The Vicious Cycle Draining America's Hospitals: The Steward Health Care Collapse and Its Disturbing Aftermath

A Hospital Chain's Downward Spiral

The bankruptcy of Steward Health Care, once a giant in the for-profit hospital landscape, wasn't a sudden implosion. It was the culmination of a decade-long decline marked by hospital closures, devastated communities, and a deal with Medical Properties Trust (MPT) that crippled the system. Steward sold its facilities to MPT, then leased them back at exorbitant rates, a move that saddled the chain with an unbearable $350 million in annual rent.

This financial burden forced Steward to close hospitals and compromise patient care, leaving communities with dwindling access to critical services. As one patient advocate put it during the closure of Steward's Phoenix medical center: "It's a public health hazard."

Profits Over Patients: A Story of Corporate Looting

While patients and providers suffered, Steward's top officers, now under federal investigation for corruption, profited handsomely. Even as hospitals struggled, the company paid out $800 million in dividends to its owner, the private equity firm Cerberus. Critics decried the MPT deal as corporate looting, highlighting the devastating consequences.

"This has just been an ongoing multiyear degradation of our healthcare system," lamented Massachusetts State Senator Jamie Eldridge, whose district lost a hospital in the financial fallout.

Senator Edward Markey's report on Steward's collapse echoed this sentiment, accusing private equity of treating hospitals like fast-food franchises, focused on "dollar signs" rather than community well-being.

A Disturbing Pattern Emerges: The Cycle of Plunder

With Steward selling its remaining hospitals, hope flickered in underserved communities. But the future looks bleak. MPT continues to collect rent on many of the struggling facilities, and several have landed in the hands of operators with questionable track records – operators often linked to deals with MPT. This suggests a troubling pattern: already-plundered hospitals are sold to those who will continue the plunder.

"The only people who will buy them are people who are using them as an asset to be bought and sold and stripped," observes Rosemary Batt, a professor at Cornell University's Industrial and Labor Relations School.

Justin Simon, managing director of Jaspar Capital, paints a grim picture, predicting further bankruptcies within a year without substantial financial intervention: "I do not think these hospitals can maintain any reasonable level of operation for more than nine to 12 months without permanent financial support."

Case Study: American Healthcare Systems and the Echo of Steward

Eight former Steward hospitals now belong to American Healthcare Systems (AHS), run by Michael Sarian. Sarian's previous tenure at Prime Healthcare Services, a company accused of Medicare fraud, raises concerns. Like Steward, Prime has a history of extracting money from its hospitals, often at the expense of patient care. The National Nurses United criticized Prime for closing maternity wards, prioritizing profits over the needs of vulnerable communities.

AHS itself has a troubling track record, with lawsuits, staffing shortages, and regulatory violations plaguing its facilities. The company has been accused of siphoning millions from hospitals like Vista Medical Center East, a facility serving a low-income community in Illinois, even as the quality of care deteriorates.

A System Failing Patients: The Need for Oversight

The Steward saga reveals a systemic flaw in American healthcare. Distressed hospitals are trapped in a cycle of looting, with MPT often at the center. The system prioritizes profits over patient care, and even bankruptcy courts struggle to break this cycle.

"This is the dirty end game of private equity failures," Simon states, highlighting the difficulty of returning hospitals to the community once the real estate has been separated from operations.

While regulators may scrutinize MPT's deals for investor protection, patient advocates worry about the lack of accountability to the communities these hospitals serve. Mary Bugbee of the Private Equity Stakeholder Project asks a critical question: "Who is going to hold these entities accountable to patients?"