Judge approves Carney, Nashoba Valley closures as Steward crisis deepens

A federal judge on Wednesday cleared the way for Steward Health Care to close two Massachusetts hospitals, while the fate of the company’s other hospitals remains unsettled and Steward runs critically low on cash.

Judge Christopher Lopez of the U.S. Bankruptcy Court in Houston called the decision "painful." But he said Steward met the legal standard for shutting down Carney Hospital in Dorchester and Nashoba Valley Medical Center in Ayer.

“It’s affecting the lives of people who are in there right now,” he said. “The importance of every individual who’s in there weighs on me.”

Steward is running out of money to operate and continues to mount financial losses.

“To keep those hospitals open, based upon the evidence before me, threatens the entire hospital system in Massachusetts,” the judge said, speaking haltingly, near the end of the two-and-a-half hour hearing.

His ruling came despite a dire warning from the Massachusetts Nurses Association that people could die if they have to travel farther and wait longer for care.

Hugh McDonald, a lawyer representing Massachusetts, said state officials are disappointed about the closures but will work with Steward officials to relocate the patients at Carney and Nashoba Valley.

“We have seen this coming,” McDonald said. “We have prepared for this. We are trying our very best to make sure, through cooperation, we are going to get these patients into safe facilities.”

The bankruptcy judge also approved a request from Steward to reject a lease agreement that Steward and Massachusetts officials say has stalled the process of transferring Steward hospitals to new owners. Steward’s lawyers said the company received bids from “high-quality” operators for most of the Massachusetts hospitals, but none of the bidders want to assume expensive lease payments.

Steward sold its real estate to another company, Medical Properties Trust, in 2016. The Massachusetts properties now are jointly owned by MPT and another firm, Macquarie Asset Management. Yet another company in the mix is Apollo Global Management, a lender to MPT and Macquarie.

“It’s an immensely complex negotiation,” said Ray Schrock, a lawyer representing Steward. He urged representatives from these firms to get together in New York this week to resolve the real estate issues.

“We will stay there as long as we need to. People should bring clothes, because we have to get this done,” Schrock said. “We’re already in overtime, effectively.”

Massachusetts officials have admonished the real estate firms for blocking deals on Steward’s hospitals by trying to extract as much money as they can from the process.

“The infighting, this brinkmanship … has led us to the place where we are today. The commonwealth is losing its patience,” said McDonald, the state’s lawyer.

Still unresolved is the issue of funding to keep Steward’s hospitals afloat through the next month. Massachusetts officials have offered $30 million in advance Medicaid payments to help the hospitals continue operating — but only if Steward signs sales agreements for its remaining five hospitals.

"The infighting, this brinkmanship … has led us to the place where we are today. The commonwealth is losing its patience."

Hugh McDonald, attorney representing Massachusetts

Those agreements were supposed to be finalized by the end of July, but Massachusetts officials decided to give Steward another week to finish the deals.

“It’s clear through the bankruptcy process that Steward’s decision to sell properties to Medical Properties Trust has jeopardized community care,” said Tim Foley, executive vice president of 1199SEIU, a labor union representing 5,000 workers across Steward hospitals in Massachusetts. “We need to ensure that these hospitals are transitioned, as many as we can, to not-for-profit owners who are going to put patients first.”

Labor leaders and elected officials have been protesting the planned hospital closures in Ayer and Dorchester — one in a rural part of Middlesex County, the other in Boston's largest and most populous neighborhood. Some health care leaders have warned that the closures will exacerbate health disparities.

The Massachusetts Nurses Association says patient volume is down at the Carney and Nashoba Valley because Steward has been sending patients elsewhere, cutting services and shrinking staff.

MNA president Katie Murphy is calling on the Healey administration to declare a public health emergency because each hospital serves a vulnerable community. For the Carney, that’s low-income largely minority patients. Meanwhile, Nashoba Valley is located in a small town, where patients having a heart attack or stroke will lose quick access to an emergency room. Murphy says the state can draw from the state’s rainy day fund if needed.

“This is a rainy day, that’s what the fund is for,” said Murphy, “the state needs to step in.”

The Healey administration did not object to the closures during the bankruptcy hearing and did not raise the option of declaring a public health emergency. A spokeswoman says doing so would not provide funds to run the two hospitals. There’s no comment yet on calls to use rainy day funds.

“It never should've come to this, but Steward and Ralph de la Torre's greed and mismanagement brought us to this point,” said Health and Human Services Secretary Kate Walsh in an emailed statement. “Steward made the decision to close these hospitals because they did not receive qualified bids. What they need to do now is present a responsible closure plan that follows the 120-day process, outlines how they will protect patient safety and provides for robust community engagement.”

Steward first announced the closures less than a week ago and plans to shutter the hospitals by Aug. 31, even though state law requires 120 days’ notice. The MNA represents 240 nurses at Carney and 145 at Nashoba Valley.

Eliza Williamson, executive director of the National Alliance on Mental Illness of Massachusetts, said Carney and Nashoba Valley together have 70 licensed psychiatric beds. According to Massachusetts officials, a total of 45 patients were at Carney Hospital on Wednesday, while Nashoba Valley had just 21 patients.

She said the loss of these beds is devastating for the state and expects it will be very difficult to find places to transfer patients.

“I don’t think we can underestimate the crisis that this could cause,” Williamson said. “Even if there was a place for these patients to go, transfers would be deeply challenging. But there is nowhere for people to go."