Investigation alleges $1B in payments to Steward Health Care insiders before bankruptcy

A recent court filing alleges that more than $1 billion in payments were made to insiders of the now-bankrupt Steward Health Care, including its former CEO and a private equity firm.

The filing, which raises questions about the company's financial practices, is expected to launch a legal battle with potential consequences for lenders, hospital landlords, and others.

The report, filed in U.S. Bankruptcy Court in Dallas, was prepared by Alan Carr, CEO and Managing Member of Drivetrain LLC, a firm specializing in complex restructurings and litigation. According to Carr's report, approximately $790 million in dividends were distributed from a 2016 sale-leaseback agreement with Medical Properties Trust Inc., even as Steward Health Care faced financial difficulties.

Medical Properties Trust owned the properties of several Steward Hospitals, including the former Trumbull Regional Medical Center in Warren, Hillside Rehabilitation Hospital in Howland, and Sharon Regional Medical Center in Mercer County.

Steward’s bankruptcy resulted in the layoffs of health care workers and the closure of the three Valley hospitals.  Tenor Health Partners took over and reopened Sharon Regional Hospital.

Insight Health System, which acquired both Trumbull County hospitals, has said it is still working to reopen the facilities, which shut down in March.

Carr’s report notes that in November 2010, the private equity firm Cerberus initiated a $420 million leveraged buyout of the non-profit hospital chain Caritas Christi Health Care System, which later became Steward.

Following Cerberus Capital’s exit from its investment in 2020, the investigation alleges that former Steward CEO Ralph de la Torre collected an additional $200 million. In 2021, the report found $111 million was paid to de la Torre, an affiliate of Medical Properties Trust, and other insiders; de la Torre allegedly ordered the transaction.

Carr’s court filing also states that the 2022 sale of a care business to CareMax for $134 million resulted in proceeds being directed to Steward’s parent company and subsequently to insiders. CareMax, in which de la Torre holds a 15% ownership stake, filed for bankruptcy in 2023.

The document indicates that a litigation trust will pursue fraudulent conveyance claims against Cerberus Capital, Ralph de la Torre, Medical Properties Trust, and Tenet Healthcare, which sold the Florida hospitals to Steward.