The company's board believed they could not find a replacement for Chaney by the date of his intended departure, and so the directors put the company up for sale. In March 1996, the New York-based investment banking firm Merrill Lynch was hired to generate interest in the company, and a suitable buyer was found, a New York-based private investment firm named Forstmann Little & Co. This company was headed by Theodore Forstmann, a leveraged buyout specialist. Forstmann's firm had more than $20 billion invested in 20 companies and made its living by acquiring companies and selling them for a profit. Forstmann Little acquired Community Health in 1996, and this was the firm's first purchase of a healthcare company. The firm paid $1 billion for Community Health, which at the time operated 38 hospitals in 18 states, and this change in ownership made Community Health a privately held company. In January 1997, Wayne T. Smith was named president of Community Health and was selected as its chief executive officer in April 1997. He joined Community Health after spending more than two decades working for Louisville, Kentucky-based Humana Inc., joining the healthcare provider in 1973 after serving a four-year stint as a Captain in the U.S. Army Medical Services Corp. Smith rose through the executive ranks at Humana, becoming its president and chief operating officer in 1993 (Community Health Systems, Inc., 2005). Community Health now started began expanding its portfolio of properties, to become the largest operator of rural hospitals in the country. The company acquired many other companies and enjoyed its status as a privately held company, making it possible to develop into the country's largest player. Converting to public ownership was seen as inevitable, however, in part because Forstmann Little wanted to get a return on its investment, but also because Smith needed to obtain capital to fuel the company's expansion drive. Community Health did indeed again become a publicly held company in 2000. Investors responded by buying the stock, and revenue in 1998 exceeded $850 million and passed the $1 billion mark the following year. The company completed its IPO in June 2000 and raised $245 million from the offering and another $269 million through a secondary offering of stock before the end of the year. By the end of 2000, sales had increased 24% to reach $1.34 billion (Community Health Systems, Inc., 2005).

The company came under greater scrutiny as it reached a higher position in the industry. The appraisal from the critics was positive and supported the soundness of the company's strategy:

Community Health adhered to a disciplined acquisition strategy, selecting hospitals that were ailing for reasons that were not related to the market they served. "You can fix bad hospitals; you can't fix bad markets," an analyst noted in the June 24, 2002 issue of Investor's Business Daily. Community Health relied on strong management and a centralized office to keep costs down, recouping the investments it made in recruiting health specialists, adding new services, and implementing new information and supply systems by carefully following its acquisition criteria. Once a hospital was purchased, it often took several years for the hospital to reach Community Health's standard of optimal performance -- one of the reasons the company was unprofitable during the late 1990s -- but after the property's financial performance improved, Community Health gained a valuable money-maker (Community Health Systems, Inc., 2005)

As Community Health neared its 20th anniversary, Forstmann Little reduced its stake in the company three times after the IPO and in 2004 sold its remaining 23% interest for $560 million, nearly tripling the firm's original investment. Between 1996 and 2004, the company spent $1.8 billion and acquired 47 hospitals. Continued expansion would become the mark of the company.

Company Management

The management chart for CHS, as set forth by Reuters this year, stands as follows:

Management Chart

http://www.investor.reuters.com/images/arrowMoreU.gif

Management Since

Chairman of the Board, President, Chief Executive Officer

Smith, Wayne T.

Chief Financial Officer, Executive Vice President, Director

Cash, W. Larry

Senior Vice President - Group Operations

Portacci, Michael T.

Senior Vice President - Group Operations

Newsome, Gary D.

Senior Vice President - Group Operations

Miller, David L.

Senior Vice President, General Counsel, Secretary

Seifert, Rachel a.

Senior Vice President -- Group Operations.

Hussey, William S.

Vice President, Corporate Controller

Buford, T. Mark

(Community Health Systems Inc.: Management, 2007).

The most recent financials as detailed by Reuter's are as follows:

Key Numbers (Currency in Millions)

Income Statement

Total Revenue

Gross Profit

Total Operating Expense

Operating Income

Net Income before taxes

Net Income After taxes

Net Profit Margin

Balance Sheet

Total Assets

Current Assets

Total Liabilities

Current Liabilities

Long-Term Debt

Total Debt

Total Equity

Cash Flows

Cash from Operating Activities

Cash from Investing Activities

Cash from Financing Activities

Net Change in Cash

Growth Rates

Years

Revenue

COGS

Total Operating Expense

Operating Income

Net Income

Total Assets

(Community Health Systems Inc.: Company Overview, 2007).
The management of the company notes the following about the target market for the company:

We target growing, non-urban healthcare markets because of their favorable demographic and economic trends and competitive conditions. Because non-urban service areas have smaller populations, there are generally fewer hospitals and other healthcare service providers in these communities. We believe that smaller populations result in less direct competition for hospital-based services. Also, we believe that non-urban communities generally view the local hospital as an integral part of the community. There is generally a lower level of managed care presence in these markets (Prospectus Summary, 2006).

Community Health Services is one of the largest employers in Tennessee, and the company states that it sees keeping employees happy and motivated is the key to continued success. To this end, the company fosters opportunities for development, motivation, encouragement, and education. The company also states that "employees are best able to enhance and put their individual skills to work" (Career opportunities, 2007). The company also states that the dedication of employees goes beyond demonstrating professional excellence to demonstrating a commitment to their surrounding communities by stepping up and taking part in blood drives, United Way initiatives, national relief efforts, and other philanthropic endeavors. The company also has a written policy concerning the treatment of employees:

This organization is an Equal Opportunity Employer and is committed to workforce diversity. Employees also sign an acknowledgement of a Code of Conduct that is designed to provide guidance in performing daily activities in accordance with all federal state and local laws, rules and regulations. This code is an integral component of our Compliance Program and reflects a commitment to achieve goals within the framework of the law through a high standard of business ethics and compliance (Career opportunities, 2007)..

The company benefited from changes in reimbursement in 2002 after the period of recession that preceded that period (Reimbursement prospects support Community Health, 2002). Another reason for the success of the company in recent years has been its purchase of many rural hospitals that are essentially the only medical care facility for the population of the region. CHS focuses on rural and suburban areas that often have only one medical care facility. Such hospitals may not have all the equipment that a big city hospital has, but these hospitals are not as primitive as they once were. One of the reasons for this has been the infusion of cash and expertise by companies like CHS, which has invested millions of dollars to bring many of those facilities up to speed with the latest gear. CHS buys hospitals that are struggling financially but that operate in solid markets. The company targets small markets, meaning those generally with populations of less than 100,000 in areas served by a single hospital. These markets also have a strong economic base, allowing the company to thrive. The company also utilizes strong management and a centralized office to keep costs in line and distribute capital where it is most needed. The company buys a facility and then adds a CT scan, MRI, or cardiac catheterization unit. The company also expands the emergency room and recruits specialists to the hospital.

This approach made it possible for Community Health to have eight straight quarters of 100% or better year-over-year earnings growth, with sales growth that topped 20% in each of those quarters (Watkins, 2002).

Acquisitions are not the only reason for the growth of the company. The company's same-store sales grew at 9.5% during the first quarter, a figure that has hovered in the high single digits to low double digits for eight quarters. In 2002, some industry factors threatened to slow growth moving forward, and these included wage inflation for nurses, medical liability costs, and Medicare reimbursement issues. As one analyst noted,

Community Health has some protection against those risks, however. It should be able to maintain strong growth over the next couple of year as it integrates acquired hospitals into its system and improves performance (Watkins, 2002, p. A04).

Once Community Health buys its hospitals, it institutes a set method of adding new information and supply systems, recruiting specialists, and adding services. The syste4m used has been so…