AG Andrea Campbell wasted no time telling a Texas bankruptcy court that floundering hospital operator Steward Health Care Systems “extracted value” from Massachusetts by burdening its facilities with debt at the same time it was hauling in hundreds of millions of dollars from the Bay State’s generous health care plans, charged she outlined in court papers filed Tuesday.
Campbell told the Bankruptcy Court of the Southern District of Texas that Steward Healthcare has spent the years since it started operating for-profit hospitals in the commonwealth making one bad decision after another, and that the company has “systematically…extracted value from Massachusetts, for among other reasons, to pay substantial dividends to investors and expand their network in other states.”
“Steward enters bankruptcy with its hospitals in Massachusetts compromised by fiscal and operational mismanagement, the nature and scale of which it actively concealed from both the government and the public. Steward created an untenable situation by over-leveraging its hospitals and imposing exorbitant and unsustainable rental obligations on each hospital. It is now clear that not long after creating this situation, hospital operations could not bear the excessive rent costs,” Campbell explained to the court.
“Steward could not service the debt it had incurred, and Steward started to shirk its obligations to pay vendors and suppliers. All the while, Steward continued to enrich its investors and management,” Campbell continued.
On Monday, just hours after it was learned Steward would declare bankruptcy, Executive Office of Health and Human Services Secretary Kate Walsh declared that Massachusetts would insert itself into the court proceedings to ensure Bay State patients’ rights were looked after.
True to that word, Department of Health Commissioner Robert Goldstein joined Campbell’s Tuesday filing, telling the court he is concerned that closure of Steward hospitals could “disrupt access to hospital services.”
“Already overburdened hospitals currently operating beyond licensed capacity would be required to absorb the additional volume. This decrease in hospital capacity, specifically for emergency services, maternal and newborn services, and inpatient behavioral health, would endanger the lives of patients,” Goldstein told the court.
State monitors have been in place in the company’s eight Massachusetts hospitals since January, after it was revealed the health care provider is apparently behind on its debts enough to find itself embroiled in several lawsuits (the AG’s Office cites 21) from suppliers and the owners of the land on which the hospitals sit.
On Friday, Gov. Maura Healey’s administration launched an “emergency operations plan” aimed at dealing with whatever fallout may come from Steward’s dire financial circumstances and the potential for disruption to patient care at any of the company’s Bay State hospitals.
Despite their financial woes, according to court filings the hospital system has benefitted from its position in Massachusetts, to the tune of tens of millions per month.
“The Commonwealth of Massachusetts is a major source of Steward’s revenue. In total, on a fee-for-service basis or through managed care plans, MassHealth paid approximately $19-20 million per month to Steward-controlled entities during calendar year 2023 on behalf of MassHealth members, for a total of approximately $264-276 million in 2023. In addition, Steward received over $84 million in supplemental or incentive payments from MassHealth during hospital rate year 2023,” Campbell told the court.
The AG’s office told the Herald on Tuesday that they would work closely with the Healey Administration and bankruptcy counsel to protect patient access and the about 1,600 jobs Stewards supports. Campbell is personally involved in the process, her office said, along with state lawyers from the Health Care and Fair Competition Bureau and Executive Bureau.
While they could not comment on any particular investigation, the AGs office said they are looking into Steward’s actions to see if they breached any state law.
“The public is rightly frustrated right now, and I share their concerns. My office is working to get answers and we intend to seek accountability for any laws that may have been violated,” Campbell told the Herald in a statement. “We expect the bankruptcy process to bring about transparency and stability, as well as greater legal oversight over Steward’s operations than before. We’ll continue to work within that process to protect patients and employees who are showing up on the frontlines each day.”
Also on Tuesday, the Texas court extended the timeline for Steward to disclose their assets and liabilities by 46 days, essentially giving them a full two months to provide that information to the court while leaving the door open for more time.
“The day by which the Debtors must file their Schedules and Statements is extended through and including July 9, 2024. The Debtors may obtain a further extension of the time periods set forth in this paragraph by further order of the Court,” the court ordered.
Steward operates St. Elizabeth’s Medical Center in Brighton, Carney Hospital in Dorchester, Good Samaritan Medical Center in Brockton, Holyoke Hospitals in Haverhill and Methuen, Morton Hospital in Taunton, Nashoba Valley Medical Center in Ayer, and Saint Anne’s Hospital in Fall River. Norwood Hospital closed in 2020 due to flooding, and the company recently closed New England Sinai Hospital permanently.
