When Steward Health Care first came to Massachusetts in 2010, it was cast as something of a savior. It offered to buy and revive a chain of Catholic community hospitals that were vital to the health care system but failing fast under the weight of aging facilities and a crushing pension burden.
And Steward’s plan was to make money doing so. The company’s private-equity, for-profit model was a novelty that no one quite knew how to regulate.
They still don’t. The state would never figure out how to contend with, much less rein in, a venture like Steward, and in that lies half the story of how the chain could go unchecked from the early days of hope and promise to the financial disaster looming today.
The other half is all about Steward, its repeated failure to live up to promises made to the state: closing hospitals and units it said would stay open, stubbornly refusing to provide financial records demanded of all medical providers, and draining hundreds of millions in desperately needed capital from the chain for the benefit of its owners.
“It makes me angry that we after the fact want to solve a crisis when we knew the train was coming down the tracks, starting when the clock was ticking in 2010,” said state Senator Mark Montigny, a New Bedford Democrat and long-time critic of for-profit health care.
The question now is whether this train wreck could have been averted. There were chances.
The Globe analyzed documents from throughout Steward’s 14-year tenure in Massachusetts and spoke to more than a dozen people who either observed or participated in the state regulatory process. The review found that time and again, state officials have lacked the legal tools to hold Steward to account, handcuffed by a fragmented oversight system and a lack of political will to take a tougher approach.
First to try was then-attorney general Martha Coakley, whose office had to approve the sale of the six Caritas Christi hospitals to Steward. Coakley heard all the worries: Would the company put patients before shareholders? Would Steward protect crucial services that don’t make money? And how would the state respond if the company strayed?
She demanded that Steward increase its purchase price by $45 million, to $495 million, and set some strict conditions for the sale, seeking to protect the public’s interests. She ultimately green-lighted the deal — it was the only option on the table. But she declined to impose more extensive ongoing operating rules, saying she saw no reason not to trust that Steward would act responsibly in the years ahead.
“The attorney general has no data or experience to suggest that the for-profit hospital sector is prone to acting in a manner so inconsistent with the non-profit charitable sector as to merit particular operating constraints,” Coakley wrote in her decision allowing the 2010 sale.
It was a misplaced confidence. In the years that would follow, Steward repeatedly sidestepped its promises. Meanwhile, the company sought to fortify its political clout, developing ties on Beacon Hill through donations to key players.
Steward in 2016 took another startling step, unprecedented in the state. It sold its hospitals’ real estate for $1.25 billion, netting its owners a massive payout. Its Massachusetts facilities would pay millions per year in rent, a crippling burden on a hospital system already struggling to break even.
Today, with Steward confronting a crisis that jeopardizes its ability to continue offering services, many in the industry point to the real estate sale as another troubling sign that the state did not have the discipline or the tools to hold the company accountable.
“You’d think with a health care transaction someone would be awake and watching this,” said Senator Montigny. “Obviously, whatever rules [we had] weren’t strict enough.”
Against this backdrop of regulatory fecklessness, Coakley’s efforts stand out as the best attempt to date to set limits on the new for-profit operator. Among other concessions, Steward promised to invest $400 million in its newly acquired facilities, and keep them open for five years.
Through a spokesperson, Coakley declined to comment. But the agreement she forged with Steward was seen as a groundbreaking approach that addressed most of the concerns of the time, according to Mary Beckman, who was chief of the health care and fair competition bureau in the attorney general’s office under Coakley’s successor, now-Governor Maura Healey.
As Steward grew, the state made further efforts to regulate its operations but some proved fruitless.
When Steward acquired Quincy Medical Center and Taunton’s Morton Hospital in 2011, the attorney general’s review of the transaction prompted even larger concessions, with Steward agreeing to keep those facilities open for 10 years.
That didn’t happen, not even close. Steward had quickly begun to ignore its promises.
At the stroke of midnight on Dec. 26, 2014, Steward closed everything but the emergency room at the 124-year-old Quincy Medical Center.
Steward’s move, years before the expiration of its commitment to the state, didn’t even meet the looser 90-day notice that state law requires of all hospitals closing a service. Steward told state officials of its plans less than 60 days before the midnight shutdown.
With patient volume dwindling in Quincy, Coakley ultimately allowed the Quincy closure, with conditions — including a requirement that Steward keep its ER open for at least two years. That pledge was kept; the unit would close in 2020.
Steward maintains that it did comply with state rules about advance notice by holding required public meetings following its announcement of the early closure.
Paul Hattis, at the time a member of the state’s Health Policy Commission, said it was becoming increasingly obvious that the state’s laws were “insufficient to meet the challenge of the day.”
“Ultimately both the legislative and regulatory scheme failed to protect against the rise and evolution of Steward, such that we’re in the situation we face now,” said Hattis, who is now a senior fellow at the Lown Institute, a Needham-based health care think tank.
Steward continued to carry out closures, even as Healey took over as the state’s top lawyer in 2015.
For instance, the company eliminated the pediatric and then maternity wards at Morton Hospital in Taunton in 2013 and 2017, respectively. Steward said it was moving a detox and recovery program affiliated with Good Samaritan Medical Center to Morton in 2021, but said two years later that it would close that facility.
Such moves triggered a review by the Department of Public Health, but the agency ultimately had no authority to stop them. In most cases, Steward did comply with the required 90-day notice.
However, Steward abruptly closed its Morton maternity ward in October 2017. The Department of Public Health ordered the company to reopen or face fines. Steward filed a closure notice with the state in December 2017.
State Senator Marc Pacheco, who represents the area served by Morton, suggested the number of closures statewide, by Steward and others, are an indictment of a regulatory system that has long been in obvious need of reform.
“It’s long past the time,” said Pacheco, who has been pushing for a decade to toughen the rules around hospital and service closures. “What has happened is we have given the health care sector in general — not just talking about Steward, but more broadly — pretty much a free rein.”
Steward has often rationalized service closures, citing inadequate hospital’s staffing levels or dwindling patient usage. But it stopped revealing comprehensive financial information soon after beginning operations in the state, making it hard to get a handle on the depths of their overall financial troubles.
Starting in 2013, Steward began redacting the financial documentation that regulators demand of all hospitals. Steward stopped submitting any system-level data to the state’s Center for Health Information and Analysis after 2015. In December of last year, Steward provided some additional documentation, which CHIA said still did not meet requirements, as they were missing critical pieces.
From 2016 through 2017, the state levied fines on Steward, totaling $400,000. It has only collected $114,000 of that amount to date.
Steward sued CHIA in 2017, arguing that the state has no statutory authority to collect confidential business information that it will not keep private. The case is ongoing.
Montigny, the New Bedford state senator, said leaders in the executive and legislative branches have failed to act on multiple proposals to create more enforcement power over Steward — going back to at least 2017. He doubts that such a measure on its own could have prevented the current crisis, but to him it’s an example of the lack of urgency in the state’s approach to Steward.
“There is a lot of blame to go around,” Montigny said.
Healey, in a recent interview with The Globe , contested the idea that she didn’t push Steward enough, noting the attorney general’s office has defended its right to request financial data in court. In February, Governor Healey wrote a letter to Steward officials demanding additional records.
However, the state said Steward failed to turn in all requested documents by Healey’s Feb. 23 deadline, saying Steward did not have requested audited financials. It hasn’t faced immediate consequences.
Why regulators haven’t done more or pushed harder is a matter of debate, but some point to Steward’s efforts to build its clout by courting political leaders.
For example, Coakley was the guest of honor at a fund-raiser held at the home of chief executive Ralph de la Torre’s house during her failed 2010 bid for US Senate. Steward employees and their family members have also made multiple campaign donations to politicians, including Healey and Coakley.
Others blame lobbying efforts of the powerful health care industry.
“The cozy relationship between lobbyists and special interests, in health care, it’s particularly insidious,” Montigny said. “If you have 200 legislators all with different expertise and philosophies, it’s a hell of a lot easier to do nothing or mush it into mediocrity, than it is to do the right thing.”
Now, as Steward looks to blunt its financial problems by selling off more assets, Massachusetts regulators still might not have sufficient power to intervene.
“State government is sleepwalking through this crisis, stumbling around in the dark, and wakes up to nightmares,” said Alan Sager, a Boston University professor of health law, policy, and management, who has long studied the Massachusetts health market. “It has always tried to kick this problem down the road, instead of developing the tools.”
Steward is planning to sell Stewardship Health, a business that encompasses many of its primary care physicians, according to a person familiar with the matter.
“The proceeds from Stewardship Health will be used to satisfy a multitude of constituents and in any way possible to ease the transition of the Massachusetts hospitals,” said a spokesperson for Steward in a statement.
But as it stands, Montigny said, there are few mechanisms to make sure the company actually does that. He worries that Steward could sell off its lucrative doctors’ practices without using the money to help its struggling hospitals. After all, he said, the company has done it before — and gotten away with it.
“We did see it coming, a [flawed] deal was cut, and they were allowed to run roughshod over regulators,” Montigny said, referring to the 2016 sale of hospital properties. “And no one did anything.”
Jessica Bartlett can be reached at jessica.bartlett@globe.com. Follow her @ByJessBartlett.