Debra Russell was working a shift at the Glenwood Regional Medical Center in West Monroe, Louisiana, when a relatively young patient began having a heart attack. When an emergency room physician read his EKG and attempted to call a cardiologist, the cardiologist refused to have the conversation; the hospital hadn’t paid him in months. So the doctor ordered a vial of the emergency anti-clot agent TNKase and asked Russell to administer it immediately, which is when she learned that Cardinal Health had also cut the hospital off for not paying its bills, so there wouldn’t be any TNKase either.
Glenwood’s parent company, Steward Health Care, had spent most of the year to supply its Texas and Louisiana hospitals with generalist doctors and nurse practitioners like Russell. In its desperation to keep the clinicians showing up, Steward execs constantly claimed to have sent payments they had not actually sent, at one point even emailing the staffing agency copies of fake checks they claimed to have mailed. “The last couple of weeks that I was there at Glenwood, I would pray every morning, ‘Lord give me a sign to stay or to get out of this,’” Russell recalled last spring at a of the Louisiana House of Representatives.
One morning, she saw the community coffee service man, who had been restocking the cafeteria for 30 years, repossessing all the pots and urns, and she knew it was time. She worked her final shift last November, just a week or two before a team of inspectors from the Centers for Medicare & Medicaid Services composed a identifying 48 basic critical supplies, from blood to milk to biopsy needles to ICU beds, that the hospital had run out of altogether due to “the current corporate practice of not paying vendors in a timely manner.” The inspection was the first of during which the agency would deem Glenwood to be putting the lives of patients in “immediate jeopardy,” a finding that by definition puts the institution’s Medicare funding in jeopardy.
“The [radiology director] stated that the hospital cannot go much longer like this and that it will eventually fall like a ‘house of cards,’” inspectors on the third visit. When a Louisiana state representative asked the hospital’s CEO under oath if he felt “personally responsible for any deaths or declining care” at Glenwood, he did not hesitate: “Yes.” Since Russell testified in April, her erstwhile hospital chain Steward has filed for Chapter 11 bankruptcy protection; had three of its executives indicted in Malta and an FBI criminal investigation formally opened into its management; been as an “elaborate Ponzi scheme” by Sen.
Bernie Sanders (I-VT) in a speech before the successful vote of the Senate Health, Education, Labor and Pensions Committee to issue a formal subpoena to the company’s notoriously extravagant founder; and been revealed in a series of articles published by the (OCCRP) to have spent more than $7 million paying private intelligence firms to carry out elaborate “false flag” operations against critics and internal whistleblowers, during the same months Glenwood was going without blood and coffee. And yet it is still far from clear if the house of cards has finally fallen. Last Wednesday, that the aforementioned extravagant CEO Ralph de la Torre had been spotted at Versailles, of all places, viewing equestrian events at the Olympics.
While he has been subpoenaed, de la Torre has somehow not been fired as Steward’s chief executive. More than three months into the bankruptcy proceedings, no one has made any overture to claw back the hundreds of millions of dollars Dr. de la Torre extracted from a chain of safety net hospitals.
And the only mention of the criminal investigations supposedly under way into the hospital chain’s treachery during nearly five hours of bankruptcy hearings the listened in on over the past week came in a single throwaway line in a PowerPoint presentation. announced that Glenwood was one of just two facilities in the chain that had found a “qualified buyer”: a small California-based company called American Health Systems. Republican state Rep.
Mike Echols, a managed care executive who represents Glenwood’s district and organized the April hearing on the hospital, wanted to be optimistic, but after a year of watching his old hospital collapse into humanitarian crisis, he was bothered by the dearth of basic financial details about the transaction. How much capital did the company have to invest? How did it intend to mend fences with a community full of clinicians and small businesses that had been stiffed by its corporate predecessor? Then he googled American Healthcare Systems. A Missouri hospital whose operations it had assumed in 2022 had already .
An AHS hospital in Randolph County, North Carolina, which the state had successfully agreed to subsidize with a $12 million loan, was to be transferring funds outside the state to other ventures, including a Texas hospital it had purchased out of bankruptcy that was recently reported by a patient care watchdog to be in the throes of a death spiral brought about by its failure to pay its electronic health records vendor. And most troublingly, an Illinois hospital AHS had purchased last summer had been stripped of its trauma center designation over the spring after a CMS revealed a state of disarray eerily similar to Glenwood’s. It was direly understaffed, almost wholly bereft of basic supplies since having been placed on credit hold with numerous vendors, blacklisted for nonpayment of all of its on-call surgeons, and forced to cancel the four elective colonoscopies it had scheduled that day for lack of anesthesiologist coverage.
Echols called the number on the AHS website, but no one answered and the voice mailbox was full. The company’s CEO Michael Sarian and general counsel Faisal Gill returned his call later that evening and confirmed his worst fears. “I asked whether they were ready to prove they had the capital to spend $40 to $60 million in deferred maintenance expenses on the facility,” he told the .
“And they said, ‘Oh, well Medical Properties Trust will be taking care of that.’ And then I asked what they thought were the hospital’s most urgent needs, and they said something that just blew my mind. They said they hadn’t visited the hospital, because Medical Properties Trust .
I said, ‘Guys, I don’t think it’s legal for them to forbid you from walking into a public hospital.’” Neither Gill nor Sarian responded to a detailed list of questions about its plans for Glenwood or the status of its hospital operations generally. in these pages many times over the past year and a half, is an Alabama real estate investment trust that is a landlord to many of the most struggling hospitals in America, including Steward’s facilities.
That isn’t a coincidence. Many, like Glenwood, were once vibrant facilities with serious neurosurgery departments and state-of-the-art cancer centers and cath labs that were the source of considerable community pride. But when health care profiteers sold their real estate out from under them, forcing the hospitals to pay to rent buildings they once had owned, most of the hospitals had to cut corners, then entire departments, then sometimes whole hospitals.
In Glenwood’s case, former hospital employees say, the decline started out gradually. The private equity firm TPG sold the underlying real estate to MPT in 2013 for about $87 million, meaning the hospital owed annual rent of just under $7 million in the early days. The hospital cut pediatrics and lost some top surgeons, but the results were not cataclysmic because Glenwood was profitable and TPG only used about one-third of the transaction proceeds to pay itself a dividend, leaving the rest to retire debt.
The austerity began to accelerate when TPG sold its entire hospital chain to a strangely structured partnership of MPT and Steward, a collection of money-losing neighborhood hospitals in eastern Massachusetts owned by the private equity firm Cerberus, mostly purchased in 2010 from the Catholic Church. When Steward did its first of many sale-leasebacks in 2016, it sold all ten of its functioning hospitals for $1.2 billion, then used about $800 million of the proceeds to pay insiders and investors, according to REIT analyst Rob Simone of the financial news service Hedgeye.
Where TPG had sold its hospital assets at small premiums to the price it had paid for them, MPT had purchased Steward’s buildings at an extreme markup. For example, it placed a value of —later climbing to $258 million—on the beleaguered Carney hospital, which Steward had purchased in 2010 for just $12.5 million.
The transaction was an extraordinary payday for Cerberus investors, but it left Steward with an impossible annual rent bill of more than $100 million. MPT ensured Steward paid its rent on time by funneling cash into the company through a mind-bending array of mergers, joint ventures, refinancings, and “working capital” loans. A 2021 article some $700 million in payments the landlord (MPT) had made to its tenant.
And between April 2022 and April 2024 alone, MPT amended one of its leases with Steward 14 times. Along the way, executives of both companies exploited MPT’s balance sheet to line their own pockets, perhaps none more lustily than de la Torre, who owns . By the time Steward filed for bankruptcy protection, it operated more than 30 hospitals, owed clinicians and vendors roughly $1 billion in unpaid bills, and was on the hook for an annual rent bill of more than $400 million.
Steward’s distress was no secret. Breach-of-contract lawsuits and mechanic’s liens piled up in the courthouses of every county where Steward ran a hospital. A former employee of the company’s facilities management contractor CREF told the that Steward was so notoriously bad at paying its bills the eastern Massachusetts construction community joked that businesses that took jobs for the hospital chain were committing “Steward-cide.
” Both Steward and MPT took great pains to conceal the full nature of the distress. When Massachusetts fined Steward in 2017 for failing to submit a customary annual financial statement to the state’s Center for Health Information and Analysis, Steward sued the agency and relocated its headquarters to Dallas. When the SEC demanded that MPT disclose Steward’s financial statements in its own filings under rules requiring REITs to report the finances of tenants that comprise more than 20 percent of their assets, MPT claimed that Steward’s auditors had yet to complete their review of the statements.
And when a few equity researchers and money managers began publishing research that dared to suggest not all was kosher about MPT’s relationship with its largest tenant, both began into top-shelf corporate black ops in hopes of scaring short sellers and critics off their trail, according to the OCCRP report. Steward paid a private security firm called Greyprism to stake out the home, place a tracker on the car, and illegally obtain the banking records of a British hedge fund manager who had published research on Steward’s fiscal woes. Both MPT and Steward paid a firm called Audere to, among other things, mine the cellphone of a former Steward executive they suspected of sharing details of their insolvency with a lender, and develop an elaborate plan involving a sex worker to smear and sabotage him in the event of a leak of confidential financial information.
And Steward paid an opposition research outfit called CT Holdings to send journalists a phony bank statement that purported to reveal that a European bureaucrat who’d antagonized Steward had taken a bribe. OCCRP in which Steward general counsel Herbert Holtz called Audere’s work for the firm “truly existential,” clamoring to the chief financial officer to stay current on the contract. So it is perhaps not surprising that when the reached Debra Russell, the courageous nurse practitioner whose last spring had riveted state legislators—and by extension played a key role in the unusual decision of her senator and HELP Committee ranking Republican Sen.
Bill Cassidy to join his Democratic colleagues in calling to subpoena the Steward brass—she was unwilling to comment further on anything she had said, for fear of inviting retaliation over and above that which she claimed (without elaborating) she had already experienced. In other words, Steward may be bankrupt, the subject of criminal investigations on two continents and the first congressional subpoena in the 41-year history of the HELP Committee, and an industry laughingstock. But the company still strikes fear into the hearts of its workers past and present, in large part because no sign has yet emerged that the company will face legitimate consequences.
is the bankruptcy code, which gives special privileges to the lenders of so-called “debtor-in-possession” financing, which bankrupt companies use to reorganize their operations while in court. By providing the first $75 million of Steward’s DIP financing, MPT was able to control both the narrative about the root causes of Steward’s downfall—COVID-19 and declining reimbursement trends—and the terms under which Steward’s assets would be marketed for sale. Unsurprisingly, there weren’t many takers.
Even when the state of Massachusetts offered to give $30 million to any buyer of Steward’s eight remaining hospitals in the state, a small Michigan company called Insight with one hospital and three specialized surgery centers was the only company willing to , which was reportedly not “qualified” under Steward’s criteria. Insight’s surgical hospital in Michigan was sued in 2022 by Allstate Insurance Company for allegedly orchestrating a $2.4 million scheme that involved “intentionally associating with unscrupulous medical providers who have lengthy histories of billing for medically unnecessary and inappropriate patient care” and submitting phony or wildly exaggerated claims to the insurer.
(That case, about which an Insight spokesperson declined to comment, is still making its way through the court system, though the hospital’s initial to the complaint contained roughly 350 variations on the sentence “Defendant lacks sufficient information to form a belief as to the truth of the allegations in paragraph X.”) The only qualified bids for any of Steward’s assets came from an Arkansas emergency services company called Pafford Health, which offered to take on the management of Steward’s Wadley Regional Medical Center in Hope, and the aforementioned AHS, the company that bid on Glenwood Regional Medical Center despite being forbidden by its landlord from visiting the hospital first. That leaves at least 29 Steward hospitals, including 16 in Florida and Massachusetts alone, hanging in the balance.
Steward has already said it plans to close Carney and Nashoba Valley Medical Center in Massachusetts, leading two Boston City Council members to introduce a resolution declaring a in Dorchester, the dense working-class neighborhood where Carney is the only hospital. In regular reports produced for the bankruptcy, court-appointed patient ombudsmen painted a picture of rapidly eroding occupancy and operations at most of Steward’s other locations, which in turn diminishes their value to potential buyers while accelerating Steward’s $75 million-a-month cash burn. In theory, bankruptcy isn’t supposed to work this way.
Not long ago, most of Steward’s hospitals were profitable and essential institutions; Chapter 11 reorganization should give them a chance to start fresh with new owners. But because MPT is both Steward’s biggest creditor and the source of most of the funds Steward used to hire its bankruptcy lawyers and advisers, its $8 billion in spectacularly bloated lease obligations linger like a noose around the necks of its hospitals. No $2,000-an-hour lawyer is about to suggest wiping out the company that is funding his or her paycheck.
The situation is especially dire, analysts say, because the publicly traded REIT has not sufficiently written down the value of its Steward holdings; a Phoenix hospital is still listed on MPT’s balance sheet at a value of $90 million, even though all that remains is a behavioral unit which last week was forced to transfer all 100 of its patients to other facilities following a “catastrophic”—though quite predictable, —failure of its air-conditioning systems amid 105-degree heat. When you start digging into other hospital bankruptcies that have involved MPT, you’ll find a distinct pattern of small, undercapitalized operators paying themselves handsomely, stiffing vendors and service providers, and exploiting the bankruptcy code to discharge debts to workers and medical suppliers while keeping the hospital in hands “friendly” to MPT. AHS obtained its Texas hospital, for example, from Alecto Healthcare Services, a closely linked to MPT that closed four out of five of its hospitals and used the bankruptcy code to dodge $49 million it allegedly owed the federal government for Medicare overpayments.
MPT also “gifted” the operations of a hospital in Watsonville, California, to a small company called Halsen Healthcare that quickly bankrupted it and was only later accused of skimming $4 million from the facility—by which point Halsen’s leadership had decamped for another small community hospital in East Texas. Meanwhile, a former colleague of Halsen’s CFO founded and quickly bankrupted a small hospital chain called Pipeline Health with hundreds of millions of dollars from MPT. While the hospital chain filed for bankruptcy protection in October 2022 and emerged a few months later, none of its hospitals appear to be current on their bills and a hospital it sold in Texas just laid off 35 percent of its staff.
Without delving into the details, the irregularities and apparent improprieties involved in all these hospitals’ financial distress are numerous, glaring, and yet completely commonplace these days. When there are no apparent consequences for owning an LLC that systematically rips off small businesses and suppliers, you could argue it’s a fiduciary obligation to do so. I’m sure Ralph de la Torre would make that argument, and who am I to argue with someone who telecommutes from Versailles? At this point, it is the government’s fiduciary obligation to make an example out of men who build vast fortunes by casually nuking the institutions on which we rely to sustain human life.
But the government, for whatever reason, has decided to mainly express its displeasure through . But there are a few small signs a reckoning might still await Steward. In June, MPT, low on cash itself, agreed to invite other lenders into the DIP, meaning it could not longer single-handedly steer the bankruptcy process.
Late last month, Steward finally won permission from the bankruptcy court to sever its master lease in Massachusetts, so at least some of the hospitals might have a prayer of finding new owners. More tantalizingly, Steward’s lawyers filed a last week notifying the court it was using something called 2004 authority to demand that the accounting firm KPMG—which it’s worth noting is under fire from the Public Company Accounting Oversight Board over the the agency found in an audit of a random sampling of its audits—furnish a long list of documents related to the years it served as Steward’s auditor. In particular, Steward asked for “All Documents and Communications between You and any party other than the Company” regarding Steward’s financial relationship with MPT and a slew of related firms that either received large transfers from Steward in the year before its bankruptcy filing or are suspected by insiders and analysts of serving purposes outside the realm of hospital operations.
Notably, KPMG resigned as Steward’s auditor in 2022 and handed over the reins to a smaller firm called Crowe LLC; the request also seeks all communications and correspondence related to the firm’s decision to withdraw and transfer its client to Crowe. For the most part, the information Steward’s bankruptcy lawyers now seek—solvency and going concern analyses from over the years, internal assessments of the value of various company assets, discussions of the company’s multitude of sale-leasebacks and other related party transactions—is the sort of stuff that should be available to every creditor in every bankruptcy. Any gratuitous funds knowingly extracted from an insolvent company are subject to clawback provisions under the bankruptcy code, and Steward has arguably been certifiably insolvent for the better part of a decade.
But in the age of private equity, it’s also exactly the sort of information bankruptcy lawyers get paid to conceal and obfuscate from creditors, the public, and if they want to stay sane, themselves. The fact that Steward’s $2,000-an-hour lawyers are now demanding to know what KPMG found objectionable enough to resign could mean that the end is finally nigh for at least one hospital Ponzi scheme. Alas, there’s more where Ralph de la Torre came from.
.
