CHS to sell 25 hospitals as net loss swells to $1.7B in 2016
Franklin, Tenn.-based Community Health Systems will continue selling off hospitals this year after ending 2016 with a net loss.
CHS recorded operating revenues of $4.5 billion in the fourth quarter of 2016, down 6.9 percent from revenues of $4.8 billion in the same period of the year prior. The company's net loss widened from $83 million in the fourth quarter of 2015 to $220 million in the fourth quarter of last year.
Much of CHS' loss in the fourth quarter was due to one-time, noncash impairment charges to reduce the value of hospitals the company is selling or under-performing hospitals. In the fourth quarter, CHS recorded impairment charges of $224 million.
The company said impairment charges were partially offset by the sale of its home care division. CHS completed the sale of a majority interest in CHS Home Health to Louisville, Ky.-based Almost Family in December.
Looking at full-year 2016 results, CHS reported operating revenues of $18.4 billion, down 5.1 percent from revenues of $19.4 billion in 2015. The dip in revenues was largely attributable to the spinoff of Quorum Health Corp. last year.
CHS ended 2016 with a net loss of $1.7 billion, compared with net income of $158 million in 2015. For the year, the company's impairment charges totaled $1.9 billion.
To improve its finances and trim its debt load of about $15 billion, CHS put a turnaround plan into place last year. During a third-quarter earnings call in November, Chairman and CEO Wayne T. Smith said CHS is selling off 17 hospitals. According to Monday's earnings release, CHS will now sell 25 hospitals, which includes the eight hospitals the company is selling to Boston-based Steward Health Care. CHS also signed a definitive agreement in November to sell Spokane, Wash.-based Rockwood Health System to Tacoma, Wash.-based MultiCare, and entered into an agreement in December to sell two hospitals to Sunnyside (Wash.) Community Hospital & Clinics.
CHS said the sale of the 25 hospitals is expected to generate about $1.5 billion in proceeds.
Commenting on CHS' financial performance for 2016, Mr. Smith said, "Significant progress has been made in our work to divest certain hospitals and other operations, enabling a reduction in our debt and the opportunity to reshape our portfolio into a stronger, more sustainable organization. Moving forward in 2017 and beyond, we are intently focused on efficiency improvements in our operations, strategic initiatives that enhance growth in our markets, and portfolio optimization that reduces our total debt."
Mr. Smith also noted the company's adjusted EBITDA increased 7 percent year over year to $564 million in the fourth quarter of 2016. CHS' adjusted EBITDA for full-year 2016 was $2.2 billion, down 16.7 percent from $2.7 billion in 2015.
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