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Steward accused by doctors of failing to make millions in payments

Carney Hospital in Dorchester is one of nine Massachusetts hospitals owned by Steward Health Care.
Carney Hospital in Dorchester is one of nine Massachusetts hospitals owned by Steward Health Care.Pat Greenhouse/Globe staff/File 2015/Globe Staff

When a group of doctors in Southeastern Massachusetts joined Steward Health Care System’s physician network five years ago, the partnership was supposed to help both organizations.

But now Steward and the doctors group, Compass Medical PC, are engaged in an ugly business dispute over millions of dollars in payments.

Compass has accused Steward of failing to pay bonuses to doctors and rents on office space and equipment. On Friday, the East Bridgewater-based doctors group sued Steward for more than $20 million in damages.

“We have worked for over two years to secure this reimbursement and have complied with every request made by Steward to supply needed information and data, and now for the good of our providers and patients, we must take this action,” Compass chief executive Jamie Barber said in a statement.

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Steward, which owns nine Massachusetts hospitals, shot back with the threat of its own lawsuit, accusing Compass of engaging in “deceptive financial practices with the objective of enriching itself at the expense of patients and Steward.”

Boston-based Steward said Barber and other Compass officials knowingly received at least $3.5 million more than they were owed from Steward. They said Compass executives refused to consult the Department of Justice about the matter and refused to settle the dispute.

Compass was affiliated with Partners HealthCare until decamping for Steward in 2012. At the time, Steward was still relatively new in Massachusetts, and it was working to scoop up doctors from competitors to expand its footprint.

Steward, backed by the private equity firm Cerberus Capital Management, was launched in 2010 when it acquired hospitals formerly run by the Archdiocese of Boston. It has grown since then, most recently by spending $304 million to buy eight hospitals in Ohio, Pennsylvania, and Florida in a deal that closed last week.

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In Massachusetts, Steward’s network includes about 3,500 physicians, including about 50 at Compass.

Through its contract with Steward, Compass is independently run, but it relies on the health system to manage its medical claims and pay doctors. Compass doctors refer patients to Steward hospitals and work with them to coordinate patients’ care. Such relationships are common in the industry, especially as consolidation among doctors and hospitals continues.

Compass’s lawsuit, filed in Suffolk Superior Court, centers on incentive payments that doctors can earn when they meet certain quality targets. Compass did not detail the quality targets, but these generally include measures such as making sure patients get regular physicals and cancer screenings, and helping patients with chronic diseases keep their symptoms under control.

Compass said Steward has refused to make incentive payments since 2013. Steward claimed the payments “would exceed the fair-market value for services rendered by Compass,” but it failed to provide information supporting that argument, according to Compass’s lawsuit.

Steward rejected those allegations and placed the blame on Compass and its CEO.

Herbert L. Holtz, a lawyer at the Boston firm Holtz & Reed LLP who represents Steward, described “an egregious pattern of greed” at Compass. He said Compass executives were paid $70 million in administrative fees over four years through their lucrative contract with Steward.

“They were well paid,” Holtz said in an interview. “They received an enormous amount of money. It’s ridiculous for them to now comport and claim that they were shorted.”

Steward said it would file suit against Compass later this week on allegations of fraud and breach of contract.

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Barber, the Compass CEO, rejected Steward’s assertions and said the company’s statements reflect “an alternate reality that bears no resemblance to any actual event.”

While Steward blamed Compass for withholding financial information, Barber said it was actually Steward that concealed important information.

“We look forward to justice being served through our legal system and will save our response to Steward’s baseless allegations for that venue,” Barber said.


Priyanka Dayal McCluskey
can be reached at priyanka.mccluskey@globe.com. Follow her on Twitter @priyanka_dayal.