May 22, 2024

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Steward Health Care is seeking bankruptcy protection

Steward Health Care is seeking bankruptcy protection

After months of uncertainty about its future, the nation’s largest for-profit private hospital chain has filed for bankruptcy in Texas.

Dallas-based Steward Healthcare filed for Chapter 11 bankruptcy on Monday, saying it would move to restructure its debt under court supervision and continue operating its hospitals across the United States — including eight in Massachusetts — as it does so.

Steward will negotiate terms for a “debtor-in-possession” status with the property owner, Medical Properties Trust, “for initial financing of $75 million and up to an additional $225 million,” the company said. He said in a statement announcing the decision.

The company added in its statement: “Steward Hospitals, medical centers and physician offices are open and continue to serve patients and the broader community, and our commitment to our employees will not change.”

Steward operates more than 30 hospitals in a handful of states, employing tens of thousands of workers, including 16,000 in Massachusetts, according to their unions. In the bankruptcy filing, Steward estimated the number of its creditors at more than 100,000, and its liabilities ranging from $1 billion to $10 billion. The company valued its assets in the same range.

In her statement, Steward blamed government reimbursement rates, increased labor costs and inflation for her financial difficulties, as well as the lingering effects of the COVID-19 pandemic.

“Steward Health Care has done everything in its power to operate successfully in an extremely challenging health care environment,” said Ralph de la Torre, CEO of Steward.

State officials monitor care at Steward’s facilities, which are located mainly in eastern Massachusetts. The state is preparing to file for Steward’s bankruptcy and “patients should not hesitate to seek care,” state Health and Human Services Secretary Kate Walsh said in a statement Monday.

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“The Haley-Driscoll Administration is working with Steward and any potential partners to support an orderly transfer of ownership that protects access to care, preserves jobs and stabilizes our health care system,” Walsh wrote.

Surrounded by health care officials, union leaders and the state’s attorney general on Monday morning, Gov. Maura Healey placed the blame for Steward’s bankruptcy squarely at the feet of company leaders.

“This situation stems from greed, mismanagement and a lack of transparency on the part of the supervisory leadership in Dallas, Texas,” Healey said.

However, she stressed that the company is taking steps to retain employees, that its doors remain open to patients, and said that bankruptcy provides a “structured” process for dealing with debts, liabilities and the potential transfer of ownership.

“Ultimately, this is a step toward our goal of getting Steward out of Massachusetts,” Healey said.

State officials said they created Hotline and website To provide information and resources to patients, staff, and community members. They pledged to do everything they could to maintain healthcare services and thanked the staff at Steward for continuing to show up every day to care for patients.

Some workers at the state’s Steward Hospitals previously described difficult conditions as the company’s finances became strained, including unpaid bills and supply shortages. Dr. Vartan Yeghiazarians, head of the medical staff at Holy Family Hospital, said that by last December the problems were causing some medical procedures to be delayed or cancelled.

“I think that’s when we started to notice that things were really bad,” Yegizarianz told WBUR’s Deborah Baker.

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State officials said last Friday that they had established a Command center To help manage the effects of any potential loss of services, hospital closures, transfer of ownership or bankruptcy. They said their focus is on maintaining the stability of the state’s health care system.

Revelations of Steward’s financial problems in January sparked criticism of the role of for-profit companies in health care and calls for more oversight. Massachusetts lawmakers recently proposed legislation that would more precisely regulate hospitals in the state.

The bankruptcy process may reveal new details about Steward’s financial straits, and how untenable the situation has become. The company has long kept its financial records, even challenging a Massachusetts rule that requires hospital companies to disclose detailed financial information.

State officials in February asked for more documents, but said the company had not fully met the deadline.

Although Steward has said it is looking for a buyer for its hospitals in Massachusetts, no deal has been reached yet.

State officials noted that one obstacle to finding new operators for Steward Hospitals is lease arrangements with Medical Properties Trust. In 2016, Steward sold the Massachusetts Hospital buildings and real estate to MPT. Proceeds from the sale helped Steward executives launch a national expansion but burdened their hospitals with rent.

Steward is also selling its physician network, Stewardship Health. In March, Steward announced it had reached an agreement with Optum, whose parent company, UnitedHealth Group, owns the larger insurer UnitedHealthcare. The state Health Policy Commission will review the deal but said the companies have not yet submitted the full paperwork. Steward noted that the timing of this process played a role in its decision to file for bankruptcy.

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“With the delay in closing the Stewardship Health transaction, Steward has been forced to seek alternative ways to fill its operations,” De La Torre wrote in a statement Monday. “With the additional funding in this process, we are confident that we will keep hospitals open, staffed and operating so that our care for our patients and staff is maintained.”

Massachusetts Association of Health Plans President and CEO Laura Pellegrini said in a statement Monday that her group, which represents 14 health plans, will continue to provide coverage at Steward facilities.

“The Massachusetts Association of Health Plans and our member plans understand the uncertainty created by Steward Health Care’s action today to file for Chapter 11 bankruptcy,” she wrote. “However, this filing does not mean that the system’s hospitals, medical centers or physician groups will be closed. Patients can continue to receive care at all Steward facilities.”

The Massachusetts Nurses Association praised hospitality workers for serving patients through a “stressful” process. In a statement, the union urged health care industry leaders and state officials to “immediately take the necessary steps to ensure the preservation of these facilities and a safe transition to more stable, responsible, not-for-profit ownership.”

“Inaction would exacerbate health inequities, create hospital deserts, and weaken the entire health care infrastructure for all patients in Massachusetts,” the union said.

This is a developing story, and will be updated.