Steward Health Care System of Boston posted its first-ever profit in 2015, driven by a change in employee pension plans and a drop in expenses.
The private-equity-backed company, founded in 2010 to take over the struggling hospitals formerly run by the Archdiocese of Boston, including St. Elizabeth’s Medical Center and Carney Hospital, lost money in each of the four previous years. It had a $75 million operating loss in 2014. That reversed to an operating profit of more than $131 million in 2015, according to the company’s latest public filings.
The company’s financial statement shows a $132 million gain from a “pension settlement” in 2015.
Steward officials said they reduced pension expenses last year after contributing $300 million to cover the unfunded pension liability they inherited from the church.
“The fact that Steward has successfully cleared the hurdle of the prior debt and is now able to join a multi-employer plan with a lot of participants diffuses both the risks and the expenses significantly,” spokesman Jeff Hall said.
Without the pension changes, Steward would have lost about $1 million on operations last year, still an improvement from the previous year. Before taxes, the company said it recorded a $6.5 million operating profit, as its model of affordable community-based care attracted more patients.
Revenue grew about 1 percent to almost $2.2 billion last year.
Steward, backed by Cerberus Capital Management, is a rarity in Massachusetts, a private, for-profit health care provider; most other hospital systems are set up as nonprofits.
The company remains locked in a dispute with state officials over what financial information it must disclose. Its 2013 consolidated financial statements were submitted almost a year late. Steward has not submitted a financial statement for 2014, and its 2015 statement was submitted two months late, and with several pieces missing.
“The consolidated financial statement provided [for 2015] is missing certain footnotes, which were excluded through redactions,” said Andrew Jackmauh, a spokesman for the Center for Health Information and Analysis, or CHIA, a state agency that monitors the financial health of all Massachusetts hospitals. “We have requested that Steward provide the redacted information. We do not know yet when we will receive this information.”
CHIA has already levied more than $43,000 in fines against Steward for the violations — which Steward has not paid — and has asked the attorney general’s office to get involved.
“We are actively working to help the parties resolve this issue,” said Cyndi Roy Gonzalez, a spokeswoman for Attorney General Maura Healey.
At issue are financial statements that include profits and losses, cash flows, assets, debt, and other details about a company’s finances. CHIA collects this information as part of its role to monitor the health care industry and to keep the public and policy makers informed. In the past, Steward has resisted submitting certain information, arguing that it is proprietary.
Hall, the Steward spokesman, said the company and CHIA “are engaged in discussions regarding the details and formatting of prior and future financial submissions and are aiming to complete that process as quickly as possible.”
Steward reduced pension expenses last year after contributing $300 million to cover the unfunded pension liability it inherited from the Boston Archdiocese.
Like most private-equity firms, New York-based Cerberus prefers to keep much of the financial information about its holdings secret.
Since entering the market in 2010, Steward has become one of the largest health systems in the state, with nine hospitals. It shuttered Quincy Medical Center amid poor performance in 2014.
Hall said the company’s patient numbers are rising, citing a 9 percent increase in emergency room visits last year, and a 10 percent increase in outpatient surgeries. St. Anne’s Hospital in Fall River, Good Samaritan Medical Center in Brockton, and Norwood Hospital performed particularly well in 2015, he said.
And efforts to make the business more efficient and patient-friendly are paying off, Hall added. “Quality, convenience, and a growing physician network are major factors in more patients choosing Steward and the increasing financial stability Steward hospitals experienced in 2015.”
But the company, which employs about 17,000, also indicated that it will be difficult to continue making profits, citing ongoing challenges with reimbursements from both private insurers and the government programs Medicare and Medicaid.Priyanka Dayal McCluskey can be reached at firstname.lastname@example.org. Follow her on Twitter @priyanka_dayal.