Former CEO makes $3M bet on CHS turnaround

Wayne Smith, former CEO and current executive chairman of Franklin, Tenn.-based Community Health Systems, has bought 1 million shares of CHS this month, according to a disclosure filed with the Securities and Exchange Commission. 

Mr. Smith made the buy when the hospital operator's share price dipped. The transactions, which occurred on Aug. 1 and Aug. 2, totaled nearly $3 million. The company's shares were trading up 25 percent on Aug. 3 after Mr. Smith filed paperwork informing the SEC of his buy, according to the Nashville Post

Although Mr. Smith is betting his own cash on the company's turnaround, a report from Fitch Ratings released this week indicates there may be challenges ahead. 

On Aug. 2, Fitch announced that it affirmed the "B-" long-term issuer ratings of CHS and revised the company's rating outlook to negative from stable. 

The credit rating agency said the negative outlook reflects operating performance deterioration in the first half of this year, with significant increases in labor costs. Higher costs, weakness in volumes and acuity mix drove a downturn in the for-profit company's revenue, resulting in a reduction in its financial guidance for this year, Fitch said. 

CHS ended the first six months of this year with a net loss of $327 million on revenues of $6.04 billion. In the first half of 2021, the company posted a net loss of $58 million on revenues of $6.02 billion.

Fitch noted that CHS still benefits from its strengthened liquidity and balance sheet after several debt refinancing and exchange transactions. CHS also benefits from investments in outpatient care and higher-acuity inpatient services, the credit rating agency said. 

Shares of CHS closed Aug. 4 at $3.30, down from $3.50 the day prior.

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