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First bankruptcy, and now a federal investigation. It’s safe to say Steward Health Care is not having a great year so far.
A spokesperson for the Dallas-based health system confirmed Friday to Healthcare Brew that Steward is facing a federal probe by the Department of Justice (DOJ).
“Steward Health Care can confirm it is aware of and cooperating with an investigation by the US Department of Justice. As a matter of policy, Steward will have no further comment on this investigation as it remains ongoing,” spokesperson Deborah Chiaravalloti said in an emailed statement.
The health system has encountered a series of issues in recent months, including its landlord reporting in January that the company owed $50 million in back rent as of December 2023. The company filed for bankruptcy in May, and while UnitedHealth Group’s Optum had expressed interest in buying Steward’s physician group, it pulled out of the deal in late June. Optum has not publicly commented on the matter, according to the Boston Globe.
Arielle Trzcinski, principal healthcare analyst at Forrester, told Healthcare Dive that an ongoing regulatory review by a board in Massachusetts could have something to do with the decision to pull back.
Inside the investigation: CBS News reported on July 11 that the DOJ is investigating allegations of fraud and violations connected to the Foreign Corrupt Practices Act (FCPA) of 1977 following plans to operate three state-owned hospitals in Malta. Steward and the system’s executives have not been charged at this time, according to CBS.
The FCPA is an anti-bribery law that outlaws making bribe payments to foreign officials to receive or maintain business.
When asked for comment, Caroline Ferguson, public affairs specialist for the US Attorney’s Office for the District of Massachusetts, told Healthcare Brew that the DOJ doesn’t “confirm or deny investigations.”
History lesson: Steward’s issues have drawn much criticism over private equity (PE) in healthcare.
In 2010, PE firm Cerberus Capital Management acquired Boston-based nonprofit health system Caritas Christi for $895 million, changing its name and establishing Steward Health Care as a for-profit system. The Boston Globe reported in January that Steward’s financial issues created conditions that led to the death of a patient after some of the hospital’s life-saving medical equipment had been repossessed.
In a July 11 statement about the investigation, Massachusetts Sen. Ed Markey said that “Steward is just the latest example of corporate greed endangering our health system.”
“Steward must be investigated, and I hope the company and the corporate executives who facilitated Steward’s actions face consequences that reflect the lives, livelihoods, safety, and security that they stole from communities,” Markey said.
Correction 07/18/2024: This piece has been updated to reflect that the final purchase price of Caritas Christi was $895 million. The original price was $830 million.