Steward CEO Sues Senators Day Before He Steps Down

Dive Brief:

• Ralph de la Torre will resign from his position as CEO and chairman of Steward Health Care’s board effective Tuesday, a company spokesperson confirmed to Healthcare Dive. 
• The news comes days after the Senate voted to refer de la Torre for prosecution on criminal contempt charges after he failed to testify before a Senate committee about his alleged role in Steward’s financial collapse.
• De la Torre is challenging those charges — and the subpoena itself — in court. The executive filed a lawsuit on Monday to quash the subpoena and render the Senate’s vote on contempt charges invalid.

Dive Insight:

De la Torre agreed to step down on Sept. 19, according to a Steward spokesperson — the same day that the Senate’s Health, Education, Labor and Pensions committee voted to refer de la Torre to the full Senate for contempt charges. 

The health system has offered no details on who will step into de la Torre’s role or the timeline to replace him.

The powerful congressional committee has increased pressure on de la Torre to face questions about his management of Steward since the spring, inviting him to attend field hearings about the health system’s finances. When the CEO repeatedly didn’t show up, senators subpoenaed de la Torre in July.

Lawmakers are particularly keen for de la Torre to square his own wealth and spending against his company’s cash shortage.

While the CEO amassed a portfolio of luxury items in the years prior to Steward declaring bankruptcy — including multiple private jets, yachts and luxury properties abroad — Steward often didn’t have cash on hand to pay its bills. Payment delays led to supply shortages that at times impacted patient care, according to former employees.

Still, de la Torre declined to appear before Congress, saying it would be improper to testify amid ongoing bankruptcy proceedings and citing his Fifth Amendment right against self-incrimination in testimony.

Lawmakers found his logic unconvincing. Last week, the full Senate voted to send on criminal contempt charges to the Department of Justice. If found guilty, de la Torre could face fines or imprisonment.

In response, de la Torre announced he would sue the HELP committee, and is asking the court to reject its previous subpoena.

“No one can be compelled to testify when they exercise this right under these circumstances,” Bill Burck, de la Torre’s attorney, said in a statement. “Nor does the Constitution permit Congress to punish and intimidate him, or any other American, for exercising these rights. The Constitution, not the Senate, reigns supreme in this country.” 

De la Torre has sat at the helm of Steward since it was first created in 2010 and helped craft the company’s vision of offering local and affordable care.

But even before Steward, de la Torre — who previously served as the CEO of Massachusetts-based Caritas Christi Health Care — enjoyed an unusual level of political support and visibility for a health system CEO.

On a campaign stop in 2010, former President Barrack Obama stopped by de la Torre’s home to discuss the future of healthcare and Boston Magazine named him one of the city’s most influential people in 2012.

At its prime, de la Torre built Steward into a 39-hospital network that spanned eight states and three countries.

However, a series of financial maneuvers that allowed the health system to rapidly expand — including selling the hospitals’ underlying real estate in a series of sale-leaseback transactions — also left the company burdened with high debt levels and strapped for cash.

The shine around de la Torre and Steward began to wear off as it became increasingly clear that the health system was not performing as expected. In May, the health system filed for bankruptcy and has spent the months since rapidly pairing down its hospital portfolio.

In Massachusetts, where de la Torre launched his career, Steward sold six hospitals this month at an approximate $17 million net loss.

Attorneys for the system called the deal the best one on the table.