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WASHINGTON, DC – Today, Congresswoman Lori Trahan (MA-03), a member of the House Energy and Commerce Committee’s Health Subcommittee, participated in a Congressional hearing where she slammed Steward Health Care’s private equity business model that has led to a dangerous trend in community hospital closures across the nation, including possibly in Massachusetts.

CLICK HERE or the image below to watch the full footage of Trahan’s remarks.

“Families who receive care at Holy Family Hospital and Nashoba Valley Medical Center – both owned by Steward – were recently notified that their care is now in jeopardy because of the corporation’s gross financial negligence that’s seeing the company try to shutter 4 of the 9 hospitals they own in Massachusetts,” Congresswoman Trahan said. “For their reasoning, Steward executives have pointed to, you guessed it, low Medicaid reimbursement rate as the cause of their financial distress. But earlier this month, it was revealed that the company has missed rent payments to an ‘outside landlord’ that actually owns the property and buildings their facilities operate in.”

During her line of questioning, Trahan pointed to a similar situation that unfolded with Steward-owned Texas Vista Medical Center in San Antonio. Steward purchased the facility in 2017 with the support of private equity, but allowed Medical Properties Trust, a separate firm, to purchase the land and buildings the hospital operated in and charge $5 million each year for rent. In the four years immediately following this transaction, the CEO of Medical Properties Trust received $70 million in compensation. Six years after Steward’s initial purchase, the company announced Texas Vista was closing due to the lower income, more Medicaid-dependent patient population, but disclosed nothing about the $30+ million it had paid in rent.

A similar story is unfolding in Massachusetts where Steward is attempting to offload four of its nine hospitals, including Holy Family Hospital, which serves patients in Methuen and Haverhill, and Nashoba Valley Medical Center. The company has cited the same reasoning it did in San Antonio, but simultaneously, the landlord of its properties – once again, Medical Properties Trust – has disclosed that Steward has failed to pay its rent for months.

“It’s looking more and more like this is part of a dangerous Steward-private equity playbook,” Congresswoman Trahan continued.

A full transcript of Trahan’s remarks and line of questioning with Families USA Senior Director of Health Policy Sophia Tripoli is embedded below:

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Congresswoman Lori Trahan

Remarks as Delivered

House Health Subcommittee Hearing on “Health Care Spending in the United States”

January 31, 2024

TRAHAN: Thank you, Mr. Chairman. As I’ve previously raised in this committee, community hospitals across our country have faced significant financial challenges over the years – challenges that were deepened by the pandemic and in some cases are being made even worse by a private equity model that puts profits squarely above our patients and their care.

In 2017, Steward Health Care, the largest private for-profit health network in the country, purchased Texas Vista Medical Center in San Antonio with the help of private equity. This was a community hospital that served a mostly working-class population. And while it looked like the acquisition might mean the hospital would keep its doors open and all of its services available, the purchase allowed a separate company – Medical Properties Trust – to purchase the land and buildings on the hospital’s campus so it could charge Steward $5 million in rent each year.

Fast forward six years, and Steward announced it was closing Texas Vista because of low Medicaid reimbursement, but it mentioned nothing about the 30-plus million it had to pay in rent to Medical Properties Trust – a company by the way whose CEO earned 70 million dollars in salary, bonuses, and stock in the four years following the purchase of Texas Vista’s properties.

Mr. Chairman, this is what the disastrous reality of private equity in our health care system looks like, and the thing is, it’s happening again. But this time, families in my district are the ones who are being told that they have to pay the price.

Families who receive care at Holy Family Hospital and Nashoba Valley Medical Center – both owned by Steward – were recently notified that their care is now in jeopardy because of the corporation’s gross financial negligence that’s seeing the company try to shutter 4 of the 9 hospitals they own in Massachusetts. For their reasoning, Steward executives have pointed to – you guessed it – low Medicaid reimbursement rate as the cause of their financial distress. But earlier this month, it was revealed that the company has missed rent payments to an “outside landlord” that actually owns the property and buildings their facilities operate in.

It’s looking more and more like this is part of a dangerous Steward-private equity playbook.

Ms. Tripoli, hospitals have had a rough go of it post-COVID with workforce shortages, supply chain issues, and inflation. Do you have concerns about the increasing role of private equity ownership of community hospitals, particularly this type of purchase structure where a for-profit system purchases a community hospital with a separate firm purchasing land and buildings that it operates?

TRIPOLI: Absolutely, I think we have to be very skeptical of the role of private equity in mergers and acquisitions in the health care system in general. Their business model is just incompatible with ensuring the health and financial security of the American people, particularly at the community level. What we see when private equity comes in, they’re cutting costs. They’re trying to increase prices. We see quality go down. We see hospital-acquired infections go up. We see increasing in falls. We see prices go up. They’re trying to look profitable for resale in three to five years. And in some instances, as you just pointed out, we actually see them closing the doors of those centers because the real estate underneath is much more profitable than the institution itself.

So, we have to be very, very critical and scrutinize. We need a lot more transparency around the role of private equity ownership in the health care system. Right now, that is a giant black box. And we need more data unveiled so that federal and state regulators can have greater scrutiny over the role of private equity in health care.

TRAHAN: Thank you. I mean when these hospitals are forced to close like in San Antonio and now across Massachusetts, it’s patients who suffer.

Your testimony, Ms. Tripoli, urges our committee to continue to explore opportunities to improve transparency around the ownership interest of private equity in health care corporations. It seems doubtful that greater transparency rules alone could slow private equity’s penetration of health care markets. Can you please elaborate on how we should be thinking about legislating beyond what was included in the House-passed Lower Costs, More Transparency Act so that our health care system is fully meeting the needs of Americans?

TRIPOLI: I think certainly in terms of the role of PE ownership, the piece about transparency is really, really important. It’s a critical first step. It is because of how often private equity buys and sells within the time period, oftentimes you see changing hands of ownership multiple times, and we don’t have good insight into how often that is happening. So that is why we actually need more transparency around the ownership – private equity ownership – in health care. Because that not only will allow us to have a better sense of what the trends are happening in the market around mergers and acquisitions related to private equity, we can identify other types of anti-competitive practices that are going on, and we can empower federal and state regulators with important information to scrutinize the role of private equity in health care mergers and acquisitions.

TRAHAN: Very helpful, thank you so much. I yield back the balance of my time.

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