Three Years Makes A Trend

Priyanka Dayal McCluskey reports that Steward Health Care System, owned past times the private equity draw solid Cerberus Capital Management, has lastly given the terra firma a component subdivision of the accounting information concerning its 2013 operations.  The system, which operates 10 hospitals inwards Eastern Massachusetts, showed a loss of $55 meg on revenues of $2.1 billion.

Last year, Commonwealth Magazine reported that the organization had lost $22 meg on operations inwards 2012, downward from a larger operating loss inwards 2011.  At the time, the companionship said:

[T]he numbers are inwards draw amongst the company’s draw organization plan, which calls for turning around each of its private hospitals inside 3 years. “We are precisely where nosotros expected to live inwards damage of quality, sustainability, together with fiscal performance,” he said.

These numbers should non live taken to hateful that Cerberus has non done good on the deal.  Private equity firms, every bit noted past times Warren Buffett, are marvelous at extracting cash from their operating units.

Later, the draw organization volition live resold, oft to some other leveraged buyer. In effect, the draw organization becomes a slice of merchandise.

But that is to a greater extent than hard here. When it comes fourth dimension to flip this investment, the probable buyers would live large for-profit infirmary systems. As those companies tend to concord on to their assets together with run the hospitals amongst a long-term sentiment inwards mind, they volition aspect at the actual bottom draw performance of the system. A persistent negative operating margin is non skilful intelligence for the company's expire strategy, specially when revenue-producing assets guide keep been sold off for short-term cash gains.

As I guide keep noted, this transaction volition guide keep a tail that volition exit Massachusetts policy-makers amongst hard choices.

But it certain is dainty to run into the company's ads at Logan Airport.

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