• Monthly
  • $25
  • $50
  • $100
  • $other
  • use PayPal


Is it time for our Spring fundraiser already? If you enjoy what we offer, and have the means, please consider donating. The sooner we reach our modest goal, the faster we can get back to business as (un)usual. Please, stay safe and we’ll see you down the road.

Hospital Bailouts Begin…for Those Owned by Private Equity Firms

On March 22, the Steward hospital chain sent a letter to Pennsylvania Governor Tom Wolf, saying it would close Easton Hospital, in the state’s Lehigh Valley, on March 27 unless it received a government bailout to keep it operating.

Steward’s letter read: “If the Commonwealth has no interest in assuming all operating expenses and liabilities of Easton Hospital, Steward Health Care will proceed immediately on planning to close the facility.” The threat paid off: On the 27th, the state guaranteed Easton $8 million for April and a likely $24 million through the month of June. The bulk of the funds, Wolf said, would be covered by the federal bailout package that President Trump had signed into law that very day.

How Easton had descended to such dire straits is a good question, inasmuch as its owner—the private equity firm Cerberus Capital Management—is hardly a candidate for taxpayer-funded assistance, and is responsible for loading down the hospital with an unpayable level of debt.

The Easton story is likely to be just the first of many. After compelling hospitals to take on huge piles of debt through leveraged buyouts, private equity firms—currently sitting on $1.5 trillion in uninvested cash from investors—are poised to line up for taxpayer bailouts.

Steward has claimed that Easton Hospital has been financially distressed for months, that competition from other larger hospitals is fierce, and that the postponement of all elective surgeries has further cut into revenues. It had worked out a deal to sell the hospital to St. Luke’s University Network, but the deal has slowed down due to the COVID-19 crisis.

But why is Easton Hospital struggling so much more than other hospitals?

After compelling hospitals to take on huge piles of debt through leveraged buyouts, private equity firms are poised to line up for taxpayer bailouts.

Size matters, but its private equity buyout history matters more. In March 2017, Cerberus acquired Easton, along with seven other hospitals, in a leveraged buyout for an undisclosed amount from Community Health Systems (CHS). While we don’t know how much debt Steward took on in order to buy out Easton, the typical private equity buyout includes debt financing in the range of 50 percent to 70 percent of the purchase price, which the acquisition, in this case Easton Hospital, is expected to repay. We do know that at the time of the sale, Steward sold the property of all eight hospitals to a real-estate investment trust, Medical Properties Trust (MPT), and pocketed $304 million in return.

Since then, Easton Hospital has had to pay rent on property it had owned for the 127 years of its existence. How much of Easton’s revenues have been used to pay down debt Steward incurred to acquire it and to pay rent on its facilities—revenues that could have been used to financially stabilize the hospital?

Easton’s financial struggles began under the ownership of CHS, itself originally owned by private equity firm Forstmann Little & Co. Forstmann used the classic private equity leveraged buyout model to buy out hospitals and load them with debt. Forstmann cashed out in the mid-2000s, but CHS continued the LBO strategy with financing from Forstmann even after it went public. Its largest buyout came in 2014, when CHS bought Health Management Associates (HMA) to form the largest for-profit chain in the country by number of hospitals—with more than 200 hospitals and 30,000 beds. But this led CHS to crash.

By June 2015, the hospital system’s total long-term liabilities had increased dramatically and its debt-to-equity ratio had nearly tripled since 2000. CHS was unable to meet its debt obligations and began selling off hospitals to pay down debt and avoid default. Its share price, at a high of $65 a share in July 2015, fell to a low of $1.81 per share in August 2019.

In its divestment spree from 2017 to 2019, CHS sold off 53 hospitals—including Easton to Steward. Most of those hospitals were in financial trouble. As of February 2020, only 11 had positive operating margins; four were closed soon after they were sold; 38 had operating losses, and of these, six have since declared bankruptcy. While it is true that smaller hospitals don’t have the revenue or the payer mix of larger systems, size alone doesn’t explain this level of hospital disasters. CHS’s debt burden prevented it from investing in Easton and its other hospitals to help them develop a sustainable footing.

Enter Steward to buy out Easton with the same private equity playbook. From 2010, when Cerberus bought out a handful of Massachusetts Catholic hospitals and created the Steward platform, to 2020, its aggressive buyout activity made Steward the largest private hospital system in the U.S. It owns 37 hospitals (with over 7,900 beds), more than 25 urgent-care centers, 42 skilled-nursing facilities, and a network of physician groups—with some 42,000 workers serving 800 communities.

Steward knew that Easton was financially weak when it bought the company, but claimed it could turn it around. But was the buyout just a real-estate deal from the beginning? Throughout its empire, Steward’s buyout strategy has included sale-leaseback deals in which it sells off valuable hospital real estate to pay itself back. In September 2016, Steward sold all of its acute-care hospital properties to Medical Properties Trust for $1.2 billion—allowing Cerberus to recoup its initial investment in Steward and more. It repeated this a year later, buying out IASIS Healthcare, owned by PE firm TPG, and selling the real estate of 11 of the hospitals to MPT in a sale-leaseback deal that returned 75 percent of the purchase price to Steward’s private equity owners.

While Cerberus and its investors have prospered, the Steward system is in financial ruins. In 2018, Steward’s Massachusetts hospital system was the worst-performing in the state on every metric. It lost $592 million in 2017 and 2018. In 2018, its overall margin, including operating and non-operating activities, was negative 4.1 percent. Its current ratio (a measure of its liquidity) for its Massachusetts hospitals, was under 1—indicating that its current liabilities cannot be met with current assets. Steward’s long-term debt exceeded the value of its assets by $1.21 billion.

Like the health care workers at Easton Hospital and the patients in the rural Lehigh Valley, Steward’s 42,000 workers and the 800 communities it serves face the danger of a sudden shutdown by the financially frail system if it cannot cope with the coronavirus crisis that is sweeping across the country.

Federal bailouts to the rescue. Easton Hospital is the first private equity bailout, but surely not the last.

This article first appeared on American Prospect.

June 02, 2020
Zoltan Grossman
Deploying Federal Troops in a War at Home Would Make a Bad Situation Worse
Nicholas Buccola
Amy Cooper is Christian Cooper’s Lost, Younger Sister 
Manuel García, Jr.
Global Warming is Nuclear War
Patrick Cockburn
An Unavoidable Recognition of Failure: Trump’s Withdrawal From Afghanistan
John Feffer
Is It Time to Boycott the USA?
Kathy Kelly
Beating Swords to Plowshares
Lawrence Davidson
U.S. Urban Riots Revisited
Sam Pizzigati
“Failed State” Status Here We Come
Ron Jacobs
In Defense of Antifa
Cesar Chelala
Bolsonaro and Trump: Separated at Birth
George Wuerthner
The BLM’s License to Destroy Sagebrush Ecosystems
Danny Antonelli
The Absurdity of Hope
Binoy Kampmark
Sinister Flatulence: Trump Versus Twitter
John Stanton
How Much Violence and Destruction is Enough for Depraved American Leaders and Their Subjects?
Richard C. Gross
The Enemy Within
Thomas Knapp
Trump’s “Free Speech:” Doctrine: Never, Ever, Ever Mention He’s a Liar
John W. Whitehead
This Is Not a Revolution. It’s a Blueprint for Locking Down the Nation
June 01, 2020
Joshua Frank
It’s a Class War Now Too
Richard D. Wolff
Why the Neoliberal Agenda is a Failure at Fighting Coronavirus
Henry Giroux
Racial Domestic Terrorism and the Legacy of State Violence
Ron Jacobs
The Second Longest War in the United States
Kanishka Chowdhury
The Return of the “Outside Agitator”
Lee Hall
“You Loot; We Shoot”
Dave Lindorff
Eruptions of Rage
Jake Johnston
An Impending Crisis: COVID-19 in Haiti, Ongoing Instability, and the Dangers of Continued U.S. Deportations
Nick Pemberton
What is Capitalism?
Linda G. Ford
“Do Not Resuscitate”: My Experience with Hospice, Inc.
Medea Benjamin - Nicolas J. S. Davies
Who Are the Secret Puppet-Masters Behind Trump’s War on Iran?
Manuel García, Jr.
A Simple Model for Global Warming
Howard Lisnoff
Is the Pandemic Creating a Resurgence of Unionism? 
Frances Madeson
Federal Prisons Should Not be Death Chambers
Hayley Brown – Dean Baker
The Impact of Upward Redistribution on Social Security Solvency
Raúl Carrillo
We Need a Public Option for Banking
Kathy Kelly
Our Disaster: Why the United States Bears Responsibility for Yemen’s Humanitarian Crisis
Sonali Kolhatkar
An Open Letter to Joe Biden on Race
Scott Owen
On Sheep, Shepherds, Wolves and Other Political Creatures
John Kendall Hawkins
All Night Jazz All The Time
Weekend Edition
May 29, 2020
Friday - Sunday
Tim Wise
Protest, Uprisings, and Race War
Nick Pemberton
White Supremacy is the Virus; Police are the Vector
T.J. Coles
What’s NATO Up to These Days? Provoking Russia, Draining Healthcare Budgets and Protecting Its Own from COVID
Benjamin Dangl
Bibles at the Barricades: How the Right Seized Power in Bolivia
Kevin Alexander Gray - Jeffrey St. Clair - JoAnn Wypijewski
There is No Peace: an Incitement to Justice
Jeffrey St. Clair
A Few Good Sadists
Jeff Mackler
The Plague of Racist Cop Murders: Ahmaud Arbery, George Floyd and the COVID-19 Pandemic
Joshua Frank
In Search of a Lost Socialism