Oaktree, Medical Properties Trust Form New Venture To Buy Up, Turn Around Distressed Hospitals

The Hahnemann University Hospital Campus In Philadelphia As Of May 2009

A new company has formed with the goal of swooping in and saving hospitals that are struggling to keep the lights on.

An Aug. 19 press release announced the creation of StoneBridge Healthcare, a venture capitalized by a combination of private debt and equity sources headlined by Medical Properties Trust and Oaktree Capital Management. StoneBridge's mission will be to "buy, save and turn around deeply distressed hospitals in the cities and suburbs of America," the release said.

StoneBridge will focus particularly on hospitals situated in areas with disadvantaged or vulnerable populations via what its website calls The Mission Project. Though light on specifics, the initiative's outline mentions using hospitals as a home base for bringing healthcare into their surrounding communities.

The press release clarified that plans for StoneBridge had been set in motion well before the coronavirus swept across the country and its healthcare systems, but that the pandemic has only made the new company's mission more urgent.

"The coronavirus has created the worst financial crisis American hospitals have ever faced, depriving them of the revenue they need to stay alive," the release stated. "Many U.S. hospitals are close to running out of cash and the ability to operate."

StoneBridge's reliance on private equity funds managed by Oaktree may give some healthcare advocates pause, considering the controversial end to a private equity-owned hospital in Philadelphia last year. Hahnemann University Hospital, a centrally located facility that catered primarily to individuals insured by Medicare and Medicaid, closed its doors mere months after a takeover by Paladin Healthcare, an entity controlled by private equity investor Joel Freedman and backed with debt from Apollo Global Management.

The new company's stated goals are in direct opposition to how Freedman conducted business with Hahnemann, but some experts at the time wondered aloud if the Philly hospital's abrupt closure was due to pressure from Paladin's lenders.

To lead StoneBridge as CEO, its founders tapped Joshua Nemzoff, a consultant for healthcare system mergers and acquisitions. His firm, Nemzoff & Co., is based in the Philadelphia suburb of New Hope, Pennsylvania.

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