On Steward Health Care, Massachusetts Governor Healey says legislator to play role

Colin A. Young

STATE HOUSE, BOSTON, MAY 13, 2024…..Though she had done so previously, Gov. Maura Healey this weekend did not rule out the possibility of a state bailout for the bankrupt Steward Health Care and suggested that the Legislature will have a role to play in the resolution of the health care sector turmoil. But on Monday, her office said a bailout was not under consideration.

Steward operates eight Bay State hospitals and has been sinking under a pile of debt to vendors and its de facto landlord. The company filed for bankruptcy protection last week and said it is supposed to auction its hospitals — including the eight it operates in Massachusetts — to new owners by late next month, leading to uncertainty for the thousands of people here who rely on Steward for health care or employment.

Asked in an interview on WCVB’s “On The Record” whether she would rule out a taxpayer bailout for Steward, the governor did not answer directly.

“Well, you know, we’ll work with the Legislature on all of this, we’ve continued to be in close touch with the Legislature, because this implicates the stability of the health care market,” Healey said in the televised segment that aired Sunday.

Months ago, Healey said in an interview with WBUR that “Steward is not going to get bailed out.” And the governor’s office told the News Service on Monday that Healey is not considering a bailout of Steward or its embattled CEO, Ralph de la Torre.

Around the same time that Healey first ruled out a bailout, House Speaker Ron Mariano seemed to slam the door on the potential of the Legislature to provide state money to address Steward’s financial failings.

“We are not in a financial position to commit to financing anything to bail these people out,” the speaker said of Steward in early February, adding that the House had not specifically been asked to consider a Steward bailout at the time. The speaker’s office said Monday that Mariano’s stance on a potential Steward bailout has not changed since his February comments.

Healey continued in her response to the bailout question on “On The Record” to point out that “as a general matter, the state does provide a number of dollars to our existing hospitals around the state in the form of Medicaid payments and the like.”

The state made a similar point in its filings in Steward’s bankruptcy proceedings last week, calling Massachusetts “a major source of Steward’s revenue.” The state said that MassHealth paid Steward-controlled entities up to $20 million per month or about $276 million in total in 2023 on a fee-for-service basis or through managed care plans. Separately, Steward received more than $84 million in supplemental or incentive payments from MassHealth during hospital rate year 2023.

Steward officials in recent months and years have argued that MassHealth payments are too low and don’t cover care costs. 

The transition of Steward’s hospitals to new owners — Healey said Sunday she wants to see them go to nonprofit ownership groups — is taking shape while the company seeks to restructure debt of between $1 billion and $10 billion in federal bankruptcy court and as more than 100,000 creditors scramble to position themselves to be paid.

Despite the upheaval, Steward said it intends to keep its hospitals open.

“What we’re doing is trying to manage an orderly transition of Steward from Massachusetts. We’re engaging with potential acquirers, there is a bankruptcy process underway. Frankly, that’s good for bringing transparency and the real numbers to this,” Healey said on OTR. “But our hope is that we can manage a transition to new ownership of these facilities. In the meantime, I’ve said … it’s important for people to continue to access care at these facilities. We’ve got monitors on site for patient safety. And it’s also important that we recognize, and I appreciate, the hard work, the men and women at the Steward facilities, doctors, nurses showing up every day. I’m grateful that they are as we work through this.”

The governor said Sunday there is interest in taking control of Steward’s hospitals from “a variety of entities out there,” including some inside Massachusetts and some outside Massachusetts.

With Steward now in bankruptcy court, the company’s lawyers have acknowledged that selling the hospitals could be difficult thanks to the sale-leaseback transaction that saw Medical Properties Trust buy the land beneath Steward’s hospitals in 2016.

Ray Schrock, Steward’s lawyer from the firm Weil, Gotshal & Manges, said he expects there will be “tension between MPT and some of the stakeholders in these cases that we’re just going to have to work through” because MPT owns the land that Steward’s for-sale hospitals sit on.

“MPT, listen, they’re here to maximize the real estate value and maximize the value of their claims. That’s their job. The other stakeholders are looking at the sale processes and say, ‘Listen, there’s an operational value that’s really the crux of these hospitals and these operations.’ And how you sort between the operational value of a hospital and the real estate value of a hospital, I’ll just say people could logically debate,” Schrock said last week. He added, “How you get that value between the [operating company] and the lease is something that’s going to have to be resolved.”

Healey’s Health and Human Services Secretary Kate Walsh has previously noted that due to the company’s debt and lease arrangements, “People can’t figure out what they’re buying.”