A 'ghost town': Construction halted on Steward Massachusetts hospital over payment dispute

Reconstruction work has been paused at Norwood (Mass.) Hospital, part of Dallas-based Steward Health Care, due to contractors claiming they have not been paid, The Boston Globe reported Feb. 21.

The hospital, which closed in 2020 after sustaining widespread flood damage, is in U.S. Rep. Stephen Lynch's congressional district. 

"Right now we’re stuck with a hospital that’s not built," he told the publication during a visit to the hospital Feb. 21. "It's not buttoned up, and nothing's happening right now. So we're in a very difficult spot."

Calling the site a "ghost town," Mr. Lynch said workers told him that four months had gone by since the hospital had seen regular construction activity, with no meaningful work since late January.

A Boston-based construction company leading the project is waiting on Birmingham, Ala.-based Medical Properties Trust, the largest hospital landlord in the U.S. and Steward's landlord, to give it the OK to ensure the hospital is weathertight and safe, The Boston Globe reported. 

Efforts to rebuild the hospital started to struggle when both Steward and MPT sued Zurich American Insurance Co. and its subsidiary American Guarantee and Liability Insurance Co., opposing the insurer's Norwood Hospital policy interpretation. 

MPT has an overall limit of $750 million on its insurance policy and Steward's separate policy has an $850 million limit, but a lower payout limit of $100 million on each policy was claimed by the insurer due to the nature of the hospital's damage, the publication reported.

While litigation on the insurance is ongoing, construction kicked off in November 2021 on the $375 million project.

Since the construction pause, vendors working on site also filed lawsuits, including an architecture firm that claimed Steward and MPT owe it $2 million in unpaid invoices, The Boston Globe reported.

News of the 215-bed hospital's inability to pay contractors comes amid continued financial difficulties for Steward, including being $50 million behind on rent at year's end to MPT.

Mr. Lynch said he is hopeful another operator would take ownership or purchase the hospital, but recognized it as a challenge. 

In its recent financial reports, MPT expressed encouragement from interest in hospital operators taking on Steward's facilities.

"We expect this real estate portfolio will either resume its contributions to earnings or become additional sources of liquidity as the year progresses," Edward Aldag Jr., chair, president and CEO of MPT, said in the report.

Becker's has reached out to Steward for comment on Norwood Hospital and will update this article if more information becomes available.

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