State officials are bracing for Steward Health Care to possibly file for bankruptcy and change top management - The Boston Globe (2024)

“Bankruptcy doesn’t mean the hospitals would close,” said Walsh, who has been Governor Maura Healey’s point person on Steward’s mounting financial crisis. “The hospitals would be open, at least for a period of time.”

A spokesperson for Steward declined to comment on Walsh’s remarks or the possibility of a bankruptcy filing. Steward faces a Tuesday payment deadline for a portion of about $750 million that a half-dozen lenders have provided over the past year to keep its national hospital system afloat.

The deadline could be extended, or Steward could secure additional financing. But if Steward’s lenders called in the loan and it couldn’t come up with the money, that would trigger a bankruptcy filing. Under that scenario, the company could keep operating its network in eight states — for a time, at least — while it restructures its debts and determines the fate of its 32 hospitals.

Steward’s financial problems came to light in January when a commercial landlord, Medical Properties Trust, disclosed that the system hadn’t been paying its full rent on its hospital buildings for months. The company also faces more than two dozen lawsuits from vendors, ranging from nursing agencies to medical supply firms, alleging they haven’t been paid. It’s now trying to sell its eight hospitals in Massachusetts.

Robbie Goldstein, the state’s public health commissioner, who also testified at Wednesday’s hearing, said he had five contingency planning sessions last week with leaders of other hospitals and community health centers in Massachusetts to discuss how they’d handle an influx of patients in areas where Steward operates. He plans another round of meetings this week.

Goldstein described the invitation-only meetings as heartening in a stressful time. “Every single person in these regional sessions was cooperative,” he said. “They wanted to do whatever they can” to help patients if Steward winds down services or closes hospitals.

Walsh said she and her chief of staff have had direct conversations with Ralph de la Torre, the longtime Steward chief executive whom she got to know when she was chief executive of Boston Medical Center. But she said state officials don’t expect de la Torre and his management team, which moved Steward headquarters from Boston to Dallas in 2018, to remain in control of the company’s Massachusetts hospitals for long.

At the Senate hearing, Walsh didn’t explicitly broach the prospect of a bankruptcy. But she told lawmakers “there’s not a one-size answer” to Steward’s crisis, suggesting different approaches might be needed to meet patients’ needs in different parts of the state. Those approaches could include more telehealth, primary care, and home-based care, and less reliance on emergency rooms, she said.

“This is a moment in time when we know there will be some changes,” Walsh said. “We know it will be different on the other side.”

Goldstein, for his part, offered no details of his contingency planning. But he told lawmakers that health care leaders in each region understand the gravity of the situation and the need for a shared solution.

“We don’t know yet exactly what will happen with Steward Health Care, what a transition will look like,” he said. “But one thing we can say with certainty is that such a major change will affect communities across Eastern Massachusetts and will require coordination and collaboration of health care organizations in areas where Steward currently operates.”

State Senator Marc Pacheco and three colleagues brought their Senate post audit and oversight committee to a union hall at Local 223 of the International Brotherhood of Electrical Workers, less than 6 miles from Steward-operated Morton Hospital. The field hearing came a day after a group of Morton nurses and supporters rallied in a Taunton park, calling for keeping the hospital open under a new operator.

In Massachusetts, in addition to Morton, Steward runs Good Samaritan in Brockton, St. Elizabeth’s in Brighton, Carney Hospital in Dorchester, Holy Family in Methuen and Haverhill, Morton Hospital in Taunton, Nashoba Valley in Ayer, Norwood Hospital, and St. Anne’s in Fall River. It closed New England Sinai, a rehabilitation hospital in Stoughton, last month.

Katie Murphy, president of the Massachuetts Nurses Association, which represents nurses at Steward hospitals, told lawmakers her members had a “unique vantage point” on “all the suffering Steward’s ownership and practices have caused over the last 14 years.”

Steward bought the former Caritas Christi chain of Catholic hospitals in 2010, converting it into a for-profit operation backed by a private equity firm. In 2016, it sold the hospital properties to MPT, a real estate investment trust, in a $1.2 billion sales leaseback deal that saddled the chain with multimillion-dollar debt payments, a disincentive to potential buyers.

Five years later, as its debts accumulated, the company reportedly issued a $111 million dividend to its equity owners, including de la Torre.

“I’ve talked to bankers and health care lawyers,” Walsh said in the interview. “Nobody has seen a deal structure like Steward’s. And no one has seen an exit out of this deal structure that’s as complex as this is.”

Steward has fought Massachusetts officials in court for years to avoid disclosing the finances of its hospitals in the state. But in a bankruptcy filing, “all kinds of financial information would have to be disclosed,” Adam Ruttenberg, a Needham attorney who specializes in bankruptcy cases, said in an interview.

Wednesday’s hearing focused on health care needs in five counties in Southeastern Massachusetts, Cape Cod, and the Islands, which make up about 20 percent of the state’s population. But the financial crisis at Steward dominated the discussion throughout the hearing.

The region is already under strain because of the temporary closing of Brockton Hospital, which was shut last year after an electrical fire, and is on track to reopen this spring. Steward-owned Norwood Hospital nearby is also closed in the aftermath of a flood; renovations to that hospital have been halted by contractors, who say they haven’t been paid.

“We need to assure that our communities have access to hospital care, and quality hospital care,” Pacheco said at the start of the hearing.

Walsh, in the interview, declined to say if any bids have been submitted for the Steward hospitals. But she applauded nurses and other hospital workers who’ve continued to serve patients during the crisis.

“People have hung in there with these hospitals,” she said. “Nurses are showing up every day. We owe a debt of gratitude to those professionals for showing up every day at hospitals that may or may not stay open. . . . But if something happens, we’ve been working really hard to safely and effectively transition these hospitals to new ownership.”

Robert Weisman can be reached at robert.weisman@globe.com.