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What’s left is a stream of potential patients, a local brand name, however diminished, and the prospect of a bargain.
“It’s a risky business proposition,” said Marc Bard, a national health care consultant based in Holderness, N.H. “You’re buying a book of business, a license to deliver care in a highly competitive Eastern Massachusetts market. But this is not your typical transaction.”
That may explain why, with bids due Monday, appetite for buying the hospitals appears to be tepid. Steward, which filed for bankruptcy May 6, is selling off its 31 hospitals, including eight in Massachusetts, to pay its lenders and scores of other creditors.
But few would-be acquirers have gone public with their interest. Many rival hospital systems — which might otherwise welcome an expansion opportunity — are struggling with their own financial strains and are daunted by the complexity of a Steward deal. An auction is set for next Thursday. The state’s two largest systems, Mass General Brigham and Beth Israel Lahey Health, have made it clear they won’t be taking part.
Still, the Steward hospitals could prove to be attractive to the right buyers under the right conditions. They come with a built-in work force and an existing base of patients from their communities. None of them is expected to fetch premium prices.
For those weighing bids, the real estate looms as a major obstacle. Steward sold the hospitals’ land and buildings to Medical Properties Trust for $1.2 billion in 2016, saddling the eight Massachusetts hospitals with annual rents totaling more than $100 million and leases running through 2040. MPT, in turn, sold a 50 percent interest in its leases to another firm, Macquarie Infrastructure Partners, for $1.8 billion in 2021.
Most hospitals in Massachusetts, including nearly all of Steward’s competitors, own their real estate and pay no rent.
“You’re taking over a business that rents space from landlords,” said Boston City Councilor Liz Breadon, whose district includes Steward’s local flagship, St. Elizabeth Medical Center. “And they’re charging onerous rents.”
The high-cost leases aren’t the only impediment. Steward also has put up for sale its physicians network, Stewardship Health, which manages its hundreds of primary care doctors and other clinicians in Massachusetts and seven other states.
This raises the possibility that a new Stewardship operator could seek to renegotiate its contracts with the organizations that purchase the hospitals, potentially driving up their expenses. A new owner of the doctors network could even affiliate with a competing hospital system, eviscerating the hospitals’ medical staffs.
Without the doctors or the property, what’s left for the hospital buyers?
For one, they would get operating licenses, which are valuable but would have to be reissued by state regulators. They’d inherit staffs of nurses, administrators, and kitchen and maintenance workers, many of them employees who’ve served the hospitals for years, and a reliable revenue stream from patients in their communities. They’d also take over medical and office equipment, and labor, supply, and health insurance contracts.
Whether that’s enough will hinge partly on price — many anticipate bargain-basement buyouts — and partly on the buyers’ strategic aims, according to consultants, bankruptcy experts, and community leaders.
“The bankruptcy code is designed to help buyers,” said Ross Martin, a Boston College law professor who practiced bankruptcy law in Boston and New York, noting that the sales will be approved not by Steward but by a federal bankruptcy judge motivated to find new owners. “The buyer gets to decide what to pay, and the buyer can factor in the risks.”
Among the factors likely to influence the sales process is whether the landlords agree to accept lower rents and whether officials in Governor Maura Healey’s administration are willing to have the state pony up financial aid to new hospital owners. These issues have been the focus of sensitive negotiations.
Massachusetts health officials and representatives of Steward, MPT, and Macquarie all declined to discuss those talks or the upcoming hospital sales.
Listed for sale are two Boston hospitals, St. Elizabeth’s in Brighton and Carney Hospital in Dorchester. West of the city, Steward is marketing Nashoba Valley Medical Center in Ayer. It’s selling Holy Family Hospital, north of Boston, with campuses in Methuen and Haverhill. And to the south, Good Samaritan Medical Center in Brockton, Morton Hospital in Taunton, and St. Anne’s Hospital in Fall River are on the market.
Norwood Hospital, also owned by Steward, is its only Massachusetts hospital not listed for sale. The hospital has been closed since a 2020 flood, and landowner MPT has taken charge of the renovations.
The names of a handful of potential buyers of the Steward hospitals have surfaced, but it’s not certain which of them will ultimately make bids or if other prospective acquirers are quietly waiting in the wings.
Hospitals in southeastern Massachusetts are seeing the most interest, with Southcoast Health, which runs hospitals in Fall River, New Bedford, and Wareham, eyeing St. Anne’s, and Lifespan Health System of Providence, which is changing its name to Brown University Health, preparing bids for both St. Anne’s and Good Samaritan.
At least two other hospitals have been considering bids: Boston Medical Center for the Boston hospitals and possibly others, and Lawrence General for Holy Family. And a physician-owned health system called Insight, based in Flint, Mich., is weighing the possibility of purchasing Steward hospitals that can’t find other buyers.
Because of the uncertainty in how to value the hospitals, and the departure of an unknown number of doctors and nurses for other jobs in recent months, many people in the blue-collar communities where most of the hospitals are located fear these critical facilities could be shut down. The state requires hospitals to give 120 days’ notice before closing.
Still, patients continue to seek care at the Steward hospitals, including many who lack transportation to get to other treatment centers and rely on their emergency rooms.
“The Dorchester community is concerned about losing an emergency room that’s in our part of the city,” said Boston community activist Bill Walczak, founder of the Codman Square Health Center and a former president of Steward-owned Carney. “We don’t want the burden of people needing emergency care shifting to downtown Boston, where we know it’s sometimes extremely chaotic from the patient volume.”
Alan Sager, who teaches health care finance at the Boston University School of Public Health, estimated Steward hospitals handle 10 percent of emergency room visits statewide — and an even larger share in Eastern Massachusetts — and 7 or 8 percent of inpatient admissions.
“If these hospitals close, people are going to be hurt,” said Sager, who called on state officials to play a more aggressive role in keeping the hospitals open. “And if the Steward hospitals close, costs will go up because the remaining hospitals are more expensive.”
Community leaders are hopeful the hospitals can find buyers, noting that even as Steward and its creditors haggle over money in bankruptcy court, loyal employees are working to keep the hospitals running.
“You’re taking over an institution that has a footprint, a history, and hard-working employees who have served a community for over 100 years,” said Boston City Councilor Breadon. “If you had a reputable organization take over St. Elizabeth’s, I think it would bounce back quickly.”
While the transition would be challenging, Steward hospitals could be an asset to health systems eager to expand their markets and channel patients needing specialized care to their flagship medical centers.
“Some of these systems are being encouraged to buy these hospitals as a community service,” Sager said, suggesting they could become more financially viable with higher government payments for MassHealth, the insurance program for low-income residents. “What they’re buying is an opportunity to get these hospitals at a low price in the hopes of extracting revenue from the state to keep them open.”
Robert Weisman can be reached at robert.weisman@globe.com.
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