How Private Equity Has Looted Our Hospitals

In January 2024, the Boston Globe reported the tragic story of a new mother who died in October 2023 after the embolization coil needed to treat her post-birth bleeding was unavailable at the Massachusetts hospital where she gave birth. The coil had been repossessed weeks before by the medical device company that owned it because the hospital had not paid its bill. The hospital in question was Steward Health Care’s St. Elizabeth’s Medical Center.¹

The year before, another Steward hospital—Rockledge Regional Medical Center in Florida—had experienced an infestation of thousands of bats.² The fifth-floor intensive care unit (ICU) reportedly reeked of bat guano,³ and an ICU nurse found a bat clinging to one of the curtains.⁴ One ICU patient complained of being attacked by a “giant grasshopper,” which turned out to be a bat.⁵ Steward hired an extermination company to address the issue, and within months that company sued the hospital over an alleged $1.6 million in unpaid bills and related costs.⁶

Stories of Steward Health Care’s deteriorating finances and hospitals began to pile up in local media coverage. By early 2024, Steward, a for-profit healthcare system that was owned by private equity firm Cerberus Capital Management from 2010 to 2020,⁷ was drawing significant national attention.

In April 2024, Massachusetts Senators Edward Markey and Elizabeth Warren held a field hearing in Boston, where they and the various witnesses called to testify criticized the private equity investors who had looted Steward Health Care and left its hospitals on the brink of ruin.⁸ In that moment, criticism and the promise to introduce legislation preventing another situation like this were the only weapons the legislators could wield. Much of what the private equity investors and their accomplices got away with involved legally permitted business practices.

Steward filed for Chapter 11 bankruptcy in May 2024.⁹ The system reported over $9 billion in liabilities in its bankruptcy filing, which included almost $1 billion owed to vendors and medical suppliers and $6.6 billion in long-term lease obligations to its hospital landlord, Medical Properties Trust.¹⁰ Steward’s bankruptcy is one of the largest hospital bankruptcies in decades.¹¹

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Private equity has increasingly shown up in media coverage about struggling hospitals in the United States, leading to heightened scrutiny from state and federal legislators and regulatory agencies.¹² But what exactly is private equity? And how is it different from other types of corporate healthcare that have attracted ire for putting profits before patients?

Private equity is a type of alternative investment that uses money from pension funds, foundations, and other large investors. These investments are typically not publicly traded (hence “private” equity), so there is relatively little transparency around them. The opacity makes it easier for private equity to make investment decisions that can enrich a few at the expense of many.

Private equity investment usually works like this: a private equity firm opens a fund and raises money for this fund from institutional investors, like pension funds and foundations. The firm uses the fund, alongside debt, to purchase multiple companies—then tries to cut costs and increase cash flow at these companies so as to sell them at a profit roughly three to seven years down the road.¹³ The private equity firm generally has control of the investments, even though most of the money it invests belongs to others. The firm also takes home a disproportionate share of any profits (about 20 percent) from the fund, despite investing little of its own money (around 2 percent or less).¹⁴

Private equity has become an increasingly powerful force in the global economy. As of June 2023, private equity firms controlled $13.1 trillion in assets, a number that has been rising nearly 20 percent annually since 2018.¹⁵ In the US healthcare sector alone, private equity has invested over $1 trillion in the last decade.¹⁶

Private Equity and Healthcare

The healthcare sector of the US economy has long been favored by private equity firms because there is growing demand for healthcare services thanks to a population that not only is aging but also has a high disease burden. There are also many subsectors within healthcare—such as outpatient specialty care, home health and hospice care, and clinical research—where firms see opportunities for consolidation.¹⁷ Consolidation, or gaining greater market share by acquiring multiple companies and rolling them up into one big company, can generate profits for private equity investors hoping to sell the company down the road. This does not translate to cheaper or better care for patients; the available evidence shows that consolidation among healthcare providers drives up the cost of care with little or no improvement—indeed, some studies show declines—in the quality of care.¹⁸

Putting profits before patients is not unique to private equity–owned healthcare companies. But because there’s less transparency around private equity deals and the companies they own, and because private equity firms tend to use more debt than other types of investors to fund their business strategies, the private equity business model can amplify the profit-seeking behaviors that put patients and healthcare workers at risk.

At least 8 percent of all private hospitals—and 20 percent of all for-profit hospitals—in the United States are now owned or operated by private equity firms.¹⁹

The Private Equity Hospital Business Model

Debt is a fundamental part of the private equity business model and one of the main reasons private equity acquisitions of hospitals can be so harmful to workers and patients. Private equity firms often use leveraged buyouts to acquire companies, which involves financing a substantial portion of the acquisition by taking out debt secured by the company it is buying. This means that the debt doesn’t belong to the private equity firm and its investors—it’s instead saddled onto the company being acquired, such as a health system or hospital. In a leveraged buyout, 60 to 90 percent of the transaction will typically be funded by debt,²⁰ and the health system, not the investors, will ultimately be on the hook for this debt. This may sound confusing or seem like the kind of thing that shouldn’t be allowed. But it’s perfectly legal.

Steward Health Care came into existence via a leveraged buyout in 2010, when private equity firm Cerberus Capital Management purchased Caritas Christi Health Care, a Catholic nonprofit health system based in Massachusetts. Cerberus rebranded the health system as Steward Health Care and converted its status from nonprofit to for-profit.²¹

Because of the health system’s conversion to for-profit status, the deal required approval from the state attorney general’s office, which imposed a five-year monitoring period and multiple conditions on the transaction. These conditions included a requirement for the new owners to invest $400 million into the system’s infrastructure.²² Despite Cerberus Capital’s deep pockets, these “investments” came from debt loaded onto Steward as well as from selling off the real estate of some of its medical office buildings.²³ Although the initial purchase price was just $420 million, these conditions pushed the total purchase price to $895 million—but Cerberus only put up $246 million in equity for the transaction.²⁴

In addition to the initial leveraged buyout, private equity firms often use debt to fund expansion. Investors will direct the health system to take on more debt so it can acquire more hospitals, physician practices, and other ancillary businesses. This is what happened with Steward Health Care. After its monitoring period in Massachusetts was over, Steward embarked on a rapid debt-funded expansion strategy by buying up other hospitals and rolling them into the same corporate chain. Steward eventually grew to be the largest private hospital system in the United States, even as many of its hospitals were struggling.²⁵

Cutting Costs and Increasing Revenues

A health system that’s loaded down with debt has to pay its debt service obligations—principal and interest—each month on top of all the usual costs of running a hospital. When the debt burden is high, the health system has added pressure to increase revenues and cut costs. There aren’t many ways to cut costs in healthcare without impacting patients and workers.

Common cost-cutting practices used by private equity investors in hospitals include understaffing, relying on cheaper staff with fewer qualifications, skimping on healthcare supplies, and delaying important capital improvements, like equipment and building maintenance. Some systems have even delayed payments to vendors or failed to pay staff on time. And most tragically, some systems have cut critical services or closed entire hospitals, leading to layoffs of workers and reduced access to care for entire communities.²⁶

Researchers have been empirically examining the impacts of private equity investments in healthcare. A recent peer-reviewed study demonstrated that private equity acquisition of hospitals was associated with a 25.4 percent increase in hospital-acquired conditions, including falls and bloodstream infections.²⁷ A 2023 systematic review of the research on private equity ownership and its impacts on health outcomes, costs, and quality found that private equity ownership was associated with reduced nurse staffing levels.²⁸

Under Cerberus Capital’s ownership, Steward’s Massachusetts hospitals faced numerous unsafe staffing complaints from the local nurses’ union²⁹ and saw higher than average patient hospital-acquired infections, falls, and readmissions.³⁰

In 2014, Steward moved to close Quincy Medical Center in Massachusetts despite commitments it had made to regulators to keep it open.³¹ In response, the state attorney general’s office required it to keep the emergency room open, while all other services were cut. After selling the hospital to a real estate developer, Steward eventually closed Quincy Medical Center for good in late 2020, leaving the city of Quincy with no emergency room.³² In Youngstown, Ohio, Steward closed a hospital in 2018 just a year after acquiring it, laying off 388 workers³³ and leaving the city without a labor and delivery unit.³⁴

Alongside cutting costs, private equity investors seek to increase revenues. While increasing revenues sounds like a helpful thing for a business, if left unchecked it can lead to putting profits before patients and staff. Hospitals may raise prices or go after unpaid patient bills more aggressively. In fact, the aforementioned 2023 study found an association between private equity ownership and higher costs to patients and payers (i.e., health insurers).³⁵ Clinicians may be incentivized or required to see more patients per hour and order more expensive tests. Sometimes the pressure to increase revenues can even cross the line into Medicare and Medicaid fraud.³⁶

In 2018, Steward was sued for an alleged Medicare and Medicaid kickback scheme. The system ultimately reached a $4.7 million settlement with the US Department of Justice in 2022.³⁷ In December 2023, the US Attorney’s Office filed another lawsuit against Steward regarding allegations of a kickback scheme spanning from 2013 to 2022.³⁸

Even a hospital that achieves healthy revenues each year may end up aggressively cutting costs to make its debt payments. For a hospital that operates on much thinner margins, a high debt load can be a death sentence—especially when interest rates go up. What once might have been an affordable monthly payment can skyrocket in a high interest rate environment.

In 2021, interest rates in the United States started to creep up, and by the end of 2022, many debt-burdened private equity–owned healthcare companies were feeling the pain. According to credit rating agency Moody’s Investors Service, 93 percent of the most distressed healthcare companies as of November 2023 were owned by private equity firms.³⁹ One-fifth of healthcare companies that declared bankruptcy in 2023 were owned by private equity firms.⁴⁰

If debt is so risky, why do private equity firms like Cerberus Capital use it to buy and expand hospital systems? Debt means their investors aren’t on the hook. Ultimately, the risk that comes with debt is borne by the hospitals themselves because the private equity firms use the hospitals to guarantee the debt. And so private equity firms can treat the debt taken out against their hospitals as free money. They use it to buy the health system, to expand it, and sometimes to even pay themselves dividends (more on this in a bit). But private equity firms have limited liability: they cannot lose more than the capital they’ve put in. Therefore, just like parasites that can thrive while their hosts die, they can still make a profit even if the hospital system they own goes bankrupt.

But a savvy private equity firm will exit an investment before bankruptcy transpires. In the case of Steward Health Care, its private equity owners plundered it and sold what was left to a new set of owners. After Cerberus exited, the health system’s financial situation continued to deteriorate as the legacy of various financial decisions made by its former owners put it on the path to bankruptcy.⁴¹

Looting Tactics

There are three particularly parasitic strategies that private equity firms have used with hospitals: dividend recapitalizations, management fees, and sale-leasebacks of hospital real estate. These strategies often increase the debt load on the hospital and burden it with extractive payments that cut into operations.

Dividend Recapitalizations

A dividend recapitalization is, in essence, a misnomer. It sounds like it will make more capital available to the hospital, but it does the opposite. The private equity firm makes the hospital take on new debt in order to provide cash payouts to its private equity investors. Just as in a leveraged buyout, the health system is on the hook for the debt—not the private equity firm. Dividend recapitalizations are a fundamentally extractive strategy in which the health system gets treated like a piggy bank so investors can pay themselves handsomely.

Management Fees

Private equity firms often charge management or advisory fees to the companies they own, which can amount to millions of dollars per year. Fees are typically stipulated in a management services agreement between the private equity firm and the company it controls. In some cases, companies must pay fees to the private equity firm even for services never rendered (called “accelerated monitoring fees”). These fees can further drain a company’s cash away from hospital operations and into investors’ pockets.

Prospect Medical Holdings is a hospital system that was majority owned by private equity firm Leonard Green & Partners from 2010 to 2021. At its largest, Prospect owned hospitals across California, Connecticut, New Jersey, Pennsylvania, Rhode Island, and Texas. Most of Prospect’s hospitals are safety-net hospitals, which are designated to serve low-income, uninsured, and vulnerable populations.⁴²

Over the course of its 10-year ownership, Leonard Green & Partners, and Prospect’s minority owners, took approximately $9 million in management fees and $649 million in dividends, in part by saddling this safety-net hospital chain with debt and using the proceeds of the loans to pay themselves.⁴³ They siphoned this money out of Prospect even as many of its hospitals suffered deteriorating financial conditions and serious patient care quality concerns.⁴⁴

Sale-Leasebacks and Hospital Landlords

You can’t tell the story of how private equity has looted many US hospitals without mentioning their accomplices: hospital landlords, otherwise known as real estate investment trusts (REITs). In a sale-leaseback transaction, a hospital system splits its real estate from its operations and sells the real estate to a REIT. Selling the real estate generates cash, but much of that goes straight to private equity investors who pocket it for themselves. After the sale, the health system has to pay monthly lease payments to the new landlord on real estate it used to own. Sale-leasebacks replace mortgage payments (or no payments for a property that was paid off) with lease payments and strip the health system of its most valuable asset.

One REIT in particular has played a starring role in recent hospital looting scandals: Medical Properties Trust (MPT). Founded in 2003 and headquartered in Birmingham, Alabama, MPT has worked closely with various private equity–owned hospital systems, including Steward and Prospect, to sell off hospital real estate to enrich investors, often at the expense of the health systems.⁴⁵

After its five-year monitoring period with the Massachusetts attorney general expired,⁴⁶ Steward Health Care executed a $1.2 billion sale-leaseback transaction in 2016 with MPT. MPT made an additional $50 million equity investment in Steward, becoming a minority owner of the company.⁴⁷ Many Steward hospitals were now on the hook for hefty rent payments, in addition to losing their highest-value asset. This sale-leaseback deal was used to pay nearly $500 million in dividends to Cerberus and help fund Steward’s expansion to other states.⁴⁸

Four years later, Steward was financially struggling, but Cerberus wanted to exit its investment. With the hospitals’ poor financial position and the pandemic just beginning, selling the company would be difficult. At Cerberus’s behest, MPT provided a $400 million cash infusion into the system and a $335 million loan to a group of Steward physicians who would become its new owners, allowing Cerberus to exit.⁴⁹

Despite the cash infusion from MPT and $675 million that Steward received in pandemic relief loans and grants in 2020,⁵⁰ the system was still struggling by the time Cerberus fully exited in January 2021, having made at least $800 million in profit in the decade it owned Steward.⁵¹ That month, its new physician owners took out another $111 million in dividends. Chief Executive Officer Ralph de la Torre bought a $40 million yacht later that year.⁵²

The role of MPT in the pillaging of Steward cannot be overstated. Without a willing REIT like MPT to abet Steward’s asset-stripping and to help its private equity investors exit, Steward would not have been so easily able to generate the millions paid to Cerberus. The rent payments for those hospitals would ultimately burden the system’s finances at the expense of operational costs.

In September 2023, state and federal officials declared that patients were in immediate jeopardy at Steward’s Good Samaritan Medical Center in Brockton, Massachusetts—where the local nurses’ union had been warning officials since 2021 about critical understaffing and major safety issues in the emergency department.⁵³

By early 2024, Steward’s hospitals were facing a dire financial situation. In January 2024, MPT announced that Steward Health Care was $50 million behind in rent payments.⁵⁴ Vendors were suing for unpaid bills⁵⁵ and staffing and patient quality of care issues were mounting.⁵⁶ Between May 2023 and February 2024, Steward had already closed struggling hospitals or units in Texas⁵⁷ and Florida,⁵⁸ and in April 2024 it closed New England Sinai Acute Long-Term Care and Rehabilitation Hospital in Massachusetts.⁵⁹ Legislators and politicians scrambled to address the system’s financial implosion.⁶⁰

MPT also had a hand in the pillaging of Prospect Medical Holdings. As mentioned, Prospect’s owners, Leonard Green & Partners, saddled the hospital system with millions in debt to fund investor payouts. To pay off this debt, Prospect sold the bulk of its real estate to MPT in a sale-leaseback transaction.⁶¹ The transaction simply replaced the debt with lease liabilities and left Prospect with fewer assets.⁶²

In 2021, Leonard Green & Partners exited its stake in Prospect, with the system left in $3.1 billion of debt.⁶³ And Prospect’s hospitals are in serious financial trouble. One of its four hospitals in Pennsylvania had to close in late 2022 due to inadequate staffing, and others have laid off workers or cut critical services.⁶⁴

At Prospect’s three hospitals in Connecticut, the financial situation became especially grim in 2023. The hospitals reportedly owed millions to vendors and contract physicians⁶⁵ as well as $67 million in back taxes and interest to the state.⁶⁶

Parallel to Steward’s situation, lease payments with MPT have contributed to financial distress at Prospect hospitals. As of May 2023, Prospect owed at least $68 million to MPT,⁶⁷ and some of its hospitals reportedly missed rent payments to MPT through much of 2023.⁶⁸

It appears that both Cerberus Capital and Leonard Green & Partners have gotten off scot-free. They siphoned hundreds of millions from the Steward and Prospect healthcare systems, adding substantial debt that put hospitals in dire financial condition, then made their exit—leaving patients, workers, and their communities holding the bag.⁶⁹

What We Can Do

The abuses wrought by private equity firms at many of our nation’s hospitals are infuriating at best, tragic at worst. What can we do to ensure that private equity pillaging in healthcare comes to a stop—and that Wall Street is held accountable? There are two main ways we can accomplish this: by organizing and by fighting for robust and effective policies.

Organize!

Healthcare workers should always be organizing, whether their hospital is currently private equity–owned or not. A merger or buyout can always be around the corner, and workers should pay attention to how their workplace fits into the broader ecosystem of for-profit healthcare.

When workers come together to educate each other and fight for each other and their patients, they begin to shift the power away from greedy executives and investors. At both Steward and Prospect hospitals, healthcare workers have been playing important roles in exposing harms such as unsafe staffing practices inside their hospitals and in advocating for their patients.⁷⁰ Healthcare worker organizing efforts have also extended to their communities. Activities like informational pickets have helped educate community members about the dangers to patients and workers,⁷¹ and building coalitions with community organizations has helped to bring the voices of patients, workers, and community members—those most affected by corporate greed—to the forefront as major decisions are being made.⁷²

If you work at a unionized hospital, get involved with your union.* Go to union meetings. Learn and talk with your union siblings about what’s going on at your hospital. Support bargaining efforts by joining your union’s bargaining committee, participating in bargaining surveys, and attending union-led actions. If you’re not yet a member, now is the time to join.

Pension funds are some of private equity’s most important investors. This unfortunately means that workers’ retirement money can end up funding investments that hurt patients and workers.⁷³ You can work with your union to ensure current and retired union members’ pensions aren’t being used to fund destructive businesses in healthcare or the larger economy. You can also advocate for your pension fund to take on the larger fight of changing private equity’s practices. As AFT President Randi Weingarten and North America’s Building Trades Unions President Sean McGarvey wrote, “Our members’ retirement funds have over $4 trillion invested.… We agree with the [Biden-Harris] administration that private equity needs greater transparency, fairer fees, and a business model that grows strong businesses and creates good jobs—not one that exploits workers, loads companies with debt, and sells them off for parts.”⁷⁴

You can also learn about proposed legislation at the state and federal levels that will impact you and your patients. Your union can be a resource here and may be already lobbying for you and your coworkers. Learn how you can help with these policy efforts, such as by submitting testimony, showing up to rallies, or meeting with politicians.

Fight for Robust and Effective Policy

One of the reasons it has been so challenging for regulators and workers to hold private equity accountable for looting hospitals is that most of the tactics fall under the realm of legal business practices. If we want to stop the pillaging in the first place, we need to win legislation that removes incentives to loot hospitals or goes even further by making looting tactics illegal.

Much of the regulation of hospital sales and mergers happens at the state level. The good news is that many states have been beefing up their regulations in this area, often in response to how private equity has impacted healthcare in their regions. Since 2023, Illinois,⁷⁵ Minnesota,⁷⁶ New York,⁷⁷ Oregon,⁷⁸ and Washington⁷⁹ have passed legislation that increases state oversight of healthcare transactions; other states, like California,⁸⁰ are attempting to update their regulations. While these new state laws vary considerably,⁸¹ they indicate an appetite among state legislators to better monitor healthcare transactions, especially those involving private equity.

Many of these laws primarily focus on increasing transparency and addressing anticompetitive effects of healthcare transactions, but they can and should go further to address the long-term financial viability of health systems, access to care, and quality of care. Rhode Island’s Hospital Conversion Act addresses all of these issues and is perhaps the most robust piece of state legislation for overseeing healthcare changes of ownership.⁸² It can serve as a starting place for other states considering new or updated legislation. In 2021, Rhode Island used this law to require Leonard Green & Partners to pay $80 million to an escrow account to help ensure its Prospect hospitals would stay open after Leonard Green’s exit.⁸³

State laws, and federal laws where applicable, should also address private equity’s pillaging tactics by restricting or banning health systems from paying out debt-funded dividends to investors and barring investors from charging arbitrary fees to healthcare companies, such as management fees for services that haven’t been provided.

One of the biggest loopholes in state laws regulating hospitals is that the laws typically pertain only to hospital operations, not to real estate. As we’ve seen with Steward Health Care, Prospect Medical Holdings, and other systems whose real estate has been stripped away in sale-leaseback transactions, monthly lease payments can burden hospital finances, cutting into operations in ways that impact patients and workers. Hospital real estate sales need to be regulated. Ideally, such transactions would be banned. At a minimum, health systems should be required to notify state and/or federal regulators of real estate splits and to provide essential information to and receive approval from regulators for sale-leasebacks. If sale-leasebacks are approved, there should be limits on using proceeds to line investors’ pockets.

At the federal level, lawmakers should create joint liability for private equity firms and their portfolio companies. This would mean that private equity firms would also be responsible for the debt they load onto their portfolio companies, as well as be liable for any harms and illegal business practices, including Medicare and Medicaid fraud, that occur under their ownership. And importantly, lawmakers should close what is known as the carried interest loophole. This loophole has made it so that some portions of private equity firms’ profits are taxed at a substantially lower rate than the average worker’s income is taxed.⁸⁴

Most importantly, we need strong enforcement of regulations at both the federal and state levels. In the absence of enforcement, laws and regulations are useless no matter how well designed they are. We need to fight for legislators and budgets that adequately fund the relevant state and federal agencies tasked with enforcing the laws that regulate for-profit healthcare.

Summing It All Up

The cracks within our broken for-profit health system offer greedy investors plenty of opportunities for plunder. Private equity’s pillaging of hospitals is just one of the latest iterations of profiteering at the expense of patients, workers, and our collective well-being. But despite their immense wealth and power, private equity firms and the hospital landlords with whom they partner are not invincible. By organizing and winning effective policies, workers can use their collective power to hold these pillagers accountable and put a stop to the looting.

Mary Bugbee is the research and campaign director on the healthcare team at the Private Equity Stakeholder Project and a PhD candidate in medical anthropology at the University of Connecticut. Previously, she was a union representative and organizer for United Auto Workers Local 2322. While a graduate teaching assistant at the University of Connecticut, she served as vice president and then president of UConn’s Graduate Employee Union, United Auto Workers Local 6950.

*If you want to learn more about organizing a union at your workplace, please reach out to the AFT at formaftunion@aft.org. (return to article)

Endnotes

1. J. Bartlett, “Steward’s Medical Devices Were Repossessed. Weeks Later, a New Mother Died,” Boston Globe, January 25, 2024, bostonglobe.com/2024/01/25/business/steward-health-care-mother-death.

2. M. Tkacik, “Scenes from the Bat Cave,” American Prospect, February 27, 2024, prospect.org/health/2024-02-27-scenes-from-bat-cave-steward-health-florida.

3. Tkacik, “Scenes from the Bat Cave.”

4. M. Evans and J. Weil, “A Bat Infestation, Postponed Surgeries and Unpaid Bills: A Hospital Chain in Crisis,” Wall Street Journal, March 20, 2024, wsj.com/health/healthcare/hospital-chain-financial-crisis-steward-mpt-45be8bfb.

5. Tkacik, “Scenes from the Bat Cave.”

6. Evans and Weil, “A Bat Infestation”; and M. Ashley, “Steward Florida Hospitals Hit with Lawsuits,” Becker’s Hospital Review, March 4, 2024, beckershospitalreview.com/legal-regulatory-issues/steward-florida-hospitals-hit-with-lawsuits.html.

7. S. Willmer, “Cerberus Quadruples Money After Unusual Exit from Hospital Giant,” Bloomberg, May 27, 2021, bloomberg.com/news/articles/2021-05-27/cerberus-quadruples-money-after-unusual-exit-from-hospital-giant.

8. S. Vogel, “Senate Ramps Up Scrutiny of Private Equity ‘Greed’ in Healthcare,” Healthcare Dive, April 5, 2024, healthcaredive.com/news/senate-private-equity-probe-steward-emergency-room-staffing/712205.

9. E. Harrison, L. Creamer, and P. McCluskey, “Steward Health Care Seeks Bankruptcy Protections,” WBUR, May 6, 2024, wbur.org/news/2024/05/06/steward-bankruptcy-massachusetts-for-profit-hospitals-debt.

10. M. Ashley, “Steward Plans Sale of All Hospitals, Reports $9B in Debt,” Becker’s Hospital Review, May 7, 2024, beckershospitalreview.com/finance/steward-plans-sale-of-all-hospitals-reports-9b-in-debt.html.

11. S. Vogel, “Steward Health Care Files for Chapter 11 Bankruptcy,” Healthcare Dive, May 6, 2024, healthcaredive.com/news/steward-health-care-files-chapter-11-bankruptcy/714050.

12. Federal Trade Commission, “Federal Trade Commission, the Department of Justice and the Department of Health and Human Services Launch Cross-Government Inquiry on Impact of Corporate Greed in Health Care,” March 5, 2024, ftc.gov/news-events/news/press-releases/2024/03/federal-trade-commission-department-justice-department-health-human-services-launch-cross-government.

13. H. MacArthur et al., The Year Cash Became King Again in Private Equity (Washington, DC: Bain, March 11, 2024), bain.com/insights/year-cash-became-king-again-global-private-equity-report-2024.

14. E. Appelbaum and R. Batt, “How Private Equity Firms Are Designed to Earn Big While Risking Little of Their Own,” LSE Business Review (blog), January 23, 2017, blogs.lse.ac.uk/businessreview/2017/01/23/how-private-equity-firms-are-designed-to-earn-big-while-risking-little-of-their-own; and A. Gupta and S. Howell, “The Role of Private Equity in the U.S. Economy, and Whether and How Favorable Tax Policies for the Sector Need to Be Reformed,” Washington Center for Equitable Growth, September 14, 2023, equitablegrowth.org/the-role-of-private-equity-in-the-u-s-economy-and-whether-and-how-favorable-tax-policies-for-the-sector-need-to-be-reformed.

15. F. Dahlqvist et al., McKinsey Global Private Markets Review 2024: Private Markets in a Slower Era (Washington, DC: McKinsey & Company, March 28, 2024), mckinsey.com/industries/private-equity-and-principal-investors/our-insights/mckinseys-private-markets-annual-review.

16. D. Blumenthal, “Private Equity’s Role in Health Care,” Commonwealth Fund, November 17, 2023, commonwealthfund.org/publications/explainer/2023/nov/private-equity-role-health-care.

17. M. Bugbee, E. O’Grady, and M. Fenne, Private Equity in U.S. Healthcare: Trends in 2023 Deal Activity (Chicago: Private Equity Stakeholder Project, March 6, 2024), pestakeholder.org/private-equity-healthcare-2023-trends.

18. K. Schwartz et al., “What We Know About Provider Consolidation,” KFF (blog), September 2, 2020, kff.org/health-costs/issue-brief/what-we-know-about-provider-consolidation.

19. Private Equity Stakeholder Project, “PESP Private Equity Hospital Tracker,” pestakeholder.org/private-equity-hospital-tracker.

20. S. Kaplan and P. Stromberg, “Leveraged Buyouts and Private Equity,” Journal of Economic Perspectives 23, no. 1 (March 2009): 124.

21. Fierce Healthcare, “Acquisition of Caritas Christi Now Complete,” November 9, 2010, fiercehealthcare.com/healthcare/acquisition-caritas-christi-now-complete.

22. R. Batt, E. Appelbaum, and T. Katz, The Role of Public REITs in Financialization and Industry Restructuring, Working Paper No. 189, Center for Economic and Policy Research, July 9, 2022, ineteconomics.org/uploads/papers/WP_189-Batt-Appelbaum-Public-REITS-2.pdf, 39.

23. Batt, Appelbaum, and Katz, The Role of Public REITs, 39.

24. A. La France, R. Batt, and E. Appelbaum, Hospital Ownership and Financial Stability: A Matched Case Comparison of a Non-Profit and Private Equity Owned Health System (Washington, DC: Center for Economic and Policy Research, March 22, 2021), cepr.net/wp-content/uploads/2022/03/LBA-Advances-Chapter-Final-03-24-21.pdf, 20–21; and Willmer, “Cerberus Quadruples Money.”

25. La France, Batt, and Appelbaum, Hospital Ownership, 2, 24.

26. E. O’Grady, “Private Equity Healthcare Bankruptcies Are on the Rise,” Private Equity Stakeholder Project, April 17, 2024, pestakeholder.org/reports/private-equity-healthcare-bankruptcies-are-on-the-rise.

27. S. Kannan, J. Dov Bruch, and Z. Song, “Changes in Hospital Adverse Events and Patient Outcomes Associated with Private Equity Acquisition,” JAMA (The Journal of the American Medical Association) 330, no. 24 (December 26, 2023): 2365–75.

28. A. Borsa et al., “Evaluating Trends in Private Equity Ownership and Impacts on Health Outcomes, Costs, and Quality: Systematic Review,” The BMJ 382 (July 19, 2023): e075244.

29. See R. Weisman, “Boston Globe Story on Steward Health Care Includes Concerns of MNA/NNU Nurses About Poor Staffing Cinditions [sic],” Massachusetts Nurses Association, February 4, 2013, massnurses.org/2013/02/04/boston-globe-story-on-steward-health-care-includes-concerns-of-mna-nnu-nurses-about-poor-staffing-cinditions; Massachusetts Nurses Association, “Steward St. Elizabeth’s Medical Center RNs to Hold Informational Picket to Protest Unsafe Staffing and Patient Care Conditions; Call on Steward HealthCare to Honor Contractual Commitments,” March 11, 2019, prnewswire.com/news-releases/steward-st-elizabeths-medical-center-rns-to-hold-informational-picket-to-protest-unsafe-staffing-and-patient-care-conditions-call-on-steward-healthcare-to-honor-contractual-commitments-300810310.html.

30. See Batt, Appelbaum, and Katz, The Role of Public REITs, 40.

31. D. Primack, “Hospital Debacle Puts Focus on Private Equity,” Axios, March 6, 2024, axios.com/2024/03/06/hospital-debacle-private-equity-cerberus-steward; and J. Bartlett, “On Steward’s Path to Financial Ruin, a Series of Missed Opportunities,” Boston Globe, March 25, 2024, bostonglobe.com/2024/03/25/business/steward-financial-ruin-state-intervention-massachusetts.

32. J. DiFazio, “Quincy Medical Center Closes for Good,” Patriot Ledger, November 1, 2020, patriotledger.com/story/news/2020/11/01/quincy-medical-center-closes-for-good/114602450.

33. A. Ellison, “Steward to Close Ohio Hospital, Lay off 388,” Becker’s Hospital Review, August 17, 2018. beckershospitalreview.com/finance/steward-to-close-ohio-hospital-lay-off-388.html.

34. WKBN, “Northside Regional Medical Center in Youngstown Closing,” August 15, 2018, wkbn.com/news/local-news/northside-regional-medical-center-in-youngstown-closing.

35. Borsa et al., “Evaluating Trends in Private Equity Ownership.”

36. E. O’Grady, “Money for Nothing: How Private Equity Has Defrauded Medicare, Medicaid, and Other Government Health Programs, and How That Might Change,” Private Equity Stakeholder Project, February 2021, pestakeholder.org/wp-content/uploads/2021/02/Private-Equity-False-Claims-Act-PESP-022221-.pdf.

37. J. Bartlett, “Steward Health Care to Pay $4.7M to Resolve Anti-Kickback Allegations,” Boston Globe, June 9, 2022, bostonglobe.com/2022/06/09/metro/steward-health-care-pay-47m-resolve-anti-kickback-allegations.

38. US Attorney’s Office for the District of Massachusetts, “United States Files Complaint Against St. Elizabeth’s Medical Center, Steward Medical Group and Steward Health Care System,” US Department of Justice, December 18, 2023, justice.gov/usao-ma/pr/united-states-files-complaint-against-st-elizabeths-medical-center-steward-medical-group.

39. Moody’s Investors Service, “More Defaults Likely as Roster of Low-Rated Companies Grows and Interest Expense Rises,” November 30, 2023, moodys.com/research/Healthcare-North-America-More-defaults-likely-as-roster-of-low--PBC_1383659; and P. Wendling, “Bankruptcies Jump Among Private Equity-Owned Healthcare Companies,” MedCentral, April 20, 2024, medcentral.com/biz-policy/bankruptcies-jump-among-private-equity-owned-healthcare-companies.

40. O’Grady, “Private Equity Healthcare Bankruptcies.”

41. S. Vogel, “Steward Bankruptcy Likely as Massive Debt Remains, with Few Options Left,” Healthcare Dive, April 16, 2024, healthcaredive.com/news/steward-health-care-bankruptcy-risk/712899.

42. E. O’Grady, “How Private Equity Raided Safety Net Hospitals and Left Communities Holding the Bag: A Case Study on Leonard Green & Partners’ Ownership of Prospect Medical Holdings,” Private Equity Stakeholder Project, November 2022, pestakeholder.org/wp-content/uploads/2022/11/Prospect_Primer_Nov-2022.pdf.

43. E. O’Grady, “Update: Leonard Green-Led Ownership Collected $658 Million in Dividends and Fees from Prospect Medical Holdings Despite Challenges, Commitment to Regulators to Forgo Dividends,” Private Equity Stakeholder Project, May 2020, pestakeholder.org/wp-content/uploads/2020/05/UPDATE-Leonard-Green-Prospect-Medical-Dividends-PESP-051420.pdf.

44. State of Rhode Island, Office of the Attorney General, “Decision Re: Initial Application of Chamber Inc.; Ivy Holdings Inc.; Ivy Intermediate Holdings, Inc.; Prospect Medical Holdings, Inc.; Prospect East Holdings, Inc.; Prospect East Hospital Advisory Services, LLC; Prospect CharterCARE, LLC; Prospect CharterCARE SJHSRI, LLC; Prospect CharterCARE RWMC, LLC,” June 1, 2021, riag.ri.gov/sites/g/files/xkgbur496/files/documents/Prospect_Chamber_Ivy_AG_HCA_Decision.pdf; and P. Elkind and D. Burke, “Investors Extracted $400 Million from a Hospital Chain That Sometimes Couldn’t Pay for Medical Supplies or Gas for Ambulances,” ProPublica, September 30, 2020, propublica.org/article/investors-extracted-400-million-from-a-hospital-chain-that-sometimes-couldnt-pay-for-medical-supplies-or-gas-for-ambulances.

45. M. Tkacik, “Quackonomics,” American Prospect, May 23, 2023, prospect.org/health/2023-05-23-quackonomics-medical-properties-trust.

46. La France, Batt, and Appelbaum, Hospital Ownership, 5.

47. Steward Health Care System, “Steward Receives $1.25 Billion Investment from Medical Properties Trust, Setting Stage for National Growth,” September 26, 2016, prnewswire.com/news-releases/steward-receives-125-billion-investment-from-medical-properties-trust-setting-stage-for-national-growth-300334227.html.

48. La France, Batt, and Appelbaum, Hospital Ownership, 2.

49. J. Weil, “The Private-Equity Deal That Flattened a Hospital Chain and Its Landlord,” Wall Street Journal, May 7, 2024, wsj.com/finance/the-private-equity-deal-that-flattened-a-hospital-chain-and-its-landlord-3096747d.

50. S. Willmer, “A Wall Street Giant Tapped $1.5 Billion in Federal Aid for Its Hospitals,” Bloomberg, September 14, 2020, bloomberg.com/news/articles/2020-09-14/a-wall-street-giant-tapped-1-5-billion-in-federal-aid-for-its-hospitals.

51. Willmer, “A Wall Street Giant Tapped $1.5 Billion.”

52. Weil, “The Private-Equity Deal”; and R. Robertson, “As Steward Ship Was Sinking, CEO Bought $40M Yacht,” May 8, 2024, medpagetoday.com/special-reports/features/110025. As of October 1, Ralph de la Torre has resigned from his position as CEO. The resignation came following a unanimous Senate vote to hold him in contempt for his defiance of a subpoena to appear at a Senate HELP Committee hearing on September 12. De la Torre has since sued the HELP Committee, arguing that the committee violated his right against self-incrimination under the US Constitution’s Fifth Amendment. See D. Knauth, “Steward Health’s Ousted CEO Sues Senators Over Contempt Resolution,” Reuters, September 30, 2024, reuters.com/legal/government/steward-healths-ousted-ceo-sues-senators-over-contempt-resolution-2024-09-30.

53. L. Kowalczyk and F. Freyer, “Sick Patients Collapsed Waiting for Care in Overwhelmed Steward Hospital’s Emergency Department,” Boston Globe, February 15, 2024, bostonglobe.com/2024/02/14/metro/steward-health-care-emergency-department-overcrowding.

54. Business Wire, “Medical Properties Trust Provides Update on Steward Health Care,” January 4, 2024, businesswire.com/news/home/20240104928323/en/Medical-Properties-Trust-Provides-Update-on-Steward-Health-Care.

55. S. Vogel, “Steward’s Legal Battles Offer Insight into Pattern of Mismanagement,” Healthcare Dive, March 20, 2024, healthcaredive.com/news/steward-health-care-mismanagement-lawsuits/710102.

56. A. Niezgoda, “Steward’s Financial Woes Are Impacting Patient Care, Workers Say,” NBC10 Boston, February 21, 2024, nbcboston.com/news/local/stewards-financial-woes-are-impacting-patient-care-workers-say/3286716; and NBC10 Boston, “Steward Health’s Financial Woes Are Impacting Patient Care,” YouTube video, 2:15, February 21, 2024, youtube.com/watch?v=UE5u4VKC2zg.

57. Axis Neuromonitoring, “Texas Hospitals Hit Hard by Bankruptcies, Closures,” January 29, 2024, axisneuromonitoring.com/news/texas-hospitals-hit-hard-by-bankruptcies-closures; and S. Vogel, “Troubled Steward Health Care Announces Yet Another Facility Closure,” Healthcare Dive, January 26, 2024, healthcaredive.com/news/steward-health-care-closes-medical-center-southeast-texas/705712.

58. M. Ashley, “Steward Florida Hospital Shutters Obstetrics Unit Early,” Becker’s Hospital Review, February 15, 2024, beckershospitalreview.com/finance/steward-florida-hospital-shutters-obstetrics-unit-early.html.

59. S. Vogel, “Steward Health Care to Close Massachusetts Hospital amid Financial Troubles,” Healthcare Dive, December 6, 2023, healthcaredive.com/news/steward-health-care-to-close-massachusetts-hospital-amid-financial-troubles/701695; and M. Bean, “Steward Rehab Hospital Closes,” Becker’s Hospital CFO Report, April 2, 2024, beckershospitalreview.com/finance/steward-rehab-hospital-to-close-april-2.html.

60. D. Muoio, “With Steward’s Struggles on Full Display, Clinicians, Lawmakers Sound the Alarm on Private Equity’s Impact on Healthcare,” Fierce Healthcare, April 3, 2024, fiercehealthcare.com/regulatory/steward-healthcares-struggles-full-display-clinicians-policy-researchers-tell-senators; and D. Muoio, “MA Governor Orders Steward Health Care to Disclose Withheld Financial Documents, Says It Must Exit State ‘as Soon as Possible,’” Fierce Healthcare, February 20, 2024, fiercehealthcare.com/providers/mass-gov-orders-steward-health-care-disclose-withheld-financial-documents-says-it-must.

61. Moody’s Investors Service, “Moody’s: Prospect Medical’s Sale-Leaseback Improves Liquidity, However Operating Challenges Remain,” July 16, 2019, markets.businessinsider.com/news/bonds/prospect-medical-holdings-inc-moody-s-prospect-medical-s-sale-leaseback-improves-liquidity-however-operating-challenges-remain-1028359617; and Business Wire, “Prospect to Receive $1.55 Billion Investment from Medical Properties Trust, Inc.,” July 15, 2019, businesswire.com/news/home/20190715005786/en/Prospect-to-Receive-1.55-Billion-Investment-from-Medical-Properties-Trust-Inc.

62. Prospect Medical Holdings, “Consolidated Financial Statements as of and for the Years Ended September 30, 2019 and 2018,” Private Equity Stake Holder Project, December 2019, pestakeholder.org/wp-content/uploads/2020/06/PMH-Financial-Statement-2018-2019.pdf.

63. State of Rhode Island, Office of the Attorney General, “Decision Re: Initial Application of Chamber Inc.,” 22.

64. M. Bugbee, “Prospect Safety Net Hospitals Continue to Struggle Under the Legacy of Leonard Green’s Past Ownership,” Private Equity Stakeholder Project, November 8, 2023, pestakeholder.org/news/prospect-safety-net-hospitals-continue-to-struggle-under-the-legacy-of-leonard-greens-past-ownership.

65. J. Carlesso and D. Altimari, “Yale Health, CT Officials Resume Negotiating Prospect Hospitals Sale,” CT Mirror, October 25, 2023, ctmirror.org/2023/10/25/prospect-medical-holdings-yale-health-ct-negotiations; and J. Carlesso and D. Altimari, “Lamont Warned Cyberattack, Vendor Debt Put Sale of Prospect Hospitals at Risk,” CT Mirror, September 21, 2023, ctmirror.org/2023/09/21/ct-prospect-medical-holdings-hospital-yale-health.

66. D. Altimari, J. Carlesso, and K. Phaneuf, “Prospect Medical Chain Owes CT $67M, Tax Liens Show,” CT Mirror, January 9, 2024, ctmirror.org/2024/01/09/prospect-medical-holdings-ct-hospitals-tax-lien.

67. Medical Properties Trust, “Medical Properties Trust, Inc. Reports Second Quarter Results,” August 8, 2023, medicalpropertiestrust.gcs-web.com/node/15471/pdf; and J. Weil, “Cracks Deepen for America’s Biggest Hospital Landlord: Struggling Tenants, a Bailout on Hold,” Wall Street Journal, August 18, 2023, wsj.com/business/deals/cracks-deepen-for-americas-biggest-hospital-landlord-struggling-tenants-a-bailout-on-hold-21e3294c.

68. Weil, “Cracks Deepen”; and S. Srinivasan, “Powerful Landlord Could Play Key Role in Deal Between Prospect Medical and Yale,” New Hampshire Public Radio, March 29, 2024, nhpr.org/2024-03-29/prospect-medical-yale-mpt-ct.

69. O’Grady, “How Private Equity Raided Safety Net Hospitals”; and M. Tkacik, “Massachusetts Wakes Up to a Hospital Nightmare,” American Prospect, January 26, 2024, prospect.org/health/2024-01-26-massachusetts-hospital-nightmare-steward-health.

70. See Massachusetts Nurses Association, “Boston Globe Story”; Massachusetts Nurses Association, “Steward St. Elizabeth’s Medical Center RNs to Hold Informational Picket to Protest Unsafe Staffing and Patient Care Conditions; Call on Steward HealthCare to Honor Contractual Commitments,” March 11, 2019, prnewswire.com/news-releases/steward-st-elizabeths-medical-center-rns-to-hold-informational-picket-to-protest-unsafe-staffing-and-patient-care-conditions-call-on-steward-healthcare-to-honor-contractual-commitments-300810310.html; and Associated Press, “Nurses, Techs Strike at Delaware County Memorial Hospital,” WHYY, March 6, 2017, whyy.org/articles/nurses-techs-strike-at-delaware-county-memorial-hospital.

71. Massachusetts Nurses Association, “Boston Globe Story.”

72. G. Lehman, “Steward Financial Crisis Sparks Community Action at St. Elizabeth’s Medical Center,” Daily Free Press, April 24, 2024, dailyfreepress.com/2024/04/24/204262.

73. AFT, “Ranking Asset Managers: A Retirement Security Report on Money Managers for Trustees,” April 19, 2013, wsj.com/public/resources/documents/AFTRetirementSecurityRepor0417.pdf.

74. R. Weingarten and S. McGarvey, “We Are Entrusted with the Pensions of 4.7 Million American Workers. We Must Ask Private Equity Firms the Hard Questions—Even If They Don’t Like It,” Fortune, May 31, 2024, fortune.com/2024/05/31/pensions-american-workers-private-equity-firms-hard-questions-labor-finance-politics.

75. M. Bugbee, “Big Step Forward for Illinois Healthcare Oversight,” Private Equity Stakeholder Project, September 19, 2023, pestakeholder.org/news/big-step-forward-for-illinois-healthcare-oversight.

76. Office of the Revisor of Statutes, “HF 402,” Minnesota Legislature, revisor.mn.gov/bills/bill.php?b=House&f=HF0402&ssn=0&y=2023.

77. New York State Department of Health, “Required Reporting of Material Transactions,” health.ny.gov/facilities/material_transactions.

78. Oregon Health Authority, Office of Health Policy, “Health Care Market Oversight,” oregon.gov/oha/hpa/hp/pages/health-care-market-oversight.aspx.

79. Washington State Office of the Attorney General, “Healthcare Transactions Notification Requirement,” atg.wa.gov/healthcare-transactions-notification-requirement.

80. E. O’Grady, “California Legislation Aims to Safeguard Against Private Equity in Healthcare,” Private Equity Stakeholder Project, February 29, 2024, pestakeholder.org/news/california-legislation-aims-to-safeguard-against-private-equity-in-healthcare.

81. D. Gersh, J. Freshman, and M. Lewellyn, “The National Patchwork Grows: Illinois and Minnesota Pass New Health Care Transaction Oversight Laws,” Ropes & Gray, August 14, 2023, ropesgray.com/en/newsroom/alerts/2023/08/the-national-patchwork-grows-illinois-and-minnesota-pass-new-health-care-transaction-oversight-laws; and J. Towhey, “More States Increasing Scrutiny of Healthcare Transactions, with Skilled Nursing Targeted,” McKnight’s Long-Term Care News, August 15, 2023, mcknights.com/news/increased-scrutiny-of-healthcare-mergers-and-purchases-could-be-just-the-beginning-of-nursing-homes-headaches.

82. State of Rhode Island, Department of Health, “Hospital Conversions / Mergers Program,” health.ri.gov/programs/hospitalconversionsmerger.

83. M. Bugbee, “Big Step Forward for Illinois Healthcare Oversight,” Private Equity Stakeholder Project, September 19, 2023, pestakeholder.org/news/big-step-forward-for-illinois-healthcare-oversight.

84. E. Stewart and J. Baker, “Private Equity: The Metastasizing Disease Threatening Health Care,” Health Affairs Forefront, December 18, 2023, healthaffairs.org/content/forefront/private-equity-metastasizing-disease-threatening-health-care.

[Illustrations by Richard Mia]