Steward founder Ralph de la Torre for Malta talks on hospitals

Steward Health Care chairman and CEO Ralph de la Torre will be meeting Maltese prime minister Robert Abela, after the American healthcare giant was sold by former asset group Cerberus Capital to a doctor-led group.

Together with Steward Malta president Armin Ernst, who runs the international arm of the private hospital group, discussions will focus on the future of a controversial concession of three state hospitals to Steward.

A majority of Cabinet members are believed to have strong reservations about using taxpayers money to finance the American company’s concession, a project driven by the former prime minister Joseph Muscat and one-time energy and health minister Konrad Mizzi.

But the 30-year concession to run three state hospitals, granted to a mysterious group of investors under the name of Vitals Global Healthcare in 2015, ran aground when the company sold its concession for a reported €15 million to Steward.

Now the Maltese government is seeking ways to renegotiate the concession with Steward, that includes fronting the annual healthcare cost for hospital staff and medications.

Risky default clause

With a magisterial inquiry underway into the controversial public-private partnership, the government is risking a hefty bill should the concession ever be rescinded.

An agreement hammered out in August 2019 with former tourism minister Konrad Mizzi gave Steward Healthcare an “escape clause”, that turns any termination of its concession into a government default.

The wording is part of an agreement in which the government acknowledged a €28 million loan from Bank of Valletta to Steward as “lender’s debt”.

In the agreement signed by Mizzi and Steward, the government agreed that should the hospitals’ concession be terminated by a court of law – for whatever reason, and even if Steward is in breach of contract – such an event would be a government default.

That would mean that all debts incurred by Steward would be passed on to the government, and the American company would still be liable for a €100 million contractual pay-out for its equity.

The American healthcare company was already on the verge of being given wider berth on its concession back in November 2019, before former prime minister Joseph Muscat lost control of power in the wake of his chief of staff’s resignation in connection with the Daphne Caruana Galizia murder investigation.

The original concession itself obliges the Maltese taxpayer to pay hefty penalties should the government decide single-handedly to terminated the concession: €100 million in cash and any lenders’ debt incurred by Steward.

But should Steward default on the contract and not fulfill its obligations on the St Luke’s, Karin Grech, and Gozo hospitals, it would ‘only’ lose its equity – the investment it carried out in the hospitals. Government would still have to pay all the debt incurred throughout.

With Muscat, in November 2019 Steward wanted to extend the grounds on which a ‘force majeure’ or national emergency default might incur, that is, situations where civil strife or war would make the operation unworkable. In such case, government would be obliged to pay Steward 50% of its equity, but also cover any debt the company incurred.

But Steward wanted to add a host of other such ‘force majeure’ conditions, not necessarily as calamitous as a warlike event, such as accidental loss or damage, strikes and work-to-rule situations, and even ordinary changes in laws or EU rules.

Only last month, Cerberus Capital Management sold Steward Health Care System to a management group of Steward physicians led by the company’s CEO and founder Ralph de la Torre. Medical Properties Trust will maintain its 10% stake.