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Background: Public-private partnership (PPP) in constructing and operating hospitals is a good strategy to provide high quality services to people at lower cost for the government.  However, PPP is facing several challenges. The objective of this research was to identify and explore the PPP challenges in building Moheb Yas hospital in Tehran, Iran.
Materials and Methods: A qualitative approach was used for this case study in 2018. In-depth semi-structured interviews were conducted with 24 key stakeholders, managers and employees who were involved in PPP initiative implementation using purposive and snowball sampling methods. Thematic analysis approach was used for data analysis.  
Results: Moheb Yas hospital was built in the yard of a public hospital (Co-location PPP) by the private entity. Then, the public hospital was moved into the private hospital. The new hospital was transferred to the government after one year owing to some challenges. These challenges include an inappropriate PPP model, low government capacity and competency in PPP, low trust in private partner, difficulty in funding the project, demolishing the old building, applying for hospital licences, merging two public and private hospitals, and difficulties in equipping the new hospital with human and physical resources.
Conclusion: The PPP was not successful in this case. Although PPP initiatives have benefits for the health system, but, it comes with numerous challenges especially in developing countries owing to disparate goals, incentives, and management practices of public and private sectors. The research findings provide useful insights for policy makers and senior managers in health systems in similar countries about the main barriers of PPP initiatives in the health sectors.