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The team now running Steward Health Care System — a large, privately held hospital chain that filed for bankruptcy court protection in May 2024 — is suing Dr. Ralph de la Torre, its former chief executive officer, and other individuals and companies in an effort to recoup about $1.4 billion in payments.
The current Steward management team received approval from Bankruptcy Court Judge Christopher Lopez Wednesday to use any proceeds from litigation to help fund efforts to liquidate Steward and emerge from Chapter 11 bankruptcy reorganization proceedings.
In addition to suing de la Torre and other company insiders, the Steward team is seeking $1.6 billion from insurers and creditors.
The backdrop: Steward is a Dallas-based company that owned 33 hospitals and employed 30,000 people at the time that it filed for bankruptcy in the U.S. Bankruptcy Court for the Southern District of Texas.
Related: Steward Health Care files for Chapter 11 bankruptcy protection
The company entered bankruptcy reporting that it faced $1.2 billion in funded lease obligations, $6.6 billion in unfunded lease obligations, and assets that were hard to value and could have a value of anywhere from $1 billion to $10 billion.
Since then, the team that took over management of the company has closed five hospitals and started putting most of the others in the hands of other parties. A hearing is scheduled for July 22, according to the case administration page.
The yacht: Steward paid a $111 million dividend to de la Torre and other company insiders in 2021, when Steward already had weak finances, according to the new Steward team.
About $81 million of the cash went to de la Torre, and de la Torre used $40 million of what he received to buy a yacht, according to court filings.
In September 2024, Sen. Bernie Sanders, an independent from Vermont, talked at a hearing of the Senate Health, Education, Labor and Pensions Committee about the media reports about the yacht.
The purchase of the yacht was part of an "overarching scheme to drain Steward of its assets," according to a complaint seeking the recoveries that the new Steward team filed with the bankruptcy court Tuesday.
De la Torre and the other executives named as defendants also arranged an ill-advised effort to pay $1.1 billion for a group of hospitals owned by Tenet Healthcare and a Medicare Advantage plan asset sale that led to about $134 million of the $194.5 million in proceeds being behind to de la Torre, other Steward insiders and an entity controlled by de la Torre, rather than to Steward, according to the complaint.
De la Torre's perspective: De la Torre rejected the allegations made in the new complaint.
"Dr. de la Torre disputes the allegations of wrongdoing and will vigorously defend himself against them," a de la Torre representative said via email.
De la Torre said in a suit against members of the Senate HELP Committee that he has been pilloried by the committee and others for unsuccessful efforts to cope with the same forces buffeting all U.S. hospitals.
De la Torre began working with a private equity firm to buy struggling hospitals and turn them around starting in 2010, and that strategy was working, de la Torre said in the complaint against the Senate HELP Committee.
"But Steward, like many other businesses, faced significant financial headwinds as a result of the COVID-19 pandemic," according to de la Torre's complaint, which was filed in the U.S. District Court for the District of Columbia. "Steward hospitals endured a sharp decline in elective patient visits in the face of significant cost increases — to say nothing of the physical, emotional, and mental toll on all Steward physicians and staff, including management."
The pandemic hurt Steward's revenue, de la Torre told the court.
"Steward has faced additional struggles in recent years as well, including a nationwide health care labor shortage and associated rising labor costs, rising fixed costs for equipment and supplies, in addition to severe inflationary pressures," de la Torre said. "And because most of Steward's patient service revenue is typically attributed to government-run health care programs, Steward is left with reimbursement rates far lower than that of non-government programs and those received by competing academic medical centers."
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