.The The Downfall of Steward Health Care
Steward Health Care, once positioned as a leader in private equity-driven hospital management, now finds itself in financial turmoil, filing for Chapter 11 bankruptcy in 2024. At one point, they operated 31 hospitals from Brighton in Boston, and Haverhill, Massachusetts to Coral Gables, Florida, to Houston, Texas, as well as hundreds of care facilities across the United States.
Steward grew into a massive health care system, providing employment for 33,000 people across nine states. Acquired by Cerberus Capital Management in 2010 for $246 million, the company was rebranded from Caritas Christi into Steward Health Care. Over the years, Cerberus extracted significant profits from its investment. This includes a staggering $1.25 billion deal with Medical Properties Trust (MPT) in 2016.
However, by 2020, Cerberus began exiting its investment, transferring ownership to a group of the company’s doctors. Despite these high-stakes financial maneuvers and direct physician investment, the company’s profit-driven model ultimately led to its downfall, leaving many Texas healthcare facilities in jeopardy. Many of their other facilities were negatively impacted as well. For instance, Carney Hospital in Dorchester, Massachusetts has permanently closed and is no longer providing patient care.
This chapter in Steward’s history highlights the inherent risks of prioritizing corporate profits over patient care. When the bottom line becomes the primary focus, the quality of healthcare service often suffers. Thus, affecting the lives of both patients and healthcare professionals.
The Profit-Driven Model of Steward Health Care
Cerberus Capital Management’s acquisition of Steward Health Care exemplifies how private equity investments often prioritize financial returns over patient outcomes. While Cerberus and other investors made substantial gains, it has been reported that the hospitals under Steward’s management faced severe cost-cutting measures. These cuts are alleged to have compromised patient care. By acquiring struggling hospitals and aggressively trimming expenses—often by reducing staff and resources—it appears that the company attempted to maximize profitability. These decisions resulted in serious consequences for patient safety.
This profit-focused approach can be devastating in the healthcare industry. Hospitals serve as critical lifelines for their communities. Unfortunately, cost-cutting measures that affect staffing and resources can have fatal consequences. It has been reported that under Steward’s management, hospitals like the Medical Center of Southeast Texas experienced staff shortages and a decline in care. Thereby demonstrating the inherent dangers of prioritizing profits in healthcare.
Staffing Shortages and Decline in Care
One of the clearest symptoms of Steward’s profit-driven model was the severe reduction in staff across its hospitals. Staff members have explained that as the company cut costs, many critical positions were left unfilled. Therefore, healthcare professionals were left overworked and unable to provide the necessary care to patients. This resulted in longer wait times, delayed procedures, and an overall decline in the quality of care.
Documentation shows that in Texas, particularly at facilities like Medical Center of Southeast Texas and St. Joseph Medical Center in Houston, the consequences of understaffing became apparent. Patients faced increased risks of medical errors, delays in care, and worsening conditions due to a lack of adequate medical attention. Reports indicate that spinal cord and brain injuries from interventional pain procedures surged as safety protocols were ignored or compromised to keep up with the demand while cutting corners.
The Bankruptcy and Cerberus’ Role
Cerberus Capital Management’s involvement in Steward Health Care started with a $246 million acquisition. Over time, it appears that they profited massively, especially through the $1.25 billion deal with Medical Properties Trust in 2016. Despite the financial success for Cerberus, the hospitals under Steward’s control continued to struggle. By 2020, Cerberus began to exit its investment,. They started transferring its ownership stake to a group of doctors within the company. Unfortunately, this maneuver left the hospitals and the communities they served vulnerable to decline.
The filing for Chapter 11 bankruptcy in 2024 was a direct result of this profit-driven model. Underinvestment in infrastructure, medical equipment, and staff left the hospitals in a financially precarious position. Facilities like Medical Center of Southeast Texas, already facing financial strain, were further burdened by Steward’s neglect. This bankruptcy filing was the final blow, leaving many of the healthcare facilities’ futures uncertain.
Senate Committee Hearings
Recent news reports say that Steward Health Care CEO, Dr. Ralph de la Torre, has been subpoenaed. He must testify at a bipartisan Senate committee hearing about the bankrupt hospital chain’s financial dealings. So far, he has refused, stating that it would be inappropriate to speak to this until the bankruptcy proceedings are complete. Two members of the Senate Committee on Health, Education, Labor and Pensions (HELP Committee) have called for pursuing contempt proceedings against the embattled CEO.
The committee asked nurses from two hospitals in Massachusetts and elected officials from Louisiana for their input. They wanted to see how Steward’s hospital management impacted their local communities. Ellen MacInnis, a nurse in the emergency department at St. Elizabeth’s Medical Center in Boston for twenty years, was heard by the committee. She recounted the shortages of supplies, equipment, and personnel that the hospital faced during Steward’s 14-year management.
Healthcare Systems of America: A New Hope or More of the Same?
Following Steward Health Care’s bankruptcy, Healthcare Systems of America took over operations at multiple facilities. As of September 11, 2024, HSA began overseeing daily operations at these hospitals. These include the Medical Center of Southeast Texas, St. Joseph Medical Center in Houston, and several others across Louisiana and Florida. At this time, there is no specific information about the nature of this contract, or the details of the contractual terms.
Mike Sarian, CEO of HSA, has expressed his commitment to stabilizing these hospitals. Thus, ensuring they can provide the necessary care to their communities. With HSA’s takeover, the question remains whether they can reverse the damage done by years of profit-driven management. The focus now is on rebuilding trust, ensuring adequate staffing, and restoring the quality of care that has been compromised.
Rural Healthcare Group
Keeping track of which company owns each health system facility is becoming increasingly difficult. Just recently, according to an article released in August, another player has entered the arena – Rural Healthcare Group (RHG), based in Nashville, Tennessee. RHG is owned by Kinderhook Industries, LLC, an organization that specializes in management buyouts. The company is planning on purchasing Steward Medical Group and Steward Health Care Network, which operates in nine states, according to a news release and the website of the organizations, together known as Stewardship.
Rural Healthcare Group describes itself as a primary care provider organization delivering health care to underserved communities in multiple states. According to their website they are proficient in problem solving. Nevertheless, we must ask if this new for-profit partnership is any different from Steward and Cerberus Capital Management. Are they really prepared to provide better care for patients?
The Danger of Private Equity-Driven Healthcare
Steward Health Care’s collapse serves as a cautionary tale about the risks of private equity in healthcare. Cerberus Capital Management, allegedly focused primarily on maximizing financial returns. Thus, extracting substantial profits while neglecting the long-term sustainability of the hospitals they acquired. This approach may work in other industries, but in healthcare, where lives are at stake, it leads to dire consequences for patient safety.
When hospitals are focused solely on saving money and increasing profit, the patients are the ones who suffer. Decisions that prioritize financial gains over medical outcomes result in understaffed hospitals. Additionally, patients face delayed treatments and an increased risk of medical errors. This raises an important question: should healthcare be a for-profit business, or should it focus mainly on patient care and safety?
The Future of Texas Healthcare
As HSA takes over operations at key facilities in Texas, including the Medical Center of Southeast Texas, the immediate priority is stabilizing these hospitals and addressing the critical staffing shortages that plagued them under Steward’s management. While HSA promises to focus on patient care, the larger issue of private equity in healthcare persists. Without regulatory reform, the risk of profit-driven management remains, potentially threatening the future of Texas healthcare.
The transition to HSA provides an opportunity to refocus on the needs of patients and healthcare professionals. Still, Texas residents must remain vigilant to ensure that patient safety and care are prioritized over financial gains. Staunch patient advocacy might be the difference as to whether this is a turning point, or simply a sign of things to come.
Lessons Learned: Steward Health Care
Steward Health Care’s bankruptcy highlights risks of profit-driven healthcare management. Cerberus Capital Management and investors profited, but patients and staff suffered long-term. As Healthcare Systems of America, and possibly Rural Healthcare Group, take over operations, the hope is that these hospitals can be restored to provide the quality care that their communities deserve.
However, the larger issue of private equity in healthcare continues to loom across the entire country. The case of Steward Health Care serves as a stark reminder that when corporate profits take precedence over patient care, everyone suffers. For Texas communities, the lesson is clear. It’s time to demand better oversight, regulation, and accountability in healthcare management to ensure that patient care always comes first.
