CFO Larry Cash: CHS is "Well-Positioned for the Future"

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Last week at the Morgan Stanley Healthcare Conference in New York City, Community Health Systems CFO Larry Cash gave an overview of the Franklin, Tenn.-based for-profit hospital company, saying it is "well-positioned for the future" due to its strong growth and new partnerships.

CHSlogoCHS has been one of the most highly discussed health systems in the country over the past year. It current owns and operates 135 hospitals across 29 states, and that number could balloon to 206, pending the company's $7.6 billion acquisition of Naples, Fla.-based Health Management Associates — one of the biggest deals in the industry.

Mr. Cash said the Health Management deal, which is currently making its way through the government antitrust review process, completely changed CHS' acquisition strategy for the year. Last year, CHS had hoped to acquire two to four hospitals. However, several potential hospital deals in the Midwest, Florida and Texas fell through earlier this year for various reasons — for example, the unnamed target in Texas was bought out by another party for "more money than what we thought it was worth," Mr. Cash said.

The Health Management deal revived CHS' immediate growth. But once the deal closes, expected in the first quarter of 2014, CHS plans to slightly pump the brakes on acquisitions to see results materialize.

"When the HMA [deal] closes, we may take a step back and not do as many not-for-profit [hospital] acquisitions for a while," Mr. Cash said. "But the pipeline is pretty active."

CHS has still been involved on the acquisition trail as of late. In August, the company signed a nonbinding letter of intent to acquire Sharon (Pa.) Regional Health System, which includes a 251-bed hospital and 23 satellite centers. CHS has also announced two joint ventures through its new strategic alliance with Cleveland Clinic. CHS and Cleveland Clinic are working toward the joint venture purchase of both Akron (Ohio) General Health System and Metro Health in Wyoming, Mich. At the conference, Mr. Cash said both the Sharon Regional and Akron General deals made sense for CHS because the company has hospitals in similar types of markets.

Mr. Cash also said despite the system's poor second quarter, which included lower-than-expected profit and revenue figures due to sluggish admissions, he expects utilization will ramp up in the latter half of 2013. He also said 2014 could be a positive year for CHS considering the new health insurance exchanges and Medicaid expansion.

Currently, about 40 percent of CHS' hospitals are in states that plan to expand Medicaid, with other big states with CHS hospitals like Florida and Ohio are in the process of tinkering with their Medicaid plans. In addition, Mr. Cash said CHS has been feverishly negotiating with commercial payers — notably Blue Cross Blue Shield, Humana, Cigna, Aetna, UnitedHealthcare and many regional insurers — on exchange plan pricing. "We do expect to be very active," he said. "We will continue to add plans as [they] start showing up. Our managed care group has been focused on this since late last year, and as exchange pricing becomes available, we feel we are in a good situation, especially for bronze and silver [plans] that cost the least."

Roughly 55 percent of CHS' business comes from emergency rooms — a point that has not been lost on the Department of Justice, which has sent the company several subpoenas based on how CHS hospitals admit inpatients from ERs. Mr. Cash says the company's ERs will be a major factor in a new way over the coming year, as certified counselors help uninsured ER patients sign up for new health coverage.

More Articles on Community Health Systems:
Metro Health in Michigan Considers Partnership With CHS, Cleveland Clinic
9 Major For-Profit Hospital Companies Record $600M in Quarterly Earnings
9 Things to Know About the CHS-HMA Merger

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