When private equity destroys your hospital
by Cory Doctorow
February 28, 2024
As someone who writes a lot of fiction about corporate crime, I naturally end up spending a lot of time being angry about corporate crime. It’s pretty goddamned enraging. But the fiction writer in me is especially upset at how cartoonishly evil the perps are — routinely doing things that I couldn’t ever get away with putting in a novel.
Beyond a doubt, the most cartoonishly evil characters are the private equity looters. And the most cartoonishly evil private equity looters are the ones who get involved in health care.
(Buckle up.)
Writing for The American Prospect, Maureen Tcacik details a national scandal: the collapse of PE-backed hospital chain Steward Health, a company that bought and looted hospitals up and down the country, starving them of everything from heart valves to prescription paper, ripping off suppliers, doctors and nurses, and callously exposing patients to deadly risk:
https://prospect.org/health/2024-02-27-scenes-from-bat-cave-steward-health-florida/
Steward occupies a very special place in the private equity looting cycle. Private equity companies arrange themselves on a continuum of indiscriminate depravity. At the start of the continuum are PE funds that buy productive and useful firms (everything from hospitals to car-washes) using “leveraged buyouts.” That means that they borrow money to buy the company and use the company itself as collateral: it’s like you getting a bank-loan to buy your neighbor’s mortgage out from under them, and using your neighbor’s house as collateral for that loan.
Once the buyout is done, the PE fund pays itself a “special dividend” (stealing money the business needs to survive) and then starts charging the business a “management fee” for the PE fund’s expertise. To pay for all this, the PE bosses start to hack away at the company. Quality declines. So do wages. Prices go up. The company changes suppliers, opting for cheaper alternatives, often stiffing the old company. There are mass layoffs. The remaining employees end up doing three peoples’ jobs, for lower wages, with fewer materials of lower quality.
Eventually, that top-feeding PE company finds a more desperate, more ham-fisted PE company to unload the business onto. That middle-feeding company also does a leveraged buyout, pays itself another special dividend, cuts wages, staffing and quality even further. They switch to even worse suppliers and stiff the last batch. Prices go up even higher.
Then — you guessed it — the middle-feeding PE company finds an even more awful PE bottom-feeder to unload the company onto. That bottom feeder does it all again, without even pretending to leave the business in condition to do its job. The company is a shambling zombie at this point, often producing literal garbage in place of the products that made its reputation. Employees’ paychecks bounce, or don’t show up at all. The company stops bothering to pay the lawyers that have been fending off its creditors. Those lawyers sue the company, too.
That’s the kind of PE company Steward Health was, and, as the name suggests, Steward Health is in the business of stripping away the very last residue of value from community hospitals. As you might imagine, this gets pretty fucking ugly.
Steward owns 32 hospitals up and down the country, though its holdings are dwindling as the company walks away from its debt-burdened holdings, after years of neglect that have rendered them unfit for use as health facilities — or for any other purpose. Tcacik’s piece offers a snapshot of one such hospital: Florida’s Rockledge Regional Medical Center, just eight miles from Cape Canaveral.
Rockledge is a disaster. The fifth floor was, at one point, home to 5,000 bats.
Five.
Thousand.
Bats.
(Rockledge stiffed the exterminators.)
The bats were just the beginning. One of the internal sewage pipes ruptured. Whole sections of the hospital were literally full of…
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