Monday evening was the deadline for bids on the seven Massachusetts hospitals being sold by bankrupt Steward Health Care, and it could be a while before the public learns any details about who the bidders are.
Steward hasn’t yet confirmed the receipt of any bids, and the company isn’t required to do so. If any one hospital received multiple bids, an auction is scheduled for Thursday.
The seven Massachusetts hospitals Steward is offering for sale are: St. Elizabeth’s in Brighton, Carney Hospital in Dorchester, Good Samaritan Medical Center in Brockton, Holy Family Hospital in Methuen and Haverhill, Morton Hospital in Taunton, Nashoba Valley Medical Center in Ayer and St. Anne’s Hospital in Fall River.
Steward also owns Norwood Hospital, which closed nearly four years ago because of severe flood damage and is not included in the bidding process. Its future is unclear after Steward stopped paying the contractors rebuilding the hospital, putting the project on hold.
Since the hospital chain filed for bankruptcy, hospital staff and members of the communities that rely on their services have been voicing concern that the bankruptcy and sales could result in some of the seven hospitals being closed.
“From the outset, Steward has said their goal is not to close any of the hospitals, and the judge has said his goal is to not allow any of the hospitals to close,” said Schuyler Carroll, an attorney at the firm Manatt, Phelps & Phillips, which specializes on bankruptcy and restructuring but is not involved in the Steward case. “If there’s no bidder and there’s no way to fund the operations going forward, [closure] certainly is a possibility. But everyone has stated it’s their least favorite option.”
If there are no bids — or just one bid — it could be weeks before that’s disclosed, Carroll said. Bidders might also bid for different groupings of hospitals.
“In fact, in some situations like this, you can have an auction where you’re comparing apples and oranges,” Carroll said. “You can have one bidder who bids on just one hospital, a second bidder who bids on three hospitals, and a third bidder who bids on all of them. And you have to see what your best bid is in that scenario.”
It’s not a real estate sale, since Steward doesn’t own the property its hospitals are located on, and pays rent to a landlord, called Medical Properties Trust.
“What they’re buying is the business and the continued business operations that would come from that — the patients that come to them, the doctors that have agreements to stay there,” Carroll said.
Bidders will be allowed to directly negotiate with the landlord on the terms of the hospital leases, Carroll explained.
“And the landlord is a sophisticated party,” Carroll said, referring to Medical Properties Trust. “They’ve been in many bankruptcy cases before, many health care bankruptcy cases before. So they understand that if a buyer isn’t willing to pay the rent and they aren’t willing to give any rent concessions — if they’re the only buyer, they may not have a tenant there in the future. So the landlord is likely to, depending on the circumstances, negotiate if necessary.”
The sale of Steward’s hospitals presents an opportunity to create some real competition in Massachusetts’ healthcare market, according to John Gruber, chair of the economics department at MIT.
“I hope that someone innovative can figure out a way to take these existing assets, which are basically the buildings and the network of patients, and turn them into an effective competitor to the [Mass General Brigham] network because we need more competition in health care in Massachusetts,” Gruber said.
“That was sort of the promise of Steward Health Care, to be that competitor,” he said. “I don’t know if that promise can be realized, given that the land has been sold out from under them and these hospitals have to pay these high rents on this land. I’m not sure if there’s enough juice left to squeeze to be able to run the system and still be priced lower than the academic medical systems.”
Gruber is hopeful, though, that what emerges from the sale could present a viable alternative.
“There are positive aspects of for-profit health care in America and placing competitive pressure in our system, but there are excesses as well,” Gruber said. “And, unfortunately, Steward was more on the bad side of the ledger. There’s absolutely potential, but it needs to be well-regulated. This never should have been allowed to happen, and we need a more careful system.”
