Steward Health Care, the company that owns and runs three Maltese hospitals, has posted significant losses for the last two years, according to US media reports.
The company had promised to inject more than €300 million into the hospitals by now, honouring a previous agreement reached between former hospitals concessionaire Vitals Global Healthcare and the government in 2015 as part of the controversial privatisation of the three state hospitals.
But while Steward took over the concession in 2018, the promised investment is still to materialise.
Steward Malta did not reply to questions concerning the state of the company’s business locally by the time of publication. It later said that it was very pleased with its financial performance and still in the investment phase of its Malta operations (see below).
According to financial information filed at the Centre for Health Information and Analysis in Massachusetts, where Steward controls most of the state’s hospitals, the company reported an operating loss of nearly $600 million (€543m), $322 million for 2017 and $270 million for 2018.
However, the company’s results show that most of its hospitals were profitable, with increasing margins over the two years. Despite the heavy losses, Steward’s revenue increased to $6.6 billion in 2018 from $3.7 billion a year before.
They are really in a financial bad place
According to senior company officials in the US, the losses were due to expansion and investments, and the company is in a healthy financial position.
Steward has not filed detailed financial information with the state of Massachusetts, as required by law, for several years. It is in a legal battle arguing that the state has no right to the information.
Questions are being asked about its financial position, with finance professor Kristina Minnick of Bentley University expressing concern.
“The news is very concerning. They have more debts than assets and they are really in a financial bad place,” she is quoted as telling the Boston Globe.
Her concerns are shared by unions representing the 40,000 employees on Steward’s books.
The company was asked about the effects of these losses on its Malta operations and whether it will continue to delay its promised investment into Gozo’s General Hospital and Malta’s Karen Grech and St Luke’s hospitals.
It did not reply to that question. Neither did it confirm its commitment to honour the remaining term of the concession, which runs out in 2045.
The government agreed to pay Steward over €2.1 billion staggered over the term of the concession. However, since it took over the concession, Steward has not met any of its targets.
According to the contract negotiated by then Health Minister Konrad Mizzi, by the end of the first three years of the original contract, 2018, the concessionaire was to have built a new state-of-the-art public hospital in Gozo and refurbished Karen Grech and St Luke’s.
None of this work has started and no planning applications have even been filed.
While Steward is responsible for a project to build a new medical school in Gozo – which was meant to have been completed in 2016 but is still a work in progress – it is the government that is forking out the investment for it.
Steward took over from Vitals after this company became insolvent and had to trade its concession. Steward in Malta is headed by Armin Ernst, the same person who used to run VGH.
Steward 'very pleased'
A spokesperson for Steward said Saturday said the group was "very pleased " with its financial performance, which reflected investments the group was making.
Much of the company's loss in 2017/18 was an expense write-off associated with those investments, the spokesperson said.
"Steward’s model is to take underperforming hospitals and turn them around. In 2017, Steward Health Care nearly quadrupled in size when we acquired two hospital systems and 25 hospitals to expand its integrated care model across the United States," they said.
The spokesperson said that the company was still in the investment phase of its Malta operation and was confident it would fulfil its obligations to the Maltese government, citizens and patients.