Update: Dispute Puts Reopening of Sharon Hospital in Jeopardy

SHARON, Pa. – The reopening of Sharon Regional Medical Center is in jeopardy.

After considering their options, the board of directors of the Buhl Legacy Trust vowed it “will not surrender the community’s claim against [Medical Properties Trust].”

The Buhl Legacy Trust met behind closed doors Wednesday to consider the deal between Steward Health Care System, MPT and Tenor Health Partners regarding the sale and reopening of the Sharon hospital.

MPT, which is the leaseholder for the Sharon hospital property, claimed in a statement this week that without approval of the Buhl Legacy Trust, the hospital would not reopen. The approval would have required Buhl to drop any claims against MPT, including that the hospital leaseholder has not lived up to a prior agreement for the upkeep of the hospital.

MPT had urged Buhl to release those claims ahead of the organization’s meeting Wednesday morning and stated it would jeopardize the deal if it did not.

MPT released this statement late Wednesday after Buhl’s decision: “MPT has been and continues to be fully committed to successfully reopening this hospital for the people of Sharon. That is why we worked tirelessly and collaboratively through the holidays to reach an agreement that all our other stakeholders including the commonwealth support. And that is why we agreed to fund more than $10 million to ensure a smooth transition to new operators.

“However, MPT and Tenor Health are unable to proceed with our agreement to reopen the hospital due to the Trust’s actions today. It is now abundantly clear that the Trust is more interested in re-litigating a decade-old transaction than serving the best interests of the Sharon community.”

Buhl indicated $10 million is not enough to provide for the viability of the Sharon hospital long-term, claiming MPT owes at least $25 million.

“MPT, which shares the blame with its business partner, Ralph de la Torre, for the closure of the hospital, is now threatening to scuttle the deal made with Steward and Tenor in the Houston bankruptcy court if Legacy Trust does not surrender the $25 million claim that Legacy Trust holds in trust for the greater Sharon community,” Robert Lackey, an attorney for the Buhl Legacy Trust, said in a statement Wednesday. “MPT’s threat suggests that it truly is not serious about reviving the hospital, but rather is actually engaged in a scheme to force Legacy Trust to abandon the community’s claim for all the damage done to Sharon Regional Medical Center and this community.” 

In a statement earlier this week, MPT said the deal with Tenor approved in U.S. Bankruptcy Court includes $10 million in financial support from MPT and another $10 million in support from the local community, which would allow Tenor Health to reopen the hospital and lease it from MPT.

“While all other affected stakeholders including the commonwealth were committed to the success of this arrangement, the Buhl Trust has not yet decided whether it will satisfy a key closing condition contained in the bankruptcy court’s order,” an earlier statement from MPT reads. “To be clear, the Buhl Trust is not being asked for any financial support, only to confirm it will not pursue claims against those who are supporting re-opening the hospital, something the commonwealth agreed to. If the Trust votes against supporting the arrangement on Wednesday morning, then MPT and Tenor Health will be unable to move forward and the re-opening will not take place. In that event, MPT remains committed to Sharon Hospital and hopes there will be another opportunity in the future to bring the hospital back for the people of Sharon.”

Lackey said Buhl supports the efforts to reopen the Sharon hospital and has, with the help of the commonwealth, Sen. Michele Brooks and others poured money into the hospital during eight months of Steward’s bankruptcy proceedings. Lackey said MPT didn’t contribute anything.

According to Lackey, when Buhl transferred the hospital operations to Community Health Systems in 2014, the asset purchase agreement negotiated to protect the community “required CHS to invest necessary capital into the facility to ensure it remained a vibrant, quality hospital.” Lackey said Steward made the same promise when it acquired the hospital from CHS, even asking for an additional 18 months to do so at the beginning. However, Steward instead transferred the property to MPT.

“From the outset, Steward and MPT starved the hospital of the necessary capital, leaving the hospital in its present near fatal condition,” Lackey said. “As a result, Legacy Trust has a contractual claim against Steward and MPT for the promised funds, at least $25 million that were denied this community.”

Earlier Wednesday, Charles Kelly, another attorney representing Buhl, called MPT’s assertion that the trust agree not to pursue litigation against MPT for the deal to go through “absolute misinformation being peddled by MPT for deceitful purposes.”

“If MPT and Tenor want to proceed and Steward wants to proceed with the Tenor transaction, they can. We have nothing to do with that – nothing,” Kelly said, adding that the Buhl Legacy Trust wishes them nothing but the best of luck reopening the hospital.

The bankruptcy court order outlining the agreement between Steward, MPT and Tenor, and signed by Judge Christopher Lopez, states: “The Ccosing shall not occur, and no party shall have any obligation to provide health care services at Sharon Regional Medical Center (and such hospital shall not provide health care services), until the commonwealth of Pennsylvania and the Christian H. Buhl Legacy Trust, on behalf of themselves and their respective affiliates, shall have entered into a release agreement with Medical Properties Trust Inc. and its applicable affiliate (“MPT”) and [Steward] relating to Sharon Regional Medical Center, in form and substance satisfactory to MPT and [Steward] (as applicable).”

Kelly said as far as he knows, the Pennsylvania attorney general’s case against MPT in Mercer County Common Pleas Court remains scheduled for Jan. 28. A spokesman for the attorney general’s office declined to comment when asked about the status of the lawsuit.

That case not only deals with the ownership of Sharon Regional Medical Center, but also the requirement that MPT put $25 million into the hospital.

“MPT has a duty to put in no less than $25 million – that’s principal and interest – which we view as their duty under relevant agreements for capital expenditures that would truly allow that hospital to survive,” Kelly said. “It’s simple, if they want that release, put $25 million in. That’s the price of the release.”

Kelly said if the hospital landlord truly cares about the Sharon community, it would be putting money into the hospital.

“Because my client [Buhl Legacy Trust] cares about people more than money, they’re going to try to determine what to do with this 11^th hour bogus demand,” Kelly said.

“[Sharon Regional] has a closed sign outside – that’s MPTs current legacy,” he continued, and that legacy is doing what is best for its shareholders and Wall Street.

“It is ironic that MPT, after reducing the hospital to a patient on life support and interfering with the efforts of the community and Meadville Medical Center to save the hospital, now professes to be among those trying to save the hospital,” Lackey said in his statement. “Worse yet, as part of its misinformation campaign, MPT is attempting to portray Legacy Trust as an obstacle in the effort to save the hospital.”

The Sharon hospital closed Jan. 6. The deal in bankruptcy court was approved Jan. 10.

Steward filed Chapter 11 bankruptcy May 6, which has resulted in the change of operator or closure of all of its 31 hospitals in Ohio, Pennsylvania, Massachusetts, Florida, Arizona, Texas, Arkansas and Louisiana.