A leveraged-buyout group led by physicians in Fort Wayne has made an offer to buy Community Health Systems' eight Indiana hospitals branded as Lutheran Health Network, Fort Wayne City Councilman Dr. John Crawford said Thursday.
Crawford, co-founder of Radiation Oncology Associates in Fort Wayne who is not a part of the buyout group, said his eight-physician practice has written a letter supporting the buyout.
Crawford said Lutheran's profitable operations are subsidizing CHS' massive losses and the eight hospitals have not gotten their fair share of capital for upgrades and equipment because of CHS' problems.
CHS, the nation's second-largest investor-owned hospital company, posted a net loss of $1.7 billion in 2016 and plans to divest 30 hospitals to reduce a $15 billion debt burden.
Crawford said it was "suspicious" that CHS announced late last week that Lutheran Health would get $500 million in capital upgrades in the coming years. That announcement came on the eve of the buyout group's offer and just before the CHS annual shareholder meeting that was held Tuesday in Franklin, Tenn.
Several of the nearly 300 local physicians reportedly involved in the buyout offer traveled to the Nashville suburb for the meeting, said Crawford, who has been a Fort Wayne councilman for 20 years.
"There's an offer on the table," Crawford said of the buyout, adding that he did not know the name of the private-equity players backing the physician's offer.
He said he would be holding a press conference Friday to publicly announce his support for the physician-led buyout. Physicians at Radiation Oncology Associates practice at the Lutheran hospitals.
Receptionists for two of the Fort Wayne physicians identified as leaders of the buyout effort separately told Modern Healthcare that the doctors were not talking to the media.
In a statement, CHS spokeswoman Tomi Galen said CHS generally does not comment on divestiture or acquisition activity.
She said CHS remains "very focused on the long-term success of Lutheran Health Network."
"We are very excited about the $500 million capital plan announced last week and the opportunity to make a transformative investment that will enhance patient care and expand health services in Fort Wayne, as well as bring jobs and other economic benefit to the community," Galin said.
New CHS chief financial officer Thomas Aaron noted during a Thursday presentation at the Bank of America Merrill Lynch 2017 Health Care Conference that the 30 hospitals and other assets that CHS is selling to multiple buyers would yield net proceeds of about $2 billion. That does not include the $1.2 billion that CHS raised through the spin-off of 38 small and rural hospital last April into Quorum Health.
If the sale of all 30 hospitals is completed, CHS would be left with 125 hospitals. Aaron said CHS is getting interest in hospitals beyond the 30 already noted.
Fort Wayne is one of CHS' largest regional markets. The eight hospitals, plus three others in Indiana, accounted for 10% of the system's $4.5 billion in first-quarter revenue, according to a presentation slide shared by Aaron at the conference.
