How the fall of Steward Health Care shaped private equity’s presence in hospitals

Steward Health Care quickly became a lesson for healthcare leaders about what can happen when private equity (PE) controls a system—specifically, what can go wrong.

PE has become increasingly popular in healthcare in the last few decades, with investments growing from $5 billion annually in 2000 to an estimated $104 billion in 2024, according to accounting firm Cherry Bekaert. As of April 2025, PE firms owned 488 US hospitals, however, studies have shown PE can worsen quality of care, as we’ve previously reported.

The downfall of Steward inspired lawmakers to create more regulations to keep hospitals operational, spurring an ongoing debate about whether PE has a place in healthcare’s future.

History of Steward

Before Steward was Steward, it was a Catholic health system called Caritas Christi Health Care. But in late 2010, leaders agreed to sell the six-hospital system to New York PE firm Cerberus Capital Management for nearly $900 million.

Caritas Christi, which was previously run by the Boston Archdiocese, had been facing financial complications amid the Catholic church’s child sex abuse scandal, which ultimately cost $3 billion in settlements across the US.

The hospitals were located in underserved communities in Massachusetts and treated 600,000 patients annually. According to 2023 research published in the American Journal of Managed Care, living in lower-income areas not only leads to worse care quality but also 3x to 8x more in average healthcare costs.

Caritas’s CEO, a Massachusetts surgeon named Ralph de la Torre, convinced the state to allow Cerberus to buy the system and rename it Steward. A judge agreed, with certain conditions, including that Cerberus would not sell any hospitals for five years and that it’d put $110 million into facility improvements, Boston’s NPR station WBUR reported at the time.

“At the time, the state was very mindful that Caritas was not doing very well. It owed a lot of pension benefits that it was going to have trouble paying,” Amy Goldstein, a visiting fellow who researched Steward at nonprofit research institution Brookings, told us.

Despite its financial struggles, in 2011 and 2012, Steward bought five more hospitals. Then in 2016, the system drew the attention of a new buyer and was bought out in a $1.3 billion acquisition by real estate investment trust Medical Properties Trust (MPT), which currently owns 171 acute care facilities across the US.

The system quickly grew to 36 hospitals in 10 states. In 2018, Steward also moved its headquarters to Dallas, presumably to avoid some of Massachusetts’s stricter regulations, Goldstein said. Massachusetts had created two state agencies in 2012 in an effort to reduce costs and build transparency surrounding care. Part of these agencies’ jobs was to collect data on hospitals, and in 2017, one of the agencies, the Center for Health Information and Analysis (CHIA) accused Steward of trying to skirt the requirements and eventually filed a lawsuit against the system.

The move to Texas got Steward “a little farther away,” Goldstein said. “There was just a lot of tension in Massachusetts around Steward’s relationship with parts of the state government.”

What went wrong?

Massachusetts is a state that takes pride in its universities and healthcare. Boston is not only a biotech hub but also the scene for third highest National Institutes of Health funding in the US.

The healthcare culture of Massachusetts is also defined by how nonprofit-driven it is. The biggest players in the Bay State are Mass General Brigham, Beth Israel Lahey Health, Baystate Health, and UMass Memorial Health—all nonprofit systems collectively serving nearly two-thirds of patients in the state. In fact, of the 60 hospitals in the state in 2023, only 10 were for-profit, according to the latest data from CHIA.

Still, Goldstein said there weren’t enough reporting mechanisms or regulations in place to understand the financial situation of hospitals and therefore detect problems like the ones that were occurring at Steward.

Even if other hospitals were struggling as much as Stewart was, she said, “the way that states and the federal government regulate doesn’t necessarily mean that these problems will be caught in time to prevent something from collapsing.”

Plus, she added, the state government didn’t always enforce regulations, allowing Steward to slip through the cracks.

Remember those conditions outlined by the judge? Steward broke those rules, closing one of its hospitals (196-bed Quincy Medical Center in 2014) within that five-year period—and didn’t face any formal consequences.

Goldstein also credited Steward’s financial challenges to the fact that the health system’s expansion was “large and rapid.” The other problem, she said, was that when MPT bought the Steward hospitals, the system had to pay rent back to the private company, adding yet another monthly cost.

“The hospitals were not functioning with enough money,” Goldstein said.

This lack of money coincided with patient complications. For instance, a new mother died from internal bleeding that wasn’t caught because Steward didn’t have certain equipment at the hospital; the equipment had been repossessed due to unpaid bills, the Boston Globe reported last year. Brookings found the health system was facing around 130 lawsuits over unpaid bills around that time, too.

And, frankly, the optics weren’t great. De la Torre had two multimillion-dollar yachts and made $3.8 million from May 2023 to April 2024 as the health system floundered financially.

“Ralph de la Torre made for a pretty appealing public enemy because he was living large,” Goldstein said.

Falling apart

By May 2024, the system filed for bankruptcy (one of the largest hospital bankruptcies ever) with $1 billion in debt.

At the time of the Chapter 11, Steward had more than 2 million patients, 31 hospitals, and 400 facilities as well as 30,000 employees across eight states. Amid bankruptcy proceedings, de la Torre was reportedly watching the Olympics in Versailles.

In Massachusetts, two hospitals closed right away: Carney Hospital in Boston and Nashoba Valley Medical Center in central Massachusetts, which impacted at least 150,000 patients. Six Massachusetts facilities were sold off and 2,400 workers lost jobs across three states.

The threat of hospitals closing in Massachusetts raised alarms among advocates and state officials. But it also left Massachusetts—a state with its own regulations and that often celebrates the fact that it laid the groundwork for the Affordable Care Act—in a bind.

“Steward has served as an object lesson or wake-up call to the problems that hospitals can have, and it’s prompted a number of state legislatures to rethink how they regulate or oversee hospitals,” Goldstein said.

Law firm Weil, which represented Steward in bankruptcy proceedings, didn’t respond to requests for comment.

Once the hospitals transferred ownership, Steve Walsh, president and CEO of the Massachusetts Hospital Association, said in a statement the lobbying group is “encouraged to see that trusted health systems are on track to take over Steward’s Massachusetts hospitals and have every confidence in their ability to restore normalcy, build upon relationships with patients and caregivers, and create a new legacy for these hospitals moving forward.”

PE debate

After Steward’s downfall, elected officials went into action, with Massachusetts Gov. Maura Healey sending the system in February 2024 an ultimatum, accusing it of not being “forthcoming, truthful, or responsive” about its financial status. About six months later, federal leaders hosted a congressional hearing, which de la Torre did not attend.

Lawmakers in Massachusetts also responded with new legislation. At the federal level, Sens. Ed Markey and Elizabeth Warren introduced a new bill in June 2024 to create criminal penalties for executives who “loot” health systems and to require hospitals to share more financial information, though it hasn’t seen much movement.

Meanwhile, the Massachusetts legislature passed a bill to further regulate PE in the state. Signed into law by Healey in January, it requires more financial reporting from hospitals and stricter penalties if they don’t comply.

Chris Wilson, a partner and co-chair in law firm Goodwin’s healthcare PE group, told Healthcare Brew he still sees a place for PE in healthcare, though. Purchasing a struggling hospital or health system is difficult and expensive, he said, which can make it challenging to turn investments into successes.

“Private equity firms tend to be mislabeled as being a capital source for providers that are myopically focused on generating return for their investors,” he said, adding that the investors and hospitals often have aligned goals of caring for patients while making money.

“When you have situations, as we’ve been seeing this year, where you have the potential for less governmental funding going into hospitals and health systems,” he added, “that increases the importance of the role of private capital in fueling innovation in healthcare.”

This is one of the stories of our Quarter Century Project, which highlights the various ways industry has changed over the last 25 years. Check back each month for new pieces in this series and explore our timeline featuring the ongoing series.

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