Update: Steward Healthcare System in bankruptcy

Uncovering Capitalism – the actual Workings (forthcoming) includes a brief case study of the impacts of private equity strategies on this hospital chain, “A Brief Private Equity Case Study from Healthcare” in Chapter 6. Using information from Matt Sedlar’s, “Private Equity in Healthcare: Profits before Patients and Workers.”¹ The case study notes that Cerberus Capital, the private equity firm involved, sold off all of the Massachusetts’ buildings for $1.25 billion.  This instantly burdened the hospitals with new lease payments to their new landlord, Medical Properties Trust.  The lease payments were a new burden on the day-to-day cashflows of the hospitals.

Now, Steward Healthcare Systems has entered into bankruptcy proceedings. This is not unusual for private equity purchased firms. A 2019 study found that they experience bankruptcy at a rate ten times the 2% rate for businesses in general.²

1. Sedlar, Matt. “Private Equity in Healthcare: Profits before Patients and Workers.” Center for Economic and Policy Research (blog), February 1, 2022. https://www.cepr.net/private-equity-in-healthcare-profits-before-patients-and-workers/.
2. Ayash, Brian, and Mahdi Rastad. “Leveraged Buyouts and Financial Distress.” SSRN Scholarly Paper. Rochester, NY, July 20, 2019. https://doi.org/10.2139/ssrn.3423290.