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Watching For Answers As Steward Expands

(Source: Mass. Attorney General's report)
(Source: Mass. Attorney General's report)

Attorney General Martha Coakley issued an initial report last week on her office's monitoring of Steward Health Care System, the for-profit chain that has quickly expanded recently to become the state's second-biggest care provider — and says it can offer high-quality care at lower cost.

That report has fed into two freshly updated overviews of Steward and its place in the metamorphosing Massachusetts health care system:

From Rob Weisman, in Sunday's Boston Globe: Steward reshapes Mass. health care business, with a sub-head: For-profit hospital chain is growing fast; cutting costs with tough management, innovation.

He writes that thus far, Steward has "lost tens of millions of dollars. But it has also assembled a formidable network of 11 hospitals with nearly 2,100 beds, second only to the giant Partners HealthCare System. Steward says it is forging a lower-cost 'community care' model, drawing patients from expensive Boston teaching hospitals. It is forcing every other player in the medical business to reassess its own strategy."

Will Steward reach its goals and make medical care cheaper while making a profit for Steward? That, Rob writes, "remains an open question."

And Paul Levy, former chief of Beth Israel Deaconess Medical Center, on his Not Running A Hospital blog here, focuses in part on whether Steward will achieve the operating efficiencies it seeks. He writes of Steward:

This is the big for-profit system, owned by private equity firm Cerberus, which acquired it from the former Caritas Christi system.  Tongues were wagging recently when the Attorney General issued her first report on this system, showing operating losses in its first year of ownership.

For example, a colleague who studies municipal bonds said, "We are sitting here in tax-exempt bond land saying 'What was Cerberus thinking?' and 'How long are they going to stick it out, but on the other hand, what can they do, is somebody else going to buy them out at this point?' All very interesting, especially since the for-profit guys are so confident that they can play the game better. Perhaps not always."

Not so fast.  Don't jump to conclusions.  The report only covered operations for the year ending September 30, 2011. And remember that operating losses on the income statement are not the main concern for a private equity firm.  Cash flow is what matters, earnings before depreciation and taxes.  Depreciation is a non-cash expense.  Taxes are subject to all kinds of IRS rules and loopholes.

Here at CommonHealth, the question we tend to hear from readers is not whether Steward will succeed financially. It's whether Steward's efforts to lower costs could possibly translate into worse care for them. In other words: Should I be scared? (And by the way, all hospitals are trying to lower costs these days, so that question could be asked across the board.)

The Globe piece mentions complaints from nurses about lowered staffing levels, but nothing about complaints from patients. I just combed through the entire attorney general's report and saw nothing about patient complaints either. Perhaps all is well. Perhaps it's too early. But bottom line is that as Steward expands, isn't that the question we most want answered?

Readers of health care tea leaves, do you see any cause for concern or rejoicing in the attorney general's report?

This program aired on February 4, 2013. The audio for this program is not available.

Headshot of Carey Goldberg

Carey Goldberg Editor, CommonHealth
Carey Goldberg is the editor of WBUR's CommonHealth section.

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