CommonSpirit inks letter of intent to sell Essentia 14 mostly rural hospitals

Dive Brief:

  • CommonSpirit Health has signed a letter of intent to move numerous critical access hospitals to the control of Essentia Health.

  • The deal involves CommonSpirit’s Alexius Medical Center in Bismarck, N.D., 13 critical access facilities, associated clinics, home health services and senior living facilities. Critical access hospitals are small and located in rural communities. Terms of the potential transaction were not disclosed.

  • The announcement comes as numerous nonprofit hospital systems have been hit hard financially due to the COVID-19 pandemic and may be looking to offload underperforming assets.  Although CommonSpirit’s most recent quarterly numbers showed signs of a rebound, it lost $550 million in the 2020 fiscal year.

Dive Insight:

CommonSpirit Health is the product of the merger of two large religious hospital systems, Catholic Health Initiatives and Dignity Health. The letter of intent it signed with Essentia suggests the roughly 140-hospital system is taking stock of its smaller rural facilities, most of which were under the control of CHI prior to the merger.

With 286 beds, the Alexius Medical Center in Bismarck is by far the largest of the hospitals involved in the potential transaction. The remaining 13 facilities are critical access hospitals, which are no bigger than 25 beds and are almost always geographically isolated. CHI Alexius operates 11 critical access facilities in North Dakota, although the names and locations of the facilities to be included in the deal were not disclosed.

Although critical access facilities receive additional funding from the federal government to keep their doors open, many are struggling financially. Sixty-four critical access hospitals have closed between 2005 and 2019, according to data from the Sheps Center for Health Services Research at the University of North Carolina. The closures include two in the Dakotas and four in neighboring Minnesota.

Meanwhile, numerous hospital systems have downsized in recent years. Tenet Healthcare, for example, has shed a large chunk of its hospital portfolio and is now more focused on owning and operating ambulatory surgical centers. CHS has also offloaded numerous hospitals in recent years.