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MASSACHUSETTS WAKES UP TO A HOSPITAL NIGHTMARE  
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Maureen Tkacik
January 26, 2024
The American Prospect
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_ Erstwhile Boston media darling Steward Health Care has been
strip-mining hospitals for a decade now. The power elite may finally
be paying attention. _

Residents at Steward Health Care’s Carney Hospital in Dorchester,
Massachusetts, called the graduate medical education accreditation
agency to have the failing program shut down., WBZNEWS

 

The group of fresh medical school grads knew something wasn’t right
with Steward Health Care when they showed up in Dorchester,
Massachusetts to start their residencies in Carney Hospital’s
inaugural family medicine residency class during the summer of 2014
and learned the president who had recruited them had already been
fired.

  Soon afterward, a Steward administrator admitted the new family
medicine clinic and the pediatric ward they had toured on their
recruitment visit were never actually opening, and that the nearby
hospital at which residents were supposed to learn how to deliver
babies was being shuttered entirely. Shortly after that, they showed
up to work to learn their program director had been fired. Ultimately,
the residents decided to call the graduate  medical accreditation
agency and get the program shut down.

“It was all smoke and mirrors...they had no intention of giving us
any of the resources we needed to learn what we needed to learn or do
a good job,” remembers a preventative medicine physician and former
Carney medical resident, recalling an afternoon when a patient had a
heart attack and she had to Google “how to operate an EKG machine”
because she could not find a single nurse or technician in the
building to help her. “It’s hard to convey how much of a crisis it
felt like as a first-year resident,” another former Carney resident,
family physician Stephanie Arnold, wrote in an essay
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for the _Prospect_ last year about her experiences working for private
equity owned health care providers.

It was not the first or last time Steward has been accused of making
big, empty promises. In 2011, they promised
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the urologists of Brockton they were building a prostate cancer
“center of excellence” at Good Samaritan Hospital: That never
happened, though Steward apparently upgraded the ICU’s wiring, which
we know because they allegedly skipped out
[[link removed]*8WvxJ2CZna4wQYl-KFM0*TfT01d9RLljOvf-Kvm3Pb*fmjNB5t1wokq64toQMKTD5V8boK2G9GdEsx4ExWTB9KlDNsltJT49rqI7Qdvn4gQoRYtGnyk83loPa6lR6nMRRLL*uZx*qPkGDnyoF991AzrW-Q7KifeeYlHsFBeZi5TASlNUHyDVB3RR1ySPQ&antiCache=1706184838904]
on paying the contractor who did the job. In 2017, Steward told the
government of Malta that it would turn the Mediterranean
micro-state’s three aging hospitals into a hub for medical tourism,
but instead they spent the 400 million euros they got for the job on
… a lot of lawyers; an appeals court judge last fall called the
contract a “simulation
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designed “to draft contracts intended not to deliver quality medical
service
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but other things.” And in 2019, Steward promised the community of
West Monroe, Louisiana, that Glenwood Regional Medical Center would
become a leader in a “groundbreaking” new form of cardiac surgery
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fall, the state health department threatened to shut down
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the hospital after an inspection revealed it was so behind on its
water, sewer, and utility bills its hot water had been cut off. State
Rep. Mike Echols, who represents northern Louisiana and used to
operate a large physician practice in the state, described Steward to
the _Prospect _as “one of those corporate terrorists who come in and
loot the ship and drain it dry.”

Indeed. Yesterday, Steward announced
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it would be closing a hospital it owns in Texas at 7 a.m. next Friday.
Its New England Sinai Hospital is shutting soon after that. The
company has hired the restructuring adviser AlixPartners, which is
often a precursor to a Chapter 11 filing. Physicians say that few of
its 30-some hospitals are in shape to survive. Carney Hospital has
long been nicknamed “Carnage,” and a group of Steward hospitals
formerly named Wuesthoff Health System are still widely known within
their northeastern Florida community as “Worst Off.”

For years, officials in Steward’s home base of Massachusetts, where
a media darling
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cardiac surgeon named Ralph de la Torre founded the hospital chain in
2010, had conspicuously little to say about the company that owns nine
hospitals comprising more than 2,000 beds in the state. That changed
this week, when the state’s 11-member congressional delegation, all
Democrats, issued an unusual joint statement in response to a _Boston
Globe _story
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about the company’s insolvency, demanding an explanation of its
“financial position, the status of their Massachusetts facilities,
and their plans to ensure the communities they serve are not
abandoned.” Attorney General Andrea Campbell, who as a Boston City
Council member had Steward’s neglected Carney Hospital in her
district, offered an even more tepid comment
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on the matter to the public radio station WBUR: “We’re currently
in problem-solving mode, willing to use every power available to us to
protect these priorities, while _looking to a time in the near future
to seriously address how Steward got in this situation_” (italics
mine).

Uhh … call me maybe? (A message left with Campbell’s office was
not returned.)

I happen to be one of quite a few observers who can tell you _exactly_
how Steward “got in this situation.” For ten years, the hospital
chain, which originated as an agglomeration of nun-operated
Boston-area neighborhood hospitals known as Caritas Christi, was owned
by the private equity firm Cerberus, which extracted more than $800
million in excess of its investment out of the hospitals, then left
during the pandemic. Company founder de la Torre was left to “finish
the job,” which took more than three years because de la Torre,
despite his penchant for mega-yachts and private jets, kept getting
new bailouts from an Alabama real estate investment trust
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called Medical Properties Trust. Last year, MPT finally started to run
out of cash—in part because most of its other tenants were not a
whole lot more solvent
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than Steward—and the Justice Department sued Steward
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for violating the Stark Law against physician kickbacks, the flouting
of which appears in hindsight to have been the entire underlying
premise of Steward’s business model, back when he pretended to have
one. As it stands, the company hasn’t had so much as a chief
financial officer in more than a year, though its president identified
himself as the company’s CFO in a court filing
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October.

Indeed, the mystery here is not “how Steward got in this
situation” but _what in God’s name_ took the state of Elizabeth
Warren and Maura Healey so long to notice the brazenness at work in
their proverbial backyard.

YOU CAN PROBABLY GUESS HOW THE “PRIVATE EQUITY” PHASE of this
story went, especially given that Cerberus, named after the
three-headed dog that guards the gates of Hell, has a reputation for
sophisticated Mafia-style bust-outs. There’s a whole book
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disembowelment of the Anchor Hocking Glass Company of Lancaster, Ohio,
a _New York Times Magazine _story
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on the (not-so-mysterious) “financial engineering mystery” of how
it made hundreds of millions of dollars buying up 18 gun manufacturers
and bankrupting all of them; a chapter of private equity scholars
Eileen Appelbaum and Rosemary Batt’s _Private Equity at Work
_chronicling its profitable liquidation of the department store chain
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Mervyn’s, etc. In its time running Steward, Cerberus sold off
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most of its real estate and other monetizable assets for about $1.5
billion, pocketed
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the vast majority of the proceeds, sued
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the Massachusetts state agency that collects health care data in lieu
of complying with laws requiring hospitals to disclose their financial
obligations, and finally moved its headquarters
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to Texas in 2018 in what seems like a pretty shameless attempt to
avoid all the people they’d promised to invest $400 million in
“bringing health care back to the community.” Finally in 2020,
having quadrupled its money, Cerberus began to sell out.

Post-Cerberus, when Steward should have been in bankruptcy court, its
story instead got much wilder. For some reason, de la Torre had so
ingratiated himself to MPT founder/CEO Ed Aldag, whose $1.25 billion
purchase of Steward’s real estate had enabled Cerberus to get its
requisite windfall, that MPT kept plowing money into Steward for no
apparent reason. MPT financed Steward’s purchases of dozens of Sun
Belt hospitals and random international forays like the Malta venture,
while lending money to help it make the $400 million-plus annual rent
payments it owed back to MPT. The investment trust even lent de la
Torre the cash to buy out Cerberus in 2021, after which the former
cardiac surgeon issued Steward’s shareholders—who mostly consisted
of de la Torre himself—a $110 million dividend
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In all, MPT has shoveled at least $5.5 billion into Steward
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over the past eight years. MPT now claims it is owed $50 million in
back rent by the health system, but a cash flow analysis by the REIT
analyst Robert Simone, who has been covering MPT’s demise for the
research firm Hedgeye, suggests Steward’s unpaid rent bill to MPT
for the past two years alone totals at least $261 million.

What became of all this money? Well, we have a good idea what Steward
_didn’t_ do with it, because dozens of companies have sued it for
not paying its bills. The angry creditors include a supplier of
cadavers and body bags in Texas, an exterminator it hired to conduct a
“bat eviction”
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of the ceilings above an intensive care unit in Florida, a California
medical device supplier
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nurse staffing agencies, and electrical contractors. A pizza shop
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in Brockton, Massachusetts, cut Steward off long ago, and a physician
in Florida told the _Prospect_ Steward still owes his practice more
than $400,000 for treating its patients in 2021 and 2022. These unpaid
bills have jeopardized patient safety in countless ways; _The_ _Boston
Globe_ recently reported
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that a recently repossessed medical device could have saved the life
of a patient who died at St. Elizabeth’s Hospital last fall.

It’s unclear, in part because Steward has refused to release
financial statements to anyone who demands them despite having been
ordered by the SEC
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to disclose them to MPT shareholders last year, what Steward _has_
done with the money. We do have evidence that Ralph de la Torre bought
a $40 million mega-yacht a few months after he paid himself an
apparent nine-figure dividend, and that at some point in 2022 a
vehicle called Sagamore Capital Management
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controlled by de la Torre’s close associate Robert Gendron acquired
a Dassault corporate jet
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he supposedly uses for business purposes. We mostly know these things
thanks to financial analyst Robert Simone, who writes about REITs for
the trade publication Hedgeye and tracks the movements of de la Torre
like more mainstream pundits track Taylor Swift and Elon Musk. A few
weeks ago, on the day de la Torre sent an all-staff email blaming an
influx of “undocumented immigrants” for Steward’s
“challenging” year, Simone posted
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on X that his yacht was at that very moment off the coast of Ecuador.

We also know, thanks to forensic investigations conducted by Maltese
media outlets in conjunction with the investigative journalism
nonprofit [[link removed]] behind the Panama and Paradise
Papers, that Steward wired at least 5.9 million euros between 2017 and
2020 to a Swiss entity called Accutor AG that in turn sent payments to
the former Maltese prime minister who facilitated Steward’s
privatization of the nation’s hospitals. Financial statements
obtained by the hedge fund research outlet Viceroy Research show
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that 230,000 euros were wired directly from an entity that shared an
address with St. Elizabeth’s Hospital during the spring of 2019,
with one payment landing two weeks after that hospital’s nurses held
an informational picket
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to raise awareness of the 160 incident reports they had collected in
the preceding months documenting specific cases in which Steward’s
short-staffing had threatened patient safety.

ONCE UPON A TIME, DE LA TORRE WAS A DARLING of Massachusetts liberals.
In 2008, shortly after taking the helm of the small hospital group
that would become Steward, he invited
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the then-chair of the health care division of the Service Employees
International Union to organize the hospitals. After former state
attorney general Martha Coakley approved his sale to Cerberus, he
thanked her by hosting
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a massive fundraiser at his house featuring Barack Obama. He and his
wife Wing gave more than $43,000
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to Massachusetts Democrats during the decade before his 2018 move to
Dallas, including $1,000 to Maura Healey’s campaign that year for
attorney general. In 2012, he defended
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the state’s “individual mandate” that had been the blueprint for
Obamacare in _Bloomberg Businessweek_; the following year, the
magazine profiled
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de la Torre in a piece that described Steward as “the business model
for the Obamacare era.”

The premise of Steward as the poster child for Obamacare was its
embrace of a business model called the “accountable care
organization,” a virtuous-sounding structure through which doctors
and patients were supposed to “coordinate” care to save money by
keeping patients out of the hospital. De la Torre called Steward an
“ACO on steroids,” and he promoted the model heavily in
Massachusetts. With the help of a former Steward executive named John
Polanowicz who was named the state’s health and human services
secretary in 2014, de la Torre even convinced the health department to
issue an amendment
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exempting ACOs from a 2008 building moratorium on cardiac
catheterization labs, allowing Steward to build one at a hospital in
Fall River, making way for one of the more profitable revenue streams
in health care.

But as with the HMO before it, the ACO’s appeal to for-profit
operators like Steward seemed mostly to stem from the “fraud and
abuse” waivers
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ACOs receive from the Centers for Medicare & Medicaid Services,
exempting doctors and hospitals within their systems from “certain
specified fraud and abuse laws.” Four whistleblower lawsuits filed
in Texas and Massachusetts allege that Steward executives abused those
exemptions to the point of fostering a culture of fraud. In the
Massachusetts case, physicians whose practices affiliated with Steward
claim that they were punished
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and ostracized for allowing so-called “leakage”—that is,
referring patients to specialists outside Steward’s hospitals, even
if Steward offered no comparable services itself, like partial kidney
removal or something called “high dose transperineal radiation
iridium therapy” developed for late-stage prostate cancer patients.

Shortly after Steward bought an interest in a high-profile orthopedic
surgery practice in Melbourne, Florida, its nearby Sebastian River
Medical Center was one of just two hospitals in Florida to receive a
grade of “F”
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from the Leapfrog Group, which monitors statistical outcomes to grade
hospital safety. A few months later, two Steward executives and a
former Cerberus executive
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named Jim Renna invited the CEO and CFO of the surgery practice to
dinner at a local yacht club to discuss “actions that could be taken
to benefit the partnership,” according to one whistleblower
complaint; the surgeons got the message and started moving their joint
replacements to Steward’s hospitals. Two other doctors recruited to
work for Steward hospitals in Texas described
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in a separate lawsuit being “rocked by a disorienting array of
schemes, self-referrals, upcoding, and greed … almost immediately”
upon starting the job. One lawsuit filed by a prominent urologist that
Steward recently paid $4.7 million to settle alleged that “Steward
and Cerberus have wholly corrupted the ACO model.”

These days, many Steward hospitals have neither the staffing nor the
necessary supplies to accommodate many profitable surgeries, according
to a Florida physician who practices near several Steward hospitals.
The physician forwarded an email from an HMO executive who said the
hospitals lack even basic supplies like needles and linens, because
“vendors won’t give them anything on credit.”

In January, I received an unsolicited email from a Steward nurse.
“This company puts patients at risk on a daily basis,” it read.
“This hospital is full of good doctors, nurses and other staff that
genuinely care about patients and quality care but Steward makes it
impossible to provide an environment that’s safe … I can’t in
good conscience see this happening and not continue to do anything
possible.”

A third doctor who previously worked with Steward and confirmed that
the company pressured physicians to violate the Stark Law, said he had
been contacted last year by an assistant U.S. attorney about
Steward’s finances. Steward, he explained, “collect[s] money on a
monthly basis from Medicare for [a program called ACO REACH] and
they’re supposed to on a monthly basis pay providers with that
money, but they haven’t done it in years as far as I know. I’m not
sure who’s holding the money, but from what I understand the person
on top of Steward has a mansion in Costa Rica, two yachts and two
planes … This particular group seems to be immune from
consequence.”

---Maureen Tkacik is investigations editor at the Prospect and a
senior fellow at the American Economic Liberties Project.

* Steward Health Care; Massachusetts Hospitals; Private Equity in
Health Care;
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