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

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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 300-bed Southside Regional Medical Center in Petersburg, 105-bed Southampton Memorial Hospital in Franklin and 80-bed Southern Virginia Regional Medical Center in Emporia. The latter two hospitals have posted tens of millions of dollars in losses in recent years. The deal, the financial terms of which were not disclosed, 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; it missed its 2018 targets by a long shot.

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.

“Nothing is more important than the health and well-being of the communities and patients we serve, and we look forward to welcoming Southside Regional Medical Center, Southampton Memorial Hospital and Southern Virginia Regional Medical Center into our compassionate ministry,” he said. “We have a unique opportunity to find synergies and work together to serve others.”

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

Southern Virginia Regional Medical Center is performing the worst of the three. It drew a negative 47% margin in 2019, Metrics data show. That’s a steeper loss than its negative 26% margin in 2015 but a slight improvement from its 2018 margin of negative 53%. The hospital’s operating loss was $11.2 million in 2019 on $24 million in revenue.

Like Southampton, Southern Virginia Regional suffers from low occupancy. Its acute occupancy was 21.4% in 2019, a metric that’s dropped annually since 2015, when it was 32.4%. Southside Regional’s occupancy, by contrast, was 48% in 2019.

Bon Secours Mercy Health was formed through the September 2018 merger of Catholic systems Mercy Health and Bon Secours Health System. The 43-hospital system has about $8 billion in net operating revenue.

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