Community Health Systems, Inc. (NYSE: CYH)

Issue

Attorneys in Bradley’s Healthcare Practice Group handled a number of legal matters for Community Health Systems, Inc. (CHS) in a major spin-off transaction. CHS, one of the largest publicly traded hospital companies in the United States and a leading operator of general acute care hospitals in communities across the country, spun off 38 hospitals and related businesses, as well as a healthcare consulting company, to create Quorum Health Corporation (NYSE: QHC), a new company focused on operating hospitals and other facilities primarily located in cities or counties with populations of 50,000 or less.

Challenge

The spin-off was a large, complex, and significant transaction requiring dedicated legal work in a number of disciplines. Bradley attorneys had to confront a broad range of matters, including structuring and negotiating agreements; documenting numerous corporate restructuring transactions; and handling licensure, reimbursement, employee benefits, and other issues. Stakeholders also had to take external market considerations into account when timing and carrying out the transaction, including market volatility, a federal interest rate hike, and ongoing repercussions to the healthcare industry from passage of the Affordable Care Act.

Solution

Bradley’s attorneys leveraged their broad cross-disciplinary skillset and extensive experience in all manner of healthcare transactions to guide the matter to a successful conclusion. The firm’s knowledge and understanding of the CHS business model allowed its attorneys to give practical advice tailored to advancing the company’s specific goals.

The spin-off was completed on April 29, 2016, resulting in two separate healthcare entities with more refined, efficient portfolios, poised to pursue unique pathways for success. CHS aims to sharpen its focus on growth opportunities in larger markets, while QHC’s management team can devote their efforts to the issues faced by smaller hospitals, which are often the sole providers in their communities.

As a result of the spin-off transaction, QHC is now an independent public company that owns or leases a portfolio of 38 hospitals and related businesses in 16 states, with an aggregate of 3,582 licensed hospital beds, in addition to operating Quorum Health Resources, a hospital management advisory and consulting services business.

CHS remains one of the largest healthcare companies in the country and currently owns, leases, or operates 160 affiliated hospitals in 22 states, with an aggregate of nearly 27,000 licensed beds. CHS stockholders received equity in QHC, and CHS also received a portion of the proceeds of certain financing arrangements from the transaction.