State officials knew about Steward finances long before this crisis

T he financial crisis facing Steward Health Care System should surprise no one in Massachusetts — especially Governor Maura Healey. As the attorney general charged with monitoring the fiscal health of this national hospital chain, Healey issued a report that said while Steward-owned hospitals were maintaining important services for elderly and low-income patients, “its mounting losses raise concerns about the for-profit hospital’s financial stability.” That was in 2015. Why did it take so long for anyone to loudly demand more public accountability from Steward?

A spokesperson for Healey said that, as attorney general, Healey “exercised all power and authority to monitor Steward Health Care System and report publicly on their financial situation.” The AG’s office also litigated with Steward “over the requirement that they provide transparency into their financials so that the state could have a full picture of their situation and act accordingly,” the spokesperson said. Today, as Steward struggles to overcome losses that put thousands of Massachusetts residents at risk of losing jobs and access to health care, it’s Healey’s job as governor to try to solve the problem. Meanwhile, there’s some soul-searching to do, and it goes back in time to the administrations of Deval Patrick and Charlie Baker.

Health care in Massachusetts is so highly regulated that a hospital can’t add a single bed without sign off from an array of public health watchdogs. In fact, as attorney general, Healey stopped several hospital expansion plans on the grounds that they would drive up costs. When it comes to the for-profit business model under which Steward operates, there were concerns from the outset about its financial viability. Yet in 2010, Steward got the green light to operate a chain of Massachusetts hospitals, many of which serve vulnerable populations. But now, The Wall Street Journal reports that the company, which operates 33 hospitals in eight states — including nine in Massachusetts — “lost more than $800 million from 2017 to 2020, the last year for which its financial data is available.” That kind of loss could lead to the closures of some Massachusetts hospitals, leaving patients without care or overburdening an already stretched health care system.

There was plenty of warning, including reports of stiffed Steward vendors. So how did Steward’s downward spiral play out with such limited public oversight and outcry? Are there constraints on state scrutiny that should be addressed with new laws? Or were state regulators in the AG’s office and other state agencies charged with monitoring health care simply too taken in by Dr. Ralph de la Torre, chair and CEO of Steward Health Care Systems? He’s known for his charm, Phi Beta Kappa-level intelligence, and, as The American Prospect recently pointed out, a habit of contributing thousands of dollars to Massachusetts politicians.

In 2008, de la Torre, a renowned cardiac surgeon, became president and CEO of the financially troubled Caritas Christi Health Care system, which was then affiliated with the Archdiocese of Boston. From there, he promoted a plan to sell Caritas to Steward, a holding company for Cerberus Capital Management, a New York-based equity group. For that, however, he needed approval from then-Attorney General Martha Coakley and the state Public Health Council, which organizationally fell under the Executive Office of Health and Human Services, which in turn reported directly to Patrick as governor. In October 2010, de la Torre got what he wanted, despite the fact that more than 20 community groups, health care providers, and lawmakers begged state regulators to slow the approval process.

News reports at the time made note of some of de la Torre’s political contributions. In 2009, for example, he contributed $4,800 to Coakley’s campaign for Senate. In October 2010 — the same month Coakley approved the Caritas sale to Steward — de la Torre also hosted a fundraiser at his home featuring then-President Barack Obama to raise money for the Democratic Senatorial Campaign Committee, which had contributed a huge sum to Coakley’s losing Senate campaign. Coakley did not respond to an email seeking comment.

According to state campaign contribution records, de la Torre has also contributed a total of $3,000 to Healey’s campaigns for attorney general and governor. A Healey spokesperson declined to comment on contributions.

When she gave her blessing to the deal, Coakley put some conditions on it, including the requirement that Steward should remain subject to public oversight. Officials now connected to the Healey administration say that the report Healey issued as attorney general in December 2015 — during Baker’s first year as governor — represented the last time she had direct access to Steward’s financial records. The requirement for the attorney general to monitor Steward has now sunsetted, they say. Steward has fought efforts by another state agency to access its records since then.

“The Healey-Driscoll administration is now actively engaged in finding a path forward that protects patient care, preserves jobs, and stabilizes the system,” the Healey spokesperson said.

Any path forward should require Steward hospitals to provide their complete financials, just like any other hospital. The public should also have access to any complaints filed against Steward, and how they were dealt with by the state.

State regulators should have all the power they need to scrutinize Steward’s finances and assess its ability to provide responsible patient care. But it certainly looks like regulators knew enough — or should have known enough — to understand what was happening in Steward hospitals long before it officially turned into a crisis.

There was plenty of warning, including reports of stiffed Steward vendors.