July 17, 2024

The Health

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Steward Health Care seeks bankruptcy protections

After months of uncertainty about its future, the nation’s largest private, for-profit hospital chain has filed for bankruptcy in Texas.

Dallas-based Steward Health Care filed for Chapter 11 bankruptcy Monday, saying it will move to restructure its debt under court supervision and keep running its hospitals across the U.S. — including eight in Massachusetts — as it does so.

Steward will negotiate the terms of its “debtor-in-possession” status from its landlord, Medical Properties Trust, “for initial funding of $75 million and up to an additional $225 million,” the company said in a statement announcing the decision.

“Steward’s hospitals, medical centers and physician’s offices are open and continuing to serve patients and the broader community and our commitment to our employees will not change,” the company added in its statement.

Steward operates more than 30 hospitals in a handful of states, and employs tens of thousands of workers, including 16,000 in Massachusetts, according to their unions. In its bankruptcy filing, Steward estimated its creditors number more than 100,000, and its liabilities range from $1 billion-$10 billion. The company estimated its assets in the same range.

Steward, in its statement, blamed government reimbursement rates, increasing labor costs and inflation for its financial difficulties, as well as lingering impacts from the COVID-19 pandemic.

“Steward Health Care has done everything in its power to operate successfully in a highly challenging health care environment,” said Steward’s CEO Ralph de la Torre.

Flanked by health care officials, union leaders and the state’s attorney general Monday morning, Massachusetts Gov. Maura Healey placed the blame for Steward’s bankruptcy squarely on the shoulders of company leaders.

“This situation stems from and is rooted in greed, mismanagement and lack of transparency on the part of Steward leadership in Dallas, Texas,” Healey said.

Gov. Maura Healey speaks to the news media. (Jesse Costa/WBUR)
Gov. Maura Healey speaks to the news media. (Jesse Costa/WBUR)

However, she emphasized that the company is taking steps to retain staff, its doors remain open for patients, and she said bankruptcy provides an “orderly” process for dealing with debts, liabilities and a potential transfer of ownership.

“Ultimately, this is a step toward our goal of getting Steward out of Massachusetts,” Healey said.

State officials have been monitoring care at Steward facilities, which are located mainly in eastern Massachusetts. In a statement Monday, state Health and Human Services Secretary Kate Walsh said the state has been preparing for Steward’s bankruptcy filing and “patients should not hesitate to seek care.”

“The Healey-Driscoll administration is working with Steward and any potential partners to support an orderly transfer of ownership that protects access to care, preserves jobs and stabilizes our health care system,” Walsh wrote.

The list of Steward’s largest unsecured creditors includes staffing companies, medical device vendors, technology companies and a food service company. It also reported owing tens of millions of dollars to the federal Center for Medicare and Medicaid Services and the IRS.

Some workers at Steward hospitals in the state earlier described challenging conditions as the company’s finances have become strained, including unpaid invoices and a lack of supplies. Dr. Vartan Yeghiazarians, president of the medical staff at Holy Family Hospital, said by last December the problems were causing some medical procedures to be delayed or canceled.

“I think that’s when we started noticing that things were really off,” Yeghiazarians told WBUR’s Deborah Becker.

State officials last Friday said they had set up a command center to help manage the effects of any potential loss of services, hospital closures or other changes resulting from Steward’s financial predicament. They have now added a hotline and website to provide information and resources for patients, workers and community members.

The disclosure of Steward’s financial woes in January sparked criticism of the role of for-profit companies in health care and calls for greater oversight. Massachusetts lawmakers recently proposed legislation that would more closely regulate hospitals in the state.

The bankruptcy process could reveal new details about Steward’s financial straits — and how the situation became untenable. The company has long kept financial records close to the vest, even defying a Massachusetts rule requiring hospital companies to disclose detailed financial information.

The Good Samaritan Medical Center, a Steward Family Hospital in Brockton, Mass. (Robin Lubbock/WBUR)
The Good Samaritan Medical Center, a Steward Family Hospital in Brockton, Mass. (Robin Lubbock/WBUR)

State officials in February demanded further documentation, but said the company did not fully comply with their deadline.

Although Steward has said it is looking for a buyer for its Massachusetts hospitals, no deal has emerged to date.

State officials have indicated one obstacle to finding a new operator is Steward’s lease arrangement with Medical Properties Trust. In 2016, Steward sold its Massachusetts hospital buildings and real estate to MPT. The sale proceeds helped Steward executives launch a national expansion but saddled their hospitals with rent.

Steward has also been working to sell its physician network, Stewardship Health. In March Steward announced it had reached a deal with Optum, whose parent company, UnitedHealth Group, owns the larger insurer United Healthcare. The state’s Health Policy Commission will review the deal but said the companies have yet to file completed paperwork. Steward indicated the timing of this process played a role in its decision to file for bankruptcy.

“With the delay in closing of the Stewardship Health transaction, Steward was forced to seek alternative methods of bridging its operations,” de la Torre wrote in Monday’s statement. “With the additional financing in this process, we are confident that we will keep hospitals open, supplied, and operating so that our care of our patients and our employees is maintained.”

Massachusetts Association of Health Plans President and CEO Lora Pellegrini said in a statement Monday that its group, which represents 14 health plans, will keep providing coverage at Steward facilities.

“The Massachusetts Association of Health Plans and our member plans understand the uncertainty raised by Steward Health Care’s action today to file for Chapter 11 bankruptcy,” she wrote. “However, this filing does not mean that the system’s hospitals, medical centers, or physician groups will close; patients can continue to receive care at all Steward facilities.”

The Massachusetts Nurses Association commended Steward workers for serving patients through a “grueling” process. In a statement, the union urged health care industry leaders and state officials to “immediately take whatever steps are needed to ensure the preservation of these facilities and the safe transition to more stable and responsible not for profit ownership.

“Inaction would worsen health inequities, create hospital deserts, and weaken the entire healthcare infrastructure for all patients in Massachusetts,” the union said.