Community Health Systems’ (CHS) shares are down to their lowest price ever, continuing a downward trend of the past six months.
Saba Capital Management recently purchased nearly 7% of CHS’ outstanding shares, Modern Healthcare reported.
Analysts remain bullish on CHS' near-term growth potential, according to All Stock News.
CHS’ 2017 has been a mix of losses and divestitures to shed billions of dollars of debt.
The Franklin, Tenn.-based system ended 2016 with $15 billion in debt after losing $1.7 billion last year. The for-profit health system has announced 30 divestitures so far this year. The system of 127 hospitals in 20 states is talking about additional sales, too. Company officials haven’t named the facilities, but they did say they have at least $2 billion in annual net operating revenues.
This year has been a tough one for CHS. Moody’s Investors Service recently downgraded CHS’ corporate family rating, probability of default rating and senior unsecured notes because of its financial issues.
CHS recently announced its third-quarter earnings, which included a 16.3% drop in net operating revenues. The company’s EBITDA fell by nearly 29% compared to a year ago and its cash operations decreased 36% from $178 million in the third quarter last year to $114 million this year.
When comparing only facilities still operated by the health system, CHS said both its admissions and adjusted admissions decreased 2.3% in the third quarter compared to last year. For the first nine months of FY17, admissions fell by 1.9%.
Looking long-term, Wayne T. Smith, chairman and CEO at CHS, said in announcing the third quarter results that CHS is focused on strategic initiatives that it believes will yield positive results. "We’ve made substantial progress in our portfolio rationalization initiative with 30 hospital divestitures now complete. Our goal is to emerge from this process with a sustainable group of hospitals that are positioned for long-term success and growth,” he said.
CHS isn’t the only system seeing lower patient volumes and trying to survive with debt and lower reimbursements. Another major system, Tenet Healthcare, lost $366 million in the third quarter and had about $15.4 billion of debt at the end of June.
Though the systems are trying to rid themselves of unprofitable hospitals, investors won't pay top dollar for struggling hospitals with heavy debt. Systems, in turn, need to figure out whether a reduced sale price is worth shedding the struggling facility.
“The balance is always what is the right sale price for the exchange of cash flow when it becomes less than profitable. Balancing those two are always tough,” Patrick Allen, managing director with Kaufman Hall’s mergers and acquisitions practice, told Healthcare Dive.