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Community Health Systems spins off 38 rural hospitals to focus on regional networks

CHS to focus on more populated regions.

The 56-bed Barrow Regional Medical Center in Winder, Georgia. Photo via BRMC. The 56-bed Barrow Regional Medical Center in Winder, Georgia. Photo via BRMC.

Community Health Systems is creating a new for-profit hospital chain, selling a consulting and management division and 38 rural hospitals.

The new company will be named Quorum Health Corporation, operating 38 hospitals across Alabama, Illinois, Georgia, Pennsylvania and 12 other states, in areas with populations of 50,000 or less, many in places where the hospital is the sole acute care provider. Quorum Health also includes a management and consulting services that currently works for 150 non-affiliated hospitals.

The new Quorum Health Corporation will be a network of rural hospitals focusing "on the changes in the healthcare delivery system, which are different in smaller community hospitals than in our larger and more urbanized markets," said Wayne Smith, CHS chairman and CEO.

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The rest of Tennessee-based Community Health Systems will be able to evolve with a core business of more than 25,000 hospitals beds and a growing network of outpatient facilities, Smith said.

"This significant transaction will realign our portfolio into two strong and focused companies that can respond to market demands with greater agility and that are better positioned to take advantage of growth opportunities, while creating additional value for our stockholders," said Smith. "Over the past 30 years, Community Health Systems has evolved from a collection of smaller hospitals into a much more complex and diversified portfolio of hospitals, outpatient services, and healthcare systems across the country."

Now, CHS is going to focus on "high-opportunity markets and in areas where we are building regional healthcare networks," in states like Texas, Tennessee and Washington. For investors, the spin-off is "intended to be tax-free."

"Our stockholders have benefited from our acquisitiveness as we have grown the size and value of our company," said Smith, who has been CEO of the company for 18 years. "We view this transaction as the best next step."

Twitter: @AnthonyBrino