Steward Health Care’s bankruptcy involves hospitals in Worcester County

WORCESTER – Dr. Eric Dickson is worried.

The president and CEO of UMass Memorial Health understands the state’s immediate concerns about Steward Health Care’s bankruptcy and its negative impact on tens of thousands of patients in Massachusetts if Steward’s eight hospitals were to close.

However, Dickson doesn’t want Gov. Maura Healey’s administration and state lawmakers to focus solely on Steward and forget about the two hospitals in North Central Worcester County that have already filed for bankruptcy.

Those hospitals are Athol Hospital and Heywood Hospital in Gardner, both under the umbrella of Heywood Healthcare, which filed for bankruptcy in October.

“I’m very concerned about north-central Massachusetts,” Dickson said. “We need to push the state not to forget about the two hospitals north of us that are bankrupt and not see all the money go to Steward.” A proposed merger of UMass Memorial Health and Heywood Healthcare ended in January 2023. The parties cited poor financial timing.

Heywood Healthcare reported an operating margin of 0.8% for the fiscal year quarter ended Dec. 31, according to the Center for Health Information and Analysis. Quarterly operating margins across Heywood Healthcare’s three entities were 1.3% for Athol Hospital, 1.7% for Heywood Hospital and -35.8% for Heywood Medical Group.

The report defined operating margin as a critical ratio that measures how profitable the entity is when looking at the performance of its primary activities.

Based on a prepared statement from the Healey government, Dickson does not have to worry about potential funding to help save Steward, which would lead to the neglect of struggling hospitals in Worcester County.

“The Healey-Driscoll administration is committed to protecting access to care, preserving jobs and stabilizing the health care system for the entire state, including in central and north-central Massachusetts,” a spokesperson for the Massachusetts Executive Office of Health and Human Services. “There are important lessons to be learned from this situation with Steward and the government will work with partners to evaluate how we can protect the long-term stability of our healthcare system.”

Heywood Healthcare received a $26.5 million financial shock from MassHealth, the state’s Medicaid insurance program, according to the state’s Executive Office of Health and Human Services. The cash infusion was approved under the hospital’s sustainability program established by the state legislature in 2023.

About half of the money ($13.3 million) was paid to Heywood Healthcare in April 2023. The rest came in monthly installments of $2.2 million from October 2023 to the end of February.

Third hospital in the mix?

A third hospital may be in the mix that could lead to health care unrest in the province.

Nashoba Valley Medical Center in Ayer, located on the Worcester County line near Fitchburg and Leominster, is one of eight failed Steward hospitals in Massachusetts.

“We cannot afford to lose three emergency departments and three hospitals in north-central Massachusetts,” Dickson said.

Nashoba is the least critical of the three hospitals, Dickson said, because Emerson Hospital in Concord is nearby. The Athol and Heywood hospitals should remain, Dickson said, because the closest hospital to Athol, Baystate Franklin Medical Center in Greenfield, may be too far for some patients.

Meanwhile, UMass Memorial Health likely won’t be able to handle a surge of patients if the hospitals in Athol and Gardner close. Reasons Dickson cites include the fact that the UMass health care system recently completed the purchase of Harrington Hospital locations in Southbridge and Webster. Additionally, UMass continues the process of completing its business partnership with Milford Regional Medical Center.

“We’ve maxed out,” Dickson said.

Additionally, Dickson said hospitals statewide are currently at 100% capacity and are not in a position to take on a slew of new patients.

Dickson doesn’t see a repeat of the UMass field hospital at the DCU Center during the early stages of the COVID-19 pandemic if Steward Hospitals in Massachusetts were to close. The number of patients would not be nearly as high as in the early months of the pandemic, he said.

UMass is working with less acute care facilities, including skilled nursing facilities, to plan for a possible influx of patients due to impacts from Steward. Dickson said these facilities have a higher vacancy rate compared to hospitals, and could accept new patients if necessary.

Do what it can

The Edward M. Kennedy Community Health Center, with locations in Worcester, Milford and Framingham serving more than 32,000 patients, will do what it can to admit patients if Steward hospitals were to cease operations in Massachusetts, Stephen J. Kerrigan said , president and CEO of Kennedy Health. director.

Kerrigan doesn’t expect a wave of Steward patients to come to Worcester, but Kennedy Health’s Milford and Framingham locations could see a significant increase in patients because they are located closer to Steward hospitals.

‘Huge impact’

What worries Kerrigan is a “huge impact” on Kennedy Health if Athol, Heywood and Nashoba were to close.

More physicians and care teams would need to be hired, and additional space would need to be created from new construction or construction to accommodate the wave of patients. These steps cannot be accomplished overnight.

There is also the uncertainty of where the money will come from to finance those additional expenses.

Kennedy Health never closed during the COVID-19 pandemic, when it served as a pressure relief valve for hospital emergency departments and urgent care centers, Kerrigan said. However, that valve could break if thousands of new patients descend on Kennedy from displaced patients from North Central Worcester County. Such a scenario could overwhelm Kennedy staff, forcing patients into local emergency rooms for routine care, Kerrigan said.

More authority is needed

For-profit health care has a place in Massachusetts, Dickson said. However, he believes the state needs stricter controls on for-profit companies that want to buy nonprofit health care systems.

“We need to tighten regulations and give more authority to the attorney general and the Health Policy Commission to make sure that when something goes from nonprofit to for-profit, it is really scrutinized,” he said.

If a careful review isn’t done before the paperwork is completed, Dickson says it’s game over, as little can be done at that point to address the issues that surface.

Massachusetts has many recent examples of for-profit organizations snapping up nonprofits, and this often happens when nonprofits are in the midst of financial trouble. That was the case in 2018, when Optum Care, part of UnitedHealth Group, bought the nonprofit Reliant Medical Group. Optum surpassed UMass Memorial Health in that deal.

Optum resurfaced in 2022 when it purchased nonprofit Atrius Health, which was reportedly experiencing serious financial strains at the time.

Steward entered the picture in 2010 when it bought several hospitals in Massachusetts from the financially troubled nonprofit Caritas Christi Health Care, which was controlled by the Archdiocese of Boston. Steward was backed at the time by the private equity firm Cerberus Capital Management.

The financial troubles began when Steward sold its Massachusetts hospitals to Medical Properties Trust in 2016 under a leaseback agreement for $1.25 billion. Steward used the money to buy hospitals across the country, took on debt and is reportedly relying on a possible sale to Optum of his physician network, Stewardship Health, to get the money to pay off creditors.

This week, Steward reportedly said it will sell its hospitals in Massachusetts, plus six others in other states, by the end of June. Whether or not that happens, Dickson believes the state needs more control over hospital transactions.

‘Not being solvent is not an option’

Sen. John Cronin, D-Lunenburg, Senate co-chair of the state Joint Committee on Healthcare Financing, is focused on the precarious developments swirling around Steward.

However, like Dickson, Cronin believes the survival of the Athol and Heywood hospitals is critical to maintaining stability in the state’s health care system. “Having Heywood’s system not solvent is not an option as it would have a hugely detrimental impact on the rest of the system.”

The debate starts next week; never again at Mass.

Meanwhile, the Massachusetts House plans to debate and vote next week on a sweeping bill that includes greater oversight of the health care industry and hospital transactions, which was promoted by the Steward developments.

“It is the Legislature’s responsibility to ensure that what happened to Steward Health Care never happens again,” House Speaker Ron Mariano, D-Quincy, said in a prepared statement. “Next week, the House will pass comprehensive legislation to address the holes in our regulatory process that Steward has exploited, stabilize the health care system, and address the rising costs of health care.”

Like Dickson at UMass, Cronin supports more powers for the attorney general and the Health Policy Commission to regulate hospital transactions.

He cited frustration over Steward’s failure to turn over financial records requested by the state. Cronin also expressed a desire to rid Massachusetts of Steward Chief Executive Officer Ralph de la Torre’s kind of “perverse incentives” to “bankrupt a health care system to make itself enormously wealthy.”

The way Cronin sees it, it’s time for debate, approval and getting a measure to Healey’s desk for her signature to make it law.

“The core of this is that our health care system is a public-private partnership,” Cronin said. “Whether for-profit or not-for-profit, every health care operation depends on hundreds of millions, hundreds of billions of state and federal tax funds. The state definitely needs conversations about the role of future for-profit operations (in Massachusetts).

“It’s a debate we need to have, and we need to do it the right way.”

Contact Henry Schwan at [email protected]. Follow him on X: @henrytelegram.