Did you know that, at one point, Cerberus Capital Management, Steward’s private equity backer, received approximately $800 million in dividends primarily through sale-leaseback real estate deals?

Steward Health Care, once America's largest private for-profit hospital network, is now a cautionary tale of rapid growth, unchecked leverage, and misaligned incentives, hence making entry into our Hall of Shame for "Blast from the Past".​

Dr. Ralph de la Torre, a heart surgeon who spearheaded the company's transition from a non-profit hospital system (Caritas Christi) to a for-profit healthcare network under Cerberus Capital Management, is often hailed as the founder for Steward Healthcare.​
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Did you know that before becoming an executive, Dr. de la Torre was a leading heart surgeon at Boston's Beth Israel Deaconess Medical Center?

Unique Value Proposition:

• Acquisition with Fresh Capital: Cerberus Capital Management acquires the struggling Caritas Christi Health Care, transitioning it into the for-profit Steward Health Care under Dr. Ralph de la Torre.
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• Strategic Partnerships: Steward quickly expands by acquiring institutions such as Quincy Medical Center and Morton Hospital, funding this growth through innovative sale-leaseback real estate deals.
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• Operational Profitability: Steward achieves profitability through aggressive cost-cutting, freeing resources for ambitious national expansion.

Did you know that Steward even tried expanding internationally, including partnerships in Malta and Saudi Arabia?

Rapid Expansion & the Asset-Light Gamble (2016–2019)

• 2016–2017: Steward executes a massive $1.25 billion sale-leaseback deal with Medical Properties Trust (MPT), producing nearly $800 million in dividends for Cerberus and insiders.
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• 2017: Acquiring 26 hospitals from Community Health Systems and Iasis, Steward ascends as the largest private, for-profit hospital network, generating approximately $8 billion in revenue.
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• 2018: Steward relocates its headquarters to Dallas, signalling an aggressive expansion strategy heavily reliant on real estate monetisation.

Triggers for Slowdown:

• The COVID-19 pandemic triggers a $408 million net loss, exacerbating Steward's precarious financial position.
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• Steward's leveraged asset-light strategy spirals into significant annual liabilities ($350 million rent plus mounting debt), stretching finances beyond recovery.
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• Operational cracks emerge: Regulatory investigations surface, highlighting unsanitary conditions and declining patient care standards at multiple hospitals.

Final Collapse:

• 2023: High-profile incidents including fires, hospital closures, unpaid salaries, and vendor lawsuits, underscore Steward’s operational meltdown.
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• May 2024: Steward files for Chapter 11 bankruptcy, citing roughly $9 billion in liabilities, significantly impacting 30,000 employees.​
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• June 2025: Legal scrutiny intensifies as litigators claim over $1 billion was improperly diverted to Cerberus and insiders amidst insolvency.

5 Mistakes which turned an $8 Billion empire into a $9 Billion collapse

1. Asset Light to Asset Blind: Steward's real estate transactions initially fuelled growth, but rent burdens eclipsed operating margins.​
   ​Monetize assets strategically to enhance, not replace core profitability.​
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2. Build Financial Discipline: Steward’s commitments spiraled into unsustainable financial obligations amid unforeseen events like COVID-19.
   ​Stress-test strategic leverage under worst-case scenarios before committing.​
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3. Don't Shit where you Eat: Massive insider withdrawals amid financial distress triggered regulatory scrutiny for Steward Healthcare.
   ​Robust oversight and clear fiduciary duties are critical, especially under private equity ownership.​
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4. Build Operational Efficiencies: Declining patient care and safety led to reputational damage and regulatory intervention, in the latest years if Steward.
   ​Sustainable growth cannot compromise service quality; the cost of neglect is catastrophic.
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5. Contingency Planning is Crucial: Steward was reactive rather than proactive in crisis, resulting in chaotic restructuring.
   Build robust "Plan B" strategies, M&A, carve-outs, and restructuring options, well before crises strike.