Community Health Systems CYH recently announced that Martin D. Smith will join its planned spin-off company, Quorum Health Corporation, as the Executive Vice President (VP) of Operations.
Community Health is currently in the process of establishing this new publicly traded hospital company by spinning off 38 of its hospitals along with Quorum Health Resources – its hospital management and consulting business.
The transaction is expected to close in the first quarter of 2016. The new entity will mainly operate in markets where hospitals are the solitary provider of acute care services.
Meanwhile, Community Health continues to divest small assets that will help it to focus on large hospitals in non-urban areas. The company recently announced the divestiture of 72-bed Florida-based Bartow Regional Medical Center and its related outpatient services to subsidiaries of BayCare Health System, Inc.
The transaction is expected to be completed by the end of 2015. However, the company believes that the same will not have much impact over its financials. Following the deal, Community Health will now operate 24 hospitals in Florida.
To-date in 2015, Community Health has divested a number of small hospitals in accordance to its growth strategy. In the first quarter 2015, it sold Carolina Pines Regional Medical Center and related outpatient services (January), Harris Hospital and related outpatient services (February), Riverview Regional Medical Center and Dallas Regional Medical Center (March).
In the second quarter, Community Health announced the divestiture of two hospitals – Chesterfield General Hospital in Cheraw and Marlboro Park Hospital in Bennettsville. In the third quarter, the company sold Payson Regional Medical Center and Lehigh Regional Medical Center along with related outpatient services.
Apart from these divestitures, we believe that Community Health will continue to benefit from Obamacare as an insured patient base will lower charity care expenses and bad debts for the company. Simultaneously, it will witness increased admission rates owing to improving affordability among patients.
Zacks Rank & Key Picks
Community Health currently carries a Zacks Rank #3 (Hold).
Better-ranked stocks in the industry include Better-ranked stocks in the industry include Adeptus Health ADPT, Acadia Healthcare ACHC and MEDNAX MD. While Adeptus sports a Zacks Rank #1 (Strong Buy), Acadia and MEDNAX carry a Zacks Rank #2 (Buy).
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