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CHS exits divestment program with stronger results in 2020

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Community Health Systems in 2020 wrapped up its multi-year efforts to sell underperforming hospitals, a company that has significantly reduced its portfolio and appears to have strengthened its bottom line.

CHS Investor Owned posted a net profit of $ 511 million to shareholders in a year when admissions were hampered by a devastating global pandemic, a major departure from its net loss of $ 675 million in 2019. Like most of its peers, the performance of the CHS has was significantly boosted by federal stimulus grants, including $ 600 million during the year. The company’s profit – expressed as adjusted earnings before interest, taxes and depreciation – was $ 1.8 billion in 2020, up 11% year-over-year.

The Franklin, Tennessee-based CHS has worked for years to remove weak links from its hospital portfolio. The company divested 13 underperforming hospitals in 2020 and concluded its official divestment program at the end of the year. The CHS had 89 hospitals as of December 31, 2020, less than half of its total at the end of 2014.

“Our hospital portfolio is now mainly concentrated in Sunbelt states with attractive demographics, higher population growth and economic opportunities,” said Tim Hingtgen, new CEO of CHS since this year, during the call to Thursday’s results. “Our stronger portfolio, coupled with high yield investments, positions the company for future growth.”

CHS grossed about $ 1.5 billion in revenue from sales, which helped the company to beat its goal of $ 1.3 billion, CFO Kevin Hammons told Modern Healthcare in November.

The procedural stops resulting from the COVID-19 pandemic reduced CHS volumes last year. Comparable store admissions were down 8% year over year. The CHS’s 2020 operating revenue of $ 11.8 billion was down 10.8% year over year, in part due to fewer hospitals. Who fell below even the lower end of Zacks Investment Research estimates. The company’s third-quarter revenue of $ 3.1 billion – down 5% from the prior year period – was higher than Zacks’ estimate.

In 2021, Hingtgen said CHS is focused on increasing its volumes by adding new surgical lines and beds. The company is also adding three more stand-alone emergency departments and three outpatient surgery centers this year, he said.

CHS spending was $ 10.7 billion in 2020, a decrease of 15% from 2019. Spending declined 14% in the fourth quarter to $ 2.7 billion.

In 2021, CHS projects generating between $ 11.7 billion and $ 12.5 billion in revenue and between $ 1.6 billion and $ 1.8 billion in adjusted EBITDA. The company’s stock was down about 9% as of noon Thursday, likely because its forecast does not include improving earnings.

Hammons said on Thursday’s call that CHS expects its strategic initiatives to drive greater cost savings and profit growth in the second half of this year.

“We expect the pace of EBITDA to increase sequentially over the year, with the fourth quarter being our best EBITDA quarter of the year,” he said.

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