Magnus Manske, CC BY 1.0 <https://creativecommons.org/licenses/by/1.0>, via Wikimedia Commons
On May 6, 2024, the private equity healthcare company Steward Health Care filed for Chapter 11 bankruptcy, throwing many patients into an area of uncertainty. Chapter 11 bankruptcy is a “reorganization” bankruptcy where the debtor remains “in possession,” is allowed to continue business operations, and potentially allowed to borrow new money. At the filing of bankruptcy, the company owned over 30 hospitals across the United States, 9 of which were in Massachusetts. In the months leading up to the filing, hospitals owned by Steward faced financial struggles and supply shortages.
Leading up to the bankruptcy status, the healthcare network was millions of dollars in debt while facing accusations of siphoning millions of dollars away from community hospitals. This comes as private equity firms increase their investments in healthcare into the billions of dollars while simultaneously cutting services and closing hospitals, causing other hospitals to bear the burden of the shuttered ones.
A report by the United States Congressional Joint Economic Committee disclosed in a study that private equity management firms are much more likely to go bankrupt than their public company counterparts. In 2005, Toys R US was bought by three private equity firms leading to the company's eventual bankruptcy due to high debt, although senior executives were able to make out with millions of dollars in bonuses before bankruptcy was filed. Between the years of 2000 and 2018, private equity investment in healthcare increased by $95 billion dollars, with Massachusetts having the second lowest share of private hospitals with private equity ownership.
Steward Health Care CEO Dr. Ralph de la Torre was subpoenaed to testify before the United States Senate Committee on Healthcare, Education, Labor, and Pensions for the decisions he made in his position that harmed patient care at the nearly three dozen hospitals the company owns. However, de la Torre failed to appear at the committee meeting, leading the Senate to hold him in criminal contempt of Congress. Despite his absence, testimonies went forward. A nurse testified that personal funds were being used to purchase bereavement boxes, that patients could spend days in the emergency room, and that there was a lack of access to necessary or properly functioning medical equipment. Senator Ed Markey (Mass.) noted that “Death rates for certain conditions at Steward-owned hospitals went up as rates for those same conditions went down.”
Since his failure to appear before Congress, de la Torre has resigned as CEO. Criticism of Steward has not been limited to de la Torre, with the board of directors facing criticism for enabling the actions of de la Torre and allowing the company’s financial situation to get as dire as it is. Board members, who were to oversee de la Torre, joined the CEO in inflating their wealth along with extravagant spending. Those board members have maintained their positions on the board of Steward Health Care.
In Massachusetts, most of the 9 Steward-owned hospitals have found new owners. St. Elizabeth’s Medical Center in Brighton was seized through eminent domain by Massachusetts Governor Maura Healey in an attempt to keep the hospital open and avoid a public health crisis. The medical center is planned to go under the operation of Boston Medical Center, a private not-for-profit medical center. The owner of the property that the St. Elizabeth’s Medical Center sits on, Medical Properties Trust, and lenders Apollo Global Management and ACREFI CS U have stated that they plan to fight the state’s eminent domain takeover. In addition to St. Elizabeth’s Medical Center, Boston Medical Center has acquired Good Samaritan Medical Center in Brockton. The mayor of Brockton welcomed the change in ownership and continuation of service, as the city’s other hospital, Brockton Hospital, only recently reopened after a closure that lasted over a year.
Steward has reached agreements regarding four of its other hospitals in the state, being sold off to two local health operating systems. Lifespan, based in Rhode Island, will acquire Morton Hospital and Saint Anne’s Hospital, while Lawrence General Hospital will acquire Holy Family Hospital-Methuen and Holy Family Hospital-Haverhill.
Not all Steward-owned hospitals have been so lucky. Norwood Hospital, which has been closed since 2020 due to flooding, is to abandon the hospital and shutter four nearby clinics, with the state continuing to search for a buyer for the hospital and ways to continue medical care. The hospital had a planned reopening with new construction, although that has been stalled since February 2024.
Steward Health Care’s financial collapse caused major uncertainty within Massachusetts’ healthcare system due to the unknown recovery timeline for these hospitals. Reform is underway in the Massachusetts State House, with S.2871 being introduced into the Senate Committee on Ways and Means to enhance the healthcare market's review process.
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