Capacity Utilization

Health Care Debt

Years ago when Tenant, Columbia and others were building out their networks, they purchased thousands of local community hospitals. They were viewed as undervalued assets. These large health conglomerates issued bonds to finance their acquisitions, and the first thing they'd do upon purchasing a small community hospital would be to sell the land it was on to one of their REITs. The community hospital then would begin paying rent to the REIT, and that in turn ultimately financed the acquisition. Community hospitals were effectively refinanced and mortgaged, instead of being free and clear of debt burden. No longer did the community hospital operate as an entity standing on fully paid for land. Historically, before the massive reconsolidation by Wall Street, Community Hospitals paid no rent. Why is this important?