Steward Health subject of DOJ fraud investigation as Senate committee launches probe into bankruptcy
In addition to the financial fiasco Steward Health Care is mired in, the Dallas-based health system is being investigated by federal prosecutors for allegations of fraud allegations and for potentially running afoul of the Foreign Corrupt Practices Act, according to reports from multiple news outlets.
A spokesperson for Steward confirmed that the health system was aware of and cooperating with an investigation by the Department of Justice but declined to further comment on the ongoing investigation.
CBS News first broke the story that prosecutors at the U.S. Attorney’s office in Boston had opened a criminal investigation into a deal Steward made in 2018 to run three state-owned hospitals in Malta.
The original 30-year contract signed in 2015 was between the Maltese government and a company called Vitals Global Healthcare Group. Vitals subsequently transferred the deal to Steward Health Care International, an entity formed in 2017 with Dr. Armin Ernst listed as its CEO in the Maltese business registry, according to Healthcare Dive, and Dr. Ralph de la Torre, Steward Health Care’s CEO, listed as the owner.
Steward reportedly bought Vitals Global Healthcare for 1 euro in early 2018. Dr. Ernst previously served as Vitals’ CEO.
In the ensuing years, Steward received more than 200 million euros to improve the three hospitals, records at Malta’s National Audit Office indicate, but Steward failed to meet reporting deadlines on its efforts to improve the facilities, according to a timeline Healthcare Dive published.
Steward also signed a contract in 2019 with a Swiss payroll company called Accutor to establish a “political support fund,” according to the timeline, and emails from Dr. Ernst authorized paying Accutor 100 thousand euros per month. Times of Malta reported last month that “senior executives at Steward” signed off on payments to Accutor totaling roughly 7.6 million euros, and that Accutor is suspected of funneling bribes to Malta’s former prime minister, Joseph Muscat.
Times of Malta reported that Steward ended its contracts with Accutor in August 2020 but then began making payments to another Swiss company, Canberra International. According to the Times article, Steward paid Canberra approximately 450,000 euros between 2021 and 2022.
In early 2023, a Maltese court annulled the contract between Steward and the government. In its ruling, according to Healthcare Dive, the court said Steward had acted to “unjustly enrich itself at the expense of citizens” and had engaged in “possibly criminal behavior.”
In May, Muscat and two employees of Steward Health Care International — an attorney and an IT manager — were among approximately two dozen individuals and companies arraigned in a Maltese court in connection with the hospital deal. The charges against Muscat included money laundering, soliciting bribes, and setting up a criminal association, according to Reuters; Muscat pleaded not guilty.
CBS News pointed out that “neither Steward nor its executives” have been charged in the Maltese investigation.
Meanwhile, the Senate Health Committee is launching an investigation into Steward Health Care’s bankruptcy. The committee’s chair, Bernie Sanders, I-Vt., and ranking member, Bill Cassidy, R-La., said Thursday the committee would vote this coming week on whether to issue a subpoena to Dr. de la Torre compelling him to testify at a hearing on Sept. 12, The Hill reported.
Citing bankruptcy documents, Healthcare Dive reported that executives at Steward “issued themselves multimillion-dollar payouts” in the months before the health system filed for Chapter 11 bankruptcy protection, even as vendors filed lawsuits claiming they had not been paid.
Steward has pushed back the timeline for selling its hospitals multiple times. The Boston Globe reported last week that patients and health care providers are “fleeing” Steward’s hospitals in Massachusetts as the bankruptcy proceedings are drawn out.
Our Take: The Steward saga just keeps getting uglier.
As more information comes to light, it seems as if Dr. de la Torre might replace Martin Shkreli as the poster boy for corporate greed — although the doctor is only one participant in what appears to be a sizable international network of greedy individuals and organizations.
And while Shkreli’s actions were nothing short of reprehensible, Dr. de la Torre has failed miserably to uphold the Hippocratic Oath he took when he became a physician. He and his C-suite colleagues at Steward (and Steward International) have inflicted harm on countless people, and for now there’s no end in sight.
While the first order of business is to address the looming hospital closures in Massachusetts, we’re pleased to see that the Senate intends to dig into how the Steward situation unfolded. It could be years before legislation is passed to prevent a similar scenario, but that’s what needs to happen.
Steward and its executives may not be held accountable for whatever role they may have had in the Malta scheme, but we don’t see any way they can wiggle out of what has taken place here.
What else you need to know
An attempted software update by cybersecurity firm CrowdStrike caused a widespread IT outage on Friday that crippled health systems, banks, airlines, media outlets, and other businesses worldwide, as well as 911 emergency systems in multiple states. CrowdStrike said in a statement that the outage was caused by a defect in a Falcon content update “for Windows hosts,” and that Mac and Linux systems had not been affected. Several of the nation’s largest health systems postponed non-urgent surgeries and procedures, with the outage primarily disrupting EHRs and communication systems used for scheduling, billing, and check-in processes. CrowdStrike said it identified and isolated the issue “quickly” and a fix had been deployed.
Although in-house IT teams were able to address the situation at many businesses, and systems had begun to recover by Friday afternoon, CrowdStrike CEO George Kurtz acknowledged that the company would need to work individually with some customers to restore functionality. The Cybersecurity and Infrastructure Security Agency (CISA) and CrowdStrike cautioned that “threat actors” could exploit the situation by attempting to gain access to IT systems so they could carry out “malicious activity.”
Providence will have a new president and CEO on Jan. 1 when Erik Wexler, who has served as chief operating officer at the Renton, Wash.-based health system since 2022, takes on the dual roles. Before joining Providence in 2016, Wexler was with Tenet Healthcare, where he was chief executive of Tenet’s northeast region, according to the announcement. He has also held leadership positions at Vanguard Health Systems, LifeBridge Health, and Northwest Hospital. Dr. Rod Hochman, Providence’s current CEO, announced in May that he would retire at the end of the year. The not-for-profit Catholic health system has 51 hospitals and more than 1,000 physician clinics across seven states.
Pfizer’s tafamidis, the only drug approved for a rare and sometimes fatal heart condition, would need to have its list price discounted 96% to be considered cost effective, Fierce Pharma reported, citing a draft report by the Institute for Clinical and Economic Review (ICER). Sold under the brand names Vyndamax and Vyndaqel (tafamidis meglumine), the drug was approved by the FDA in 2019 for treating cardiomyopathy caused by transthyretin mediated amyloidosis, or ATTR-CM. Tafamidis’ annual wholesale acquisition cost is nearly $268,000, ICER’s report shows, and the drug’s net price after discounts is approximately $194,200.
ICER conducted two analyses of transthyretin stabilizers to calculate the annual price needed to meet commonly accepted cost-effectiveness thresholds — one for quality-adjusted life year (QALY) gained and the other for equal value of life years (evLY) gained. The results of the QALY analysis indicated that the drugs “should cost below or between $5,200 and $10,400 per year,” according to Fierce Pharma. Pfizer told Fierce Pharma in a statement that while the use of QALY as a cost-effectiveness measure is well-established, it “poses some challenges and bias” in rare diseases, “particularly against elderly populations suffering from serious diseases who have a shorter life expectancy and less time to benefit from treatment.”
UnitedHealthcare, Regence BlueShield, Premera Blue Cross, and Kaiser Permanente Washington are among a group of eight payers that signed an agreement to improve access to high-quality primary care in the state of Washington. The group, known as the Washington Multi-payer Collaborative, signed a memorandum of understanding outlining policies that “aim to balance alignment of alternative payment models with flexibility to accommodate payer-specific constraints,” according to a press release from the Washington State Health Care Authority. The state agency said a primary policy goal is to shift from the fee-for-service payment model toward “a framework that incentivizes higher-quality care.” Rounding out the collaborative are Community Health Plan of WA, Coordinated Care, Molina Healthcare of Washington, and Wellpoint Washington.
Yale New Haven Health System and Yale Medicine launched the first mobile retail pharmacy and clinic in the U.S. earlier this month. Connecticut became the first state to legalize mobile retail pharmacy services last year. The goal of the Yale project, known as InMOTION, is to “make better health accessible to anyone disconnected from the health care system for any reason,” the organizations noted in a news article. They expect InMOTION to reduce disparity gaps in the communities the mobile pharmacy and clinic will serve throughout Connecticut. In addition to filling prescriptions and administering vaccinations, the mobile unit will provide clinical care — including both primary care health services and care for chronic diseases — through telehealth and in-person visits. Other services include phlebotomy services, specialty services for wound care and infectious diseases, addition services, mental health care, and social service assistance for housing applications and financial navigation.
Nancy Howell Agee will retire as Carilion Clinic’s CEO in September. She has been with the Roanoke, Va.-based health system since 1973, starting her career there as a nurse. She became Carilion Clinic’s seventh CEO and president in 2011, according to the announcement. Steve Arner, who served as chief operating officer for 11 years before being promoted to president last year, will take on the additional role of CEO on Oct. 1. Agee will serve as CEO emeritus until September 2025.
What we’re reading
Pathways to Governing AI Technologies in Healthcare. Stanford University HAI, 7.15.24
The Ethics of Relational AI — Expanding and Implementing the Belmont Principles. NEJM, 7.13.24 (audio interview)
Behavioral Economics to Enhance Food Is Medicine Programs. JAMA Health Forum, 7.12.24
