The Controversy of Steward Health Care: A Deep Dive into Private Equity's Influence on Healthcare

In recent news, the CEO of Steward Health Care, Ralph De La Torre, has come under fire for the purchase of a $40 million yacht. This extravagant expenditure has ignited a wave of controversy, given the health system's crippling $50 million rent debt and the looming threat of hospital closures across Massachusetts. However, this situation serves as more than a simple tale of fiscal irresponsibility. It provides a stark illustration of the deeper issue at play: the influence of private equity in healthcare.

Steward Health Care's Financial Struggles

Steward Health Care, a large for-profit healthcare system attending to 2.2 million people annually, has been grappling with financial difficulties. Despite receiving an infusion of money, the health care giant is feared to be unable to continue operating all nine of its Massachusetts hospitals. U.S. Rep. Stephen Lynch has voiced concerns that the financing deal may not be sufficient to keep all hospitals open. This has led the company to explore various options such as selling its physicians' practice and identifying a buyer for the hospitals.

Adding to its financial woes is a $50 million back rent owed to its landlord, Medical Properties Trust. Steward Health Care has also been hit by lawsuits alleging it has not paid its bills, including a hefty $40 million claim from a health care staffing agency. Amidst these financial struggles, the CEO's $40 million yacht purchase has understandably raised eyebrows.

Private Equity's Role in Healthcare

The role of private equity firms in healthcare is a topic of heated debate. Dr. Edward Hoffer, an associate professor at Harvard Medical School, argues that private equity firms often prioritize profit over patient care. This profit-first mentality leads to cost-cutting measures, increased prices, unnecessary tests, and decreased staffing in hospitals.

Steward Health Care, which was acquired by a private equity firm, is a glaring example of this trend. The health care system's financial struggles and closures of hospitals in various states echo the detrimental effects of private equity's involvement in the sector. In 2020, Steward closed a $1.1 billion deal to acquire five South Florida hospitals, yet sold the properties to Medical Properties Trust for $900 million. They also announced an agreement to sell all of their Utah hospitals to HCA Healthcare, further highlighting the company's financial instability.

A Call for Oversight

Given the current scenario, Dr. Hoffer urges strict oversight of private equity's involvement in healthcare. Lawmakers, including U.S. Rep. Stephen Lynch, are also seeking more information about Steward's finances and have written to the private equity firm, Cerberus, which backed Steward until 2020. While private equity can provide much-needed capital and management expertise to struggling healthcare providers, it must be tempered with the responsibility to prioritize patient care over profits.

The situation at Steward Health Care serves as a cautionary tale for the healthcare industry. It underscores the need for transparency, accountability, and stringent oversight in the involvement of private equity firms in healthcare. As the debate continues, one thing is clear: the health of millions of patients should never be compromised for profit.