Steward, which filed for bankruptcy on May 6, gave no reason for the delay. A spokesperson for the company, the nation’s largest for-profit hospital system, declined to comment Wednesday.
But the names of relatively few potential bidders have surfaced so far. And communities from Dorchester to Taunton to Haverhill are asking, with growing urgency, what will happen to hospitals that draw no bids. State law requires 120 days’ notice before hospitals can be closed.
In interviews this week, some hospital leaders who’ve considered bidding for Steward hospitals said it would be a risky proposition without state support. They cite Steward cutbacks in services, doctors and nurses leaving in recent months, and steep rent obligations — $104 million annually for the eight hospitals — to their landlord, Medical Properties Trust.
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“When you get right down to it, nobody’s rushing to put in a bid,” said David E. Williams, president of Health Business Group, a Boston consulting firm. “If you look at it as a pure business investment, the numbers don’t add up without some help from the state.”
A pair of investment banks has been aggressively marketing the Steward hospitals for months. But so far, only two nonprofit hospital systems in southern New England, and one new player from the Midwest, have confirmed interest in bidding for any of the Massachusetts hospitals.
Southcoast Health, which runs hospitals in Fall River, New Bedford, and Wareham, has said it’s exploring acquiring Steward-owned St. Anne’s Hospital in Fall River. And, Lifespan Health System of Providence, the largest hospital operator in Rhode Island, has said it plans to bid for St. Anne’s and Good Samaritan Medical Center in Brockton.
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Meanwhile, an out-of-state system called Insight, based in Flint, Mich., said it’s studying the possibility of acquiring those Steward’s hospitals in Massachusetts that can’t find other buyers. “We’re trying to see where we might fit into this entire bid and auction process,” Atif Bawahab, chief strategy officer for Insight, which runs nonprofit and for-profit hospitals in Michigan and three other states, told the Globe.
Insight, a physician-owned health system, has been snapping up “safety net” hospitals that serve a high number of Medicaid patients. In 2021, it took over Mercy Hospital in Chicago, which had been slated to close. Its leaders say it focuses on treating underserved populations.
Steward, which moved its headquarters from Boston to Dallas in 2018, operates 31 hospitals in eight states. The bid and auction deadline extensions apply to its eight hospitals in Massachusetts as well as four in Arizona, and to Stewardship Health, its nationwide physicians network that was put up for sale in March. Optum, an arm of health insurance giant UnitedHealth, signed a letter of intent to buy Stewardship, but hasn’t yet inked a definitive agreement.
Among the issues complicating the hospital sales is a sharp disagreement between Steward and Medical Properties Trust, the Alabama-based real estate firm that bought the land and buildings where the hospitals operate, on how to allocate proceeds from the sale. MPT is the largest creditor and a part owner of Steward. Judge Lopez, who must sign off the allocations, brought in a second bankruptcy court official to help mediate that dispute.
That second court official, bankruptcy Judge Marvin Isgur, plans to convene the parties — along with other lenders and creditors — for mediation sessions. Steward owes more than $9 billion to creditors, including escalating rent payments over the coming years. It’s not clear how long the mediation will take or whether they could further delay the hospital sales.
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In addition to Good Samaritan and St. Anne’s, the Massachusetts hospitals Steward put up for sale include St. Elizabeth’s Medical Center in Brighton, Carney Hospital in Dorchester, Morton Hospital in Taunton, Holy Family in Methuen and Haverhill, and Nashoba Valley in Ayer.
Two other hospitals, Boston Medical Center and Lawrence General Hospital, have been weighing bids, according to parties close to the process — BMC for Steward’s two Boston hospitals and Good Samaritan, and Lawrence General for Holy Family. Neither has expressed interest publicly, and neither responded to inquires Wednesday. Both would need financial help from the state.
Steward also runs Norwood Hospital, which has been closed since 2020 due to flooding. That hospital, where construction work was halted after contractors complained that they weren’t being paid, wasn’t included on Steward’s list of those being sold in the upcoming auction.
In bankruptcy filings and hearings, Steward’s investment bankers have suggested there’s substantial demand for its hospitals. They haven’t yet identified bidders or indicated whether they’ve designated potential buyers as “stalking horses” to set floors on bids. People involved in the process said they can’t discount the possibility a surprise bidder might emerge late in the game to claim one or more of the hospitals.
Boston-based Leerink, one of Steward’s investment banks, last month said it had solicited bids from 30 parties for St. Elizabeth’s and Carney, Nashoba Valley, and Holy Family. Thirteen have signed nondisclosure agreements to review Steward’s proprietary data.
A second Steward investment bank, Cain Brothers of New York, said it had contacted 45 potential buyers about Good Samaritan, Morton, and St. Anne’s. Twenty parties were poring over financials, it said.
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Prospective operators are keenly interested in what Massachusetts officials might do to support or hasten the transition of Steward hospitals to new operators. Thus far, the Healey administration hasn’t tipped its hand. Governor Maura Healey has repeatedly said the state won’t give any money to Steward or MPT, which she accused of looting the hospitals. But any new operator is likely to want state backing.
Among other things, they would like state financial support to improve the hospitals’ infrastructure and adapt electronic medical records, short-term operating capital, a commitment to maintain or boost Medicaid rates, and accelerated regulatory review of the purchases.
State officials didn’t respond to questions about what help, if any, they’d be willing to provide to new operators. In informal talks with potential acquirers, they’ve made it clear that state money won’t be used to cover lease payments to the landlord, putting the onus on MPT to sell its properties or accept lower rent payments.
As the sales process gets underway, the largest Massachusetts hospital systems, Mass General Brigham and Beth Israel Lahey Health, have stayed on the sidelines. “Mass General Brigham is not seeking to purchase any of the Steward hospitals,” a spokeswoman said. A representative of Beth Israel Lahey said it “does not have plans to bid on any of the Steward assets.”
State officials have worked to limit the growth of both Harvard-affiliated systems for years, maintaining that their scale has enabled them to drive up health costs in Massachusetts. But because they have more resources than other potential buyers, some think the state’s posture could change — and it might soon be prodding the big hospital systems to help.
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“They might get pushed into this eventually,” said Williams, at Health Business Group. “The state doesn’t want further concentration of these oligopolies, but they might see it as the lesser of two evils.”
Robert Weisman can be reached at robert.weisman@globe.com.
