The Facts - Dr. Ralph De La Torre

Dr. de la Torre made more money as a heart surgeon than he did during his first few years as a corporate CEO. In addition, since 2020, Dr. de la Torre has invested more into Steward Health Care – professionally and personally – than he has taken out of it, unlike Cerberus Capital Management, which in the last four years of its ownership monetized approximately $1.1 billion from Steward, resulting in $800 million profit for its investors.

In 2020, when Covid-19 was first striking Massachusetts, Dr. de la Torre guaranteed a $200 million loan with certain personal assets – the proceeds of which were used by Steward to maintain services and prevent Cerberus from implementing a bankruptcy strategy.

Dr. de la Torre’s compensation, even including the use of a plane, is still well below market as determined by a third-party independent compensation consultant.

Furthermore, Dr. de la Torre did everything in his power to help Steward Health Care overcome numerous industry headwinds and challenges, including personally purchasing necessary equipment and supplies in order to address the needs of patients and personally guaranteeing loans with certain of his assets. Dr. de la Torre's contributions are made evident by the reimbursements he received as reflected in public bankruptcy filings.

Dr. de la Torre has also been a tireless advocate for the improvement of reimbursement rates for the underprivileged patient population served by Steward’s hospitals.

This allegation and accompanying figure are both grossly misleading as they conflate share ownership with financial distribution.

Media downplays and omits Dr. de la Torre’s contributions and investments in Steward. The most common piece of misinformation reported involves the 2021 dividend. In 2020, when Covid-19 was first striking Massachusetts, Dr. de la Torre guaranteed an approximately $200 million loan with certain personal assets – the proceeds of which were used by Steward to maintain services and prevent Cerberus from implementing a bankruptcy strategy.

The portion of the dividend received by Dr. de la Torre in 2021 partially offset his guarantee of the approximately $200 million note, and most of the proceeds of that note were deemed by auditors as a capital contribution into Steward Health Care System LLC. The dividend was approved by the requisite shareholders at the time. The distribution was made by Steward Health Care System as part of a larger transaction in which MPT purchased Cerberus’ interests in Steward. Around this time, Steward also obtained a third-party valuation of its business, which confirms Steward retained significant value far in excess of the dividend.

Dr. de la Torre's employment contract  incorporates the personal use of the corporate jets. The value of this travel is calculated and added to his compensation. Simply put, he received compensation in the form of travel rather than taking a higher salary. His total compensation, including travel, was still on the lower end of the recommended salary range for an executive like Dr. de la Torre, according to an analysis by a nationally recognized compensation consultant.

Many of the locations where Steward operates or seeks to operate, and where Dr. de la Torre travels, carry a unique threat profile, which includes acts of terrorism, high levels of violence, and kidnapping of high-net worth individuals. A third-party private security consulting firm strongly recommended that he and his family use private transportation, including private air travel, for safety reasons. The non-business travel compensation figures listed in the bankruptcy filing  incorporate the compensation attributable to the use of the corporate plane. To be clear, his use of the corporate plane not only counted as compensation but was also taxed appropriately.

Further, it is highly inaccurate to say or imply that the costs of the plane were born solely by Steward Health Care. Two other entities, including Steward International, contributed significantly to these costs. Furthermore, SHCI is a sole proprietor LLC. The assessments of the value ascribed to the personal jet usage referenced in the bankruptcy filings were conducted by a Big Five accounting firm. The use of a private plane as part of Dr. de la Torre's compensation dates to 2016, when Cerberus Capital Management was the majority owner of Steward.

No charges regarding Dr.de la Torre’s boats were ever passed onto the company. The values pushed by elected officials are obviously inflated. For example, Jaruco is a 2017 90ft Viking that was paid for in 2015. Anyone can research the resale value and see that the numbers referenced by elected officials are exaggerated.

In reality, MHS is not a consulting firm owned by Dr. de la Torre, but simply a payroll vendor set up long before 2021 while Cerberus Capital Management was the majority owner of Steward. The only payments Dr. de la Torre has received from MHS are for his contractual salary.

In fact, CREF made no cash payments to Dr. de la Torre. Since Dr. de la Torre became a passive, minority shareholder of CREF, all contract negotiations between CREF and Steward have been handled by an independent committee, in which Dr. de la Torre had no involvement.

The portion of the dividend paid to Dr. de la Torre in 2021 partially offset his guarantee of the approximately $200 million note, which prevented Cerberus from implementing its bankruptcy strategy. The dividend was approved by the requisite shareholders at the time.

The distribution was made by Steward Health Care System as part of a larger transaction in which MPT purchased Cerberus' interests in Steward. Around this time, Steward also obtained a third-party valuation of its business, which confirms Steward retained significant value far in excess of the dividend.

The suggestion that this one-time payment precipitated Steward Health Care System LLC’s bankruptcy is absurd while Cerberus Capital Management monetized approximately $1.1 billion from Steward, resulting in the $800 million profit for its investors in its final four years of ownership.

Dr. de la Torre has never received any cash distribution from CareMax. All cash distributions went to Steward Health Care System LLC. The shares he received as part of the sale were immediately pledged on behalf of Steward Health Care System LLC to support its debt structure and those shares have never been sold.

The UCC filing showing the share pledge can be found HERE.

Media has attempted to conflate financial distributions with ownership. These are not parallel concepts. Voting shares do not equal financial distributions. To be clear, since 2020, the financial distributions that would have come out of any equity value in Steward Health Care Investors are widely different than the percentage ownership in voting shares.

Share ownership by an entity does not equate to financial distributions.

The state of Massachusetts has had the opportunity to fix its failed healthcare system, but the same problems still exist. Dr. de la Torre and many others have been trying to not only shed light on the inequities in the state system for years, but fix them, while publicly advocating for the balancing of reimbursement rates. Carney and Nashoba —two facilities with only (on average) 25 medical and surgical in-patients combined on any given day — are not the only hospitals that have struggled under the state's failed system. Tufts has experienced well-documented financial losses and Boston Medical Center has received regular payments to offset similar turmoil. As a taxable entity, Steward has several headwinds: it pays taxes, it is not allowed to participate in the Federal drug program 340B, and it was excluded in large part from the Massachusetts state government’s hospital bailout bill of the summer of 2023. The state refused to offer support to the debtors regarding the bids that were in fact received for Carney and Nashoba. These facts are clear in the court transcript.   

Even worse, the state allocated approximately 500 new hospital beds to Harvard teaching hospitals, which have superior name recognition and significantly higher reimbursement rates, while Steward’s St. Elizabeth’s hospital got nothing. As the hospitals compete geographically, this significant disadvantage made St. Elizabeth’s substantially less attractive to potential buyers, making a market-priced sale unachievable.  

Steward has been singled out, but the reality is, the state’s entire healthcare system is in disarray and the state government has not done enough to fix these existential, industry-wide challenges.

Importantly, on August 30, 2024, Steward announced an agreement with MPT, allowing for Steward-operated hospitals to be transitioned to new ownership. That agreement was approved by the bankruptcy court on an interim basis on September 11, 2024, and the transition to new ownership has already begun. Final approval of the agreement was obtained September 17, 2024.

The agreement, together with the previously announced transition of six Massachusetts hospitals to new operators, ensures that all of Steward’s remaining hospitals will stay open.