Massachusetts Makes Deal To Force Steward Hospital Sales

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Dive Brief:

• The state of Massachusetts has brokered an agreement to keep five hospitals owned by Steward Health Care open while the struggling health system undergoes bankruptcy, the governor’s office announced Friday.
• The operations of Saint Anne’s Hospital, Good Samaritan Medical Center, Morton Hospital and Holy Family Hospitals will be taken over by third parties when deals are made final. Meanwhile, Gov. Maura Healey’s administration will use eminent domain to wrest control of Saint Elizabeth’s from Steward and transfer the facility to a new owner, according to the announcement.
• The divestitures, when completed, will effectively end Steward’s presence in Massachusetts. A spokesperson for Steward declined to comment on expected proceeds from the sales.

Dive Insight:

Steward declared bankruptcy in May after stacking up $9 billion in debt. Since then, the Dallas-based system has scrambled to sell its assets, including its 31 hospitals in 8 states and a major physician group, Stewardship Health, to try to make its lenders whole.

State and federal lawmakers have closely watched Steward’s bankruptcy process, while accusing the system’s leadership, especially CEO Ralph de la Torre, of putting profits before patients. De la Torre was even subpoenaed to testify before the Senate about his role in Steward’s financial collapse.

Of particular concern to lawmakers in Massachusetts is how Steward’s implosion will affect patient access to care. The system already announced the impending closure of two other hospitals in the state, while another Steward facility, Norwood Hospital, remains closed following serious flooding in 2020.

Now, Healey’s office has facilitated a deal to sell Steward’s remaining five hospitals in Massachusetts — including through eminent domain, a power that allows the government to take control of private property for public use while providing compensation.

Healey, a Democrat, accused Steward’s landlords Medical Properties Trust and Macquarie Investment Partners, along with major lender Apollo Global Management, of putting their own interests ahead of ensuring their hospitals can continue providing care for Massachusetts residents.

“Enough is enough,” the governor said in a statement.

Under the deal, the Holy Family hospital campuses in Haverhill and Methuen will be taken over by Lawrence General Hospital, while Morton and Saint Anne’s will be run by Lifespan.

Boston Medical Center will assume operations of Good Samaritan and eventually Saint Elizabeth’s once the eminent domain process is complete.

Massachusetts is also pledging $30 million to help keep the facilities open through the end of August. However, the state is not providing aid to help facilities that are on track to close: Carney Hospital in Dorchester and Nashoba Valley Medical Center in Ayer. Steward announced that Carney and Nashoba — two of its worst-performing facilities — would close last month after it failed to receive any qualified bids from potential buyers.

Steward has had difficulty selling its assets, including publicly losing buyers and pushing back the timeline for sales several times. Negotiations are complex, given Steward doesn’t own the land its hospitals operate on and different lenders are jockeying for their slice of any proceeds.

In a bankruptcy hearing earlier this month, Steward said it’s finalizing sales agreements for its hospitals in Louisiana and Arkansas, and has received bids for facilities in Pennsylvania and Ohio. Last week, Orlando Health bid more than $439 million for Steward’s hospitals in Florida, according to court documents.

And, earlier this month, Steward reached a deal to sell its physician network to a private equity firm for $245 million.