CHS completes sale of 9 hospitals

Dive Brief:

  • Community Health Systems continues to chip away at its debt with the completion of multiple hospital sales.
  • Late last month, the system completed the sale of Stringfellow Memorial Hospital in Anniston, AL. On Monday, CHS completed the sale of eight hospitals to Steward Health.
  • In addition, subsidiaries of the company announced an agreement to divest the 88-bed Lake Area Medical Center in Louisiana to subsidiaries of CHRISTUS Health. The transaction is expected to close in Q2 2017.

Dive Insight:

The deals are part of a major restructuring CHS put in place last year to reduce about $15 billion debt — stemming in part from its 2014 purchase of Health Management Associates (HMA) for $7.5 billion. HMA, which owned 23 hospitals and some clinics in Florida, was struggling financially at the time of the sale. To say afloat, CHS has had to sell off a number of its hospitals.

CHS inked the definitive agreement to divest the 125-bed hospital in March, saying at the time that the Health Care Authority of the City of Anniston would pay $25 million, including assumption of the $13 million facility lease. Stringfellow Memorial is the 16th hospital CHS has agreed to let go. In February, CHS announced plans to sell off 25 hospitals in 2017, on top of the dozens it divested last year.

CHS reported a $1.7 billion net loss in 2016. Operating revenues for the year were $18.4 billion, down from $19.4 billion the previous year. Revenues for the current year are expected to dip to $16.2 million or lower. Divestitures are one means of righting finances in the face of declining operating margins and revenues. The company's website currently boasts 158 hospitals in 22 states under its purview so a planned sale of 25 hospitals isn't nothing but it's important to remember the company still has plenty of assets with which to make money from.

Still, the care delivery landscape, with declining operating margins and revenues, is changing how hospital administrators should look to future profitability. Selling off assets is a fine, quick means to shore up finances but a programmatic review of operations may be in due as the landscape continues to change.

The company will provide an update its divestiture activity in a 2017 Q1 earnings call on May 2 at 12:00 p.m. EST.

Filed Under: Finance Hospital Administration