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

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The main entrance to St. Elizabeth Medical Center, the Steward Health Care family hospital in Brighton.  (Robin Lubbock/WBUR)

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

State and federal officials expect Steward to unveil its plan soon, and said they are reviewing several possible options if Steward were to close its Massachusetts facilities.

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

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

The Main Entrance To St. Elizabeth Medical Center, The Steward Health Care Family Hospital In Brighton.  (Robin Lubbock/Wbur)

“He expressed his intention to exit the Massachusetts health care market,” Lynch said. A week ago we had no advance notice that they were in difficulty, or that they were considering exiting the Massachusetts health care market.

Lynch described the stewards’ announcement as “surprising” and said he had expected more notice. He noted that Steward has received more than $150 million in federal funding for Massachusetts operations over the past few years. He is wondering where the money went. He said that the steward did not tell when it would leave the state.

“I think the underlying message is that the for-profit model doesn’t work,” Lynch said. “(Steward) is a for-profit health care network, and I firmly believe that it is very difficult to pursue two missions: making profits and still providing high-quality health care.”

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Steward, which is one of 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 attributed it to 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 the stewards to attend a briefing and outline their plans.

At a congressional subcommittee hearing Wednesday, Massachusetts U.S. Representative Lori Trahan said for-profit investments in health care are hurting patients — particularly in her district north of Boston where some of Steward’s hospitals are located. Trahan blamed Steward’s “financial negligence” for the company’s difficulties.

“Families in my district are being told they have to pay a price for this,” Trahan said. “Families who receive care at Steward-owned Holy Family Hospital and Nashoba Valley Medical Center were recently informed 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.

Massachusetts Officials Are Preparing Contingency Plans To Prevent The Closure Of Stewarded Health Care Facilities, Including Carney Hospital In Dorchester.  (Jesse Costa/Wbur)
Massachusetts officials are preparing contingency plans to prevent the closure of stewarded health care facilities, including Carney Hospital in Dorchester. (Jesse Costa/WBUR)

At a state Department of Public Health meeting Wednesday about closing New England Sinai, Steward re-issued a statement from early December that said the company had lost $22 million at New England Sinai and She cannot afford to keep the facility open.

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“Approximately 75% of Steward Hospital’s patients are public pay (Medicare and Medicaid)
“They have been underpaid for a long time, sometimes at rates well below the cost of providing services,” Steward’s statement said.

New England Sinai officials said staff shortages, increased costs and low reimbursement rates have “destroyed” the hospital. He promised to work to ensure a smooth transition for patients and said staff would be able to apply for positions at other Steward facilities.

In his statement, Steward also said it 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 that are not served by nonprofit hospitals.

But there may be another factor impacting Steward’s balance sheet. In 2016, Steward sold most of its hospital real estate to an investment trust called Medical Properties Trust, or MPT. The stewards then leased the facilities back. In early January, MPT said its largest tenant, Steward, owed $50 million in back rent. Lynch said that Steward officials cited the debt as one of the reasons for its financial difficulties.

Some analysts have suggested that Steward may be owed much more than $50 million by MPT. Robert Simon, a real estate investment trust analyst who studies MPT for the research firm HedgeEye, said MPT has experienced problems with other hospital operators it supports and is now trying to help Steward financially. Not as capable as he used to be in the past.

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“In my view, and the math shows, the reason why Steward is failing right now is because MPT is not able to lend any more money to Steward,” Simon said. “In my opinion it’s a house of cards.”

Simon has raised red flags about MPT and advised investors to stay away from the company or “go short” as a way to profit from an anticipated future decline in the stock price.

Several lawsuits reveal that Steward also has other significant debts. One of the largest claims, filed in December, alleges Steward owes health care staffing firm ProLink Health Care more than $45 million. 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 that Steward stopped paying ProLink in early 2022, even though ProLink continued to send employees to Steward facilities.

Some health care executives say Steward’s options include declaring bankruptcy, and allowing the state to come up with a plan for its own hospitals, or selling assets to satisfy some creditors. Although Steward does not own the real estate of its hospitals, it has 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 could be an asset the company could sell.