Dive Brief:
- Bankrupt Steward Health Care is suing its former CEO Ralph de la Torre, alleging he and other former health system leaders “pilfered” the company’s assets and led to its financial decline.
- In a lawsuit filed Tuesday in Bankruptcy Court for the Southern District of Texas, the provider argued de la Torre and some former board members “operated Steward with the aim of enriching themselves at the expense of the Company, its creditors, and the patients and communities that Steward served.”
- The health system, which filed for bankruptcy last year, seeks to recoup nearly $1.4 billion from de la Torre and the other defendants.
Dive Insight:
Steward’s bankruptcy is one of the largest provider restructurings in decades.
The filing sent the Dallas-based health system on a monthslong push to sell off dozens of hospitals and other assets, leaving some facilities to shut their doors after failing to find buyers.
Thousands of jobs were lost after five Steward hospitals shut down, and the closures strained local healthcare systems, according to a report published this spring by the Private Equity Stakeholder Project.
The bankruptcy also sparked the ire of lawmakers, who raised concerns about access to care in communities served by Steward as well as the health system’s financial practices in the run-up to its collapse.
De la Torre was called before the Senate last year to testify about Steward’s bankruptcy, but he failed to appear and was held in contempt for ignoring a congressional subpoena. De la Torre eventually resigned from his position as Steward CEO and chairman of the health system’s board last fall.
Now, he and other former Steward officers are facing a lawsuit from the system, alleging they mismanaged the health system to boost their own finances. De la Torre couldn’t be reached for comment by Healthcare Dive by press time. In a comment to Bloomberg Law Wednesday, a spokesperson for de la Torre said he “disputes the allegations of wrongdoing.”
The case centers around three transactions executed from April 2020 through November 2022. In one deal, de la Torre allegedly orchestrated a $111 million dividend paid out to some of the defendants, even at a time when the health system was “insolvent,” according to the lawsuit.
The case also argues a 2021 purchase of five Miami-area hospitals and their associated physician practices from Tenet Healthcare — a for-profit health system also named in the suit — cost Steward $1.1 billion, above the facilities’ value at $895 million.
Steward alleged the high price was “based on de la Torre’s personal desire to build a hospital empire in the Miami area, rather than on any independent financial analysis.” Tenet did not respond to a request for comment by press time.
Additionally, Steward claimed a third deal negotiated by de la Torre, where the health system sold its value-based care assets to medical center operator CareMax, ended up funneling the sale’s proceeds back to a separate entity controlled by the defendants.
Late last year, CareMax also filed for bankruptcy, saying it was dragged down by Steward’s collapse, given it served as the exclusive value-based managed service organization across Steward’s network.
