Private Equity Involvement in Hospital System Leads to Bankruptcy 

By Consumers for Quality Care, on October 2, 2024

A private equity firm’s ownership stake in a multi-state hospital system resulted in the firm turning a $800 million profit, enriching shareholders, but ultimately forcing the hospital system to file for bankruptcy, putting consumer care in peril, according to The Wall Street Journal.  

Steward Health operated a network of more than thirty hospitals in eight states. Private-equity firm Cerberus Capital Management took over Steward in 2010 and continued acquiring other hospital systems, eventually making them the largest private for-profit hospital chain in the country. This rapid growth allowed Steward to pay a $790 million dividend to shareholders in 2016, with more than 90 percent of that dividend going to Cerberus. 

But in the early months of the Covid-19 pandemic, Steward was in a financial hole and needed a cash infusion to stay in business. Cerberus, rather than putting up the capital itself, convinced Steward’s landlord, Medical Properties Trust (MPT), to make a $400 million investment. Shortly after the payment from MPT was made, Cerberus sold its stake in Steward to Dr. Ralph de la Torre and a group of physicians, turning a total profit of $800 million, more than three times its initial investment. 

But by 2020, Steward was reporting a deficit of $1.5 billion. The dividend payout, as well as losses reported during the early months of the pandemic, made up most of this deficit. 

To make matters worse, lawmakers and regulators struggled to understand the gravity of the situation because the health system refused to disclose financial documents when requested. 

CQC is deeply troubled by the growing trend of private equity-owned hospitals, especially given that their business tactics can jeopardize the care that patients should receive. Health care providers must prioritize patients over profits to ensure lower costs and high-quality care.