Under fire from government officials, Steward Health Care released a six-point action plan late Friday outlining a $150 million financing agreement, asset sales and a partial restructuring that will allow the for-profit system “to emerge as a sustainable business.”
Among those points was a commitment to “cooperation and transparency” with Massachusetts’ leadership, which last week demanded that Steward provide its financial documents in full by the end of Friday.
However, in a statement released last week, Gov. Maura Healey’s office said that the information that’s been supplied—all audited financial statements through 2021 and “draft statements with footnotes for years where the audit remains incomplete,” per Steward—isn’t enough.
“The financial information that Steward provided this week continues to be incomplete and insufficient,” the governor’s office said in a statement. “What Steward must do from this point forward is clear—complete an orderly transition out of Massachusetts.”
Steward said it has provided “tens of thousands of pages of information” to the state’s attorney general and “will continue to provide more.”
The Dallas-based system, which operates 33 hospitals across eight states, runs seven acute care hospitals and employs over 15,000 people in the Bay State. Its finances—over $50 million in debt owed to its landlord and more than a dozen lawsuits over unpaid invoices—have become a concern for government officials concerned that any closures could overwhelm other providers across the state.
Friday’s release gave a broad outline of Steward’s plan to transition toward its “next phase of operating as [a] smaller, more nimble system” without interrupting patient care.
The system said it has now secured a $150 million cash infusion via a “robust financing agreement” with its current lenders. The bridge loan, which extends forbearance through April 30, 2024, will let the company “reset its operations and address vendor obligations” as it works to sell off its Stewardship Health physician group. Steward also said that it’s working to sell other nonessential assets, such as its owned aircraft, and is consolidating its back-office operations.
“In addition, Steward is continuing to actively seek strategic opportunities to divest noncore assets with a focus on improving the system’s liquidity position,” the company said Friday.
Steward’s six-point plan included word that the system has retained consulting firm AlixPartners to help restructure its business and that it has already appointed new leadership for its northeast business region.
The release also highlighted Steward’s moves to ensure that its facilities can “maintain staffing and levels of care,” an area in which government officials and employees said the company has lately fallen short. Specifically, Steward said it has “secured and maintained its robust pension plan” in new labor agreements with two unions, and kicked off a recruitment strategy that includes referral payments of up to $40,000 per hire for current employees.
“First and foremost, we want to continue to do the right thing for patients, our staff, and our communities. That is our commitment going forward,” Michael Callum, M.D., Steward’s executive vice president for physician services and interim president of its northeast region, said in the release. “In the future, that will take a different form, but the mission remains the same.”
Steward’s plight and the threat of widespread closures has sparked public scrutiny of its leadership and Cerberus Capital Management, the private equity firm that formed Steward after acquiring Boston-based nonprofit system Caritas Christi in 2010.
Earlier this month, Massachusetts lawmakers including Democratic Sen. Elizabeth Warren sent a letter to Cerberus seeking information on more than a billion dollars in liabilities the system took on before the firm secured a $800 million-plus exit by selling Steward’s hospital properties to Medical Properties Trust.
“We are particularly concerned about the extent to which Cerberus and its affiliates literally stripped out and sold the property from underneath these hospitals, creating hundreds of millions of dollars in profits for private equity executives, while leaving the facilities with long-term liabilities that are magnifying—if not creating—the current crisis,” the lawmakers wrote.
Steward’s financial position and recent service closure announcements in Florida and Texas, for instance, have also raised concerns of fallout in communities outside of Massachusetts. The company has also been hit with lawsuits in Utah reportedly alleging it pulled funds from five hospitals it sold to last year to CommonSpirit Health to pay its debts in other states.