(Bloomberg) — Medical Properties Trust Inc., one of the largest hospital landlords in the U.S., has moved to take control of three health care facilities in Southern California after accusing the owner — Prospect Medical Holdings — of default on his debts.
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MPT has demanded that the board members of three units resign so they can be replaced by MPT-appointed independent managers, according to a Nov. 18 letter to Prospect from MPT, a copy of which has been seen by Bloomberg News. The company also warned Prospect that MPT could still seize the properties if the debts are not paid.
MPT confirmed the demand Tuesday, saying in a statement that the relationship will remain Prospect’s landlord and “will continue to have no involvement in hospital operations.”
“As disclosed on MPT’s recent earnings call, Prospect did not pay cash rent during the third quarter as liquidity continues to be impacted by ongoing sales processes in several East Coast markets,” an MPT spokesperson said in the statement. “As a result, MPT has asserted its right to appoint new independent directors to the boards of directors of certain prospect entities.”
Targets include one of Prospect’s flagship entities, Alta Hospitals System, which owned three hospitals when Prospect bought the company in 2007. That purchase began Prospect’s experiment in what it calls “coordinated regional care,” which aims to increase profits by making medical services in an area more efficient.
Representatives for Medical Properties Trust and Prospect Medical did not respond to requests for comment.
Medical Properties Trust purchases medical facilities and leases them back to the operators. In 2019, Prospect sold several properties to MPT as part of a $1.55 billion deal.
MPT announced a restructuring of its agreement with Prospect last year after months of missed rental payments. Under the deal, MPT owned more than $1 billion in assets related to Prospect. The health care company has refinanced some of its debt but still owes hundreds of millions of dollars to its landlord and other lenders.
The landlord has been in contact with other medical companies that operate hospitals on MPT-owned land. Bankrupt hospital operator Steward Health Care System accused Medical Properties of improperly interfering with a court-approved plan to sell some properties to pay off creditors.
(Adds statement from MPT beginning in third paragraph.)
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