Claire Dawson
After declaring bankruptcy in May 2024, Steward Health Care has been looking for buyers for its 31 hospitals across eight states, including Massachusetts. The state of Massachusetts has brokered agreements to keep five hospitals owned by Steward Health Care open while the struggling health system undergoes bankruptcy. Lifespan, a Rhode Island-based health system, has signed a purchase agreement to acquire two of Steward Health Care's hospitals in Massachusetts for $175 million. Boston Medical Center has also purchased Good Samaritan Medical Center and St. Elizabeth's Medical Center for $140 million.
| Characteristics | Values |
|---|---|
| Number of hospitals | 31 in 8 states |
| Hospitals in Massachusetts | 8 |
| Hospitals sold | 6 |
| Hospitals closed | 2 |
| Hospitals to be sold | 5 |
| Hospitals to be closed | 2 |
| Hospitals bought by Lifespan | 2 |
| Hospitals bought by Lawrence General Hospital | 1 |
| Hospitals bought by Boston Medical Center | 2 |
| Hospitals bought by Rural Healthcare Group | 1 |
| Hospitals bought by Insight Health System | 31 |
| Hospitals founded by Caritas Christi | 6 |
| Hospitals bought by Cerberus Capital Management | 6 |
| Hospitals bought by Medical Properties Trust | 37 |
| Hospitals with purchase agreements | 3 |
| Hospitals with layoffs | 2 |
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What You'll Learn
Steward Health Care's financial collapse
Steward Health Care, the largest physician-led for-profit healthcare network in the country, has been facing financial collapse, resulting in the closure of some of its hospitals and the sale of others. The company was formed in 2010 when the private equity firm Cerberus Capital Management bought out the failing Caritas Christi Health Care system in Massachusetts for $420 million, renaming it Steward Health Care.
From the outset, Steward Health Care struggled financially, failing to turn a profit between 2011 and 2014. During this period, the company's debt increased, and its total liabilities ballooned to $1.4 billion. Despite this, in 2016, Steward sold 37 of their 39 buildings and associated land to Medical Properties Trust (MPT) for $1.25 billion, using the proceeds to pay dividends to investors rather than reinvesting in its hospitals. This left the hospitals burdened with steep lease contracts, and the company's financial troubles continued.
In addition, Steward Health Care has been criticised for its mismanagement, with reports of understaffing and shortages of supplies and equipment, which have endangered patients. There have also been allegations of the company defrauding the Medicare program. As a result of its financial difficulties, Steward has closed hospitals and is in the process of selling several more.
The financial collapse of Steward Health Care has had a significant impact on the communities it serves, with concerns that the closure of hospitals will leave communities without crucial healthcare services and place additional strain on other hospitals in the state. The situation has also highlighted the concerns surrounding the private equity business model in healthcare, where the focus on quick financial returns for investors may compromise patient care.
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Hospitals bought by private equity firms
Private equity firms have been buying hospitals and healthcare systems at an increasing rate over the past few decades. In 2023, the Private Equity Stakeholder Project identified 1,135 healthcare-related deals conducted by private equity firms, business development corporations, venture capital firms, private credit funds, and other investors. Of those deals in 2023, 148 were buyouts.
The growing trend of private equity firms buying hospitals has left patients, doctors, and local politicians concerned that the private equity business model does not lend itself to high-quality patient care. This concern is supported by a study led by researchers at Harvard Medical School, which found that patients are more likely to fall, get new infections, or experience other forms of harm during their stays in hospitals acquired by private equity firms.
Private equity firms' acquisitions of hospitals have also resulted in dangerous conditions, closures, reduced access to services, declining quality, and fraud. In the case of Steward Health Care, a multistate hospital system previously owned by Cerberus Capital Management, private equity ownership resulted in bankruptcy and the closure of two of its Massachusetts hospitals: Nashoba Valley Medical Center and Carney Hospital.
Despite the concerns and negative impacts associated with private equity firms buying hospitals, supporters of private equity cite its ability to create value for companies and investors across industries by improving operations, promoting innovation, and providing access to capital for infrastructure improvements.
In the case of Steward Health Care, the bankrupt health system has reached definitive agreements for the sale of six of its Massachusetts hospitals to other healthcare providers. These deals are expected to prevent closures and secure almost 30,000 jobs.
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State aid and financing plans
The state of Massachusetts has been actively involved in brokering agreements and providing financial support to ensure the continued operation of Steward Health Care's hospitals during the company's bankruptcy proceedings. The state's interventions include:
- Pledging Financial Support: Massachusetts pledged $30 million to help keep Steward's hospitals operational through the end of August. This funding was intended to prevent closures and maintain access to healthcare services for the communities served by these hospitals.
- Facilitating Sales and Transfers: The state, through Governor Maura Healey's office, has played a pivotal role in facilitating the sales of Steward's hospitals to other operators. This includes negotiating agreements and addressing concerns from potential buyers to ensure the hospitals remain open during the bankruptcy process.
- Eminent Domain and Landlord Disputes: In the case of St. Elizabeth's Medical Center, Governor Healey's administration used eminent domain to take control of the hospital and transfer it to a new owner, bypassing landlord disputes that had hindered the sale process.
- Cash Advances and Capital Support: Governor Healey mentioned working with lawmakers to develop a fiscally responsible financing plan. This plan includes cash advances, capital support, and maximizing federal matches to facilitate the transfer of hospital ownership.
- State Approval and Regulatory Oversight: The finalization of the hospital sales agreements is contingent on approvals from state regulators and the Bankruptcy Court. This oversight ensures that the sales are conducted in compliance with state laws and in the best interests of the public.
- State Funding for Buyers: Lawrence General Hospital, a nonprofit community hospital, is relying on upcoming payments from the state of Massachusetts to help them acquire and improve Steward's Holy Family campuses. This state funding is essential for ensuring the successful transition of these hospitals to new operators.
The state's interventions demonstrate a commitment to maintaining healthcare services, protecting jobs, and ensuring the financial viability of Steward's hospitals during this period of transition.
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Sale agreements and negotiations
In May 2024, Steward Health Care, a for-profit corporation that owns eight hospitals in Massachusetts, declared bankruptcy after accruing $9 billion in debt. The Dallas-based system has since been attempting to sell its assets, including its 31 hospitals across eight states and a major physician group, Stewardship Health.
In August 2024, the state of Massachusetts brokered an agreement to keep five hospitals owned by Steward Health Care open while the company undergoes bankruptcy. 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 the deals are finalised.
On 29 August 2024, Lifespan, a Rhode Island-based health system, announced it had signed a purchase agreement to acquire two of Steward Health Care's hospitals in Massachusetts for $175 million. The price covers the hospital operations, as well as the land and buildings, for St. Anne's Hospital in Fall River and Morton Hospital in Taunton. Lawrence General Hospital, a nonprofit community hospital, has also finalised an agreement to purchase Holy Family Hospital, which has campuses in Methuen and Haverhill, for $28 million.
On 3 September 2024, it was announced that Steward Health Care had locked in definitive agreements for six of its Massachusetts hospitals. Lifespan will purchase Morton Hospital and Saint Anne's Hospital, while Lawrence General Hospital will purchase Holy Family Hospital's Methuen and Haverhill locations. Boston Medical Center will purchase Good Samaritan Medical Center and St. Elizabeth's Medical Center for $140 million.
These deals are contingent on customary closing conditions, including approvals from regulators and bankruptcy court.
In addition to these sales, negotiations are also taking place with entities that own the land under the hospitals, which have been charging what the bidders consider onerous rents. The landlord for several of Steward's hospitals, Medical Properties Trust, has agreed to a deal that will prevent closures and secure almost 30,000 jobs.
Massachusetts has also seized control of St. Elizabeth's Medical Center in Boston, as a qualified buyer was found but the landlord refused to move.
Steward Health Care was founded in 2010 when the private equity firm Cerberus Capital Management bought out the failing Caritas Christi Health Care system for $420 million. In 2016, Steward sold 37 of their 39 buildings and associated land to Medical Properties Trust for $1.25 billion. In 2020, Cerberus sold Steward Health Care to a group of its physicians.
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Hospitals set to close
Steward Health Care, a for-profit corporation that owns eight hospitals in Massachusetts, has been facing financial troubles and has been unable to pay its bills, leading to concerns about the quality of patient care. The system has accumulated $9 billion in debt and has struggled to sell its assets, including its hospitals and a major physician group. As a result, the state of Massachusetts has stepped in to broker agreements to keep some hospitals open while the company undergoes bankruptcy proceedings.
Two Steward hospitals, Carney Hospital in Dorchester and Nashoba Valley Medical Center in Ayer, were set to close after failing to receive qualified bids from potential buyers. These hospitals, with 91 and 38 licensed beds respectively, were among the worst-performing facilities in the Steward system. The closures generated sadness and anger in the communities they served, as patients formed close bonds with these hospitals.
However, the state of Massachusetts, led by Governor Maura Healey, has taken steps to prevent the closure of five other Steward hospitals. The state seized control of St. Elizabeth's Medical Center in Boston, which had received a high-quality bid but faced issues with the landlord refusing to move. Additionally, agreements have been reached for the sale of four other hospitals to other operators, ensuring they remain open.
These hospitals include Lifespan purchasing St. Anne's Hospital and Morton Hospital, and Lawrence General Hospital buying Holy Family Hospital with locations in Methuen and Haverhill. The deals are valued at $175 million and $28 million, respectively, and are expected to bring positive changes to the healthcare system in Massachusetts.
The future of Steward's remaining hospitals in Massachusetts and other states is still uncertain, with ongoing negotiations and bids from potential buyers. The bankruptcy proceedings and sales of assets are being closely watched by state and federal lawmakers, who are concerned about the impact on patient access to care.
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Frequently asked questions
As of September 2024, Lifespan, Lawrence General Hospital, and Boston Medical Center have been named as buyers of Steward hospitals in Massachusetts.
There are agreements for the purchase of six hospitals in Massachusetts.
The purchase price for Boston Medical Center is $140 million, while the deal for St. Anne's Hospital and Morton Hospital is $175 million.
Steward Health Care filed for bankruptcy in May 2024 after accruing $9 billion in debt.
The sales are expected to secure almost 30,000 jobs and ensure that the hospitals remain open.
