‘Elaborate Ponzi scheme.’ CEO of Miami-area hospitals to get subpoena, part of new probe

A U.S. Senate committee is launching an inquiry into the bankruptcy of Steward Health Care System, which runs hospitals in Florida and is already under federal investigation for possible corruption.

And Steward’s CEO Dr. Ralph de la Torre is in the hot seat.

The Senate’s Health, Education, Labor and Pensions committee voted on Thursday to subpoena the hospital executive to testify in front of Congress in September about the healthcare system’s financial crisis.

Senators on the committee say the CEO has ignored requests to voluntarily testify. Now, he’ll have no choice but to show up or risk a hefty fine and possible jail time.

“It is time for Dr. de la Torre to get off of his yacht and explain to Congress the financial chicanery which made him wealthy while the hospitals he managed went bankrupt,” U.S. Sen. Bernie Sanders of Vermont, who chairs the committee, said at the start of Thursday’s meeting.

Steward Health Care — considered to be the largest physician-owned healthcare network in the U.S with 31 hospitals in the country, including five in South Florida — filed for bankruptcy protection under Chapter 11 in May with $9 billion in debt. Sanders called the bankruptcy a “result of Dr. de la Torre’s elaborate Ponzi scheme.”

“Steward Health Care will address the subpoena with the appropriate HELP Committee staff,” Steward Health spokesperson Josephine Martin told the Miami Herald Friday in an emailed statement. “We understand the desire for increased transparency around our journey and path forward.”

She did not answer whether de la Torre plans to attend the Sept. 12 hearing.

What happened in the Senate committee

On Thursday, the Senate committee in a bipartisan vote of 20-1 agreed to launch an investigation into the bankruptcy of Steward Health Care. And for the first time since 1981, the committee voted to issue a subpoena in order to get de la Torre to testify. The subpoena vote was 16-4.

The Senate committee’s probe comes as Steward Health is also under federal investigation for possible violations of the Foreign Corrupt Practices Act, which prohibits U.S. citizens and companies from committing bribery and other corruption overseas in order to obtain or retain business. The investigation is related to the public-private partnership Steward made with Malta, an island in Southern Europe, to manage some of its state-run hospitals, according to Sen. Bill Cassidy of Louisiana, a member of the Senate committee. Steward is under a similar criminal investigation in Malta.

Steward Health has previously told the Miami Herald that it is cooperating with the U.S. Department of Justice investigation.

Steward Health Care and its CEO have faced criticism over financial deals and the handling of hospitals, which have languished while Steward’s executives made millions. Doctors and nurses at Steward’s hospitals have seen cutbacks, layoffs and problems with supplies, equipment and delayed payments to vendors and workers, including in South Florida. Some hospitals have closed.

“All I can say to Dr. de la Torre is: You cannot treat communities as expendable. You are accountable. Your day of reckoning is going to arrive here on Sept. 12,” said Sen. Edward Markey of Massachusetts, a subcommittee chair.

In Florida, Steward owns eight hospitals and five are in Miami-Dade and Broward counties. In South Florida, Steward’s hospitals are Palmetto General in Hialeah, Coral Gables Hospital, Hialeah Hospital, Florida Medical Center in Lauderdale Lakes and North Shore Medical Center in North Miami-Dade, which is ground zero of Steward’s financial crisis. Sanders alluded to North Shore’s troubles during his speech.

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North Shore this year has seen a series of cutbacks and layoffs, including the shutdown of its behavioral health, neonatal and maternity services, as the Miami Herald has reported. The FDA this year also ordered the hospital to stop performing mammograms after a review found images taken in the past two years did not meet image quality standards.

“This is not just about Dr. de la Torre. Cerberus, the private equity firm he partnered with, made an $800 million profit from its investments in Steward Health Care. Where did that money go?” Sanders said, chiding the executive for purchasing luxury boats and jets while his hospitals struggled financially. “Other than Dr. de la Torre, who else benefited financially from these financial schemes? Those are just some of the questions we will be asking.”

Steward Health, in its statement to the Miami Herald, doubled down on Steward’s decision to voluntarily file for bankruptcy under Chapter 11 and how it is a detailed and public process.

Two independent patient care ombudsman appointed by a bankruptcy court trustee “have issued reports concluding that all Steward hospitals are safe for patient care,” Martin, the Steward spokesperson, told the Herald by email.

Suzanne Koenig, one of the patient care ombudsman appointed by the U.S. Trustee to represent patients and monitor care at Steward’s hospitals in Miami-Dade County and other places, recently filed a report in court describing her visits to the hospitals.

Koenig said that while the hospitals have staffing challenges and broken equipment that need to be replaced or repaired, she “does not believe the security, safety or care of the hospitals patients are presently at risk.”

The healthcare giant is in the process of trying to sell all of its hospitals, which remain open, to help thin out debt during its Chapter 11 restructuring process. So far, all of its Massachusetts hospitals have reportedly received bids.