Community Health Systems (NYSE: CYH) is still at it. The financially troubled hospital chain unloaded three more hospitals in May, bringing the number of divested facilities in 2019 to seven.
The latest announcements involved two Florida hospitals, Heart of Florida Regional Medical Center (193 beds) in Davenport and Lake Wales Medical Center (160 beds) in Lake Wales, along with their respective assets, physician clinic operations and outpatient services.
The acquirer is AdventHealth, formerly known as Adventist Health System, a not-for-profit healthcare system with 45 hospital campuses and more than 8,200 licensed beds in nine states. Lake Wales Medical Center has been struggling financially since at least 2015, while Heart of Florida Regional has been financially healthy.
The third hospital, located in College Station, Texas, was sold to CHI St. Joseph Health, a not-for-profit four-hospital system in the Brazos Valley. CHI St. Joseph is part of Catholic Health Initiatives, which merged with Dignity Health in 2018 to form CommonSpirit Health.
The divested hospital, 167-bed College Station Medical Center, will operate as a Catholic healthcare facility once the transfer is complete, expected in the third quarter of 2019.
All three hospitals were among the additional planned divestitures discussed on Community Health’s first quarter 2019 earnings call. On that call, CEO Wayne Smith said the current plan, which includes both 2018 and 2019, called for divestitures of at least $2 billion of annual net revenue with a mid-single-digit EBITDA margin.
Since the beginning of 2018, CHS has closed divestitures accounting for approximately $1.5 billion of net revenue, generating approximately $550 million of gross proceeds. Those divestitures consisted of hospitals with low single-digit EBITA margins.
Through these divestitures, CHS has shifted its portfolio of hospitals, now a combined total of 106 in 18 states, away from rural areas, retaining those in urban/suburban markets where populations are healthier and have higher levels of education and employment. It’s also depending less on hospitals for net revenue. In a presentation to UBS on May 23, the company said 51% of its net revenue now comes from outpatient services.