By George F. Indest III, J.D., M.P.A., LL.M., Board Certified by The Florida Bar in Health Law
On September 16, 2016, Community Health System Inc. (CHS), one of the largest U.S. hospital chains, announced that it is exploring the possibility of a deal to sell the company. The struggling Tennessee-based company announced “very preliminary” discussions with advisers to consider all of its options.
A Tough Sell.
Since its acquisition of 71 hospitals from Florida-based Health Management Associates Inc. (HMA) in 2014, CHS has struggled. Executives have said that the turn around of former HMA hospitals has been difficult. In August 2016, CHS posted a second-quarter net loss of $1.43 billion (that’s billion with a “B”) after writing down the value of its hospital assets. The company said at the time that it had overestimated the long-term fair value of its hospitals.
Community Health’s shares reportedly plunged 75% in the past 12 months; however, they rose 16% after the news of a possible sale.
Who Will Want to Buy It?
The high level of debt, combined with a slew of operational issues facing the company, could limit the number of potential buyers. The two other biggest hospital chains, HCA Holdings Inc. and Tenet Healthcare Corp., may view CHS’s debt load as too much of an obstacle. Sheryl Skolnick, an analyst with Mizuho Securities, said “Tenet would have to use stock (and put its stock at risk) and we doubt that its new board would risk the new strategy for such a disruptive transaction,” Skolnick said in a note to clients. “We don’t think it gets sold in whole, but it might get sold in part.”
CHS said in a news release that it had no timetable for its talks with advisors. It also added that it had “no certainty that the exploration will result in any kind of transaction.”
To read the press release from CHS in full, click here.
To read one of my prior blogs on how the merging and acquisition of hospital companies affects the health care industry, click here.
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Sources:
Evans, Melanie. “Hospital Operator Explores A Deal.” The Wall Street Journal. (September 16, 2016). Print.
Hammond, Ed. “Community Health Said to Explore Options Including Sale.” Bloomberg. (September 16, 2016). Web.
About the Author: George F. Indest III, J.D., M.P.A., LL.M., is Board Certified by The Florida Bar in Health Law. He is the President and Managing Partner of The Health Law Firm, which has a national practice. Its main office is in the Orlando, Florida, area. www.TheHealthLawFirm.com The Health Law Firm, 1101 Douglas Ave., Altamonte Springs, FL 32714, Phone: (407) 331-6620.
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