Steward balks at state record request

Officials threaten to impose fines on health care firm

Steward Health Care is refusing to turn over to state officials its audited financial statements, setting off a behind-the-scenes tug of war that could lead to fines being assessed on the for-profit company.

Steward, which is owned by the New York private equity firm Cerberus Capital Management, is notoriously tight-lipped about its finances. The only reliable source of information on the company’s overall performance and its financial relationship with Cerberus has been its audited statements. For the past two years, Steward filed the statements with state regulators, who turned them over to CommonWealth in response to public records requests.

But this year, Steward is refusing to turn over the financial records. Mark Rich, Steward’s chief financial officer, said in a June letter to state officials that the company provided detailed financial information on all of the hospitals it owns. Rich said Steward was not going to turn over the 2013 consolidated financial statement of the company as a whole because it “combines the results of hospital operations with our non-hospital businesses that are not covered by the regulations.”

Nancy Maroney, associate general counsel of the state’s Center for Health Information Analysis, has insisted that state regulations require Steward to turn over the consolidated financial statements. She said in a June 9 letter that Steward could be subject to reductions in its Medicaid payments and other financial penalties if it refuses to comply.

Andrew Jackmauh, a spokesman for the state agency, said both sides have staked out their positions. “We are currently exploring our enforcement options,” he said, noting that the agency has the right to levy fines against entities that fail to comply with reporting requirements.

The audited financial statements don’t provide a lot of information, but they do give a picture of Steward’s overall performance and offer some insights into Cerberus’s financial support for the health care company. The fiscal 2011 statement indicated Steward as a whole had a net loss of $56.9 million. That loss narrowed to $33 million in fiscal 2012. A company spokesman said the 2012 numbers were in line with the company’s business plan, but a year earlier a Steward attorney had forecasted “positive net income” in 2012.

Cerberus incorporated Steward in late 2010 to purchase and operate six struggling Catholic hospitals in Brighton, Dorchester, Norwood, Brockton, Fall River, and Methuen. Since then, Steward added five more hospitals in Ayer, Haverhill, Taunton, Quincy, and Stoughton. It has also acquired a number of physician groups.

Ralph de la Torre, Steward’s CEO, is attempting to mold the group of struggling hospitals into a market force capable of challenging the region’s top health care networks. Some analysts suspect Cerberus may be readying the company for a sale to recoup its investment.

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Bruce Mohl

Editor, CommonWealth

About Bruce Mohl

Bruce Mohl is the editor of CommonWealth magazine. Bruce came to CommonWealth from the Boston Globe, where he spent nearly 30 years in a wide variety of positions covering business and politics. He covered the Massachusetts State House and served as the Globe’s State House bureau chief in the late 1980s. He also reported for the Globe’s Spotlight Team, winning a Loeb award in 1992 for coverage of conflicts of interest in the state’s pension system. He served as the Globe’s political editor in 1994 and went on to cover consumer issues for the newspaper. At CommonWealth, Bruce helped launch the magazine’s website and has written about a wide range of issues with a special focus on politics, tax policy, energy, and gambling. Bruce is a graduate of Ohio Wesleyan University and the Fletcher School of Law and Diplomacy at Tufts University. He lives in Dorchester.

About Bruce Mohl

Bruce Mohl is the editor of CommonWealth magazine. Bruce came to CommonWealth from the Boston Globe, where he spent nearly 30 years in a wide variety of positions covering business and politics. He covered the Massachusetts State House and served as the Globe’s State House bureau chief in the late 1980s. He also reported for the Globe’s Spotlight Team, winning a Loeb award in 1992 for coverage of conflicts of interest in the state’s pension system. He served as the Globe’s political editor in 1994 and went on to cover consumer issues for the newspaper. At CommonWealth, Bruce helped launch the magazine’s website and has written about a wide range of issues with a special focus on politics, tax policy, energy, and gambling. Bruce is a graduate of Ohio Wesleyan University and the Fletcher School of Law and Diplomacy at Tufts University. He lives in Dorchester.

The consolidated audited financial statements would provide some indication of how de la Torre’s makeover of Steward is going financially. The refusal to release the documents, however, makes it nearly impossible to gauge that effort.