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November 09, 2016 11:00 PM

Quorum Health makes priority of 8-hospital divestiture

Dave Barkholz
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    Sandhills Regional Medical Center in Hamlet, N.C.

    Management of Quorum Health Corp. is negotiating to sell five more of its money-losing hospitals to go along with two already under contract, Quorum CEO Tom Miller said Thursday.

    During a third-quarter earnings call with analysts, Miller said divesting eight hospitals that came with the 38 hospitals that Community Health Systems spun off in April to create Quorum is a top management priority.

    In fact, Quorum has passed on 30 opportunities to buy hospitals, Miller said, so it could stay focused on first cleaning up the portfolio it has.

    But a hospital in Huntsville, Texas, the sole hospital in town, is so attractive that Quorum has expressed an interest in it, Miller said. The hospital in Huntsville is not-for-profit Huntsville Memorial Hospital.

    He said if a deal can be reached, he hoped to be able to announce it by the second quarter of 2017.

    The eight hospitals being divested are largely responsible for a drop in earnings and admissions that Quorum experienced in its third quarter.

    Income from operations in the third quarter ended Sept. 30, was $17.5 million compared with $19.8 million in the year-earlier period. Adjusted EBITDA for the quarter was $46.7 million compared with $60.3 million for the same period of 2015.

    Quorum CFO Mike Culotta said the hospitals under contract to sell, Barrow Regional Medical Center in Winder, Ga., and Sandhills Regional Medical Center in Hamlet, N.C., contributed $4.4 million of that third-quarter EBITDA deficit.

    Miller said the hospitals being divested could fit well with other hospitals in their areas given more physician and capital resources. The rural facilities also might be attractive for high-acuity referrals, he said.

    Brentwood, Tenn.-based Quorum has announced that it expects to receive $25 million for Barrow and Sandhills. The proceeds will be used to retire debt, the company said.

    The sale of the other six hospitals could fetch another $75 million in proceeds, Miller said.

    Quorum is aggressively recruiting physicians for the 30 hospitals that it is keeping, Miller said.

    The system expects to have recruited 128 physicians, including many specialists, by year end vs. 111 physicians in 2015, the company said. This year's recruiting is predominantly targeted at 30 hospitals instead of the 38 hospitals that the physicians were divided between last year.

    Quorum also has cut 41 staff at its corporate offices and is targeting reductions of 200 employees at its hospitals at a savings of about $10 million, Culotta said.

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