			$	84	$	134

(1) Minimum lease payments have not been reduced by minimum sublease rentals due in the future, which are considered immaterial.

As of March 31, 2019, there were approximately $10 million of assets underlying approved but pending leases that have not yet commenced, primarily for medical equipment.