Judge OKs Agreement to Keep Local Hospitals Open

YOUNGSTOWN, Ohio – Steward Health Care System’s three local hospitals – Trumbull Regional Medical Center in Warren, Hillside Rehabilitation Hospital in Howland and Sharon Regional Medical Center in Sharon, Pa. – have a future now defined in court documents.

U.S. Bankruptcy Court Judge Christopher Lopez approved an interim global settlement agreement Wednesday morning, keeping several Steward Health Care hospitals open, but with interim managers in place to oversee them.

Steward will continue to operate the hospitals at this time under the direction of the interim managers, according to Ray Schrock, the attorney representing Steward, who laid out the agreement during Wednesday’s hearing in U.S. Bankruptcy Court.

Insight Foundation of Hillside will be the interim manager of Hillside Rehabilitation Hospital, while Insight Foundation of Trumbull will serve as the interim manager of Trumbull Regional Medical Center. The management teams were expected to be in the hospitals as early as Wednesday.

The other hospitals in the agreement – in Arizona, Texas and Florida – had other interim managers named that do not appear to be affiliated with Insight.

Sharon Regional Medical Center will eventually be purchased by Meadville Medical Center, according to an attorney representing the commonwealth of Pennsylvania, who also spoke during the hearing. Pennsylvania will pay $1.5 million per month to cover operation expenses until the deal can close Dec. 1. Medical Properties Trust, which owns the hospital properties, is reportedly still negotiating the details.

According to the global interim agreement for all the hospitals laid out by Schrock, the accounts receivable generated prior to 12:01 a.m. Wednesday belong to the estate, while those generated after 12:01 a.m. accrue for the benefit of the managers operating the hospitals. The managers will be funding the operations of the hospitals from there forward, as well.

A second $5 million escrow account is to be set up by Medical Properties Trust to cover incidental expenses in the interim. Payroll will be funded this week, which is about a $9 million expense.

“These managers would operate in the hospitals, will work toward eventually getting bills of sale and transitioning the hospitals as quickly as possible, including ownership of the assets and the like,” Schrock said.

MPT would be granted a release, but not until the hospitals have been transitioned. The estate is getting $395 million in net proceeds from Space Coast Hospitals, and that money eventually will go toward recovery for the secured and unsecured lenders. MPT reportedly is also waiving billions in claims.

Schrock talked about how important these hospitals are to so many, especially in underserved communities.

“We’re very proud of what the company is doing day in and day out, and we realize how much it matters to everyone to keep these hospitals open,” he said.

A hearing was scheduled for Sept. 17 for a final agreement, which Schrock said will include more details that are still being determined on transitioning the properties, including protecting those with claims of debts owed by the hospitals.

“What has transpired over the last few weeks is nothing short of remarkable, that we’re here today,” Lopez said as he approved the agreement. “I think this is a good thing.”

Among those who spoke during the hearing were representatives from the Ohio Nurses Union, the Service Employees International Union 1199 and AFSCME Ohio Council 8, which were concerned about the transition going against labor protections in the collective bargaining agreements. Schrock noted later that there has been no change to any labor agreements at this time.

They were only two of about a dozen parties that spoke up with concerns about the agreement and how it protects the rights of those involved, including companies seeking to reobtain medical or food service equipment should deals fall through.

“This is very complex by any stretch. Operationally, it’s a very complex endeavor that we’re undertaking,” Schrock said. “There’s going to be bumps in the road.”

Schrock said they are prepared to mediate those bumps or come back to the court if necessary.

Brad Kahn, who represents the unsecured committee of creditors and has been one of the objectors to the agreement said the main reason for his objection Tuesday was to make certain there are protections in place as the transitions go forward, “at least a spare tire and a flare when things go off the road.”

Following the approval of the interim agreement, the ONA, which serves as the union for registered nurses at Hillside issued a statement.

“Today’s judgement to keep Hillside Rehabilitation Hospital and Trumbull Regional Medical Center open is lifesaving for the patients and employees of those hospitals,” said Rick Lucas, ONA president and executive director. “ONA will work with the Insight Foundation of Hillside to ensure the transition keeps patient and staff safety a top priority, hospital operations fully functional, and continues to honor the collective bargaining agreement for our union nurses.”

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