Investigation reveals how investors made millions as Steward Health Care system collapsed

The CEO of the nation’s largest private for-profit hospital chain is under fire for ignoring a subpoena to testify before the Senate. The hearing examined the financial collapse of Steward Health Care, a group created by a private equity firm that generated huge fortunes for investors and its CEO, but left patients in dangerous conditions. William Brangham discussed more with Mark Arsenault.

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Geoff Bennett: The CEO of the nation’s largest private for-profit hospital chain is under fire for ignoring a subpoena to testify before the Senate today.

The hearing looked at the financial collapse of Steward Health Care. That’s a hospital group created by a private equity firm, generated huge fortunes for its investors and its CEO, but left patients in dangerous, sometimes deadly conditions.

William Brangham has the story.

William Brangham: Geoff, Steward Health Care CEO, Dr. Ralph de la Torre, skipped today’s hearing where he would have been questioned about his role in the bankruptcy of this nationwide hospital chain.

According to an investigation by The Boston Globe, Steward Health’s 30 plus hospitals were some of the worst in the nation. Six of its remaining hospitals in Massachusetts are for sale and two others have closed. Several witnesses who worked for Steward provided damning testimony today about the role that corporate profits played in Steward’s downfall.

That included a nurse who described one example of how the chain’s habit of not paying vendors created horrible circumstances for grieving parents.

Ellen MacInnis, Former Nurse, St. Elizabeth’s Medical Center: Sadly enough, sometimes, babies die, newborn babies die, and the practice is to place the baby’s remains in a bereavement box and take it to the morgue.

Steward didn’t pay the vendor and they weren’t any bereavement boxes. And nurses were forced to put babies remains in cardboard shipping boxes.

William Brangham: For more on the downfall of this hospital chain, I’m joined by Mark Arsenault. He’s part of The Boston Globe’s Spotlight investigative team that did this series.

Mark, thank you so much. Just a tremendous investigation that you have done here.

Before we get into the details of how patient care suffered at these hospitals, can you sort of explain the sort of basic architecture of Steward Health Care, how it was started? What is it?

Mark Arsenault, The Boston Globe: Yes, Steward Health Care was founded in Boston in 2010, when a private equity firm known as Cerberus Capital Management bought six hospitals, struggling community hospitals from the Boston Catholic Archdiocese.

Steward then went on quite a buying spree with a real goal to try to get bigger and ended up with more than 40 properties at its peak. It did a — what we were calling a chain-defining deal in 2016 with a real estate investment trust from Alabama, whereby Steward sold a lot of the property, sort of the land in the buildings under its own hospitals, and then leased them back, which generated a bunch of money for Steward, more than a billion dollars, most of which went to dividends, not into hospital reinvestment, but also straddled these community hospitals with significant rent lease payments.

William Brangham: Your investigation details this remarkable duality, where investors get incredibly rich, the CEO has got two yachts, while patient care at their hospitals suffer because of incredible stinginess.

Can you describe some of what your team calls the human cost of financial neglect?

Mark Arsenault: Yes, absolutely. I mean, I think there were sort of two categories where Steward really harmed its hospitals.

The one was just the failure to pay for enough staffing. And this is not just nurses, but also doctors and certain specialists. And the other category would be failure to pay for oftentimes routine equipment, supplies, maintenance on machines and even maintenance on buildings.

For example, if you don’t have wires for pacemakers, then patients who need that procedure have to have a delay. If you don’t have biopsy needles, as that was one of the shortages that we documented, then certain vital cancer-detecting tests are delayed in an area of medicine where early detection is everything.

The team found 15 cases in which a person died after receiving care in a Steward hospital that did not meet professionally accepted standards due to a lack of staff or a lack of supplies and equipment.

William Brangham: One of the most harrowing stories is a story about a man named Gilberto Melendez-Brancaccio, who was taken to a Steward hospital when he was having a psychiatric break. Can you tell us a little bit about his experience?

Mark Arsenault: Yes, Gilberto. Yes, this was a hard case.

Young guy, 31 years old, beloved uncle, beloved nephew, had some mental health problems that normally would be managed with medication. He didn’t always take it because he didn’t like how the medication made him feel sometimes. He had a bit of a psychological break. The police did the reasonable thing and brought him to Carney hospital in Dorchester, Massachusetts, a Steward hospital.

He was restrained in the emergency department chemically and physically restrained. He was also having some respiratory issues. And the doctors ordered that he not be left alone, that Gilberto needed one-on-one monitoring continuously.

Unfortunately, the hospital didn’t have the people for one-on-one monitoring and he was left alone. So when his heart stopped, there was nobody there to help him. There was nobody there to resuscitate him, nobody there to raise an alarm.

And 19 hours after he entered a Steward hospital, they wheeled his body to the morgue.

William Brangham: Some legislators have argued that this circumstance ought to make us rethink the role that private equity plays in hospital management. And they have proposed some legislative guardrails. Can you explain sort of what’s on the table there?

Mark Arsenault: Well, I mean, number one, we heard it today in the Senate hearing, where people just asked for just a ban, or with certain legislation that would require in private equity hospitals or in all hospitals sort of minimum staffing requirements, minimum equipment requirements.

Just, we heard it today before the Senate committee nurses just saying that we just can’t let other hospital chains like Steward leave nurses and doctors shorthanded or without the tools they need to do the jobs.

William Brangham: All right, Mark Arsenault of The Boston Globe, a tremendous piece of reporting. Thank you so much for speaking with us.

Mark Arsenault: Right on. Thank you, William.