CHS Ups Hospital Divestitures to 17

12028461_lCommunity Health Systems is now working on seven transactions to sell 17 hospitals, its home-care business and other real estate, CEO Wayne Smith said during a third-quarter earnings call with analysts Wednesday.

The developing divestitures have combined revenue of about $2 billion and should yield net proceeds of about $1.2 billion, Smith said.

Some of the deals could be announced this quarter with others revealed by the second half of next year, he said.

CHS has been divesting assets to reduce a crushing debt of $15 billion, among the highest for investor-owned hospital companies nationally.

The company also is bleeding red ink, missing analyst expectations in the third quarter with a net loss of $79 million compared with net income of $52 million in the prior-year quarter.

CHS’ 159 hospitals also saw admissions during the quarter decline 2% on a same-hospital basis, the company said. CHS is the nation’s second-largest investor-owned hospital company.

“Our inconsistent performance is simply not good enough,” Smith said.

With its high debt level, CHS is exploring hospital divestitures, including the possible sale of the entire company.

Smith said the company’s strategic review is still ongoing with Wall Street financial advisers, but he said CHS would not discuss specifics.

The 17 hospitals for sale are in addition to four rural hospitals that CHS has already agreed to sell and the April spinoff of 38 small and rural hospitals into a separate company, Quorum Health Corp.

The rural hospital operator has struggled to digest its $7.6 billion acquisition of Health Management Associates in 2014.

Of the four hospitals recently sold, three are in Mississippi and one in Florida.

The hospitals, all part of the original HMA deal, were sold to not-for-profit Curae Health of Clinton, Tenn. Terms were not disclosed.

CHS said last quarter, before announcing its deal with Curae, that it had five prospective buyers for 12 hospitals. Since then, CHS also has announced the sale of 80% of its home care division for $128 million. CHS CFO Larry Cash said during the earnings call Wednesday that a real estate investment trust is among the prospective new buyers of CHS assets, adding that the target assets would be CHS medical office buildings or diagnostic centers rather than hospital real estate.

Revenue in the third quarter fell 9.6% to $4.38 billion from $4.85 billion in the same period last year. The lost revenue was mostly due to CHS spinning off the Quorum hospitals, but CHS is still struggling to hold volumes at its HMA hospitals.

Cash said admissions and surgeries were down about 4% in the third quarter at the 61 hospitals that CHS retains from the 2014 HMA deal. By contrast, surgeries at its 91 legacy hospitals, or those owned before HMA, were up 1%, while admissions fell 1%.


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