DOJ files objection to Steward's bankruptcy deal
The proposed sale of Steward's physician-owned network is moving forward without regard for antitrust procedures, DOJ says.
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The Department of Justice has filed an objection to the debtor-in-possession financing terms for Steward Health Care.
The DOJ claims the proposed sale of Steward's physician-owned network is moving forward without regard for antitrust procedures, in an objection filed May 28 in U.S. Bankruptcy Court in the Southern District of Texas.
WHY THIS MATTERS
Steward seeks to borrow up to $300 million from landlord and real estate investment firm Medical Properties Trust, even though it stated that the financing proposal contains "expensive terms as well as onerous milestones, covenants and events of default," according to court records.
"The United States objects to the proposed DIP (debtor-in-possession) facility to the extent its 'milestones' interfere with the exercise of United States regulatory rights concerning any proposed sales of the debtors' assets," the DOJ said.
Specifically, the DOJ objects to Steward's proposed sale of its physician services network, Stewardship Health, to UnitedHealth Group.
The DOJ began review of the sale before the bankruptcy filing, it said, and the timeline outlined in the sale does not give it enough time to complete its review.
Steward intends to use the proposed sale of its physician network as a "stalking horse" bid for a bankruptcy sale of its hospitals, according to the court filing. A stalking horse bid sets a minimum floor price for the assets to protect against receiving unreasonably low bids.
There's inadequate time for compliance with the antitrust review prior to the sale hearing on July 2, the DOJ said. There's an aggressive schedule for auctions and sale approval.
Bids for Stewardship Health are due three weeks after the debtor-in-possession hearing on June 24 and the auction date is set three days later on June 27.
"The sale hearing is set for July 2, 2024, one day after the date for objections," the DOJ said.
The DOJ wants the court to conclude that Steward cannot complete its sale until after the conclusion of the antitrust review.
THE LARGER TREND
Steward Health Care, among the largest physician-led hospital operators in the country, filed for Chapter 11 bankruptcy earlier this month.
Steward has more than 30 hospitals across nine states, and has plans to sell all of them.
Prior to filing bankruptcy, Steward announced plans to sell its physician group to Optum, which is part of UnitedHealth Group.
Email the writer: SMorse@himss.org
