Quorum sale raises concerns reminiscent of Steward, Prospect

New Mexico — A new report from the Private Equity Stakeholder Project (PESP) warns that GoldenTree Asset Management’s proposed sale of Quorum Health to a newly formed nonprofit could follow a troubling pattern seen at Steward Health Care and Prospect Medical Holdings, where private equity firms exited heavily indebted hospital companies.

The proposed $957 million transaction would leave Quorum’s 11 hospitals across nine states with 30% more long-term debt and a much weaker balance sheet, while GoldenTree and other lenders could receive a significant payout.

According to PESP’s analysis of regulatoryfilings, the proposed nonprofit buyer, QKA Health Corporation, doing business as Healthside Partners, would emerge with:

• $1.7 billion in total liabilities, including approximately $1.26 billion in long-term debt.
• $635 million in negative equity, with liabilities exceeding assets by 59%.
• 30% more long-term debt, increasing from $968 million to $1.26 billion.

GoldenTree is Quorum’s majority owner and holds approximately 24.5% of its senior debt, positioning it to potentially benefit from repayment of existing loans.

The report draws parallels to Leonard Green & Partners’ exit from Prospect Medical Holdings and Cerberus Capital’s exit from Steward Health Care. While the transactions differ in structure, both involved private equity firms exiting heavily indebted hospital companies. PESP warns that Quorum’s proposed sale could similarly leave hospitals facing substantial financial pressures after their private equity owners exit.

“We’ve seen what can happen when private equity firms exit hospital companies and leave behind mountains of debt, ” said Jim Baker, executive director of PESP. “Steward Health Care and Prospect Medical are cautionary examples, and regulators should be asking whether Quorum is headed down a similar path. GoldenTree and other Wall Street lenders should not be allowed to walk away with a payout while leaving hospitals, workers, and patients to bear the consequences of an even heavier debt burden.”

Eleven hospitals across nine states

Quorum has shrunk from 24 hospitals when it filed for bankruptcy in 2020 to 11 today. The company currently owns or operates:

• Arkansas: Forrest City Medical Center (Forrest City)
• California: Barstow Community Hospital (Barstow)
• Kentucky: Kentucky River Medical Center (Jackson); Three Rivers Medical Center (Louisa)
• New Mexico: Mimbres Valley Medical Center (Deming)
• Nevada: Mesa View Regional Hospital (Mesquite)
• Oregon: McKenzie-Willamette Medical Center (Springfield)
• Texas: Big Bend Regional Medical Center (Alpine); Odessa Regional Medical Center (Odessa)
• Utah: Mountain West Medical Center (Tooele)
• Wyoming: Evanston Regional Hospital (Evanston)

Read the full report:  pestakeholder.org/reports/the-quorum-health-sale