Steward Health Care reports $592m loss amid major 2-year expansion push

Amid a major expansion push over the last two years, Dallas-based Steward Health Care reported operating losses totaling $592 million, according to The Boston Globe.

The privately held health system posted an operating loss of about $270 million in 2018 and $322 million in 2017.

At the same time, the company’s revenue jumped to $6.6 billion in 2018, up from $3.7 billion one year prior due to its acquisition of IASIS Healthcare, an 18-hospital system based in Franklin, Tenn.

Steward Health Care System LLC is the largest private, tax-paying physician-led health care network in the United States. Headquartered in Dallas, Texas, Steward operates 37 hospitals in the United

States and Malta that regularly receive top awards for quality and safety. The company employs approximately 42,000 health care professionals.

The Steward network includes multiple urgent care centres and skilled nursing facilities, substantial behavioral health services, over 7,900 beds under management, and approximately 2.2 million full risk covered lives through the company’s managed care and health insurance services.

The Steward Health Care Network includes 5,000 physicians across 800 communities who help to provide more than 12 million patient encounters per year. Steward Medical Group, the company’s employed physician group, provides more than six million patient encounters per year.

The Steward Hospital Group operates hospitals in Malta and nine states across the US, including Arizona, Arkansas, Florida, Louisiana, Massachusetts, Ohio, Pennsylvania, Texas, and zxxUtah.

Steward spokesperson Darren Grubb told The Globe that the company is financially strong, pointing to the steep revenue jump. He said that the operating losses reflect acquisition costs and said that some of the hospitals it bought needed major investments.

But Kristina Minnick, a finance professor from Waltham, Mass.based Bentley University, told The Globe that the company’s financial statements are concerning.

“They have more debt than assets,” she said after reviewing the company’s financial reports. “They’re in a really bad place financially.”

Steward Health Care was founded in 2010 when the struggling Boston-based Caritas Christi Health Care system was sold to the private equity firm Cerberus Capital Management. The system was converted into a private, for-profit company and renamed Steward.

In 2016, Steward lined up a deal to sell its buildings to Medical Properties Trust, a real estate firm that now owns a 10 percent stake in the company, for $1.2 billion. Steward used this money to finance a national expansion, pay off debt and pay back Cerberus Capital.

Part of its plan was expanding operations outside its Massachusetts hub, including its 2017 deal to buy IASIS Healthcare for $1.9 billion. The deal made it the largest private, for-profit operator in the U.S.

Today, due to its expansion efforts in 2017 and 2018, the system operates 38 community hospitals and employs more than 40,000 healthcare professionals in the US.

Meanwhile, Blue Cross Blue Shield of Arizona plans to acquire Steward Health Choice Arizona from Steward Health Care System LLC, including the Arizona Health Care Cost Containment System Complete Care plan and the “Generations” Medicare health plan for dual-eligible special needs members.

The acquisition will give Blue Cross the capability to serve Arizonans who are eligible for Medicaid and those who are dual-eligible for both Medicare and Medicaid. It advances the organization’s strategy of expanding access to quality healthcare in Arizona, addressing members’ evolving healthcare needs, and better supporting Arizona’s vulnerable populations.

The transaction is expected to close following regulatory approval. The Health Choice plans will remain fully operational, stand-alone plans, and the local leadership team will remain the same.

“As a local, non-profit plan, our job is to help Arizonans with their healthcare needs,” said Pam Kehaly, President and CEO of Blue Cross. “This investment brings us closer to Arizonans who need our support, and gives us more opportunity to inspire health, which is truly at the heart of what we do.”

Blue Cross and Steward Health Choice Arizona both share long-term commitments to the state of Arizona, its residents and providers. Both companies have decades of experience serving a broad range of managed care programs, including commercial, employer based, and large governmentsponsored programs in Arizona.

“Steward Health Choice Arizona shares our values, our commitment to members and Arizona, and our vision of bringing affordable, innovative healthcare solutions to the people of Arizona,” Kehaly added. “This acquisition will allow Blue Cross to work in partnership with the state of Arizona to support a population that is heavily burdened with health challenges.”

With more than 17,000 healthcare professionals providing services to more than 200,000 Arizona Healthcare members, Steward Health Choice Arizona has laid the groundwork for Blue Cross to improve the quality of life for more individuals and families.

“Steward’s guiding principle and proven model as a leading Accountable Care Organization is to provide an integrated approach to health and wellness for our patients,” said Dr Michael Callum, Executive Vice President of Steward Health Care. “By concentrating on our providers and our Accountable Care Organization, we’re enhancing our commitment to patients’ well-being.”

“Blue Cross’s acquisition of Steward Health Choice Arizona will give Arizonans of all ages access to a wider range of comprehensive programs and solutions, and further enhance both organizations’ focus on affordable and high-quality healthcare services,” said Rubén José King-Shaw Jr., President of Steward Health Care Network.

Blue Cross and Steward Health Choice Arizona will work diligently in partnership with Arizona Healthcare for a smooth transition for both employees and members so that members continue to receive healthcare benefits throughout the transition period.

In Malta, the National Audit Office rebutted allegations made by MAM president Martin Balzan, that the office had yet to start an investigation into agreements with Vitals and Steward Health Care.

In a statement, the NAO said that it failed to understand Balzan’s “unfounded” comments.

“As all involved stakeholders are aware, the Office is presently conducting an extensive investigation of the agreements,” the NAO said.

Last week, while addressing a press conference Balzan claimed that the NAO had to date not conducted an inquiry in what he said amounted to institutional failure.

“The Auditor General has to do his duty or at least admit he is scared to evaluate the contract. This is an institutional failure,” Balzan said.

Balzan said that according to the legal advice it had received, MAM didn’t have the grounds to start a formal dispute on the PPP deal, it was actively evaluating whether it could do so on the basis of a breach of EU state aid rules.

Furthermore, the association said that the government’s public-private partnership agreement with Steward Health Care has failed, and the US consortium’s deal should not be extended.

Balzan said that the 2020 budgetary estimates indicate that the government has either approved or is planning to approve an increase in payment to Steward.

He emphasized that no more money should be given to the US health care giant and that Steward should either carry out its contractual obligations or else leave Malta.

Balzan’s criticism came on the same day that the Barts Medical School in Gozo, which formed part of the Steward deal, was opened for students.

Steward took over the PPP contract that government had entered into with the obscure Vitals Global Healthcare after the latter company went bust. The contract covers the Gozo general hospital, St Luke’s hospital and Karen Grech hospital.