Private Equity Involvement in Health Care System Leads to Bankruptcy 

By Consumers for Quality Care, on May 22, 2024

The nation’s largest physician-led hospital system, Steward Health Care, has officially filed for bankruptcy after months of speculation and continued fallout from its previous private equity acquisition, according to reporting by The Wall Street Journal and Healthcare Dive. 

Steward operates a network of over thirty hospitals in eight states. Private equity firm Cerberus Capital Management took over Steward Health in 2010 and continued acquiring other hospital systems, eventually making them the largest private for-profit hospital chain in the country. But by 2020, in the early months of the COVID-19 pandemic, Steward was in a financial hole and needed a $400 million cash infusion. But Cerberus, rather than putting up the capital itself, convinced Steward’s landlord, Medical Properties Trust (MPT), to make the investment. Later that year, with the $400 million infusion already made, Cerberus exited the deal, turning a $800 million profit and leaving both MPT and Steward on the verge of financial collapse.  

Cerberus argued that Steward “was financially healthy with substantial liquidity” when they exited the deal, but records show that Steward carried a financial deficit worth over one billion dollars both shortly before and after Cerberus left.  

These financial troubles may potentially damage Steward’s ability to provide quality care to its patients, endangering the health of thousands of health care consumers, including those from low-income populations.   

For months, lawmakers and regulators struggled to understand the gravity of the situation because the health system refused to disclose financial documents when requested. Stuart Altman, Chair of the Massachusetts Health Policy Commission, admitted that his agency was left in the dark and didn’t understand the full scope of Steward’s problems “until fairly recently.” 

CQC is deeply troubled by the growing trend of private equity-owned hospitals, especially given that their business tactics don’t line up with the care that patients should receive. Health care providers must prioritize patients over profits to ensure lower cost, high quality care.