Lawmakers Ask Department Of Labor To Protect Steward Workers

Dive Brief:

• A group of federal lawmakers on Monday urged the Department of Labor to ensure Steward Health Care provides uninterrupted health and retirement benefits to workers through its bankruptcy process.
• The members of Congress, led by Sens. Edward Markey, D-Mass., and Bernie Sanders, I-Vt., asked the agency to enforce Steward’s compliance with required 60-day layoff notices, determine the company’s plan for paying benefits during and after Chapter 11 restructuring and share that plan with employees. 
• Steward has a vested interest in retaining talent. During a bankruptcy hearing earlier this month, Steward’s attorneys petitioned the court for emergency funding, in part to pay staff, saying competitors were “circling” and attempting to lure workers away.

Dive Insight:

Steward, which was once owned by private equity firm Cerberus Capital Management, is the largest physician-owned healthcare network in the country, with locations across Arizona, Arkansas, Florida, Louisiana, Massachusetts, Ohio, Pennsylvania and Texas.

Regulators have had Steward in their crosshairs since late 2023, after it came to light that the Dallas-based health system was carrying millions in debt and had allegedly mismanaged operations across its eight state portfolio.

In Monday’s letter, addressed to the DOL Acting Secretary Julie Su, lawmakers accused the health system of closing hospital units and facilities in some states, and not providing sufficient resources in others, leading to maintenance issues and disruptions in patient care.

Now, lawmakers want to ensure Steward’s remaining workforce of nearly 30,000 are protected during the health system’s restructuring.

“Amid this torrent of disruption, hospital workers held firm to their commitment to serve the public as they faced overflowing emergency departments, missing medical supplies and uncertainty about their job security,” the lawmakers wrote. “These workers and retirees rely on their wages and benefits for their livelihoods and need clear communication about changes to plan benefits and administration and assurances that their rights are protected throughout this process.”

Lawmakers said some Steward workers have already experienced disruptions in their benefits during restructuring, including those in Massachusetts whose paychecks were delayed after Steward declared bankruptcy in May. At the time, Steward said the delay was due to a processing error with its bank and not its bankruptcy, according to reporting from Boston 25 News.

However, court records show that Steward has owed worker compensation obligations before.

Prior to entering restructuring, the company owed $289.8 million in compensation, including $68 million in wages and $105.6 million in payments for physician services.

Steward also owed $88.9 million associated with employee benefits, including $62 million for healthcare benefits and north of $2 million for retirement benefits.

The letter also comes amid broader concerns about facility closures and layoffs at Steward.

State regulators and federal lawmakers have pressed Steward about the impact of possible closures since January, after the health system closed facilities in Massachusetts and Texas and laid off more than 150 workers in Florida in early March.

In addition, the health system accepted loan terms last week that will require Steward to transition or close facilities that don’t sell during the company’s rapidly approaching asset auction.

If Steward fails to assuage layoff fears or meet its compensation obligations for workers, employees could jump ship. When Steward declared bankruptcy, workers told Healthcare Dive they were torn between staying at the facilities they’d worked at for years and seeking job security.

The need for physicians to stay on is of “paramount importance” in order for the hospitals to retain value ahead of auction, Steward’s attorney Ray Schrock told the court during a June hearing.

Steward is attempting to sell the hospitals on a tight timeline — it needs to close a sale of its physician group, Stewardship Health, and most hospitals by July 11 and all other assets by August 22.

Without the physicians, Schrock warned, the health system “can’t continue to function.”

But competitors are aware of that value, Schrock said, and are attempting to grab it out from under the struggling health system.

“Our competitors are circling,” said Ray Schrock, co-chair of the restructuring department at Weil, Gotshal & Manges, during a June hearing. “Especially through a sale process, you have to keep people motivated and know that they have a future at Steward or with an acquirer.”