MPT Hospital Corporate Savior

MPT Our Corporate Raider

MPT was founded in 2003 by Ed Aldag, an Alabama native who serves as the firm's president, chairman, and CEO. The core idea was simple: to buy hospital real estate, pocket the lease payments, and use the money to reward investors. (By law, real-estate investment trusts like MPT must pay 90% of their taxable income to shareholders.) Over the past few decades, plenty of private-equity firms have engaged in a similar form of financial engineering, called sale-leasebacks, with hotels and retailers. Selling the real estate was a key element, for instance, of the financier Eddie Lampert's plan to make money from a struggling Sears. But no one had done it at a massive scale with hospitals — for reasons, perhaps, that should have been obvious.

MPT came along at the perfect moment. Hospitals in rural and underserved communities have always been a tough business, for the simple reason that they serve more patients who are uninsured or who rely on Medicaid, which reimburses at a fraction of the rate of commercial insurance. But then two things happened. First, in 2006, Bain Capital and a handful of other investors bought the massive hospital chain HCA and quickly made a fortune. Second, the passage of the Affordable Care Act in 2010 added to the gold-rush mentality by promising to dramatically expand the number of Americans with insurance, thereby improving hospital margins. By 2011, seven of the nation's top for-profit chains were owned by private-equity firms.

To say the investments didn't pan out would be an understatement. Obamacare didn't wind up providing the expected infusion of cash, and the government has continued to slash Medicaid reimbursements. As a result, hospitals in rural and underserved areas continued to be a difficult business proposition, and their private-equity investors were facing serious losses. "The hospital chains faced major challenges in meeting loan obligations," the economist Eileen Appelbaum and Rosemary Batt, a management professor at Cornell University, found.

What started out as a way to rescue failed investments wound up creating a whole new form of financial engineering for private-equity profiteers.

Note: During this research especially this portion a named italic above referenced "Bain Capital". For those who find that name familiar it is, the senior US Senator from Utah was the CEO of this private equity raider in the years before the Obama Administration. How our history repeats itself.