Private Equity's Hospitals: A Business Model for the Obamacare Era?

Ralph de la Torre is dressed in a gray pinstripe suit, white shirt, and orange tie. His graying hair has been carefully trimmed. He looks like a Wall Street guy, and talks like one, too. “I know the numbers like the back of my hand—the quality scores, the heart failure scores,” says de la Torre, chairman and chief executive officer of Steward Health Care System, the Boston-based hospital chain owned by Cerberus Capital Management. “I know the financials. I feel compelled to know this business as well as anybody.”

De la Torre says he’s created the ultimate business model for the age of Obamacare: a national chain of no-frills hospitals. He unveiled his plan in January 2011 at the JPMorgan Healthcare Conference in San Francisco, vowing that Steward would compete aggressively on price with the large university-affiliated teaching hospitals that dominate most metropolitan areas. “In a world of Neiman Marcuses, we’re OK with being Filene’s,” he said. De la Torre said that Steward would deliver low-cost, state-of-the-art care through the use of advanced electronic medical records systems, new preventive medicine approaches, and the standardizing of everything throughout the chain, from billing to emergency room procedures. He joked about publicly humiliating employees who fell short of his safety standards. “It works,” he quipped.