HealthSouth to Sell 6 Hospitals to LifeCare for $120M

HealthSouth Corp. announced Wednesday that it will sell its six long-term acute care hospitals to LifeCare Holdings, Inc. for approximately $120 million, in a deal that is expected to be completed by September.
"The sale of these six long-term acute care hospitals to LifeCare reinforces HealthSouth's strategic focus on its 97 core, inpatient rehabilitation hospitals," HealthSouth President/CEO Jay Grinney said in a media release.

Grinney said Birmingham, AL-based HealthSouth will use the money from the sale to "invest in the retirement of our 10.75% senior notes and our accelerated de novo strategy. Most importantly, this divestiture does not change the company's outlook for 2011: We still expect our 2011 full-year results will be at the high end of, or greater than, the Adjusted EBITDA range of $440 million to $450 million."

Based in Plano, TX, LifeCare operates 20 long-term acute care hospitals in nine states. In a media statement, LifeCare chairman and CEO Phillip B. Douglas said, "Our company’s primary focus is the operation of long-term acute care hospitals. We look forward to sharing best practices across all of our hospitals and continuing to advance care for medically complex patients who require intensive treatment over an extended period of time.”

Coker Group analyst Mark Reiboldt said in an e-mail to HealthLeaders: "This one is probably more straightforward and perhaps less strategic relative to broader market trends. I imagine HLS recognizes where reimbursement and costs are heading for long-term care and they would likely be better served to focus on their core strengths in PT, rehab and other ancillary services.  I read this as an opportunity to divest these assets, retire debt, and refocus on the company's core profitability. "

HealthSouth will work with LifeCare to transition the hospitals' employees and ensure there will be no interruption to patient care during the transfer to the new ownership. "We want to recognize and thank our highly skilled employees at these hospitals for their years of service and wish them the best under LifeCare's leadership," Grinney said.

The hospitals in the sale include:

• HealthSouth Hospital at Tenaya, Las Vegas, NV;
• HealthSouth Hospital of Houston, Houston, TX;
• HealthSouth RidgeLake Hospital, Sarasota, FL;
• HealthSouth Hospital of Pittsburgh, Pittsburgh, PA;
• HealthSouth Regional Specialty Hospital, Mechanicsburg, PA;
• HealthSouth Specialty Hospital of North Louisiana, Ruston, LA, and two satellite locations, HealthSouth Hospital of North Louisiana — Farmerville, LA, and HealthSouth Hospital of North Louisiana — Homer, LA.

These hospitals contributed $121.7 million of net operating revenues and $17.5 million of Adjusted EBITDA to HealthSouth Corporation in 2010.  They will be treated as discontinued operations beginning in the second quarter of 2011, HealthSouth said.

HealthSouth, which specializes in inpatient rehabilitative healthcare services, operates in 26 states and in Puerto Rico, with a network of inpatient rehabilitation hospitals, long-term acute care hospitals, outpatient rehabilitation satellite clinics and home health agencies.