Community Health Systems plans to shed 38 hospitals, most of them in small markets, and shift its focus to large markets and regional networks. The hospitals and a consulting subsidiary will be spun off into a new publicly traded company.
CHS also reported Monday that it achieved net income of $111 million on $4.8 billion in revenue during the quarter ended June 30, compared with a net loss of $42 million on $4.7 billion in revenue in the prior-year period.
Admissions decreased 2.2% on a same-hospital basis, or a decline of 0.2% when adjusted for outpatient activity.
The spinoff means CHS would lose its status as the largest U.S. hospital company by hospital count. Its portfolio included 196 hospitals as of June 30.
CHS grew substantially with the 2014 acquisition of Naples, Fla.-based Health Management Associates. The list of hospitals slated to be dropped in the spinoff (see below) suggests the company got what it wanted in that deal. Only four of the hospitals to be included in the transaction were part of HMA: Clearview Regional Medical Center in Monroe, Ga., Barrow Regional Medical Center in Winder, Ga., Paul B. Hall Regional Medical Center in Paintsville, Ky., and Sandhills Regional Medical Center in Hamlet, N.C.
The new company will be named Quorum Health Corp. to retain the brand identity of the consulting arm, Quorum Health Resources. Like Franklin, Tenn.-based CHS, it will be based in Tennessee. Last year, the businesses that will make up Quorum Health Corp. generated unaudited net revenue of $2.1 billion.
The facilities picked for Quorum have 3,635 licensed beds across 16 states. Most of them are in cities or counties with 50,000 or fewer residents. In 84% of the markets, the hospital is the sole provider of acute-care hospital services.
“This transaction will allow Quorum Health Corp.'s hospitals to focus on the changes in the healthcare delivery system, which are different in smaller community hospitals than in our larger and more urbanized markets,” CEO Wayne Smith said in a statement. The company said it expects the transaction to be completed in the first quarter of 2016.
“At the same time, the transaction will facilitate a sharper focus on the hospitals that are retained by Community Health Systems, especially in high-opportunity markets and in areas where we are building regional healthcare networks,” he added.
In March, the chain, announced plans to divest two hospitals in South Carolina. Meanwhile, the company plans to assume full ownership of five Oklahoma hospitals operated under a joint venture with Integris Health.