Dive Brief:
Community Health Systems’ proposed $120 million deal to sell three Pennsylvania hospitals to WoodBridge Healthcare is no more, after Woodbridge failed to secure adequate funds, CHS said on Tuesday.
The now-defunct deal included 186-bed Regional Hospital of Scranton, 122-bed Moses Taylor Hospital and 369-bed Wilkes-Barre General Hospital — all of which lost money in 2023, according to a report from the Pennsylvania Health Care Cost Containment Council.
CHS said it is evaluating future options in light of the termination. Some lawmakers are concerned facility closures may be on the horizon.
Dive Insight:
CHS first announced plans to offload its three-hospital Commonwealth Health System to WoodBridge in July. The nonprofit health system worked with investment banking firm Zeigler up until the 11th hour to find financing for the transaction, according to a spokesperson from WoodBridge.
However, “Ziegler could not sell the bonds,” the spokesperson said Wednesday morning.
The sale was meant to be a small stepping stone on CHS’ path toward netting $1 billion in asset sales this year.
The divestiture falling through is “not ideal,” Jefferies analysts said in a note published Wednesday. However, the analysts characterized the collapse as a “speed bump” for the health system’s overall divestiture strategy, particularly as it follows CHS announcing a $265 million deal to sell its Florida-based ShorePoint Health System.
“[…] We view the ShorePoint divestiture as a positive, and expect the company to continue to make progress towards its $1B of divestitures,” the analysts said.
The larger implications of the deal collapse are concentrated locally, where CHS is facing rising pressures from state and federal lawmakers to reinvest in its Pennsylvania facilities — or exit the state entirely.
NPR affiliate WVIA reported in July that state representatives had been been working to find a buyer for the Commonwealth hospitals for over a year, due to concerns CHS was driving specialists away from hospitals.
Sen. Bob Casey, D-Pa., penned a letter to CHS’ CEO Tim Hingtgen in July accusing the executive of prioritizing shareholders over patients at the facilities.
“CHS has repeatedly forgone efforts to invest in their Pennsylvania facilities and risked the quality and accessibility of care for Pennsylvanians in the pursuit of profit for their shareholders and executives,” Casey wrote.
The three hospitals have been a financial drag for CHS. In 2023, operating expenses surpassed revenues by 24.1% at Moses Taylor, 15.7% at Wilkes-Barre General and 9.5% at Regional, according to state documents.
In turn, CHS shuttered some service lines at the facilities, including the emergency room at Moses Taylor.
Absent a buyer, there is concern that CHS may elect to close the hospitals. Since 2020, CHS has shuttered two hospitals in the state: Tyler Memorial and First Hospital Wyoming Valley.
In Casey’s letter, the senator said that CHS executives communicated in June that they planned to close Regional Hospital or Moses Taylor Hospital if they could not find a buyer “in the next few months.”
CHS did not respond for requests for comment by press time.
