The Collapse of Steward Health Care and Its Devastating Impact on Communities

The Downfall of Steward Health Care: A Decade of Decline and Bankruptcy

Steward Health Care, once the largest private for-profit hospital system in America, faced a catastrophic decline over the past decade, culminating in its bankruptcy last year. The collapse marked the end of a long and painful journey for the hospital chain, which had shuttered eight of its facilities, leaving countless communities without access to critical medical care. The loss of these hospitals was particularly devastating for underserved areas, where Steward’s facilities were often the only option for patients. A patient advocate aptly described the closures as a “public health hazard.”

The roots of Steward’s demise can be traced back to a financially disastrous deal with Medical Properties Trust (MPT), a real estate investment company. In this arrangement, Steward sold its facilities to MPT and then leased them back at exorbitant rates, resulting in an annual rent burden of $350 million. This crippling financial obligation forced the hospital chain to close facilities and cut corners on patient care. By the time Steward filed for bankruptcy, it still owed MPT a staggering $6.6 billion, highlighting the unsustainable nature of the deal.

The Consequences of Steward’s Deal: Profits for Executives, Suffering for Patients

While Steward’s patients and providers bore the brunt of the financial instability, the deal with MPT enriched the company’s top executives, who are now under federal investigation for corruption. Additionally, the private equity firm Cerberus, which owned Steward, received $800 million in dividends, even as the hospitals were being starved of resources. Critics have blasted the arrangement as a form of corporate looting,where the pursuit of profit took precedence over patient care.

The consequences of this deal were far-reaching. Patients in underserved communities lost access to vital healthcare services, and the quality of care at remaining facilities deteriorated. Massachusetts State Senator Jamie Eldridge described the situation as “an ongoing multiyear degradation of our healthcare system,” while Senator Edward Markey released a scathing 26-page report accusing private equity firms like Cerberus of treating hospitals like fast-food chains, prioritizing profits over people. The report concluded that “where people saw vital pillars of communities in their hospitals, Steward, Cerberus, and MPT saw only dollar signs.”

The Sale of Remaining Hospitals: A Grim Outlook for Underserved Communities

Today, Steward is selling off its remaining 31 hospitals, leaving many communities hopeful that new ownership will prioritize patient care over profit. However, the outlook remains grim. MPT will continue to collect rent on at least 15 of these hospitals, many of which are already operating at a loss. Furthermore, 12 of the facilities have been acquired by operators with track records of mismanaging hospitals, often through similar deals with MPT. This raises concerns that the cycle of financial exploitation and decline will continue unchecked.

Justin Simon, a hedge fund managing director who has studied the industry, warns that “I do not think these hospitals can maintain any reasonable level of operation for more than nine to 12 months without permanent financial support.” The financial instability of these hospitals is so dire that MPT is providing loans and temporary rent relief to the new owners, effectively perpetuating a cycle of dependency. This arrangement ensures that MPT will continue to profit from the very hospitals it helped push into financial distress.

The Role of Private Equity and the Vicious Cycle of Hospital Looting

The fate of Steward’s hospitals reveals a deeper flaw in America’s healthcare infrastructure: a self-perpetuating cycle of exploitation. Distressed hospitals, often already plundered by private equity firms, are sold to new buyers who continue the same destructive practices. Cornell University professor Rosemary Batt explains that “the only people who will buy them are people who are using them as an asset to be bought and sold and stripped.” This cycle of looting has left many hospitals in dire financial straits, with little hope of recovery.

Companies like American Healthcare Systems (AHS), which has acquired eight of Steward’s hospitals, have a history of siphoning money from the facilities they operate. AHS, led by Michael Sarian, has faced lawsuits, reports of short staffing, and allegations of substandard care. Despite these red flags, the bankruptcy court and regulators have allowed the sale to proceed, raising questions about the failure of oversight in protecting healthcare infrastructure.

The Broader Implications: A Broken Healthcare System

The collapse of Steward Health Care and the subsequent sale of its hospitals highlight a systemic failure in America’s healthcare system. Private equity firms and real estate investors have exploited vulnerable hospitals, prioritizing profits over patient care. This has resulted in a vicious cycle where distressed hospitals are sold to new owners who continue the same exploitative practices, ensuring that the cycle of decline and bankruptcy persists.

The situation is further complicated by the fact that regulators have failed to hold these companies accountable. While investors like MPT continue to profit from rent payments and loans, underserved communities are left without access to quality healthcare. Patient advocates and watchdog groups warn that without meaningful oversight, the looting of America’s hospitals will continue unabated, leaving millions of vulnerable patients at risk.

The Path Forward: Breaking the Cycle of Exploitation

To address this crisis, there must be a fundamental shift in how healthcare infrastructure is managed and regulated. Private equity firms and companies like MPT must be held accountable for their role in exploiting vulnerable hospitals. Patients, not profits, should be the priority. Policymakers and regulators must act to ensure that hospital sales are transparent and that new owners are committed to maintaining quality care.

Without such changes, the cycle of exploitation will continue, and underserved communities will bear the brunt of the consequences. As Bethany McLean, a special correspondent at Business Insider, so aptly puts it, “the dirty end game of private equity failures” is a stark reminder of the failures of the current system. The story of Steward Health Care serves as a cautionary tale about the dangers of treating healthcare as a commodity rather than a vital public service.

Ultimately, the collapse of Steward Health Care and the subsequent sale of its hospitals underscore the urgent need for reform. America’s healthcare system cannot afford to continue down this path of exploitation and neglect. Patients deserves better, and so do the communities that rely on these hospitals for their survival.