Rennova Health completed its purchase Friday of an 85-bed hospital in rural Tennessee from Community Health Systems, paying in total about $1 million.
The struggling West Palm Beach, Fla.-based lab test company is getting into the hospital business after insurance carriers cut off most of their payments for its toxicology tests. The company's CEO, Seamus Lagan, described rural hospitals as a "more reliable revenue source" in an interview last month. The company owns another hospital less than 40 miles away called Big South Fork Medical Center, which it bought out of bankruptcy.
Franklin, Tenn.-based CHS announced the deal's completion in a news release Friday afternoon. Rennova announced in its own release that the price was approximately $635,000, but that diligence, legal and other items pushed the total acquisition cost to about $1.1 million. Rennova launched a new website Friday for the hospital, which it renamed the Jamestown Regional Medical Center.
The deal includes an associated physician practice, medical office building, outpatient facilities and ancillary services.
The June 1 closing date had been extended from the original closing date of April 1 listed in the asset purchase agreement between CHS and Rennova. CHS included Tennova Healthcare-Jamestown in its $25 million in goodwill impairments related to hospitals up for sale in its first quarter earnings report.
Rennova is in a precarious financial situation. The company reported a $51 million net loss from continuing operations in 2017 on less than $5 million in revenue, and ended the year with no cash on hand from continuing operations. An independent auditor questioned whether the company can stay in operation in its 2017 financial filing.
Rennova's stock fell 4.92%, or $0.0003 per share, to $0.0058 on Friday. Nasdaq delisted the company in October because its equity balance fell below the $2.5 million minimum requirement for listing. The company currently trades on the OTCQB, a market designed for early-stage and developing companies.
The Jamestown hospital is struggling in its own right. It saw a net loss from operations and in total annually from 2013 through 2016, the most recent year for which data is available. The hospital reported a loss of $2.5 million in 2016 on total patient revenue of $15.6 million, or a negative profit margin of 16.2%, according to Modern Healthcare Metrics, a joint venture with Healthcare Management Partners.
CHS separately announced Friday it had completed the previously announced divestitures of three other Tennova Healthcare hospitals in Tennessee to West Tennessee Healthcare: 225-bed Dyersburg Regional, 150-bed Regional Jackson and 100-bed Volunteer Martin. It also announced it completed the sale of 60-bed Byrd Regional Hospital in Leesville, Louisana to Allegiance Health Management.
CHS' stock price fell 2.93%, or $0.12, to $3.97 on Friday.
