CHS To Sell Tennessee Hospital For $160M

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Dive Brief:

• Community Health Systems has entered into a definitive agreement to sell Tennessee-based Tennova Healthcare-Cleveland to Hamilton Health Care System for approximately $160 million in cash, the for-profit system said Thursday.
• Under the proposed deal, Hamilton Health Care will acquire the 351-bed hospital, along with its physician clinics and outpatient services. The deal is expected to close in the third quarter, subject to regulatory approval.
• CHS executives said during recent earnings calls that divestitures would allow the health system to fund acquisitions and provide liquidity for debt management.

Dive Insight:

Franklin, Tennessee-based hospital operator CHS struggled in fiscal year 2023, posting a $133 million net loss compared to a net gain of $46 million in 2022. 

CHS leadership attributed the loss to a challenging macroeconomic environment, telling investors during an earnings call in February that higher costs for supplemental reimbursement programs, outsourced medical specialists and professional liability insurance negatively impacted CHS’ performance.

Credit rating agency Fitch Ratings downgraded the operator’s issuer default rating in December, noting CHS had experienced an “elongated period of elevated leverage” and had also failed to recover its operating margins to expected levels following the COVID-19 pandemic. 

The ratings agency expected margins would only improve “modestly” in the near term, and said CHS would benefit from pursuing divestitures.

The proposed sale to Hamilton Health Care could be one of several CHS divestitures this year.

CHS executives also told investors in February that the hospital operator was evaluating inbound interest for sales in certain markets, and predicted 2024 divestitures could yield more than $1 billion.

Last year, CHS completed eight hospital divestitures and the sale of its majority in another hospital, according to its 2023 10-K filing. 

The deals include a $294 million sale of three Florida hospitals to Tampa General Hospital, the sale of West Virginia-based Plateau Medical Center for $92 million and the sale of West Virginia-based Greenbrier Valley Medical Center. 

Not all of CHS’ proposed transactions have gone as planned. 

In January, the Federal Trade Commission sued to block CHS’ proposed sale of two hospitals in North Carolina to Novant Health, alleging the deal could reduce competition and increase annual healthcare costs by millions.

Both CHS and Novant have hit back against regulators’ antitrust claims, arguing that the agencies have a “distorted and artificially narrow view” of the hospital market in the greater Charlotte, North Carolina region.