$9B Disaster: How Cerberus Drained Steward Health Care

This is a yacht. Two hundred and ninety feet of polished steel and teak, named the Amaral, worth roughly forty million dollars. It belonged to a heart surgeon named Ralph de la Torre. And while he cruised the Mediterranean aboard it, the nurses who worked for him were counting surgical supplies by hand, because there weren't enough. In one of Boston's poorest neighborhoods, an emergency room was weeks from going dark. A maternity ward was about to be padlocked. Within two years, his hospital empire would collapse into the largest hospital bankruptcy in decades. This is the story of how those two things — the yacht and the empty hospital — are the same story.

In May of twenty twenty-four, Steward Health Care collapsed into the largest hospital bankruptcy in at least thirty years. Nine point two billion dollars in liabilities. Thirty-one hospitals across eight states. More than thirty thousand jobs. But here is the part almost no one explains. Steward did not fail because it lost money treating patients. It failed because, for fourteen years, the money was pulled out of it on purpose. By the time it filed for bankruptcy, Steward owed six point six billion dollars in rent — on hospitals it used to own outright. Somebody sold those buildings. Somebody collected that rent. And somebody walked away very, very rich. This is how you strip-mine a hospital. And it ends with something the United States Senate had not done in more than fifty years.

To understand the end, you have to go back to twenty ten, to a chain of Catholic charity hospitals in Massachusetts called Caritas Christi. Six hospitals, founded by the Archdiocese of Boston, built to care for working-class and immigrant neighborhoods — Dorchester, Brighton, Methuen. They were beloved. They were also broke, losing money every year and desperate for a buyer. The buyer that arrived was a New York private-equity firm called Cerberus Capital Management. Cerberus is named, deliberately, after the three-headed dog of Greek myth — the beast that guards the gates of the underworld and makes sure nothing that enters ever leaves. Remember that name.

Cerberus, led by the famously private financier Stephen Feinberg, structured a deal worth around eight hundred and ninety-five million dollars. It put in roughly two hundred and forty-six million of its own equity, assumed the hospitals' pension obligations, and promised four hundred million dollars in new investment. The charity hospitals got a new name — Steward Health Care — and a promise of salvation. Regulators approved it. The Archdiocese blessed it. And almost no one noticed the single most important fact in the entire story. At that moment, the hospitals still owned their own land and their own buildings. That ownership was the one thing standing between them and ruin. So that is exactly what got taken first.

For the first few years, it looked like a turnaround. But in twenty sixteen came the move that doomed everything — a maneuver called a sale-leaseback. Steward sold nine of its Massachusetts hospital campuses to a real-estate company in Birmingham, Alabama, called Medical Properties Trust — MPT for short — for somewhere between one point two and one point three billion dollars. And then, having sold the buildings, Steward signed long-term leases to rent those very same buildings right back. Think about what that means. The hospitals would now pay rent, forever, to occupy the rooms they had owned the day before.

Here is the detail that tells you everything. Carney Hospital, in Dorchester, had been valued at twelve and a half million dollars when Cerberus bought it in twenty ten. Six years later, it was sold to MPT for two hundred and sixty-three million dollars. A twenty-one-fold markup — not because the building got more valuable, but because the higher the sale price, the higher the rent that could be charged against it forever after. The cash from that giant sale didn't go into nurses or equipment. It went out the door. In twenty sixteen, Steward paid a dividend of seven hundred and eighty-nine million dollars — of which roughly four hundred and eighty-four million flowed straight to a Cerberus fund. And it did this in the same year that Steward recorded an operating loss of around three hundred million dollars. Read that again. They paid out nearly eight hundred million dollars in the same twelve months they lost three hundred million running the hospitals. The buildings were gone. The cash was gone. And the rent meter had just started running, and it would never, ever stop.

With the real estate converted into a money machine, Steward went national. Using more MPT financing and more sale-leasebacks, it bought hospital systems across Florida, Texas, Ohio, Arizona, Pennsylvania, and Utah — until it ran thirty-one hospitals in eight states. But every acquisition deepened the dependence on its landlord. By twenty nineteen, Steward hospitals made up forty-four percent of all of MPT's revenue and thirty-eight percent of its assets. The two companies were no longer separate. They were fused — a hospital chain and its landlord, so financially entangled that the landlord had to keep the dying patient breathing, because the moment Steward stopped, MPT's own rent stopped too. According to the Boston Globe's Spotlight team, MPT would ultimately funnel more than one and a half billion dollars back into Steward over the years — not out of charity, but to keep the patient alive long enough to keep collecting the rent, and to keep the true depth of Steward's insolvency hidden from regulators and the public for as long as possible. A landlord, quietly propping up a tenant it was simultaneously bleeding.

And down at the bedside, the consequences were already showing. Vendors went unpaid. Supplies ran short. Before the bankruptcy even began, at least six Steward hospitals quietly shut their doors, erasing more than two thousand six hundred jobs. Then, in twenty twenty, Cerberus made its move. The firm that had renamed itself after the guard dog of Hell engineered its exit — swapping its equity stake for a convertible note, a piece of financial engineering that locked in its winnings while leaving Steward holding the debt. Cerberus was leaving. Over its decade of ownership, it had pulled out roughly eight hundred million dollars. And it walked away clean, before the worst of it ever hit the news. Ralph de la Torre and his group of physician-owners were left in control of a company that was already hollowed out from the inside. And the looting wasn't even finished.

In twenty twenty-one came a transaction with an almost unbelievable code name — Project Easter. MPT, the landlord, arranged a fresh round of financing. But follow where it went. Three hundred and thirty-five million dollars went into a loan that retired Cerberus's note — in other words, to pay Cerberus off in full, one last time. And one hundred and eleven million was distributed to the physician-owners, of which de la Torre personally took an estimated eighty-three million dollars. In exchange, MPT got a ten percent stake, and Steward got even more debt and even more rent it had no hope of paying. The resurrection in the name "Easter" was not for the hospitals. It was for the people cashing out of them.

And this is the moment the yacht arrives. With his windfall, Ralph de la Torre bought the forty-million-dollar Amaral. He bought a seven-million-dollar horse ranch in Texas. He drew a twenty-seven-million-dollar line of credit from Steward itself — from the company. Senators would later put the value of his two corporate jets at around ninety-five million dollars. And at the same time, in his hospitals, this was happening — nurses testified before Congress that they were rationing basic supplies. Linens. Surgical equipment. The things you need to keep a person alive on an operating table. That is the entire story in one frozen image. Extraction at the very top. Scarcity at the bedside. A yacht on the water, and an empty supply closet.

You cannot run a hospital chain on rent you cannot pay forever. By early twenty twenty-four, the arithmetic finally broke. Steward could no longer make its rent payments to MPT. There was nothing left to sell, because the buildings were already sold. There was nothing left to borrow, because the company was already drowning in debt. The machine had finally consumed itself.

On May sixth, twenty twenty-four, Steward Health Care filed for Chapter Eleven bankruptcy in the Southern District of Texas — case number twenty-four, ninety-two-thirteen, before Judge Christopher Lopez. The number that explains the entire crime is this — nine point two billion dollars in liabilities, and six point six billion of that was future rent owed to MPT. Rent, on hospitals Steward had once owned free and clear. The strip-mining had a price tag at last, and patients were about to pay it.

That August, the closures came home to Boston. Carney Hospital, in Dorchester — one of the city's most underserved neighborhoods — and Nashoba Valley Medical Center, in rural Ayer, were shut down on the thirty-first. Roughly two thousand four hundred more people lost their jobs after the filing. Two hundred and ninety million dollars in wages and benefits owed to workers simply went unpaid. Communities that had relied on those emergency rooms for generations now had to drive somewhere else, and hope the somewhere else was close enough. In an emergency, distance is measured in minutes, and minutes are measured in lives. Carney had stood in Dorchester for more than a century. Nashoba Valley was the only hospital for miles of rural Massachusetts. When the doors locked, the nearest help moved further away for tens of thousands of people at once — the kind of cost that never appears on a balance sheet, because it is paid entirely by strangers who never signed a single one of these deals.

And then, finally, came the reckoning — the part that had never happened before. The United States Senate's health committee subpoenaed Ralph de la Torre, and ordered him to come and explain, under oath, where the money went. He refused. On the day of the hearing, he did not show up; through his lawyers, he invoked his Fifth Amendment right against self-incrimination. The Senate did not let it go. On September nineteenth, twenty twenty-four, the health committee voted twenty to zero, with a single member abstaining — bipartisan in every vote cast — to hold de la Torre in both civil and criminal contempt of Congress. Then, on September twenty-fifth, the full United States Senate voted unanimously to refer him for criminal prosecution. It was the first time the Senate had voted criminal contempt against a private citizen in more than fifty years. On October first, he resigned.

So let's settle the question we started with. Who actually got rich? Cerberus, the firm named after the dog that guards Hell, extracted roughly eight hundred million dollars and exited before the collapse. Ralph de la Torre took his eighty-three-million-dollar payout and turned it into a yacht, a ranch, and a line of credit from the very company now in ruins. And the landlord, Medical Properties Trust, collected rent for years on buildings whose price had been inflated twenty-one-fold — paying its own top executives hundreds of millions along the way. Against all of that, set thirty-one hospitals in crisis, more than five thousand jobs erased, and emergency rooms gone dark in the neighborhoods that needed them most.

Cerberus, the myth tells us, guards the gates of the underworld so that nothing inside can ever escape. Steward's owners did the opposite. They walked out through the gates with everything of value — the buildings, the cash, the future — and left them wide open behind them. And it was the patients, and the nurses, and the towns, who were left standing in the dark, listening to the rent still running on hospitals nobody owned anymore.