Community Health Systems (CHS) is one of the largest publicly traded operators of hospitals in the United States. It provides health care services through the hospitals it owns and operates in non-urban and selected urban markets throughout the United States. In more than half of the markets it serves, it is the sole provider of health care services.

As of December 31, 2014, CHS owned or leased 197 hospitals, comprising 194 general acute care hospitals and four stand-alone rehabilitation or psychiatric hospitals. These hospitals are geographically diversified across 29 states and about 30,137 licensed beds. The company employs approximately 2,500 physicians and an additional 600 licensed health care practitioners.

CHS operates 64 licensed home care agencies and 21 licensed hospice agencies, located primarily in markets where the company also operates a hospital.


CHS’ core business includes general acute care, ER, general and specialty surgery, critical care, internal medicine, obstetrics, diagnostic, psychiatric and rehabilitation services. CHS also provides additional outpatient services at urgent care centers, occupational medicine clinics, imaging centers, cancer centers, ambulatory surgery centers and home health and hospice agencies, as well as consulting services to smaller hospitals.

In August, CHS said it would spin off 38 hospitals and Quorum Health Resources (provider of consulting, management and group purchasing services) in Q1 2016, creating Quorum Health, another publicly traded hospital company.

Opportunities and Threats
CHS grows through acquisitions. The company targets hospitals in growing, non-urban and selected urban health care markets for acquisition because of their favorable demographic and economic trends and competitive conditions. According to the company, this is smart targeting because non-urban service areas have smaller populations, there are generally fewer hospitals and other health care service providers in these communities, and there is generally a lower level of managed care presence in these markets.

CHS’ acquisition strategy has also included acquiring selective physician practices and physician-owned ancillary service providers. Such acquisitions are executed in markets where the company already has a hospital presence and provide an opportunity to increase the number of affiliated physicians or expand the range of specialized health care services provided by its hospitals.

CHS’ most significant move in its strategy was its acquisition of Health Management Associates (HMA) for $7.6 billion in cash and stock, including the assumption of $3.7 billion in debt. CEO Wayne T. Smith said at the time that the acquisition would create a company “well positioned to realize the benefits of health care reform and to address the changing dynamics of our industry.” The deal closed January 28, 2014.

CHS is highly leveraged, and this could pose some risk moving forward with respect to the company’s ability to attract more capital to run its operations. As of October 1, 2015, the company had $16.9 billion in debt.

Of Note…

•    Oppenheimer recently said that CHS shares are highly undervalued, citing the recent selloff in shares as further reasons to buy. The investment firm noted that its pending spinoff of Quorum Health will allow CHS to be focused on its core business. “We also believe that legacy Community Health will be well-positioned for growth, as it sheds some of its lower margin and lower growth businesses. Furthermore, the business should have more opportunity from Medicaid expansion, as Quorum has 74% of its revenues in expansion states (vs 43% overall for Community Health).” 

•    CHS and other hospital stocks hit record highs this summer on the Supreme Court’s decision to uphold ACA subsidies. But profit taking and other market conditions show a marked decline in July through September. 

•    The Atlantic reported in June that of the 50 hospitals with the highest markups on services, half are owned by Community Health Systems. Citing a study in Health Affairs, researchers reported that the 50 hospitals with the highest markups charged 10 times more than what it cost them to provide the treatments.


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