The largest privately held hospital chain in the United States is now owned by a group of physicians who practice there. Steward Health Care System LLC was sold by its founding owner, Cerberus Capital Management, to a management group of Steward Health Care physicians led by the company’s CEO and founder, Dr. Ralph de la Torre. Dr. de la Torre, a cardiac surgeon, was tapped to run Steward’s predecessor, the six-hospital Caritas Christi Health Care in Boston, in April 2008.

The current deal was structured as a recapitalization, with no additional leverage added to Steward’s balance sheet and Cerberus’ controlling interest was exchanged for a convertible note. The new management group holds a 90% stake in the company and Medical Properties Trust (NYSE: MPW) holds the remaining 10%. Back in September 2016, the REIT paid $1.25 billion to acquire the assets of nine Steward hospitals (1,768 beds).

That investment set the stage for Steward to expand nationally, and return the original investment Cerberus made in Steward back in 2010. The agreement also included a commitment by Medical Properties Trust to participate in up to the next $1.0 billion of Steward’s hospital acquisitions.

In February 2017, Community Health Systems sold eight hospitals (1,818 beds) in Florida (3), Ohio (3) and Pennsylvania (2) as part of a pre-announced effort to pay down its $15 billion debt. No financial terms were disclosed.

In May 2017, Steward made a bigger move, acquiring IASIS Healthcare from its owner, TPG, for an undisclosed amount. IASIS operated 17 hospitals and one behavioral health facility located in Arizona, Arkansas, Colorado, Louisiana, Texas and Utah. Its 140 outpatient facilities and managed care operations were included in this transaction.

That deal created the largest private equity-owned hospital operators in the United States, with 36 hospitals across 10 states, managed care operations in Arizona, Utah and Massachusetts, and projected revenues of almost $8 billion in 2018. As part of the deal, Medical Properties Trust acquired the real estate assets of 10 IASIS hospitals and a behavioral health facility for $1.4 billion, in a separate transaction.

More recently, Steward acquired Scenic Mountain Medical Center, a 75-bed acute care hospital in Texas from Quorum Health (NYSE: QHC) for $22 million. Scenic Mountain became Steward’s 37th hospital nationally and its sixth in Texas.

But times have been tough on health systems, even before the coronavirus pandemic arrived in March 2020. Perhaps in preparation for the leveraged buyout, Steward began paring its holdings. In November 2019, Steward closed St. Luke’s Medical Center in Phoenix, due to declining patient volumes. That was also the month it divested its 17,000-member managed care plan, Steward Health Choice, in Arizona to Blue Cross Blue Shield of Arizona.

Its most controversial move to stem financial bleeding is still ongoing. Back in October 2019, Steward ended certain services at Easton Hospital (164 beds) in Easton, Pennsylvania. The small community hospital could no longer compete with two larger regional health networks on heart surgeries and neonatal care. At the end of 2019, it recorded net patient revenue of $125.7 million but a loss of $30,438,877.

By February 2020, Steward thought it had a buyer in one of those competitors, as both St. Luke’s University Health Network and Lehigh Valley Health Network submitted bids and a letter of intent were reported to be signed with St. Luke’s, according to the local newspaper, The Morning Call.

In March, with the COVID-19 pandemic forcing cancellations of profitable elective surgeries, Steward asked Pennsylvania Governor Tom Wolf for $40 million to keep the hospital open through the end of June to provide care for COVID-19 patients. Instead, it received $8 million to keep Easton open until the end of April. In May, Steward filed a Worker Adjustment and Retraining Notification with the state, in case the deal didn’t go through in June. Finally, on June 3, Steward and St. Luke’s announced they’d signed an asset purchase agreement that will allow for the transfer of ownership to St. Luke’s on July 1. One less facility for Steward’s new management to worry about.