Steward Healthcare doctors take 90% in buy-out of American owners

Cerberus Capital Management has sold Steward Health Care System LLC – the company which owns Steward Health Care International, which runs three state hospitals in Malta.

Cerberus Capital Management agreed to sell control of community hospital group Steward Health Care back to the company, which is controlled by doctors.

This would make Steward one of the United States’ largest physician-owned and operated companies. It also marks the end of a 10-year ownership period for Cerberus, which was most recently marked by threats to shutter a Pennsylvania hospital in March, despite the pandemic, if the facility didn’t receive state bailout funds.

Dallas-based Steward has 37 hospitals across nine states, employing more than 42,000 people.

A management group of Steward physicians led by the company’s CEO and founder acquired a 90% interest, while Medical Properties Trust will maintain its 10% stake.

“The COVID-19 global pandemic has exposed serious deficiencies in the world’s health care systems, with a disproportionate impact on underserved communities and populations,” Steward CEO and Founder Ralph de la Torre, MD, said in a news release.

“We believe that future health care management must completely integrate long-term clinical needs with investments. As physicians first, we will focus on creating structures and timelines that meet the long-term needs of our communities and the short-term needs of our patients.”

In Malta, Steward took over a public-private partnership first entrusted to an unknown group, Vitals Global Healthcare, in December 2017 for an estimated €15 million.

Vitals had no track record in the health industry when in mid-2017 it encountered difficulties finding banking institutions to finance its operations and commitments. The performance guarantee would have been called up by the Maltese state, if the hospitals’ concessionaire failed to meet its commitments.

MaltaToday revealed pointed correspondence from Steward International’s president Armin Ernst to Prime Minister Robert Abela, showing how Steward is owed €18 million in government dues for running the three hospitals.

Ernst said Steward was facing an exposure of over €12 million due to problems connected to the Vitals concession on financing problems as well court proceedings from former investors. But it called on the government to honour well over €18 million in reimbursements in accordance with the concession agreement.

“While we agree that it is incumbent on Steward as the (relatively) newly appointed concessionaire to resolve these issues on the project… we simply cannot do this without the support of the government,” Ernst told Abela.

He said many of the legal claims and tendering issues Steward was dealing related to VGH’s business practices “in a period where the government was, or should have been closely involved in and overseeing the commission, including the financing and construction arrangements” – a reference to a monitoring committee appointed by the health ministry to oversee the VGH concession.

Health Minister reacts

Health Minister Chris Fearne said in parliament that he is awaiting a written explanation from the Steward Healthcare administration.

“I was informed by the Steward Healthcare CEO that a number of assets were bought by Steward,” he said.

While stating he would not be commenting further until an explanation is received, the deputy PM assured workers with the company that they will be retaining their job.

“Steward are still committed to their responsibility,” Fearne said.