Local impact unknown in Community Health Systems downsizing

The for-profit company that owns Deaconess and Valley hospitals and Rockwood Clinic plans to sell off 12 medical centers following a rocky financial performance over the past year.

Tennessee-based Community Health Systems isn’t saying which of its 200-plus hospitals and related clinics are for sale. But during a recent conference call with analysts, Chief Executive Officer Wayne Smith said the company expects to shed the hospitals in five sales totaling $850 million before the end of the year.

The proposed sale of a Washington hospital would trigger a review by the state Department of Health, which would look into the prospective buyer’s financial and operating history. To date, no paperwork related to Community Health Systems has been filed with the state, health department spokeswoman Julie Graham said Thursday.

CHS is one of the nation’s largest for-profit hospital companies, with holdings primarily in the East Coast, Midwest and South. The New York Stock Exchange-traded company purchased Deaconess and Valley hospitals in 2008 and Rockwood Clinic a year later. The three local properties now operate as Rockwood Health System with more than 3,600 employees.

Money from the hospital sales will be used to pay down the company’s debt and finance expansion in more profitable markets, Smith said.

In the same analyst call, Smith mentioned the February opening of Deaconess’ stand-alone emergency department in north Spokane. It was part of his discussion about the company’s expansion of outpatient surgery centers and freestanding ERs in select communities.

CHS has been on a rapid growth path over the past decade, buying up hospitals with a focus on suburban and rural health care markets. But the company struggled after the 2014 purchase of Florida-based Health Management Associates for $7.6 billion, which added 71 hospitals to its portfolio.

Two Central Washington hospitals were part of the deal: Toppenish Community Hospital and Yakima Regional Medical and Cardiac Center.

As a whole, admission rates, surgeries and revenue lag at the hospitals purchased from Health Management Associates compared to CHS’ other hospitals, said Larry Cash, the company’s president of financial services. CHS continues to work on increasing the profitability of those hospitals, he said in the conference call.

The company’s net revenues in the second quarter were $115 million lower than expected, said Smith, who attributed part of the revenue decline to fewer hospital admissions resulting from a less severe cold and flu season.

CHS also took a $1.6 billion non-cash writedown on the value of its assets during the second quarter, which officials said was related to an 80 percent decline in the company’s stock value over the past year and lower-than-expected revenues.

CHS finished the second quarter $1.4 billion in the red. The disappointing earnings report follows a lackluster financial performance for the company stretching back to the second half of 2015.

Besides selling the 12 unidentified hospitals later this year, CHS recently spun off 38 rural hospitals and a hospital-consulting business into an independent company, Quorum Health Corp. Proceeds from the $1.2 billion transaction are being used to pay down CHS’ long-term debt, company officials said.