Norwood hospital construction on pause as vendors await payments from Steward

Steward has been facing severe financial challenges that it acknowledges are threatening its ability to continue operating the nine hospitals it has here, including Norwood. Steward’s precarious situation has set off alarm bells in the state’s health care industry over the potential loss of medical services in needy communities, and the domino effect it could trigger at other hospitals that are already struggling to manage admissions and discharges.

And in Norwood, residents are worried that what they thought was a temporary closure could become permanent, with serious economic and public health implications.

Norwood sits in a part of the state where the health care infrastructure has diminished in recent years. Steward closed the emergency room at Quincy Medical Center, the last department still operating there, in 2020. Brockton Hospital remains closed due to a 2023 fire.

And now there’s new uncertainty over the future of Norwood Hospital.

Officials with Steward and its landlord in Norwood, Medical Properties Trust, did not respond to requests for comment.

State Representative John Rogers, speaking at the construction site, said that the hospital had long been the largest employer in Norwood, and that there was comfort knowing the town had a hospital with an emergency department.

“That peace of mind no longer exists. The thousands of jobs it provided directly and indirectly within the Neponset River region are gone,” Rogers said. “We need this hospital to reopen yesterday.”

But on Wednesday, Lynch said the site is a “ghost town.” Workers told him that it had been four months since there had been regular construction activity, and that there has been no meaningful work since late January. The steel beams and skeletal frame remain exposed to the elements.

Suffolk Construction, which is working on the project, said it is waiting on Medical Properties Trust to give it the go-ahead to make the building weather tight and safe.

The 215-bed Norwood Hospital has been closed since a storm in June 2020, when 5.75 inches of rain fell in 90 minutes, causing catastrophic flooding and the evacuation of all patients in the facility. Despite extensive work on the site, hospital consultants ultimately decided the existing building could not be restored.

The closure has meant the thousands of people in the Norwood area who have used the hospital over the years had to turn elsewhere for care, creating additional pressure on nearby facilities.

But work to rebuild the hospital soon ran into problems. Steward and Medical Properties Trust, which has owned the property since 2016, each sued Zurich American Insurance Co. and its subsidiary American Guarantee and Liability Insurance Co. in late 2021, contesting the insurer’s interpretation of Norwood Hospital’s policy.

Though Medical Properties Trust’s insurance policy has an overall limit of $750 million, and Steward has a separate policy with a limit of $850 million, the insurer had claimed a lower payout limit of $100 million on each policy should apply because of the nature of the damage. Litigation over the insurance is ongoing.

Despite the dispute, construction on the new, $375 million project began in November 2021.

Amid the stoppage, vendors working on the project have also filed lawsuits. Architecture firm SmithGroup sued Steward and Medical Properties Trust in Norfolk Superior Court, saying it was owed $2 million in unpaid invoices.

Separately, MDM Transportation of Marlborough said in a lawsuit that it was hired by Steward in July 2021 to conduct traffic and parking studies. As of October, the company said it was still owed $69,158.

Lynch said he hoped another operator would purchase or take ownership of the Norwood site, though he recognized that the steps needed to bring the project to completion under another operator are cumbersome.

“That’s a real challenge, but that’s the one we face here,” Lynch said.

Steward has faced escalating financial challenges, unable to make full rent payments for months, and lawsuits from other vendors that have alleged nonpayment. Steward has been in talks with state regulators on resolving its financial issues, which have included the potential sale or transfer of ownership of its hospitals.

Those issues have been highlighted multiple times this week. On Tuesday, Governor Maura Healey issued a scathing note to Steward chief executive Dr. Ralph de la Torre, questioning whether Steward broke the law in its business dealings and demanding the company get out of the hospital business in Massachusetts. The governor also requested the company submit complete financial information on its hospital operations to her administration by Friday.

Steward responded to Healey on Wednesday, saying it had cooperated with state officials, provided financial documentation, and had more than a dozen conversations with people in the attorney general’s office. It said the allegation that it had maximized profits for personal gain and engaged in legally questionable business practices was “unfortunate and lacks any sound basis.”

Also Wednesday, landlord Medical Properties Trust said in an earnings release that it is focused on reducing its exposure to the struggling health system. Despite those concerns, the publicly traded real estate investment firm said it would continue to lend money to Steward.

The uncertainty over the future of Steward has created headaches locally. Norwood Selectman William Plasko said that he has been following Steward’s struggles closely, but that the town has not gotten any updates — from Steward or the state — about what that might mean for Norwood. That hasn’t stopped locals from noticing that there had not been work at the site for weeks.

“We’re quite concerned. The hospital’s very important for the community and the entire region,” he said.

Plasko said the absence of the hospital is taking a toll on the town’s ambulance service, which is making longer runs to more distant hospitals.

Dolly Parker, 92, noted that many doctors have also left Norwood. And Liz Coughlin, sitting with other locals at the Norwood Senior Center, said she and others she knows had moved to Norwood precisely because there was a hospital.

“We’re all in favor of getting rid of Steward,” Coughlin said.

Jeff Sedgwick, a Norwood resident, said small business owners who depended on the hospital have also been impacted by the closure, and the uncertainty about its future.

“The hospital is a question mark,” he said, “which keeps a lot of small businesses from growing in the community.”

Jessica Bartlett can be reached at jessica.bartlett@globe.com. Follow her @ByJessBartlett. Suchita Nayar can be reached at suchita.nayar@globe.com.