Community Health Sells Hospitals & Assets to Steward Health

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Community Health Systems, Inc . CYH recently announced that its subsidiaries have signed a definitive agreement with Steward Health Care LLC to sell eight hospitals and their associated assets to the subsidiaries of the later. The transaction is subject to customary regulatory approvals and closing conditions and is expected to be completed in the second quarter of 2017. This divesture is part of the company's efforts to generate funds to lower its debt level.

The company is burdened with a high level of long-term debt. No wonder it is resorting to a number of divestures to pay off its debt in order to focus on a more sustainable portfolio of hospitals and networks for long-term growth. At the end of first none months, Community Health had approximately $2.7 billion of long-term debt compared with $3 billion at the end of 2015.

However, investors remain skeptical about the company's high level of debt obligations. This is evident from the stock's underperformance in the first three quarters of 2016. Over the time duration, the shares of Community Health lost 58.5%, whereas the Zacks Medical Hospital industry registered a decrease of only 0.50%.

Coming back, the facilities to be sold to Steward Health include the 119-bed Wuesthoff Health System-Melbourne, 298-bed Wuesthoff Health System-Rockledge, 154-bed Sebastian River Medical Center, ValleyCare Health System of Ohio, with 355-bed Northside Medical Center in Youngstown, 311-bed Trumbull Memorial Hospital and 69-bed Hillside Rehabilitation Hospital in Warren, 258-bed Sharon Regional Health System and 254-bed Easton Hospital.,

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. Earlier 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 has sold 80% ownership interest in its Home Health division to the subsidiary of Almost Family for $128 million.

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

Zacks Rank and Stocks to Consider:

Community Health carries a Zacks Rank #3 (Hold). Some better-ranked stock from the same space include HCA Holdings Inc. HCA and Universal Health Services, Inc. UHS , both carrying a Zacks Rank #2 (Buy). You can see the complete list of today's Zacks #1 Rank stocks here .

HCA Holdings delivered positive surprises in the last four quarters with an average surprise of 10.16%.

Universal Health, on the other hand, surpassed expectations in two of the last four quarters with an average positive surprise of 0.28%

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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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