Community Health Systems In Talks to Sell Another $450M+ of Assets
The leaders of Community Health Systems Inc. are further pruning their portfolio of hospitals around the country and expect to generate $450 million or more from sales being discussed with potential buyers.
Speaking on a Feb. 19 conference call with analysts and investors, President and CFO Kevin Hammons said the Tennessee-based company expects to net roughly $550 million from the recently announced agreements to sell Lake Norman Regional Medical Center in North Carolina (to Duke University Health System) and the ShorePoint Health System in Florida (to Adventist Health System).
“We continue to advance discussions on additional divestitures that we expect to announce in the near future, also at very attractive multiples,” Hammons said. “All told, these pending and expected transactions should generate more than $1 billion in total proceeds.”
The deals pending and being negotiated will follow a 2024 in which CHS divested two hospitals for net proceeds of $174 million and a 2023 that saw it net $518 million from the sale of eight facilities. Since the beginning of this year, the company also sold for $17 million its 50% interest in Merit Health Biloxi to an affiliate of Memorial Hospital of Gulfport.
That last deal trimmed CHS’ portfolio of owned or leased hospitals to 75, which have a licensed bed count of about 11,000. When the signed and contemplated deals are completed, the company’s holdings will be roughly a third the size of what they were a decade ago, which was a year after it purchased Health Management Associates.
Then, CHS’ portfolio stood at 205 hospitals that were home to about 31,000 licensed beds. But the company’s $19 billion debt load and operational struggles at some of the acquired HMA facilities led executives to launch a major divestiture program. The recent sales are an outgrowth of that initiative driven by what remains of CHS’ long-term debt: The company finished 2024 with $11.4 billion of debt outstanding and a stockholders’ deficit of nearly $1.7 billion.
Hingtgen said Feb. 19 that his team’s broad plan—sell facilities outside of what it considers core markets and invest in network expansion in key regions (such as the acquisition of 10 urgent-care centers in Arizona)—is paying off. CHS has a series of surgery center builds or expansions lined up, he said, and is moving ahead with several freestanding emergency departments. Executives also are looking to further grow their post-acute and behavioral health service lines.
“It’s a smaller portfolio generating roughly [a] similar amount of net revenue as three or four years ago,” Hingtgen said. “We know that our investments are yielding the intended outcomes, caring for more patients and driving that type of growth.”
CHS posted a fourth-quarter net loss of $70 million on nearly $3.3 billion in operating revenues. In late 2023, those numbers were a profit of $46 million and roughly $3.2 billion, respectively. Adjusted EBITDA for the quarter rose 11% year over year to $428 million while net cash from operations more than doubled to $216 million.
Shares of CHS (Ticker: CYH) rose more than 7 percent on that earnings report to $3.61 each. They are, however, still down more than 25 percent over the past six months, mostly because of a drop after executives reported third-quarter results that were hurt by a growing number of claims denials. The company’s market capitalization now stands at about $490 million.
