Former Steward Health Care hospitals drag down new owners

“The financial performance was an order of magnitude worse — for a number of reasons — than we or anyone had expected,” said Dr. Alastair Bell, chief executive of Boston Medical Center Health System.

One year into new ownership, the former Steward hospitals are a major drag on the finances of their new owners, new records show. For some, it is costing them much more to operate the facilities than Steward had prepared them for, while others were surprised by the sheer scale of the upgrades. Meanwhile revenues from patients were much lower than forecast.

And these unexpected challenges come as the old Steward hospitals, many of which serve large numbers of poor and underinsured patients, face potentially even tougher times ahead with federal cuts to government insurance.

At the former Holy Family hospitals in Methuen and Haverhill, it was “staggering” how many things were falling apart, from leaky roofs to electrical and heating systems to decrepit equipment, said Diana Richardson, chief executive of Merrimack Health. All told, the costs to bring them up to speed greatly exceed the funds Merrimack received from the state to help with the transition.

“It is just completely underinvested in, every possible component you can imagine,” Richardson said.

Meanwhile, Brown University Health spent tens of millions of dollars wrestling with Steward’s electronic medical record system at Morton Hospital in Taunton and Saint Anne’s Hospital in Fall River while they worked to transition to a new one. At the same time Brown was engaged in negotiations for new contracts with the hospitals’s physicians.

“Every corner you turn around, there is a nice little mess to fix,” said Brown University Health chief executive John Fernandez. “Many of which we knew, but you still have to fix it. It’s still work. That’s on top of running a health care organization — that’s not easy when it’s fine.”

If last year was hard, what comes next may be worse. Experts pointed at looming changes at the federal level that could further reduce Medicaid reimbursements, narrow which services Medicaid will cover, or strip some patients of insurance altogether. Those changes will more greatly affect institutions like several of the former Steward hospitals that have large Medicaid populations.

Many hospitals already operate on “razor-thin margins,” so those federal changes are going to make things even worse, said Megan Cole Brahim, director of the division of health policy and insurance research at Harvard Medical School. “It will be that much more difficult as they navigate how to continue to provide care.”

Rather than pull back on their commitments, though, hospital executives say they are moving forward, renovating the institutions, restoring patient traffic, figuring out which services should be merged or even expanded, and rebuilding trust with their communities.

At a recent panel before an audience of hospital administrators, Kate Walsh, the former Massachusetts health secretary, asked the executives of all three acquiring institutions whether they would do the Steward acquisitions all over again.

“Yes,” said Richardson without hesitation.

“Absolutely,” Fernandez said.

Bell’s “yes” was quieter, though no less committed.

“No, absolutely. The care needed to be preserved,” Bell clarified. “It’s a tough road ahead, though.”

That’s to say nothing of the road behind them.

For Boston Medical, the cost of taking two former Steward hospitals has more than doubled its already troubling operating deficit for the year ending in September, from $111 million to a whopping $240 million.

And, it would have been much worse were it not for the $100 million BMC received from the state for operations, plus millions more for technology and other investments.

Issues compounded on one another. The network of doctors and medical practices the Brighton and Brockton hospitals had long relied upon for referrals was broken up during the transition, with the entire primary care component of Steward cleaved off and sold during the bankruptcy. The Brighton facility had also previously received transfers from a network of community hospitals. Overnight, almost all those facilities were owned by different operators or had closed.

There were also fewer doctors working inside the hospitals, many having left as the bankruptcy dragged on, which further decreased the number of surgeries and treatments at the hospitals.

Patients also stopped coming, fearful of establishments that under Steward’s ownership had been bereft of supplies. The Boston Globe had reported in January 2024 on a new mother that died after she gave birth at the Brighton facility, which didn’t have the necessary supplies to care for her. Later that year, the Globe’s Spotlight Team revealed at least 15 instances in which Steward Health Care patients died after failing to receive professionally accepted standards of care due to equipment or staffing shortages.

At the same time, Boston Medical was also spending millions to repair equipment and the building and to buy badly-needed supplies.

BMC also struggled to collect payments for services at the two hospitals. For about six months, it relied on Steward for electronic medical records, but those systems were so bad that, Bell said, BMC had trouble getting paid.

“The mismanagement of Steward did not stop when the bankruptcy concluded,” Bell said.

Approximately $387 million in state support has helped to a degree, but it won’t cover everything BMC took on. In addition to the $100 million to cover operations in fiscal 2025, approximately $135 million of state funds went to acquire the Good Samaritan property. Among the remainder, another $80 million is dedicated to a new electronic medical records system.

The work is not done. Executives are looking at the services the hospitals offer, and deciding which to rebuild where, and which to consolidate.

“We could see this would be financially difficult,” Bell said, but, he added, “We viewed it as our role to step in and help.”

The challenges engulfing Steward facilities were in no way unique to BMC.

At its newly acquired hospitals in Fall River and Taunton, Brown University Health also confronted tens of millions of dollars in costs to operate a medical record and billing system through Steward for months, as well as dwindled patient traffic that is still slow to return.

The state provided $10 million a year for three years, but that’s barely made a dent. Even with the state support, the Massachusetts side of Brown’s business caused $89 million in losses in the year ending in September.

“The takeaway is we are moving in the right direction,” Fernandez said. “Even in Massachusetts, we’ve made a decision and we will work really hard to make sure we make it work.”

Similarly, Merrimack Valley Health hemorrhaged cash trying to use Steward’s systems at the Methuen and Haverhill hospitals, as well as making critical upgrades. Entire units of the two new campuses were offline due to neglected infrastructure, Richardson, the chief executive, said.

The state provided $125 million to the health system as part of the acquisition. The funding was the only reason why Merrimack Health overall was able to finish the fiscal year in the black.

And looking ahead, Richardson expects repairs at both facilities will be much more expensive.

Merrimack is considering which services to expand and which to consolidate across its now larger footprint, in an increasingly difficult time for anyone in the health care field.

“It is really easy to get caught up in the unbelievably difficult environment health care operates in anywhere, in particular if you are a safety net hospital right now,” Richardson said. “The only way for us to approach it is to remember why we’re here — to take care of our patients and community.”

Jessica Bartlett can be reached at [email protected]. Follow her @ByJessBartlett.