Bankrupt hospital chain Steward Health Care paid private equity giant $700M dividend despite losses
By Ariel Zilber,
2024-09-11
The country’s largest private, for-profit hospital chain paid out a $790 million dividend — with a big chunk of that money going to its Manhattan-based private equity owner — before it filed for bankruptcy several years later, according to a report.
Steward Health Care System, the Boston-based network of 30 hospitals that operated in rural and low-income areas, made the payout to Cerberus Capital Management in 2016, the same year the chain recorded a net loss of $300 million, The Wall Street Journal reported.
Steward Health Care, the nation’s largest chain of for-profit hospitals, recently declared bankruptcy. Boston Globe via Getty Images
The money from the payout was derived from a leasing deal with Medical Properties Trust, an Alabama real estate firm, according to the Journal.
“Steward had more than sufficient capital and liquidity to make the dividend payments in 2016,” Cerberus spokesperson Michael Sitrick told the Journal.
According to Sitrick, Cerberus received $719 million of the dividend while the remaining $71 million was paid to the Steward management team headed by CEO Dr. Ralph de la Torre.
Cerberus, which acquired Steward in 2010, did not receive any other dividends from Steward during the time it owned the company, the Journal reported.
In April 2020, Cerberus conducted an analysis which found that the hospital chain would need $750 million over the next seven years to execute its business strategy. Steward had recorded a net loss of $408 million during the COVID pandemic.
A month later, Cerberus sold the company to a group of physicians led by de la Torre.
This past May, Dallas-based Steward filed for bankruptcy protection, attempting to sell all its hospitals to address $9 billion in debt. Steward had regularly stiffed vendors, and lacked adequate staff and equipment at many of its facilities, the Journal reported.
De la Torre, who has resisted attempts by a bipartisan group of senators to have him answer questions in Congress about his company’s collapse, lived a life of luxury that included corporate jet flights to exotic locales and a multimillion-dollar apartment — all on the company’s dime, according to The Boston Globe.
De la Torre was spending lavishly despite the fact that his company was reporting nine-figure losses in 2020, 2021 and 2022.
Steward CEO Ralph de la Torre has resisted attempts by lawmakers to have him answer questions on Capitol Hill. Bloomberg via Getty Images
De la Torre has asked to postpone testifying on Capital Hill in response to a subpoena that requires him to appear before lawmakers on Sept. 12.
The CEO is also reported to have maneuvered to have Steward enter contracts with other companies in which he, himself, had ownership stakes.
A whistleblower told Congress that de la Torre and other Steward executives bragged that they could hand “brown bags” over to government officials in Malta in order to illegally secure hospital contracts, CBS News reported.
A spokesperson for de la Torre called the allegations “preposterous” and said that the company acted “in a lawful and transparent manner throughout the period in which the company was operating” in Malta.
De la Torre’s accounting practices and financial dealings are now the subject of scrutiny by a federal grand jury in Boston, according to the Globe.
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