STEWARD HEALTH CARE appears to be in serious financial trouble. In some ways, it’s surprising the for-profit health care system — with 33 hospitals, including eight in Massachusetts, plus a physicians network — has survived as long as it has. In August 2022, the system’s dire financials showed a negative net worth of $1.5 billion. 

That figure is conservative by not reflecting hundreds of millions of dollars that Steward must pay each year under lease agreements for all its hospitals. The land owner for those facilities, Medical Properties Trust (MPT), is a real estate investment trust that entered the picture in 2016 when it purchased all of the Steward hospital real estate, and then entered into these incredibly burdensome lease arrangements with Steward.   

The surprise is how Steward lasted so long under their mountains of debt in a system that has only grown substantially weaker as it also sustained large operating losses. MPT recently noted that Steward is behind on its lease payments, and now needs an additional $60 million bridge loan to help with continued operations, while trying to raise cash from sales of assets such as its hospital operating agreements and parts of its physician and managed care enterprises. 

Steward would probably like to offload some or all of its Massachusetts hospitals if it can find a buyer. The company has apparently approached Massachusetts state officials for their help. It’s unclear what that help would involve: advice, financial assistance in some form, or regulatory relief to smooth the way for a new owner. 

MPT would need to be at the table in any discussions about Steward hospitals—as any scenario of public help would require a sizable write-down of the lease payments MPT is owed. That’s what happened last spring when Steward sold some of its hospital operations in Utah. MPT agreed to take a $300 million write-down of assets to make the sale possible.  

How did Steward get to this terrible financial position and how did state officials allow this to happen? This should be answered even with pressing issues now on the table. 

This is a sad mess, created long ago and ignored by state government, and now in the lap of Gov. Maura Healey, who had eight years of oversight responsibility as attorney general between 2015 and 2022. How can the state avoid costly mistakes now? With a February 1 deadline approaching, state leaders must make or guide key decisions about the fate of Steward hospital and physician operations in Massachusetts. A lot is at stake.  

These conditions should guide the state’s thinking to protect the interests of patients, clinicians, health care workers, and taxpayers.

Protect patients first: Seek to avoid abrupt closures of Steward operating facilities. While not all of its current hospitals may need to survive, most play critical roles in medical care access. Closures or service discontinuations should happen with advance notice and planning beyond 90 days. Steward hospitals admit mostly government-sponsored patients, including a disproportionate share of inpatient, outpatient, and emergency department services for psychiatric and substance abuse patients, many vulnerable. Losing these hospital services would create chaos for patients and the clinicians who work at or send patients to them. A few of the hospitals, like Good Samaritan in Brockton, provide care in a part of the state already is lacking adequate trauma care and inpatient access.

Maintain the clinician workforce that currently serves Steward patients: Beyond hospitals, Steward owns a large physician practice group. If Steward sells or makes adverse changes affecting these clinicians, the state must act to retain primary care and behavioral health clinicians in geographic areas serving at-risk current patient populations. Some specialists must also be retained. For patients, loss of access to clinicians may be far more damaging than losses of an acute care facility.  

If wealthier provider systems come to the rescue, don’t give away the store: The state may turn to deeper pocket nonprofit providers (Mass General Brigham, Beth Israel Lahey, possibly Children’s) or a for-profit one (Tenet or Optum) to absorb one or more Steward hospital sites into their operations. This likely would result in increased market dominance and higher service pricing that could worsen health care affordability.

Attempts at cherry picking more profitable Steward hospitals should be expected and should not be permitted. Burdens and benefits of hospital ownership should run together for an acquiring entity who is coming forward to help address key access needs. While some adjustments in the Medicaid rates for the acquired hospitals may be appropriate, the state should resist any quid pro quo of a general increase in Medicaid rates for an entire system for taking on one or more Steward hospitals. 

Explore bringing Steward hospitals under management or control by UMass Memorial, Tufts Medicine, or Boston Medical Center: This could be a creative solution, potentially increasing competition, and the most complicated to pull off. At a time of tight state budgets, state money would be needed for this to happen. UMass Memorial is tightly connected with the state, especially in medical education. Steward hospitals’ location in markets far from Worcester creates less antitrust concern than an acquisition by Mass General Brigham or Beth Israel Lahey Health.

Tufts Medicine and Boston Medical Center are academic health systems with patient populations most similar to Steward’s. Each could benefit from greater market share and covered lives. Tufts Medicine is in a weaker financial position for such an acquisition; BMC is a bit stronger but with no real experience in running a multi-hospital system. Putting Steward assets into either or both hands may keep costs more under control. Medicaid would have to play an important role in enabling a system change that would be sustainable across all of these facilities and the physician networks. But at least current Steward assets could be in the hands of nonprofit systems who might gain from having more covered lives.

Don’t waste state money: Throwing good money after bad is always a bad idea.  Bankrolling a solution that bails out Steward and keeps them in control seems to be a bad idea. Overpaying Medicaid funding to a larger health system to take on Steward hospitals would also be a mistake. If the state needs to throw in money to enable the next phase of ownership of Steward assets—it should also help other challenged provider systems and promote a more competitive market.   

One more condition is essential: transparency. The public deserves a transparent process about the fate of these assets and any transactions which include subsidies or change of ownership of Steward assets in our state, especially if government monies are needed to deal with the problem at hand. When the crisis ends and decisions are implemented, the state  should appoint a commission to examine how this crisis happened.  

One should read this investigative journalist’s account of Steward’s behavior. For example, Steward CEO Ralph de la Torre bought himself a $40 million yacht using Steward dividends, a compelling symbol of all that has gone wrong with the leadership of Steward. It is now clear that many parts of state government oversight failed here. We need an honest account of how this happened and how to avoid this from happening again. 

Paul Hattis is a senior fellow at the Lown Institute. John McDonough is a professor of public health practice at the T.H. Chan School of Public Health at Harvard University. They co-host a monthly podcast for CommonWealth Beacon.