Steward Health Gets ‘Late Bids’ for 3 Local Hospitals

YOUNGSTOWN, Ohio – Steward Health Care System has received “some late bids” on its three local hospitals and is “doing its best to finalize those bids.”

So declared Steward’s attorney, Ray C. Schrock, during a hearing Wednesday before U.S. Judge Christopher M. Lopez.

Steward operates Sharon Regional Medical Center in Sharon, Pa., as well as Trumbull Regional Medical Center in Warren and Hillside Rehabilitation Hospital in Howland.

“Our focus is to keep every hospital open to the extent available,” Schrock said.

His disclosure of interest in the local hospitals came as part of a Chapter 11 case update at the start of the nearly three-hour hearing about the closing of two hospitals in Massachusetts and the sale of six other hospitals there.

In a filing July 20 with U.S. Bankruptcy Court in Houston, Steward reported that no “qualified” bids had been received for the three local hospitals, and he said it is “working with the consultation parties to evaluate alternatives.”

No further information was provided by Steward’s attorney about the “late bids.”

The hearing agenda included the closure process that Steward has proposed for Carney Hospital in Boston and Nashoba Valley Medical Center in Ayer, Mass. If approved by Lopez, Steward’s motion would set shutdown timelines and patient care requirements that would apply to hospitals elsewhere that Steward may decide to close.

A representative of the Pennsylvania attorney general argued that, like in Massachusetts, state regulations govern hospital closings. Should Steward decide to close Sharon Regional Medical Center, the commonwealth would need at least 30 days to review any closure plan. The same would apply to a bid that could be made to buy the hospital, he said.

Sharon Regional Medical Center is the only hospital that Steward operates in Pennsylvania.

“We need a window to work with [Steward],” the AG representative said. “There are complex issues to work out,” among them “$10 million in deferred maintenance,” he said, and leases with Medical Properties Trust, which owns 54 real estate parcels where Steward operates medical offices and hospitals.

Regarding the two hospitals in Massachusetts that Steward plans to close, the judge noted that even if the hospitals stopped paying rent to MPT, they would continue to lose millions of dollars.

“It’s painful,” he said in upholding Steward’s right to close the hospitals. “I recognize that the decision I am making today, while legally sound, doesn’t mean the hospitals will close today.”

Accordingly, Lopez ordered Steward to coordinate with the court-appointed patient care ombudsman, whose work he praised, so that patients at the two hospitals – 45 in one and 21 in another – receive the highest standard of care that preserves their rights and medical records. And he ordered the parties to be fully transparent, with a filing on the court docket, in actions they take to close the hospitals.

He saved for another day his ruling on how the closure details set forth in Steward’s motion to close the Massachusetts hospitals would apply to potential closings elsewhere.

Much of the hearing dealt with Steward’s motion to reject the real property leases it has with Medical Properties Trust. The judge agreed that Steward has the legal right to reject the leases, which have been described in court filings as onerous and the main reason why Steward is bankrupt.

But he held off determining at what point Steward could stop paying rent to MPT. He told the parties to reach agreement on an effective rejection date and do so by Aug. 2, when another hearing will be held.

Crucially, consensus must be reached on how much value Medical Properties Trust will attempt to extract from the bankrupt company’s estate. Without an agreed upon formula, the six hospitals in Massachusetts cannot be sold. The commonwealth has pledged $30 million to subsidize Steward until it transfers ownership, but not without asset purchase agreements. And no buyer will sign such a document if MPT stands to cash out millions.

“We can’t have all the values swallowed up unfairly and in a disproportionate rate by the real estate,” Schrock said.

“We have engaged in multiple days of mediation … regarding value of hospitals and the underlying value of property owned by MPT,” he continued. “We need that issue solved and it has to happen over the next few days.”

Intense negotiations will begin Thursday, with Steward promising to report back to the judge Friday.

In August and September, “Serious decisions have to be made, and I hope good ones,” Lopez said.

“The importance of every individual in these hospitals weighs on me. These could be life decisions.”

Copyright 2024 The Business Journal, Youngstown, Ohio.