Apollo-owned ScionHealth quietly sells and leases-back 5 hospitals from REIT

In September 2024, Apollo-owned hospital system ScionHealth’s subsidiary, Kindred Health, sold five long term acute care (LTAC) hospitals to Ventas, a healthcare real estate investment trust (REIT),[1] in a sale-leaseback transaction valued at $189 million.[2] The deal comes as lawmakers and public officials question the practice of selling off hospital real estate to REIT landlords to enrich private equity firms.

Ventas has not yet disclosed the list of properties it acquired in the sale-leaseback,[3] although a real estate industry publication reported that one of the facilities is Kindred Hospital – The Palm Beaches in Riviera Beach, Florida.[4] The five hospitals will pay a yearly combined rent of $16 million to Ventas, with 2.75% annual increases.[5]

Ventas is a publicly traded REIT that has around 1,350 properties across the United States and the United Kingdom, including 34 facilities owned by Kindred/ScionHealth.[6] Ventas also owns approximately 800 senior living properties.[7]

ScionHealth is one of two hospital chains owned by private equity firm Apollo Global Management, the other being Lifepoint Health.^[8]

The two companies are the result of a series of hospital acquisitions by Apollo, which in 2018 bought Lifepoint and merged it with another hospital chain, RegionalCare Hospital Partners.^[9]  Then, in December, 2021 Lifepoint acquired the large long term acute care hospital chain Kindred Healthcare. As part of the transaction, Lifepoint shifted some of the acquired facilities and some of its existing hospitals into a new company called ScionHealth,^[10] which is also controlled by Apollo.^[11]

Through Lifepoint and ScionHealth together, Apollo has an extensive hospital footprint, owning approximately 220 hospitals across 36 states.^[12] Of the 220 hospitals, Lifepoint has 126 (57%), while Scion has 94 (43%).

REITs own the real estate of at least 35% of Lifepoint/ScionHealth hospitals (77 hospitals total). Medical Properties Trust (MPT) is their second largest REIT landlord after Ventas, holding 33 Scion/Lifepoint hospital properties.[13]

PESP released a report on Apollo-owned hospital chains, Lifepoint Health and ScionHealth, in January 2024. The report can be accessed here.

Over the past year, high profile stories about struggling hospital systems, like Steward Health Care’s bankruptcy and Prospect Medical Holdings’ financial troubles, have brought REITs and their relationship to private equity-owned hospital chains into the media and regulatory spotlight. Federal[14] and state lawmakers[15] have begun to look more closely at healthcare REITs, proposing and debating legislation that would limit or ban sale-leasebacks of certain healthcare facilities. Lawmakers have also sent letters to various REITs as part of their investigations into current and former private equity-owned health systems: Steward Health Care, Lifepoint Health, and Prospect Medical Holdings.

Both Senators Ron Wyden (D-OR) and Elizabeth Warren (D-MA) also recently wrote to the IRS urging more scrutiny of REITs.[16] In Warren’s letter, she pointed out the special tax breaks REITs receive, and how recent behavior of REITs in healthcare and hospitality industries raises questions about whether they are following tax code. If the IRS were to find they were not, these REITs could lose their special tax status for up to five years and be fully subject to corporate tax.[17]

Warren closed her letter urging the IRS to turn its attention to REITs:

“As the IRS continues to identify massive corporations and businesses that may be violating tax law, I urge you to increase enforcement scrutiny of REITs, especially large health and hospitality REITs that may be illegally claiming significant tax breaks while meddling in the operations of their tenants. Decades-long underfunding of the IRS may have let bad actors feel safe to claim large REIT tax breaks while violating REIT rules, but such tax cheating should not be allowed to continue.”[18]

ScionHealth’s sale-leaseback transaction with Ventas was announced less than two weeks after Warren’s letter to IRS Commissioner Danny Werfel indicating that investors are continuing business as usual even as policymakers and regulators are ramping up their scrutiny of REITs in the healthcare sector.

In the press release announcing the transaction, Ventas stated that, “ScionHealth has agreed to use the proceeds to further improve its credit profile and for other bona fide corporate purposes.” However, because ScionHealth is a private company, it is not required to publicly disclose details about where the revenues from its recent sale leaseback will go. At Steward[19] and Prospect hospitals,[20] private equity investors used sale-leasebacks to extract hundreds of millions of dollars from the hospital chains, even as the hospitals were experiencing financial issues. When Steward field for bankruptcy in May 2024, long term lease liabilities made up the greatest proportion of its overall liabilities.[21]

In December 2023, credit rating agency Moody’s Investors Service downgraded ScionHealth from a B3 to Caa2 rating. In its rationale, Moody’s cited ScionHealth’s excessive debt as a factor, as well as its private equity-ownership: “ScionHealth is owned by private equity sponsor Apollo, making it more at risk to partake in shareholder friendly policies that can include debt funded dividends.”[22]

ScionHealth’s private equity owner Apollo not only has sale-leaseback arrangements with REITs, but is an investor in hospital real estate itself.

Apollo and its affiliates now own eight Massachusetts hospitals whose operations were formerly owned by Steward Health and whose real estate was owned by MPT and Macquarie Asset Management (MAM). Apollo and its affiliates had provided a loan to a joint venture involving MPT and MAM in 2022,[23] and after Steward hospitals went bankrupt in 2024, Apollo gained control of the real estate.[24]

Resources

[1] Ventas Reaches Agreements with Kindred and ScionHealth,” September 16, 2024. https://ir.ventasreit.com/news/news-details/2024/Ventas-Reaches-Agreements-with-Kindred-and-ScionHealth/default.aspx.

[2] Sherman, Erik. “Ventas Buys 5 Long-Term Acute Care Hospitals For $189M.” Globest.Com, September 18, 2024. https://www.globest.com/2024/09/18/ventas-buys-5-long-term-acute-care-hospitals-for-189m/.

[3] As of October 15, 2024.

[4] Alvarado, Francisco. “Ventas Expands South Florida Health Care Portfolio with $37M Hospital Purchase.” The Real Deal, September 23, 2024. https://therealdeal.com/miami/2024/09/23/ventas-buys-riviera-beach-hospital-for-37m/.

[5] Ventas Reaches Agreements with Kindred and ScionHealth,” September 16, 2024. https://ir.ventasreit.com/news/news-details/2024/Ventas-Reaches-Agreements-with-Kindred-and-ScionHealth/default.aspx.

[6] As of August 1, Ventas owned the real estate of 29 Kindred facilities. Access downloadable property list here. The sale-leaseback of new facilities brings the total to 34.

[7] “Senior Housing | Ventas, Inc.” Accessed October 15, 2024. https://www.ventasreit.com/what-we-do/senior-housing.

[8] David Muoio, “Lifepoint Health to create new 79-hospital company upon close of Kindred Healthcare acquisition,” Fierce Healthcare, October 27, 2021. https://www.fiercehealthcare.com/hospitals/scionhealth-Lifepoint-health-to-create-new-79-hospital-company-upon-close-kindred

[9] 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.

[10] “Lifepoint Health Completes Kindred Healthcare Transaction,” December 23, 2021, https://Lifepointhealth.net/news/2021/12/23/Lifepoint-health-completes-kindred-healthcare-transaction.

[11] 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.

[12] See Lifepoint’s list of hospitals here. Scion’s list of hospitals is here. Accessed October 2024.

[13] Access MPT’s downloadable property list here.

[14] “Health Over Wealth One Pager.” Senator Edward Markey, July 25, 2024. https://www.markey.senate.gov/imo/media/doc/health_over_wealth_one_pager.pdf.

[15] healthlawadvisor.com. “Proposed Minnesota House Bill HF 4206 Would Prohibit Ownership Interests, Operational/Financial Control of Health Care Providers by Private Equity and REITS,” March 15, 2024. https://www.healthlawadvisor.com/proposed-minnesota-house-bill-hf-4206-would-prohibit-ownership-interests-operational-financial-control-of-health-care-providers-by-private-equity-and-reits; Lisinski, Chris. “Mass. House Applies Steward Lessons in New, Expansive Health Bill.” NBC Boston, May 2, 2024. https://www.nbcboston.com/news/local/mass-house-applies-steward-lessons-in-new-expansive-health-bill/3357239/.

[16] Slowey, Erin. “IRS Warns of Hotel, Medical REITs Pushing Tax Status Boundaries.” Bloomberg Tax, September 3, 2024. https://news.bloombergtax.com/daily-tax-report/irs-warns-of-hotel-medical-reits-pushing-tax-status-boundaries; “Senator Warren’s Letter to IRS Commissioner.” warren.senate.gov, September 3, 2025. https://www.warren.senate.gov/imo/media/doc/2024.09.03%20Letter%20to%20IRS%20on%20REITs%20enforcement.pdf.

[17] “Senator Warren’s Letter to IRS Commissioner.” warren.senate.gov, September 3, 2024. https://www.warren.senate.gov/imo/media/doc/2024.09.03%20Letter%20to%20IRS%20on%20REITs%20enforcement.pdf

[18] “Senator Warren’s Letter to IRS Commissioner.” warren.senate.gov, September 3, 2024. https://www.warren.senate.gov/imo/media/doc/2024.09.03%20Letter%20to%20IRS%20on%20REITs%20enforcement.pdf

[19] Weil, Jonathan. “Exclusive | How a Private-Equity Payday Drained a Hospital Chain of Cash.” WSJ, September 11, 2024. https://www.wsj.com/finance/how-a-private-equity-payday-drained-a-hospital-chain-of-cash-35a5cb35.

[20] Pg. 6 of O’Grady, Eileen. “How Private Equity Raided Safety Net Hospitals and Left Communities Holding the Bag: A Case Study on Leonard Green & Partners’ Ownership of Prospect Medical Holdings.” Private Equity Stakeholder Project, November 2022. https://pestakeholder.org/wp-content/uploads/2022/11/Prospect_Primer_Nov-2022.pdf.

[21] Pg. 21 of Bugbee, Mary. “The Pillaging of Steward Health Care: How a Private Equity Firm and Hospital Landlord Contributed to Steward’s Bankruptcy.” Private Equity Stakeholder Project, June 26, 2024. https://pestakeholder.org/reports/the-pillaging-of-steward-health-care/.

[22] Moody’s Investors Service. “Moody’s Downgrades Knight Health Holdings LLC’s CFR to Caa2; Outlook Revised to Stable | Rating Action | Moody’s,” December 14, 2023. https://www.moodys.com/research/Moodys-downgrades-Knight-Health-Holdings-LLCs-CFR-to-Caa2-outlook-Rating-Action–PR_483645.

[23] “MPT of Haverhill-Steward, LLC, as Mortgagor to Athene Annuity and Life Company, ACREFI CS U, LLC, Aspen American Insurance Company and Aspen Specialty Insurance Company (Mortgagee).” salemdeeds.com, March 14, 2022. https://pestakeholder.org/wp-content/uploads/2024/06/MPT-of-Haverhill-Steward-to-Athene-Annuity-et-al.pdf; Pg. 76 of “(2022) Form 10-K Medical Properties Trust, Inc. MPT Operating Partnership, L.P.” Medical Properties Trust, March 1, 2023. https://medicalpropertiestrust.gcs-web.com/static-files/0493778f-e713-49ab-94c4-6f80457448c5.

[24] Weisman, Robert. “State’s Steward Exit Plan Is No Sure Thing, as Landowners, Creditors Push Back.” The Boston Globe, August 20, 2024. https://www.bostonglobe.com/2024/08/20/business/steward-exit-from-massachusetts/.