By Emily Costello
Steward Health Care, one of the nation’s largest for-profit hospital systems, filed for Chapter 11 bankruptcy – upending the Massachusetts healthcare ecosystem and dominating the headlines. The system must sell over 30 hospitals around the country to pay back creditors for more than an estimated $9 billion in debt accrued. As one of the largest hospital bankruptcies in decades, the filing raises concerns about the fate of its approximately 30,000 employees, as well as the hundreds of thousands of patients who rely on the care that Steward provides.
On July 26, Steward announced its intention to close two of its Massachusetts hospitals, Carney Hospital in Dorchester and Nashoba Valley Medical Center in Ayer, claiming that it did not receive qualified bids for the hospitals. Steward said they received qualified bids for the other six Massachusetts hospitals. A sale hearing is scheduled for August 13, which will kickstart the transition of the remaining Steward hospitals to new operators.
As everyone in the state eagerly awaits updates on the transition of the remaining hospitals from Steward to new operators, the importance of effective communication and proactive crisis planning across our state’s healthcare system remains at the forefront of our minds. Here is what the IMG Healthcare Team is tracking as Steward Health Care’s bankruptcy unfolds:
Private Equity in Healthcare
For years, non-profit and not-for-profit institutions and health systems have dominated the Massachusetts healthcare market. Steward Health Care, created shortly after a private equity firm acquired a chain of six charitable Catholic hospitals in 2010, has been an outlier. The extent of Steward’s financial struggles highlights the potential implications of private equity in healthcare and how business practices focused on generating rapid returns at the expense of patient care can lead to exacerbated staffing challenges, difficulty paying vendors, insurmountable debt, and poorer quality of care.
The Massachusetts Health Policy Commission (HPC) published a report detailing the impact of private equity investments in Massachusetts healthcare, finding that over 51 percent of healthcare provider transactions in Massachusetts from 2013-2023 involved private equity to some degree. According to the HPC, private equity in healthcare falls outside state and federal market oversight, which led to a lack of transparency from Steward to the state.
Regulating Private Equity in Healthcare
In an effort to regulate private equity, both the Massachusetts House and Senate introduced and will negotiate during informal session healthcare oversight legislation (H.4543/S.2881) designed to prevent another situation similar to Steward from happening again. The bills under consideration would require private equity firms that are associated with healthcare providers to participate in the annual cost trends process, disclose out-of-state financial operations, and limit the amount of private equity ownership allowed for a healthcare provider.
The proposed legislation also aims to address additional business practices that Steward engaged in, such as selling its hospital property to a real estate investment trust and leasing the facilities back – using the proceeds to pay investors while also expanding across the country with the same approach. The bills would also allow the HPC to scrutinize transactions more closely for anticompetitive measures.
State Communication and Response
As Steward Health Care bankruptcy proceedings shake the Massachusetts healthcare landscape, elected officials and state leaders have made a continuous effort to communicate how this will impact their constituents’ access to care.
Once news of Steward Health Care’s financial failings became public, state officials launched an incident command system to prepare for service disruptions across the state. The Department of Public Health instituted patient quality monitors at Steward facilities to ensure safety doesn’t slip throughout the bankruptcy proceedings. Senators Elizabeth Warren and Ed Markey, along with Governor Maura Healey, called on Steward to exit the state and a Senate panel led by Bernie Sanders issued a subpoena to Steward CEO Ralph de la Torre, all while remaining committed to preserving access to care at Steward facilities.
Elected officials and policymakers have remained diligent in providing statements to news stories and remaining proactive through press conferences, even if they are letting the public know they are awaiting more information. Following the announcement of the closures, the Department of Public Health commissioner Robbie Goldstien along with Governor Maura Healey stated their commitment to ensuring a smooth transition of care for patients.
Physician and Patient Departures
Nashoba Valley Medical Center and Carney Hospital will prepare to close by August 31 following a federal judge ruling allowing an expedited closure timeline. As a result, Carney patients will now have to seek care at other Boston-area hospitals, and Nashoba Valley patients will have to travel farther distances to seek care, with the closest hospitals being more than 20 minutes away. In response, the state launched a new health care capacity interactive dashboard, which provides capacity data for hospitals across the state. It will also provide $30 million in advanced Medicaid payments to support Carney, Nashoba and the six Steward hospitals during their upcoming transitions.
Additionally, several non-Steward hospitals said they recently experienced an increase in patient volumes, and attribute part of this rise to patients avoiding Steward facilities. As Massachusetts hospitals already face high emergency department wait times and staff shortages, hospitals are now facing more demand from patients who would otherwise receive care at Steward facilities while simultaneously competing for physicians, nurses, and other healthcare professionals.
According to a story in WBUR, a nurse at St. Elizabeth’s Medical Center in Brighton said that over half of its emergency department physicians have left. The Massachusetts Public Health Commissioner Robbie Goldstein said that many of Steward’s facilities have seen “declining patient activity,” citing anywhere between a 30-40 percent decline from January to June.
As Steward works to exit Massachusetts, the IMG team will be keeping a close eye on the impacts to patient care along with our broader healthcare environment, and how these transitioning facilities serve their communities moving forward.