A FOLLOW UP: FOR-PROFIT HOSPITALS

JULY 2013 VOICE: In our May Voice, we opened the door for discussion on the concept of for-profit hospitals in Massachusetts. Specifically, we referred to the Steward Health Care System, which surprisingly now owns eleven hospitals in our strongly unionized, socially sensitive state.

With the six struggling Caritas hospitals, which had been affiliated with Boston’s Roman Catholic Archdiocese, given permission by the state to turn control over to Steward in 2010, combined with Norwood Hospital, Morton in Taunton, Merrimack in Haverhill, New England Sinai in Stoughton, Quincy Medical Center and Nashoba Valley in Ayer, Steward has become firmly entrenched in a short period of time.

Other than a threatened walkout by Quincy nurses over a staffing problems and some grumbling of discontent by Morton employees. Steward, has been moving forward swimmingly.
Steward is actually owned by Cerberus Capital Management L.P., a $23 billion New York private equity firm which does expect to lose money in the initial stages of a buyout acquisition (Think Mitt Romney or Bain Capital).

Steward has also been signing up physicians at a rapid pace, doctors who agree to practice under the Steward connection, a label that has become increasingly noticeable throughout the state.

Management Team: Business Background

In listing its management team, Steward’s website proudly leads with Ralph de la Torre, MD, Chairman and Chief Executive Officer of Steward Health Care System, LLC, New England’s largest fully integrated community care organization with eleven hospitals, 17,000 employees and other affiliates including a home health company, a nursing college, and an imaging company. His annual salary is over $1 million.

Leaving no doubt however that Steward is a for-profit operation, Stuart Grief, a non-doctor, is a prominent member of the team. Grief, Chief Administrative Officer, has broad business experience in corporate development operations and business and market strategy. Grief was Chief Human Resources Officer for Fidelity Investments. Earlier, he was a Vice President with Textron, Inc., a prominent aircraft, defense and industrial business where he was responsible for the firm’s portfolio strategy.

Another star in Steward’s VIP list is W. Brett Ingersoll, who serves as a Co-Head of Private Equity and is a member of the Investment Committee of Cerberus Capital Management, the aforementioned private investment firm with over $23 billion in capital under management. This includes Steward which is but one of the 40 Cerberus turn-around holdings.

A key member of the A-Team, Joshua Putter, President – Steward Hospitals, is responsible for all hospital management experience. His resume leads with oversight of a 13-hospital system in Florida as a Division President of Health Management Associates. He also headed a similar chain of hospitals in Oklahoma and Texas.

Down in sunny Florida, Health Management Associates (HMA) has now grown to 23 hospitals. Headquartered in Naples, the firm has a Steward-type for-profit background.
Florida For-Profits Reject Medicare

With thousands of Massachusetts’ retirees living in Florida, Unicare the Group Insurance Commission’s primary indemnity carrier, has established a broad listing of Florida hospitals that will accept Unicare and Medicare’s combined coverage rates. This enables our members to be comfortable, knowing they have the same coverage as back in our state.

But, there is a major hitch with Health Management Associates. HMA will not recognize Unicare’s Medicare covered patients in Florida. This eliminates about ninety percent of retirees whose primary plan includes Medicare. However, fifteen of the HMA hospitals will gladly accept retirees with straight Unicare indemnity coverage, unencumbered by a Medicare component. How generous.

Perhaps Unicare or the GIC should eliminate these hospitals from their accepted list. Why should for-profit hospitals reject our Medicare insured members. We wouldn’t allow this to happen in Massachusetts.

Setback In Rhode Island

Down the road in Rhode Island, Steward’s attempt to build a national for-profit hospital and physician network has been anything but swimmingly.

Last fall Steward terminated an agreement to buy Landmark Medical Center, a financially troubled Woonsocket hospital which had been run for years under state receivership.

Steward had committed to putting up between $71.6 million and $76 million through a mix of investments, debt forgiveness and other payments – including $49 million in capital improvements.

However, this May Steward backed by $23 billion Cerberus Capital Management, filed a complaint in State Superior Court in Providence, which alleged that Blue Cross & Blue Shield of Rhode Island engaged in anticompetitive practices and interfered with prospective contractual relations to thwart Steward’s proposed acquisition of Landmark.

Representatives of Blue Cross & Blue Shield said they would defend themselves against the suit and are confident they will prevail. A statement said, “At a time when Rhode Island is focused on assuring access to quality health care for all residents, lowering costs and increasing collaboration in the private community, Blue Cross & Blue Shield is disappointed with Steward’s decision to file a lawsuit.”

Steward, which said it was backing out of the agreement because unnamed “private health care entities” had failed to meet conditions specified in the proposed deal.
Landmark has since been negotiating to be acquired by another for-profit system, Prime Healthcare Services which is based in Ontario, California.

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