Business

Debt Sickened a Hospital Giant. Now the Doctors Are Revolting

The standoff over Lutheran shows how for-profit chain CHS, once the nation’s largest, allowed its facilities to decay, compromising care and destroying investor value.

4017_biz_health-CMS — Illustration: Simon Landrein for Bloomberg Businessweek

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By David Welch and John Lauerman

September 21, 2017 at 4:00 PM UTC

Corrected

October 2, 2017 at 2:07 PM UTC

This article is for subscribers only.

This article is part of the September 25, 2017 issue of businessweek.

Four doctors from Lutheran Hospital in Fort Wayne, Ind., showed up at parent company Community Health Systems Inc. in May with a message for Chief Executive Officer Wayne Smith and his board. Physicians were in widespread revolt, they said. Facilities were cash-strapped and crumbling. Powerful locals wanted CHS to reinvest or leave.

The doctors urged Smith to sell the eight-hospital Lutheran Health Network to their physician group, which already owned a 20 percent stake, and an investor partner, for $2.4 billion—triple CHS’s current market value. The combative 71-year-old CEO denied authorizing cost cuts in Fort Wayne and demanded the names of those who did, say people in the meeting. The board refused the offer, and rather than pursue the budget-cutters, Smith fired Lutheran’s CEO, who’d sided with the doctors.