On May 6, Steward Health Care filed for Chapter 11 protection in the U.S. Bankruptcy Court for the Southern District of Texas. At filing, Steward operated 31 hospitals, listed more than $9 billion in liabilities, and said it intended to sell its hospitals through a court-supervised process. In Massachusetts, where Steward runs eight hospitals, state officials have been preparing for closures for months. It is the largest hospital bankruptcy in decades, and it is the second time this year that an event outside a practice's walls has reached straight into its revenue.
We work with practices in several of the affected markets, and the questions are the same everywhere. Where do I send my patients for imaging next month? Will the surgeon I share call with still be here? Is the prior authorization I got for a procedure at that hospital any good somewhere else? And, quietly: does the contract I signed through their physician network still pay? None of these have a single answer, but all of them have a method, and the method starts with measuring how exposed you are before the next department closes.
Key takeaways
- A failing system reaches you in a sequence: unpaid vendors, closed service lines, departing physicians, then possibly a closed hospital and a wave of new patients with incomplete records.
- Measure exposure in dollars: what share of your orders go to the system's facilities, what share of new patients come from its employed physicians, and what those visits are worth.
- Facility-tied prior authorizations, network contracts signed through the system's physician organization, and any money the system owes you each need a decision this month.
- Payer mix shifts slowly and then all at once; track five buckets monthly against the same month last year.
- New volume is only good news if you are enrolled with the payers it carries and can verify eligibility on every visit.
How a hospital system's trouble reaches an independent practice
A struggling system stops paying vendors first, which is why Steward's problems showed up as supply shortages and unpaid staffing agencies before the filing. Then services close or move: an obstetrics unit, a cath lab, an outpatient imaging center. Then physicians leave, and the employed groups that referred to you, or received your referrals, shrink or dissolve. Then, sometimes, a hospital closes outright, and the patients who used it as their emergency room and their specialist hub show up in your office with nowhere else to go.
Each of those steps changes the practice's numbers. Referral volume shifts. Payer mix shifts, because the patients who move to you are disproportionately Medicaid and self-pay when a safety-net hospital is involved. Authorizations tied to a facility have to be redone. And if you participate in a clinically integrated network or ACO organized by the system, your contract terms and your shared savings distribution are now questions for a bankruptcy court.
Six things to do in the first 30 days
- Map your exposure. Pull 12 months of referrals in and out by destination and source. Count how many of your orders (imaging, lab, procedures) go to the system's facilities. Count how many of your new patients came from its employed physicians. Put a dollar figure on the visits that depend on each relationship.
- Identify alternative sites now. For each service you routinely order at the system's facilities, identify two alternatives that are in network for your top five payers. Confirm they accept electronic orders and can return results to your EHR. Do this before you need it; the week a department closes, every practice in town is calling the same two imaging centers.
- Review every facility-tied authorization. Prior authorizations for procedures usually name the facility. If the procedure moves, some payers transfer the authorization on a phone call; others require a new request. Sort your open authorizations by facility and start with the ones scheduled soonest.
- Read your network agreements. If you signed a payer contract through the system's physician-hospital organization or clinically integrated network, find out whether you also hold a direct contract with that payer. If you do not, you may need one, and commercial contracting takes 90 to 180 days. Ask counsel whether the bankruptcy affects amounts the network owes you, such as care coordination payments or shared savings.
- Prepare for the patients. If a hospital or a large employed group closes nearby, expect new patients with incomplete records. Have a records request template ready, a plan to obtain medication lists, and a clear self-pay and payment plan policy. Front-desk staff should know the practice's position on accepting new Medicaid patients, because the question will come daily.
- Talk to the physicians you work with. Employed physicians in a failing system are recruiting targets. Some will join independent practices. If that is you, the credentialing clock starts the day they sign, and their existing enrollments are tied to the system's tax ID until someone files the reassignment.
A worked example: measuring the exposure
A fictional three-physician primary care practice in a Steward market runs the exposure report. It sees about 14,000 visits a year and refers out or orders roughly 6,200 times. The report groups those by where they went and what the practice earns from the visits that depend on them.
| Relationship | Annual volume | What the practice earns from it | Exposure if it ends |
|---|---|---|---|
| Imaging and lab orders to the system's outpatient sites | 2,900 orders | Nothing directly; results feed follow-up visits | Delayed results, repeat visits, patient complaints |
| Specialist referrals to the system's employed groups | 1,400 referrals | Nothing directly; return communication supports care management billing | Loss of TCM and CCM documentation trail |
| New patients from the system's employed physicians and ED | 310 new patients | About 1,100 visits, roughly $130,000 in collections | Largest direct revenue risk |
| Care coordination payments through the system's network contract | Monthly | About $2,400 a month | Now a bankruptcy claim |
The dollar figure that matters is the third row, and most practices never calculate it because new patient source is a field the front desk fills in casually or not at all. If your registration screen has a referral source field, make it mandatory this month and standardize the values. Six months from now that field is how you will know whether the collapse cost you patients or brought you some.
If the system owes you money
Some practices are creditors without realizing it. Care coordination or quality payments due through the system's network, rent owed under a sublease, on-call stipends, medical directorships, or fees for services the practice provided to the system's clinics all become claims in the bankruptcy once the filing happens. You may receive a notice from the claims agent with a bar date, which is the deadline to file a proof of claim. Missing the date generally means losing the claim. This is a job for counsel, and the sooner the better, but the practice's part is to pull every agreement with the system, list what is owed under each as of May 6, and keep paying attention to the mail. In our experience, the notices arrive addressed to whoever signed the agreement years ago, which is sometimes a physician who has since retired.
Watching payer mix as it moves
Payer mix changes slowly enough that nobody notices until the monthly deposit is short. Track it monthly, by visits and by charges, in five buckets: Medicare, Medicare Advantage, Medicaid and Medicaid managed care, commercial, self-pay. Then look at the change from the same month last year.
| Payer bucket | Visits, May 2023 | Visits, May 2024 | What a shift usually means |
|---|---|---|---|
| Medicare | 31% | 30% | Stable; watch Advantage conversion instead |
| Medicare Advantage | 14% | 17% | More prior authorization work per visit |
| Medicaid and MCO | 12% | 18% | Lower allowed amounts; eligibility churn; check MCO enrollment |
| Commercial | 38% | 30% | Lost employer groups or network changes; largest revenue effect |
| Self-pay | 5% | 5% | Watch it after coverage losses |
The example is illustrative, but the pattern is what we see when a safety-net hospital falters: Medicaid rises, commercial falls, and the practice's average reimbursement per visit drops even when visit volume goes up. Put numbers on it. If a 99213 pays $92 from your main commercial plan and $58 from Medicaid managed care, an eight-point swing from commercial to Medicaid on 14,000 visits is roughly $38,000 a year in lower collections for the same work. A practice that sees this coming can decide how many new Medicaid patients it can absorb, whether to pursue a direct commercial contract, and whether the new volume justifies another provider. A practice that does not see it coming just works harder for less.
The opportunity, said carefully
Independent practices in these markets will pick up patients, and some will pick up physicians. That is only good news if the practice is enrolled with the payers those patients carry, can get authorizations for the procedures they need at facilities that are still open, and has the front-end discipline to verify eligibility on every visit. Otherwise the new volume becomes new denials. The practices we have watched do this well added a half-day of front-desk capacity before the patients arrived, not after.
Questions we hear
Our contract is through the system's network. Should we sign a direct contract now?
Ask the payer what happens to your participation if the network agreement terminates, and get the answer in writing. If the answer is that you would be out of network, start the direct contracting process now. It takes months, and it is easier to negotiate while you are still in network.
Can we bill for the work of getting new patients' records and medications sorted out?
Sometimes. Transitional care management codes apply after a discharge, and chronic care management may apply for patients you take on with multiple conditions, but the requirements are specific and the payer has to cover them. We would not build a plan around it.
How do we know whether the practice can afford to take the new Medicaid patients?
Know your cost per visit and your Medicaid allowed amount for a 99213 and a 99214 in your state. If the allowed amount is below cost, each visit loses money unless it is paired with care management or gap-closure work that does pay. Our closing gaps in care service and an RCM audit can help a practice see that math before it decides.
What to do this month
- Run the 12-month referral and order report by destination and source, and put a dollar figure on the visits that depend on the system.
- Make the referral source field mandatory at registration and standardize its values.
- List every open prior authorization that names one of the system's facilities and call the payers for the cases scheduled in the next 60 days.
- Pull every agreement with the system or its network, list what is owed as of May 6, and ask counsel about proofs of claim and the bar date.
- Ask each major payer, in writing, what happens to your participation if the network contract terminates.
- Start the five-bucket payer mix report and compare each month with the same month in 2023.
