It’s no secret that Community Health Systems (NYSE: CYH) is selling off hospitals and medical office buildings to pay down its $15 billion debt. Its latest deal offloads eight hospitals with a total of 1,818 beds in Florida, Ohio and Pennsylvania to Steward Health Care LLC for an undisclosed price.
The hospitals involved in this deal are Wuesthoff Health System-Melbourne (119 beds) in Melbourne, Wuesthoff Health System-Rockledge (298 beds) in Rockledge, and Sebastian River Medical Center (154 beds) all in Florida; ValleyCare Health System of Ohio, which consists of Northside Medical Center (355 beds) in Youngstown, and Trumbull Memorial Hospital (311 beds) and Hillside Rehabilitation Hospital (69 beds), both in Warren, Ohio; and Sharon Regional Health System (258 beds) and Easton Hospital (254 beds) in Pennsylvania. This transaction is expected to close in the second quarter of 2017.
For Steward, this is a big first step outside of Massachusetts, where its nine hospitals (with a total of 1,768 licensed beds) are located. In September 2016, it sold the real estate assets to those hospitals to Medical Properties Trust (NYSE: MPW) in a sale/leaseback transaction.
The total value of that deal included a $1.2 billion investment in the hospital real estate and a $50 million equity stake in Steward. MPT will invest another more than $100 million in capital improvements for the hospitals. The agreement also included a right of first refusal for Medical Properties Trust to acquire future Steward hospitals.
That investment set the stage for Steward to expand nationally, and to return the original undisclosed investment that Cerberus Capital Management made in Steward almost six years ago. The agreement also includes a commitment by Medical Properties Trust to participate in up to the next $1.0 billion of Steward’s hospital acquisitions.
Community Health committed to divesting at least 17 hospitals in 2016, and has been working toward fulfilling that promise. In December, the company announced a definitive agreement to sell two Washington State hospitals, the 214-bed Yakima Regional Medical & Cardiac Center in Yakima, and the 63-bed Toppenish Community Hospital in Toppenish. Sunnyside Community Hospital & Clinics, a not-f0r-profit in Sunnyside, Washington, paid $45 million for the facilities.
Earlier in the month, Community closed the sale and leaseback of 10 medical office buildings for $163 million to HCP, Inc. (NYSE: HCP). In November 2016, Community Health sold the Rockwood Health System and its assets to MultiCare Health System for $425 million. Rockwood 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. All became part of MultiCare’s not-for-profit system.
