Kevin Wolf/AP Photo
Sen. Ed Markey (D-MA) looks to Ellen MacInnis, RN, a nurse at St. Elizabeth's Medical Center in Boston, at right, as she testifies during a Senate HELP Committee hearing to examine the bankruptcy of Steward Health Care, September 12, 2024, on Capitol Hill in Washington.
Five minutes before last Thursday’s Senate hearing on the Steward hospital chain bankruptcy was scheduled to start, there were still whispers in the room that founder/CEO Ralph de la Torre, who mortgaged the assets of more than three dozen community hospitals across the nation to finance a vast portfolio of luxury real estate and billionaire toys, might actually show up to serve his subpoena. “He’s such a narcissist, there’s a 5 percent chance he walks through the door,” a hospital veteran remarked to me a few days earlier, and he had a point; this is the man who famously bragged to The Boston Globe back in 2010 that his own father had once playfully nicknamed him “King of the Cannibals.”
Alas, de la Torre did not show. A flyer circulating around the room featuring a photo of him wearing a floppy red Carmen Sandiego hat humorously speculated as to his whereabouts: “Is he … in his villa in Madrid? On his yacht? On his other yacht?
And so the hearing consisted of four witnesses: two Massachusetts-based Steward nurses and two politicians representing West Monroe, Louisiana, where Steward gutted a regional hospital serving 26 rural feeder facilities. The witnesses described the deterioration in services and working conditions that accompanied their hospitals’ acquisition by de la Torre and his private equity backers at Cerberus Capital Management, and the subsequent rounds of nine-figure dividend payments the owners made to themselves.
At one point, Sen. Ed Markey (D-MA) asked what the witnesses would have done with the $800 million dividend Cerberus siphoned out of the hospital in 2016, or the $40 million de la Torre spent on the larger of his two yachts. Ellen MacInnis, a 26-year veteran of St. Elizabeth’s hospital in Brighton, suggested she might start by paying off the elevator mechanic. “I work on the 10th floor and there are supposed to be six elevators and one is working, and even that one [only] works most of the time,” said MacInnis. Steward administrators devised a bizarre if creative solution: “They gave us these sleds, to drag patients who can’t walk in an emergency, or if there’s a fire in the building,” she said. “I’m 65 years old. Do you think for one minute I can haul a patient down a flight of stairs in a sled? This is lunacy!”
The senators who spoke during the hearing all seemed to regard the problem of Steward as a larger, systemic one, as opposed to a proverbial bad apple.
Staci Albritton Mitchell, the mayor of West Monroe, Louisiana, perhaps thinking of the hurricane flooding much of her state at the moment, imagined a new roof for the crumbling Glenwood Regional Medical Center, which a recent inspection had found completely lacking no fewer than 48 basic medical supplies. “If you walk around the hospital, there’ll be buckets in the hallway catching water because of the leaks,” she told the senators. “You had to walk around things like that.”
MacInnis said she and her colleagues had frequently reached into their own pockets to buy smaller items patients needed: baby formula, Pedialyte, and even dinner. At one point earlier this year, a representative from Boar’s Head reportedly walked into St. Elizabeth’s to repossess its remaining inventory of deli meat. MacInnis choked back tears recounting how pediatric nurses had pooled funds to buy specialized boxes for presenting the corpses of dead newborns to grieving parents when Steward went on credit hold with the vendor; Steward expected them to simply place the remains in “cardboard shipping boxes.”
“We need to keep this from happening again,” said Sen. Bill Cassidy (R-LA).
“We have got to make sure that what happened at Steward never happens again,” Markey agreed.
“I’m so grateful that finally somebody’s going to raise the flag and say uncle, we can’t take this anymore, we need to reel in this corporate greed and pass the legislation that will prevent this from happening again,” MacInnis said later at a post-hearing press conference.
AND YET, AS STATE REP. MIKE ECHOLS, a Republican health care executive from Louisiana who described Steward’s leadership as “health care terrorists” during the hearing and successfully lobbied Cassidy’s staff to subpoena de la Torre, pointed out in his testimony, it literally is already happening again, to the same hospitals. The private equity–friendly Houston bankruptcy judges overseeing the Steward reorganization just orchestrated a secret deal that handed Glenwood and 18 other Steward hospitals over to their landlord Medical Properties Trust, the real estate investment trust on the other side of the dubious “sale-leaseback” transactions that enabled Cerberus and de la Torre to extract billions from their struggling hospitals.
Sale-leasebacks have brought about the demise of all manner of private equity–owned entities, from Red Lobster and Big Lots to the nursing home chain HCR ManorCare. But Steward’s sale-leaseback was especially catastrophic, because they valued the real estate portfolio at a ludicrous premium. By way of example, MPT valued seven recently closed Steward hospitals at roughly three quarters of a billion dollars in its 2023 financial statements.
From the very outset of their relationship, Steward was unable to pay the rent that resulted from those inflated transactions, and relied on cash advances and injections from MPT to make its payments, which in turn caused the hospital chain’s outstanding balance with the REIT to expand to the point that it “owed” MPT more than $8 billion by the time it filed for bankruptcy protection.
In theory, the purpose of bankruptcy protection is to enable a debtor to discharge unsustainable debt, but lease obligations work a bit differently. A bankruptcy judge can force a landlord to reduce the rent on a debtor entity if he or she determines that a sale-leaseback was actually a “disguised financing”—which both Steward and its committee of unsecured creditors argued was self-evidently true of the hospital chain’s absurd rent bill. But MPT, itself in shaky financial condition, was determined to avoid writing down its portfolio, while Steward was hell-bent on avoiding any of the damaging disclosures that a prolonged dispute with MPT would invariably entail.
Maureen Tkacik
A humorous flyer speculating on the whereabouts of hospital looter Ralph de la Torre was distributed by the American Federation of Teachers, which represents workers at a Steward hospital in Warren, Ohio.
So behind closed doors, under the supervision of legendary Houston bankruptcy judge Marvin Isgur, the two sides hammered out a deal whereby MPT agreed to take the reins—and assume financial responsibility for the operations—of the hospitals, and allow the Steward estate to keep the proceeds of the three Florida hospitals for which they successfully found a buyer. Judge Christopher Lopez, who has been presiding over the Steward bankruptcy, blessed the deal just two days before MPT CEO Ed Aldag, who has sold about $56 million worth of stock and reported about $85 million in compensation since 2020, was scheduled to be deposed by Steward’s bankruptcy attorneys.
The one stakeholder with the theoretical power to put a stop to the deal or force a modicum of transparency over what looks like a blatant agreement to keep the hospital shell games going, Steward’s Unsecured Creditors Committee, was extremely resistant to do anything that might be perceived as an “attack on MPT and Steward,” according to one creditor representative who voiced disgust with the process. “Their rationale is that they didn’t want to invite any bad publicity that would make the hospitals seem like they couldn’t be taken over by another operator,” the individual told the Prospect. “My view was that it was a few years too late for that,”—which of course, was vindicated when the vast majority of the hospitals received no qualified bids.
Hours later, the operations of the hospitals that remained shifted over to new operators handpicked by MPT. In Louisiana, Houston, and South Florida, Steward hospitals are now being operated by Healthcare Systems of America, a California company that changed its name from American Healthcare Systems. The Prospect reported on the rather dubious track record of this organization last month. “I’m not impressed,” a surgeon and former administrator at Steward’s St. Joseph’s hospital in Houston told the Prospect. “They don’t seem to have any idea what they’re doing or any capital. I don’t know why they were chosen.”
A Texas filing dated last Wednesday and circulated by the financial research publication Hedgeye suggests that a subsidiary of MPT is providing a secured line of credit to HSA’s two newly “acquired” former Steward hospitals in the state. Echols said in testimony that HSA was such an obvious pawn of MPT that its management had declined to visit the Glenwood hospital before “bidding” on it, at the request of MPT.
Meanwhile in west Texas, two small-town Steward hospitals will be transferred to Quorum Health, a distressed Tennessee hospital operator that last month missed an interest payment on one of its term loans, putting the company in “limited default” of its covenants. At least as of last year, Quorum was jointly owned by GoldenTree Asset Management, which owns nearly a million shares of MPT’s stock; and Davidson Kempner Capital Management, which co-owns another struggling hospital chain that received a $215 million cash injection from MPT in 2021.
The Louisiana state representative urged the committee to go after MPT in addition to de la Torre. “Medical Properties Trust coupled with Steward have facilitated Ponzi-like schemes that are creating criminal enterprises out of our hospitals,” he testified. “And I do want to make sure that MPT cannot continue to fund other bad actors. They’ve got people they’ve been working with for decades that will come in and have the same thing happen.”
Hedgeye REIT analyst Rob Simone concurred, marveling in a note to subscribers that MPT was trying to “run back the same playbook all over again [only] from a point of much deeper weakness, less liquidity, insane leverage and less access to capital.”
In Warren, Ohio, where a Steward hospital transitioned over to a Michigan-based operator called Insight Health System this week, there are already signs that conditions have worsened. Local hospital insiders say Insight, whose own shadowy history of alleged insurance manipulation the Prospect addressed last month, has declared its intention to slash services. And a surgical tech recently contacted Trumbull County authorities to report that the regular spousal support payments Steward had withheld from his paychecks had not made their way to the courts for the past ten weeks, echoing a complaint reported by nurses at an MPT-owned hospital in Watsonville, California, over a period during which it was being operated by a undercapitalized “shell” called Halsen Healthcare.
On Sunday, a Florida-based startup called Yates Medical Group issued a press release claiming it had been working for months on its own bid for the Ohio hospitals, only to learn on Wednesday that MPT had already agreed to transfer the hospitals to Insight. In an interview Yates Medical Group CEO Benjamin Yates, who repeatedly described his “faith-based” business model as “the antithesis of private equity,” said he had offered to buy the hospital at far superior terms than what Insight had offered, and that he had further promised not to cut any patient services. But at the last minute, Yates said, he realized he had been double-crossed by a local coalition with which he had been working to save the hospital. A county official said the local official in question, whose members did not respond to numerous requests for comment, had been extremely defensive of MPT, claiming repeatedly in public meetings that MPT were “not the bad guys” and that the hospital’s lease with MPT was “not negotiable.”
AT THE PRESS CONFERENCE, SEN. MARKEY PROMISED that more accountability was in the works. Next week, the committee will vote on whether to hold de la Torre in civil and/or criminal contempt of Congress; the Democrats and Sen. Cassidy appeared to be pretty surefire yes votes for that, and Sen. Mitt Romney (R-UT), who noted in his questioning of the witnesses that Steward had operated five Utah hospitals in “reprehensible” fashion between 2017 and 2023, seemed inclined in the same direction, in spite or perhaps because of his own long and lucrative career at a firm (Bain Capital) widely blamed for touching off the private equity stampede into hospital buyouts with the outrageous 1,072 percent five-year return it booked on its 2006 privatization of HCA.
Rep. Echols, who at one point jokingly asked a Mother Jones reporter not to photograph him next to American Federation of Teachers president Randi Weingarten for fear of damaging his conservative reputation, promised he would lean on his Republican colleagues to broaden their investigation into the roles MPT and Cerberus, whose founder Stephen Feinberg is a Trump adviser and GOP megadonor, played in the demise of the hospital chain.
Unusually, the senators who spoke during the hearing all seemed to regard the problem of Steward as a larger, systemic one, as opposed to a proverbial bad apple. Romney wondered whether state health departments had sufficient authority to penalize hospitals; Sen. Chris Murphy (D-CT) wondered when “capitalism had gone so off the rails” and shared his own anecdote about three private equity–pillaged, MPT-owned hospitals in his state. Asked why it had taken so long for de la Torre to be raided by the FBI, much less sentenced to prison, Markey offered: “I’m afraid that too many people viewed private equity as just a player in the American economy and whatever they do to any sector of the American economy, it’s just part of the way the American economic system has evolved.”
Maureen Tkacik
Sen. Markey speaks at a press conference following the hearing on Steward Health, outside the U.S. Capitol in Washington.
Indeed, as I was waiting for the hearing to begin, a notification flashed on my phone about a new $1.75 billion debt offering from something called HAH Group Holding Co. LLC, a rollup of medical staffing agencies that employs some 50,000 home care aides at an average hourly rate of $12.77 an hour and is currently owned by the private equity firms Centerbridge Partners and the Vistria Group. You might wonder why a company with no real worksites or capital expenditures would need such a massive loan, and the answers to that are varied, but in this case the company has disclosed that some $262.6 million, plus related fees and expenses, will be used to pay a large dividend to Centerbridge and Vistria, whose founders have given millions of dollars to the Democratic Party in recent years.
Centerbridge and Vistria are paying themselves this ungodly sum in spite of the fact that interest rates are at unprecedented heights, and that HAH will be stuck paying annual interest expenses in excess of $150 million, a sum which in all likelihood exceeds its annual earnings, leading the credit rating agency S&P to declare its expectation that HAH will report negative free cash flow in 2024—the first milestone on the path to insolvency, though Centerbridge and Vistria likely see a great deal more juice to squeeze, given the recent mad dash of insurance companies to acquire home health companies just like HAH.
Home health care is the gruesome $35 billion underbelly of a rotten health care system. There is virtually no oversight over this particular sector or efficient means of enacting any, inviting fraud and abuse and neglect in increasingly outlandish ways. Minimal training and education are required to become a home health aide, and the pay is minimal as well. But as vital health care facilities like Steward’s collapse and shutter across the country under the burden of unsustainable greed and predatory financing schemes, a poorly functioning app that enables patients to schedule untrained, barely paid gig workers to maybe show up at their house is increasingly America’s substitute for legitimate medical care.
And sadly, it’s far easier to steal money from gig workers than community hospitals.
This piece has been updated.
