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CHS to divest 10 'low-performing' hospitals as it continues to shed financially struggling facilities

CHS will use the proceeds to cut its debt by approximately $975 million, likely before the end of 2016.

Susan Morse, Senior Editor

Community Health Systems will divest 10 of its low-performing hospitals to reduce debt by approximately $975 million, Chairman and CEO Wayne Smith a recent earnings call.

CHS has released no specific information about which facilities or markets will be affected, according to Tomi Galin, senior vice president of corporate communications and marketing for CHS in Tennessee.

"Also under our portfolio rationalization, we told you during our last earnings call in February that we would drive toward a more sustainable high-margin group of hospitals by pursuing additional divestitures. We have moved swiftly to initiate the sale of certain assets, and already, we have several transactions underway. These include 10 hospitals that are not part of our regional networks and other non-hospital operations. These facilities and operations generate approximately $1 billion in revenue and with single-digit margins in 2015," Smith said on the call.

[Also: CHS rural hospitals spin-off Quorum Health loses $5 million in 1st quarter]

CHS will use the proceeds to cut its debt by approximately $975 million, likely before the end of 2016, Smith said.

This is in addition to CHS is ending a joint venture with Universal Health Services in Las Vegas and an estimated $1.2 billion in debt reduction made possible by the spin-off of 38 hospitals to Quorum Health, Smith said.

CHS may also divest more low-margin operations in the future, according to Smith.

"So again, we've raised about $1.2 billion from the Quorum spinoff, anticipate approximately $975 million more, likely by the end of the year, from transactions underway now," Smith said during the earnings call. "These proceeds of approximately $2.2 billion from our portfolio rationalization effort will be used to pay down debt."

CHS is expected to reduce its number of hospitals from 200, to 140 to 150. One of the goals of the health system is having a more sustainable, high-margin group of hospitals in markets that have growth potential, according to Smith. 

"I think we're on track to do that," Smith said.

Twitter: @SusanJMorse

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