As we watch the inevitable yet unconscionable denouement of the Steward hospital system bankruptcy, a number of things are apparent in a quick recap:
The “Throughlines”
- The sale of the Boston Catholic hospital system buildings and grounds by Steward-related entities to Medical Properties Trust added several hundred million dollars annually to the operating costs of those hospitals that could not be sustained by their revenue (largely based on Medicare and Medicaid payments) and gave them a jump start to bankruptcy.
- The proceeds of that asset sale (well over $1 billion) were then distributed to the private equity firm Cerberus Capital Management and Dr. Ralph de la Torre and other principals, giving them an enormous payday (think large yachts, for example) that was unrelated to any operating profits. Their message clearly was, “We got ours. Good luck to the rest of you.”
- And within the past few days, according to the Boston Globe, the federal bankruptcy judge overseeing the proceedings, Christopher Lopez in Houston, has approved close to $36 million in payments to Weil, Gotshal & Manges, the New York law firm lucky enough to be advising on this dissolution, including partner rates of $2,350 per hour ($18,800 per 8-hour day). Really? Is anyone that valuable? That extraordinary payment (the firm calls it “competitive”) substantially increases the amount the Massachusetts taxpayer has to pay to resurrect a second tier but still important local hospital system.
Madoff and Clawbacks
Please resurface your memories of the Madoff Ponzi-scheme scandal from 2008. The appointed trustee was the firm of attorney Irving Picard. Originally $65 billion was thought to have been lost, but Picard was able to retrieve funds from those investors who had reaped outlandish profits from their investments by “clawing back” the amount they received in excess of their investment. Madoff had not actually invested their money and had faked their financial statements. Ultimately investors got back a large portion of their actual investment dollars, but some long-term investors who had enjoyed fake 10% annual returns had to return substantial sums.
Published reports, incidentally, indicate Picard’s firm’s overall hourly fees averaged $544. For reference, inflation since 2008 has been about 48%, so comparable average hourly attorneys’ fees today for comparable work would be $805, or about one-third of what Weil, Gotshal & Manges has been awarded. The difference is about $24 million that Mass taxpayers are unnecessarily paying for.
Where Are Our Governor and Attorney General?
Why is there not any publicly acknowledged effort by our senior Massachusetts officials, Governor Maura Healey or Attorney General Andrea Joy Campbell, to highlight the causation of the hospital land and building asset sales that set the path for the ensuing Steward bankruptcy, nor for moving to claw back the unholy “dividends” that de la Torre and his colleagues paid to themselves, nor for vigorous objections to the bloated “competitive” fees that the bankruptcy judge somehow approved? The “through line” is that Massachusetts taxpayers are directly funding de la Torre’s yachts. Why? We are not pushing for clawbacks. Why not?