The deal represents another step on the road to recovery for the debt-riddled for-profit health system.
Embattled for-profit hospital operator Community Health Systems got a much-needed infusion of cash with its $425 million sale of Rockwood Health System to seven-hospital MultiCare Health System, based in Tacoma, Washington. The sale of Rockwood, which includes Deaconess Hospital, Valley Hospital and Rockwood Clinic, announced in November 2016, closed this earlier this month.
MultiCare adds 3,200 employees and three healthcare facilities in the acquisition, which will convert Rockwood, based in Spokane, to MultiCare’s nonprofit status.
“This is an important step for MultiCare,” said Bill Robertson, MultiCare’s president and CEO, in a press release. “This acquisition will help the organization advance toward our vision of becoming the Pacific Northwest’s highest value system of health.”
Brentwood, Tennessee-based Community Health Systems has been shedding assets since 2015 amid declining profitability and concerns about its heavy debt load. The company’s high point surrounded its multi-billion-dollar acquisition of Health Management Associates in 2014.
The Fortune 500 company’s stock price has recovered somewhat since the acquisition was announced, but it is still far below its historical average. In the wake of its decision to sell assets in the face of a heavy debt load and intermittent operating losses that became apparent in 2015, the company’s stock has dropped from more than $52 a share in early 2015 to less than $5 a share in late 2016. CHS has struggled in part from the healthcare industry’s general move away from expensive hospital-based services, but more specifically because it was heavily exposed to rural markets, especially in states that did not expand Medicaid under the Affordable Care Act.
Among other deals meant to help the company recover, Community Health spun off 38 hospitals to form Quorum Health Corporation in April 2016, a deal that provoked accusations of fraud and an internal investigation of the behavior of the former parent company by Quorum’s board of directors, which, according to the board, did not produce conclusive evidence of intentional fraud or misconduct by CHS officials. CHS’s debt load is just less than $15 billion.
Lately, CHS stock has recovered to just less than $10 a share as its turnaround plan has started to show positive results.
Philip Betbeze is the senior leadership editor at HealthLeaders.