ICYMI: Warren’s Opening Remarks at Senate Hearing in Boston: Steward Health Care is a clear-cut case of private equity exploiting for-profit health care.

April 03, 2024

ICYMI: Warren's Opening Remarks at Senate Hearing in Boston: Steward Health Care is a clear-cut case of private equity exploiting for-profit health care.

"Turning private equity loose in our health care system kills people."

"We need accountability here, and law enforcement authorities should carefully review every aspect of this fiasco. We also need to change the law. Private equity should not be allowed to loot one business after another, and I have introduced the most comprehensive bill to overhaul the private equity industry."

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Boston, MA - Today, United States Senator Elizabeth Warren (D-Mass.) delivered remarks at a Senate hearing in Boston titled, "When Health Care Becomes Wealth Care: How Corporate Greed Puts Patient Care and Health Workers at Risk," with Senator Edward J. Markey (D-Mass.), chair of the Health, Education, Labor and Pensions (HELP) Subcommittee on Primary Health and Retirement Security. The Senate hearing comes amidst the financial of Steward Health Care's Massachusetts hospitals, in which private equity firm Cerberus Capital Management bought the health care system, sold it for parts to Medical Properties Trust, and walked away with hundreds of millions of dollars, leaving the hospitals, their patients, and their doctors out to dry.

Opening Remarks by Senator Warren
As Prepared for Delivery
April 3, 2024

I have been warning about the dangers of private equity for years.

In industry after industry, when private equity marches in, a few wealthy investors see an opportunity to turn a quick profit. They buy a business, load it up with debt, strip out the assets, sell them off. They take the money and run, leaving a hollowed-out shell behind.

Stores get closed. Consumers get cheated. Workers get laid off. Pensions get raided.

When private equity gets hold of health care providers, it is literally a matter of life and death.

One example: when private equity firms buy up nursing homes, they cut costs to the bone, reduce staff and suck money out the door to boost investor profits. Quality of care declines. During the pandemic, private equity owned nursing homes had a 40 percent higher Covid mortality rate than other nursing homes. I'll say it bluntly: turning private equity loose in our health care system kills people.

Steward Health Care is a clear-cut case of private equity exploiting for-profit health care. Investors looted the hospitals and got rich while nurses, doctors, and other workers tried to provide care, supplies ran out, and contractors walked away because they weren't getting paid. Investors got rich while communities struggled with the reality that they might lose access to reliable health care.

Steward was created when a private equity firm, Cerberus Capital Management, bought a small non-profit hospital system, Caritas Christi. Six years later, Cerberus sold the land and hospital buildings - the operating rooms and the nursery for the babies and even the gift shop and parking lot - to a real estate investment trust called Medical Properties Trust, or MPT, for 1.25 billion dollars.

Ultimately, Cerberus made a profit of at least 800 million dollars from its machinations with Steward. Let me repeat that: 800 million dollars.

What did this private equity firm do with the money from the sale? Did they upgrade their operating room equipment or modernize the nursery? Nope. Private equity paid themselves and walked away.

Meanwhile, the hospitals now had to make huge rent payments to MPT. Not enough money was coming in, and Steward fell behind on bills everywhere. Steward's fate was pretty much sealed. It was economically dead - a zombie - but that wasn't public yet. The private equity guys knew it, of course, but they had their money, and they were off in their yachts sipping pina coladas.

Now, the entire system could collapse. There is one - and only one - thing of value that private equity hasn't already taken: Steward's physician group. Now Optum, a subsidiary of the corporate conglomerate UnitedHealth Group, wants to buy that last asset.

Optum may be willing to pay Steward hundreds of millions of dollars, but the deal provides no guarantee that the hospitals would stay open. None. In fact, the money could go into Steward and right back out the door to corporate lenders or investors - without a single penny used to help out the hospitals.

Worse yet, this deal gives Optum, which has already bought up physician practices all across the country, a chance to buy up an even bigger chunk of health care here in Massachusetts. Optum is already the largest employer of physicians in Massachusetts, counting more than 53,000 of our doctors in its network. For comparison, Mass General Brigham has about 7,500 doctors. Now, Optum wants to get its hands on thousands of physicians in the Steward group.

The net result could be a disaster. Optum isn't offering to pay hundreds of millions of dollars so they can make health care better in Massachusetts. No, it's all about making more money - and they have run the same play in other states. Optum boosts profits by overbilling Medicare and cutting care for patients who need it most. I do not understand how regulators can approve such a deal.

I appreciate the work that Governor Healey and Secretary Walsh are doing to find a solution to this problem they inherited.

The blame for this crisis falls squarely on the private equity firm that bought the hospitals and stripped their assets, and Steward's CEO, Ralph de la Torre, who sold the deal both to regulators and the health care community.

While we hold this hearing, Dr. de la Torre is hiding out. Shame on Dr. de la Torre. He owes the residents of Massachusetts an explanation for his part in looting Steward's hospitals, and his refusal to appear at today's hearing is cowardly.

We need accountability here, and law enforcement authorities should carefully review every aspect of this fiasco.

We also need to change the law. Private equity should not be allowed to loot one business after another, and I have introduced the most comprehensive bill to overhaul the private equity industry. In addition, investors should face extra restrictions when they buy up hospitals and health care practices, and I have a bill to accomplish that as well. In the meantime, either of these laws could be put into place by our state legislature and protect the people of Massachusetts.

This hearing is a good start, and I appreciate Sen. Markey for getting the ball rolling.

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