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CHS divests Virginia hospitals, sells to Bon Secours Mercy Health

In an ongoing effort to consolidate and reduce debt, CHS is exiting the state in a deal expected to close by year's end.

Jeff Lagasse, Associate Editor

Franklin, Tennessee-based Community Health Systems, which has been beleaguered by financial difficulties in recent years, is divesting three more of its hospitals in an ongoing effort to consolidate the company's operations and reduce its debt.

By selling off three hospitals in Virginia, the health system exits the state entirely. While the transaction has not yet closed, the organization has entered into a definitive agreement with Bon Secours Mercy Health, one of the 20 largest health systems in the nation and the fifth-largest Catholic health system in the U.S.

With the deal, Bon Secours will acquire Southside Regional Medical Center, Southampton Memorial Hospital and Southern Virginia Regional Medical Center from CHS. Financial terms of the deal were not disclosed.

In a statement, Bon Secours said the complementary strengths of each facility will be combined with the Catholic system's best practices and commitment to delivery quality and value, achieving economies of scale and enhancing healthcare access.

In the coming months, both parties will work together to finalize a definitive agreement, obtain applicable approvals and complete integration plans for the coming year. While there is no specific date outlined, both Bon Secours and affiliates of CHS expect to complete the transaction by the end of 2019.

WHAT'S THE IMPACT

CHS is one of the largest publicly traded hospital companies in the country, and through its subsidiaries, the system owns, leases or operates more than 100 affiliated hospitals in 20 states, encompassing roughly 19,000 licensed beds.

THE LARGER TREND

CHS has been struggling since its $7.6 billion acquisition of Health Management Associates in 2013. When Community Health Systems purchased HMA, it made CHS among the largest for-profit hospital operators at the time.

But in recent years, its long string of hospital sales and a complicated financial picture has been the catalyst behind a massive divestiture plan that sees a combined total of approximately $2 billion in annual net operating revenues.

In July 2018, the system announced its second quarter financial results, showing it had decreased its net loss by $27 million in Q2 2018 to $110 million, down from a $137 million net loss during the same period a year previous. On a same-store basis, admissions decreased by 2.1 percent and adjusted admissions decreased 0.2 percent, compared with the same period in 2017.

CHS also saw its long-term debt drop to $13.67 billion as of June 30 from $13.88 billion at the end of 2017.

The system recently posted its Q3 2019 financial results showing net operating revenues totaling $3.2 billion, a 5.9% decrease. Net losses totaled $17 million, compared to $325 million the year before. On a same-store basis, admissions increased 2.4% and adjusted admissions increased 3.6 percent, compared with the same period in 2018.

ON THE RECORD

"We are very pleased to have the opportunity to add three strong, dynamic hospitals to our southeast Virginia footprint," said John Starcher, Bon Secours Mercy Health president and CEO. "Nothing is more important than the health and well-being of the communities and patients we serve, and we look forward to welcoming Southside Regional Medical Center, Southampton Memorial Hospital and Southern Virginia Regional Medical Center into our compassionate ministry. We have a unique opportunity to find synergies and work together to serve others."

Twitter: @JELagasse

Email the writer: jeff.lagasse@himssmedia.com