Steward Healthcare is looking to sell some assets to shore up its finances, but it has no plans to continue operating all nine Massachusetts hospitals, according to people who have met with Steward executives in recent days. There is a possibility that it cannot be done yet.
About WBUR radio boston Massachusetts Congressman Stephen Lynch said Friday that Steward executives were told at a meeting this week that while some hospitals received an infusion of funding to keep them open, “it’s not enough.” Lynch also told staff that Steward has not deviated from his initial statement that the company would exit Massachusetts.
“We have not retracted our statements that we intend to exit the Massachusetts health care market,” Lynch said. “Stewards are seeking a buyer or other structure to continue operating these hospitals.”
Lynch believes these other arrangements could include selling Steward’s physician practice or identifying a buyer for one or more hospitals. State officials are also planning other possibilities, including a possible state takeover or bankruptcy.
Mr. Steward declined to comment, but company executives said last week that the company has no plans to close the Massachusetts hospital. The company announced earlier this month that it had secured a bridging loan to allow it time to sell assets and stabilize its finances. Details of the contract are unknown.
Lynch, a Democrat, said the situation was “unfavorable” because his district has five Steward hospitals, which serve about 200,000 patients a year and employ about 16,000 people. “Stable” and potentially “catastrophic.”
Leaders of nearby hospitals fear that if Steward’s facility were to fail, they would not have the capacity to take in all of the affected patients. State officials are monitoring Steward Hospital daily to ensure the quality of patient care amid the company’s financial woes.
Mr Lynch said he had asked stewards to break down each hospital’s plan to help with contingency planning. He attributed the company’s financial problems primarily to its decision to sell and lease back hospital real estate at high prices.
Steward’s landlord, Alabama-based Medical Property Trust, says it is the nation’s largest hospital landlord. The company said Mr. Steward owed $50 million in back rent. Steward also faces several lawsuits for not paying its bills, including a claim of more than $40 million from a medical staffing company.
As a private company, Steward is not required to disclose financial information and has resisted providing full financial statements, which are required of all hospitals in Massachusetts, which raises the issue of the scope of the problem and how it is being addressed. Lynch said it makes it difficult to understand.
Lynch specifically took aim at Steward’s support from private equity. The company was founded in 2010 with funding from private equity firm Cerberus Capital Management, and has since received other private funding, including through the sale of assets to MPT.
“We’re trying to go after the stewards for what they did here, but they’ve been very adamant,” Lynch said. “They’ve been very creative in raising money, but this whole private equity model is very slippery and ill-defined. Ironically, this is a form of triage.”
Economic researchers and analysts say it is becoming increasingly common for hospital real estate to be sold, providing capital for hospital operators to pay down debt and generate additional profits for investors. states that they are doing so. The agreement requires the hospital company to pay rent to continue operating the facility.
“While this is a strategy that generates additional profits, it also increases risk. [hospital operator] They face additional financial pressures given the new rent obligations they didn’t have before,” said Dr. Jirui Song, an associate professor at Harvard Medical School who studies private equity in the health care sector.
Professor Song’s research found that hospitals that were acquired by private equity investors had worse patient outcomes than those that were not. The role of private equity in the U.S. healthcare sector is growing, with $1 trillion invested over the past decade.
Lynch and other members of Massachusetts’ congressional delegation asked Steward for more information about the finances. This week, lawmakers also sent a letter to private equity firm Cerberus, which supported Steward through 2020 and was part of the company’s move to sell its Massachusetts real estate.
