Column: What happens when private equity takes over hospitals

The Washington Post –  Monday, October 27, 2025
By Bethany McLean

In the past few years, two major hospital chains have gone bankrupt. First, in March 2024, there was Steward Health Care, which owned 31 hospitals across the country. Then came Prospect, which owned 16 hospitals when it declared bankruptcy at the start of this year. The financial condition of the hospitals had wreaked havoc on the ability of the low-income communities where both hospitals operated to deliver care even before the bankruptcies. “They died in hallways. In line. Alone,” wrote the Boston Globe of Steward’s patients. “Their deaths are the human cost of Steward’s financial neglect.”

Multiple congressional committees and think tanks have held hearings and released reports and written letters and written more reports. Both Steward and Prospect were owned by private equity firms that delivered hefty profits for their investors. Over the decade that they owned the hospitals, Steward’s owner, Cerberus, earned over $700 million for its investors, just a bit more than the $424 million Prospect’s owners, Leonard Green, got for their investors. “Board and committee meetings centered around profits, cost cutting, acquisitions, managing labor expenses and increasing patient volume — with little to no discussions of patient outcome or quality of care,” noted a bipartisan report by the Senate Budget Committee, which detailed Prospect’s tragic history. As for Steward, a just-published study by the Brookings Institution cites more than 650 documented instances of deficient care, in some cases allegedly leading to death, at Steward’s hospitals before its collapse. In just once instance, in January 2024, a 39-year-old woman died after giving birth, because an unpaid vendor had repossessed the equipment needed to stop her internal bleeding, the Boston Globe reported. (Cerberus has repeatedly said that Steward was financially healthy before its exit in 2021; Leonard Green did not respond to a request for comment.)

But amid all the hand-wringing, the one thing no one in government wants to ask is this: What happens now to the hospitals that were owned by Steward and Prospect? Or as Brookings asked more broadly in its recent report about Steward, “When problematic actors take over a hospital system, who is minding the store?” Access to health care is both a sign of inequality — and a prime cause of creating more of it. The pandemic taught us that the health of all of us matters to the health of our country. Right now, as cuts to Medicaid threaten to further decimate already weakened hospitals, our health is at great risk.

Profits prioritized over public health

Until its bankruptcy, the CEO of Prospect was longtime hospital executive David Topper. He and Prospect’s president, Samuel Lee, had a 25-year partnership in hospital operations that “exhibited a pattern of prioritizing profits over sustainable management, undertaking aggressive acquisitions, and engaging in questionable financial activities,” according to the Budget Committee report. Hospitals under their purview were abruptly closed even as Topper and Lee made millions. (Neither Topper nor Lee responded to requests for comment.)

In 2010, Prospect was sold to Leonard Green. That was the same year that Cerberus bought a collection of struggling not-for-profit hospitals in Massachusetts and renamed it Steward Health Care. A charismatic heart surgeon, Ralph de la Torre, became the CEO of Steward. The two companies had similar stated missions — their goals were to bring investment to underserved communities and rescue struggling hospitals. De la Torre spoke passionately about his desire for people to have “really good health care in their community — not just where they can afford it, but where they can access it.” (De la Torre has created a website to defend his track record; his spokesperson did not return an additional request for comment.)

The contrast between the civic-mindedness of their stated strategies and the profit-driven nature of private equity ownership wasn’t the only thing Prospect and Steward had in common. Both companies also sold the real estate that belonged to the hospitals to a landlord called Medical Properties Trust, or MPT, which would then lease it back. It’s as if you sold your house to someone who rented it back to you. You got money, but you now owe rent. Indeed, that gave each of the hospital companies more than a billion dollars in immediate cash but saddled them with rent payments on land they’d once owned — some $350 million a year for Steward and over $100 million a year for Prospect, according to the Senate Budget Committee. (MPT did not respond to a request for comment.)

In neither case did all the cash flow through to patient care. Instead, as Brookings and the Senate Budget Committee note, large chunks of proceeds from selling the real estate were used to fund the dividends to the private equity owners, or repay additional debt that the company had taken on to fund such dividends. But it wasn’t just the private equity firms that got paid; so did management. The Budget Committee report notes that Lee, for instance, “likely received over $112 million in dividends and boasts an impressive portfolio of luxury properties, including million dollars homes in Aspen and Los Angeles valued collectively at over $20 million. As for Steward, de la Torre and his team got a $71 million dividend in 2016. Then, in 2021, Steward paid the team — which included MPT — another $111 million, of which over $81 million was wired to de la Torre on the same day, according to documents in the bankruptcy case. De la Torre used some of that money to purchase a superyacht he named the Amaral, according to bankruptcy court documents.

Cerberus insists that Steward was financially healthy while it owned the company, and that it only ran into problems after Cerberus sold Steward to the management team in 2020. De la Torre, for his part, has created a website to defend himself. De la Torre’s website says that he “did everything in his power to help Steward Health Care overcome numerous industry headwinds and challenges.”

Another thing the chains had in common were mounting signs of distress before the bankruptcies. In Steward’s case, Brookings found “a roster of nearly 130 lawsuits that mounted as the bankruptcy neared.” Many of them were from vendors — such as suppliers of medical devices and air conditioning services — alleging that Steward wasn’t paying its bills. Brookings also noted a growing pile of “healthcare deficiencies” — such as surgical supplies not being kept clean.

Brookings didn’t do the same analysis for Prospect, but ProPublica chronicled a similar pattern of vendor lawsuits and deficiencies at those hospitals, including bedbugs and dirty surgical instruments.

After the bankruptcies, both Prospect and Steward struggled to find buyers for their hospitals. Some were shuttered as a result, leaving communities without health care. Any buyer would need to fund huge investments just to bring the starved hospitals back to functioning. But even more, MPT owned the real estate. That meant ongoing rent payments. It also meant that bankruptcy courts had their hands tied. Even if they wanted to hand the hospitals over to the communities, they couldn’t. “One you separate the ownership of the real estate from the operating hospital, there’s no way for the bankruptcy court to give the hospital back to the community,” Justin Simon, who runs the hedge fund Jasper Capital and who has followed MPT for years, told me. “They can’t.”

As all this was unfolding, another longtime hospital executive, Mike Sarian, who had worked with Topper and Lee at Prospect until 2012 — and whose next employer, Prime Healthcare, also sold its hospitals’ real estate to MPT — left Prime and created a new hospital venture, American Healthcare Systems. In 2021, AHS got its start by purchasing a bankrupt hospital in North Carolina. Lawsuits from vendors began to pile up.

Despite these warning signals, eight of Steward’s hospitals were sold to American Healthcare Systems. The problems have only grown since that point. Richard Mortell, a real estate investor who has long been critical of MPT, has documented multiple lawsuits from vendors. In early 2025, a patient at Vista Medical Center East, an AHS hospital that serves a low-income community in Illinois, died after being found on the hospital’s roof wearing only a hospital gown. AHS also has cut services, including closing an emergency room and ending maternity services at Vista. Sarian says that the hospitals were troubled when AHS purchased them and that his company is “working very hard to bring them into positive financial situations.” He also says that “vendors were taking advantage of the past history of the hospitals” and that those vendors have been terminated.

Communities can hope this is the case, because the court overseeing the Prospect bankruptcy just approved the sale of its California hospitals to a new entity called Nor, which was just registered in Nevada earlier this year. The person listed on Nor’s filings is Mike Sarian. The basis for the court’s decision, says Simon, is that the court can’t force MPT to sell the real estate it owns to a new buyer, and Nor has a “good working relationship,” as the court said in its judgment, with MPT. As Simon points out, it doesn’t seem to matter that neither MPT nor Sarian’s track record are exactly pristine.

At this point, it might seem as though there isn’t any money to be squeezed out of these dying hospitals. But if the past few decades have shown anything, it’s that a surprising amount of money can be made off a hospital’s carcass.

The government is trying to do … something? Brookings says that 18 states have considered legislation during the past few years that would give attorneys general or health agencies greater latitude when health care facilities are sold or acquired. Eleven passed bills, although the requirements are quite limited. As of now, Oregon is the only state that routinely evaluates a hospital’s condition after a transaction takes place. At the national level, Sens. Edward J. Markey (D-Massachusetts), Bernie Sanders (I-Vermont) and Richard Blumenthal (D-Connecticut) just introduced a bill called “The Stop Medical Profiteering and Theft Act,” or the Stop MPT Act, which will prevent health systems from entering into deals with real estate players that “weaken their financial security or risk public health.”

But even if any of this comes to fruition — and that’s a big if — it’s too late for the former Steward and Prospect hospitals, and the people who depend on them. “I just don’t understand how absolutely no one is really standing up to stop this madness,” says Mortell.

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