CHS inks deal to sell three Va. hospitals to Bon Secours Mercy Health

Community Health Systems agreed to sell three Virginia hospitals to Bon Secours Mercy Health, two of which have lost money for years.

The definitive agreement covers 300bed Southside Regional Medical Center in Petersburg, 105-bed Southampton Memorial Hospital in Franklin and 80bed Southern Virginia Regional Medical Center in Emporia. The latter two hospitals have posted tens of millions of dollars in losses in recent years. Financial terms weren’t disclosed for the deal, which is subject to regulatory approvals and closing conditions.

Franklin, Tenn.-based CHS, a for-profit company, has been selling off hospitals in an effort to pay down its debt. The sales haven’t gone as well as the company had anticipated. The company missed its 2018 targets by a long shot, generating $400 million in gross proceeds on hospital divestitures last year, less than half of its $1.3 billion target.

John Starcher, CEO of Cincinnati-based Bon Secours Mercy Health, said in a statement the health system is pleased to add the hospitals to its Southeast Virginia footprint.

Modern Healthcare Metrics data show Southside Regional Medical Center generated a 2.1% operating margin in fiscal 2019, posting $4 million in operating income on $189 million in operating revenue. That’s an improvement from a negative 1.75% margin in fiscal 2018.

Southampton Memorial Hospital, by contrast, has struggled financially in recent years. Metrics data show the hospital posted a negative 33% margin in 2018, the latest year for which data is available. That hospital reported a $13.2 million operating loss on $40 million in revenue that year. Its acute occupancy rate in 2018 was 14.5%, down from 17% in 2014.