Steward Health Care files for Chapter 11 bankruptcy
Steward blames decreasing government reimbursement rates and higher costs as primary factors driving its decision.
Photo: John Fedele/Getty Images
Steward Health Care, among the largest physician-led hospital operators in the country, has filed for Chapter 11 bankruptcy, the company announced today.
Steward is finalizing a deal with its landlord, Medical Properties Trust, on the terms of a bankruptcy loan of up to $300 million. The deal consists of debtor-in-possession financing from Medical Properties Trust for an initial funding of $75 million and up to an additional $225 million.
The in-court restructuring process has started through the filing of voluntary petitions for relief under Chapter 11 in the U.S. Bankruptcy Court for the Southern District of Texas.
Steward is the largest tenant of hospital landlord Medical Properties Trust. It has 33 community hospitals across nine states.
The Chapter 11 petition will allow Steward to keep its hospitals running without disruption, the company said. It does not expect any interruptions in its day-to-day operations.
Steward's hospitals, medical centers and physician's offices are open and continuing to serve patients. It said its commitment to its employees will not change.
WHY THIS MATTERS
Steward blames decreasing government reimbursement rates as a primary factor driving Chapter 11. Declining reimbursement is happening at the same time the health system is facing skyrocketing labor costs, increased material and operational costs due to inflation, and the continued impact of the COVID-19 pandemic, Steward said.
It is Steward's goal to resolve the Chapter 11 process as quickly as possible, with the help of the court, with a view to the long-term and sustainable financial health of the system.
It ran into financial difficulty by recklessly accumulating debt, threatening its nine healthcare facilities across Massachusetts, according to Sen. Edward J. Markey, D-Mass., speaking in March, when Steward announced a deal to sell its physician group to Optum Care.
The Massachusetts Health Policy Commission said on Monday that it has begun examining the proposed sale of Stewardship Health and Steward Health Care Network to Optum Care, based on available information, but the parties have still not submitted key required information and many details are still outstanding.
"The material change notice filing is not complete until the HPC receives the definitive agreement governing the transaction and other requested information and documents which are necessary to conduct a preliminary review of potential impacts on healthcare costs and market functioning, said HPC Executive Director David Seltz. "With the news of Steward Health Care's bankruptcy filing, the HPC is working to understand the implications of the Chapter 11 process on the current proposed sale of the physicians to OptumCare and any other related changes in ownership that may be filed in the future (e.g., Steward's Massachusetts hospitals). We remain in close communication with the Healey-Driscoll Administration, the Attorney General's Office, the Executive Office of Health and Human Services, and the Massachusetts healthcare community about coordinated next steps."
THE LARGER TREND
In January, Medical Properties Trust announced plans to accelerate its efforts to recover uncollected rents and outstanding loan obligations from Steward Health Care System, and related processes designed to significantly reduce its exposure to Steward.
Steward Health Care is among the country's largest physician-led, minority-owned, integrated value-based healthcare systems, the company said.
Based in Dallas, Steward currently operates more than 30 hospitals across Arizona, Arkansas, Florida, Louisiana, Massachusetts, Ohio, Pennsylvania and Texas.
ON THE RECORD
"Steward Health Care has done everything in its power to operate successfully in a highly challenging healthcare environment," said Steward CEO Dr. Ralph de la Torre. "Filing for Chapter 11 restructuring is in the best interests of our patients, physicians, employees, and communities at this time. In the past several months we have secured bridge financing and progressed the sale of our Stewardship Health business in order to help stabilize operations at all of our hospitals. With the delay in closing of the Stewardship Health transaction, Steward was forced to seek alternative methods of bridging its operations. With the additional financing in this process, we are confident that we will keep hospitals open, supplied, and operating so that our care of our patients and our employees is maintained. By working collaboratively with stakeholders in this court-supervised controlled environment, and having the benefit of our earlier strategic efforts, Steward will be better positioned to responsibly transition ownership of its Massachusetts-based hospitals, keep all of its hospitals open to treat patients, and ensure the continued care and service of our patients and our communities."
Email the writer: SMorse@himss.org
