After months of dodging requests for public comment on his company’s failings, Steward Health Care CEO Ralph de la Torre will be forced to come forward in September to face questioning over the role he played in his company’s financial collapse.
A bipartisan group of senators voted Thursday to launch an investigation into Steward’s bankruptcy and issued a subpoena to question de la Torre.
It’s the first time the Senate Committee on Health, Education, Labor and Pensions has issued such a subpoena since 1981. Sen. Bill Cassidy, R-La., said the subpoena was issued as a last resort.
Committee members have grown increasingly concerned about Steward’s financial practices prior to filing for Chapter 11 bankruptcy in May.
The senators contend executives mismanaged finances while hospitals struggled to stay open, including spending tens of millions of dollars on luxury items, like de la Torre’s $40 million yacht and a $15 million fishing boat, which the Boston Globe first reported.
Cassidy said a subpoena is necessary after he and Sen. Bernie Sanders, I-Vt., extended de la Torre an invitation to testify in June, but the executive “refused without further discussion.”
“It is time for Dr. de la Torre to get off this yacht and explain the financial chicanery, which made him wealthy while the hospitals he managed went bankrupt,” Sanders said before the vote.
The investigation will include questions about how executives allocated money at Steward facilities prior to its Chapter 11 filing. Former employees and vendors alike allege Steward routinely failed to pay bills on time, and, as a result, critical medical supplies were often unavailable. At times, consequences were dire.
“At a Steward-owned Massachusetts hospital, a woman died after giving birth when doctors realized mid-surgery that the supplies needed to treat her had been repossessed due to Steward’s financial troubles,” Cassidy said. He later said, “Patients’ lives are at risk. Americans deserve answers.”
The inquiry is also likely to touch on Steward’s overseas activity. In Cassidy’s remarks, he mentioned the company’s allegedly fraudulent deal in Malta, which is currently under investigation by the Department of Justice. The company won a contract in 2018 to operate and refurbish three Malta hospitals, however, Malta courts found Steward never fulfilled its promise to invest in the facilities.
In a statement to Healthcare Dive, a spokesperson for the company said that Steward will “address the subpoena with the appropriate HELP Committee staff. We understand the desire for increased transparency around our journey and path forward.”
The Senate committee voted 20-1 to open the investigation into Steward. Sen. Rand Paul, R-Ky., dissented. The panel voted 16-4 to subpoena de la Torre, with Paul and Republican Sens. Tommy Tuberville, Markwayne Mullin and Ted Budd voting against subpoena. Sen. Lisa Murkowski, R-Alaska, did not vote.
Sen. Edward Markey, D-Mass., and Rep. Pramila Jayapal, D-Wash., introduced legislation Thursday that seeks to impose transparency requirements on private equity firms and for-profit companies that own and invest in healthcare.
Steward was previously owned by private equity firm Cerberus Capital Management, which exited its position in 2020 with a multimillion-dollar profit.
The senators disagreed Thursday on how much blame to assign Cerberus. Markey, speaking after the vote, seemed to want to place private equity on trial alongside Steward, stating the hearing would be a “historic one.”
“It’s going to put the focus on the role private equity is playing in this hospital sector. This is not taking over a widget company. It’s not taking over a coffee company. This is where they take over hospitals, and they apply the very same standards to those hospitals which they would apply to a widget company,” Markey said. “So all I can say to Dr. de la Torre is you cannot treat communities as expendable. You are accountable. Your day of reckoning is going to arrive here.”
Cassidy said private equity was not to blame for Steward’s problems.
“Robust private equity investment kept the hospitals afloat in 2010,” Cassidy said, referring to the year Cerberus purchased the original six struggling Boston hospitals.
Across the industry, private equity-backed providers make up less than 4% of the U.S. healthcare provider market by revenue, according to data from PitchBook, published this month.
However, their presence in the market is polarizing. Senators have launched multiple probes of the impact of private equity on healthcare over the past year, citing research that private investment corresponds to degraded care.
For example, patients are more likely to experience adverse health events, like infections or falls, at PE-owned hospitals, according to a study published late last year in JAMA. Other research has linked PE ownership to higher costs for patients and payers, and some studies found harmful impacts to healthcare quality.
