Eight Florida hospitals owned by Steward Health Care are getting new owners and management after the Dallas-based provider sold them off in bankruptcy proceedings. Steward, which had 30 hospitals nationally, reported $9 billion in debt.
Steward CEO Ralph de la Torre reportedly is the subject of a federal investigation into allegations he raided company accounts to underwrite lavish travel and other personal expenses. Records indicate that executives received millions of dollars in pay and bonuses as the company failed to pay vendors and landlords.
Regardless of any malfeasance, Florida Hospital Association President Mary Mayhew says Steward’s financial troubles are a harbinger of trouble in the industry. Operating costs have skyrocketed since the COVID-19 pandemic, led by a 35% jump in labor costs, spikes in pharmaceuticals and overall inflation, she says. “That’s not sustainable. If you already have strained cash flow … you can’t weather a storm like that for very long.” That’s especially true for hospitals whose patients rely on Medicare and Medicaid. Medicaid pays about 55 cents on the dollar, and private insurers have not adjusted their contracts to reflect hospitals’ increasing expenses.
Those concerns didn’t discourage Orlando Health from buying Melbourne Regional Medical Center, Rockledge Regional Medical Center and Sebastian River Medical Center. It promises to quickly restore stability to the three hospitals. “We have seen repeatedly that when Orlando Health enters a new area, patient care improves, relationships with physicians and team members grow stronger and surrounding communities benefit,” Orlando Health president and CEO David Strong said in a statement.
The first priority, says Ohme Entin, senior vice president for Orlando Health East Region, is to meet with patients, doctors and other employees at the former Steward properties “to learn how they feel about the hospital or health system” and understand their needs and learn about existing strengths.
A large system like Orlando Health can consolidate “back office” operations, such as payroll, billing and IT, Mayhew says.
The path might be more challenging for the five hospitals in Miami-Dade and Broward counties — Coral Gables Hospital, Hialeah Hospital, North Shore Medical Center and Palmetto General Hospital in Miami-Dade County and Florida Medical Center in Broward, all of which have sizeable Medicaidcovered patient bases and already were struggling financially.
Medical Properties Trust, which essentially became Steward’s landlord three years ago, is buying the hospitals and hiring new management, Nevada-based Healthcare Systems of America. Some may need significant maintenance, Mayhew says.
All of this can add stress to surrounding medical centers, which may have to absorb patients from the Steward facilities. “You can’t just flip a switch and expand capacity,” she says. She’s confident nearby hospitals and health systems saw the problem developing and have taken steps to anticipate a possible influx of patients.