Steward losses narrow in 2012 to $33 million
Officials says $243m in debt retired
STEWARD HEALTH CARE SYSTEM, the for-profit company owned by the private equity firm Cerberus Capital Management, reported a net loss of $33 million in 2012, down approximately $17 million from the year before.
Steward spokesman Christopher Murphy said the numbers are in line with the company’s business plan, which calls for turning around each of its individual hospitals within three years. “We are exactly where we expected to be in terms of quality, sustainability, and financial performance,” he said.
A year ago, however, Jeffrey Chase-Lubitz, an attorney representing Steward in its bid to acquire a Rhode Island hospital, told regulators there that the company was expecting “positive net income” in fiscal 2012 and positive free cash flow by the fourth quarter of 2012.
Steward is one of the more intriguing stories in the Massachusetts health care world. Its owner is a New York private equity firm with billions of dollars invested in a wide range of concerns, everything from supermarket chains (Shaw’s was recently purchased from Supervalu) to the nation’s largest gun manufacturer (earlier this year Cerberus said it was selling Freedom Group in the wake of the Sandy Hook shootings in Connecticut).
Cerberus incorporated Steward in late 2010 as a vehicle to purchase and operate six struggling Catholic hospitals in Brighton, Dorchester, Norwood, Brockton, Fall River, and Methuen; since then, Steward has added five more hospitals in Ayer, Haverhill, Taunton, Quincy, Stoughton and a number of physician groups. Ralph de la Torre, the company’s rising-star chief executive, has vowed to take this group of struggling community hospitals and turn them into a market force capable of challenging the big teaching hospitals in Boston.
In a January report, Attorney General Martha Coakley said Steward had so far honored all its financial and regulatory commitments to maintain services, continue charity work, and make capital investments in its hospitals. She also noted that the company had a “highly leveraged capital structure,” losing money in its first year of operation and borrowing $96 million under a revolving line of credit. The company also received a $246 million capital infusion from Cerberus.
The financial statements for 2012 indicate the company increased its borrowing under the revolving line of credit to $198 million and then added another $45 million earlier this year, bringing the total debt to $243 million. But Murphy, the Steward spokesman, said the entire balance was paid off recently, but refused to say whether the money came from internal cash flow, Cerberus, or a replacement borrowing.
The financial statements also shed light on how much Steward paid for some of the physician groups it acquired over the past year as it sought to build up its presence in the market. Steward bought the Compass Medical Group, a South Shore practice that had been affiliated with Partners HealthCare, in April 2012 by paying $16.6 million. It bought Physicians Healthcare LLC in February 2012 for $9.1 million. And the financial statements indicate it added other, unnamed physician practices during 2012 for $6.8 million.
Steward spent $9.8 million on advertising in 2012, including heavy local ad buys during last summer’s Olympics telecasts. The health care firm reported paying $17.8 million in termination payments to employees during 2012 and paid Cerberus $220,000 for legal, accounting, and professional consulting work.
To read the financial statements in their entirety, click here.