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Subsidiaries of Community Health Systems (NYSE:CYH) have reached a deal to sell four hospitals in Pennsylvania as well as their assets to subsidiaries owned by PinnacleHealth System. The divestiture plan was first revealed and discussed during the earnings call of the fourth quarter in 2016 in which twenty five hospitals were designated for sale.

The hospitals that will be sold include Carlisle Regional Medical Center that is located in Carlisle, Heart of Lancaster Regional Medical Center located in Lititz, Lancaster Regional Medical Center located in Lancaster and Memorial Hospital of York located in York.

Bed capacity

Of the four hospitals, the Memorial Hospital of York is the smallest with a capacity of 100 beds while the Lancaster Regional Medical Center is the largest with a capacity of 214 beds. Carlisle Regional Medical Center is the second-largest with a capacity of 165 beds while Lancaster Regional Medical Center is the third-largest with a capacity of 148 beds.

The deal is expected to be sealed mid this year upon the closing conditions and regulatory approvals being fulfilled. McNees Wallace & Nurick LLC will act the legal counsel in the transaction for PinnacleHealth while Kaufman, Hall & Associates, LLC will be the financial advisor.

Portfolio rationalization

By divesting, Community Health Systems’ goal is deleveraging and portfolio rationalization. The assets that have been selected for divestiture are those whose operating margins are low and those which are not in line with the business strategy. At the close of 2016, Community Health Systems’ long-term debt stood at $14.8 billion.

Once the deal is concluded Community Health Systems will still retain a huge number of hospitals as it currently has in its portfolio 158 of them in 22 states. This translates to a total number of 26,000 beds. Community Health Systems operates, lease or owns these hospitals through subsidiaries making it one of the biggest public hospital firms in the U.S. Most of the hospitals in Community Health Systems’ portfolio provide general acute care services. Community Health Systems is headquartered in Franklin, Tennessee.

On Wednesday shares of Community Health Systems rose by 4.36% to close the day at $9.58.

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