market folly

We're posting up notes from the Sohn New York Investment Conference.  Next up is Ryan Heslop of Firefly Value Partners who presented a short of Community Health Systems (CYH).


Ryan Heslop's Sohn New York Presentation

•    Short Community Health Systems (CYH): levered rollup of rural hospitals

o    Company will file for bankruptcy and equity will be worthless
o    CYH grew from 8,000 to 30,000 beds through acquisitions since 2000’s. Paid 600k per bed
o    Net debt grew to $16 billion from less than $2 billion since 2005
o    Management compensated on revenue and EBITDA. Ignores debt
o    Admissions have been declining. Patients are choosing to go to urban hospitals. Trend towards outpatients
o    Rising unit costs
o    Declining profitability per bed
o    Slashed capex by 50% per bed over 10 years. Under-investing in new technologies which fuels patient declines
o    CYH charging more and gauging out of network patients and uninsured. Top in the industry in gauging. Desperate for cash
o    Over 4 years has sold 1/3 of hospitals. Paid top dollar buying them at 600k. On sale has received 250k per bed and might be getting worse
o    Debt per bed has increased to over 700k per bed
o    Company doesn’t generate any cash. Including items the company categorizes as one-time costs they are burning a few hundred million a year.


Be sure to check out the rest of the Sohn New York conference presentations.