Hospital sale-leasebacks linked to higher closure risk: Study

A study published Dec. 18 in the BMJ found hospitals acquired by real estate investment trusts can see a significantly higher risk of bankruptcy or closure, even as most quality-of-care and financial performance measures stay unchanged. 

The study was led by researchers from the University of Chicago, Boston-based Massachusetts General Hospital, Boston-based Harvard T.H. Chan School of Public Health, Brigham and Women’s Hospital in Boston and the American College of Surgeons. It comes on the heels of high-profile hospital bankruptcies, such as Dallas-based Steward Health Care’s May 2024 bankruptcy, which led to the sale or closure of more than 30 hospitals across eight states. Steward was founded in 2010 after private equity firm Cerberus Capital Management acquired Boston-based nonprofit health system Caritas Christi, now known as Steward. 

Cerberus entered a sale-leaseback deal with Medical Properties Trust, the largest hospital landlord in the U.S., in 2016 and retained part of the $1.25 billion investment for future projects and distributed some to Cerberus investors. Cerberus later exited Steward in 2020, selling its controlling equity stake to then-Steward CEO Ralph de la Torre, MD.

“The private equity backed Steward Health Care entered a sale-leaseback agreement with Medical Properties Trust, a REIT, in 2016,” the study said. “It was reported that much of the initial cash from the sale to Medical Properties Trust was likely returned to private equity investors and shareholders without clear benefit to individual Steward hospitals. Facing increasing debt because of rents to its REIT landlord and invoices to medical supply vendors, Steward Health Care recently declared bankruptcy and ultimately collapsed.”

Here are six things to know:

1. The study looked at 87 general acute care hospitals that engaged in REIT sale-leaseback transactions from 2005 and 2019, comparing them with 337 matched hospitals that did not engage in such transactions. While Steward’s bankruptcy involved a REIT sale-leaseback structure, the study analyzed a broader national sample and did not focus on a single system.

2. Hospitals acquired by REITs experienced significant declines in physical assets. Total fixed assets fell by an average of 31%, while building-specific fixed assets dropped by nearly 41% compared with non-REIT hospitals.
3. Apart from fixed asset reductions, the study did not find statistically significant differences in revenue, expenses, staffing, margins or liquidity after adjusting for multiple comparisons.

4. Quality-of-care outcomes also showed no major differences. Risk-adjusted 30-day mortality and readmission rates for heart attack, heart failure and pneumonia, as well as patient satisfaction scores, remained comparable to non-REIT hospitals.
5. Long-term outcomes sharply differed. By the end of 2024, 25% of REIT-acquired hospitals had closed or filed for bankruptcy, compared with 4% of hospitals in the control group.
6. REIT-acquired hospitals had an adjusted hazard ratio of 5.66 for closure or bankruptcy when compared with non-REIT hospitals.

“The findings of this study suggest that the short term financial gains from hospital real estate sales are not associated with changes in financial or quality of care,” the study said. “Instead, REIT acquisition is associated with an increased risk of closure or bankruptcy. As REITs continue to expand in healthcare, ongoing evaluation of their impact on patients and healthcare providers is warranted.”

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