Steward implosion provides cautionary tale on private equity in health care

By Judith Garber and Imari Daniels

Private equity acquisitions in healthcare have grown rapidly over the past decade, and hospitals are no exception. As of January 2024, at least 460 hospitals are now owned by private equity firms, comprising 30% of for-profit hospitals in the U.S. 

Previous reports have shown the perils of private equity acquisitions of rural hospitals, but these aren’t the only type of hospital at risk. Steward Health Care, a for-profit system formerly owned by a private equity firm, is selling nine hospitals in Massachusetts, after running out of money to run the hospitals. Here’s what happened, and what the fallout might mean for Massachusetts communities.

Steward’s downfall: A timeline

March 2010

Caritas Christi bought by private equity firm

Cerberus Capital Management buys the financially distressed hospital system, Caritas Christi for roughly $830 million and rebrands under a new corporation named Steward.

Steward closes 124 year old hospital

Steward closes Quincy Medical Center three years after acquiring the hospital, despite promising to keep it open for at least 10 years.

November 2014
September 2016

Massachusetts hospital buildings sold to a real estate investment firm

Steward signs a $1.25 billion sale-leaseback agreement for its Massachusetts hospitals with a publicly traded firm called Medical Properties Trust (MPT), giving the system with hundreds of millions in rent burden each year.

Steward acquires 30+ hospitals

Steward’s merger with the IASIS Healthcare LLC hospital system allows them to acquire 36 hospitals across 10 states.

May 2017
May 2020

Cerberus starts to exit, Steward CEO buys yacht

Cerberus transfers ownership of Steward hospitals to the company’s doctors, making a whopping profit of $800 million in ten years. Steward’s ownership team pays itself a $100 million dividend, and the CEO Ralph de la Torre buys a $40 million yacht.

Patient safety issues flagged

A preventable patient death at Good Samaritan Hospital alerts officials to “patient safety lapses” and staffing problems. Officials order the hospital to fix the staffing issues within 23 days. Since then, other Steward hospitals have been investigated for quality and safety concerns.

September 2023
January 2024

Threats raised about possible Steward bankruptcy

Steward’s landlord reveals that the health system was $50 million behind on its rent and would contemplate selling off hospitals nationally.

Massachusetts tells Steward to “get out”

After the Massachusetts Governor told Steward to exit the state, the system is looking to sell their Massachusetts hospitals.

February 2024

Impact on the community

What is at stake for Massachusetts communities when it comes to Stewards’ financial health?Data from the Lown Hospitals Index shows that many of these hospitals were serving an important community need. All of Steward’s hospitals in Massachusetts received A or B grades in both Community Benefit and Inclusivity last year. According to Steward, 70 percent of hospital patients are covered by Medicare and Medicaid. Closures could make it harder for this vulnerable population to access care.

HospitalCommunity Benefit grade, 2023Inclusivity grade, 2023
Carney HospitalAB
Saint Anne’s HospitalBA
St. Elizabeth’s Medical CenterBA
Morton HospitalBB
Holy Family Hospital-MethuenBB
Nashoba Valley Medical CenterBB
Good Samaritan Medical CenterBB
Source: Lown Institute Hospitals Index, 2023

All of Steward’s hospitals had financial assistance spending or Medicaid revenue share above the state average in recent years (see tables below). Some hospitals, such as Carney Hospital, Holy Family Hospital in Methuen, and Nashoba Valley Medical Center, were above the state average in all of the past three years on one or both of these metrics.

Financial assistance spending, share of expenses

Hospital 202120202019
Carney Hospital0.79%1.25%1.26%
Saint Anne’s Hospital0.57%0.75%0.66%
St. Elizabeth’s Medical Center0.43%0.63%0.53%
Morton Hospital0.52%0.71%0.60%
Holy Family Hospital-Methuen0.58%0.81%0.70%
Nashoba Valley Medical Center1.51%1.12%1.52%
Good Samaritan Medical Center0.76%0.98%1.07%
Massachusetts Average0.77%0.82%0.93%
Source: CMS Hospital Cost Reports

Medicaid revenue, share of patient revenue

Hospital 202120202019
Carney Hospital26.21%25.47%25.17%
Saint Anne’s Hospital12.61%13.14%12.80%
St. Elizabeth’s Medical Center12.23%13.26%12.05%
Morton Hospital14.62%13.79%12.96%
Holy Family Hospital-Methuen18.06%19.08%16.98%
Nashoba Valley Medical Center10.78%11.23%10.76%
Good Samaritan Medical Center12.84%14.48%13.42%
Massachusetts Average12.86%13.07%12.98%
Source: CMS hospital cost reports

Patients are feeling the impact of the ongoing crisis through treatment disruptions, last-minute procedure rescheduling, and reduced provider availability. The potential displacement of 16,000 Steward healthcare workers and the risk of losing vital anchor hospitals further exacerbate concerns. Reports of understaffing and service limitations, such as closed nurseries and unavailable lactation consultants, highlight the strain on resources.

Additionally, nonprofits that were dependent on Steward hospitals for funding, like the Allston Brighton Health Collaborative’s food voucher program, went unpaid for months. According to WGBH, St. Elizabeth’s hospital “quietly backed away from more than $600,000 in community giving” as the Steward system faced financial difficulties.

Beyond immediate employee concerns, there’s a real risk of deepening economic challenges and health inequalities within the community with this disruption of healthcare services to almost 200,000 patients. As Steward hospitals transition to new owners, challenges will require concerted efforts from all stakeholders involved to overcome these obstacles and continue supporting the well-being of the communities they serve.