Community Health Systems, Inc.’s (CYH - Free Report) units recently inked a definitive deal to divest its 92-bed Bluefield Regional Medical Center in Bluefield, WV and the related ancillary healthcare operations to Princeton Community Hospital’s subsidiaries. The transaction is subject to certain closing conditions.
This deal is expected to close in the third quarter of 2019.
This move is in line with the company’s strategy, which helps it focus on its core businesses that comprise large hospitals. Community Health is burdened with debt and has therefore taken up this portfolio rationalization strategy.
Notably, in 2017 and 2018, the company sold hospitals worth $1.7 billion and $405 million, respectively. In the first quarter of 2019, the company continued with its divestment activities.
Earlier this April, the company entered into a definitive agreement to divest its 245-bed Tennova Healthcare — Lebanon in Lebanon, TN and its related assets to the subsidiaries of Vanderbilt University Medical Center, which too is expected to close in the third quarter.
These transactions are likely to boost the same-store metrics and cash flow of the company. The company could lower its debt level with these transactions. The sale of units is also going to result in reducing its leverage ratios.
Although the company reduced its long-term debt by 3.5% in 2018, we believe, it will take up more divestments in the future to improve its debt level further.
One of its peers, Tenet Healthcare Corp. (THC - Free Report) , also shed some of its non-core and unprofitable facilities from its portfolio in order to repay its debt and maintain financial liquidity. A number of divestitures executed in the past three years streamlined the company’s operations and generated funds to pay down debt. The company’s strategic priorities include completing the hospital divestments and allocating capital to higher return investments in the capital structure.
Shares of this Zacks Rank #3 (Hold) company have lost 22.3% in a years’ time against its industry’s growth of 14.7%.
Investors interested in the medical sector can take a look at some better-ranked stocks like WellCare Health Plans, Inc. (WCG - Free Report) and HCA Healthcare, Inc. (HCA - Free Report) .You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
WellCare Health offers managed care services to government-sponsored health care programs. The company pulled off average positive surprise of 13.52% in the preceding four quarters. It holds a Zacks Rank #2 (Buy).
HCA Healthcare provides health care services. In the last four quarters, the company delivered average beat of 15.74%. It carries a Zacks Rank of 2.
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