Steward's financial woes raise questions about for-profit health care

While the fate of Steward Health Care's nine hospitals in Massachusetts remains in doubt, lawmakers and others are discussing what — and who — is to blame for the precarious state of the medical system. Many are pointing fingers at the role of for-profit companies, like Steward, in health care.

State and federal officials expect Steward to reveal its plan soon, and said they're reviewing several potential options should Steward shutter any of its Massachusetts facilities.

In a meeting last week with congressional staffers, Steward executives said the company plans to leave Massachusetts, according to U.S. Rep. Stephen Lynch, a Massachusetts Democrat, who was briefed after the meeting.

According to Lynch, Steward executives told his staff the situation is "urgent" at four of the company's hospitals: St. Elizabeth's in Brighton, Norwood Hospital, Holy Family Hospital in Haverhill and Methuen, and Nashoba Valley Medical Center in Ayer. The company indicated it would halt the planned reconstruction of Norwood Hospital, a 200-bed facility that closed after flooding in 2020.

"They expressed their intent to exit the Massachusetts health care market," Lynch said."We had not had advance notice prior to a week ago that they were in difficulty, or that they were contemplating exiting the Massachusetts health care market."

Lynch called the pronouncement from Steward "surprising," and said he would have expected more notice. He pointed out that Steward has received more than $150 million in federal funding for its Massachusetts operations over the past few years. He's wondering where the money went. He said Steward did not say when it might leave the state.

"I think the underlying message is that the for-profit model does not work," Lynch said.

"[Steward] is a for-profit health care network, and I firmly believe that it's very difficult to pursue two missions: to generate profits and still provide high quality health care."

Steward, which is among the largest hospital operators in Massachusetts, did not respond to requests for comment Wednesday. The company has said its financial losses jeopardize operations in the state and has blamed low reimbursement rates for Medicare and Medicaid patients.

Members of the Massachusetts congressional delegation are drafting a letter to Steward asking the company to answer questions about its finances and its plans for the future. The delegation has already called on Steward to attend a briefing and outline its plans.

At a congressional subcommittee hearing Wednesday, Massachusetts U.S. Rep. Lori Trahan said for-profit investment in health care is harming patients — especially those in her district north of Boston where some of Steward's hospitals are located. Trahan blamed Steward's "financial negligence" for causing the company's difficulties.

"Families in my district are the ones who are being told that they have to pay the price," said Trahan. "Families who receive care at Holy Family Hospital and Nashoba Valley Medical Center, both owned by Steward, were recently notified that their care is now in jeopardy."

Most of Steward's Massachusetts facilities are in the eastern part of the state, and also include St. Anne's Hospital in Fall River, Good Samaritan Medical Center in Brockton, Carney Hospital in Dorchester and Morton Hospital in Taunton. The company is in the process of closing New England Sinai Hospital, a rehabilitation facility in Stoughton.

At a state Department of Public Health meeting Wednesday about the closing of New England Sinai, Steward re-released a statement from early December saying the company has lost $22 million on New England Sinai and cannot afford to keep the facility open.

"Nearly 75% of Steward hospital patients are public pay (Medicare and Medicaid) which
chronically underpay, sometimes at rates less than the cost of delivering services," the Steward statement said.

It also said Steward is "the largest owner of community-based hospitals, the largest provider of in-patient behavioral health, and employs the highest percentage of union employees of any other hospital system" in Massachusetts. As a for-profit company, the statement said Steward pays taxes to the communities it serves that nonprofit hospitals do not pay.

New England Sinai officials said staff shortages, increased costs and low reimbursement rates "decimated" the hospital. They pledged to work to ensure smooth transitions for patients and said workers will be able to apply for positions at other Steward facilities.

There may be another factor weighing on Steward's balance sheet. In 2016, Steward sold most of its hospital real estate to an investment trust known as Medical Properties Trust, or MPT. Steward then leased back the facilities. In early January, MPT said Steward, its largest tenant, owed $50 million in back rent. Lynch said Steward executives cited the debt as one of the reasons for its financial difficulties.

Some analysts have suggested the amount Steward owes MPT may be much higher than $50 million. Robert Simone, a real estate investment trust analyst who studies MPT for the research firm Hedgeye, said MPT has experienced problems with other hospital operators it backed and is no longer able to help Steward financially as it has in the past.

"The reason why Steward is failing right now, in my view, and the math kind of bears it out, is that MPT cannot afford to loan any more money to Steward," said Simone. "It is a house of cards in my opinion."

Simone has raised red flags about MPT and recommended investors steer clear or "short" the company, a way of profiting by anticipating future declines in stock value.

Several lawsuits suggest Steward has other significant debts. One of the largest claims, filed in December, alleges Steward owes more than $45 million to ProLink Health Care, a health care staffing firm. According to the complaint, Steward and ProLink began working together in 2020, and the agency provided more than 1,600 temporary health care workers to Steward facilities across the country, including in Massachusetts. The lawsuit claims Steward stopped paying ProLink in early 2022, even though ProLink continued to send workers to Steward facilities.

Some health care officials said the options for Steward include declaring bankruptcy, and allowing the state to come up with a plan for its hospitals, or selling off assets to satisfy some creditors. Although Steward doesn't own the real estate of its hospitals, it does have the subsidiaries Steward Medical Group and Steward Health Care Network, a network of primary care and specialty health care providers. Some health care finance experts said its physician network is one asset the company might sell.