45Bloomberg Businessweek August 10, 2020PHOTOS: PREVIOUS PAGE: ST. ELIZABETH’S: GETTY IMAGES. THIS PAGE: DE LA TORRE: MICHAEL NAGLE/BLOOMBERG.
DATA:MASSACHUSETTSHEALTH&HOSPITALASSOCIATIONhospitalsreportthattheyalwaysgothelpassoonasthey
wanted.Overall,theCMSgiveslowtomiddlingqualityratings
toSteward’shospitals,inpartbecausetheyhavemorepatients
whohavetobereadmittedafterdischarge.
Stewardsaysitsmortalityrateis betterthanexpectedbased
ontheunderlyinghealthofthepatientsit treatsandthatit’s
improvedsincethetakeover.Thecompanyalsocitesdatashow-
ingthatsince 2016 itshospitalshaveimprovedtheirpatient
safetyindex,whichmeasureshowwellhospitalsavoida collec-
tionof 10 seriouscomplications.Stewardnotesthatitshospi-
talshavewonawardsfromLeapfrogandHealthgrades,another
ratingcompany,forservicessuchascardiaccare.
Ananalysisof 2019 Massachusettshospitalassociationdata
showspatientsinmostStewardadultcareunitsonaverage
receivelesstimeindirectcarefromnursesandaidescom-
paredwiththoseinsimilar-sizedhospitals.InGoodSamaritan’s
ICU,patientsreceivedroughlyfourfewerhoursa dayofcare.
Stewardsaysindustrydatacan’tbeusedfairlytocomparehos-
pitalsonstaffing,becauseinstitutionsmaynotbereportingcon-
sistently,makingit “skewedagainstSteward.”PatriciaNoga,the
association’svicepresidentofclinicalaffairs,sayshergroup
trainshospitalofficialsonwhattoincludeandasksthemto
attesttothedata’saccuracy.
Throughtheirunion,nursesfiledhundredsofunsafestaffing
reportswithStewardin 2019 andsofarin2020.Massachusetts
NursesAssociationdocumentstendtoclaimthatshiftsare
downa nurse,orthatnurseslackassistants,includingaidesfor
patientsatriskoffalling.“Patientshadtowaitexcessivetimefor
interventionsincludingmeds,toileting,”oneGoodSamaritan
nursewrotelastSeptember.Patientswere“inhallwayswith-
outmonitoringasbedswerefull.”
Attimes,nursessay,they’reforcedintoovertimeevenafter
12-hourshifts,leavingthemexhausted.Often,theysay,the
patientsaresosickthattheyneedmorethanminimumlevels
ofstaffing.“Frequently,I’mnotperformingthejobuptostan-
dard,”saysStephanieHinsvark,a St.Elizabeth’snurse.“Ifeel
likeI’mfailingmypatients.”
StrugglingwithoverwhelmingnumbersofCovid-19patients
atthepeakofthepandemicinthespring,nursessayshort-
staffing, especially a lack of aides, increased their exposure to
the virus. Lisa Mancuso, a nurse at St. Elizabeth’s for 37 years,
contracted Covid-19 in May. Although she recovered, she quit
her job in June. Mancuso says the church prized patient care,
while Steward focuses on profit. “They’re pretty much all
about the money,’’ she says. “They made that clear over and
over again over the last 10 years. Their M.O. is take care of
corporate first. Then, take care of everything else—second,
third, and fourth.”
Joseph Weinstein, Steward’s chief medical officer, says the
company is working to lower readmission rates through bet-
ter follow-up with patients. “We do not cut corners on staffing,”
Weinstein says. “I will be emphatic on that one.” Steward says
the unsafe-staffing reports are a union strategy to gain lever-
age, rather than indications of serious shortcomings. The com-
plaints can reflect unusually busy nights, a spokesman says,addingthatduringtheCovidcrisis,thecompanyflewinout-of-
town nurses to handle the surge in virus cases. Steward says it
hassupportforitseffortsfromotherlaborgroups.TimFoley,
executivevicepresidentof1199SEIUUnitedHeathCareWorkers
East,whichrepresentsMassachusettsnursingassistants, house-
keepers,andothers,creditsthecompanyforcooperating with
workersandkeepingstrugglinghospitalsafloat.ovid-19 has exposed the weaknesses of the entire U.S.
hospital industry. Medical centers rely on profitable
elective surgery to offset the losses they take on many
lines of business, including treating poor patients. In
May the American Hospital Association estimated that hospi-
tals and health systems lost $203 billion from March through
June,becauseofthecostsassociatedwith
treatingpatientswiththeviruscombined
withtheinability to treat others.
Steward was no exception, but its fi-
nances had deteriorated long before the
crisis.Cerberusindicatedasmuchtoin-
vestorslastyear.Ina yearendupdate,
theinvestment firm described Steward’s
liquidity, or ability to raise cash eas-
ily to meet obligations, as “on watch.”
Previously,Cerberus had “no concerns.” (In a statement,
Cerberus said that “at no time was the Steward investment
viewed as at risk.”) More recently, the firm told investors the
Covid crisis could cost Steward $500 million.
The company got help from U.S. taxpayers to get through
the pandemic. It received at least $400 million in loans from a
federal health program and secured a $105 million U.S. grant.
Then in May, to stabilize its finances, Steward agreed to sell an
additional $400 million worth of property, according to a con-
fidential letter to investors. At the same time, Cerberus made
a move to protect its remaining investment. In June, Steward
announced the outline of a deal: The private equity firm trans-
ferred a controlling interest to a management team of Steward
doctors. Cerberus said it was ceding control on “a high note,”
calling its investment “a success story.”
Cerberus hasn’t cut all ties. It exchanged its stock in Steward
for a kind of bond. Steward now owes Cerberus $350 million
through a note due in five years. Cerberus says the note puts
its investors in a more “secure place in the capital structure.”
Inessence,Cerberusis hedging.If Stewardweretoheadto
bankruptcy,it willbebettertobea bondholderthana stock-
holder—equityisfrequentlywipedout.Cerberussaysthe
transactionensuresthatStewardhas“unfetteredaccess to
capital” in the Covid crisis and wasn’t motivated by concerns
about bankruptcy.
If Steward trudges on, Cerberus will collect another $350 mil-
lion when Steward repays the note, plus interest. And if Steward
stabilizes its finances and even thrives? Cerberus can convert
the note into a 37.5% equity stake. So, whether or not Steward’s
nurses, doctors, and patients prosper, or its vendors get paid,
Cerberus may yet have another big payday. <BW>De la Torre