The parent company of East Georgia Regional Medical Center in Statesboro and a host of local doctor's practices, announced last week via a press release that "with the assistance of advisors, they are exploring a variety of options with financial sponsors as well as other potential alternatives."
The release from Community Health Systems (CHS) went on to say that the discussions are at a very preliminary stage and there is not a timeline established for the review or a sale, if any. In fact, the release said there is no certainty that the exploration will result in any kind of transaction.
In 2014, Community Health acquired East Georgia Regional as part of the 70 hospitals it purchased from Health Management Associates (HMA) for $7.6 billion. The acquisition brought the total number of Community Health hospitals to 206 spread over 29 states.
Health Management was the Naples, Fla., based company that purchased the operations of the non-profit, community-owned Bulloch Memorial Hospital in 1995. Three years later, HMA began construction of the current East Georgia Regional.
The $53-million hospital, medical office building and women's pavilion were constructed on the 35-acre, Fair Road site. According to their website, the hospital currently employees more than 750, along with 75 physicians. The value of the 150-bed hospital, medical office building and women's pavilion is $60 million, according the East Georgia Regional website.
According to a story published last week in Modern Healthcare, Wayne Smith, CEO of CHS, thought at the time of the 2014 purchase that he could turn around HMA facilities where doctors had fled. Prior to the sale, operations suffered as HMA management unsuccessfully fought to hold onto power against activist investor Glenview Capital Management.
CHS saw its debt rise to $16.7 billion after the HMA acquisition. As of June 30, their debt load was $15.1 billion. Last August, in an attempt to control debt and improve the financial position of the company, Community Health spun-off 38 small and rural hospitals to a newly formed Quorum Health Corporation. East Georgia was not part of the spin-off and remains a core CHS property.
With other spin-offs and restructuring, CHS now operates 159 hospitals. Earnings and revenue have been falling since last year, which has caused stock prices to fall from nearly $40 per share a year ago to $10 per share last week.
The price of the stock is so depressed that it is attracting bargain hunters like Chinese billionaire Tianqiao Chen, who has accumulated 14.7 million shares of CHS stock in the last few months and now owns a 12.9 percent stake in the company. With an activist investor grabbing stock, CHS, ironically, is experiencing the same thing HMA did that put CHS in the position to purchase HMA two years ago.
The good news is Community Health currently has good cash flow and no major debt payments due near term that would prompt a bankruptcy. Also, according to a recent article published in industry magazine "Modern Healthcare," they have five buyers, including not-for-profit hospital systems for 12 unnamed hospitals that are for sale.
Insiders that I have spoken to have explained that out of the 159 hospitals left, EGRMC continues to be a crown jewel. It continues to perform extremely well and would be a key prize for whomever ends up acquiring CHS.
If CHS sells EGRMC it will be the third time the hospital has had new ownership in the past two decades.
Please email DeWayne at email@example.com or give him a call at (912) 489-9499.