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Community Health Continues Divestiture, to Sell 4 Hospitals

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In its bid to divest units to lower its debt level, Community Health Systems, Inc.CYH has struck an agreement with PinnacleHealth System to sell four Pennsylvania hospitals and their associated assets.

The company is burdened with a high level of long-term debt. It has therefore implemented portfolio rationalization and a deleveraging strategy by divesting hospitals and non-hospital businesses.

Generally, these business lines are not in one of the company's strategically beneficial service areas, are less complementary to its business strategy and have lower operating margins. At the end of 2016, Community Health had approximately $14.8 billion of long-term debt, reflecting a decline from $16.7 billion at the end of 2015.

Despite significant divestitures and a consequent decrease in the debt level, the company has failed to gain investors' favor. Its share price was down 41% over the past one year compared with gains of 6.2% for the Zacks categorized Medical-Hospital industry.

Coming back, Community Health will divest a 100-bed Memorial Hospital of York in York, 214-bed Lancaster Regional Medical Center in Lancaster, 148-bed Heart of Lancaster Regional Medical Center in Lititz and 165-bed Carlisle Regional Medical Center in Carlisle. The transaction is expected to close in the summer of 2017.

Earlier this month, Community Health announced to divest a 125-bed Stringfellow Memorial Hospital in Anniston, AL to The Health Care Authority of the City of Anniston. Last month, the company signed one more deal with Steward Health Care LLC to sell eight hospitals and their associated assets.

During the fourth quarter, Community Health divested many of its operating units. In Dec 2016, it inked a deal to sell two Washington hospitals, the 214-bed Yakima Regional Medical & Cardiac Center and the 63-bed Toppenish Community Hospital to Sunnyside Community Hospital & Clinics. In the same month, it completed the sale and leaseback of 10 medical office buildings for $163 million to HCP, Inc. HCP . Last November, the company signed a definitive agreement to sell Rockwood Health System and its associated assets to MultiCare Health System.

In Jan 2017, the company sold an 80% ownership interest in its Home Health division to the subsidiary of Almost Family for $128 million. The company also spun off 38 facilities to Quorum Health Corporation. The spin-off was completed in Apr 2016. Due to a number of divestitures, the number of hospitals at the end of 2016 was 155 compared with 194 at the end of 2015 and 197 at the end of 2014.

Regarding the latest transaction, we are hopeful that this would help Community Health to optimize its portfolio and operations in the future.

Community Health carries a Zacks Rank #3 (Hold). Some better-ranked stocks from

Some better-ranked stocks are AMN Health Services Inc. AMN and The Advisory Board Co. ABCO . Each of these stocks carries a Zacks Rank #2 (Buy). You can see the complete list of today's Zacks #1 Rank stocks here .

AMN posted a positive earnings surprise in each of the last four reported quarters with an average beat of 15.8%.

The Advisory Board posted a positive earnings surprise in each of three of the four reported quarters with an average beat of 33.4%.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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