The state’s third largest hospital operator is poised to essentially exit Massachusetts Monday, after sales of the bankrupt company’s medical facilities are scheduled to officially close.
The deals to transfer ownership of the five remaining Steward Health Care hospitals are part of the company’s Chapter 11 bankruptcy proceedings, and will clear the way for three nonprofit companies to take over the private, for-profit Steward’s hospitals.
Under the deals, Boston Medical Center will take ownership of St. Elizabeth’s Medical Center in Boston and Good Samaritan Hospital in Brockton for a purchase price of $140 million; Lawrence General Hospital will pay $28 million for the Holy Family hospital campuses in Methuen and Haverhill; and Rhode Island-based Lifespan will purchase St. Anne’s Hospital in Fall River and Morton Hospital in Taunton for $175 million.
In a last minute bankruptcy court hearing Sunday, the parties continued to haggle over how the sales proceeds would be distributed between Steward’s lenders and the investors that own its hospital real estate. Attorneys for the state agreed to seek an additional $5 million to allow the deals to be close.
“Bankruptcy is always a long and complicated process,” state Health and Human Services Secretary Kate Walsh said in an emailed statement Sunday. “The Healey-Driscoll administration remains confident that these sales will be finalized soon and the five Steward hospitals will transition to new operators.”
Although patient care is expected to continue uninterrupted, taking over operations of a hospital is a complex process, particularly in facilities that need investments and where scores of employees have left since the start of the year, when Steward publicly acknowledged its financial problems.
While new owners should provide some relief to patients and hospital workers, the transition will be like “changing a car’s tire while the car is moving,” according to Marc Bard, a health care consultant with the advisory firm MB2. He said a lot of work is required behind the scenes to integrate facilities into new hospital systems.
“They’re going to have to live with redundant systems — financial systems, computer systems, record systems, quality systems,” Bard said. “Over time, they’re going to have to develop a strategic ramp for how they’re going to replace the local systems. But that’s going to take some time.”
The state has spent hundreds of millions of dollars to keep the hospitals running, and promised millions more to aid the new owners as they take control. The sales have been approved by regulatory agencies including the state Department of Public Health, the state Attorney General’s Office and the state Health Policy Commission.
“The proposed acquisitions offer a critically important opportunity to maintain access to services for the patients of these institutions while offering real opportunities to improve quality and stabilize the health care market,” the Health Policy Commission said in a statement on Friday, after it issued its decision to let the deals proceed without a broader review.
Massachusetts’ public health commissioner, Dr. Robbie Goldstein, approved emergency applications from the three new operators, known as “Determination of Need” or DoN applications, although the new owners did not promise to preserve all services at the facilities. The buyers said they needed time to review operations they were unable to access before the deals closed.
“Without issuance of an Emergency DoN the public health will be measurably harmed due to access challenges and potential disruptions in patients’ treatment,” Goldstein wrote in his approval letters.
Goldstein did place some conditions on the new operators. They include a five-year state monitoring period, and six months for each operator to conduct an initial assessment of the hospitals and notify the state of plans to integrate the hospital systems. The new owners will propose measures to assess patient care and equity, identify measures for patient satisfaction and report to the state on the mix of insurance payers.
The Massachusetts Attorney General’s Office, which monitors all nonprofits in the state, will oversee the hospitals. The office does not monitor for-profit health care entities.
As part of the bankruptcy process, two Steward hospitals — Carney Hospital in Dorchester and Nashoba Valley Medical Center in Ayer — closed last month. Gov. Maura Healey has created two working groups to assess the closures and ensure that patients continue to receive health care services.
Arriving at agreements to sell the remaining hospitals in the Steward system has required state officials to navigate a complex bankruptcy system. The deals were also complicated by the fact that Steward sold its hospital real estate to a real estate investor Medical Properties Trust in 2016. During the negotiations, MPT turned the properties over to its mortgage lender, Apollo Global Management.
Several moves were made in the final hours before the hospital sales were set to close.
On Friday, the state took over St. Elizabeth’s Medical Center in Brighton in eminent domain proceedings. The investor that owns the real estate had rejected the state’s offer of $4.5 million for the property and promised to fight the taking in court.
On Saturday, Steward announced its CEO Ralph de la Torre had resigned from the company and as chairman of its board. His spokesperson said de la Torre “amicably separated from Steward on mutually agreeable terms.” His resignation takes effect Tuesday.
At a bankruptcy hearing Sunday, judge Christopher Lopez agreed to amend the sales agreements after the state said it work with others to ensure that $5 million would be made available to some of Steward’s lenders.
Barring any 11th hour changes, the company will cease running hospitals in Massachusetts after Monday. The sales deals stipulate that the new owners take over on October 1.
“These sales need to be completed on Monday so that the hospitals can transition to new, responsible operators and so that Steward leaves Massachusetts,” a spokesperson for the Executive Office of Health and Human Services said in an emailed statement.
The effects of Steward’s departure likely will continue to reverberate throughout the state’s health care system. Steve Walsh, president of the Massachusetts Health & Hospital Association, told the Health Policy Commission’s advisory board last week that the state still has to address how other hospitals will handle Steward patients and employees.
“When the Steward problem is quote unquote ‘solved,’ it is only the tip of all of the other challenges we face throughout the entire commonwealth,” Walsh said. “And I say solved in air quotes because although there are a lot of really good and smart people doing everything they can to meet the needs of patients and communities, it is imperfect at best.”
This article was originally published on WBUR.org.
