Steward Bankruptcy Filing Rattles Massachusetts Health Care

By Sam Drysdale

The operator of the third largest hospital system in Massachusetts, and one of the state’s largest employers, declared bankruptcy early Monday morning.

Steward Health Care, which operates eight Bay State hospitals and has been sinking under a pile of debt to vendors and its de facto landlord, filed for Chapter 11 bankruptcy in Texas, seeking the legal protection to restructure its debt while leaving its hospitals open.

The company said it does not expect any interruption to day-to-day operations and that the bankruptcy filing was “a necessary measure to allow the Company to continue to provide necessary care to its patients in their communities without disruption.”

“Steward Health Care has done everything in its power to operate successfully in a highly challenging health care environment. Filing for Chapter 11 restructuring is in the best interests of our patients, physicians, employees, and communities at this time,” Steward CEO Ralph de la Torre said.

They cited insufficient reimbursement from the government as labor costs have “skyrocket[ed],” as well as inflation, the continued impacts of COVID-19, and delays in a proposed deal to sell their physician network as their reasons for the move.

In the hours since Steward Health Care announced the bankruptcy filing in a middle-of-the-night press release, the state  launched a website (mass.gov\stewardresources) with resources about the situation and set up a hotline for concerned patients and health care providers. The hotline is 617-468-2189 (local) or 833-305-2070 (toll-free).

Gov. Maura Healey and her administration stressed in a State House press conference at 10 a.m. Monday that care will continue at the Steward hospitals throughout the bankruptcy proceedings, and that the action brings Steward one step closer to getting out of the state — as Healey has repeatedly called on the company to leave Massachusetts.

“The hospitals that were open yesterday remain open today,” Health and Human Services Secretary Kate Walsh said. “The providers who were employed yesterday remain employed today and the community care that you could access yesterday, you can access today. Today’s bankruptcy filing does not change that. What bankruptcy does mean is that a federal court in Texas will be working with Steward creditors, our legal representation and others to address their financial challenges.”

State government will also send legal counsel to represent the Bay State’s interests in the Chapter 11 bankruptcy proceedings in Texas, Walsh said.

Healey repeatedly called for patients to continue their appointments at Steward hospitals. Hospitals around the state have been buckling under the weight of increased patient demand intersecting with a decrease in the state’s health care workforce.

“We want people to hear from the Department of Public Health that it is safe to get care at Steward facilities, the facilities are open,” said DPH Commissioner Robbie Goldstein. “If you’re having chest pain, if you’re a pregnant person about to deliver, please go to the hospital that’s closest to you, the hospital that’s in your community.”

Steward operates eight hospitals in Massachusetts: St. Elizabeth’s in Brighton, Carney Hospital in Dorchester, Good Samaritan Medical Center in Brockton, Holy Family Hospital in Methuen and Haverhill Hospital in Haverhill, Morton Hospital in Taunton, Nashoba Valley Medical Center in Ayer, Norwood Hospital, and St. Anne’s in Fall River.

State government on Friday announced that it had launched an incident command system to track and respond to the financial upheaval at Steward.

Responses to Steward’s bankruptcy filing poured in from across the state, including the House of Representatives scheduling a date next week to take up a massive health care reform bill, the attorney general declaring her office was looking into holding hospital executives accountable, and the state’s watchdog health cost agency announcing it is still missing necessary financial documents that it has been seeking from Steward for over a month.

“Next week, the House will take up comprehensive legislation to address gaps in our regulatory process that Steward exploited, to stabilize the health care system, and to address the rising cost of health care,” House Speaker Ron Mariano said in a statement Monday morning.

Attorney General Andrea Campbell praised the legislative action during Monday’s press conference, adding that “of course, we continue to work with the Senate on their proposal.”

The House’s 97-page oversight bill aims to stabilize the spiraling health care sector, strengthen data reporting requirements and increase fines for violators — after Steward hospital executives allegedly failed to produce legally-required financial reports for years — and safeguard residents’ access to care. The bill would also provide new authority to the Health Policy Commission as regulators look to rein in health care spending.

The HPC has been asking for more teeth for years, saying they could do more as an agency if they could better enforce beyond-expectations cost growth.

The agency is also seeking to review the proposed sale of Steward’s physician network to for-profit OptumCare.

The proposed deal is to sell Stewardship Health Inc., the parent of Stewardship Health Medical Group Inc., which employs primary care physicians and other clinicians across nine states, to OptumCare, a subsidiary of UnitedHealth Group.

The agency said in late March that once all required information has been provided about the sale, the HPC will have 30 days to assess potential impacts of the transaction. However, in a statement they released Monday following the bankruptcy filing, the HPC said it still does not have the necessary information.

“The HPC has begun examining the proposed sale of Stewardship Health, Inc. and Steward Health Care Network, Inc. to OptumCare, based on available information, however, the parties have still not submitted key required information and many details are still outstanding. The material change notice (MCN) filing is not complete until the HPC receives the definitive agreement governing the transaction and other requested information and documents which are necessary to conduct a preliminary review of potential impacts on health care costs and market functioning,” the agency said.

Meanwhile, de la Torre said the delay in that deal with OptumCare is one of the reasons for their bankruptcy filing.

“With the delay in closing of the Stewardship Health transaction, Steward was forced to seek alternative methods of bridging its operations. 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. By working collaboratively with stakeholders in this court-supervised controlled environment, and having the benefit of our earlier strategic efforts, Steward will be better positioned to responsibly transition ownership of its Massachusetts-based hospitals, keep all of its hospitals open to treat patients, and ensure the continued care and service of our patients and our communities,” he said in a statement.

The News Service asked Healey about Steward blaming their bankruptcy in part on the delay of the Optum deal.

“You know, one of the good things about bankruptcy is that Steward and its CEO and its management team will no longer be able to lie,” she said. “Transparency is really important here, and that’s why we look forward to seeing what is in the various documents that will be before the court, because we need transparency. We need clarity about debts and liabilities as we assess opportunities and restructuring as we go forward.”

Healey has repeatedly called on Steward to exit the state, calling de la Torre and other company officials “greedy” and “selfish.”

When Steward bought a number of hospitals in the Bay State in 2010, then-Attorney General Martha Coakley said the transfer of hospitals to a private-equity backed company was in the public interest, calling charitable hospital systems “impracticable, if not impossible.”

However, since news broke of Steward allegedly failing to pay vendors and its landlord, and withholding legally-required financial information from state regulators for years, both state and federal politicians have been calling for a hard look at private equity’s role in health care.

Campbell said her office is looking into options to hold Steward operators accountable.

“How do we ensure accountability? I know the public is eager to get answers on this. And I can’t at this moment talk about that work until it’s complete. And you’ll hear from us in a timely manner with a sense of urgency,” Campbell said. “I also want to make it crystal clear that I take it very seriously in any effort for this hospital system to make a profit to the detriment of patients to strip hospitals of their value. And if those efforts have violated the law, those involved will absolutely hear from our office at the appropriate time.”

The governor during her press conference renewed her calls for Steward to leave Massachusetts.

“Ultimately, this is a step toward our goal of getting Steward out of Massachusetts,” Healey said. “And it allows us to do that to protect access to care, preserve jobs and stabilize our health care system. Of course, we cannot guarantee that there won’t be disruptions or inconveniences, and I understand that members of the public are concerned about what this means for them and their families in terms of accessing care.”

When later asked about what kind of disruptions she anticipates, the governor said “I just want to acknowledge the reality.

“When we wake up to news that this major hospital system in Massachusetts has filed bankruptcy that can cause a lot of alarm and concern among residents. But I wanted to be here today with our team to tell people that we have been preparing for this,” she said.