Steward Health Care Files for Bankruptcy Amid CEO's Lavish Lifestyle

Steward Health Care, the largest for-profit hospital chain, files for Chapter 11 bankruptcy protection with $9 billion in liabilities. The company plans to sell its 31 US hospitals, including eight in Massachusetts, to reduce debt.

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Bijay Laxmi
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Steward Health Care Files for Bankruptcy Amid CEO's Lavish Lifestyle

Steward Health Care Files for Bankruptcy Amid CEO's Lavish Lifestyle

Steward Health Care, the largest for-profit hospital chain in the country, has filed for Chapter 11 bankruptcy protection in a Texas court, citing $9 billion in outstanding liabilities. Led by CEO Dr. Ralph de la Torre, the company plans to sell its 31 U.S. hospitals, including eight in Massachusetts, to help reduce its debt.

The bankruptcy filing comes amidst a financial crisis and controversy surrounding de la Torre's lavish lifestyle. Steward's liabilities include $1.2 billion in loans, $6.6 billion in rent obligations, nearly $1 billion owed to medical vendors and suppliers, and $290 million in unpaid employee wages and benefits. The company's financial woes have been attributed to mismanagement and greed by Massachusetts Governor Maura Healey, who stated, "Ralph de la Torre basically was incredibly greedy and along with the management team stripped a lot of assets from those facilities and so we're in this situation."

Why this matters: The bankruptcy of Steward Health Care has significant implications for the healthcare industry, as it raises concerns about the financial sustainability of for-profit hospital chains. Furthermore, the fate of Steward's hospitals and employees may set a precedent for how the healthcare industry addresses similar financial crises in the future.

The fate of Steward's hospitals and the risk to its 16,000 employees in Massachusetts have state and local officials deeply concerned. Governor Healey has activated an "emergency operations plan" to monitor the company's hospitals and manage the fallout of the bankruptcy filing. "Our hope is that we can manage a transition to new ownership of these facilities," said Healey. The state is already engaging with prospective hospital buyers, with the goal of selling the facilities to a non-profit hospital system.

Steward's financial troubles have had a direct impact on staff and patients at its hospitals. Delayed paychecks following the bankruptcy filing left many employees uncertain about their future. "Please come to work. Thank you for coming to work," urged Massachusetts Health and Human Services Secretary Kate Walsh. A physician who has worked at Good Samaritan Medical Center in Brockton for 17 years described dire staffing and supply shortages, saying "it couldn't be worse than it is now." The doctor, who plans to leave this summer, has seen the situation deteriorate over the past four years.

Steward Health Care was founded by Dr. Ralph de la Torre, a cardiac surgeon who previously ran the non-profit Caritas Christi Health Care. In 2010, Steward, backed by private equity firm Cerberus Capital Management, acquired six hospitals from Caritas Christi, including Good Samaritan Medical Center. The company expanded rapidly, relying on backing from investors like Medical Properties Trust (MPT) to purchase dozens of community hospitals across the U.S.

MPT, a real estate investment trust, has been significantly affected by Steward's bankruptcy. The REIT provided $75 million in debtor-in-possession funding for Steward and recognized a $693.1 million impairment charge in the first quarter. Despite this setback, MPT's dividend coverage ratio remains strong at 1.6X, and the company reported normalized FFO of $0.24 per share in Q1 2024. Medical Properties Trust seems to be weathering the storm, but the long-term impact remains uncertain.

As Steward Health Care navigates the bankruptcy process, the future of its hospitals and employees remains uncertain. The company faces a June 25 auction deadline if it cannot find buyers for its Massachusetts facilities. Governor Healey has the authority to take over the hospitals by eminent domain if she declares a public health emergency, an action urged by some health care advocates. The state's involvement and oversight aim to protect access to healthcare in the communities served by Steward hospitals during this tumultuous period.

Key Takeaways

  • Steward Health Care files for Chapter 11 bankruptcy with $9B in liabilities.
  • The company plans to sell 31 US hospitals, including 8 in Massachusetts, to reduce debt.
  • Massachusetts Governor Maura Healey blames CEO Dr. Ralph de la Torre's "greed" for the crisis.
  • The state has activated an "emergency operations plan" to monitor hospitals and manage the fallout.
  • The fate of Steward's hospitals and 16,000 employees in Massachusetts remains uncertain.