Two years ago, as Steward Health Care was collapsing, Massachusetts officials praised the doctors and nurses keeping its hospitals running as “true heroes” — delivering babies, performing surgeries, holding emergency departments together in buildings the company had starved of money. Now, as the Boston Globe reports, hundreds of those same clinicians are discovering that the malpractice insurance they were promised is, to a first approximation, gone. Some are raiding retirement accounts to buy their own coverage. Two Superior Court judges have ordered former Steward doctors to personally pay six-figure malpractice settlements that they say were negotiated on their behalf by an insurer that then didn’t fund them. “It feels like a massive betrayal,” said Dr. Paresh Mane, a thoracic surgeon who worked at Steward’s Holy Family Hospital and St. Elizabeth’s Medical Center.
The piggy bank in Panama
Here is the mechanism, because the mechanism is the whole story. Like a lot of hospital systems, Steward didn’t buy malpractice insurance from some big commercial carrier. That costs money. Instead it self-insured through a subsidiary called TRACO — a “captive” insurer, meaning an insurance company that exists to insure its own parent. TRACO, which once covered 1,400 medical practitioners nationwide, promised to pay for clinicians’ legal defenses and cover settlements up to specified limits, typically $6 million per clinician per year. And then, in 2019, Steward moved TRACO from the Cayman Islands to Panama, in part — according to a 2024 Globe Spotlight investigation — to take advantage of the country’s lax regulations.
The laxness was load-bearing. Massachusetts doesn’t require foreign-based captive insurers to be licensed in the state, so TRACO never had to file financial statements with the Division of Insurance, which says it therefore had no authority to monitor the company’s solvency or check whether it could actually pay claims. This was convenient for Steward, because TRACO could not actually pay claims. Steward executives — the same people running TRACO — had been treating it as a piggy bank for years, pulling cash out and leaving IOUs behind. By mid-2024 the insurer held $3.5 million in cash against more than 500 malpractice claims. You do not need to be an actuary to see the problem: that is under $7,000 per claim.
The darkly funny part is that the assurances kept coming anyway. Dr. Michael Callum, a former Steward executive vice president who served as TRACO’s president from 2019 to 2024, and Rubén José King-Shaw Jr., TRACO’s current CEO and president, told doctors in September 2024 that Steward was reserving funds in the bankruptcy to cover new claims and would keep defending old ones; Callum and Steward hospital executives had made similar promises at a town hall that summer. Many clinicians kept working at falling-apart hospitals partly on the strength of those words. King-Shaw and Callum — now TRACO’s treasurer, and affiliated with a concierge men’s health business in Florida — didn’t respond to the Globe’s requests for comment. Ralph de la Torre, Steward’s disgraced founder and former CEO, still sits on the insurer’s board alongside Callum. Attempts to reach de la Torre were unsuccessful.
Everyone else’s problem
When Steward sold its Massachusetts hospitals in the fall of 2024, doctors hoped the buyers would provide “tail” coverage — insurance for claims arising from their Steward years. Of the new owners, only Brown University Health, which took Saint Anne’s in Fall River and Morton Hospital in Taunton, has done so. Boston Medical Center Health System, which bought St. Elizabeth’s and Good Samaritan in Brockton, says it will provide tail coverage only if TRACO is declared insolvent — a declaration no one has made. Merrimack Health, which bought the Methuen and Haverhill hospitals, declined; “the primary responsibility for, and any resolution of those claims, remains with TRACO with any underfunding concerns addressed through the bankruptcy courts,” it said, which is a way of saying: ask the empty piggy bank.
So the market solution is that each doctor buys a tail policy personally, and the market has priced this enthusiastically. Dr. Chontelle Degler, an emergency physician who worked at St. Elizabeth’s, was quoted at least $50,000 a year — money she says she doesn’t have and won’t borrow. One physician assistant saw her quote jump from $7,000 a year ago to more than $50,000; in obstetrics and neurology, physicians report quotes over $100,000 a year, marked up because of Steward’s miserable safety record. “Every day I wonder, will this be the day I get sued? You can be blindsided,” Degler said. One clinician with a trial set for February, named Rees, told the Globe the plaintiffs’ calculus is simple: “They know you can’t get money from a stone, so the [malpractice] attorneys assume that rich old doctors have money and say, ‘Let’s go after them.’ What do I do? Work until I collapse and die?” Some doctors are leaving bedside care altogether.
More than 300 former Steward clinicians have now formed a coalition asking the Healey administration to backstop their coverage, tighten oversight of malpractice insurers, and open a criminal investigation into former Steward executives for misleading them. The Massachusetts Medical Society has called the situation “unconscionable” and warned it will deepen the state’s physician shortage. Governor Maura Healey’s office says it is reviewing the coalition’s proposals, notes that Steward ignored repeated demands to maintain adequate coverage, and says it has asked the Texas judge overseeing the bankruptcy to intervene — warning that TRACO, still operating out of Panama, had “little to no independent capital.” “Doctors and clinicians should not continue to have to pay the price for Steward and Ralph de la Torre’s greed and mismanagement,” a spokesperson said, which is true and also not, so far, a plan.
And the doctors aren’t even the worst-off party. Patients harmed by Steward’s care — the Globe’s 2024 Spotlight series counted at least 15 who died after equipment or staffing shortages left them without accepted standards of care — may now have claims against an insurer with nothing in it. “What’s happening with TRACO is catastrophic for everyone involved, and exposes a glaring weakness in our insurance regulatory structure,” said Maria O’Brien, an insurance-law professor at Boston University School of Law. “The hope that anyone will ever get anything close to compensating them for the harms caused is very remote.”
The elegant thing about the arrangement is that everyone along the way did something perfectly defensible. Steward saved money by self-insuring. Panama minded its own business. Massachusetts regulators had no jurisdiction. The hospital buyers bought the assets, not the liabilities. The result is that 1,400 clinicians and an unknown number of injured patients hold paper from a company that exists, has a board, and once had money. Everyone involved can explain exactly why the hole in the balance sheet is not their fault. That’s the thing the hole has in common with the money: someone took it, and it’s not coming back.