Mass. leaders scramble to plan for potential Steward hospital closures

Health care leaders and public officials are becoming increasingly concerned about the potential failure of Steward Health Care as they accelerate plans to respond to what could become a health emergency if any of Steward's nine Massachusetts hospitals close.

"The thought that Steward is in financial crisis and is considering closing facilities is a very frightening thought," said Dr. Barbara Spivak, president of the Massachusetts Medical Society. "No matter where they would consider closing something, it would create an undue burden."

The ripples of financial difficulties at Steward have been felt by its employees, vendors, state officials and patients for years, but the state is now scrambling to prepare for what could become a tsunami if the for-profit health care company shutters some, or all, of its Massachusetts hospitals.

Talks are under way with various members of the health care sector, including other hospital systems and unions representing some of the more than 14,000 workers at Steward facilities in Massachusetts, about how the state might handle the loss of Steward's hospitals.

Many are warning that closures would overwhelm other facilities.

"We know the health care system in Massachusetts just cannot sustain the influx of the number of patients that are seen at Steward every day given the capacity strains our entire health care system is under," said Tim Foley, executive vice president of 1199 Service Employees International Union, which represents 5,000 Steward workers.

"We're working every day with our members and with all stakeholders to ensure that these hospitals remain open, that these jobs remain in the community," Foley said.

Leaders of the Massachusetts Nurses Association, which represents some 3,000 registered nurses and other health care workers at Steward facilities, said they are hopeful arrangements can be made to keep the hospitals operating.

"We’re really looking at this as a disaster," said Katie Murphy, president of the nurses union. "When I think about the gridlock we have, if we lost any more beds, it would really be a crisis."

Most Steward facilities are in eastern Massachusetts, and include St. Anne's Hospital in Fall River, Good Samaritan Medical Center in Brockton, St. Elizabeth's Medical Center in Brighton, Carney Hospital in Dorchester, Holy Family Hospital in Methuen and Haverhill, Morton Hospital in Taunton, Norwood Hospital and Nashoba Valley Medical Center in Ayer. The company is in the process of closing New England Sinai Hospital, a rehabilitation facility in Stoughton.

The southeastern part of the state could be most dramatically affected by changes at Steward, because of the area's reliance on Steward-run Good Samaritan Medical Center in Brockton. Steward's Norwood Hospital was closed because of flooding damage in 2020 and remains under construction. Brockton Hospital was shuttered after a fire in 2023.

Steward's troubles were the buzz at the Massachusetts Health & Hospital Association annual conference Thursday, though the company isn't a member of the trade group and wasn't on the agenda.

Dr. Kevin Tabb, chief executive of Beth Israel Lahey Health, told attendees that hospitals across the state face many challenges, including finances, workforce — and "private equity-backed for-profit systems failing challenges."

In explaining its financial difficulties, Dallas-based Steward has said 70% of its patients are covered by Medicaid or Medicare. The company argues its facilities face an unfair disadvantage due to the gap in reimbursement rates from public insurance for community hospitals, compared to larger academic medical centers. The company has also said the COVID-19 pandemic and increased immigration have contributed to its problems.

Steward operates 33 hospitals in eight states, including Massachusetts. It's one of the largest private, for-profit hospital operators in the U.S.

State officials have promised to closely monitor the situation and ensure that patient care and health care jobs are protected. Gov. Maura Healey's office said it has been in regular talks with Steward about its financial situation. State law requires hospitals to give 120 days' notice of any closure.

"We are exploring all options to ensure that patients across Massachusetts continue to have access to the care they need, that jobs are preserved and that our health care system is stable," said Karissa Hand, a spokesperson for Healey.

Administration officials met with a group of hospital leaders Thursday, but the meeting ended without a clear plan forward, according to people familiar with the discussion.

The options on the table are complex and varied. Those with knowledge of the state's ongoing talks said officials are developing several contingency plans, but the final outcome largely depends on how Steward moves forward.

One possibility under consideration, they said, is dividing Steward's facilities among some of the state's other hospital groups. Another option involves declaring a public health emergency to allow a state takeover of some facilities, or utilizing state receivership powers.

"The administration and the legislature are trying to meet and collaborate on our options," said Rep. John Lawn, a Middlesex Democrat and co-chair of the legislature's Joint Committee on Health Care Financing. "We're trying to get some extensions on some of the creditors. Hopefully, we'll have a plan in place pretty soon."

There have been signs of financial trouble at Steward for years. The company has been named in several lawsuits from employees and vendors over payment arrangements. Earlier this month, Steward's landlord, the real estate company Medical Properties Trust, said Steward owed $50 million in unpaid rent.

Medical Properties Trust is one of the largest hospital property owners in the country, and Steward is its largest tenant. Steward sold its Massachusetts real estate to the company in 2016, in a deal that allowed it to raise quick capital and lease back the properties. Medical Properties Trust also has investments in health care real estate in other states.

The company said in a statement that Steward is working to repay its debt, but "there can be no assurance that Steward will successfully execute its plans or that the Company will recover all of its deferred rent and loans outstanding to Steward."

According to Medical Properties Trust, Steward is looking at several options — including selling hospitals — to right its finances. The company said Steward "has committed to seeking a third-party capital partner for its managed care business," to pay off its debt to Medical Properties Trust. Steward is expected to resume partial rental payments to the company next month.

Steward has long been secretive about its finances. Litigation is still pending over its refusal to provide financial data to state officials, as is required of all hospitals in Massachusetts. Steward argued that its confidential business information needed to be kept from its competitors.

According to people familiar with the situation, the clock is ticking for Steward to come up with a plan for its future. They say the company is expected to report back to its creditors by next week, though the situation is fast-moving.

Many health care officials and experts in Massachusetts say the situation with Steward raises larger questions about the role of private, for-profit companies in health care — particularly those backed by private equity.

Among them is Ray Campbell, who was involved in the state litigation against Steward for its financial filings when he was the leader of the Center for Health Information and Analysis, an agency that analyzes state health care data.

Campbell, now an instructor at the Harvard T.H. Chan School of Public Health, said the state should be allowed to see Steward's corporate financial data, and should improve regulation of for-profit health care facilities like hospitals.

"Private equity and for-profit investments in health care need to be scrutinized very carefully because the objectives and the dynamics aren't necessarily the same," Campbell said. "It's not clear that what private equity is really good at is what health care needs to be good at."

John McDonough, also at Harvard's school of public health and a longtime observer of the hospital market, echoed that sentiment.

"If there's a lesson from this," he said, "it is that the entire state health system and state government need to be much more wary of all for-profit entrants — particularly of the private equity brand."