Tuesday, June 22, 2021

Cerberus Four Bagger Steward Healthcare Ready to Fail?

The deal between a hell hound and Catholic hospital system resulted in an $800 million profit for Cerberus, a New York City based private equity underwriter (PEU)  Bloomberg reported:

Cerberus Capital Management, demonstrating the rewards of Wall Street’s rush into health care, made a roughly $800 million profit on its investment in struggling Catholic hospitals, records show.
In 2016, Cerberus made most of its money by selling valuable hospital property to the real estate investment trust, which then leased it back to the hospitals. That transaction enabled Cerberus to extract hundreds of millions in dividends for its investors. Medical Properties Trust also ended up owning a stake, now almost 10%, in Steward.

Medical real estate investment trusts are often the canary in the bankruptcy coal mine.  Before The Carlyle Group drove nursing home giant ManorCare into insolvency it sold the nursing home facilities to HCP.  As ManorCare paid less and less in rent HCP ring-fenced the poorly performing assets into QCP.  

ManorCare board member and former Medicare Chief Gail Wilensky promised Carlyle's buyout wouldn't harm quality.  Carlyle's shenanigans killed the whole company.  Wilensky is yet to comment.

Medical Properties Trust did more than make a one time buy of "valuable hospital property".  It propped up an imploding Steward.  WSJ reported:

When Steward ran into financial trouble, Medical Properties Trust provided it more than $700 million through a series of complex deals, the documents show. It provided $200 million to buy Steward assets valued at $27 million. Then it refinanced debts Steward owed Cerberus.
Cerberus made out, over and over in the Catholic hospital deal. 

The greed and leverage boys love accessing Uncle Sam's wallet, much of which is spent on healthcare.

The federal government provided Steward a total of $675 million in grants and loans

Steward executives wanted their share of the green, also known as a conflict of interest.  Becker's Hospital Review reported:

Medical Properties Trust formed a new joint venture with the founder of Steward, Ralph de la Torre, MD, and other executives  The real estate firm agreed to lend the joint venture $205 million so it could acquire the international assets from Steward. Financial documents show that the assets that were sold were valued at $27 million.

This is why many people hate healthcare.  Those talking "value" have their hand in the pocketbook and rely on impersonal technology to develop a "relationship."   Costs never go down, as an ever increasing amount is shifted to those with supposedly good health insurance.

PEU deal makers brought us surprise medical billing, safety net hospital closures, and billions more in healthcare costs at hospital giant HCA.  Carlyle just struck a deal for Medline, the nation's largest medical supplier.  

The greed and leverage boys ensure their financial needs are met first.  Patients are but an afterthought in a healthcare system where U.S politicians serve the investor class.   

Update 6-23-21:  Rather than ring fence Steward properties MCP went even further in by buying five former Tenet Healthcare hospitals in Florida and leasing them back to Steward.  This capital injection should enable Steward to pay rent for awhile.

 An odd story revealed the Saudi assassins of journalist Jamal Khashoggi trained the prior year at Cerberus affiliate Tier 1 Group.