CHS to promote 3 hospitals, exiting Pennsylvania

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Dive Transient:

• Neighborhood Health Techniques plans to promote its three hospitals in Pennsylvania to nonprofit Health system Health-systems-announces-definitive-agreement-sell-17″>WoodBridge Healthcare for $120 million, exiting the state altogether, the system mentioned Tuesday. 
• The deal is predicted to shut within the fourth quarter, pending regulatory critiques.
• Throughout CHS’ second quarter earnings name final week, CFO Kevin Hammons mentioned the corporate hoped to promote upwards of $1 billion in belongings this 12 months to assist pay down its money owed. This transaction is a part of that divestiture plan, CHS mentioned in an announcement.

Dive Perception:

Whereas CHS’ bigger for-profit friends try and broaden their geographic attain, CHS is taking the other strategic method. The Health system bought eight hospitals final 12 months and its majority curiosity in one other.

But deliberate gross sales have been bumpy this 12 months. CHS expects to shut a $160 million hospital sale within the third quarter, executives mentioned throughout their most up-to-date earnings name. Nonetheless, CHS’ deliberate three-hospital sale to Novant Health fell aside earlier this summer season following a problem from the Federal Commerce Fee.

Asset gross sales are “integral” to CHS’ restoration story, Jefferies analysts mentioned in a word on the corporate’s second quarter earnings.

CHS has a weak portfolio in comparison with its friends. CHS was the one main for-profit Health system to submit a web loss within the second quarter, regardless of rising affected person volumes.

Together with its weaker working portfolio, CHS has additionally struggled to manage expense development, in accordance with credit score scores company Fitch Scores. Fitch has labeled CHS a Finance/fitch-downgrades-community-Health-systems-idr-to-ccc-08-12-2023″>“substantial credit score danger,” noting “default is a real possibility.” CHS is extra extremely leveraged than its friends as effectively, in accordance with Fitch — on the finish of the second quarter, CHS had $11.5 billion in long-term debt.

CHS is trying to promote hospitals to assist pay down that debt.

The system’s newest cope with WoodBridge consists of 186-bed Regional Hospital of Scranton, 122-bed Moses Taylor Hospital in Scranton and 369-bed Wilkes-Barre Normal Hospital.

WoodBridge will even take over the hospitals’ ambulatory surgical procedure facilities and emergency departments, in accordance with the discharge.

The three hospitals hemorrhaged cash in 2023, in accordance with a report from the Pennsylvania Health Care Price Containment Council. Moses Taylor reported the worst figures with a -24.1% operating margin within the 2023 fiscal 12 months.

WoodBridge’s founder, Joshua Nemzoff, additionally chairs the board for StoneBridge Healthcare, which buys and turns round “deeply distressed hospitals,” in accordance with a 2020 launch from the corporate.

StoneBridge is backed by non-public fairness agency Oaktree Capital Administration and Medical Properties Belief — the hospital landlord embroiled within the Steward Health Care chapter that’s gripped the healthcare business this summer season.

Nemzoff Health/community-Health-systems-sale-woodbridge-20240730.html” goal=”_blank”>informed the Philadelphia Inquirer on Tuesday that StoneBridge and its backers wouldn’t have their palms on the Pennsylvania hospitals, saying: “This can be a WoodBridge deal.”