CHS spin-off Quorum Health suffers heavy losses on impairment charges

Brentwood, Tenn.-based Quorum Health Corp.'s second-quarter results were rocky, as impairment charges took a toll on the company's bottom line.

Quorum, a 38-hospital spin-off of Franklin, Tenn.-based Community Health Systems, reported operating revenues of $529.7 million in the second quarter of 2016, down 1.6 percent from $538.4 million in the same period of 2015.

Quorum ended the second quarter with an operating loss of $259.3 million — a significant change from the operating income of $27.5 million the company recorded in the second quarter of last year.

The operating loss was largely attributable to impairment charges of $250.4 million. Quorum said the charges included $45.4 million to reduce certain long-lived asset values in property, equipment and software; $5 million in goodwill based on management's decision to divest certain hospitals and $200 million related to the carryover allocation of goodwill at the time of the spin-off.

"We are committed to divesting underperforming assets and paying down our debt," said Quorum President and CEO Thomas D. Miller. "We have already received letters of intent on certain facilities, and we currently anticipate that some sales should be completed in the fourth quarter."

The operating results also reflect a decrease in patient volume. Admissions were down 3.4 percent in the second quarter of 2016, compared to the same period of last year.

"Although our operating performance fell short of expectations for the quarter, we want to emphasize that our management team and local operators are pursuing initiatives to both reduce costs and increase our readiness for growth opportunities, including selected acquisitions," said Mr. Miller.

The company reported a net loss of $245.1 million in the second quarter of 2016, down from a net gain of $1.4 million in the same quarter of 2015.

Mr. Miller and Quorum CFO Michael Culotta said they do not foresee any loan covenant issues throughout the year. 

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