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CHS sees drop in net loss, long-term debt as $2 billion divestiture continues

Community Health Systems saw their net operating revenue drop thanks to hospital offloading, but same-store revenue actually jumped 3 percent.

Beth Jones Sanborn, Managing Editor

As Tennessee-based Community Health Systems continues to weather massive change and pursue hefty divestiture plans, the 119-hospital health system saw its net loss shrink in the second quarter of 2018, according to the system.

An earnings release shows that the system shrunk its net loss by 27 million dollars in Q2 2018 to $110 million, down from a $137 million net loss the same period 2017. On a same-store basis, admissions decreased 2.1 percent and adjusted admissions decreased 0.2 percent, compared with the same period in 2017. 

CHS also saw its long-term debt drop to $13.67 billion as of June 30 from $13.88 billion at the end of 2017.

Net operating revenue dropped 14 percent from $4.14 billion in Q2 2017 to $3.56 billion in Q2 2018, with CHS attributing that decrease to operating fewer hospitals after a deluge of divestitures in 2017 and having already unloaded seven hospitals in 2018. However, on a same-store basis, net operating revenues increased 3.3 percent during the three months ended June 30, compared with the same period in 2017.

The system said they have plans in the works to sell an additional five more hospitals. Those transactions are in various stages of completion. In fact, CHS said system leadership is pursuing a divestiture plan that, including together the hospitals already subject to definitive agreements and those already divested during 2018, has a combined total of approximately $2 billion in annual net operating revenues.

"Our second quarter results reflect progress in our key areas of strategic focus, most notably improvements in same-store operating results, progress on divestitures and successful refinancings. As we complete additional divestitures this year, we believe our portfolio will become stronger, and more of our resources can be directed to markets where we have the greatest opportunities to drive incremental growth. We remain confident in our ability to strengthen our company through execution of our strategic growth initiatives, investments in high-quality healthcare services, and a continuous focus on expense management," said Wayne T. Smith, chairman and chief executive officer of Community Health Systems.

The company's most recent hospital sale involved the two-hospital Sparks Health System, including its physician clinic operations and outpatient services, to Baptist Health in Little Rock, Arkansas. The transaction is expected to close in the fourth quarter of 2018, subject to customary regulatory approvals and closing conditions.

Both the 492-bed Sparks Regional Medical Center in Ft. Smith, Ark., and the 103-bed Sparks Medical Center in Van Buren, Ark., are among the additional planned divestitures.

In addition to financial struggles within the core system, CHS has also weathered a shaky spin-off of its rural healthcare stake, Quorum Health, which garnered criticism and ultimately a class action lawsuit alleging that Quorum and certain of its executive officers made a series of false and misleading statements and/or failed to disclose to investors during the Class Period that a number of Quorum's hospitals were underperforming at the time of the spin-off from CHS.

Twitter: @BethJSanborn
Email the writer: beth.sanborn@himssmedia.com