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CAN’T PAY WON’T PAY  
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Maureen Tkacik
September 3, 2024
The American Prospect
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_ Steward’s evasion of creditors in its spectacular bankruptcy even
includes the wrongful death settlement for a young mom. _

, CBS News Miami

 

It is not entirely clear why none of the four physicians who saw Yani
Rodriguez over the six days in September 2022 she spent dying at the
North Shore Medical Center in Miami ever diagnosed her with thrombotic
thrombocytopenic purpura, a rare but well-established blood disorder
often associated with late pregnancy whose survival rate soared from
just 10 percent in the 1950s to almost 90 percent with the advent of
modern plasma transfusion techniques. Rodriguez’s blood readings
should have been a dead giveaway, according to expert witnesses
consulted in her medical malpractice case and a physician the
_Prospect _consulted with the medical records.

But instead, the doctors administered platelet infusions—understood
by most med school students, the doc tells the _Prospect_, to worsen
TTP—four times over the three days after Rodriguez, a 35-year-old
factory worker, gave birth to a healthy eight-pound baby girl in the
hospital. On the fourth day, a hematologist misdiagnosed her with a
milder blood disorder and ordered the staff to administer a steroid
called danazol that might have inadvertently cured her condition. But
the pharmacist told the nurse they needed special permission from the
front office to prescribe danazol, whose generic version costs about
$100 for a 30-day supply, and because admin was away for Labor Day
weekend, that never happened. On the fifth day, the doctors talked
about getting her admitted to another hospital but that never happened
either, and they conducted a somewhat pointless bone marrow biopsy
after which she experienced a stroke. On the sixth day, she died,
shortly after being hooked up to a ventilator that didn’t work
properly.

“Sometimes medical malpractice happens at the very best hospitals
and it’s not the result of a broken system,” said a lawyer
familiar with the Rodriguez case who did not want to be named. The
death of Yani Rodriguez, she said, was not one of those times. The
now-bankrupt Steward Health had purchased NSMC just a year before
Rodriguez had been admitted to the maternity ward, and almost
immediately established a reputation in the local health care
community for not paying its bills. “In years of working on medmal
cases I had never encountered a situation where a pharmacist
couldn’t fill an order for a lifesaving drug because they had to get
authorization from admin,” the lawyer continued. “But at the end
of the day, she died because no one involved in her care knew what the
hell they were doing, and that was a product of Steward’s business
model. When you cut corners in everything, you can’t hire the best
physicians. If I’m a top-notch intensivist, I’m not going to work
for Steward because I know I’m not going to get paid.”

Steward’s merciless gutting of its hospitals to finance mega-yachts,
private jets, and trophy wife horse ranches of its owner Ralph de la
Torre occurred alongside dozens of deaths, including most famously
that of another new mother who bled to death at its Good Samaritan
hospital because a medical device nurses use to block blood flow had
been repossessed just weeks earlier. As the hospital system began to
collapse under the weight of its shell games toward the end of 2023,
Steward officials stopped even denying that their “business model”
had killed patients. At a hearing last spring, a Steward hospital CEO
was asked by a state official if he felt “personally responsible for
any deaths or declining care at your facility.”

“Yes,” he answered, with not a second’s hesitation.

And so on January 9, the day the Rodriguez case was set to go to
trial, NSMC’s attorneys offered to settle Rodriguez’s case for $4
million, the maximum award covered by its medical malpractice
insurance policy, to be paid in three installments in May, June, and
July. Steward’s law firm even contracted a settlement agency to set
up an annuity for Rodriguez’s family, and sent multiple emails
assuring their lawyers the check was in the mail. But the first check
never showed up, and when Steward filed for Chapter 11 bankruptcy
protection on May 6, Rodriguez’s widower’s lawyers realized that
the hospital’s malpractice insurer, a Panama-domiciled outfit called
Tailored Risk Assurance Company Ltd., or TRACO, wasn’t just any old
insurance company. Steward founder Ralph de la Torre had incorporated
it in Panama City with a Panama-born former Bush administration
official named Ruben King-Shaw, who also joined the Steward board.

Toward the end of 2023, Steward officials stopped even denying that
their “business model” had killed patients.

Steward was supposed to make $4.5 million in monthly premium payments
to TRACO to handle malpractice lawsuits and other legal cases. But as
with almost every other one of its bills, Steward had not been making
its monthly premium payments to TRACO. Instead the insurer had amassed
$413.3 million worth of a line item titled “Investments/Intercompany
receivables”—IOUs from Steward representing close to eight years
of missed payments, alongside just $5.3 million in liquid assets.
(This came as a shock to one Boston physician formerly associated with
Steward, who says TRACO charged physicians roughly 30 percent more
than other medmal insurers for roughly the same coverage.)

When Steward filed Chapter 11, it specifically sought authorization
from the court to begin making monthly premium payments. That’s
because TRACO, although a wholly owned subsidiary of Steward, was not
a party to the bankruptcy, like several other de la Torre–controlled
entities that had extensive financial dealings with Steward.

Two others, CREF and Management Health Services, respectively received
about $37 million and $30 million from Steward in the year preceding
the bankruptcy; a recent _Wall Street Journal
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story
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estimated that de la Torre had used such vehicles to siphon at least
$250 million out of the desperately insolvent Steward in the four
years preceding the bankruptcy. But it’s impossible to know for
certain, because none of them have disclosed their own financials, and
thus far no one has forced them to.

In the meantime, Steward bankruptcy judge Christopher Lopez seems
perfectly content to allow TRACO to enjoy the protections of
bankruptcy, without any of the transparency it is theoretically
supposed to impose. In a hearing last Tuesday to discuss the Rodriguez
case, a bankruptcy attorney pleaded with Lopez to force Steward to
start paying its insurance premiums so TRACO could cut his check, or
petition the company to liquidate TRACO. Lopez would do neither; the
law, he insisted in a voice dripping with faux regret, simply did not
give him the authority to _force_ Steward to pay anyone when it owed
so many billions to so many thousands of creditors.

No one discussed a critical implication of this insistence, which is
that Steward’s doctors are apparently practicing medicine without
legitimate malpractice insurance coverage. This is actually against
the law in Massachusetts—though so is siphoning a quarter-billion
dollars out of an insolvent hospital chain, and thus far no one has
tried to indict any Steward insiders for that.

AS WE HAVE DISCUSSED EXTENSIVELY in these pages before, many wealthy
malefactors before Steward Health have exploited the bankruptcy courts
to avoid liability, even in wrongful death cases. Purdue Pharma’s
bankruptcy famously allowed the Sackler family
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to keep billions of dollars while paying out the family members of
dead OxyContin overdose victims between $26,000 and $40,000 a head.
Johnson & Johnson, Koch Industries, and other asbestos producers have
all descended upon Texas to divest their mesothelioma-generating
businesses into insolvent spinoffs that then exploit the bankruptcy
code to force the loved ones of construction workers and baby powder
consumers to settle their wrongful death cases for pennies (or
sometimes less than a penny) on the dollar.

One of the most egregious examples
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of this trend was last year’s bankruptcy filing of an entity called
Tehum Care Services, a spinoff of the large prison health care
provider Corizon Health, which recently changed its name to YesCare.
More than 500 current and former inmates and their families had sued
Corizon for negligence and wrongful death over the years; so after the
company was acquired by a shadowy nursing home syndicate in 2021, the
new owners decided to split the company into what is commonly known as
a GoodCo and a BadCo (or ShitCo). The former, YesCare, held the
company’s hundreds of contracts; the latter, Tehum, held its legal
liabilities, including both the wrongful death claims and lawsuits
filed by vendors Corizon had failed to pay. Then Tehum filed for
bankruptcy protection in Houston, and the case was assigned to Judge
Christopher Lopez, who is currently presiding over the Steward
bankruptcy.

The Tehum case was so audacious that it ultimately threatened to bring
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whole Houston bankruptcy court, which had become so popular with
private equity corporate strip miners that it handled nearly half of
all major corporate bankruptcies in 2020 and 2021. Lopez, a
soft-spoken former Weil, Gotshal partner who often sounds during
hearings like he is tormented by the moral quandaries of the
profession, appointed Judge David Jones, the architect of the wildly
popular complex case panel, to “mediate” the “dispute” between
the injured inmates’ lawyers and YesCare. Representing YesCare in
that mediation process, meanwhile, was Liz Freeman, Jones’s former
clerk who also happened to be the judge’s on-again, off-again
live-in girlfriend, an insane conflict of interest and, it turned out,
the very tip of a gargantuan iceberg.

For years, Jones had been secretly conspiring with Freeman and her law
firm Jackson Walker to bring big-money corporate bankruptcy filings to
Houston, in a series of maneuvers
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involved Jones’s best friend, former law partner and fellow
bankruptcy judge Marvin Isgur; Isgur’s former clerk turned Jackson
Walker partner Matt Cavenaugh; and the Chicago mega-firm Kirkland &
Ellis, which generally used Jackson Walker as its “local counsel”
in big bankruptcy cases it brought to the court. So far, only Jones,
who recently retained über-attorney David Boies to represent him in a
federal criminal investigation into the scheme, has been forced to
sacrifice his career over the scandal. Isgur maintains
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that he never knew that his best friend of more than 30 years lived
with another of his close friends, and earlier this month another
Houston bankruptcy judge threw out a subpoena
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to obtain the taxpayer-funded cellphone records that would likely
prove otherwise. No one has been more protective of his mentors than
Lopez, who last week shut down a creditor’s lawye
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in an oil producer bankruptcy hearing for having the temerity to ask
Cavenaugh what he knew about the judge’s affair with his old law
colleague. “We’ll see this through,” Lopez promised
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after the scandal broke last fall.

Notably, Steward’s brief explaining why it should not have to pay
its malpractice insurance premiums was largely premised on two Isgur
decisions, one in the bankruptcy of the iHeartMedia radio conglomerate
and the other in the parent company of the retailer Jos. A. Bank. In
the former case, the decision threw out the claim of a worker who’d
suffered a grievous head injury while setting up a radio station
concert; in the latter, a former Jos. A. Bank store manager had sued
for wrongful termination after getting fired for what he alleged was
race discrimination. Both cases involved the companies’ refusal to
pay substantial deductibles and were thus not terribly analogous to
the Steward case, especially given the central role of malpractice
insurance in the practice of medicine and the fact that many Steward
doctors have apparently been dutifully paying premiums for coverage
that may not exist. But both companies were represented in the court
by Cavenaugh, Jackson Walker, and Kirkland & Ellis, and that is likely
all that mattered when it came down to it. Isgur is also playing a
prominent role in the Steward bankruptcy, having been appointed by
Lopez to serve as a mediator between Steward and its landlord Medical
Properties Trust, which has been accused by real estate investment
trust experts of enabling private equity–backed operators like
Steward to siphon cash out of safety-net hospitals.

Meanwhile, the Tehum bankruptcy remains on the docket despite calls
from Sen. Elizabeth Warren (D-MA) and an official motion filed by the
United States trustee to dismiss the bankruptcy. “It’s crazy that
Lopez has allowed that case to just languish on the docket for 18
months,” an attorney told the _Prospect_. A financial statement
filed for NSMC in Steward's bankruptcy lists the $4 million Rodriguez
settlement alongside more than $462 million in other unsecured claims,
including $9.1 million it owes the Centers for Medicare & Medicaid
Services, $766,000 it owes in unpaid employee bonuses, $53.4 million
it supposedly owes Steward, $87.6 million it owes Steward’s St.
Elizabeth’s hospital in Boston, and unspecified amounts it owes more
than 40 other plaintiffs in liability lawsuits; a bankruptcy lawyer
working on the case says the hospital system has more than 500
outstanding malpractice and wrongful death claims, all of which are
likely to be worth “pennies” if the case proceeds as Steward’s
lawyers are driving it.

“I feel like a minnow in an ocean of unsecured claims,” an
attorney in a different state representing another widower whose wife
died in a Steward hospital told the _Prospect_. “I can tell already
that this is going to be just like Purdue. I’ll be working my ass
off for ten years and end up making about five dollars.”

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

* Steward Health; Private Equity; Hospitals;
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