Largest health insurer in Mass. may owe $23.5M amid bankruptcy fallout

Two years after Steward Health Care’s collapse upended hospital care across Massachusetts, the bankruptcy battle is far from over — and the state’s largest health insurer is being dragged further into the fight.

Blue Cross Blue Shield of Massachusetts (BCBSMA) is disputing a broad discovery request from the trustee overseeing Steward’s bankruptcy estate, challenging it as “premature” and an attempt to sidestep mandatory arbitration — a private dispute resolution process required under its contracts with Steward.

The move puts BCBSMA squarely in the middle of a wide-ranging effort to recover money the trustee says insurers owe to Steward’s former hospitals.

At the center of the dispute are 4,808 medical claims that Steward says BCBSMA improperly denied or underpaid, totaling at least $23.5 million, according to Docket 6454, filed March 31, 2026, by trustee Mark Kronfeld in U.S. Bankruptcy Court for the Southern District of Texas.

Kronfeld says BCBSMA “succeeded in delaying any significant dispute resolution” for nearly a year after Steward first sent the insurer a formal notice of dispute.

According to the filing, the two sides went through months of negotiations, a failed mediation in December 2025, and still reached no resolution.

When Kronfeld sought documents through a formal bankruptcy discovery process known as a Rule 2004 examination in February 2026, BCBSMA moved to block it.

In its reply, filed April 7, BCBSMA called the discovery request “wasteful, harassing, and unduly burdensome,” and argued the underlying claims belong in arbitration — not bankruptcy court — under the terms of its contracts with Steward, according to court documents.

The insurer also argued that complying with the request would require a full-time employee up to 12 months to complete.

Kronfeld pushed back, saying BCBSMA “failed to pay the Debtors more than $23.5 million leading up to the bankruptcy filing” and accused the insurer of acting in bad faith during mediation by showing up without having reviewed the sample claims the parties had agreed to analyze.

“BCBSMA is trying to slow play the process and avoid scrutiny on its reprehensible conduct that helped drive the Debtors into bankruptcy,” Kronfeld’s filing states.

It is not the first time BCBSMA has squared off with the Steward estate.

In July 2025, the insurer filed a limited objection — Docket 5309 — to Steward’s Chapter 11 plan, arguing the plan improperly tried to strip away rights of setoff and recoupment that BCBSMA had already negotiated and secured in an earlier court-approved agreement known as the FILO Lender Settlement Order.

In other words, BCBSMA said Steward was attempting to walk back a deal it had already made.

BCBSMA was one of several insurers to object at the time, joining Humana and others who raised similar concerns.

The same attorney, James B. Sowka of Seyfarth Shaw LLP, represents BCBSMA in both that dispute and the current one.

BCBSMA also filed 12 proofs of claim against the estate — meaning it is simultaneously seeking money from the bankruptcy estate while resisting the trustee’s efforts to examine its payment practices, according to court documents.

The dispute is one of several the trustee is pursuing against insurers.

In February 2026, Kronfeld filed complaints targeting five other payers — including Florida Blue and Elevance Health — seeking at least $56.9 million in unpaid reimbursements across thousands of medical claims, according to Becker’s Healthcare.

The stakes are significant.

The bankruptcy estate remains administratively insolvent, meaning there may not be enough money to pay all outstanding obligations, according to court documents.

The trustee faces a June 15, 2027, deadline to prove administrative solvency — and is counting on litigation recoveries from commercial insurers to get there.

Steward Health Care, once described in its own bankruptcy filings as the largest private physician-owned for-profit hospital network in the United States, filed for Chapter 11 protection on May 6, 2024.

The company operated eight hospitals in Massachusetts at the time, employing roughly 16,000 workers in the state.

The collapse triggered a financial crisis for communities across the region — the state directed $387 million to Boston Medical Center alone to help it take over just two of Steward’s former Massachusetts facilities, in Brighton and Brockton, according to the Boston Globe.

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