Steward Health Care Sues Former Leadership and Tenet Healthcare Amid Bankruptcy Fallout

Steward Health Care, a bankrupt health system, has launched a series of lawsuits against its former leadership and business associates, including Tenet Healthcare, in an attempt to recover funds and address alleged misconduct that contributed to its financial collapse. The legal actions, filed as part of a bankruptcy court-approved plan, aim to claw back millions of dollars to repay the company's substantial debts.

Former CEO and Executives Targeted in Lawsuit

At the center of the controversy is Dr. Ralph de la Torre, Steward's former CEO, along with other former executives including Dr. Michael Callum, Dr. Sanjay Shetty, and James Karam. The lawsuit alleges that these individuals "pilfered Steward's assets for their own material gain," pointing to a $111 million dividend payout authorized in 2021 when the company was already insolvent. De la Torre alone reportedly received $81.5 million from this dividend, which the complaint describes as "catastrophic."

The lawsuit claims that shortly after receiving the funds, de la Torre purchased a $30 million superyacht, highlighting what Steward characterizes as a misuse of company resources. The legal action seeks to recoup these funds and accuses the former leaders of violating their fiduciary duties.

Controversial Hospital Acquisitions and Asset Sales

Two major transactions are under scrutiny in the lawsuit:

1. A $1.1 billion acquisition of five Miami-area hospitals from Tenet Healthcare, which Steward claims was overvalued by approximately $209 million. The complaint alleges that de la Torre pushed for the higher purchase price without independent financial analysis.

2. A $194 million sale of Steward Health Care Network's value-based care assets to CareMax. The lawsuit contends that about $134 million of the proceeds were paid to a separate entity owned by the insiders and then distributed to the defendants, leaving Steward with only $60.5 million.

Steward is seeking to avoid these payments and recover the funds, including the entire $1.1 billion from Tenet Healthcare.

Bankruptcy Proceedings and Congressional Scrutiny

Steward Health Care filed for Chapter 11 protection in May 2024, reporting $9 billion in debt. Since then, the company has been working to sell or close its 31 hospitals. The bankruptcy and de la Torre's actions have drawn significant criticism from various quarters, including healthcare workers, affected communities, and even Congress.

The Senate Health, Education, Labor and Pensions (HELP) Committee subpoenaed de la Torre to attend a hearing, which he chose not to attend. This led to the committee unanimously voting to hold him in contempt. Shortly after, de la Torre resigned from Steward and filed a counter lawsuit against the legislators.

As Steward Health Care continues its legal pursuit to recover funds, the company estimates it will be seeking more than $3 billion in legal claims to repay its bankruptcy expenses. This process is expected to extend until mid-2027, even if only a fraction of the claims are successfully recovered.