The buyer, WoodBridge Healthcare, was unable to finance the purchase of Commonwealth Health System.
Community Health Systems has been an eager seller this year, but roadblocks continue to block the hospital operator's path to divestitures.
In the latest hang-up, CHS and WoodBridge Healthcare have mutually agreed to terminate their agreement for the sale of three-hospital Commonwealth Health System due to a lack of funding to complete the deal.
Ziegler, the investment banking firm WoodBridge retained for the transaction, was unable to sell the bonds required to fund the acquisition, the nonprofit health system said in a release.
The sale, which was announced in July for $120 million and expected to close in the fourth quarter, involved three Pennsylvania hospitals: 186-bed Regional Hospital of Scranton, 122-bed Moses Taylor Hospital in Scranton, and 369-bed Wilkes-Barre General Hospital in Wilkes-Barre.
“The entire WoodBridge team is extremely disappointed in this outcome,” Joshua Nemzoff, WoodBridge chairman of the board, said in a statement. “We very much looked forward to being part of the Scranton and Wilkes-Barre communities and partnering with the Commonwealth Health staff and physicians on providing the best healthcare in the region. CHS has gone out of its way to help get this deal done including significant concessions on their part. We appreciate all their efforts to do so.”
In the wake of the transaction falling apart, Franklin, Tennessee-based CHS said it will evaluate further options for Commonwealth Health.
The move was meant to be part of the for-profit system's plan to yield more than $1 billion in divestitures to boost its finances.
It's also the second deal that has come undone in recent months, with the first being the sale of two North Carolina hospitals to Novant Health for $320 million. That transaction faced regulatory pushback before Novant eventually called off the acquisition after the Federal Trade Commission was granted an emergency injunction to block the deal.
However, CHS has continued to be active in the market and inked more agreements to sell off assets.
Last month, the operator announced a $265 million deal with AdventHealth for Florida-based ShorePoint Health System, expected to close in the first quarter of next year.
More completed divestitures should offer CHS some relief as it works its way out of financial instability.
In the third quarter, the system reported an operating loss of $205 million and a net loss of $391 million, a sharp decline from the $173 million in operating income and $91 million net loss over the same period last year, respectively.
Jay Asser is the CEO editor for HealthLeaders.
KEY TAKEAWAYS
Community Health Systems will go back to the drawing board on Commonwealth Health System after WoodBridge Healthcare failed to fund its acquisition.
The sale was intended to be part of a series of moves for CHS in its pursuit of recouping more than $1 billion for its assets.
CHS recently reached agreement with other buyers on deals, including the sale of ShorePoint Health System to AdventHealth for $265 million.