Massachusetts to Give Steward $30 Million to Keep Hospitals Open

Bankrupt Steward Health Care System LLC reached an agreement with Massachusetts to receive $30 million through state-sponsored programs to keep its hospitals running as they transition to new ownership.

The state agreed to provide the funding to all eight Steward-owned hospitals in Massachusetts, which participate in the state’s Medicaid program, or MassHealth, the company said in a July 26 filing in the US Bankruptcy Court for the Southern District of Texas. The hospitals can use the funds only for working capital, patient care, and employee salaries in the state, the filing notes.

The payments will be released in two tranches, according to the filing. The first tranche is conditioned on the execution of sale agreements to acquire Steward’s five Massachusetts “going concern hospitals"—those financially stable enough to continue operating—and the land beneath them. The second tranche is conditioned on the bankruptcy court’s approval of the sale of those hospitals.

Steward, the nation’s largest for-profit hospital system, received bids on six of its eight Massachusetts hospitals, the company said. The state’s payments will “support the sale and orderly transition” of the hospitals to new operators and help mitigate Steward’s operating losses, according to the filing.

Steward lost about $63 million operating the “going concern hospitals” in the first five months of the year and has “insufficient liquidity to continue funding the losses,” the company said in the filing. Also, Steward’s previously court-approved financing budget does not allow for the hospital system to fund the hospitals after July 31, Steward noted.

The hospital system seeks court approval to close Carney Hospital and Nashoba Valley Medical Center, which received “little interest from bidders,” Steward said in the filing. Those hospitals will receive a total of nearly $4.9 million and $270,000, respectively, but the money cannot be used for closure costs, according to the filing.

Steward also asked the court for permission to reject its leasing agreements for the land beneath the Massachusetts hospitals. None of the bids Steward received on the hospitals provide for the bidder to assume the lease because the bids constitute a purchase price for the hospital and land that is “significantly less” than the value of the land implied by the rent cost, Steward said in a July 26 filing.

The hospital system is currently engaged in mediation with the joint venture that issued the lease and other parties to decide how money from hospital sales should be allocated.

Lawmakers have repeatedly criticized Steward’s bankruptcy. Sen. Elizabeth Warren (D-Mass.) said Steward’s plan to close two of its Massachusetts hospitals was a “direct consequence of looting by Steward executives, private equity investors, and corporate landlords.” The Senate Committee on Health, Education, Labor, and Pensions, chaired by Sen. Bernie Sanders (I-Vt.), voted 20-1 last week to investigate Steward’s bankruptcy and 16-4 to issue a subpoena to its chairman and CEO, Ralph de la Torre.

The case is In re Steward Health Care Sys. LLC, Bankr. S.D. Tex., No. 24-90213, 7/26/24.