DALLAS — Steward Health Care has filed for Chapter 11 bankruptcy protection in the U.S. Bankruptcy Court for the Southern District of Texas. The Dallas-based company, which has disclosed $9 billion in total liabilities, plans to sell the entirety of its hospital portfolio, according to Reuters. The portfolio comprises 31 hospitals throughout the U.S. Steward hopes to complete all transactions by the end of this summer, with auctions scheduled for June 28 and July 30.
In a press release, Steward attributes the decision to file for bankruptcy to “challenges created by insufficient reimbursement by government payors as a result of decreasing reimbursement rates while at the same time facing skyrocketing labor costs, increased material and operation costs due to inflation and the continued impacts of the COVID-19 pandemic.”
Steward’s total debt includes $6.6 billion in long-term rent obligations, according to media reports. Medical Properties Trust, which owns the real estate occupied by Steward Health Care hospitals, has provided $75 million in debtor-in-possession financing to Steward, with the possibility of an additional $225 million loan as Steward’s bankruptcy process continues. Hospital leases with the landlord include terms until 2041. Steward hospitals occupy the properties on ground leases, with Medical Properties Trust owning the land, according to reporting by the Dallas Business Journal.
Reuters reports that Steward’s debt obligations also include $1.2 billion in loans, nearly $1 billion in vendor and supplier bills and $290 million in unpaid employee wages and benefits.
Steward closed a Massachusetts hospital earlier this year, but the company hopes to keep the remaining hospitals open long-term. Ray Schrock, an attorney for the company, told U.S. Bankruptcy Judge Chris Lopez that Steward’s “goal remains that there are zero hospitals closed on our watch.”
Massachusetts officials have previously criticized Steward for its alleged mismanagement of its finances and hospitals in the state. In a press release responding to the bankruptcy filing, Massachusetts Senator Elizabeth Warren referenced “years of gross profiteering and mismanagement” on the part of Steward. “Steward’s latest plan raises more serious questions about the future of the Massachusetts healthcare system,” Warren added.
Schrock said that Steward is also pursuing the sale of its physician group, Stewardship Health Care, to Optum Care, a subsidiary of UnitedHealth. According to Shrock, the sale would allow Steward to repay its loans and some vendors.
— Hayden Spiess