Struggling hospital giant Community Health Systems confirmed Monday that it is exploring strategic options with financial sponsors, but said talks are very preliminary and may not lead to a transaction.
The hospital system, the nation's second-largest investor-owned hospital chain by revenue, has seen its earnings and stock price plunge since the summer of 2015.
In a statement, CHS said it is working with financial advisers as it studies a variety of options. “There can be no certainty that the exploration will result in any kind of transaction,” CHS said.
The company said it would have no further comment on its process.
CHS has been shedding hospitals to improve operating margins and reduce debt.
It has letters of intent to sell at least 12 hospitals, including some that were part of the disastrous 2014 acquisition of Health Management Associates, a debt-laden chain of more than 70 hospitals for which CHS paid $3.9 billion.
Chief Financial Officer Larry Cash said earlier this month that the sale of the hospitals would yield net proceeds of about $850 million. Those unidentified hospitals represent about $1.45 billion in annual revenue.
Earlier this summer, CHS raised $1.2 billion by spinning off 38 mostly small and rural hospitals into a separate public company, Quorum Health Corp. And it also sold its portion of a joint venture in four Las Vegas hospitals for about $445 million.
The divestitures have had no impact on CHS' depressed stock price. The company's shares closed Friday at $12.27 after trading at about $60 a year ago.
CHS also is coming off an eye-popping loss for the second quarter. It posted a $1.43 billion loss, or $12.90 per share, from continuing operations after taking a noncash write-down of goodwill on the sinking value of hospitals it had bought over the years, including those acquired as part of HMA.
Excluding the one-time adjustments, adjusted EBITDA in the second quarter fell to $563 million compared with $769 million in the year-earlier quarter. Revenue also declined by 6% to $4.6 billion.
The HMA hospitals have continued to plague CEO Wayne Smith and CHS management.
Cash said that of 153 hospitals CHS currently operates, the 61 former HMA facilities continue to post revenue and earnings below that of CHS' 92 legacy hospitals.
Problems are particularly acute at some of the former HMA hospitals in Florida. CHS has tried to buttress those weaknesses by recruiting more physicians and putting management attention there, Cash said.
Those efforts notwithstanding, the former 61 former HMA hospitals combined in the second quarter posted 3% declines in revenue, surgeries and admissions, and contributed to CHS' decline in adjusted EBITDA during the quarter, Cash said.
In contrast, CHS' 91 legacy hospitals posted 3% gains in revenue and surgeries in the quarter, with a 1% decline in admissions.