Corporate Mismanagements Leads to Bankruptcy for Steward Health Hospital Chains

Steward Health Care, once the largest for-profit hospital operator in the U.S., filed for Chapter 11 bankruptcy in May 2024. The collapse of this healthcare system is a complex story with multiple contributing factors. The primary causes of Steward bankruptcy filing were financial misconduct, private equity ownership failings, debts from failed lease back real estate transactions, vendor payment delinquencies, declining patient care and failed political regulatory fallout. 

Steward accuses its former CEO, Ralph de la Torre, and other executives of misappropriating more than $245 million, enriching themselves at the company's expense and leaving hospitals undercapitalized and insolvent. Additional court filings allege that over $1 billion in dividends and payments flowed to insiders (executives, private equity investors, and affiliates) even as the company’s financial position deteriorated.

Steward was acquired by Cerberus Capital Management, a private equity firm, in 2010. Cerberus and other investors reportedly extracted hundreds of millions of dollars in profits, and Cerberus exited with an $800 million gain in 2020. After private equity’s exit, concerns about patient safety, unpaid bills, and staffing shortfalls intensified.

Under de la Torre’s leadership, Steward sold hospital real estate to Medical Properties Trust (MPT) and then leased it back at high cost. This arrangement saddled the operating company with over $6.6 billion in long-term lease obligations. The sale-leaseback generated large up-front payments, much of which went to investors, but forced Steward to operate with thin margins and mounting rent liabilities.

Bankruptcy documents revealed $1.2 billion in loan debts, nearly $1 billion in unpaid bills to vendors, and massive overdue financial obligations to employees and medical suppliers. This resulted in critical shortages of medical supplies (e.g., blood bank refusing to supply blood without cash payment, repossessed medical devices), unmaintained equipment (HVAC, elevators), and even basic necessities. Steward owed its landlord (MPT) more than $6.9 billion through 2041.

As finances tightened, hospitals experienced missing equipment, unpaid rent, delayed surgeries, and layoffs. Investigations tied this to cost-cutting and prioritizing profits over patient care, highlighting layoffs, service cuts, and even closures that disproportionately impacted vulnerable communities. The financial neglect directly translated to declining quality of care, with some Steward hospitals receiving poor ratings and being cited for serious safety violations.

State and federal lawmakers criticized Steward’s leadership for a lack of transparency and financial mismanagement. There were delays in reporting financial data, and the CEO refused to testify before Congress about the system’s collapse. Moreover, this lack of oversight enabled fiscal mismanagement to continue unchecked until collapse.

Steward Health Care’s bankruptcy resulted from a toxic combination of extractive financial practices by private equity and executives, crippling debt from real estate deals, and chronic financial mismanagement, all of which severely compromised the company’s ability to operate hospitals or deliver quality care. As a result, numerous hospitals closed, staff lost jobs, and communities experienced disruptions in health care access. Federal and state investigations are ongoing, and efforts are being made to sell off Steward's remaining hospitals to new owners.