Dive Brief:
- Community Health Systems has agreed to sell an Alabama hospital for $450 million, the latest in a string of divestitures from the for-profit hospital operator as it looks to reduce its debt.
- CHS said on Tuesday that a subsidiary has signed a definitive agreement to sell substantially all of the assets of its 180-bed Crestwood Medical Center in Huntsville, Alabama to Huntsville Hospital Health System. The deal includes Crestwood’s network of outpatient centers and medical practices, according to CHS’ release.
- The companies expects the deal to close in the second quarter this year.
Dive Insight:
Franklin, Tennessee-based CHS has been aggressively selling off hospitals, hoping to pay down its debt and improve liquidity amid softening patient volumes and rising disruption from Washington.
The company — one of the largest hospital operators in the country, with 69 affiliated hospitals and more than 1,000 other sites of care across 14 states — has sold partial or full stakes in at least six of its hospitals last year.
CHS has also announced plans to sell additional hospitals, including three in Pennsylvania to Tenor Health Foundation for roughly $35 million and one in Tenneesee to Vanderbilt University Medical Center for about $600 million.
CHS also inked a deal to sell some of its lab services to LabCorp for $194 million in December.
All told, the company’s pre-tax proceeds from its divestiture campaign is around $1 billion, CEO Kevin Hammons said in November at an investor conference. And the company has continued to evaluate deals.
“We are continuing to kind of have some discussions around some of the inbound interest, and we’ll see where that takes us,” Hammons said at the UBS event Nov. 11.
Tuesday’s sale of Crestwood is one such deal, according to the press release.
The hospital is going to nonprofit Huntsville Hospital Health System, which said it would build a more robust healthcare network in the Huntsville region. In a release, HH Health cited its rapid growth as one reason behind the deal. The system, which operates 14 hospitals in Alabama and Tennessee, has seen its patient population grow almost 16% over the last five years.
“Acquiring Crestwood allows us to coordinate and align healthcare resources across the community,” Jeff Samz, the president and CEO of HH Health, said in a statement.
Crestwood will remain fully operational through the acquisition, which will have “no immediate changes” on patients or medical staff, according to HH Health’s release.
The acquisition includes the Medical Center, Crestwood’s free-standing emergency department and other related assets, including outpatient services, clinics and certain ambulatory interests. CHS did not respond to questions about which Crestwood assets were not included in the deal.
The $450 million sale should “minimally” impact CHS’ leverage ratio, Jefferies analyst Brian Tanquilut wrote in a note on the deal Wednesday.
CHS has now passed its $1 billion divestiture target, but should still pursue further asset sales to lower its debt, Tanquilut said. However, “the current [CHS] portfolio of hospitals has very few underperforming facilities at this point,” so future asset sales would comprise hospitals that perform at the operator’s revenue and earnings expectations, he added.
