Hospital chain Steward sues to keep finances private, challenges agency’s powers
Steward Health Care System, escalating a long-running dispute with state officials, has filed a lawsuit against a Massachusetts agency for demanding details about the company’s operations.
Boston-based Steward, a for-profit company that owns nine Massachusetts hospitals, has failed to submit several years’ financial data to the state, racking up more than $300,000 in fines for its lack of transparency. Steward has not paid the fines.
In a lawsuit filed Friday in Suffolk Superior Court, the company shot back at state officials. Steward argued that the Center for Health Information and Analysis, which regularly collects financial information from Massachusetts hospital systems, has no right to demand sensitive and proprietary information about Steward.
“CHIA has, for four successive years, demanded that Steward hand over financial statements containing confidential business information that CHIA has no statutory authority to collect and no apparent will to keep private,” the company said in court documents.
Steward also accused the agency of improperly giving some of the company’s past financial statements to CommonWealth magazine and the Globe, which have reported on Steward’s financial condition.
The suit notes Steward’s unique position in the Massachusetts market, where most of the health care providers are nonprofits, with the bulk of their business located in the state. Steward is a privately held for-profit (backed by a New York private equity fund), and as of this year, much of its business is outside of Massachusetts.
Because it isn’t publicly held, Steward does not have to detail its finances for the US Securities and Exchange Commission.
The company said it doesn’t want to disclose its full financial statements because “they can contain sensitive, proprietary business information related to long-term debt, relationships with investors, retirement plans, and significant transactions that is not otherwise publicly available.
“Steward keeps information contained in the notes [of its financial statements] confidential because releasing the notes would cause harm to Steward,” the company said in its complaint.
The CHIA treats financial statements from Steward and other companies as public documents and makes them available to reporters and others upon request. (Other information that the CHIA collects from health care providers is already posted online.)
The agency gathers data about hospital revenues, profits and losses, debt, and other details as part of its charge to monitor the financial condition of the Massachusetts hospital industry. Massachusetts has some of the strictest reporting requirements for health care providers, part of a 2012 law that aimed to tackle health care costs, in part by requiring more transparency.
Steward is the only company that has repeatedly failed to submit companywide financial statements to the state.
A CHIA spokesman said the agency cannot comment on ongoing litigation and referred questions to Attorney General Maura Healey’s office, which represents state agencies in legal matters.
A spokeswoman for Healey’s office declined to comment Tuesday, saying the office had not yet received the lawsuit.
Ruselle W. Robinson, a health care lawyer at Posternak Blankstein & Lund LLP who is not involved in the case, said the court will have to consider the authority granted to the CHIA under state law.
“Private companies, they want to keep their information private,” he said. “There’s information that they make available to their accountants that they wouldn’t want to be in the public eye.
“But that comes up against the CHIA mandate, which is to collect all of this financial information because the Commonwealth has decided this is an important public policy issue,” he added.
Steward completed two major acquisitions this year that roughly quadrupled its size. The company, launched in 2010 to acquire the troubled Massachusetts hospitals formerly run by the Archdiocese of Boston, now runs more hospitals outside of Massachusetts than inside.
Last month, Steward took over IASIS Healthcare of Franklin, Tenn., and its hospitals in Utah, Arizona, Colorado, Texas, Arkansas, and Louisiana, in a $2 billion deal. That followed the purchase in May of eight hospitals from Community Health Systems Inc.
Steward said its network now includes three dozen hospitals in 10 states, as well as physician groups, a home health care service, and more. A real estate investment trust, Medical Properties Trust Inc., owns the bulk of Steward’s hospital properties.
Steward’s local hospitals include St. Elizabeth’s Medical Center and Carney Hospital in Boston.
Kenneth S. Leonetti, a lawyer at Foley Hoag LLP who filed Steward’s suit against the CHIA, said the company has submitted the required information about its Massachusetts hospitals.
But, he said in a statement, “Steward’s physician practice groups, home health care service, and mobile medical imaging services are not hospitals and like other private organizations providing those services, the suit maintains those are not under the purview of CHIA.”
Steward filed heavily redacted financial statements for 2014 and 2015, and it has not produced any figures for 2016, according to the CHIA.
Since July 2016, the attorney general’s office has worked with the CHIA to try to reach an agreement with Steward over its financial disclosures. The agency has continued to slap fines on Steward for its delinquent filings, at $1,000 a week for each late filing.
While Steward disputes the fines and hasn’t paid them, the agency recouped more than $50,000 from funds another state agency owed to the company. Steward called this an “illegal intercept.”
Steward is asking the court to return that money. It also wants the court to rule that the CHIA doesn’t have the authority to demand companywide financial statements or to impose fines when Steward refuses to provide them.