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Senators Put Largest U.S. Hospital Landlord Under Scrutiny In Bipartisan Probe

Sen. Chuck Grassley, a Republican from Iowa

Senators from both parties have launched a probe into the role of private equity in healthcare, and they have a REIT that owns more U.S. hospitals than any other firm in their crosshairs.

The bipartisan investigation, headed up by Sen. Sheldon Whitehouse, a Democrat from Rhode Island, and Sen. Chuck Grassley, a Republican from Iowa, is looking at how private equity firms have created complicated financial arrangements to boost profits and what that has cost medical providers and patients.

The probe began in March with a focus on private equity firm Apollo Global Management and Lifepoint Health, which owns dozens of mostly rural hospitals across the country, including an Iowa facility where a male nurse assaulted multiple sedated patients in 2021 and 2022.

But the investigation is now expanding, NBC News reported, with new scrutiny into deals executed by Medical Properties Trust.

Lawmakers have sent letters out to five firms — Apollo, Lifepoint, MPT, Prospect Medical and private equity firm Leonard Green & Partners — with questions about how the companies have bought healthcare businesses including nursing homes, hospitals and physician practices before saddling them with debt.

Academic studies have shown that under the private equity model, as the firms slash company costs to increase earnings and appeal to buyers, the cost of care, taxpayer costs and death rates all increase while the quality of care provided decreases.

One part of this model is a deal blueprint used by MPT, which involves acquiring hospital real estate from private equity-owned providers.

MPT's second-largest tenant as of August was Prospect Medical, which operates 16 safety net hospitals across four states. Prospect was owned by Los Angeles-based private equity firm Leonard Green & Partners until recently, NBC reported.

MPT has failed to answer questions posed by the investigation about its dealings with Lifepoint and to provide documents where relevant, the senators claimed in a Wednesday filing.

The Senate Committee on the Budget is seeking documents that it believes would shed light on a 2019 sale-leaseback deal involving MPT, Lifepoint and Apollo. Requests include how MPT arrived at property valuations of hundreds of millions of dollars, conversations regarding the deal between executives at the companies involved, and MPT’s involvement with boards related to the hospitals and Lifepoint.

“Despite MPT’s ongoing assurances that it would cooperate with Senator Grassley and the investigation, MPT has hidden behind Lifepoint to provide relevant documents and information on its behalf and has repeatedly failed to provide its own full and complete answers,” Grassley and Whitehouse wrote in a joint letter to MPT CEO Edward Aldag.

MPT has argued that its investments create financial flexibility for hospitals and said that it isn't allowed to become involved in patient care or operational decisions.

“This enables operators to invest in facility enhancements, technology upgrades and other improvements to benefit the long-term health of communities,” an MPT spokesperson told NBC. 

The investigation is the latest sign of trouble for MPT, which is the largest hospital landlord in the country.

By this summer, hospital closures had hit the company’s revenues and dragged its stock price down by nearly 50%, while it reported a $42M loss in the second quarter. In August, the company was accused of failing to disclose to investors that California regulators were blocking a deal between MPT and Prospect.

MPT owned 441 properties at the end of September. Its practice of selling hospitals to pay down debt isn't slowing, either. It said in its third-quarter earnings report it expects to divest or sell stakes in hospitals over the next 12 months to bring in $2B to cover debt.