Ralph de la Torre, the president and CEO of Steward Health Care

WHAT IS AT STAKE right now in the unfolding crisis at Steward Health Care, with nine hospitals plus 16,000 physicians, nurses, and other health care workers? Bankruptcy? Eminent domain? Receivership? Fire sale? It’s all on the table right now, and informed sources tell us that the for-profit system is failing fast.

Worry about that may have prompted Gov. Maura Healey to send a letter on Tuesday to Steward CEO Ralph de la Torre, demanding assurances that care is being safely provided, acceptance of state monitoring of care at Steward hospitals, and, by this Friday, disclosure of all of the relevant financial information that the state has been demanding for years. 

We clearly agree with the governor’s demands and share her worries that a precipitous financial collapse at Steward threatens the health and well-being of Steward’s patients, the employment of thousands of workers, and the economic stability of key communities that rely on these facilities. It could also lead to the destabilization of our state’s entire health care system.

We see the governor’s letter as making clear that our state should not surrender our health system assets to the profit-maximizing values of private equity financing.  It is clear that she wants Steward out of our state. We agree.

But who assumes Steward’s place in running whatever health care assets remain in operation is also vitally important. 

We hope that Healey can even go further, using this crisis to strengthen and reaffirm our system’s diminishing non-profit character. Working with Attorney General Andrea Campbell and other key state officials, the goal should not be solely the preservation Steward’s medical and hospital services. Also at issue is whether those assets will be employed in a way to make advancing public health and well-being the first priority, and not simply making profits.

Here’s how we got where we are today. A private equity firm, Cerberus Capital, paid $246 million in cash and $649 million in debt to purchase the former Caritas Christi system in 2010 from the Boston Catholic Archdiocese. In 2016, Steward’s Massachusetts hospital assets were sold to publicly-traded Medical Properties Trust for $1.2 billion. Steward used some of the proceeds to become a national for-profit hospital chain, growing to 35 hospitals. By 2021, Cerberus sold the rest of its Steward investment to Steward’s physician group, bringing its total return on Steward to date to $800 million. Medical Properties Trust now claims $50 million in unpaid back rent from Steward, which is also facing claims in multiple directions for unpaid bills.  Let’s not forget that de la Torre built two yachts for himself in the process. 

Under de la Torre, Steward now is attempting to sell off several of its nine Massachusetts hospitals, as well as the Massachusetts parts of its Steward Medical Group physician network. Reports also indicate that a leading contender to purchase a portion of the physician network is Optum, the national physician organization owned by Minnesota-based, for-profit health insurance behemoth United Healthcare. Since 2018, Optum has purchased two formerly non-profit physician groups in Massachusetts, the Reliant Medical Group in 2018 and Atrius in 2022. 

So the first option for Steward is to sell off its Massachusetts hospital and physician holdings to the highest bidders, likely to be other for-profit companies. The second option would be selling parts of the system to existing large Massachusetts non-profits such as Mass General Brigham and/or Beth Israel Lahey. Both those options take the state down the wrong path and represent a missed opportunity.

The missed opportunity is a third path that could rebuild a more accountable and effective health system for communities now served by Steward facilities. While these other systems are less affluent than Mass General Brigham and Beth Israel-Lahey, they are reliable, good quality, and community-based.

For example, Steward’s Holy Family Hospitals, with campuses in Methuen and Haverhill, are near Lawrence General, an independent community hospital that has been hard-pressed financially by its independent status. Lawrence General’s new CEO, Dr. Abha Agrawal, wants to collaborate with all Merrimack Valley communities and providers to devise a regional solution to the Steward situation that could be a win for patients, providers, and communities.

Similar regionalization or networking is possible for other Steward facilities. State officials should look to Boston Medical Center, Cambridge Health Alliance, UMass Medical Center, Tufts Medicine, as well as the state’s world-class network of community health centers. A solution involving players such as these has the potential to generate new revenues by using the federal 340B Drug Pricing Program as well as Medicaid supplemental funding which, in Massachusetts, is tied to the Boston Medical Center, Cambridge Health Alliance, and UMass systems. 

A solution to the Steward crisis could be an opportunity for Massachusetts to reclaim more control and authority over our health system’s direction and fate. This could also work to address core challenges such as shortages of community-based primary care physicians as well as the ongoing behavioral health crisis. These problems, as well as the current overcrowding in acute hospital emergency departments, are legacies of the state’s abandonment of system-wide planning that goes back to Massachusetts hospital deregulation in 1991. 

Back in the 1970s and 1980s, Massachusetts claimed impressive and thoughtful health system planning. With deregulation, the state surrendered on planning, leaving such matters to be sorted out by the free market. The Steward crisis exemplifies the error of this choice. While 1980s-style regulation is not feasible today, this current crisis hands us the opportunity to reclaim better oversight and responsibility by state government.  

Years from now, citizens may be able to look back with appreciation for smart and gutsy decision-making by today’s leaders. Or, we can look back with continuing regret at endless fragmentation and health system looting by out-of-state for-profit investors, especially the private equity looters. What should the state do now?

First, state leaders should work to prevent any sale of Steward facilities or other assets, especially its physician group, to any entity whose goals are profit maximization rather than community health. Sale proceeds should not benefit financial speculators such as Medical Properties Trust, which bought the land on which Steward’s facilities rest, making the hospitals pay rent to support the trust’s profits and Steward executive looting. In recognition of the role that the lack of financial transparency has played, de la Torre and his team should not receive any personal profits from the transactions.

Second, MassHealth should make clear that Steward’s current Accountable Care Organization designation, overseen by the state’s Medicaid program, will not automatically follow any sale but rather be reviewed for compliance with appropriate patient care standards. 

Third, state government should act to protect our Commonwealth’s health care resources, whether the path involves bankruptcy, receivership, eminent domain, or other remedies. Attorney General Campbell should investigate potential criminal prosecution in collaboration with federal authorities.

Finally, state government needs to re-engage in statewide health system planning, including for the healthcare workforce which is at the root of the current hospital over-crowding crisis. We need functioning markets in health and medical care, and we need intelligent and thoughtful statewide planning that is more proactive and less reactive.

Today, we have an example of positive policy transformation at the federal level. For 40 years between 1980 and 2020, federal anti-trust policy consciously favored big corporate power, allowing mergers and acquisitions to advance with minimal scrutiny that let the big get bigger and richer. In July 2021, President Biden issued an executive order announcing a new day on anti-trust efforts—no more corporate concentration without a fight, including in health care. Over the last 30 months, we have witnessed a powerful and welcome change in anti-trust enforcement nationally, led by the Federal Trade Commission and the Anti-Trust Division of the US Department of Justice.

Taking a cue from Biden, Healey should declare it is a state policy priority to maintain, defend, and expand the non-profit, patient, and community-mission centered character of Massachusetts health and medical care. This is a core Commonwealth value. The private equity-driven financialization of Massachusetts medical care has ill served our state, with Steward’s former owners at Cerberus as the national symbol for financial misconduct.

Let’s make the Steward crisis a reaffirmation of the values and practices that made our Massachusetts health and hospital system a national model and shining star. 

John E. McDonough is a professor of practice at the T. H. Chan School of Public Health at Harvard University. Paul A. Hattis is a senior fellow at the Lown Institute.