CHS is gearing up to play offense again in hospital M&A game, CFO says

Community Health Systems may soon pivot from hospital seller to hospital buyer, CHS President and CFO Kevin Hammons told investors during a panel at the UBS Global Healthcare Conference in Rancho Palos Verdes, California, this week.

After years of chasing nearly any and all divestitures, Hammons said the influx of cash will allow the company to “be more selective” about sales and shop around for expansion opportunities.

Hammons called out CHS’ recent purchase of 10 urgent care centers in Tucson, Arizona, as an example of the health system’s return to playing offense. 

“That deal will be closing here in the fourth quarter. It’s 10 urgent cares, a pretty small deal, but yet it’s still back in being a little more offensive in nature,” Hammons said. “And I would hope that at some point we’re looking at and acquiring some acute care facilities as well.”

For now, one of CHS’ main priorities is expanding its ambulatory surgery center footprint — what Hammons calls an access point to care. Ambulatory care has been an attractive M&A option for health systems in recent years, as ASCs tend to come with lower overhead costs than acute care facilities.

Currently, the provider is growing its ASC business by four to eight facilities per year. 

CHS is also interested in expanding the “perimeters” of its network through purchasing physician clinics and free-standing emergency departments. 

President-elect Donald Trump’s return to the White House should aid CHS’ merger and acquisition strategy and be a bit more amenable to deals between two for-profit systems, Hammons said. 

While the CFO stressed the health system did not struggle to find buyers during the last four years, he said the Federal Trade Commission under Commissioner Lina Khan appeared to favor deals with nonprofit health systems.

“I think going forward, under the new administration, we’ll kind of circle back to that [traditional buyer],” Hammons said. “I think the FTC environment changes probably makes getting deals done a little bit easier.”

The Franklin, Tennessee-based operator has not bought a hospital in eight years, according to securities filings.

CHS has instead been focused on divestitures. The health system has already sold about a dozen hospitals over the past year, Hammons said, and the executive expects to have a few more asset purchase agreements in hand prior to year-end. Collectively, CHS says the sales will bring in at least $1 billion in proceeds.