CHS Offloads Two North Carolina Hospitals To Iredell Health

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Dive Brief:

• Iredell Health System announced this week it completed a deal to purchase two North Carolina-based hospitals from Community Health Systems.
• The hospitals include Davis Regional Psychiatric Hospital and Davis Regional Medical Center in Statesville, North Carolina. Terms of the deal were not disclosed. 
• The acquisition comes five months after CHS’ previous deal to sell struggling Davis Regional Psychiatric to Novant Health fell apart amid a challenge from the Federal Trade Commission. 

Dive Insight:

Iredell, a Statesville-based operator with one hospital and a network of care centers, signed a definitive agreement to purchase the hospitals from CHS in August.

The deal offered a lifeline for struggling Davis Regional Psychiatric, which appeared to be at risk of imminent closure.

Novant Health was set to acquire the facility in June, as part of a $320 million deal with CHS. However, the FTC challenged the acquisition in January, citing concerns about threats to competition in the region. 

Parties ultimately abandoned the deal in June when an appellate court granted the FTC an emergency injunction blocking the sale. The order came despite a District Court judge ruling twice that the deal should proceed to prevent the hospitals from closing.

Court filings revealed that CHS itself was in financial distress and did “not generate enough cash flow to cover its costs.” The system borrowed $400 million in 2023 alone to fund operations, for example.

Davis Psychiatric generated $1 million of losses per month for CHS, according to court documents. The for-profit operator had been attempting to offload the psychiatric facility and another hospital, Norman Regional Medical Center, since 2022. 

CHS has previously closed facilities it couldn’t sell, including a 312-bed Florida facility in 2022.

Iredell has pledged to keep the psychiatric hospital open and potentially expand services at Davis Regional Medical Center post-acquisition. It plans to rebrand the facility to Iredell Davis Medical Center.

“We recognize the critical need for behavioral health services in our area — and throughout all of North Carolina — and will strive to be a part of the solution for this crisis on a local level with Davis,” Iredell President and CEO John Green said in a statement. “This is an important investment in our community and allows us to continue to expand with those needs.”

Iredell could not be reached for comment by press time.