The fate of Massachusetts’ eight Steward Hospitals has been the subject of debate for months. After facing financial challenges that included failing to pay full rent to its landlord, Steward is trying to sell some of those hospitals. At the same time, the system announced that it would sell its physician network to a subsidiary of UnitedHealth Group.
Those efforts became more muddled on Monday, when the national for-profit health system filed for Chapter 11 bankruptcy in an attempt to restructure the debts of its 31 hospitals. Ethan Jeffrey, a bankruptcy attorney at Murphy & King with extensive experience in health care insolvency, said: Early filings appear to indicate that Steward intends to sell its assets. Those who cannot sell it may be forced to close.
“Massachusetts is not unique in having hospitals in distressed communities that are the only hospitals providing services. Nobody wants to see them close,” Jeffrey said. “At the same time, if the numbers don’t work, there has to be some solution. “
Jeffrey warned that patients will not be abandoned during this process. While Steward will initially make decisions about its facilities, such plans will require court approval. Attorneys general in each state will be heard through bankruptcy to advocate for the preservation of vital healthcare assets. Healthcare bankruptcies usually also have a patient ombudsman whose sole role is to look out for the best interests of patients.
But hospitals will be assessed to see whether they are financially viable, or whether services need to be cut to cut costs. One of those complicated considerations is the fact that each hospital must make lease payments for the property it’s located on, Jeffrey said, due to Steward selling the property in 2016.
Boston City Councilor Liz Brydon, whose district includes Steward Street. Elizabeth Medical Center noted that the state has established a command center to help oversee care during this transition period. Many also stressed that Steward’s operations remain healthy and open for the time being. Local officials urged patients to continue seeking care at those facilities.
But the future of hospitals remains a question mark.
“It’s going to be a long process,” Brydon said. “We may lose some hospitals in this process. I hope the state has a strong hand in this situation.”
The development is a major departure from the early days of Steward, which was founded in 2010 in part to rescue the struggling Caritas Christi system. Created in partnership with private equity firm Cerberus Capital Management, the system was seen as an experiment in low-cost health care.
In a press release, Steward blamed the bankruptcy filing on a number of factors, from delays in the sale of his physician group to inadequate reimbursement rates from state insurers.
For their part, state and federal officials blamed one factor: the supervisory department. The 2016 sale of the hospital properties netted Steward $1.2 billion, but subjected the facilities to millions of dollars in lease liabilities. In 2021, Steward paid $111 million in dividends to stockholders, including CEO Ralph de la Torre, a former heart surgeon, according to a lawsuit filed against the company by a California medical staffing firm.
“I don’t want to lose sight of the fact that this situation is rooted in greed, mismanagement and a lack of transparency on the part of Steward’s leadership in Dallas, Texas,” Gov. Maura Healey said in a news conference Monday.
Senator Ed Markey said he would not allow the founders of the health system to escape blame and accountability.
“Dr. De La Torre, Steward Healthcare, and Cerberus Capital Management will be remembered not for improving access to care or saving the nonprofit hospitals they bought, but for their inexcusable abdication of responsibility to the people they promised to serve,” Markey said in a statement.
Prosecutor Andrea Joy Campbell said at Monday’s press conference that she takes seriously any effort by Steward to strip hospitals for profit, saying if such efforts violate the law, “I and my team will do everything we can to detain anyone.” Responsible for any type of violation.”
Even as local officials expressed concern about what might happen through the bankruptcy process, they welcomed the transparency and closure that the process would bring.
“Ultimately, this is a step toward our goal of getting Steward out of Massachusetts. It allows us to do this to protect access to care, preserve jobs, and stabilize our health care system,” Healey said. “Of course we cannot guarantee that disruptions will not occur.” Or harassment.”
Although the news of the bankruptcy was difficult to hear, the state was prepared for this important next step, said Robbie Goldstein, Commissioner of the Department of Public Health.
“We understand that the idea of a hospital going bankrupt may be troubling,” he said at the press conference. “However, this bankruptcy filing represents an important shift, resolving some of the uncertainty about how Steward operates and moving us beyond speculation to begin the purposeful journey down the path toward resolution.”
While bankruptcy could lead to some hospitals closing or being sold, it would probably be less chaotic than the alternative, said David Williams, president of Boston-based consulting firm Health Business Group. The regulated environment of bankruptcy proceedings allows for longer transitions between operators, with the state potentially having greater visibility into the finances of individual hospitals.
“There are often layoffs and there may be service interruptions,” Williams said. “But compared to the current path, it is not worse. It gives the opportunity to do things in an organized way, avoiding making short-term decisions.
Even as the facilities themselves remain open, some employees have already begun to leave. Good Samaritan temporarily closed the Cancer Infusion Center in Brockton last month.
Some felt that the state was still on an equal footing. Laura Pellegrini, president of the Massachusetts Association of Health Plans, criticized the state’s failure to evaluate its health care assets and determine what was critical.
“The state will have to carefully consider where it can close some facilities and the availability of other facilities to accommodate this volume, and where [facilities are] “Critical,” she said.
Jessica Bartlett can be reached at [email protected]. follow her @ByJessBartlett. Robert Weisman can be reached at [email protected].
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