BOSTON – Steward Health Care, the struggling health care provider that relied on backing from private equity investors to quickly acquire dozens of community hospitals, including facilities in Massachusetts, Texas and Florida, announced Monday that it is filing for bankruptcy.
Steward, which is millions of dollars in debt, said it has “commenced an in-court restructuring process through the filing of voluntary petitions for relief” under Chapter 11 of the U.S. Bankruptcy Code. It submitted the filing in the Southern District of Texas.
The Dallas-based company currently owns 30 hospitals across eight states, including nine in Massachusetts, where its smoldering financial crisis has raised concerns about patient safety.
Steward has been one focus of a year-and-a-half-long CBS News investigation revealing how private equity investors have siphoned hundreds of millions of dollars from community hospitals with devastating public health consequences. Records reviewed by CBS News showed Steward hospitals around the country with a trail of unpaid bills, at times risking a shortage of potentially lifesaving supplies.
Last year, CBS News found Steward redirected money away from hospital operations by selling off the real estate of San Antonio’s Texas Vista Medical Center before closing the facility altogether.
The company’s bankruptcy filing lists 30 creditors who are owed a total of more than $500 million, including the U.S. government, which is owed more than $32 million to the federal government in reimbursements for insurance overpayments.
Experts tell CBS News that Steward’s debts are likely much higher, and when the dust settles, it could be one of the largest hospital bankruptcies in U.S. history. In a statement, the company said it is relying on its landlord, Medical Properties Trust, to provide sufficient funding to allow its hospitals to continue to operate through bankruptcy.
“The Company is finalizing the terms of debtor-in-possession financing from Medical Properties Trust for initial funding of $75 million and up to an additional $225 million upon the satisfaction of certain conditions acceptable to Medical Properties Trust,” Steward said in a statement.
No day-to-day impacts expected, Steward Health Care says
The company said declaring bankruptcy allows it to “continue to provide necessary care to its patients in their communities without disruption.”
Both Steward and Massachusetts officials said they expected no interruptions in day-to-day operations.
“Steward hospitals remain open, and patients should not hesitate to seek care,” said Massachusetts Health and Human Services Secretary Kate Walsh in a statement, adding that the state “is working with Steward and any potential partners to support an orderly transfer of ownership that protects access to care, preserves jobs and stabilizes our health care system.”
Despite those assurances, anxiety over the future viability of the company’s hospitals runs deep, particularly in Massachusetts. For months, health care workers have voiced concern over the impact of any potential closure.
“The potential loss of any of these facilities will have devastating consequences for hundreds of thousands of residents from the South Shore to southern New Hampshire,” the Massachusetts Nurses Association said in a statement. “However, Steward going through the process of reorganization provides an opportunity for other stakeholders to take long-awaited action and center the voices of caregivers and patients,” the statement said in part.
Private equity’s impact on health care
A spokesperson for Steward previously told CBS News company executives always put patients first and said they “deny that any other considerations were placed ahead of that guiding principle.” The spokesperson said Steward “has actively and meaningfully invested” in its hospital system since its formation, including in Massachusetts, where it took over hospitals that were “failing” and “about to close.”
“Steward’s investment has taken the form of facility upgrades, equipment, technology, and other meaningful improvements,” the spokesperson wrote.
Yet Steward has become synonymous with the perils of private equity investment in health care. The company started buying up Massachusetts hospitals in 2010, with hundreds of millions of dollars in backing from private equity giant Cerberus,
Cerberus shed its stake in Steward by January 2021, after making an $800 million profit in a decade, according to a report from Bloomberg. Financial records show Steward has also sold off more than $1 billion of its hospitals’ land and buildings since 2016 to Medical Properties Trust, which has made a business of buying up hospital real estate from private equity investors.
A filing with the Securities and Exchange Commission from 2021 shows Steward’s owners also paid themselves millions in dividends. Around the same time, Steward CEO Ralph de la Torre acquired a 190-foot yacht estimated to be worth $40 million. In an email to CBS News, Steward confirmed de la Torre owned the yacht.
“Steward Health Care has done everything in its power to operate successfully in a highly challenging health care environment,” de la Torre said in the company’s statement, released at 3:30 a.m. Monday morning. “Filing for Chapter 11 restructuring is in the best interests of our patients, physicians, employees, and communities at this time.”
Massachusetts Sen. Ed Markey tweeted, “De la Torre and his morally bankrupt business model have failed our hospitals, our providers, and our patients. He and his private equity allies must be held accountable. I’ll keep fighting to keep hospitals open and protect patients and providers.”
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