Even if the deals are approved, many challenges still lie ahead. Steward has financially ruined these hospitals, and it could be expensive — and potentially taxpayers’ responsibility — to revive them. The state was unable to prevent the closure of Carney Hospital and Nashoba Valley Medical Center. These closures will affect patients locally, particularly in the Nashoba Valley region, where patients must travel further distances to receive care. Steward’s impending sale of the physician groups to a private equity firm is also a warning sign.
Finally, there will likely be legal wrangling over the transfer of St. Elizabeth. While the acquisition of five hospitals appears to be amicable, Healey said a deal for St. Elizabeth would be difficult to reach, so the state plans to seize it via foreclosure and then transfer it to Boston Medical Center. The state offered $4.5 million to Apollo Global Management — the mortgage lender that owns the hospitals’ properties — and Apollo will likely challenge the foreclosure in court.
Despite these challenges, politicians and industry groups praised the announcement. “Thousands of health care workers and patients are breathing a sigh of relief thanks to the Healey administration’s efforts to save the remaining Steward hospitals,” said U.S. Senator Elizabeth Warren. Tim Foley, vice chair of 1199SEIU, which represents hospital workers, said, “This is exactly the kind of aggressive action that 1199SEIU health care workers have been demanding from our state leaders.”
One remaining question revolves around money. The sale prices of the hospitals have not yet been announced. Aside from the sales, the new operators — some of whom are themselves in fragile financial positions — will have to operate the hospitals sustainably. Boston Medical Center and Lawrence General Hospital already serve many Medicaid patients, as do the Steward hospitals, and Medicaid reimburses costs at lower rates than private insurance.
According to the Center for Health Information and Analysis, Boston Medical Center generally had a small positive operating margin in the five years ending in fiscal 2022, while Lawrence General Hospital was in the red every year. Lifespan has also struggled financially, although the Globe reported that it recently reached an agreement with Brown University that will bring money to the university. In CHIA data from early 2024, Boston Medical Center, Lawrence General Hospital and most Steward hospitals reported losses.
Consolidating loss-making hospitals may not sound very promising, but the acquisitions could bring the efficiencies and bargaining power of a larger health system. There are some federal funds that could become available if the hospitals receive nonprofit status. It’s also possible that Steward’s problems are partly due to inadequate contracts with their landlord that need to be renegotiated.
But even with potential savings from efficiency improvements and new contracts, there will likely still be a funding gap. Paul Hattis, a senior fellow at the Lown Institute, a health care think tank, said it might take $600 million to $700 million in subsidies to run the six hospitals for five years. The Globe reported that state officials have talked about giving the new operators $80 million annually.
Another concern is whether the sale of Steward’s physician groups to private equity firm Kinderhook Industries will reduce patient referrals — and revenue — of the former Steward hospitals. That transaction itself raises numerous questions, and the Massachusetts Health Policy Commission should — and says it will — carefully review it before approving it. Kinderhook’s Rural Healthcare Group, which operates clinics in rural Tennessee and North Carolina, offered $245 million for physician groups in 10 states, including Massachusetts. In general, private equity in health care is associated with higher costs, provider consolidation, greater reliance on physician assistants and bankruptcies.
Finally, celebrating the potential change in ownership of six hospitals does not ease the distress of residents facing the looming closure of hospitals in Carney and Nashoba Valley. State and Steward officials have said there are no qualified buyers for those hospitals, although Michigan-based Insight Health System has expressed interest. State and Steward have been transparent with residents about what Insight offered and why its offer was rejected.
The state should also continue to work with health care providers and Apollo to see if there are ways to continue providing some health services at those sites. For example, Nashoba Valley residents will need access to emergency services after the hospital closes, while Carney was a major provider of behavioral health care.
The potential deals for six hospitals give cause for cautious optimism, and the parties involved should do everything possible to ensure they go ahead. But the process of cleaning up the pieces after Steward’s departure has only just begun.
Editorials reflect the views of the Boston Globe editorial board. Follow us @GlobeOpinion.
