The troubled Steward Health Care hospital system submitted some financial data in response to a Friday deadline from Governor Maura Healey, but the administration said it has still not received all the records the governor has demanded.
The Dallas-based company provided systemwide audited financial records for several years through 2021, a Steward spokesperson said, but did not provide those records for 2022. A Healey aide said that year’s financial documents are necessary as state officials evaluate how Steward got to such a precarious financial condition that it hasn’t paid some vendors or the full rents due on its hospital properties.
Steward’s incomplete response to the governor’s request raises the stakes in an increasingly public battle between the company and the Healey administration, with the stability of much of the state’s health care infrastructure in the balance. The for-profit Steward is saddled with overwhelming debt and facing severe financial challenges that threaten its ability to continue operating its seven active hospitals in Massachusetts.
Healey has asked for Steward’s systemwide audited financial data from 2018 to 2023.
“The financial information that Steward provided this week continues to be incomplete and insufficient,” said Healey spokesperson Karissa Hand, who declined to say what steps the governor will take next. “What Steward must do from this point forward is clear — complete an orderly transition out of Massachusetts.”
Steward has acknowledged it is seeking to transfer ownership of its Massachusetts hospitals.
Officials will review the documents Steward did share this week, Hand said.
Steward has sought to cooperate with the state’s requests, said Josephine Martin, a spokesperson for the company, and has provided tens of thousands of pages of financial documents from its hospitals. The company was still working on 2023 records, according to a letter it sent the governor earlier this week.
“We’re trying to work with the state to figure out how we can get them what they need in a responsible fashion,” said Martin, who added Steward will provide the systemwide financial records from 2022 after auditors sign off on them.
Also on Friday, Steward announced a stabilization plan with lenders that included a $150 million cash infusion. More money could come through the sale of a physician group, Steward said. The company’s restructuring includes a plan to sell its planes, which flight records show were used to travel to well-known vacation spots in the Mediterranean and Caribbean.
In 2023, one Steward patient died after giving birth, just weeks after a vendor had repossessed a key piece of equipment often used to stop internal bleeding in cases like hers. Another patient collapsed while waiting in line at the overwhelmed emergency department in Good Samaritan Medical Center, a Steward hospital in Brockton. That woman also died.
In a letter earlier this week to Steward chief executive Ralph de la Torre, Healey said she wanted Steward out of the hospital business in Massachusetts, but transitioning the hospitals to new owners could be a formidable task.
More than 200,000 patients receive care at Steward hospitals each year, many of them people with lower incomes who rely on government insurance such as Medicare and Medicaid. The Steward system employs 16,000 people in Massachusetts.
Healey’s letter this week stated the company had been dishonest and unforthcoming about its financial status and contingency plans, and motivated by greed. A response from Michael Callum, a Steward vice president and interim president of its New England region, stated that “we have played with our cards face up,” in response to the state’s data requests, and took issue with questions about the legality and ethics of Steward’s management.
“Any suggestion that patient care is not the first priority of every employee and administration in a Steward hospital is not correct,” Callum wrote.
Healey spelled out several reasons why state officials are so adamant about receiving the financial information about the parent company, not just the individual hospitals in Massachusetts. She wrote that this information is essential to understanding how the company prioritizes its resources and whether Steward chose to maximize corporate gains at the expense of patients. The financial records would also help determine whether Steward’s mismanagement could have included illegal acts, Healey said.
Paul Hattis, a senior fellow at the Lown Institute health care think tank in Needham, said the systemwide information could be crucial to aides in the Healey administration as they determine how much cash the company has available to support its struggling hospitals. State officials would naturally be worried about vendors cutting off supplies to the hospitals if they don’t think they will be paid.
“It is incumbent on the state to try to assure that there’s adequate cash at any of the Steward hospitals to pay for needed staff supplies and third-party vendors that provide critical services,” Hattis said.
In 2017, the company requested a ruling from the Suffolk Superior Court that its systemwide financial records were off-limits to state officials. Last year, a judge decided the opposite, saying Steward had to share the data. The company is appealing that decision, and Callum said in his letter this week the company was within its rights to wait for the outcome of its appeal.
The state Center for Health Information and Analysis has already imposed $400,000 in fines against Steward’s parent company and the individual hospitals for failing to provide complete financial records, but has collected only $114,000 in fines so far. The agency hasn’t fined Steward since the company took court action in 2017.
If Steward continues to refuse to provide all the records Healey wants and state officials determine they don’t have credible data to prove the hospitals can pay for medical supplies and services, Hattis said the state may need to ask a judge to force Steward to put up a surety bond or provide some other guarantee to assure vendors they will be paid.
Another option would be for the state Department of Public Health to revoke its license for one or more of the hospitals in the event state officials deem them unsafe because of financial shortfalls. But state officials, Hattis noted, would also need to make sure that other hospitals have the capacity to accept any displaced patients.
Cerberus Capital Management bought Caritas Christi’s struggling Catholic hospitals in 2010 and operated them under the newly created Steward Health Care. In 2016, Steward sold its Massachusetts hospital properties for $1.25 billion to a real estate investment firm, which then rented the buildings back to the hospital system with multimillion-dollar leases that Healey described as “perhaps usurious.”
Thomas Tsai, a surgeon at Brigham and Women’s Hospital and a Harvard researcher who studies private equity and real estate investment trusts’ role in health care, said the very nature of these for-profit ventures focuses on generating fast profits for investors, creating a greater risk the facilities they own will become unstable.
Private equity investors often seek already stressed health care systems, he said, rely heavily on loans to buy them, and then have a relatively short period of time, typically four to seven years, to realize profits. The structure of private equity deals ultimately encourages underinvestment.
These firms often sell hospitals’ real estate to REITs through sale-leaseback agreements, Tsai said, which make hospitals pay rent for their own buildings, and eventually may strip the hospitals’ assets to reach profitability.
“They look for an early exit,” Tsai said. “The Steward example, we’ve seen it play out all over the country in various forms.”
Jason Laughlin can be reached at jason.laughlin@globe.com. Follow him @jasmlaughlin. Jon Chesto can be reached at jon.chesto@globe.com. Follow him @jonchesto.