Steward Health Care is threatening to cut off critical medical record and billing services it continues to provide to its six former Massachusetts hospitals unless it receives millions of dollars more each month, a move the hospitals say could create wide-scale disruptions and potentially even force some to close.
The new owners of those hospitals have been scrambling for nearly a month as a result of the demands, and this week filed motions in Steward’s bankruptcy case demanding the chain adhere to the contract, which covers a range of software and technology services including digital patient records for radiology, laboratory, pathology, microbiology, and pharmacy.
“If [Steward were to] cut off services . . . patient lives will be at risk,” said a filing submitted jointly by Boston Medical Center, Lawrence General, and Brown University Health — each of which acquired Massachusetts hospitals from Steward amid its bankruptcy proceedings last year. “[We] cannot safely and effectively operate the hospitals without appropriate transition of electronic medical records and IT services, or without receiving revenues from payers, all of which would be significantly impacted if the [contracted] services cease.”
There was no reason cited in court documents justifying the higher charges, though the hospitals said they were for the same level of services.
A hearing on the dispute, scheduled for Friday, has been delayed to no later than Feb. 14.
Local hospital operators have been in communication with state officials about the dispute, though Kate Walsh, the Massachusetts secretary of Health and Human Services, said Thursday that the state is not contemplating paying Steward additional money.
“Steward has been a bad actor for a very long time and this is the latest move by them to try to get more money from their failed operations in Massachusetts,” Walsh said later in a statement. “We are so grateful to our new operators who have stepped up, served these communities, and continue to provide care to patients every day.”
Hospital operators themselves were confident that the judge would intervene, and that the group’s existing contracts with Steward would ultimately hold. John Fernandez, chief executive of Brown University Health, said Thursday that the request for additional payment was “unbelievable, unconscionable, and ridiculous,” but that hospital leadership was working to ensure patients are being cared for.
“We are really trying to focus our attention on our patients, but we don’t want them to think all of this is going to unravel because of another Steward thing,” Fernandez said. “I’m pretty confident based on the meetings we’ve had with other hospitals and the state. We hope that with the judge, we’ll be able to figure out some solution.”
In a joint statement, Lawrence, Boston Medical Center, and Brown also said they were “working collectively to ensure that safe and quality patient care continues without the added financial burden caused by Steward’s unilateral decision to increase costs for maintaining infrastructure. We are committed to finding a solution that works.”
Steward declined to comment, and invoices submitted by the hospitals to bankruptcy court do not include any detailed explanation for the higher fees.
The demands come amid a shakeup of Steward’s leadership. Last week, chief executive Mark Rich stepped down, according to an internal email. He was replaced by John Castellano, managing director of Steward’s consulting firm AlixPartners, who has been working as chief restructuring officer for Steward since the beginning of its bankruptcy.
Steward no longer operates any hospitals in Massachusetts, but the dispute showcases the degree to which medical institutions here and beyond are still tied to the financially flailing for-profit health system.
Steward finalized the sale of its Massachusetts hospitals on Oct. 30, and transferred the Holy Family Methuen and Haverhill campus to Lawrence General Hospital, St. Anne’s Hospital in Fall River and Morton Hospital in Taunton to Brown University Health, and St. Elizabeth’s Medical Center in Brighton and Brockton’s Good Samaritan Medical Center to Boston Medical Center.
Normally, such hospital sales take six to 12 months to close, given the complexity of the organizations and the myriad regulatory, IT, and insurance relationships that must change hands.
With its finances in free fall, Steward didn’t have that kind of time. And in deals shepherded by both state officials and the bankruptcy court, the new operators agreed to take immediate ownership of hospitals to avoid the facilities shutting down. To manage switching over complicated systems, new operators agreed to pay Steward to continue providing certain services for several months. According to invoices, Brown was charged $3.3 million for services in January. Lawrence was charged $1.5 million for services the same month, with Boston Medical Center paying $4.2 million.
Then Steward began demanding more money. According to the filing, in late December, Steward sent proposed annual monthly increases for the January bill, increasing the fees by $1.5 million to Boston Medical Center, $1.1 million to Brown, and nearly $500,000 to Lawrence, representing an over 30 percent increase. The same increases were included in February invoices.
The issue extends beyond Steward’s Massachusetts facilities. Healthcare Systems of America acquired eight Steward hospitals in Texas, Louisiana, and Florida, and agreed to pay $10 million a month for IT, staffing, and revenue cycle management services to all eight hospitals.
But according to a recent bankruptcy filing, Steward has routinely charged the health system a 35 percent markup. Disputes over the amounts caused Steward to threaten to terminate the services entirely.
“Such a drastic action would jeopardize patient safety and cause patients at any of HSA’s hospitals harm or death,” HSA wrote in its filing, which has since been withdrawn, after Steward argued in a response that HSA’s filing contained confidential information.
The demands for more funding come as Steward attorneys, consultants, and creditors have begun fighting over dwindling funds as it tries to pay off the billions owed to creditors and vendors.
And the hospitals faced with big bills for technology services have scrambled to find short-term solutions, but so far come up short. Steward supplies many of the services to hospitals nationwide, and they can’t be carved out for individual operators, or even to Massachusetts hospitals as a group, the filing said.
The Massachusetts hospital operators said that they are working as quickly as they can to move services away from Steward, but there are no companies that are immediately able to assume all the services Steward currently provides. Doing so would require months to transition, and be at an incredible expense.
“Prematurely cutting off the [contracted] services would cause irreparable harm,” the filing said. “The hospitals would likely be forced to close in such a scenario.”
Jessica Bartlett can be reached at jessica.bartlett@globe.com. Follow her @ByJessBartlett.