Steward Health Care has a six-point action plan to emerge as a sustainable business, but will it work?
On the heels of a tumultuous few months, Steward Health Care is now moving into its next operational phase: “sustainability.”
How will it do this? Well, from funding to asset sales to leadership communication, Steward says it has a plan to stay afloat.
But first, let's revisit how we got here
As we know, Steward, established over a decade ago through a partnership between a private equity firm and a CEO with a mission to revitalize struggling Boston-based hospitals, grew to 33 community hospitals spanning eight states.
However, the health system, facing challenges since late last year, found itself in a financial crisis.
With over $50 million in unpaid debts owed to landlords and allegations of Medicare fraud in a federal lawsuit, Steward has been forced to close hospitals in Massachusetts and Texas.
Seeking restructuring advisors in January has sparked rumors of a potential bankruptcy filing.
As media coverage continues to intensify on Steward's struggles in Massachusetts, the health system's ability to overcome these obstacles and maintain its strong position in the healthcare industry remains uncertain, but as stated, Steward says it has a plan.
Digging out
OK, back to the plan. Steward says it is implementing a six-point action plan to emerge as a sustainable business. Let’s take a look at what Steward has in store.
Funding and Financial Stability
According to the press release, Steward has recently finalized a robust financing agreement that will provide a $150 million cash infusion to provide additional liquidity as the company marches towards the sale of its highly desired asset physician group Stewardship Health.
This would allow Steward to reset its operations and address vendor obligations.
“Included in these agreements, the lenders have provided an additional ‘vote of confidence’ in this plan. They have not only decided to increase their financial commitment to Steward through the bridge loan, but they have also agreed to extend their forbearance agreement through April 30, 2024, to give the Company time to execute this plan,” the release says.
Employee Retention and Continuity
To maintain staffing and levels of care, Steward has successfully negotiated new labor agreements with the MNA and SEIU and secured and maintained its pension plan for employees, according to the press release.
It is continuing to incentivize its employees to ensure that medical centers and physician’s offices are open and continuing to serve patients and the broader community.
Steward says it has instituted a plan to attract nursing employees to work at its busiest hospitals and has offered “referral” fees to current employees of up to $40,000 per hired employee.
Asset Sales
Steward is in process and working proactively to immediately sell non-essential assets, including Steward-owned aviation and downsizing its non-patient footprint through back-office consolidations.
In addition, Steward is continuing to actively seek strategic opportunities to divest non-core assets with a focus on improving the system’s liquidity position, the press release says.
Northeast Restructuring
Steward has retained Alix Partners to advise on a restructuring of Steward to better support their hospitals.
Cooperation and Transparency in Massachusetts
Steward sent a letter in response Governor Healey on February 21.
“Steward has tried to be transparent, compliant, and cooperative over the years in providing a significant amount of detailed and relevant financial documentation to various state agencies and regulatory bodies and moving forward it commits to do even better,” the press release says.
Leadership Communication
Senior Steward representatives intend to meet with public officials in the Commonwealth to discuss the go forward plan for ensuring continued first-class care to its patient population.
What’s in store for the future?
While a solid plan of action is a step in the right direction, Steward's financial crisis could be far from over.
There's even worry of a potential ripple effect causing problems for hospitals all over the country. In fact, Federal officials say the uncertainty surrounding the future of Steward's hospitals could result in tougher regulations of for-profit health care.
This situation should serve as a cautionary tale for other hospital and health system CFOs. It highlights the importance of closely monitoring financial health, diversifying revenue streams, and being prepared for unexpected challenges.
Amanda Norris is the Director of Content for HealthLeaders.
KEY TAKEAWAYS
Steward Health Care is transitioning into a phase of "sustainability" to address financial challenges more potential hospital closures.
Steward's plan includes funding agreements, employee retention efforts, asset sales, and restructuring initiatives to ensure operational stability.
The health system is emphasizing transparency and communication as it navigates its financial crisis, but Steward's trouble could be far from over.