CHS Sells Four Rural Hospitals in Dept-Reduction Effort

Struggling Community Health Systems has agreed to sell three rural hospitals in Mississippi and one in Florida as part of its plan to pare debt and underperforming hospitals.

Not-for-profit Curae Health is buying 95-bed Merit Health Gilmore Memorial in Amory, Miss., 112-bed Merit Health Batesville in Batesville, Miss., 181-bed Merit Health Northwest Mississippi in Clarksdale, Miss. and 126-bed Highlands Regional Medical Center in Sebring, Fla.

CHS said it would use proceeds of the sales to reduce debt. Terms were not disclosed.

“We are highly invested in the success of our affiliated hospitals, and we are considering how to best position them for the future,” said CHS CEO Wayne Smith.

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“These four hospitals provide quality care and are important in each of their communities. They will benefit from alignment with a smaller organization specializing in the operation of rural hospitals. Divestiture of these assets advances our strategy to focus on a portfolio of larger hospitals and regional healthcare systems.”

Curae is based in Clinton, Tenn. and operates three hospitals in Alabama.

CHS said the deal is expected to be completed in the fourth quarter pending all customary regulatory approvals.

Franklin, Tenn.-based CHS is the nation’s second-largest, investor-owned hospital company with 159 hospitals.

The system is plagued by $15 billion in debt that is far higher than its peers. That’s despite raising $1.2 billion earlier this year through a spinoff of 38 small and rural hospitals into Quorum Health Corp., and the $445 million sale of its stake in a four-hospital joint venture in Las Vegas.

The system has suffered an earnings and stock price slump since last fall. CHS is being dragged down by the performance of hospitals acquired in 2014 as part of its blockbuster $7.6 billion purchase of troubled Health Management Associates.

CHS is coming off a $1.43 billion, or $12.90 per share, loss from continuing operations in the second quarter, after taking a non-cash write-down of goodwill on the sinking value of hospitals it bought over the years. Excluding the one-time adjustments, adjusted EBITDA in the second quarter fell to $563 million compared with $769 million in the year-earlier quarter. Revenue also declined by 6% to $4.6 billion.

CHS said this month it had found five buyers for 12 hospitals that it had for sale.

CHS Chief Financial Officer Larry Cash said the company expects to raise $850 million from the sale of the 12 hospitals.