The unfolding crisis surrounding Texas-based Steward Health Care Systems was at the core of a congressional field hearing in Boston on April 3.
The embattled for-profit health system’s financial woes have hit Massachusetts hard as the company’s nine Bay State hospitals struggle to keep the lights on.
Steward Health Care Systems Chairman and CEO Ralph de la Torre declined to attend the Senate Health, Education, Labor, and Pensions (HELP) Committee hearing condemning “corporate greed” in health care at the Massachusetts State House. But a panel of industry professionals was nevertheless on hand to air their grievances.
Dr. Ellana Stinson, an emergency medicine physician and president of the New England Medical Association, said she had worked at several Steward facilities before noticing they all shared common problems.
“I began to realize how resources were being dwindled down and pulled from each facility,” Dr. Stinson said. “Most of the facilities no longer had certain specialty services, and Quincy Hospital eventually was taken down to bare bones before it ultimately closed.”
Stripped of various supplies and services, the doctor said she felt she could no longer provide safe or quality care to her patients.
Quincy Medical Center was purchased by Steward in 2011 with a promise to keep it running for at least 10 years. Three years later, Steward closed the doors to all but the hospital’s emergency room. And in 2020, that department was shuttered, too, making Quincy the state’s largest city without an emergency room.
But Dr. Stinton noted that such stories are not specific to Massachusetts hospitals.
“What is happening here in the Commonwealth is happening all over the country. We have now seen the buyouts and [mergers and acquisitions] led by private equity firms in over 30 percent of hospitals here in the U.S. and over 40 percent of emergency departments.”
Eileen O’Grady, health care research and campaign director for Private Equity Stakeholder Project, noted that the private equity business model often involves leveraged buyouts that leave the purchased hospitals on the hook for paying down piles of debt.
“That kind of high leverage can divert cash away from operations to paying interest on the debt and leave companies more at risk for restructuring or bankruptcy,” Ms. O’Grady said. “We’re acutely seeing the effects of this now, as private-equity-owned companies are struggling under mountains of debt in a high-interest rate environment.”
Private Equity Stakeholder Project is a nonprofit watchdog that aims to bring transparency to the private equity industry. According to Ms. O’Grady, the organization found that more than 20 percent of health care bankruptcies in the last year were owned by private equity firms, as are 90 percent of those now considered most at risk for bankruptcy.
In Steward’s case, the company was formed in 2010 after private equity firm Cerberus Capital Management bought the fraught Caritas Christi hospital chain from the Archdiocese of Boston.
Subsequent financial strains led Steward to sell its Massachusetts properties in 2016 to real estate firm Medical Properties Trust, to which it has paid rent to continue operating those same properties. With the proceeds from the sale, Steward went on to expand its hospital real estate outside of Massachusetts.
Sen. Ed Markey (D-Mass.), chairman of the Senate’s HELP Subcommittee on Primary Health and Retirement Security, noted, “When Cerberus and Dr. de la Torre partnered to buy Caritas Christi in 2010, they sold themselves as saviors.”
But instead of rescuing the hospitals they acquired, “Cerberus and Dr. de la Torre stripped the hospitals of their assets and staff and forced these hospitals to pay rent to Medical Properties Trust on land they used to own, all while they extracted billions from Massachusetts institutions to expand globally,” Mr. Markey said.
“And Steward and Cerberus made millions, rejoiced in their profits, and sailed away from their responsibility to workers and patients on their luxury yachts. Meanwhile, their hospitals drowned.”
Sen. Elizabeth Warren (D-Mass.) likewise criticized Dr. de la Torre for not being present at the hearing.
“While we hold this hearing, Dr. de la Torre is hiding out,” Ms. Warren said. “Shame on Dr. de la Torre. He owes the residents of Massachusetts an explanation...” She called for authorities to do a review.
The news follows Gov. Maura Healy’s calls for Steward to leave the state.
But supporters of private equity in health care have said politicians are directing their frustration at the wrong target.
“Private equity has a long history of strengthening U.S. health care and improving the lives of millions of Americans, including in Massachusetts,” said Drew Maloney, president and CEO of the American Investment Council, in a statement.
“Unfortunately, headline-seeking politicians continue to place misguided blame on our industry instead of pursuing sound policymaking to address systemic challenges head-on. Private equity will make targeted health sector investments that advance progress, drive life-saving innovation, and support the livelihoods of nearly 260,000 hardworking employees at Bay State-based companies.”
