Steward bankruptcy judge approves closing of Carney and Nashoba Valley hospitals - The Boston Globe (2024)

For prospective buyers of those Eastern Massachusetts hospitals, Lopez moved to ease one financial burden on Wednesday.

The judge OK’d a motion by Steward, which filed for bankruptcy May 6, to nullify a “master lease” requiring its Massachusetts hospitals to pay their landlords rents totaling more than $100 million a year through 2040. The ruling means buyers of those hospitals will have to negotiate new leases with those landlords — or reach deals to buy the properties as well.

At the request of the Healey administration, Lopez delayed to next Tuesday a ruling on the state’s proposal to advance $30 million to fund operations at the Steward hospitals until they can be sold. Steward has identified qualified bidders for the other six hospitals, but the state won’t provide the funds until those buyers have signed asset purchase agreements.

“The Commonwealth is not going to fund right now unless there’s a path to new ownership,” said McDonald, an attorney for the law firm Pillsbury Winthrop Shaw Pittman.

Lopez’s approval of the Carney and Nashoba Valley closings appeared to close the door on efforts by employees and local leaders to keep them operating. On Wednesday, delegations from Dorchester and central Massachusetts converged at the State House to call on state officials to save the two hospitals.

Sales of the remaining hospitals, including St. Elizabeth’s Medical Center in Brighton, have been held up by drawn-out talks among Steward, two investment firms that own the hospitals’ land and buildings, and their mortgage lender over how to value the hospitals’ operations and its real estate in order to allocate the sale proceeds.

A court date is scheduled for Aug. 13 to approve the sales of the Massachusetts hospitals. But it was far from clear from the parties at Wednesday’s proceedings whether they could be finalized by then.

In addition to St. Elizabeth’s, the hospitals up for sale are Holy Family in Methuen and Haverhill, Good Samaritan Medical Center in Brockton, Morton Hospital in Taunton, and St. Anne’s Hospital in Fall River

Ray Schrock, a lawyer for Weil, Gotshal & Manges who represents Steward in the bankruptcy proceedings, blamed the delay on squabbling between the two landlords, Medical Properties Trust and MacQuarie Infrastructure Partners, which jointly own the leases on the Massachusetts hospital, and their mortgage lender, Apollo Global Management.

Schrock said he’s invited all the parties to emergency talks on Thursday at Weil’s offices in New York in an attempt to resolve the “intra-stakeholder dispute” over divvying up the hospital proceeds.

“We’re out of time,” he said. “We’re in overtime. . . . We can’t continue to fund these hospitals.” If a deal can’t be reached to enable the sales to be completed, Schrock warned, Steward will “have to get ready to move patients,” an apparent reference to filing for liquidation.

Because the current funding for Steward during its bankruptcy is running low, and Massachusetts won’t advance the $30 million it’s committed before sales agreements are signed, Lopez said he had no choice but to approve the closing of Carney and Nashoba Valley by Aug. 31.

The judge made clear he was unhappy with having to make the ruling. “The importance of every individual patient weighs on me,” Lopez said. But citing Steward’s “business judgment” that the two hospitals will continue losing money even without having to pay rent under the nullified leases, he said the legal standard for closure was met.

“I hope people understand that to keep these hospitals open in this situation threatens the entire hospital system in Massachusetts,” the judge said, suggesting that using dwindling operating cash to fund the two could hurt the other Steward hospitals that are up for sale.

While the Healey administration did not contest the two hospital closings at Wednesday’s hearing, a lawyer for the Massachusetts Nurses Association, which represents nurses at Steward hospitals, objected to the closures, and with Steward’s apparent failure to comply with a state law requiring operators to give 120 days’ notice before shutting hospitals.

Sam Alberts, an attorney for Boston law firm Dentons who represents the nurses union, said its request to review hospital bids was rebuffed by Steward and its financial backers. Despite assurances that qualified bids are in hand, “we still haven’t seen a single bid,” he said.

Alberts also challenged a statement by Steward’s attorneys that the company had received bids for Carney and Nashoba Valley but determined they weren’t viable because the bidders lacked “financial wherewithal,” contending hospitals have been sold for as little as $1 in other parts of the country to buyers willing to take over their operations.

“We know there are interested parties for these two facilities,” he said.

But lawyers for Steward and the Healey administration indicated their focus was on the survival of the remaining six Steward hospitals. The state’s $30 million pledge in operating funds, conditioned on sales agreements, would be advances from money owed to Steward by MassHealth, the state’s Medicaid program that insures low-income patients.

Beyond that, state officials have been negotiating with prospective hospital buyers about additional funding once they’ve taken ownership.

That includes $35 million a year in transition funds over the next three years, financed by an increased assessment on all Massachusetts hospitals that was included in the state budget signed by Governor Maura Healey on Monday, state officials said. That money is expected to be matched by an additional $45 million from the federal Centers for Medicare and Medicaid Services, which jointly funds the MassHealth program with the state.

In addition to that money, the former Steward hospitals, which serve large numbers of patients insured by MassHealth, would be eligible for further advances in MassHealth payments. And the state health insurance agency would work to find other money in its budget that could be channeled to helping the new owners get up and running.

State officials wouldn’t specify how much they expect to spend in total to support the transition of the hospitals to new owners. But they said state backing would be key to preserving the entire hospital system.

“We are trying to help people who have stepped up, submitted bids, worked with us on how we can manage this, and worked on stabilizing the health care system in Eastern Massachusetts,” said Kate Walsh, the state secretary of health and human services. “We can’t have other hospitals sink because they’re trying to help out.”

Robert Weisman can be reached at robert.weisman@globe.com.