Monday evening marks the deadline for bids for a Massachusetts hospital run by the bankrupt Steward Health Care, but how the smoldering crisis plays out will depend on whether any hospitals receive no bids and are pushed toward closure, which officials say could put residents’ safety at risk.
Bids are due by 6 p.m., and Gov. Maura Healey and many Beacon Hill residents have made it clear that the most desirable outcome would be for all of the company’s hospitals to be in the hands of other operators, allowing them to stay open and continue serving patients. But the same financial issues that drove Steward into bankruptcy, particularly the exorbitant rent payments owed to landlord Medical Properties Trust for years to come, also make the hospitals a risky bet for other operators.
State officials said ahead of Monday’s deadline that they expect developments to happen in the coming weeks. A definitive answer may not come until a sale hearing scheduled for July 31 in U.S. Bankruptcy Court.
State officials have been reluctant to publicly discuss what would happen if Massachusetts hospitals don’t receive bids or if negotiations fail to reach an agreement in Steward’s court-led sale process, but they have repeatedly assured the public that the state has plans in place for all contingencies, with a focus on protecting jobs and maintaining access to health care.
Steward is bidding on seven hospitals it operates in Massachusetts: Good Samaritan Medical Center in Brockton, Morton Hospital in Taunton, St. Ann Hospital in Fall River, St. Elizabeth Hospital in Brighton, Kearney Hospital in Dorchester, Holy Family Hospital, which has campuses in Methuen and Haverhill, and Nashoba Valley Medical Center in Ayer. Norwood Hospital, which was undergoing reconstruction after the 2020 floods, is not included in the sale process.
But while state officials have been quiet on details, all parties involved are in close contact as the Department of Health and Human Services’ executive branch takes the lead.
House Speaker Ron Mariano said late last month that he speaks with Health and Human Services Secretary Kate Walsh “multiple times a week” and that she “keeps me apprised of what and who she’s discussing” regarding Steward.
Additionally, according to a June calendar released by Governor Healey’s office on Friday, the Governor and the Secretary of Health and Human Services have six meetings or conference calls scheduled between June 11 and 24, including two on June 18. On that same day, Governor Steward extended the deadline for hospital bids in Massachusetts from June 24 to July 15.
State officials are expected to discuss the situation further later this week. The Public Health Council, whose agenda includes updates and discussion on Steward’s situation, meets on Wednesday. Also on Thursday, the Health Policy Committee will meet for an update on Steward’s sale of its hospital and physician network, Stewardship Health. The Health Policy Committee announced last month that a proposed deal for Steward to sell its network to Optum had fallen through, with the parties not providing regulators with information needed to review the deal.
The Department of Health and Human Services’ Executive Office announced late Monday that the next step in the process is an auction scheduled for Thursday, July 18. At that point, qualified bidders will have the opportunity to increase their bids for the hospital or hospital group until a final and highest bid for each facility is determined. The final and highest bids will be submitted for bankruptcy court approval during a hearing on July 31, Health and Human Services said.
The office said it was closely monitoring Steward’s sale process but that it was up to the company to negotiate with potential buyers and announce next steps in the process.Steward declined to comment on Monday ahead of the bid deadline.
Attorney General Andrea Campbell’s office said it has no formal role in the bidding process but will work with EOHHS to protect jobs and access to health care. Steward declined to comment on the bid ahead of Monday’s deadline.
Surgeon General Dr. Robbie Goldstein said in a bankruptcy court filing in May that Steward’s Massachusetts hospitals “play a critical role” in providing inpatient medical and surgical care, inpatient behavioral health, maternal and child health services, emergency care, medical care for the entire South Shore region and for Massachusetts Health patients.
“The discontinuation of any of these services at one or more of Steward Massachusetts Hospitals could worsen Massachusetts’ hospital capacity crisis and put the health and safety of Massachusetts residents at risk.”
State law and regulations require all providers planning to close essential services to notify the Department of Public Health at least 120 days in advance and provide formal notice 90 days before the planned closure.
There are numerous checkpoints along the way. DPH must publish notice of a public hearing on a closure at least 81 days in advance and hold a public hearing at least 60 days before the closure goes into effect.
Within 15 days of the hearing, DPH will give the hospital a decision on whether the services it provides are necessary to maintain access and health in the hospital’s service area. If DPH determines the services are necessary, the hospital must submit a plan to DPH for ensuring access within 15 days, giving the two sides some opportunity for back and forth in the 10 days remaining before the closure, according to DPH’s Division of Healthcare Facility Licensing and Certification.
But even if regulators determine a service is essential to maintaining health care, they cannot legally require hospitals to keep the service available to the public. DPH can only require providers to submit a plan outlining how they will handle patients after the closure and to conduct post-closure monitoring, but it cannot prevent services from being discontinued.
In a court filing rejecting parts of Steward’s latest plan to secure needed funding during the bankruptcy process, Campbell’s office raised issues this month about post-deadline transfers, sales, closures or the possibility that the hospital might not receive bids.
Massachusetts health care regulations require hospital operators like Steward to transition or close their hospitals “in a safe manner and within specified timeframes,” the attorney general’s office said. But the terms of Steward’s bankruptcy loan, while referring to transition and closure plans, create confusion by not explaining how it would comply with Public Health Department requirements, the attorney general’s office argued.
“Despite Massachusetts expressing this concern, no clear commitment has been made by any party to resolve these ambiguities. To be clear, as a licensed operator, Steward is required to comply with all regulatory requirements, including funding, staffing and transitions due to closure or owner/operator changes,” Campbell wrote.
The Attorney General also directly addressed the possibility of a situation in which no bids are received, noting that under the terms of the loan, Steward is required to “submit a proposed ‘transition plan’ within 10 business days of the applicable bid deadline if no qualified bids are submitted by the applicable bid deadline.”
The attorney general’s office also notified Steward that Massachusetts may exercise all of its options in bankruptcy court if the company and others do not commit to continuing operations and funding the transition in accordance with state rules.
“Steward’s obligation to ensure a smooth transition is not only imposed on Steward by Massachusetts health care regulations, but also Steward’s obligation as a Chapter 11 debtor. The actual costs and expenses necessary to operate, transition and close the hospital, including obligations to vendors and employees, must be funded now as post-filing administrative expenses,” Campbell’s office wrote. “If Steward or other stakeholders in these cases do not demonstrate a willingness to fund continued operations and the transition, Massachusetts believes that this will be a clear indication that Steward will be unable to pay its post-filing obligations in a timely manner. Accordingly, Massachusetts reserves all rights to seek appropriate remedies at that time.”