What happened

Shares of Community Health Systems (NYSE:CYH), a major operator of U.S. hospitals, jumped 12.8% on Monday before finishing the session about 8.7% higher. The ASL Strategic Value Fund sent a letter to the company's board of directors urging it to do its fiduciary duty to shareholders. Citing billions lost in association with "the ill-conceived and poorly executed HMA acquisition," the fund feels that relieving Wayne Smith of his role as CEO is step one.

So what 

Smith led the $3.9 acquisition of Health Management Associates that also saddled Community Health Systems with $3.7 billion in debt. Since completing the deal in early 2014, the stock has fallen about 77%. 

Hand drawing arrows going up.

Image source: Getty Images.

In 2016, Community Health Systems investors were treated to shares of Quorum Health, a spinoff of rural hospitals acquired earlier. Unfortunately, that stock has plunged about 69% since its debut.

Now what

Although the HMA acquisition has been a disaster, it's easy to see why this is an attractive target for activist investors. The leading hospital operator in the U.S., HCA Healthcare has sported an impressive 14.6% operating margin over the past year. On the same yardstick, Community Health appears to be terribly inefficient with an operating margin that just recently emerged from negative territory to reach about 2.3% over the same period.

The HMA acquisition didn't end up growing the top line, but Community Health Systems still raked in $17.5 billion in revenue over the past year. If this company can become anywhere near as efficient as its biggest peer, the stock would soar.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.