Appelbaum and Batt’s INET working paper is repeatedly cited in testimony for the Senate HELP Committee’s subcommittee hearing

Subcommittee hearing: When Health Care Becomes Wealth Care: How Corporate Greed Puts Patient Care and Health Workers at Risk

Eileen O’Grady:

“In 2010, private equity firm Cerberus Capital purchased Caritas Christi Health in a $420 million leveraged buyout through its affiliate Steward Healthcare, converting the nonprofit health system to for-profit. Steward also assumed $475 million of debt and pension liabilities in the transaction, putting the value of the overall deal at $895 million. Because of the conversion to for-profit status, the deal required approval from the state Attorney General’s office, which imposed conditions on the transaction and a five-year monitoring period.

These conditions included a requirement for the new owners to invest $400 million into the system’s infrastructure. Despite Cerberus Capitals’s deep pockets, these “investments” would come from debt loaded onto Steward as well as sale-leasebacks of some of its medical office buildings. Another condition of the deal was that the system could not take additional debt to pay investor dividends for the first three years following the transaction. After its five-year monitoring period with the Attorney General expired, Steward Health Care executed a $1.2 billion sale-leaseback transaction in 2016 with real estate investment trust (REIT) Medical Properties Trust (MPT).

Steward eventually grew to be the largest private for-profit hospital system in the U.S. in 2017.

During its ownership under Cerberus Capital, Steward also:

  • Took on millions more in debt;
  • Saw poor financial performance;
  • Broke commitments to regulators by failing to share financial information with regulators in a timely manner18 and attempting to close hospitals or cut services at hospitals it had acquired;Cited the pandemic in March 2020 in order to collect $8 million from the Pennsylvania state government to keep an Easton, PA hospital open and then sold it in May 2020.
  • Collected $675 million in federal loans and grants money during the pandemic;
  • Was sued under the False Claims Act (ultimately the system would reach a $4.7 million settlement with the Department of Justice in 2022).
  • Saw higher than average patient hospital-acquired infections, falls, and readmissions at its Massachusetts hospitals.

As Cerberus began its exit in fall of 2020, Steward Health was struggling, reporting a net loss of more than $400 million in 2020. The private equity firm reportedly made $800 million in the decade it owned Steward. Cerberus Capital’s exit was made possible by Medical Properties Trust, which provided a $335 million loan to a new set of physician owners.”