Apollo-owned hospitals close amid declining financial condition
March 6, 2025
Private equity-owned hospital chain ScionHealth announced in February that it is permanently closing three hospitals and laying off hundreds of hospitals workers. The closures come as Scion struggles to shoulder substantial debt and private equity hospital ownership faces increased scrutiny from lawmakers.
ScionHealth is owned by private equity firm Apollo Global Management and operates long-term acute care and rehabilitation hospitals under multiple brands, including Kindred Healthcare.
The three hospitals shutting down are Kindred Hospital Sycamore and Kindred Hospital Lakeshore in Chicago and Kindred Hospital Bay Area in Tampa. Over 300 workers across the three facilities – including nurses, pharmacists, dietitians, and respiratory therapists – will lose their jobs.[1]
In both Chicago and Tampa, Kindred spokespeople have said that the company is consolidating operations to other nearby Kindred hospitals. In Tampa, workers do not have a union and are not eligible for transfer, reassignment, or bumping rights, but a ScionHealth spokesperson said they may be offered positions at nearby hospitals. Workers at the Chicago hospitals were offered positions at nearby Kindred hospitals.
ScionHealth’s Financial Troubles and PE Ownership
ScionHealth is highly indebted and facing acute financial distress.[2] According to credit ratings agency Moody’s Investors Service, Scion recently executed a distressed exchange in order to avoid a default and is highly likely to default through another distressed exchange.[3]
In its analysis of Scion, Moody’s noted the “preponderance of debt” and an “unsustainable capital structure” as contributors to its low credit rating.[4] Scion’s credit ratings have steadily and consistently declined since the company’s formation in 2021.[5]
Apollo created Scion through a series of transactions with another Apollo-owned hospital chain, Lifepoint Health, which Apollo acquired in 2018.[6] In December 2021 Lifepoint acquired Kindred Healthcare (then owned by private equity firms TPG Capital and Welsh, Carson, Anderson & Stowe[7]). As part of the transaction, Lifepoint shifted some of the acquired facilities and some of its existing hospitals into the newly created ScionHealth,[8] which is also controlled by Apollo.[9]
Through Lifepoint and Scion together, Apollo has an extensive hospital footprint, owning 217 hospitals across 36 states.[10]
While Scion shoulders a potentially untenable debt burden[11], Lifepoint enjoys a somewhat stronger financial position with a B3 Corporate Family Rating and “elevated financial leverage.”[12] Apollo’s splitting of Lifepoint to create two companies in which one company (ScionHealth) carries more debt appears to be a familiar private equity strategy. In writing about KKR-owned staffing firm Envision’s ballooning debt in 2022, economists Eileen Appelbaum and Rosemary Batt this strategy:
“Drawing on lessons from other PE-owned companies facing financial distress —like Nine West, J. Crew, and Sears—KKR will likely emerge unscathed by dividing Envision into two companies, one with the valuable assets and the second with the remaining assets…. KKR may divide Envision’s assets, with ‘Bad Envision’ holding the least profitable assets and the debt, while ‘Good Envision’ gets to make a clean start and raise new debt to pay off creditors holding the debt of Bad Envision, at significantly less than 100 cents on the dollar.”[13]
Apollo’s hospital ownership has recently come under fire from lawmakers and regulators; earlier this year the US Senate Budget Committee released the results of a bipartisan investigation into private equity ownership of hospitals that focused on Lifepoint.
In January 2024, PESP and AFT released a joint report on Lifepoint and Scion. See the report here: “Apollo’s Stranglehold on Hospitals Harms Patients and Healthcare Workers.”
Resources
[1] February 2025 WARN Act Notices for Illinois and Florida. Employee totals are 83 for Kindred Hospital Sycamore; 74 for Kindred Hospital Lakeshore; and 143 for Kindred Hospital Bay Area – Tampa.
Credit ratings agency Moody’s Investors Service assigns the company a Caa2-PD Probability of Default Rating (PDR), which is considered speculative of poor standing and subject to very high default risk (see here for an explanation of Moody’s ratings).
[3] Moody’s Investors Service, “Moody’s Ratings appends limited default (LD) to Knight Health Holdings LLC’s Caa2-PD PDR following distressed exchange,” January 13, 2025. https://www.moodys.com/research/Moodys-Ratings-appends-limited-default-LD-to-Knight-Health-Holdings-Rating-Action–PR_501001
[4] Moody’s Investors Service, “Moody’s Ratings appends limited default (LD) to Knight Health Holdings LLC’s Caa2-PD PDR following distressed exchange,” January 13, 2025. https://www.moodys.com/research/Moodys-Ratings-appends-limited-default-LD-to-Knight-Health-Holdings-Rating-Action–PR_501001
[5] Moody’s credit ratings between December 2021 and February 2025 show a decline from B2 to Caa2-PD. https://www.moodys.com/reports?entity=867945667. Accessed March 3, 2025.
[6] Prang, Allison. “Lifepoint Health Agrees to Apollo Buyout.” WSJ, July 23, 2018. https://www.wsj.com/articles/Lifepoint-health-agrees-to-apollo-buyout-1532347207?mod=article_inline.
[7] Humana press release, “Humana, Together with TPG Capital and Welsh, Carson, Anderson & Stowe, Announce Completion of the Acquisition of Kindred Healthcare, Inc.,” July 2, 2018. https://press.humana.com/news/news-details/2018/acquisition-kindred-healthcare-inc/default.aspx#gsc.tab=0
[8] “Lifepoint Health Completes Kindred Healthcare Transaction,” December 23, 2021, https://Lifepointhealth.net/news/2021/12/23/Lifepoint-health-completes-kindred-healthcare-transaction.
[9] See pg. 15 of “Form 10-K (Filed February 25, 2022), Apollo Global Management.” United States Securities and Exchange Commission, December 31, 2021. https://www.sec.gov/Archives/edgar/data/1411494/000141149422000014/apo-20211231.htm.
[10] See Lifepoint’s list of hospitals here. Scion’s list of hospitals is here. Total number of Lifepoint and Scion locations is 217. Accessed March 2025.
[11] Moody’s wrote in January 2025: “The Caa2 CFR affirmation reflects our view that ScionHealth’s weak liquidity contributes to an unsustainable capital structure and that the probability of a default, by way of another distressed exchange, is high. We anticipate that leverage will remain elevated as operating expenses, namely high interest expense, will continue to pressure profitability and liquidity in the near term.”
[12] Moody’s Investors Service, “Moody’s Ratings assigns a B2 rating to Lifepoint’s new senior secured notes,” January 14, 2025. https://www.moodys.com/research/Moodys-Ratings-assigns-a-B2-rating-to-Lifepoints-new-senior-Rating-Action–PR_501202
[13] Eileen Appelbaum and Rosemary Batt, “Envision Healthcare Hits the Skids,” American Prospect, March 14, 2022. https://prospect.org/health/envision-healthcare-hits-the-skids/
