$417 Mil to Save Steward Hospitals, So Far

At a time when state government is already coping with massive unanticipated costs for family shelters amid cooled-down revenue growth, the Healey administration said Thursday it has committed at least $417 million to help keep Steward Health Care hospitals open as they are sold and transition to new owners.

The new three-year outlay is in addition to the $72 million the state agreed to provide to keep the hospitals open through August and now September, bringing the total state financial aid commitment to $489 million so far, state officials told the News Service. That's more than the cumulative purchase price for Steward's Massachusetts hospitals ($343 million) and the amount the state committed to provide this budget year for the popular Commonwealth Cares for Children grants meant to make child care more affordable and accessible ($475 million).

For more than a year, Massachusetts has been facing spending demands associated with family shelter operations and having assumed responsibility for pandemic-era programs that started with federal dollars (including the C3 early education grant program). The governor in January cut $375 million from the budget as part of a series of mid-year budget stabilization moves.

The Executive Office of Health and Human Services said Thursday morning that the $417 million package will support the Holy Family Hospital facilities in Haverhill and Methuen (being bought by Lawrence General Hospital), Saint Anne’s Hospital in Fall River and Morton Hospital in Taunton (being bought by Lifespan) and Good Samaritan Medical Center in Brockton (being bought by Boston Medical Center).

BMC is also buying the operations of St. Elizabeth's Medical Center in Brighton and the state plans to seize that property by eminent domain, although the firms that control the land say they'll "vigorously challenge" the state's lowball $4.5 million offer. HHS said information on financial aid for St. Elizabeth's will be made available at a later time, meaning the aid package's bottom line is nearly certain to grow.

The $417 million over three years consists of $332 million in supplemental payments and $85 million in advances against expected future claims. HHS said the $332 million will come from hospital assessments ($105 million), anticipated federal reimbursements ($183 million), and the state's General Fund ($44 million).

Gov. Maura Healey on Aug. 16 said a public funding package was part of the plan to "save" six Steward hospitals, but the administration had not shared the parameters of that plan until Thursday. The hospital sales were formally announced last week and were approved in U.S. Bankruptcy Court on Wednesday.

Healey has said since first announcing that the state would provide transition funding that the package her team has negotiated with buyers will not require approval from the Legislature. House and Senate leaders did not push back on that notion Thursday.

"As Steward Health Care proceeds through the bankruptcy process and exits Massachusetts, the state will provide financing to support the transition of former Steward hospitals to new operators. The vast majority of that financing will take the form of federal funds, advances of MassHealth payments, and supplemental payments funded by an assessment on hospitals that was adopted in the Fiscal Year 2025 budget," House Speaker Ronald Mariano said in a statement. "To date, every Steward hospital that received a qualified bid from a new operator is eligible for state financing. The House will continue to monitor the transition process as it develops."

A spokesperson for Senate President Karen Spilka said the president is consistently in touch with the administration and "applauds their work mitigating a crisis of Ralph de la Torre’s making."

"She will continue working closely with the Administration and stakeholders as the situation evolves to ensure a smooth transfer of hospital operations from Steward Health Care to Boston Medical Center, Lawrence General Hospital and Lifespan," Spilka's office said.

Key to the state's financial assistance, according to HHS, is the significant increase in hospital assessments that Healey sought and lawmakers approved as part of the fiscal 2025 state budget, which Healey signed into law in July.

The Massachusetts Taxpayers Foundation said the House and Senate budget had very similar language that aimed to "increase total hospital assessments by $604.1 million and generate additional reimbursements, allowing for up to $1 billion in additional hospital payments and resulting in approximately $75 million in FY 2025 budget savings."

HHS said the administration has some flexibility around the timing of the payments it has agreed to provide the Steward buyers and will try to make sure funds are available to the new operators when they need them.

Massachusetts has already subsidized operations at Steward's hospitals for August and September. The state advanced Steward $30 million in Medicaid payments to stay afloat in August and a federal judge approved an agreement Wednesday under which the state will pay another $42 million to keep the hospitals open as the sales head toward a targeted Sept. 30 closing date.

"This is the funding that will essentially neutralize the debtors' operating losses during the months of September. And in terms of the timing, if approved today, the commonwealth will be prepared to fund the debtors with the full $42 million this Friday, September 6, which the debtors will need to promptly make payroll next week," David Cohen, an attorney from Weil, Gotshal & Manges who represented Steward, said in court Wednesday.

The agreement declares that the state's funding is to be "used solely for the purposes of sustaining the Hospitals' operations to continue patient care, ensuring payment of Hospital employee payroll, including the final September 2024 payroll for the Hospitals that is payable in October 2024 ... and provision of other Hospital employee benefits, and supporting the transition of the Hospitals to new ownership."

Unlike August's aid, the $42 million for September is made up of $34 million in payments -- things like rate add-on reconciliation payments, "Clinical Quality Incentive Additional Interim Payments" and "Health Quality and Equity Incentive Interim Payments" -- and $8 million in advances of payments that would have been due at a later date.

The agreement gives HHS the ability to recoup the $8 million in advances and also says the secretariat "will explore in good faith whether the $8,000,000 contemplated to be paid as Advances can be funded in an alternative manner."

HHS said the allowance for September is $12 million larger than for August in part because of the specific costs and revenues of the hospitals in the two months, including the contours of payroll periods.

The September package includes about $12.7 million for St. Elizabeth's, $9.9 million for the Holy Family hospitals, $9.6 million for Good Samaritan, $5.7 million for Morton Hospital, $3 million for St. Anne's, $700,000 for the closed Carney Hospital and $185,000 for the closed Nashoba Valley Medical Center, and $61,000 for the Norwood Hospital (which closed before Steward's bankruptcy filing and was not part of that sale process), according to the agreement.