Quorum Health sees net loss double, plans to divest or close hospitals

Brentwood, Tenn.-based Quorum Health ended the first nine months of 2018 with a net loss, but the company aims to improve its financial position by restructuring its portfolio.

The 27-hospital system, a spinoff of Franklin, Tenn.-based Community Health Systems, said operating revenues decreased 8.8 percent year over year to $1.4 billion in the first nine months of 2018. The decline was largely attributable to Quorum operating fewer hospitals in the first nine months of this year than in the same period of 2017. The company has sold or closed 11 hospitals since its spinoff from CHS in April 2016.

Quorum said an increase in funds from the California Hospital Quality Assurance Fee program, Illinois property tax credits and improved payer mix partially offset the decline in revenue. The company's finances were negatively affected by several one-time charges in the first nine months of this year, including impairment charges and costs related to a hospital closure.

After factoring in expenses and one-time charges, Quorum ended the first nine months of 2018 with a net loss of $179.5 million, compared to a net loss of $87.4 million in the same period a year earlier.

Looking at the quarter that ended Sept. 30, Quorum reported a net loss of $53.9 million on revenues of $460.5 million. In the same period of the year prior, the company recorded a net loss of $29.2 million on revenues of $499.3 million.

Quorum is focused on restructuring its portfolio to improve financial performance. Since the company began selling off hospitals in 2016, it has received $86.5 million in net proceeds from divestitures. Quorum used the bulk of those funds — $84.8 million — to pay down its debt.

"We perform an ongoing strategic review of our hospitals based upon an analysis of financial performance, current competitive conditions, market demographic and economic trends, and capital allocations requirements," Quorum said in its filing with the Securities and Exchange Commission. "As part of this strategy, we intend to divest or close underperforming hospitals and outpatient service facilities which, in turn, will allow us to reduce our corporate indebtedness and refine our hospital portfolio to become a sustainable group of hospitals and outpatient services facilities with higher operating margins."

Quorum said it intends to divest or close additional hospitals by the end of 2019. As of Nov. 5, the company had signed letters of intent to divest five facilities. Those potential transactions represent net cash proceeds of more than $105 million.

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