All 11 members of the Massachusetts delegation to D.C. signed onto a letter Thursday to Cerberus Capital Management, the private equity firm that owned Steward Health Care's hospitals from 2010 until 2021, seeking information amid "growing concerns" about the financial plight Steward now finds itself in.
"We are particularly concerned about the extent to which Cerberus and its affiliates literally stripped out and sold the property from underneath these hospitals, creating hundreds of millions of dollars in profits for private equity executives, while leaving the facilities with long-term liabilities that are magnifying – if not creating – the current crisis," the delegation wrote. "We have long been concerned about the nefarious role of private equity in our economy. Ownership by private equity investors increases health care costs and reduces quality of care, and private equity firms have played a role in the collapse of hospitals around the country, hurting communities and the health care workers and other staff that serve them. The dire threat of Steward's collapse appears to be a textbook example of the grave risks posed by a private equity takeover of the health care system."
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The delegation's letter specifically asks Cerberus to provide answers about the firm's investments in Steward and Steward-affiliated entities, liabilities imposed on Steward, and profits, dividends and total compensation for the firm and its top executives by Feb. 28. The company did not respond to a request for comment Thursday from the News Service.
Cerberus bought into the hospital system known at the time as Caritas Christi in 2010, investing $246 million and rechristening it as Steward. In 2016, Cerberus-owned Steward made a $1.25 billion deal with the real estate investment trust Medical Properties Trust in which Steward's hospital properties were sold to MPT and MPT took a 5 percent equity stake in Steward, the delegation said.
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The letter says that transaction returned Cerebus's initial investment, but left Steward with multi-year, multi-million dollar lease payments that are now a big part of the system's financial struggles. Cerebus began to transfer its ownership stake in 2020 and Steward borrowed $355 million as part of that transaction, the delegation said.
"The net result of these transactions appears to be an unfolding tragedy," the delegation wrote. "Cerberus and its private equity executives received $800 million in profits, while thousands of Massachusetts health care workers' jobs are at risk and ten communities in the Commonwealth face the potential closure of hospitals that are debt-ridden, unable to pay their bills, and teetering on the financial brink. You owe Congress and the public answers, and an explanation for your actions."
