CEO got big bucks as his hospital chain imploded. Here's who suffered.

Donna Gittens felt drained as she struggled to form words. Dinner plans with her husband and friends would have to wait. She worried she was in the middle of a stroke.

Gittens was rushed to Carney Hospital, minutes from her home in Boston's Dorchester neighborhood. Last summer's emergency spanned two facilities as physicians unraveled a medical mystery. The underlying issue was a brain infection, but she credits her neighborhood hospital's doctors and nurses with saving her life.

She now worries others in her area won't have access to the same emergency care.

Carney is one of two Massachusetts hospitals targeted for closure Aug. 31 following recent chaotic developments at Steward Health Care. The embattled for-profit hospital chain filed for bankruptcy on May 6 and has been mired in crises involving patients and creditors across several states.

The chain is led by a former heart surgeon who collected more than $100 million in compensation and bought a $40 million yacht while employees at Steward hospitals complained about a lack of basic supplies, according to a Senate committee. More than 2,200 employees now expect to be laid off in Massachusetts and Ohio, according to notices filed with state regulators.

The company's CEO, who lawmakers say has declined multiple requests to answer questions voluntarily, is expected to appear under subpoena in mid-September before a Senate committee to address "financial mismanagement" at Steward.

The case has raised broader issues for lawmakers and analysts about the role of private equity investments in health care. Many people from communities impacted by hospital closures are asking why there aren't built-in protections when a corporation takes over an institution providing essential life-or-death services.

The problem extends beyond Massachusetts. State health regulators in Arizona this month suspended operations at a Steward-owned psychiatric hospital after the air conditioning at the Phoenix facility cut off amid triple-digit temperatures. In West Monroe, Louisiana, hospital workers described searching the premises for basic medical supplies during procedures. One patient died at the hospital awaiting transfer to another hospital, resulting in an "immediate jeopardy" citation from regulators, according to testimony at a Louisiana House Health and Welfare Committee meeting in April.

After the chain declared bankruptcy, the Massachusetts governor enacted an emergency plan to manage the disposition of its seven remaining hospitals there. The company sought and received approval from the bankruptcy court to shutter Carney and a second facility, Nashoba Valley Medical Center in Ayer, by the end of August.

Gittens, who survived a health scare, worries her local neighborhood with a diverse, mixed-income population, will be left without essential medical care. During medical emergencies like hers last summer, timely care can be the difference between life and death.

"Carney is integral not only to my family – but the broader community," said Gittens.

Despite pleas from neighborhood leaders, the state has no plans to keep Carney or Nashoba Valley open. However, Massachusetts Gov. Maura Healey said at an Aug. 16 news conference the state plans to use eminent domain to take control of another Steward hospital, St. Elizabeth's Medical Center in Brighton. The state has struck deals with other operators to run the other four Steward hospitals.

Healey blamed Steward's financial collapse on its CEO, Dr. Ralph de la Torre, and the hospital chain's executives.

"This is not something that Massachusetts created," Healey said. "It was created by the greed and the exploitation of an individual, Ralph de la Torre, and members of his team. De la Torre's actions brought us to nearly the brink of collapse" at Steward's hospitals.

A spokesperson representing de la Torre did not respond to questions from USA TODAY about allegations of problems at an array of Steward Health Care facilities.

In a statement, the company said it would seek to minimize disruptions to patients.

"This is a challenging and very unfortunate situation, and the effect it will have on our patients, our employees, and the communities we serve is regrettable," the statement provided by Steward representative Deborah Chiaravalloti said. "SHC (Steward Health Care) is doing all we can to ensure a smooth transition for those affected, while continuing to provide quality care to the patients we serve."

Lawmakers cite 'outrageous corporate greed'

Steward Health Care was formed in 2010 when Cerberus Capital Management, a private equity firm, acquired a financially struggling nonprofit hospital chain from the Archdiocese of Boston. De la Torre, a Harvard Medical faculty member who previously led cardiac surgery at Beth Israel Deaconess Medical Center in Boston, became CEO of the new entity, named Steward Health Care.

The Dallas-based company aggressively expanded to a chain of more than 30 hospitals employing more than 30,000 people. The expansion was fueled by a splashy deal engineered by de la Torre to sell the land underneath Steward's hospitals to a corporate landlord, Medical Properties Trust. The sale-leaseback deal left the hospitals with hefty rent payments. Bankruptcy filings show the company is now reeling with $9 billion in debt, including more than $6 billion in lease payments to its landlord.

After the bankruptcy filing in May, Steward announced plans to close hospitals and lay off thousands of workers, leaving community members who depend on the hospitals worried about where they will get care.

The chain's financial flameout captured the attention of the Senate Health, Education, Labor and Pensions Committee, which authorized an investigation into the company's financial dealings. The Senate probe is expected to include questions about Steward Health's deal with private equity investors, its lavish spending, the lease deal and the hospital closures. The committee also issued a subpoena that compels de la Torre to answer questions about his company's struggles.

At a July 25 hearing, Sen. Bernie Sanders, I-Vermont, who chairs the committee overseeing the investigation, said de la Torre refused multiple invitations to testify before lawmakers, which prompted the bipartisan vote to order him to testify on Sept. 12.

While Steward closed its hospitals, Sanders said, de la Torre was collecting a "$100 million payday that he used to purchase a $40 million yacht." Sanders said the executive also bought a $15 million, custom-made fishing boat and had access to two private jets.

De la Torre "epitomizes the type of outrageous corporate greed that is permeating throughout our for-profit health care system," Sanders said at the hearing. "Today we are saying enough is enough. It is time for Dr. de la Torre to get off of his yacht and to explain to Congress the financial chicanery which made him extremely wealthy, while the hospitals he managed went bankrupt."

When asked which sources Sanders relied on for his July testimony about de la Torre's compensation and boats, his staff provided links to articles in The American Prospect , The Boston Globe and Becker's Hospital Review .

Beyond Capitol Hill, Steward is being scrutinized by other entities. The Justice Department launched a criminal investigation into allegations of fraud and corruption at the company, CBS and other outlets reported . The Justice Department and the U.S. Attorney in Boston declined to comment on whether the health care chain was under investigation.

Steward also has been investigated in the Mediterranean nation of Malta, where the company reached a $4 billion euro deal to manage three hospitals. In May, a Maltese magistrate recommended criminal charges against de la Torre. That probe involved the former prime minister of Malta, Joseph Muscat, who was charged with money laundering, corruption and bribery . He has pleaded not guilty and faces up to 18 years in prison, according to local media.

Private equity in health care scrutinized

The bankruptcy, hospital closings and disruptions to patient care at Steward are not the only issues the Senate committee will probe. Sanders plans to seek answers into private equity's growing stake in the health care sector.

Sanders said at a July hearing private equity firms own 460 hospitals in the United States – or about 1 in 5 for-profit hospitals.

"How many of these hospitals are being loaded up with debt in order to make a handful of executives and private equity firms even wealthier?" Sanders pondered aloud. "How many of these hospitals are in danger of being shut down? How many patients are at risk?"

Experts say the Steward bankruptcy raises concerns about private equity's involvement in the health care industry. Under the Steward model, the company's debt became overwhelming as it acquired more hospitals and doctors' practices.

The financial problems following Steward's acquisition spree were inevitable, said Dr. Vikas Saini, president of the Lown Institute, a Massachusetts-based health think tank.

Saini blames the chaos on the lack of regulatory oversight for health care mergers and acquisitions.

"It illustrates how moth-eaten our oversight and regulatory apparatus is for the health care sector," Saini said. He added that hospital takeovers have "much more social impact, much more meaning to communities than whether or not an iPhone plant gets built."

Hospital ownership changes require more guardrails, transparency and public scrutiny, Saini said. "We've got to be sure that you're not just selling us a bill of goods."

Louisiana patients in 'immediate jeopardy'

In Louisiana, state health regulators scrutinized Steward-owned Glenwood Regional Medical Center, which was hit with three "immediate jeopardy" warnings in 120 days from December 2023 through early 2024. These citations described lapses that put patients' safety in jeopardy and could result in the termination of Medicare and Medicaid payments.

Debra Russell, a Glenwood nurse practitioner, worked at the hospital for more than three decades before she quit last November.

During an April hearing before a Louisiana legislative committee, she described the dire circumstances for patients at the hospital. She recalled having to switch tactics in the middle of a procedure because the hospital didn't have a $5 tube called a guide wire. In another case, a young man came to the emergency room after a heart attack but staffers could not reach an on-call cardiologist because the specialist hadn't been paid. When staff tried to order medication from the pharmacy for the patient, the drug wasn't stocked because the hospital's supplier hadn't been paid.

Evidence of the financial crunch also was visible outside the emergency room. Russell described coffee pots being repossessed and said document shredding companies had quit.

Steward's days of operating that hospital appear to be nearing an end. Steward has announced another hospital operator, American Healthcare Systems, has bid to purchase Glenwood. The bankruptcy court must approve the deal.

Steward declined to answer questions about the sale or operations at Glenwood. In a news release issued last May, the hospital said it addressed issues raised by state and federal regulators following the immediate jeopardy warnings.

During the Senate hearing this spring, Russell, the former Louisiana staffer, recalled her final days at the Steward-owned hospital as particularly gutting to witness.

"It's the saddest thing I've ever been around," Russell said.

Florida doctor sells to Steward; vendors don't get paid

Dr. Charles Fischman thought he had sufficiently vetted Steward Health Care after executives approached him about purchasing his Vero Beach, Florida, medical practice in early 2017. The internal medicine doctor was nearing retirement age and considering his next steps. He wanted to make sure his 10,000 patients, two fellow doctors, a nurse practitioner and administrative staff were in good hands.

When Fischman met with Steward executives, he said each leader was more charming than the next. He felt comfortable with the idea of a physician-led company acquiring his practice. Steward representatives talked to his employees over breakfast and eased their worries.

"We felt good about it," Fischman said.

But weeks after Steward took over on June 1, 2018, problems surfaced, he said. Longtime vendors, such as lab suppliers, complained they had not been paid. The local water and power companies were within 24 hours of shutting off services due to unpaid bills.

Under the terms of the acquisition, Fischman signed a two-year contract to remain as a physician and a lab director. Things didn't improve in the following weeks and months, Fischman said.

Fischman's wife, Carol, who also worked at the office, fielded complaints from vendors – people the Fischmans knew personally after 30 years in the community. They wanted to get reimbursed for their services so they could pay their mortgages and cover other basic living expenses, he said.

At a Vero Beach dinner meeting with some Steward executives months after the hospital chain bought the medical practice, Carol asked why the vendors' payments were delinquent. She didn't get answers.

"All we heard were stories about fishing boats and hospitals in Malta," he said, recalling his conversations with Steward executives.

His wife eventually quit in frustration. Fischman said executives pressured him to refer patients only to other Steward-employed physicians. He eventually left the practice in April 2020 and relocated to Tampa, where he still sees patients a few days a week.

Chiaravalloti, of Steward, did not answer questions about the Vero Beach medical offices.

Hospitals grapple with bankruptcy, closings

State health officials and medical community leaders from Massachusetts to Louisiana are now trying to assess how Steward Health Care's bankruptcy will affect day-to-day operations, as new information about the company's business dealings and practices continues to emerge.

On Aug. 19, the Massachusetts governor's office sent a letter to Steward describing Carney Hospital as an "essential service" for Dorchester residents, while acknowledging the state lacks the "power to mandate" the hospital remain open.

Some community leaders are urging the governor to keep the hospital open nonetheless.

Bill Walczak, a former president of Carney, said the Dorchester hospital has been plagued by "terrible decisions" going back decades, long before Steward took ownership.

But he said Carney is worth saving to ensure access for up to 250,000 people who live in its service territory. He described it as a health equity issue for residents. Offering such a remedy is within the state's purview, he said.

"Massachusetts is a very wealthy state, and it has a lot of power," Walczak said. "If the legislature and governor and secretary of Health and Human Services wanted to put together a package today to preserve the essential services of the Carney Hospital, they could do it."

Walczak noted the Healey administration vowed to use eminent domain to seize Steward's St. Elizabeth's Hospital in Brighton and transfer the facility to Boston Medical Center. The governor said Boston Medical Center's willingness to take over St. Elizabeth's was necessary to get the deal done. The hospital's landlord, however, vowed to fight the seizure. The company that owns the property rejected Gov. Healey's opening bid of $4.5 million to buy the location.

Representatives of Healey and the state's Department of Public Health did not immediately answer questions about next steps in the hospital seizure.

Dorchester leaders want the governor to orchestrate a similar deal to keep Carney open.

"This is not over," Walczak said. "Perhaps the governor will understand there are a lot of lives that would be put in jeopardy by not having an emergency room and beds, at a minimum, in this section of the city."

Ken Alltucker is on X at @kalltucker, contact him by email at alltuck@usatoday.com .

This article originally appeared on USA TODAY: CEO got big bucks as his hospital chain imploded. Here's who suffered.