Dive Brief:
Community Health Systems has found a new buyer for its three-hospital portfolio in Pennsylvania, approximately nine months after a proposed sale of the same facilities to WoodBridge Healthcare collapsed.
Hospital turnaround firm Tenor Health Foundation signed a letter of intent to acquire Regional Hospital of Scranton, Moses Taylor Hospital and Wilkes-Barre General Hospital, collectively Commonwealth Health System, last week, a CHS spokesperson told Healthcare Dive.
The hospitals have been hemorrhaging money in recent fiscal years, according to reports filed to the Pennsylvania Health Care Cost Containment Council. Lawmakers have previously expressed worry that CHS could close the facilities if they could not find a buyer, reducing patients’ access to care.
Dive Insight:
Community Health Systems disclosed scant details about the proposed transaction via email on Thursday.
“This is the first step in a process that we all hope will result in a completed transaction and preserve the healthcare services provided by Commonwealth Health,” a spokesperson said. However, the spokesperson declined to offer a possible timeline for completing the transaction or a possible purchase price.
This is the second time CHS has sought to divest the facilities. Last July, the health system signed a definitive agreement with New Jersey-based Woodbridge Healthcare to sell the hospitals for $120 million, however the deal fell apart four months later when Woodbridge could not secure adequate funds.
The hospitals have dragged CHS’ finances. Last year, Regional Hospital of Scranton (which operates under the same license as Moses Taylor) posted a -20.6% operating margin, while Wilkes-Barre General posted a -6.2% margin.
As CHS sought another buyer, five local foundations stepped up to offer funding to support hospital operations, worrying that hospital employees would depart the health system without financial security.
The coalition of local organizations “invested millions of dollars” beginning this spring to sustain employees’ salaries and offer CHS breathing room to find a new buyer, Laura Ducceschi, president and CEO of the Scranton Area Community Foundation told Healthcare Dive.
“We are hopeful that a deal proceeds that will be in the best interests of the community and we have not discussed future financial support at this point,” Ducceschi said.
Tenor bills itself as a turnaround shop for financially challenged hospitals in rural and suburban markets. The California-based firm’s CEO and owner, Radha Savitala, has extensive experience in hospital acquisitions. Savitala spent 10 years working as counsel for Prime Healthcare, where she helped oversee the purchase of a number of distressed hospitals. The executive was also listed as chief legal officer for hospital turnaround company Sana Healthcare as recently as December.
Tenor Health is a new venture. The nonprofit foundation, which was formed in 2022, has just one hospital in its portfolio — former Steward Health Care-owned Sharon Regional Medical Center, also in Pennsylvania. Tenor purchased the hospital in January for approximately $1.9 million, after securing financing in part through a deal with hospital landlord Medical Properties Trust.
Elsewhere, Tenor’s bids to buy hospitals have been rejected. For example, Tenor submitted a proposal to purchase Stokes Reynolds Memorial Hospital in North Carolina last spring. Of the three proposals submitted, Tenor Health’s came in last, said the Stokes County Board of Commissioners.
Tenor is also entering Pennsylvania’s healthcare ecosystem amid growing scrutiny of corporate players and out-of-state interest groups. Recent hospitals closures, including Crozer Health this spring, has added fuel to conversations about responsible ownership of hospitals.
“We are just getting to know the Tenor team and learning of their plans for the hospitals and healthcare in the community,” Ducceschi said. “Much of those discussions will focus on our goals of preserving jobs, and maintaining — and even improving — care for patients.”
