Steward Health Care bankruptcy: One year later

On the night of August 31, 2024, the lights went out forever at Carney Hospital in Boston’s Dorchester neighborhood. The 189-bed facility that had served one of the city’s communities for over a century closed its doors, forcing the last patients to be transferred to overcrowded facilities miles away. Within hours, Boston Emergency Medical Services reported a 20% increase in transport times and emergency departments at nearby facilities reported crowding.

Carney wasn’t alone. That same night, Nashoba Valley Medical Center in Ayer closed permanently, pushing EMS services to “the verge of collapse” and creating a “crisis situation… on multiple fronts due to the increased distances and times for ambulances and first responders to travel,” wrote fire chiefs and town administrators in a letter to Massachusetts Governor Maura Healy.

Twenty-five hospitals and emergency departments closed in 2024, marking one of the worst years for hospital closures in recent memory. But 2025 has started even worse: nine more hospitals have already closed in the first half of the year, suggesting the pace of collapse is accelerating.

The scope of the crisis extends far beyond these closures. More than 700 rural hospitals are at risk of closing across the country, according to a report by the Center for Healthcare Quality and Payment Reform. An additional 360 are at immediate risk of closing within two to three years due to their severe financial problems.

The Steward catastrophe: A preview of what’s coming

Both Carney Hospital and Nashoba Valley Medical Center were part of Steward Health Care, a multistate hospital system that was owned by private equity firm Cerberus Capital Management from 2010 to 2020, and whose 2024 bankruptcy was one of the largest hospital bankruptcies in the past three decades.

Bankruptcy documents revealed the company owed more than $9 billion in liabilities, including $290 million in unpaid employee wages and benefits, nearly $1 billion in unpaid bills to vendors and suppliers, and $6.6 billion in long-term rent obligations to its landlord, Medical Properties Trust.

When Cerberus exited its ownership in 2020, Steward distributed $111 million to departing owners, including de la Torre. Cerberus and company leadership extracted roughly $1.3 billion from the hospital system during their ownership period, according to a report from the Private Equity Stakeholder Project, a nonprofit that investigates the impact of private equity.

In the six years leading up to Steward’s bankruptcy, Steward closed six hospitals across the US, resulting in the layoffs of at least 2,650 workers and reduced access to care for the communities they served. Steward also cut important service lines, such as obstetrics, behavioral health, and cancer care, at others.

Government scrutiny has just begun, more closures coming

Within weeks of Carney Hospital’s midnight shutdown, Massachusetts state legislators fast-tracked a new bill aimed at making sure Wall Street never again blindsides the state’s safety-net wards. 

House Bill 5159, signed by Governor Maura Healey in January, broadens the definition of a “material-change” deal to include any transaction that gives a private-equity fund, real-estate investment trust or management company “significant influence” over a hospital or clinic. Would-be buyers must now disclose capital structure, debt schedules and audited financials; the Health Policy Commission can subpoena records, demand public hearings and — most provocatively — order investors to post a bond if regulators fear a closure could strand patients. 

Other states are improvising their own guardrails. Indiana, a Republican stronghold with some of the nation’s highest hospital prices, passed a first-of-its-kind statute requiring every nonprofit hospital to offer at least one employer contract capped at 260 percent of Medicare by 2026, a limit sponsors openly describe as a hedge against “debt-service mark-ups.” 

California’s Legislature, rebuffed by a gubernatorial veto last year, has returned with SB 351, a measure that would prohibit private-equity or hedge-fund owners from interfering in clinical decisions and void management contracts that muzzle physicians who speak out on quality or cost. 

The bill’s author, Senator Christopher Cabaldon, says it is meant to “close the loopholes private equity uses to turn medical judgment into a profit center.”

Oregon has already gone further: a June law bars non-licensed owners from influencing staffing or billing, effectively walling financiers off from day-to-day operations. Connecticut lawmakers, stung by Prospect Medical’s near-collapse, have floated an outright ban on buy-out control of hospitals, though the proposal stalled this spring and is expected to return in January. 

The federal government is moving in concert. Citing an “urgent need to understand how corporate greed may threaten care,” the Federal Trade Commission, Justice Department and Department of Health and Human Services under the Biden Administration opened a tri-agency inquiry last year into roll-ups and leveraged buy-outs that escape traditional antitrust review. It’s unclear where that mission stands now.

The Private Equity Stakeholder Project, a nonprofit that had warned for years about Steward’s mounting debt, is pressing lawmakers to go further. In a series of reports and Senate testimonies the group has urged a mandatory “debt-sustainability test” before any CMS dollars can flow to an acquired hospital and has called on state insurance commissioners to deny rate hikes tied to dividend recapitalizations.