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EDITORIAL

Help Steward patients but don’t bail out the hospital system

State will have to carefully scrutinize any proposed acquisitions.

Holy Family Hospital in Methuen is one of the hospitals for which Steward is seeking buyers.Suzanne Kreiter/Globe staff

The nine hospitals Steward Health Care runs in Eastern Massachusetts are lifelines. They serve large numbers of Medicaid patients in cities with low-income populations, including Good Samaritan Medical Center in Brockton and St. Anne’s Hospital in Fall River.

The Boston Globe first reported that Steward is in grave financial danger. WCVB reported, citing Representative Stephen Lynch, that Steward is seeking buyers for Nashoba Valley Medical Center in Ayer, St. Elizabeth’s Medical Center in Brighton, Holy Family Hospital in Haverhill and Methuen, and Norwood Hospital, which has been closed since a 2020 flood. Steward is already undergoing a process to close New England Sinai Hospital, a Stoughton rehabilitation hospital.

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Steward has not been transparent about its intentions. A spokesperson said the company “is openly engaging in discussions with the Administration and legislators to find solutions that will keep these hospitals open.”

As state officials have those conversations, their first priority must be ensuring safe, continuous care for Steward patients — without bailing out Steward.

The Department of Public Health, as the hospitals’ licensing authority, can and should conduct inspections to ensure the hospitals are providing safe care.

If Steward no longer has money to operate the facilities, the hospital system is required to give DPH 120 days’ notice before closing to ensure patients have a safe, orderly transition of care. If a provider does not do that, the state may have legal authority to run operations temporarily as a receiver — even without the passage of legislation some lawmakers are considering to enshrine an option for state receivership of hospitals into law.

But it is possible for hospitals to shutter abruptly. North Adams Regional Hospital closed with three days’ notice when its parent company declared bankruptcy. State officials went to court, and a judge required the hospital to keep its emergency department open temporarily.

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In case of any abrupt attempts at closure, the state should consider any legal options to ensure the hospitals remain open as patients transition their care — which will not be easy since most other providers are already facing capacity crunches.

The state is also responsible for scrutinizing any proposals for transferring Steward’s assets. The Globe reported that Mass General Brigham is being eyed as a potential “savior.” Mass General Brigham and Beth Israel Lahey Health are likely the only health systems large enough and with deep enough pockets to absorb several struggling health care institutions. But MGB also has the state’s highest prices, and any transaction that further consolidates health care and lessens competition could raise prices further.

Other ideas that have been floated include the state helping other systems that run safety-net hospitals — like UMass Memorial Health, Tufts Medicine, or Boston Medical Center — absorb Steward facilities. Health care experts Paul Hattis and John McDonough suggested in a CommonWealth Beacon op-ed that this might take public money but could control costs while helping hospitals that could benefit from gaining more patients.

The Department of Public Health’s Determination of Need process for scrutinizing health care acquisitions, which can be conducted expeditiously in an emergency, will need to be comprehensive, balancing the importance of keeping Steward hospitals open with factors like price, quality, and access over the long term.

Once the immediate crisis is over, state officials will have to scrutinize how Steward got into this mess, whether the company can be held accountable, and whether laws need to change to avoid similar future scenarios.

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Steward blames its downfall on low Medicaid reimbursement rates and state policies that make it hard for a for-profit company to obtain state financial support. (Most Massachusetts hospitals are nonprofit.)

But public records suggest Steward’s problems are largely self-inflicted. In 2010, Steward, affiliated with private equity firm Cerberus Capital Management, bought several hospitals from Caritas Christi. Facing concerns about Steward’s for-profit status and Cerberus’s eventual exit from the market, the attorney general conditioned the sale on a five-year monitoring period during which Steward had to abide by several conditions.

Even then, there were warnings about financial mismanagement. Steward committed to spending $400 million on capital expenditures but did so by loading its hospitals up with debt. It began monetizing real estate through sale and leaseback arrangements, where a real estate trust buys a medical provider’s property, forcing the provider to pay rent. That lets the owner extract immediate cash while saddling the provider with long-term payment obligations.

A study published in the book “The Contributions of Health Care Management to Grand Health Care Challenges” reported that Cerberus in 2016 sold several hospital properties to real estate investment trust Medical Properties Trust for $1.25 billion. Cerberus paid dividends to itself and its investors and financed a national expansion effort, while saddling hospitals with rent payments. Bloomberg reported in 2021 that Cerberus made an $800 million profit during the decade it owned Steward before it transferred ownership to Steward physicians in another unusual deal.

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Steward’s current financial crisis was precipitated when Medical Properties Trust revealed Jan. 4 that Steward was unable to make around $50 million in rent payments.

It is impossible to get a full accounting of Steward’s finances because the company sued to avoid providing regulators with the system-wide audited financial statements that every other state hospital provides. A Suffolk Superior Court judge ruled against Steward, but Steward appealed, and litigation is ongoing.

Steward has also faced US Department of Justice scrutiny for improper business practices. In 2022, Steward paid $4.7 million to resolve allegations related to Steward’s relationships with Massachusetts physician groups. Federal prosecutors said Steward paid for services doctors never performed, and those physician groups referred patients to Steward hospitals.

In December, the US attorney’s office brought charges against Steward for violating the Stark Law, which governs “self-referrals” in Medicare. Prosecutors allege Steward improperly paid St. Elizabeth’s chief of cardiac surgery based on the volume of patients he referred to the hospital.

Governor Maura Healey said the state will not bail Steward out. Healey should keep that commitment and refuse to throw taxpayer dollars at an organization that contributed to its own demise. But it is possible state money will be required, for receivership or to help other providers purchase hospitals or care for Steward patients. State policy makers will have the unenviable — but vitally important — role of making sure any public money is spent wisely to ensure Steward’s current patients continue to have access to safe, quality care tomorrow and in the future.

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Editorials represent the views of the Boston Globe Editorial Board. Follow us @GlobeOpinion.