Franklin, Tenn.-based Community Health Systems became the largest for-profit hospital operator in the nation in 2014 when it acquired Naples, Fla.-based Health Management Associates. Now, the company is selling off hospitals to pay down its debt.
As part of a turnaround plan put into place in 2016 to improve its finances and reduce its heavy debt load, CHS divested 30 hospitals in 2017. With the help of proceeds from the hospital sales, CHS brought down its long-term debt from $14.8 billion at the end of 2016 to $13.9 billion at the end of 2017.
To further reduce its debt, CHS is selling another group of hospitals with combined revenue of $2 billion. The company has made progress toward that goal. During its first-quarter earnings call in April, the company said the divestitures that were in the works are expected to close before the fourth quarter and will mark the end of a portfolio rationalization strategy it began nearly three years ago. CHS’ long-term debt totaled $13.1 billion as of June 30.
Below are the divestiture transactions and hospital closures CHS has announced or completed in the past six months, beginning with the most recent.
1. CHS closed Shands Lake Shore Regional Medical Center in Lake City, Fla., on Aug. 31. The hospital, owned by the Lake Shore Hospital Authority, closed less than two months after announcing plans to shut down. The hospital had to borrow money to maintain operations, and declining patient volume and financial challenges resulted in losses that were unsustainable, the hospital said.The hospital announced plans to close after CHS, which operates the hospital, entered into a settlement and termination agreement with the Lake Shore Hospital Authority for the planned closure of Shands Lake Shore on June 30. The hospital authority regains control of the property Oct. 1.
2. CHS completed the sale of Northern Louisiana Medical Center in Ruston to Allegiance Health Management on July 1. With the sale complete, CHS no longer operates any hospitals in Louisiana.
3. CHS completed the sale of St. Cloud (Fla.) Regional Medical Center to Orlando Health on July 1. The organizations completed the transaction about two months after entering into a definitive agreement. Under the deal, CHS sold its majority ownership in 84-bed St. Cloud Regional to Orlando Health, which held minority ownership for more than 15 years.
4. CHS announced June 25 that it signed a definitive agreement to sell 480-bed Bayfront Health St. Petersburg (Fla.) to Orlando Health.
5. CHS completed the divestiture of 49-bed Shands Starke (Fla.) Regional Medical Center and 25-bed Shands Live Oak (Fla.) Regional Medical Center to Nashville, Tenn.-based HCA Healthcare on May 1, roughly three months after the parties entered into a definitive agreement. Under the agreement, CHS ended inpatient and nonemergency services at the two hospitals before the deal closed.
6. CHS announced April 27 that it signed a definitive agreement to sell two hospitals in Texas. The company is selling 231-bed Abilene (Texas) Regional Medical Center and 188-bed Brownwood (Texas) Regional Medical Center to Abilene-based Hendrick Health System. In September, the Federal Trade Commission sent a letter to Texas regulators urging them to block the sale of Abilene Regional Medical Center. “Although Hendrick’s acquisition of Brownwood Regional does not raise the same concerns, it likely exacerbates the overall competitive harms,” the FTC said.
7. CHS announced April 20 that it signed a definitive agreement to sell 171-bed San Angelo (Texas) Community Medical Center to Shannon Health System in San Angelo. The transaction requires approval by the Texas Health and Human Services Commission, and CHS said the regulatory review process is expected to conclude by the end of the third quarter. In September, the Federal Trade Commission sent a letter to Texas regulators urging them to block the sale of the hospital.
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