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The Boston Globe

Business

Steward Health Care quits Mass. hospital group

For-profit chain says it can better advocate for its unique interests

Steward Health Care System, the fast-growing company that operates 10 Massachusetts hospitals, has abruptly resigned from the state’s leading hospital association in the midst of a roiling political debate over the future of health care reform.

The for-profit company and its hospitals resigned as members of the Massachusetts Hospital Association without explanation in a hand-delivered note Friday, hospital association president Lynn Nicholas told board members Tuesday in an e-mail obtained by the Globe. The resignation was effective immediately.

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Nicholas described the loss of a large hospital group that pays 11 percent of the association’s dues as “difficult and challenging.’’

Steward yesterday acknowledged that it had parted ways with the association. It said the group, which represents 80 other members, is required to advocate and lobby on consensus positions within the hospital community that don’t necessarily match its own interests.

Steward has become the state’s most aggressive medical organization attempting to reorganize and prepare for changes coming from a broad overhaul of the health care payment system.

The company has spent lavishly to acquire hospitals and win over physician groups - leaving some competitors bruised and angry - with the goal of building a kind of comprehensive medical company known as an accountable care organization.

Steward decided to leave the industry association because the company had quickly transformed itself into a health care provider that looks and acts differently than most other hospitals, a spokesman said.

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“At this point in the evolution of health care reform, and of Steward itself, we feel we can make a greater contribution as a single coherent voice with a unique constituency: a fully integrated community based accountable care organization,’’ the company said in a statement.

The departure takes place just months before state lawmakers are expected to consider legislation that would usher in a second phase of changes in health care - this one focused on controlling medical costs.

A plan by Governor Deval Patrick encourages the creation of accountable care organizations - along the lines of Steward’s development - but would also give insurance regulators power to reject price increases if officials determine they are based on excessive pay to doctors and hospitals. House and Senate leaders are expected to file their own health care overhaul proposals soon.

Meanwhile, state and federal officials are also experimenting with new ways to slow the growth of Medicare and Medicaid. Earlier this month, five big Massachusetts hospital groups - including Steward - joined a new test program that effectively puts health providers on a budget to care for large groups of Medicare patients.

Steward was created with the acquisition of the six-hospital Caritas Christi Health Care chain by private equity investors last year. Caritas itself had resigned from the state hospital association in 2008, citing financial pressures. But it rejoined the group about 18 months ago, when its acquisition by Steward was pending before regulators. The company has since acquired four more hospitals in Massachusetts.

“When Yogi Berra famously said ‘deja vu all over again’ it was funny, but this is not,’’ Nicholas wrote to her board members in the e-mail about Steward’s departure. The loss of dues from the company’s 10 hospitals “will cause us to retrench and redo our budget,’’ she wrote in a separate e-mail to chief executives in charge at the association’s member institutions.

Steward and the hospital association declined to discuss the amount of dues at issue. But the association’s most recent tax return, covering the year 2009, reported total dues revenue of $8,512,024. If the association’s total dues remained unchanged, Steward’s share would amount to about $936,322.

The association has had a somewhat uneven relationship with Steward since it rejoined last year. At the time, Steward chief executive Ralph de la Torre joined the association’s board, whose members are nearly all chief executives or board chairmen at member hospitals.

But de la Torre soon stepped down from the board and his seat was turned over to Mark J. Rich, an executive vice president in charge of corporate strategy and management at Steward.

Steven Syre can be reached at syre@globe.com.

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