Hospitals owned by real estate investors more likely to close or go bankrupt

STAT News – Thursday, December 18, 2025
By Tara Bannow

Eight years before Steward Health Care’s explosive, highly publicized collapse, the private equity-backed hospital chain sold its properties to a real estate investment trust. A new study adds weight to the widely-held belief that the deal precipitated Steward’s demise.

Hospitals acquired by REITs, companies that buy real estate and pass the income they generate onto investors, were 5.7 times more likely than their non-acquired peers to close or go bankrupt four years later, according to a BMJ study published Thursday. One-quarter of the REIT-acquired hospitals examined either closed or filed for bankruptcy during the study period, compared with 4% of the non-acquired ones.

Just 3% of U.S. hospitals were owned by REITs in 2021, so they’ve been largely overlooked by academics and policymakers, said Joseph Dov Bruch, an author on the study and assistant professor of public health sciences at the University of Chicago.

“Despite the fact that real estate is oftentimes one of the most important assets that health care organizations like health systems have, there is little research on what happens when health systems lose this real estate and sell it to financial firms,” Bruch said. “We see evidence of higher risk of bankruptcy and closure.”

REITs started out in retail and office buildings, but have increasingly turned to health care in recent decades. That’s not surprising considering health care properties in the U.S. were worth $1.2 trillion in 2022, almost $700 billion of which was acute care hospitals.

Unlike a traditional property transaction where the buyer moves in once the deal closes, hospitals that sell to REITs stay in the buildings and continue to operate as usual. Instead, they rent the buildings from their new owners through what’s called sale-leaseback agreements. The hospital operator is then responsible for the cost of rent, taxes, insurance premiums, and maintenance costs. Those bills can add up quickly.

When hospitals initially sell their buildings to REITs, the payout can be enormous. In Steward’s case, Medical Properties Trust paid $1.2 billion for the real estate. But evidence suggests that money doesn’t go toward improving patient care or modernizing buildings, it flows back to the hospital’s owners and their investors. In Steward’s case, the private equity giant Cerberus Capital Management.

Interestingly, the new study found that four years after the acquisitions, the REIT hospitals didn’t fare much differently from their peers with respect to key financial metrics like profit, cash on hand, and operating margin. Those numbers were slightly lower among the REIT hospitals, but not enough to be statistically significant.

In REIT-owned hospitals that close or go bankrupt, the financial harm from the rent payments and other fees doesn’t show up until 7 or 8 years post-transaction, Bruch said. It’s not apparent at the four year mark.

Important quality indicators didn’t change among REIT hospitals four years out, either. The study looked at the number of nurses staffed per 1,000 patients and found it was unchanged in the REIT group relative to the non-REIT group.

Eileen Appelbaum, co-director of the Center for Economic and Policy Research, said it would be more useful to see what happened to financial and quality indicators in the two to three years before hospitals close or go bankrupt, rather than four years after they’re acquired.

Appelbaum, who was not involved in the BMJ study, said her own research on REITs found that as hospitals spiral toward bankruptcy, they tend to cut staff and stop paying their vendors. She cited the example of a woman who died at a Steward hospital the day after giving birth because the device needed to stem her bleeding had been repossessed by its manufacturer.

“What we have seen is they cut staff tremendously, close departments like the emergency department, and we saw at Steward that at least 15 people died, some of them waiting in line to be admitted,” Appelbaum said.

But that doesn’t happen right away. In Steward’s case, the deal with Medical Properties Trust happened in 2016, a full eight years before its bankruptcy in 2024. That said, declines in both Steward’s financial position and the quality of care provided at its hospitals were evident years before the bankruptcy.

The new study looked at 87 hospitals acquired by REITs between 2005 and 2019 and matched them to 337 non-REIT control hospitals based on region, ownership, and size. The REIT hospitals were more likely to be for profit and part of larger systems. They were equally spread across every region of the country and tended to have lower margins than non-REIT hospitals.

Of the 87 REIT hospitals, 10 had closed and 14 had filed for bankruptcy in 2024. Most of the 14 that filed for bankruptcy were Steward hospitals, Bruch said. Of the 337 non-REIT hospitals, 14 had closed and one was bankrupt by then.

Medical Properties Trust was also involved in another recent, high-profile hospital chain implosion, that of Culver City, Calif.-based Prospect Medical. The REIT invested almost $1.6 billion in Prospect Medical in 2019.

Prospect filed for bankruptcy at the beginning of 2025 saying that it owed billions of dollars to more than 100,000 creditors, including $61 million to its landlord, Medical Properties Trust. Before the bankruptcy filing, conditions at Prospect’s hospitals had deteriorated, with reports of bedbugs and cockroaches at some.

Federal efforts to regulate REITs have included upping transparency around hospital ownership, holding REITs financially liable for hospital bankruptcies and closures, ending federal health program payments to REIT-owned hospitals, and forbidding hospitals from selling their real estate to REITs.

In January, in the wake of the Steward debacle, Massachusetts became the first state to pass a law requiring health care investors to participate in annual oversight hearings and file ownership and governance information with state watchdog agencies.

Access this article at its original source.