Steward finalizes four hospital deals, expects $42M in state aid

Colin A. Young
| State House News Service

BOSTON — The sales of at least four of six Steward Health Care hospitals here are on track to go before a federal judge next week after the company announced Thursday that it has signed “definitive agreements” that will reshape the health care landscape in Eastern Massachusetts.

Steward has been working to offload its hospitals here since filing for bankruptcy in May, and the process has been marked by delays. The formal move toward sales comes as Steward hospitals here are running low on cash — the company expects Massachusetts state government to kick in an additional $42 million to keep the hospitals open as the sales process extends through September.

The bankrupt company announced Thursday that it finalized asset purchase agreements for Lifespan to buy Morton Hospital in Taunton and Saint Anne’s Hospital in Fall River, and for Lawrence General Hospital to buy the Holy Family Hospital facilities in Methuen and Haverhill. Lifespan, which will soon be known as Brown University Health, is buying the two hospitals for $175 million and Lawrence General could pay as much as $28 million for the Holy Family hospitals, according to court filings.

Steward is still working to finalize an agreement related to the sale of Good Samaritan Medical Center in Brockton and the operations of St. Elizabeth’s Medical Center in Brighton is Boston Medical Center, the company said. Gov. Maura Healey is working toward seizing the St. Elizabeth’s real estate by eminent domain, and Steward is closing Carney Hospital in Dorchester and Nashoba Valley Medical Center in Ayer this weekend.

The sales still require US Bankruptcy Court clearance and various regulatory approvals. A sale hearing in Bankruptcy Court is scheduled for Sept. 4, and Steward said it reserves the right to also seek approval of the yet-to-be-detailed BMC deal at that hearing.

In a filing Thursday, Steward said it is seeking court approval of the Lifespan and Lawrence General sales “based on representations made by the Commonwealth of Massachusetts … that it will provide $42 million in funding to the Debtors to support operations in September 2024, as well as accumulated payroll obligations prior to the closing of the transactions.”

The Healey administration had previously said the state would provide additional financial support for Steward (on top of $30 million that was meant to keep the bankrupt company’s hospitals open through August), but declined to say how much more the state will contribute. The financial aid package to help ease the transitions to new owners could reportedly swell to $700 million over three years.

The governor’s office said Thursday that the state “will support these new operators for a limited time frame, primarily by advancing MassHealth funding and similar funding that the hospitals were already set to receive.” It said those agreements were still being worked out.

The finalization of some of the deals comes nearly two weeks after Healey announced that there were agreements in principle among the array of parties involved. Steward had not confirmed or commented on the governor’s announcement until Thursday.

“We are thrilled to have identified such qualified acquirers for hospitals in the Commonwealth that are critical to the health of underserved populations,” John Castellano, Steward’s chief restructuring officer, said. “In Lifespan, Lawrence General Hospital and Boston Medical Center, we have found partners with established track records of treating communities in the northeast United States. Through these transactions, the people of the commonwealth will continue to receive critically needed care while Steward continues to focus on its ongoing Chapter 11 process.”

Peter Markell, chief financial officer for Lifespan, said the health system’s deal is to buy both the operations and the land and buildings of Morton Hospital in Taunton and Saint Anne’s Hospital in Fall River. Lifespan has agreed to pay $175 million for the two hospitals, according to court documents.

“There is an agreement separate with the owners of the property, and (purchase and sale) on the acquisition of the property,” he said Thursday morning.

Markell said the agreement for Lifespan to buy the hospital properties does not need Bankruptcy Court approval, “but because it’s all tied together, the parties involved have had to work things out … and that has been part of the bankruptcy proceeding.”

He said Lifespan is hopeful to have the state and federal regulatory approvals necessary by the end of September. He said the real estate purchase requires a filing under the Hart-Scott-Rodino Act, which generally includes a 30-day federal government review window.

“We are assuming that the authorities in both Massachusetts and the federal government want this to happen and these hospitals to stay open and get going. So we are assuming they will approve, but that is up to them,” Markell said. “And we are hopeful that we will have those approvals by September 30, so we can close then.”

The Lifespan CFO also said that the system has “committed X amount of money” to making capital investments and improvements in the facilities and digital infrastructure at the two hospitals.

“We don’t have any plans for any significant changes now,” Markell said. “The goal is to get these places stabilized and serving their communities, and we will do that and evaluate everything as we’re going through that. Both these places have, (from) what we can see, good management teams, so we’ “re looking forward to working with them and moving it forward.”

Rhode Island’s largest hospital system, Lifespan’s system already includes the Warren Alpert Medical School of Brown University, Rhode Island Hospital, Hasbro Children’s Hospital, the Miriam Hospital, Bradley Hospital, Newport Hospital, Gateway Healthcare, Lifespan Physician Group, and Coastal Medical. The company has ties between its executive suite and Massachusetts.

The company is under the relatively new leadership of President and CEO John Fernandez, who left his job as president of Mass Eye and Ear and president of Mass General Brigham Integrated Care to take over at Lifespan in early 2023. And Markell joined Lifespan around the same time after a career as executive vice president of administration and finance, and chief financial officer and treasurer of Mass General Brigham.

Healey said Thursday the news of finalized agreements “accomplishes our goal of maintaining and protecting access to care and jobs in Southeastern Massachusetts and the Merrimack Valley, while removing Steward Health Care from Massachusetts once and for all.”

“I welcome Lifespan, its leadership and team to Southeastern Massachusetts and appreciate Lawrence General Hospital for stepping up to preserve care in the Merrimack Valley. All of us will work hard to bring this over the finish line,” the governor said. “We continue to work as quickly as possible to complete the agreement for another qualified operator to take over Good Samaritan, move forward on our plans to take control of St. Elizabeth’s through eminent domain, and support the communities impacted by the upcoming closures of Nashoba Valley and Carney Hospitals.”

Details of the terms of the deal related to the Holy Family hospitals were not immediately available Thursday. Lawrence General Hospital President and CEO Dr. Abha Agrawal said in a statement that the Methuen and Haverhill facilities will “join Lawrence General Hospital.”

“We are excited about the opportunity to build a true regional health care system in the Merrimack Valley, one that puts quality and safety at the forefront of everything we do and is guided by the principle of caring for our community,” Agrawal said.

Dream. Barry Finegold told the News Service that Thursday’s news was a big deal for the Merrimack Valley because many people had been worried that the Haverhill campus of Holy Family would close or that neither Holy Family would be sold, which would have put even greater pressure on Lawrence General.

“That had us very concerned. We’re very happy with the outcome. We also know there’s a lot of work to do and we know we still have a lot to do, and by no stretch of the imagination are we out of the woods yet,” the senator said, adding praise for Lawrence General’s leadership and other area elected officials. “The fact that we have a local provider, the fact that these hospitals will still operate in some capacity is a big victory for the people of the Merrimack Valley.”

Massachusetts Health & Hospital Association President Steve Walsh said the agreements announced Thursday represent the dawn of “a new and hopefully brighter chapter for health care in Massachusetts.”