Steward Health Care Faces Financial Troubles, Possible Closures

January 22, 2024 - Steward Health Care, a for-profit health system headquartered in Dallas, Texas, is facing grave financial troubles, which may create ripples across the country.

The Boston Globe reported on Jan. 19th that Steward-run facilities in eastern Massachusetts are at risk of closing because of the system’s financial stress. Closing the facilities may create a public health emergency in the state, which has nine Steward hospitals.

In a statement to the news outlet, Steward blamed its financial troubles partly on relatively low reimbursement rates for treating Medicaid patients and some commercially insured patients. Its hospitals are paid less than most academic medical centers, according to the statement.

“This gap has only continued to increase and most community hospitals — including Steward hospitals in Massachusetts — are suffering losses that jeopardize their ability to continue to offer services,” the statement acquired by The Globe read.

Earlier this month, Steward’s landlord also revealed in a news release that the health system hadn’t been paying its full rent for several months, which could lead to the system selling off hospitals nationally.

The Globe also reported that a person with direct knowledge of Steward’s financial situation said the health system has informed state regulators that it has until the end of the month to make a plan to satisfy its lenders.

Steward already announced last month that it will close its rehabilitation hospital in Stoughton, Massachusetts. The health system also closed or sold several facilities in other parts of the country last year, including the sale of several healthcare sites in Utah to Commonspirit Health and the closure of Texas Vista Medical Center.

Steward is still the largest, tax-paying hospital operating in the US, with facilities in Arizona, Arkansas, Florida, Louisiana, Massachusetts, Ohio, Pennsylvania, and Texas. Their network includes more than 7,900 beds under management across 33 community hospitals and other facilities.

But further closures could upend access to care in places like Massachusetts, where Steward admitted over 46,000 patients over the course of 12 months ending in September 2022. About 70 percent of Steward patients are also covered by Medicare and Medicaid, The Globe found.

However, health systems across the country are being rocked by financial troubles, such as high expenses, workforce shortages, and unpredictable patient volumes since the COVID-19 pandemic. The American Hospital Association (AHA) reported last year that hospital expenses increased by 17.5 percent between 2019 and 2022, with the trend spilling over into 2023.

Financial distress drove healthcare merger and acquisition activity, which increased over the last year. Kaufman Hall, a healthcare consult firm, recently reported that deal activity in the industry was above pandemic levels, with 65 announced transactions totaling $38.4 billion in 2023. Financial distress was a driving factor or evidence in 28 percent of those transactions, the highest percentage since Kaufman Hall has tracked deal activity in healthcare.

“These trends underscore the need for organizations to, whenever possible, attempt to work from a position of strength when seeking partnership alternatives before financial distress impacts a hospital or health system’s flexibility,” Kaufman Hall stated. “Doing so allows community hospitals the opportunity to secure key services and other commitments to ensure that their community continues to have access to the appropriate level of care and that the hospital’s legacy survives into the future.”