Policy Statement White Paper

How Financial Engineering Gutted Mahoning Valley Hospitals — And What Washington Must Do About It

The collapse of our regional hospital system was not mismanagement or bad luck. It was a deliberate financial strategy that stripped value from community healthcare infrastructure while leaving local families, workers, and taxpayers to absorb the consequences. This did not just happen in our district, but across the country.

Introduction: What I See Every Morning

Each morning when I wake up in Warren, Ohio, I look out the window and see what used to be one of the central institutions of our community sitting largely empty and deteriorating.

That building is not simply an abandoned structure. My daughter worked there. My cousin worked there. Friends and neighbors built entire careers there. Families across the Mahoning Valley relied upon it for emergency care, routine treatment, births, and end-of-life care. Generations of residents of this region entered that hospital in moments of fear and uncertainty and left healthier because the people inside it were doing the work that holds communities together.

Today that building stands as a visible monument to something much larger than the loss of a single healthcare facility.

It stands as a reminder of what happens when critical civic infrastructure is converted into a financial instrument.

The collapse of hospital systems across our region is not merely a healthcare story. It is a story about economic development, population stability, property values, municipal governance, and whether communities like ours are able to compete for the industries and opportunities that determine whether our children can build their futures here.

Hospitals function as anchor institutions within regional economies. When companies evaluate potential locations for new investment, the availability of healthcare services ranks among the first criteria they examine. A region that cannot guarantee access to hospitals, emergency services, maternity care, behavioral health treatment, and medical specialists becomes significantly less attractive to employers considering long-term investment.

The disappearance of these services therefore has cascading effects that extend far beyond healthcare itself. It influences whether businesses expand in a region, whether families decide to remain, whether young professionals believe they can build careers locally, and whether property values and municipal tax bases remain stable.

The Mahoning Valley has experienced this pattern before.

When the steel mills shut down on Black Monday in 1977, the region experienced the devastating consequences of institutional collapse. Industrial assets were stripped, jobs disappeared, and entire communities were forced to rebuild their economic foundations around the empty shells of once-productive facilities.

The dismantling of hospital infrastructure across our region follows a disturbingly similar pattern.

Assets extracted. Institutions hollowed out. Communities left with the consequences.

Witnessing this process unfold while I served as a county commissioner is precisely what motivated me to seek federal office. Because unless someone in Washington understands the financial structures that allowed this to occur, the same strategy will continue being used against communities throughout the country.

The Financial Architecture of Extraction

The hospital system that ultimately served much of our region came under the control of Steward Health Care, which had previously been assembled by Cerberus Capital Management. At the time these transactions occurred, Cerberus was controlled by its founder Stephen A. Feinberg.

From the outset the financial architecture surrounding these hospitals mirrored strategies previously used against industrial infrastructure across the Rust Belt.

The underlying real estate was separated from hospital operations and sold into a real estate investment trust structure, generating roughly $300 million in immediate proceeds when the properties were transferred to Medical Properties Trust.

The hospitals themselves were then required to lease their own buildings back under obligations approaching $30 million annually.

That structure placed increasing pressure on the operational stability of the healthcare system. Revenue that would normally support staffing, equipment, and patient services instead flowed toward servicing financial obligations detached from the delivery of care.

Additional layers of financial engineering followed. Equipment that had once been owned by the hospitals was leased. Departments that generated reliable revenue streams were outsourced. Infrastructure obligations accumulated. Payments on certain assets lapsed, placing equipment at risk of foreclosure.

Over time the hospitals were pushed toward insolvency. This pattern closely resembled the strategies used decades earlier when industrial assets across the Rust Belt were acquired, stripped of value, encumbered with financial obligations, and ultimately abandoned once the extractable capital had been removed.

By the time financial sponsors exited the system, hundreds of millions of dollars had already been extracted through these transactions.

When bankruptcy followed, additional funds were removed from the system even while operators described themselves as insolvent.

Under the legal doctrine known as fraudulent conveyance, transfers of assets that leave institutions unable to satisfy obligations to creditors and stakeholders may constitute unlawful conduct. In this case the stakeholders were not merely lenders. They were patients, healthcare workers, and entire communities.

What the Mahoning Valley Lost

Facilities such as Northside Regional Medical Center, Hillside Rehabilitation Hospital, the Elm Road campus in Warren, and the Austintown medical facilities once formed a regional healthcare network serving residents across Mahoning, Trumbull, Portage, and Ashtabula counties.

Thousands of jobs were directly tied to these institutions. Doctors. Nurses. Technicians. Laboratory specialists. Administrative staff. But the losses extend far beyond employment.

The region lost hospital beds, trauma capacity, maternity services, specialized cardiac care, and inpatient behavioral health capacity for both the general population and geriatric patients.

Several counties now lack inpatient general and geriatric behavioral health beds entirely. Patients must travel significantly farther to obtain services that once existed locally. Emergency transport costs increase. Response times lengthen. Care becomes fragmented.

The absence of nearby treatment also produces measurable fiscal consequences. When behavioral health or primary care services disappear, patients often enter the healthcare system only after conditions become emergencies.

Emergency care is far more expensive and is frequently supported by Medicaid and other public programs.

In other words, the disappearance of local healthcare capacity increases public healthcare spending rather than reducing it.

The Loss of Medical Training and Primary Care

The region also lost a vital physician training pipeline connected to Western Reserve Health Education.

These residency programs trained physicians while simultaneously providing affordable primary care and gynecological services to the surrounding community. Programs of this kind reduce pressure on emergency departments and expand preventative care access.

When those programs disappear, patients delay treatment until conditions become severe enough to require emergency care. The collapse of these programs therefore increased long-term healthcare costs while weakening the region’s physician workforce.

Blight, Property Values, and Economic Development

Hospital closures also leave large institutional complexes deteriorating within surrounding neighborhoods.These structures now contribute to declining property values and undermine local redevelopment efforts.

Meanwhile Medical Properties Trust retains control of the underlying real estate and can treat the properties as depreciating financial assets on corporate balance sheets. The company benefits from depreciation, while the communities inherit the blight.

Healthcare infrastructure also plays a major role in economic development. Companies evaluating potential locations consider hospital access, emergency services, and physician availability when deciding where to invest.

The deterioration of hospital infrastructure therefore weakens the region’s ability to attract employers and retain population.

Hospitals once helped attract industry to the Mahoning Valley; their collapse now threatens to become a structural disadvantage.

Washington Ignored the Warning Signs

During this same period, national conversations about hospital closures and the policies that allow these kinds of financial takeovers were taking place across the country, including Senate hearings examining the financialization of hospital systems and the growing role of complex ownership structures in the collapse of community healthcare infrastructure.

Yet while those discussions were occurring nationally, and while the hospital system serving large portions of our region was visibly deteriorating, the congressional representative for the district, David Joyce, remained largely absent from the issue.

As a county commissioner I raised concerns about the trajectory of the hospital system and called for engagement from higher levels of government while the damage was still unfolding.

Congressman Joyce did not appear.

Only last summer, after it became clear that I was circulating petitions and preparing to challenge him for this seat, did Congressman Joyce finally respond publicly by sending a letter requesting that Pam Bondi examine aspects of the situation.

By that point the hospitals had already closed, the services had disappeared, and the communities that relied on them were left to absorb the consequences.

A letter written after the fact, particularly after a challenger emerges, does not demonstrate meaningful oversight or constituent responsiveness.

Policy Solutions: The Structural Reforms Required to Protect Communities

If policymakers are serious about preventing a repeat of what happened across the Mahoning Valley, then the response cannot stop at stabilizing a handful of distressed hospitals or issuing sympathetic statements after the damage has already been done. The structural reality is that the financial engineering used against hospitals in recent years has exposed deep weaknesses in federal oversight, bankruptcy law, healthcare finance regulation, and the legal framework governing real estate investment trusts operating within the healthcare sector.

When those weaknesses converge, the result is not merely a failing institution. The result is the hollowing out of an entire regional healthcare ecosystem while the financial actors responsible exit the scene with enormous gains and little accountability.

The federal response must therefore operate simultaneously across multiple fronts.

• Emergency Hospital Stabilization Authority

Congress must create a statutory framework allowing federal and state authorities to intervene when financial engineering begins destabilizing hospital systems. Once unsustainable lease obligations, asset transfers, equipment foreclosures, or revenue siphoning begin to appear, regulators should be empowered to initiate a forensic financial review before the institution collapses.

Hospitals should not be allowed to drift toward insolvency while executives and financial sponsors continue extracting value from the underlying infrastructure.

An emergency stabilization authority would allow regulators to freeze extractive transactions, require full disclosure of asset transfers, review lease obligations that threaten operational viability, and determine whether financial restructuring rather than liquidation would preserve healthcare access.

In other words, stabilization must occur while the hospital can still be saved, not after the lights have been turned off.

• Community and Physician Reclamation Rights

Once a hospital has already been stripped of its assets and pushed into collapse, the law should

give communities and medical professionals a pathway to reclaim those institutions.

Hospitals are not interchangeable retail properties. They are complex systems of infrastructure, licensing, medical equipment, and workforce relationships built over decades. Allowing those systems to be dismantled and then left to deteriorate while outside interests continue to treat them as portfolio entries is economically irrational and socially destructive.

Communities, nonprofit hospital systems, physician cooperatives, and regional public authorities should have a legally recognized opportunity to reclaim abandoned facilities when financial sponsors walk away.

That mechanism could include preferential purchase rights for nonprofit healthcare operators, federal financing support for physician-led recovery systems, and structured public-private partnerships designed to restore healthcare capacity where financial extraction has left communities without alternatives.

What it cannot include is the current system in which communities are forced to watch their hospitals decay while financial actors move on to the next transaction.

• Bankruptcy Law Reform for Healthcare Institutions

Hospital bankruptcies present a fundamental imbalance that has gone largely unaddressed in

federal law.

Corporate debtors and their financial sponsors enter bankruptcy proceedings represented by elite legal teams billing thousands of dollars per hour. These attorneys shape the proceedings, define the narrative of insolvency, and control the pace and structure of the legal process.

Meanwhile the stakeholders most directly affected by the collapse of a hospital system–patients, nurses, physicians, employees, municipalities, and community organizations–rarely possess the financial resources necessary to participate meaningfully in those proceedings.

This imbalance effectively silences the voices of the communities whose futures are being decided.

If a bankruptcy involves a hospital or healthcare network, federal law should require a formal community representation mechanism. Independent financial experts should be appointed to review the underlying transactions. Local governments and healthcare professionals should be granted standing in the proceedings.

Bankruptcy courts should not operate as venues where financial extraction is sanitized through procedural complexity while communities are excluded from the conversation.

• Fraudulent Conveyance Investigation and Enforcement

The legal doctrine of fraudulent conveyance exists precisely to prevent the kind of asset transfers

that can leave institutions hollowed out while creditors and stakeholders absorb the losses.

When hundreds of millions of dollars are extracted from a healthcare system through asset sales, leasebacks, related-party transactions, and equipment foreclosures shortly before insolvency, those transactions must be examined with the seriousness that the law requires.

Congressional hearings should be convened not merely to review policy failures but to obtain documents, compel testimony, and reconstruct the full sequence of financial decisions that led to the collapse of hospital infrastructure across multiple communities.

Where evidence supports it, those findings must be referred to federal enforcement agencies. If fraudulent conveyance occurred, charges should be filed.

Communities should not be expected to quietly absorb the consequences of financial extraction while no one in positions of authority is ever required to answer for the decisions that caused the damage.

• Real Estate Investment Trust Oversight

The role of hospital real estate investment trusts must also be examined with far greater scrutiny.

When hospital real estate is sold into a REIT structure and then leased back to the healthcare operator under obligations that become operationally unsustainable, the result is a system in which financial obligations take precedence over medical care.

If those hospitals ultimately collapse, the REIT may still retain control of the underlying properties while benefiting from depreciation and accounting treatments that make the deteriorating buildings financially useful on a balance sheet even as they sit empty in the communities that once relied upon them.

Congress should examine valuation practices, lease structures, and depreciation treatment when hospital infrastructure is transferred into REIT portfolios. If the financial structure itself contributes to institutional collapse while communities are left with blight and declining property values, then the regulatory framework governing those transactions requires reform.

• Offshore Insurance and Liability Transparency

The use of offshore captive insurers within healthcare systems raises additional questions about transparency and accountability.

When hospital networks rely on insurance structures located outside the United States, the ability of patients, regulators, and communities to understand the true financial condition of those insurers becomes far more complicated.

Congress should require full transparency regarding the capitalization, regulatory oversight, and solvency of captive insurers used by healthcare providers. Patients injured through malpractice should not face additional obstacles because liability coverage has been structured through opaque offshore entities.

Healthcare systems operating in the United States should be accountable to the regulatory framework of the country whose patients they serve.

• Healthcare Infrastructure as Economic Infrastructure

A functioning hospital system supports employment, stabilizes property values, attracts investment, anchors professional communities, and allows families to build long-term lives in a region.

The disappearance of hospital infrastructure therefore produces ripple effects that extend far beyond healthcare itself. It affects workforce retention. It affects population stability. It affects whether employers choose to expand locally or relocate somewhere with stronger healthcare access.

The Mahoning Valley cannot afford another generation of institutional hollowing out. We lived through the collapse of the steel industry. We know what it means when critical institutions disappear and empty buildings become permanent fixtures of the landscape. We should not be forced to watch the same story repeat itself with the hospitals that replaced those mills as the economic anchors of our communities.

This is not incidental. It is the result of extraction tactics in healthcare, a form of (vulture capitalism, not the same as traditional capitalism), where private equity moves in, acquires, extracts value, loads debt onto the institution, and exits, leaving the community with the collapse.

When private equity involves itself in the acquisition, extraction, debt loading, and exit strategy in healthcare, the impact is far too devastating to allow unchecked.

This does not Make America Great. It does not put Americans First.

Federal policy must recognize healthcare infrastructure as economic infrastructure and implement oversight, accountability, and serious examination of whether this ownership model should be allowed in health systems at all.

Conclusion

The Mahoning Valley has lived through institutional collapse before. When the steel mills shut down on Black Monday, entire communities were forced to rebuild their futures around the empty shells of once-productive industries. Hospitals eventually became some of the institutions that helped stabilize that recovery, providing jobs, supporting professional communities, anchoring neighborhoods, and helping attract new investment to a region determined to rebuild itself. Allowing those institutions to be dismantled through financial extraction represents not merely a policy failure but a failure of national leadership. The purpose of the Community

Hospital Stabilization Act is not simply to preserve buildings. It is to ensure that the healthcare infrastructure communities depend on cannot be stripped, hollowed out, and abandoned in the pursuit of short-term financial gain. The Mahoning Valley deserves representation in Washington that understands exactly what happened here and has the resolve to make sure it never happens again.

Niki Frenchko, MPA, is a real estate investor, small business owner, and former Trumbull County Commissioner who is running for Congress in Ohio’s 14th District.