As Central Mass. hospitals struggled, audit claims state watchdog agency failed to sufficiently monitor deteriorating situations

A brick three-story hospital building with traffic circle in front

Photo | Courtesy of Heywood Healthcare Heywood Hospital in Gardner

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As Central Massachusetts hospitals were spiraling financially and eventually had to file for bankruptcy or shutter, the state auditor found a key industry watchdog was not properly monitoring the situation or holding the hospitals to account, which are claims the watchdog agency disputes.

“People must have access to the vital health care services they need,” State Auditor Diana DiZoglio said in a Friday press release accompanying the report. “Our audit of the Center for Health Information and Analysis revealed a startling lack of oversight around the financial conditions of hospitals in the commonwealth.”

The audit claims the Center for Health Information and Analysis did not adequately monitor financial conditions of acute care hospitals and health systems nor assess the necessary fines against them. CHIA has outright disputed some of these claims and classified others as misleading.

The audit says CHIA’s 2021 and 2022 Massachusetts Acute Hospital Financial Performance Reports did not include mentions of essential services being cut from six acute care hospitals and it did not complete any health system profiles for the eight hospitals operated by Texas-based Steward Health Care during that time period, according to a Friday press release.

The audit found CHIA never collected audited financial statements from 10 hospitals including Athol Hospital, Heywood Hospital in Gardner, and the now-shuttered Nashoba Valley Medical Center in Ayer.

DiZoglio’s office claims CHIA did not assess potential fines of $1.61 million for acute care hospitals and health systems that did not file financial reports by required deadlines, a claim CHIA said is misguided due to the agency’s extension policy.

“It is imperative to note that CHIA’s fining authority is discretionary under statute and regulations; the agency issues fines [against] entities when necessary for compliance with reporting requirements, as it fined Steward Healthcare. The $1,613,000 figure referenced in the report is misguided as it does not account for CHIA’s discretion for reasonable extensions, Heywood’s inability to complete audited financials, nor the agency’s prior fines and active litigation with Steward,” CHIA said.

CHIA said it attempted to collect audited financial statements from Heywood Healthcare, the Gardner-based parent company of Heywood and Athol hospitals, but the system was not able to supply them.

“The report misleadingly references audited financial statements from 10 hospitals under two healthcare systems (Heywood Healthcare and Steward Health Care) that were not collected during the audit period and corresponding penalties that were not imposed. Heywood Healthcare was unable to issue an audited financial statement from a registered certified public accountant in [fiscal year] 2021 and [fiscal year] 2022; and, therefore, did not have an audited financial statement to produce,” CHIA wrote in a Friday email to WBJ.

Heywood Healthcare confirmed with WBJ the system was not able to provide financial statements for both Heywood Hospital and Athol Hospital due to errors, which contributed to the system filing for Chapter 11 bankruptcy in October 2023.

“Heywood and Athol hospitals were not able to provide audited financial statements for the years 2021 through 2023 due to a failed [electronic medical records] transition initiated in February 2021. The hospitals’ EMR was integrated with the system’s revenue cycle, compromising the overall financial performance and records. This was one of the several contributing factors to the system filing for Chapter 11 protection on October 1, 2023, following a transition in key leadership,” Heywood Healthcare wrote in a Friday email to WBJ.

Heywood further stated it did provide unaudited financials during that time period. The system has since exited bankruptcy.

“Though the system was unable to provide audited financials, unaudited internal financial reports, and any other obtainable operational data were made available to state officials and regulatory agencies prior to the filing of Chapter 11, and the organization maintained transparency throughout the bankruptcy process,” Heywood said.

Additionally, CHIA affirms the agency sought statements from Dallas-based Steward Health Care, the parent company of Nashoba Valley Medical Center, and has since filed a lawsuit over the system’s refusal to submit the required statements.

“Steward Health Care claimed it was not required to submit system-level audited financial statement data. CHIA fined Steward Health Care multiple times over several years for noncompliance which has been the subject of ongoing litigation. In 2023, the Superior Court ruled in CHIA’s favor affirming Steward’s obligation to submit its financial data to the agency. Steward appealed this decision, and the matter is still in Appeals Court, but stayed until the bankruptcy case is resolved,” CHIA said.

Steward Health Care did not respond to WBJ’s request for comment for this article.

CHIA said it utilized other data sources where possible for both the Heywood and Steward hospitals in order to report on the financial performance of the systems, their hospitals, and physician organizations including standardized financial data collected by CHIA.

“CHIA has been resolute in its position that hospitals must comply with all financial reporting requirements under General Laws and regulations, including providing audited financial statements,” CHIA said.

Lastly, the state audit reported CHIA mismanaged CompareCare, a consumer health information website operated by the agency. The audit found CHIA did not publicize the website’s availability, omitted certain required information on the site, and failed to ensure the site was accessible under the Americans with Disabilities Act.

CHIA contested these claims, stating it provided the most accurate information available.

“CHIA regularly updates CompareCare to include the best data available at the time. Two separate updates were made to CompareCare 18 months apart during the performance audit period: one in December 2021 and another in June 2023,” CHIA said.

To address the audit’s findings, DiZoglio’s office suggest recommendations for CHIA including:

Ensuring hospitals file financial statements on time, communicating to hospitals their deadlines, sending written notices and issuing fines to those who do not comply;
Reporting on hospitals at risk of closure or discontinuing essential services;
Promoting the CompareCare website with up-to-date data including those pertaining to commercial healthcare, infections patients could develop when receiving care for other conditions, serious reportable events occurring at healthcare facilities, and healthcare provider services for those disabled, and ensure the site is accessible for those with disabilities and is in compliance with Americans with Disabilities Act guidelines.

“We urge the [Gov. Maura Healey] Administration to swiftly implement our recommendations and will be revisiting these issues in roughly six months to track progress,” DiZoglio said.

Mica Kanner-Mascolo is a staff writer at Worcester Business Journal, who primarily covers the healthcare and diversity, equity, and inclusion industries.