Steward Health Care’s Bankruptcy: A Cautionary Tale of Corporate Greed in our Health Care System
Today’s Senate hearing on Steward Health Care demonstrates the dangers of putting profits over people in our health care system.
On Thursday, the Senate Committee on Health, Education, Labor and Pensions (HELP), is hosting a public hearing on how corporate greed impacted quality of care, spotlighting Steward Health Care hospital system, a network of hospitals that started in Massachusetts, but now has facilities across the nation.
The committee issued a subpoena for Steward CEO Ralph de la Torre to testify – he refused to attend.
But how did we get to this point?
What happened at Steward?
Missing medical equipment, people dying from childbirth, bat infestations, $50 million in unpaid rent, delayed surgeries – Steward Health Care’s days leading up to its bankruptcy paint a picture of chaos.
Steward Health Care, a Dallas-based hospital chain, operated 33 hospitals in nine states at the start of 2024.
In 2010, Steward, at the time a struggling company called Caritas Christi, was bought by Cerberus Capital Management, a private equity firm. Ten years later, Cerberus transferred ownership to Steward’s doctors and exited the picture – with an over $800 million profit in tow.
Shortly after private equity’s exit, people began raising concerns about poor quality of care, patient safety and lack of staff.
Yet, amid safety concerns and reportedly millions in unpaid rent, Steward CEO Ralph de la Torre bought a $40 million luxury yacht – one of two that he owns.
In early May, Steward filed for bankruptcy – and its failure to prioritize patients continues to negatively impact communities.
Following Steward’s bankruptcy, two of its hospitals announced closures – Carney Hospital which served a large immigrant community and many people of color, and Nashoba Valley Medical Center was a lifeline for the rural community of Ayer, Massachusetts.
Hospital closures not only endanger patient care – they also lead to thousands of people losing their jobs. When private equity enters a health care system, it often cuts costs to maximize profits and the patients in the communities they are supposed to serve pay the price. It is common to receive higher medical bills and worse health care experiences due to practices such as downsizing the health care workforce, eliminating less profitable services and not investing in the upkeep of facilities.
Steward’s story isn’t new, but it’s one of the first prominent examples of how private equity and profit-driven health systems prevent people from achieving and maintaining their best health – all for the sake of profit.
What is private equity?
A private equity firm is a type of investment firm where a group of investors pool money together to buy a company or companies. Private equity firms aim to reduce costs and increase profit. Their goal is to quickly ramp up profits for the company they acquired, and then resell it for a higher price, typically only a few years down the line.
In the past decade, private equity firms have spent $1 trillion on health care acquisitions.
These deals rake in massive profits, even if the acquired company is struggling to keep its commitments to the community. Despite Steward’s financial troubles and safety issues, its CEO was paid $16 million a year.
When a private equity firm acquires a health care system, communities often pay the price – which is what happened at Steward.
Because their goal is to quickly make a profit, private equity firms often reduce staffing, cut critical services, skirt around patient safety protocols, and fail to ensure access to life-saving supplies.
The impact of this can’t be understated. Last year, new mother Sungida Rashid bled to death in a Steward-owned hospital because necessary devices that could have stopped her bleeding had been repossessed after the company failed to pay the bills.
This was not just an isolated incident – recent studies have found that private equity-owned facilities are less equipped to care for patients. People at private equity-owned hospitals also experience more preventable infections and fall more often. Notably, private equity-owned facilities also led to a decline in health outcomes, particularly in reproductive care.
Prices at these facilities often go up – while quality of care declines.
This “take the money and run” approach by private equity firms can have devastating effects on communities, particularly in underserved areas where health care options may already be limited. Patients may be forced to travel longer distances to receive care or forgo necessary treatments altogether, leading to poorer health outcomes and increased health inequities.
Research from our partners at Private Equity Stakeholder Project (PESP) found that nine private equity-owned health care companies declared bankruptcy in the first six months of 2024, accounting for nearly a quarter of all health care bankruptcies in the U.S. so far this year.
The influence of private equity firms in our health care system is growing at alarming rates. The prioritization of short-term profits over patient well-being and community health is a dangerous threat that demands immediate action.
It’s time to take action.
We’re grateful to policymakers who have already taken action to rein in private equity – Sen. Bernie Sanders (I-VT), Chair of the Health, Education, Labor and Pensions (HELP) Committee and Ranking Member of the HELP Committee Sen. Bill Cassidy (R-LA) have taken a promising first step with today’s hearing.
Community Catalyst has also endorsed two bills aimed at tackling corporate greed – The Health Over Wealth Act introduced by Sen. Ed Markey (D-MA), and the Corporate Crimes Against Health Care Act of 2024 introduced by Sen. Elizabeth Warren (D-MA), a longtime leader in the fight against corporate interests in health care.
The Health Over Wealth Act would:
- Require that private equity-owned health care entities including hospitals, mental and behavioral health care facilities, and nursing homes report on their debt, executive pay, lobbying and political spending, health care costs to patients, and any reductions in services to patients or wages and benefits for staff.
- Establish a task force at Department of Health and Human Services (HHS) to review the role of private equity and consolidation in health care.
The Corporate Crimes Against Health Care Act would:
- Create a new criminal penalty of up to six years in prison for executives whose actions led to a “triggering event,” such as a closure of the health care entity or a loan default, if that triggering event results in a patient’s death or injury.
- Empower state attorneys general and the Department of Justice to claw back all compensation, including salaries, issued to private equity executives within a 10-year period after a “triggering event,” such as the closure of the health care entity or a loan default.
- Requires health care providers receiving federal funding to publicly report mergers, acquisitions, changes in ownership and control, and financial data, including debt and debt-to-earnings ratios.
- Mandates a report from the Office of Inspector General for the United States Department of Health and Human Services to Congress on the harms of corporatization in health care.
Additionally, Community Catalyst is advocating for administrative action at the federal level. Our policy requests to the Biden-Harris administration and their agencies are clear.
The Department of Health and Human Services (HHS) should:
- Increase transparency on private equity ownership and management of Medicare providers.
- Use its annual reports on health care consolidation to highlight the impact on patients.
The Federal Trade Commission (FTC) should:
- Investigate and report on the impacts of private equity and consolidation in health care.
- Bring enforcement actions and issue rules regarding unfair practices and unfair methods of competition by health care entities owned or managed by private equity companies.
The Department of Justice (DOJ) should:
- Forbid private equity-owned companies from providing health care services to those incarcerated in the federal prison system.
- Investigate and prosecute health care fraud by private equity companies, using new HHS data to identify trends and patterns.
- Encourage providers and other staff at health care entities to come forward with allegations of substandard care or improper billing and establish a portal for whistleblowers to report these claims.
What happened at Steward can’t happen again – we deserve better. Together, we can expose the abuses of corporate greed and build a health system that truly serves our communities.