It’s no secret that Community Health Systems (NYSE: CYH) has a $15 billion debt load, and that despite its spin-off of Quorum Health Corp. (NYSE: QHC) last April, its financial performance hasn’t improved. During the company’s third-quarter earnings call on November 1, CEO Wayne Smith said the company was in discussions to shed 17 of its 157 hospitals, as well as home health services and non-hospital real estate.
The most recent deal following that call was announced on November 17. Community Health’s Spokane, Washington-based Rockwood Health System will become part of Tacoma, Washington-based MultiCare Health System, a not-for-profit system that operates five hospitals, several outpatient specialty centers, primary and urgent care clinics and other services. MultiCare Health serves the residents of Pierce, South King, Thurston and Kitsap counties.
Rockwood Health consists of Deaconess Hospital (388 beds), Valley Hospital (123 beds) and Rockwood Clinic, a multi-specialty clinic with ambulatory clinics and sites in eastern Washington and western Idaho. Rockwood Health will become part of MultiCare’s integrated not-for-profit health care system, and will expand its network in the Pacific Northwest.
The announced price of $425 million works out to $831,703 per bed, but only 1.1x revenue and about 9.9x EBITDA. Compared with some other hospital transactions we’ve recorded this year (particularly from REITs), the price per bed in this deal is just above the current median price per bed of $697,248.
This transaction is expected to close in the first quarter of 2017.
Also part of this movement was the sale of an 80% interest in Community Health’s Home Health division, announced in October 2016. Almost Family, Inc. (NASDAQ: AFAM) agreed to pay $128 million for the stake in 74 home health and 15 hospice branch locations in 22 states.
With the completion of this transaction, Almost Family will operate 340 branches across 26 states, and its annual net revenue run rate is expected to exceed $800 million. Approximately $170 million in annual revenues derives from the home health business, and approximately $30 million from the hospice business. This deal is expected to close by the end of this year.
Community Health’s only other hospital divestiture this year was announced in September, when it sold four rural hospitals in Mississippi (3) and Florida (1), for an undisclosed price. The buyer was Curae Health, a not-for-profit health system formed to support rural healthcare. It currently operates three hospitals in Alabama, which it acquired in November 2014 from LifePoint Health (NASDAQ: LPNT).
The hospitals involved in this sale are Merit Health Gilmore Memorial (95 beds), Merit Health Batesville (112 beds), Merit Health Northwest Mississippi (181 beds) and Highlands Regional Medical Center (126 beds). The transaction is expected to close by the end of the year.
