(Bloomberg) — Medical Properties Trust Inc., one of the largest U.S. hospital owners, moved to take control of three Southern California health care entities after charging the owner, Prospect Medical Holdings , of defaulting on their debts.
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MPT has demanded that board members of three units resign so they can be replaced by independent managers appointed by MPT, according to a letter from MPT sent to Prospect on November 18, a copy of which was seen by Bloomberg News. The company also warned Prospect that MPT could still foreclose on the properties if the debt default is not settled.
MPT confirmed the lawsuit Tuesday and said in a statement that its relationship will remain as owner of Prospect and “will continue to have no involvement in the hospital’s operations.”
“As disclosed on MPT’s recent earnings call, Prospect did not pay cash rent during the third quarter as its liquidity continues to be impacted by ongoing sales processes in several East Coast markets,” a spokesperson for MPT said. MPT in the statement. “As a result, MPT has asserted its right to appoint new independent directors to the board 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 offering medical services in a more efficient area.
Representatives for Medical Properties Trust and Prospect Medical did not respond to requests for comment.
Medical Properties Trust purchases medical facilities and rents them to 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 rent nonpayments. Under the agreement, MPT ended up holding more than $1 billion in assets related to Prospect. The health care company refinanced some of its debt, but still owes hundreds of millions of dollars to its landlord and other lenders.
The owner has tangled with other medical companies that run hospitals on properties owned by MPT. Bankrupt hospital operator Steward Health Care System accused Medical Properties of improperly interfering with a court-approved plan to sell some properties and pay creditors.