Steward Health Care Systems LLC, which owns dozens of hospitals and medical facilities across the country, is in the middle of a nasty dispute with Aya Healthcare Inc., one of the most prominent travel nursing agencies in the U.S.
Last month, Steward Health Care Systems filed a lawsuit against Aya in Massachusetts Superior Court alleging that the company was engaged in price gouging during the pandemic. It also wants Aya to stop canceling travel nursing contracts at the last minute. In retaliation, Aya has just filed a lawsuit against Steward in the same court, alleging the company owes more than $40 million in unpaid travel nursing fees.
So, who deserves their day in court?
The High Cost of Travel Nursing
Finding qualified nurses during the pandemic hasn’t been easy. Hand sanitizer, N95 face masks, and ICU nurses were all in high demand and short supply over the last 13 months.
Many facilities and companies had to rely on short-term staffing contracts as cases were rising across the country. That was good news for travel nursing firms like Aya.
The travel nursing industry was valued at $6 billion in 2019, according to Staffing Industry Analysts. Rates shot up nearly 25% during April of last year, according to a recent data analysis from Health Carousel LLC, one of the largest health staffing companies in the U.S. They found that higher wages attracted more nurses, many of which were willing to travel long distances.
However, Steward Health Care Systems alleges in its suit filed in March that the travel nursing rates imposed by Aya were “illegally inflated”. The suit also asks the judge to temporarily stop Aya from canceling existing traveling nursing contracts due to unpaid fees.
According to the lawsuit, Steward says that one of its hospitals had to stop taking ambulances and reschedule heart procedures after Aya canceled its traveling nursing contracts at the last minute.
During a preliminary hearing, the judge ruled that Aya must continue to supply travel nurses and that Steward must pay Aya $10 million in unpaid fees to offset any risk to the travel nursing agency.
However, Aya says it can no longer pay its bills due to Steward’s growing unpaid balance. Aya Chief Executive Officer Alan Braynin denied that the company was intentionally canceling contracts at the last minute, saying, “We do not know what supplier companies did or said to their employees, or if staff were actually pulled. We do know that Aya did not pull nurses mid-shift or mid-assignment.”
Steward denies it still owes Aya $40 million. The company’s General Counsel Herbert Holtz said Steward already paid the travel nursing firm $39 million as per their agreement. Holtz also added that Steward paid an additional $11 million because Aya overcharged for its services.
Steward claims that Aya typically charged around $75/hour for temporary medical workers, including nurses, before the pandemic, but the company raised their fees to more than $160/hour during the pandemic when hospitals needed them most. Steward also alleges that Aya’s price gouging violated Massachusetts law, which caps travel nursing costs.
Aya denies these claims outright.
The judge’s order requiring Aya to supply travel nurses expired last Sunday, and Aya says it’s already in the process of reassigning travel nurses to other facilities and health systems.
The Office of the Massachusetts District Attorney has yet to weigh in on the dispute, but says they are watching the ongoing litigation carefully.
Steward has even sent out an email to staff blasting Aya and its unethical practices. Aya called the email false and disparaging.
In its defense, Aya claims it tried to work with Steward over the unpaid balance, including the option of setting up a repayment plan. Steward reportedly offered to pay $1.5 million a week, but Aya says its costs exceed $2.5 million a week. Braynin responded to Steward’s offer via email with, “You’ve got to be kidding? We are not your bank.”
Records show Aya supplied Steward with 2,133 temporary healthcare workers over the course of the pandemic.
A History of Unpaid Bills
This isn’t the first time Steward has been in the hot seat for not paying up. In March 2020, the company threatened to close its Easton Hospital in Pennsylvania unless it received $40 million in aid from the state to sustain its operations. After eight months of negotiations, Steward eventually got $8 million but says it had to sell the hospital just a few months later to save money.
The company is also in a legal battle against its rival, Community Health Systems Inc. After Steward acquired hospital systems from Community in 2017, it sued its rival, claiming it mishandled the handover of critical computer systems. Community denies these claims and says that Steward still owes them $16 million for the sale.
Michael Green, a former hospital controller for Steward, said that during his time at the company, senior executives told him there was a plan “to delay payments to improve cash flow.” He added that the payment schedule for vendors after Steward took over the facility went from 30 days to between 45 and 90 days.
Mr. Green said “tens of thousands of dollars” in payments were held up for so long that vendors began demanding their money. “Half the vendors were ma-and-pa stores that weren’t used to a big corporation coming in and dictating terms like that,” said Mr. Green. He later left the job after he said it became too unstable.
Neither suit has been resolved and it’s not clear who will walk away victorious.