Steward Health Care seeking bankruptcy

BOSTON — Steward Health Care, operator of the third-largest hospital system in Massachusetts, filed for Chapter 11 bankruptcy in Texas, seeking the legal protection to restructure its debt while leaving its hospitals open.

The company, which operates eight Bay State hospitals and has been sinking under a pile of debt to vendors and its de facto landlomrd, 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.”

On Monday morning, the state launched a website with resources about the bankruptcy and officials planned to open a hotline for health care providers and concerned patients of the system’s eight Massachusetts hospitals.

Gov. Maura Healey and her administration stressed that care will continue at these hospitals throughout the bankruptcy proceedings, and that the action brings Steward one step closer to getting out of the state — which Healey has repeatedly called on the company to do.

Also, state government will send legal counsel to represent the Bay State’s interests in the Chapter 11 bankruptcy proceedings in Texas, Health and Human Services Secretary Kate Walsh said at a press conference Monday morning.

In a middle-of-the-night press release, Steward said it was finalizing the terms of “debtor-in-possession financing from Medical Properties Trust for initial funding of $75 million and up to an additional $225 million upon the satisfaction of certain conditions acceptable to Medical Properties Trust,” the real estate investment trust that owns the land under Steward hospitals.

Steward also said the move will make it easier to transition its Massachusetts hospitals to another company.

“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. “In the past several months we have secured bridge financing and progressed the sale of our Stewardship Health business in order to help stabilize operations at all of our hospitals. 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.”

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In late March, state regulators said they had received word that Steward planned to sell its physician network to for-profit insurer Optum, with Steward describing the anticipated effective date of the deal as the second quarter of 2024, “following receipt of all required approvals.” State regulators say Steward has failed to file information it needs to review the transaction.  

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

“Today, Steward Health Care moved forward with a bankruptcy filing under federal law — an action for which the Healey-Driscoll administration has been preparing. Steward hospitals remain open, 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 said.

On Friday, Healey said that Steward will be exiting Massachusetts, calling that a “very good thing based on their completely unscrupulous behavior.” She’s repeatedly accused de la Torre of financial mismanagement and shielding financial documents from state regulators.

“So great, get them out of town, but in the meantime, it’s like, how do you manage that orderly transition?” Healey said. “Who’s going to come in and take over? What is that going to look like? And it’s something that we are committed to making sure that we manage as thoughtfully as possible, and that we work with our network of existing other hospital providers and other physician networks to make sure, again, that patients are covered, that workers are protected, and that the stability of the market is in place.”

In a statement early Monday, the Mass. Nurses Association and 1199 SEIU said Steward’s bankruptcy filing “provides an opportunity for other stakeholders to take long-awaited action and center the voices of caregivers and patients.”

“As such, the bankruptcy declaration should only embolden the administration, the legislature, the healthcare industry, and all those who value the health of our communities 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,” the unions said.

Steward operates eight hospitals in Massachusetts: St. Anne’s in Fall River, 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 and Norwood Hospital. Hawthorn Medical Associates in North Dartmouth is an affiliate of Steward Health Associates.

House Speaker Ron Mariano and Senate President Karen Spilka both declared their confidence in the Healey administration and Secretary Walsh to navigate Steward’s bankruptcy. 

In separate statements Monday, the two top Democrats each referenced plans to take up legislation influenced by the Steward crisis, but they offered differing levels of specificity on next steps.

Mariano said the House will vote next week on “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.” He previously endorsed a sweeping hospital oversight and reform bill that emerged from the Legislature’s Health Care Financing Committee.

Spilka, who has not signaled any explicit plans to take up that specific bill, said she “look[s] forward to working with [the administration] and our partners in the House to take the steps necessary to prevent the conditions within our health care system that would cause another acute situation like the one facing Steward today.”

Lora Pellegrini, president and CEO of the Massachusetts Association of Health Plans, said insurers “understand the uncertainty raised by Steward Health Care’s action today to file for Chapter 11 bankruptcy” but emphasized that patients can continue to receive care at Steward facilities. 

“MAHP member plans will continue to provide coverage at Steward facilities. If any health plan member has immediate concerns regarding coverage or access, they should contact their health plan’s member services department for further assistance,” said Pellegrini.

Massachusetts Health and Hospital Association President Steve Walsh pledged cooperation from the hospital sector. 

“As we have seen in the past, the declaration of bankruptcy is a tool that can help stabilize healthcare operations in emergency situations and protect essential patient care,” Walsh said in a statement Monday morning. “Steward’s announcement now gives Massachusetts the opportunity to think even more critically about the path forward for these hospitals and to determine how resources can be directed toward the patients and communities that Steward serves. Our hospitals will continue to work closely with state leaders in the coming weeks and months as we strive to protect healthcare workers, minimize the pressures on other providers, and – most importantly – ensure patients have access to the care they deserve.”

State House News Service reporter Chris Lisinski contributed reporting, and New Bedford Light staff provided additional material to this story.

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