Discontinued Operations

9 Months Ended

Sep. 30, 2012

Discontinued Operations [Abstract]

Discontinued Operations

7.Discontinued Operations

Our discontinued operations during the periods presented herein included: (i) 189-bed Gulf Coast Medical Center in Biloxi, Mississippi; (ii) 25-bed Fishermen’s Hospital in Marathon, Florida; (iii) the 172-bed Woman’s Center at Dallas Regional Medical Center in Mesquite, Texas; (iv) 25-bed St. Mary’s Medical Center of Scott County in Oneida, Tennessee; (v) the 293-bed idle Riverside hospital campus in Knoxville, Tennessee; and (vi) certain other health care operations affiliated with those hospitals.  The operating results and cash flows of discontinued operations are included in our consolidated financial statements up to the date of disposition.  Additionally, as required by GAAP, the operating results and cash flows of the abovmentioned entities have been separately presented as discontinued operations in the interim condensed consolidated financial statements.  Long-lived assets to be disposed of are reported at the lower of their carrying amount or estimated fair value, less costs to sell.  The estimates of fair value are based on recent sales of similar assets, market analyses, pending disposition transactions and market responses based on discussions with, and offers received from, potential buyers (i.e., Level 2 inputs under the GAAP fair value hierarchy described at Note 5).

The Woman’s Center at Dallas Regional Medical Center (the “Woman’s Center”) was closed on June 1, 2008.  On May 21, 2012, the remaining real property at the Woman’s Center was sold for cash consideration of approximately $1.4 million, less selling and other related costs.  The resulting loss of $1.1 million has been included in our discontinued operations during the nine months ended September 30, 2012.  We closed Gulf Coast Medical Center (“GCMC”) on January 1, 2008.  On July 18, 2011, the remaining real property at GCMC was sold for cash consideration of $3.4 million, less selling and other related costs.  The resulting gain of $0.6 millionhas been included in our discontinued operations during the three and nine months ended September 30, 2011.  During May 2011, one of our subsidiaries entered into a lease termination agreement for Fishermen’s Hospital that became effective on July 1, 2011.  As part of the agreement, the hospital’s remaining equipment, as well as certain working capital items, were sold to our former lessor for $1.5 million in cash.  The Fishermen’s Hospital lease termination resulted in a goodwill impairment charge of $3.6million during the nine months ended September 30, 2011.

7.Discontinued Operations (continued)

One of our subsidiaries acquired St. Mary’s Medical Center of Scott County (“SMMC”) and the idle Riverside hospital campus (“Riverside”) from Mercy on September 30, 2011 (see Note 6 for a discussion of the Mercy acquisition).  A portion of the total Mercy acquisition purchase price was allocated to SMMC and Riverside and included as an investing activity of our discontinued operations in the condensed consolidated statements of cash flows.  SMMC was a leased facility with a lease agreement that expired on May 24, 2012.  On such date, the SMMC facility was returned to the lessor.  Mercy had closed the hospital at the Riverside location prior to our acquisition.  Although we are currently evaluating various disposal alternatives, the timing of a divestiture of the Riverside hospital facility has not yet been determined.  We recently concluded that the estimated fair value of the long-lived assets at the Riverside hospital facility, less costs to sell, was lower than the corresponding net book value of such assets.  Accordingly, we recorded a long-lived asset impairment charge of approximately  $1.2 million during the three and nine months ended September 30, 2012 to reduce the affected long-lived assets to their estimated net realizable value.

The table below sets forth the underlying details of our discontinued operations (in thousands). 

	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2012		2011		2012		2011
Net revenue before the provision for doubtful accounts	$	-	$	-	$	7,316	$	13,603
Provision for doubtful accounts		-		-		(2,139)		(2,741)
Net revenue		-		-		5,177		10,862
Salaries and benefits		192		-		4,587		4,535
Depreciation and amortization		-		-		1,988		1,182
Other operating expenses		889		203		5,791		3,766
(Gains) losses on sales of assets, net		-		(619)		1,102		(304)
Long-lived asset and goodwill impairment charges		1,187		-		1,187		3,614
		2,268		(416)		14,655		12,793
Income (loss) before income taxes		(2,268)		416		(9,478)		(1,931)
Income tax (expense) benefit		879		(161)		3,673		749
Income (loss) from discontinued operations	$	(1,389)	$	255	$	(5,805)	$	(1,182)

The table below summarizes the principal components of our assets of discontinued operations (in thousands).

	September 30, 2012		December 31, 2011
Supplies, prepaid expenses and other assets	$	-	$	569
Property, plant and equipment, net, and other		8,100		13,992
Total assets of discontinued operations	$	8,100	$	14,561