Steward Health Care System LLC filed for bankruptcy early Monday after a period of mounting financial challenges and government scrutiny over the impact of its hospital closures on patients.
The Dallas-based firm is finalizing a rescue loan with landlord Medical Properties Trust Inc., according to the filing. It sought Chapter 11 protection in the Southern District Court of Texas and listed both assets and liabilities of $1 billion to $10 billion.
The bankruptcy filing allows Steward Health to keep operating while it seeks approval for a restructuring plan. Steward operates more than 30 hospitals across eight states and employs some 30,000 people, according to its bankruptcy website. It’s the biggest private for-profit hospital chain in the country.
Steward’s liquidity crisis deepened this year as it struggled to pay vendors and manage operations at its sites. The system moved to close hospitals, including several in Massachusetts, to cut costs. That prompted significant pushback and inquiry from the state’s politicians, including U.S. Sen. Elizabeth Warren.
It also moved to sell its managed services organization and hired consultancy AlixPartners for operational help, Bloomberg reported.
Medical properties
As part of the restructuring deal, Medical Properties — a U.S. real estate trust focused on health care facilities — is set to provide initial debtor-in-possession funding of $75 million and an additional loan of as much as $225 million if certain conditions are met, it said in a statement. In January, Medical Properties provided Steward Health with a $60 million bridge loan and deferred some of its rent arrears.
Medical Properties fell as much as 11.5% in Monday trading as of 11:20 a.m. New York time. MPT has been the subject of short attack for its finances and exposure to Steward.
Democratic lawmakers including Warren have also written to Cerberus Capital Management about concerns regarding the private equity firm’s role in Steward’s finances. Private equity firm Cerberus created Steward after buying St. Elizabeth’s and five other Catholic hospitals in Massachusetts in 2010.
Cerberus made a roughly $800 million profit on its investment before offloading its remaining interest to doctors in the company, including Steward’s now-Chief Executive Officer Ralph de la Torre, Bloomberg reported in 2021.
The company blamed higher costs and insufficient government-program reimbursement among the factors leading to the Chapter 11 filing. The delay in the sale of its physician business unit Stewardship Health forced it to look for an alternative source of funding.
Through the bankruptcy process, “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,” de la Torre said in a statement.
The case is Steward Health Care System LLC, 24-90213, U.S. Bankruptcy Court for the Southern District Court of Texas.
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