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A string of for-profit hospitals in Massachusetts might close — a danger for patients


One of the country's largest private hospital operators says its facilities in Massachusetts are in financial jeopardy. As Deborah Becker from member station WBUR reports, the company's finances are entangled with those of another major business, and that could cause problems for hospitals around the country.

DEBORAH BECKER, BYLINE: Massachusetts officials started monitoring Steward Hospitals daily after the company said its financial losses are jeopardizing operations. Steward's nine Massachusetts hospitals employ about 16,000 people and serve hundreds of thousands of mostly vulnerable patients. Many Steward facilities are in areas where there are few other hospital options. Massachusetts Governor Maura Healey is threatening to prevent the hospitals from admitting new patients if they don't ensure safety.


MAURA HEALEY: I am frustrated with where we are right now as a state and what Steward has done.

BECKER: Steward blames much of its losses on low reimbursement rates for government-insured patients because about 70% of its patients are covered by Medicaid. Neighboring hospitals say they're already strained, and, if Steward fails, they cannot absorb its patients. Tim Foley is with the union representing almost a third of Steward's Massachusetts workers.

TIM FOLEY: We're working with our members, the governor and the secretary and everyone in between to make sure that there's a plan in place to ensure that care can continue in these important communities and that we maintain these critical health care jobs.

BECKER: Although Steward began in Massachusetts, it's now based in Dallas and owns dozens of hospitals in eight states. It's not clear how the company's finances became so strained. Because Steward is a private business, there is little public information about its finances. Several lawsuits allege that Steward hasn't paid many of its bills over the past few years.

Harvard researcher Zirui Song says some of the company's problems stem from a common private equity strategy. Steward sold its hospital real estate to get capital and provide additional returns to investors. Then, Steward agreed to pay rent to continue running those same hospitals.

ZIRUI SONG: This is a strategy of generating additional returns but also increasing the risk because now the acquired entity faces even more financial pressures given the new rent obligations it did not have before.

BECKER: Steward's landlord is Alabama-based Medical Properties Trust - or MPT - one of the largest hospital landlords in the nation. Cornell University professor Rosemary Batt says the MPT cash allowed Steward to expand quickly.

ROSEMARY BATT: Once they made this deal with the Massachusetts hospitals, they went on a buying spree and ended up with 33 hospitals across the country, doing the exact same thing - buying hospitals, selling the property to Medical Properties Trust, loading them with debt. So this is like a house of cards.

BECKER: Steward is now MPT's largest tenant, so the Massachusetts financial problems could have a domino effect on hundreds of other hospitals that also rent their real estate from MPT. This week, MPT said it wants to reduce its exposure to Steward, and it has said that Steward owes it $50 million in back rent. Rob Simone, an analyst at the Connecticut research firm Hedgeye, started advising investors against MPT about two years ago, arguing that Steward was almost insolvent.

ROB SIMONE: The only reason why Steward is failing right now, in my view - and the math kind of bears it out - is that MPT cannot afford to loan any more money to Steward.

BECKER: MPT didn't respond to requests for comment. Steward now says it hopes to make an orderly departure from Massachusetts. Health care experts say Steward's challenges may result in tougher regulations on for-profit health care across the country.

For NPR News, I'm Deborah Becker in Boston.

(SOUNDBITE OF MARISA ANDERSON'S "CLOUD CORNER") Transcript provided by NPR, Copyright NPR.

NPR transcripts are created on a rush deadline by an NPR contractor. This text may not be in its final form and may be updated or revised in the future. Accuracy and availability may vary. The authoritative record of NPR’s programming is the audio record.

Deborah Becker