June 03, 2024

Warren, Brown, Markey Urge Federal Bankruptcy Watchdog to Protect Patients and Communities, Appoint Trustee in Steward Hospital Bankruptcy

“We urge the USTP to move to appoint a trustee to run the company in place of Steward’s current management as quickly as possible.”

Senators ask that “USTP use every legal tool available … to ensure … that patients and workers are protected and looted corporate assets or improper payments to Steward executives and investors are clawed back.”

Text of Letter (PDF)

Washington, D.C. – Senator Elizabeth Warren (D-Mass.), Sherrod Brown (D-Ohio), Chair of the Senate Banking Committee, and Ed Markey (D-Mass.) wrote to the Director of the U.S. Trustee Program (USTP), calling for USTP to move to appoint a Chapter 11 trustee to run the company in place of Steward’s current management as quickly as possible, and to monitor the hospitals’ bankruptcy proceedings to protect patients and local communities. 

On May 6, 2024, Steward, one of the largest private, for-profit health systems in the nation, filed for bankruptcy. The filing followed years of greed and mismanagement by Steward executives, Medical Properties Trust (MPT), and private equity investors — dating back to Cerberus Capital Management’s (Cerberus’s) purchase of Caritas Christi Hospitals in 2010 and the subsequent sale of the land under the hospitals in 2016 to MPT. This $1.25 billion “sale-leaseback,” a type of transaction that is a mainstay of the private equity playbook, created unsustainable debts, putting patients and communities at risk. Steward continued to borrow funds to bankroll the company’s national expansion and pay MPT’s higher and higher rents.

The constant throughout these decisions has been Dr. de la Torre, Chairman and CEO of Steward Health, who has been at the helm of Steward for 14 years, while reportedly having access to two private jets and owning two luxury yachts — enjoying “the most sophisticated sportfish boat ever built … (and) cruising the skies in one of the biggest and most luxurious private jets that money can buy.”

Because Steward Health Care is still overseen by the same management that drove the hospitals to this point, the senators are calling for the UTSP to step in.

“We urge the USTP to move to appoint a trustee to run the company in place of Steward’s current management as quickly as possible,” wrote the senators. “Steward’s current management has demonstrated a long history of deception, mismanagement, delays, and outright refusal to comply with state disclosure requirements.  Leaving current management in control of both the disclosures and the day-to-day operations of these hospitals is a threat to public health as well as an invitation for management to continue to advance its own financial interests over those of the community served by Steward.” 

Bankruptcy law provides that a judge shall appoint a Chapter 11 trustee “for cause, including fraud, dishonesty, incompetence, or gross mismanagement of the affairs of the debtor by current management, either before or after the commencement of the case.” These circumstances appear to exist in the case of Steward. A Chapter 11 trustee would take over management of the business, oversee sales of the business’s assets, and equitably address claims by creditors. In addition, a Chapter 11 trustee is empowered to claw back funds by challenging past fraudulent transactions by executives of the company. A trustee is needed to seek such redress, given that Dr. de la Torre and his management team may have been beneficiaries of potentially fraudulent transfers or other wrongdoing and thus have a conflict of interest.

“The trustee would be able to ensure that Dr. de la Torre, who currently remains at the helm of Steward, and other top executives cannot continue to mismanage Steward during the bankruptcy process as they have throughout their tenure and that they cannot cover up their actions,” wrote the senators. “A trustee would also help restore some badly-needed public trust in the Steward hospitals.”

The senators are also calling on USTP to closely monitor Steward’s bankruptcy process and work with estate fiduciaries and bankruptcy professionals to:

  • Protect the communities served by these hospitals and their workers, which is consistent with USTP’s mission to protect the “public” as a key stakeholder;
  • Protect the rights of patients, hospital workers, and local creditors affected by Steward’s bankruptcy, including by ensuring that the appointed Patient Care Ombudspersons are complying with the responsibilities enumerated at 11 U.S.C. 333;
  • Ensure Steward and its executives are faithfully complying with the disclosure and transparency requirements of bankruptcy, including full and complete disclosure of the impact of Steward-related private equity and real estate investment trust (REIT) transactions dating to 2016, and the disposition of funds from these transactions;
  • Investigate criminal, fraudulent, or abusive conduct for possible civil or criminal prosecution under applicable statutes, including under the federal fraudulent transfer provisions at 11 U.S.C. 548;
  • Carefully scrutinize the terms of the DIP financing provided by MPT to ensure that MPT does not receive unduly favorable treatment under the terms and conditions of the financing, particularly in regards to any pre-bankruptcy debts Steward owes to MPT; and
  • Ensure the interests of local creditors, patients, and state officials and regulators are well-represented and heard by the court.

Senator Warren is one of the nation’s leading bankruptcy experts, and has been leading congressional oversight of Steward’s failures. Warren has repeatedly called out the harms of private equity ownership on health care costs and quality of care and has fought to prevent companies from taking advantage of the bankruptcy system: 

  • On May 24, 2024, Senator Warren sent a letter to the U.S. Department of Health and Human Services and the U.S. Centers for Medicare & Medicaid Services, urging them to support communities and health care providers affected by the crisis caused by Steward’s financial mismanagement.
  • On April 19, 2024, Senators Warren and Senator Markey (D-Mass.) sent a letter to six private credit funds that are holders of Steward’s debt, asking them a series of questions about their loans and calling on them to offer loan modifications that could potentially help keep the hospitals afloat.
  • On April 16, Senators Warren and Markey called out Medical Properties Trust and Macquarie Infrastructure Partners for exploiting Steward Hospitals, and urged them to help keep the hospitals open.
  • On April 8, 2024, Senators Warren, Markey, and the rest of the MA delegation urged the FTC and DOJ to closely scrutinize UnitedHealth Group’s proposed acquisition of Steward Health Care’s physician group, Stewardship Health.
  • On April 3, 2024, Senator Warren 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,” which centered on Steward Health Care’s Massachusetts hospitals.
  • On March 26, 2024, Senator Warren released a statement about Steward’s plan to sell its physician group Stewardship Health to UnitedHealth Group’s subsidiary Optum.
  • On March 26, 2024, Senators Warren and Markey sent a letter to Steward CEO and Chairman Dr. Ralph de la Torre, calling on him to testify at a congressional hearing in Boston.
  • On March 8, 2024, Senators Warren and Markey sent a letter to Dr. de la Torre, blasting him for years of financial mismanagement, private equity schemes, and executive profiteering that have led to Steward Health Care’s financial crisis.
  • On February 15, 2024, Senators Warren and Markey, along with all nine members of the Massachusetts congressional delegation, sent a letter to Cerberus seeking answers from the private equity firm for its role in creating the current financial challenges at Steward hospitals.
  • On January 29, 2024, Senator Warren released a statement about Steward’s financial situation and allegations of patient neglect at Steward facilities.
  • On January 23, 2024, Senator Warren led the Massachusetts congressional delegation in a letter to the CEO of Steward Health Care pressing the company to brief them on Steward’s financial position, the status of their Massachusetts facilities, and their plans to ensure the communities they serve are not abandoned. 

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