In 2018, Holy Family Hospital’s Haverhill campus was sold to a real estate investment trust for about $124 million—a price tag well above the $14.8 million the city says it is worth.
The financial freefall has been well-documented over the years even as it now appears to surprise state regulators.
Birmingham, Alabama-based Medical Properties Trust bought the property along with other Steward Health Care-owned hospitals and related properties as part of a sell and leaseback deal that allowed, according to an announcement at the time, the then-Boston-based Steward to “to expand nationally.”
The exaggerated price tag struck many as odd, considering the City of Haverhill opened the campus in 1984 after building it for $30 million and then sold it to Essent Healthcare for $1.8 million in 2001. Essent, in turn, sold it to Steward for $8.4 million in 2011.
A year earlier, Caritas Christi Health Care, owner of Holy Family Hospital in Methuen, said it agreed to be acquired by Steward Healthcare System, then described as “a newly formed affiliate of Cerberus Capital Management,” for $895 million.
In 2020, Steward Health Care physicians led by the company’s CEO and founder Ralph de la Torre paid back Cerberus and gave the investor a bonus. Financial news provider Bloomberg summarized the deal with headlines, “Cerberus Quadruples Money After Unusual Exit From Hospital Giant; Private equity firm makes an $800 million profit in a decade; It exits after offloading to Steward Health Care doctors.”
In July of 2022, WHAV made an inquiry of the state’s “Non-Profit Hospital and HMO Community Benefits” reporting system, specifically referencing Steward’s purchase of Holy Family Hospital, Mass General Brigham’s (formerly Partners) purchase of Pentucket Medical Associates and Beth Israel Lahey Health’s merger with Anna Jaques Hospital, which also has a medical building in Haverhill. WHAV asked the attorney general’s office, which collects the reports, “Have these (hospital) mergers been worth it? Is new legislation necessary or recommended to rein in abuses?”
Responding by email, Deputy Press Secretary Thomas F. Dalton said in part, “The Guidelines encourage community benefit activities on the part of hospitals and HMOs as well as cooperation and partnership between hospitals and HMOs and their communities that promote effective Community Benefit programs. The public reports submitted pursuant to the Guidelines promote transparency with respect to these programs and investments.”
WHAV also asked, “Are these (filings) used at all to confirm compliance with conditions placed on past mergers? If not, does any agency have this obligation or responsibility?” Dalton responded, “No. Enforcement of conditions on hospital mergers varies based on the entity that imposed the conditions (often the Department of Public Health through the Determination of Need program).
In a recent statement released to WHAV and others, the company blamed government payments.
“Steward has been challenged by a payor-mix system-wide that is over 70% Medicare and Medicaid, where reimbursement meaningfully trails commercial reimbursement. Over the past decade plus, there has been a widening gap in reimbursement for all the state’s community hospitals compared to larger, academic medical centers. This gap has only continued to increase and most community hospitals—including Steward hospitals in Massachusetts—are suffering losses that jeopardize their ability to continue to offer services.”
This week, state Rep. Andy X. Vargas offered his view on the financial house of cards.
“Steward’s reckless (at-best) financial arrangement that involved speculators and Wall Street in our healthcare has left our communities, workers and patients vulnerable. This kind of behavior should not be rewarded, and we should proactively ensure it can never happen again,” Vargas said.