HealthSouth Corporation (NYSE: HLS) has entered into an agreement to sell its six long term acute care hospitals (LTCHs) to LifeCare Holdings, Inc. for approximately $120 million. The transaction is expected to be completed in the third quarter of 2011 and is subject to customary closing conditions, including regulatory approval and third party consents.
“The sale of these six long-term acute care hospitals to LifeCare reinforces HealthSouth’s strategic focus on its 97 core, inpatient rehabilitation hospitals,” said HealthSouth President and Chief Executive Officer Jay Grinney. “We want to recognize and thank our highly-skilled employees at these hospitals for their years of service and wish them the best under LifeCare’s leadership.”
“HealthSouth intends to use the proceeds from this transaction to invest in the retirement of our 10.75% senior notes and our accelerated de novo strategy,” added Grinney. “Most importantly, this divestiture does not change the Company’s outlook for 2011: we still expect our 2011 full-year results will be at the high end of, or greater than, the Adjusted EBITDA range of $440 million to $450 million.”
Expected to close in the third quarter of 2011, the agreement includes the following locations:
- HealthSouth Hospital at Tenaya, Las Vegas, Nev.
- HealthSouth Hospital of Houston, Houston, Texas
- HealthSouth RidgeLake Hospital, Sarasota, Fla.
- HealthSouth Hospital of Pittsburgh, Pittsburgh, Pa.
- HealthSouth Regional Specialty Hospital, Mechanicsburg, Pa.
- HealthSouth Specialty Hospital of North Louisiana, Ruston, La., and two satellite locations/
According to HLS, the hospitals contributed $121.7 million of net operating revenues and $17.5 million of Adjusted EBITDA to HealthSouth Corporation in 2010. They will be treated as discontinued operations beginning in the second quarter of 2011.
Coker Group analyst Mark Reiboldt told HealthLeaders in an email the deal is probably more straightforward and perhaps less strategic relative to broader market trends.
“I imagine HLS recognizes where reimbursement and costs are heading for long-term care and they would likely be better served to focus on their core strengths in PT, rehab and other ancillary services. I read this as an opportunity to divest these assets, retire debt, and refocus on the company’s core profitability,” he said.