Steward Health Care filed for Chapter 11 bankruptcy protection Monday following months of uncertainty about the national for-profit health system, which operates more than 30 hospitals across eight states.
Steward has struggled to pay its landlord, Medical Properties Trust, and vendors, stoking state lawmakers’ concern about hospital closures. Last month, Steward closed one of its nine Massachusetts hospitals, New England Sinai Hospital in Stoughton.
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Medical Properties Trust approved $75 million in debtor-in-possession financing for Steward but has not committed to additional funding, a spokesperson said. The financing plan must be approved by the court. Earlier on Monday, Steward said there was potential of another $225 million from the real estate investment trust, which owns 10% of Steward.
Dallas-based Steward said in a news release the bankruptcy filing was necessary so it could continue to provide care without interruption. As a result, 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,” CEO Dr. Ralph de la Torre said in the news release.
De la Torre blamed the health system’s financial situation on low Medicare and Medicaid reimbursement coupled with rising costs and lingering effects from the COVID-19 pandemic.
In March, Steward announced the proposed sale of its physician group, Stewardship Health, to UnitedHealth Group’s Optum. David Seltz, Massachusetts Health Policy Commission executive director, said in a statement Monday the commission is working to understand the implications of the bankruptcy process on that proposal, potential Massachusetts hospital sales and any other related changes in ownership.
Selling the Steward physician group to Optum could raise money to pay off creditors, but there are potential significant healthcare impacts, said Christopher Koller, president of the Milbank Memorial Fund, which funds research aimed at informing state policy.
“[The proposed Optum sale] could have real implications for how care is organized, how primary care is delivered, access to care for Medicaid patients, etc.,” said Koller, a former Rhode Island health insurance commissioner. “But those are secondary considerations for the court as they go through the proceedings.”
In response to the bankruptcy filing, the Massachusetts Nursing Association and a Massachusetts division of the Service Employees International Union said in a joint statement the bankruptcy filing should “embolden the administration, the legislature, the healthcare industry and all those who value the health of our communities to immediately take whatever steps are needed to ensure the preservation of these [Massachusetts] facilities and the safe transition to more stable and responsible not for profit ownership."
Private equity firm Cerberus Capital Management acquired the health system in 2010 and sold its controlling interest in 2020 to a group of Steward physicians and Medical Properties Trust. Medical Properties Trust bought Steward's real estate assets from Cerberus in 2016 for $1.25 billion in a sale-leaseback transaction.
Steward listed assets and liabilities of between $1 billion and $10 billion in the filing, made in U.S. Bankruptcy Court for the Southern District Court of Texas.
Steward owes more than $600 million to its top 30 unsecured creditors, according to the filing. Topping the list of unsecured creditors is Change Healthcare, the UnitedHealth Group claims processing subsidiary that experienced a cyberattack in February. It is owed more than $71 million, according to the filing.
In addition to Medical Properties Trust, Steward's owners include Collom & Carney Clinic Assoc., a physician group based in Texarkana, Texas; Radiology Associates of Norwood; and TRACO International Group, which provides liability insurance for physicians.
In a news release Massachusetts Gov. Maura Healey (D) said the Chapter 11 filing was “an important step toward Steward’s orderly exit out of Massachusetts.”
