Even before the ink dried on paperwork sealing Steward Health Care System’s buyout of the former Caritas Christi hospitals in 2010, many wondered what would happen when a three-year ban on selling or closing the Eastern Massachusetts chain expired.
The prohibition, a condition imposed on the sale by state Attorney General Martha Coakley, elapses Nov. 8. And while Steward says it has no plans to close any of the six former Caritas facilities — or sell the entire system, which has expanded to 10 acute-care hospitals and one rehabilitation center — community leaders are nervous.
Adding to the anxiety are state financial data showing that several Steward hospitals continue to lose money and a flurry of turnover in the system, including the recent departure — at least temporarily — of a high-ranking executive who had been Steward’s operations chief.
“It’s certainly on our radar screen,” said Dean Rizzo, president of the Quincy Chamber of Commerce. The business group’s members worry about the future of Quincy Medical Center, bought by Steward in 2011. “The conversations have picked up lately, and we’re concerned about Quincy Medical Center. The hospital has had a long history and faced many challenges.”
In nearby Dorchester, the Boston neighborhood where Steward operates the long-struggling Carney Hospital, many residents are also waiting for the company’s next move.
“People would mobilize if they tried to close Carney,” said Boston attorney Stephen J. Weymouth. “For Dorchester residents, it’s a hospital people want to keep around.”
Steward vice president Chris Murphy is adamant that no such changes are in the works. “We are not for sale,” Murphy said. “We have no plans to close any of the hospitals.”
But city and town officials, including those in Norwood, are keeping a close watch on Steward. Norwood Hospital is among the Caritas Christi properties acquired by Steward, along with Carney and St. Elizabeth’s Medical Center in Brighton, Good Samaritan Medical Center in Brockton, Saint Anne’s Hospital in Fall River, and Holy Family Hospital in Methuen.
“If anything was to transpire,” said Selectman Paul A. Bishop, “town government would get involved to make sure that Norwood Hospital remains in our community.”
Coakley’s recommendation on Oct. 6, 2010, was key to an Oct. 29 decision by Associate Justice Francis X. Spina of the Supreme Judicial Court of Massachusetts to permit the transfer of the six nonprofit Caritas hospitals to Boston-based Steward, a for-profit holding company created by New York private equity firm Cerberus Capital Management. Like other buyout firms, Cerberus typically moves to improve operations and boost the financial performance of companies it acquires before selling them for a profit. That usually happens within three to seven years.
In approving the Caritas transfer, Spina directed Steward to implement several ancillary agreements that were outlined as conditions of Coakley’s recommendation. Those deals, among other things, called for Steward to fund hospital employee pensions frozen by the Roman Catholic Archdiocese of Boston at the end of 2003, and to submit to five years of monitoring by the attorney general’s office, which otherwise regulates only nonprofits.
Most important to patients and employees, Steward agreed not to close or sell the Caritas hospitals for three years under any circumstances. The “no close’’ promise was extended to at least five years unless a particular hospital lost money for two consecutive years, monitors completed an 18-month review, and the hospital owner gave six months notice of its intentions.
Steward executives said they expected to lose money for the first two years, partly because of more than $400 million they invested in hospital renovations and capital equipment.
“This is exactly where we thought we’d be” financially, said Steward spokesman Murphy.
Figures released last month by the state Center for Health Information and Analysis showed half of the former Caritas hospitals were unprofitable through the second quarter of this year, including Carney, Norwood, and St. Elizabeth’s, which was close to breaking even.
Nonetheless, the hospital system has not given state regulators notice of any plans to close hospitals, according to Brad Puffer, a Coakley spokesman.
Steward’s track record has been mixed. Its state-backed Caritas buyout rescued financially weak hospitals that might otherwise have closed, and the company has created a more integrated low-cost community hospital model powered by better technology and a growing network of doctors. But so far at least, it hasn’t made good on the original promise by chief executive Ralph de la Torre to build a multistate community hospital system using its new model. Steward’s efforts to acquire hospitals in Rhode Island, Florida, and Maine, have all failed to come to fruition.
The hospital system also has grappled with management turnover. Steward replaced the presidents of both Boston hospitals and several other hospital presidents. In the most recent management change, Joshua Putter, at one time Steward’s chief operating officer and a top executive at its Copley Square headquarters, took an indefinite leave for personal reasons.
Putter was recruited from Health Management Associates, a national for-profit hospital chain based in Naples, Fla.
Other Steward hospital presidents also came from HMA, including Andy Davis at Carney, Emily Holliman at Norwood, and Kimberly Bassett at Steward’s Morton Hospital in Taunton.
So did Daniel Knell, who stepped down as Quincy Medical’s president in July after less than two years at the helm. Knell’s departure followed a tense one-day strike by the hospital’s nurses in April, and harsh findings from a state inspection in May that led to a temporary closure of the Quincy hospital’s psychiatric ward.
HMA, which agreed in July to be sold to another for-profit hospital company, Community Health Systems Inc., based in Franklin, Tenn., is currently the subject of a Securities and Exchange Commission investigation into its finances. There has been no indication the SEC inquiry involves any of the Steward executives recruited from HMA.