Steward Health Care Files for Bankruptcy Protection

DALLAS – Steward Health Care, which operates Trumbull Regional Medical Center in Warren, Hillside Rehabilitation Hospital in Howland, and Sharon Regional Hospital in Sharon, Pa., announced Monday that it has filed for protection under Chapter 11 of the U.S. Bankruptcy Code.

Steward is the largest physician-led hospital operator in the United States and filed papers in the U.S. Bankruptcy Court for the Southern District of Texas.  The company is finalizing the terms of debtor-in-possession financing from Medical Properties Trust for initial funding of $75 million and up to an additional $225 million upon the satisfaction of certain conditions acceptable to Medical Properties Trust.

The Dallas-based health care system also operates several urgent care centers and physician practices in the region. It owns and operates eight hospitals in Massachusetts.

Steward took this voluntary step Monday as a necessary measure to allow the company to continue to provide necessary care to its patients in their communities without disruption, the company said in a press release. Steward does not expect any interruptions in its day-to-day operations, which will continue in the ordinary course throughout the Chapter 11 process. Steward’s hospitals, medical centers and physician’s offices are open and continue to serve patients and the broader community, and its commitment to its employees will not change, according to the company. 

“Steward Health Care has done everything in its power to operate successfully in a highly challenging health care environment. Filing for Chapter 11 restructuring is in the best interests of our patients, physicians, employees, and communities at this time,” said Dr. Ralph de la Torre, CEO of Steward.

“In the past several months we have secured bridge financing and progressed the sale of our Stewardship Health business in order to help stabilize operations at all of our hospitals. With the delay in closing of the Stewardship Health transaction, Steward was forced to seek alternative methods of bridging its operations. With the additional financing in this process, we are confident that we will keep hospitals open, supplied, and operating so that our care of our patients and our employees is maintained. By working collaboratively with stakeholders in this court-supervised controlled environment, and having the benefit of our earlier strategic efforts, 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.

The other primary factor driving the Chapter 11 case is, in large part, due to Steward continuing to face challenges created by insufficient reimbursement by government payors as a result of decreasing reimbursement rates, while at the same time facing skyrocketing labor costs, increased material and operational costs due to inflation, and the continued impacts of the Covid-19 pandemic, the company said. It is Steward’s goal, the news release said, to resolve the Chapter 11 process as quickly as possible, with the help of the court, with a view to the long-term and sustainable financial health of the system.

The company has established an information line to answer questions regarding the announcement. Call 888 505 1257 (toll free) or 646 893 5546 (international). Questions can also be emailed to Court filings and other information related to the restructuring proceedings are available at a website administered by the company’s claims agent, Kroll.

Weil, Gotshal & Manges LLP is serving as the company’s legal counsel.  AlixPartners LLP is providing financial advisory services to the company, and John Castellano of AlixPartners is serving as the company’s chief restructuring officer.  Lazard Frères & Co. LLC, Leerink Partners LLC and Cain Brothers, a division of KeyBanc Capital Markets Inc., are providing investment banking services to the company.

SOURCE: Steward Health Care news release.

Published by The Business Journal, Youngstown, Ohio.