The dispute over the potential closure of Easton Hospital, which has long served the Easton, Pa., area, reflected rising concern in some corners over private equity’s role in U.S. health-care.
Photo: Kevin Hagen for The Wall Street JournalA health-care company that was backed by private equity and threatened to shut down a Pennsylvania hospital in the midst of the Covid-19 outbreak agreed to sell it to a local nonprofit health network.
St. Luke’s University Health Network said Wednesday it had agreed to buy Pennsylvania’s Easton Hospital from Dallas-based Steward Health Care System LLC, a deal that would avert the hospital’s closure during the pandemic.
The announcement of the Easton Hospital deal comes one day after Steward said its controlling shareholder, New York investment firm Cerberus Capital Management LP, had sold its stake in Steward to a management group of physicians led by its chief executive.
Before Wednesday’s announcement, the fate of Easton Hospital hung in limbo after Dallas-based Steward informed Pennsylvania’s governor in late March it would close the hospital unless it received a multimillion government bailout. Steward’s warning that it would shutter the community hospital in the midst of the pandemic sparked criticism from state officials, including Pennsylvania’s health secretary.
St. Luke’s said the deal would secure the Easton, Pa., area hospital’s future. “Easton Hospital is not at the end of the road,” said Luanne B. Stauffer, president of St. Luke’s board of trustees, in a statement.
A Steward spokesman said the Easton Hospital deal had been in the works well before the pandemic struck. He added that the hospital had struggled financially for many years and “Steward has taken accumulative losses of nearly $140 million to keep Easton Hospital open for the community.”
The dispute over the potential closure of Easton Hospital reflected rising concern in some corners over private equity’s role in U.S. health-care, which in some recent cases has spurred intense fights with local communities. Easton Hospital was the subject of a front-page Wall Street Journal in April.
Losses for Easton Hospital illustrate the challenges private-equity firms have faced generating profits from health-care buyouts, many of which were compounded recently, as non-coronavirus emergency room visits plummeted.
Pennsylvania officials had been particularly critical of Steward. After the state approved $8 million in emergency funding for Steward in March, the company informed Gov. Tom Wolf that it was still considering closing Easton Hospital, even as Covid-19 cases continued to spread.
That prompted a stern reply from Pennsylvania’s Secretary of Health Rachel Levine, who called Steward disingenuous in a letter the state provided to the Journal. A spokeswoman for the Democratic governor didn’t immediately respond to a request for comment about the deal to sell Easton Hospital.
Steward and St. Luke’s control of the Easton Hospital would be transferred to St. Luke’s on July 1, pending regulatory approvals. Both companies declined to comment on terms of the deal.
Write to Brian Spegele at brian.spegele@wsj.com
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