Franklin, Tennessee-based Community Health Systems to spin off 38 hospitals

Tuesday, August 04, 2015

Community Health Systems Inc, the No. 2 U.S. publicly traded hospital operator, said on Monday it plans to spin off 38 hospitals and a consulting business into a separate company so that it can focus on larger markets.

Quorum Health Corp, the new publicly traded company, will include hospitals primarily in cities and counties with populations under 50,000, Community Health said.

The spinoff will allow Community to sharpen its focus on building regional healthcare networks in larger markets, Chief Executive Wayne Smith said in a statement.

"Smaller facilities have distinct opportunities and different challenges than those in larger markets, where the majority of our assets are located."

Businesses in Quorom Health, including Community's Quorom Health Resources subsidiary that provides hospital management and consulting services, generated annual net revenue of about $2.1 billion in 2014.

Hospitals in the spinoff are the sole providers of acute-care services in 84 percent of their markets, Community said. The facilities are scattered across the country, from California to Georgia, and include nine hospitals in Illinois.

Sheryl Skolnick, an analyst with Mizuho Securities, said shedding the collection of smaller facilities will help Community deleverage its balance sheet and concentrate on integrating the hospitals it acquired in its 2014 purchase of Health Management Associates.

"Taking these hospitals out will eventually lead to higher margins at Community," she said.

The spinoff will be tax-free for Community shareholders and is expected to be completed in the first quarter of 2016. Community will own 160 hospitals in 22 states.

Franklin, Tennessee-based Community also reported its second-quarter net income rose to $111 million, or 95 cents a share, from $42 million, or 37 cents a share, in the year-ago period. Net operating revenue increased 2.5 percent to $4.88 billion.

 

reuters.com