Steward Hearing Resumes Today on MPT Settlement; Interim Manager Named for Trumbull Hospitals

YOUNGSTOWN, Ohio – Attempting to address all the objections and concerns of creditors, a hearing regarding a global settlement agreement with Medical Properties Trust to transition to new ownership several more of the Steward Health Care System hospitals was paused twice Tuesday afternoon in U.S. bankruptcy court hearing.

Then the hearing was rescheduled for this morning.

At their request, Judge Christopher Lopez gave attorneys overnight to work on a resolution, scheduling the hearing to begin again at 8 a.m. Central Time. Lopez presides in U.S. Bankruptcy Court in Houston. The hearing was conducted in person and remotely.

The settlement agreement they are trying to resolve would involve the two Ohio hospitals – Trumbull Regional Medical Center in Warren and Hillside Rehabilitation Hospital in Howland.

Steward filed court documents overnight that set forth new terms agreed to by MPT and the health care systems priority secured lenders. The settlement term sheet identified Insight Foundation of Trumbull and Insight Foundation of Hillside as proposed interim managers for the local hospitals.

According to court papers, “No later than Sept. 11, 2024, the interim managers and/or MPT shall fund an aggregate amount equal to at least $9.1 million into the payroll escrow account” that would pay employees of the local hospitals going forward and employees at 13 additional hospitals in three other states.

Insight Health Systems of Flint, Mich., was founded in 2006 by clinicians and technologists, according to its website. The site describes the company as “interested in developing novel solutions to complicated issues in health and health care, working to create not only new technologies but partnering with clinicians, patients, and health care organizations to find better ways of understanding and caring for patients. This occurs at the intersection of technology, clinical care, and health services.”

The website did not provide additional information.

Before the start of Tuesday’s hearing, John Castellano, chief restructuring officer for Steward Health, filed a declaration stating that he believes the settlement agreement with MPT is in the best interests of Steward Health, its creditors and their estates.

Additionally, Castellano stated the agreement would allow for nearly all the hospitals in the master lease one group, which includes the Trumbull County hospitals as well as Sharon Regional Medical Center, to remain open and serve patients.

A notice to close the Ohio hospitals was issued Aug. 21, with a tentative closure date of Sept. 20. That closure was later paused when a tentative agreement was reached between Steward and MPT, its landlord, according to Trumbull Regional Medical Center, which announced it would continue to admit and care for patients.

Still, much remains to iron out, a sentiment voiced by several parties during Tuesday’s hearings.

The committee of unsecured creditors filed a motion Tuesday claiming the proposed agreement does not address the millions in debt owed to various creditors and does not require MPT to take responsibility for the operating costs of the hospitals, while interim managers transition them to new owners.

Additionally, the committee contends the proposed settlement, filed 12 hours before Tuesday’s hearing, gave them no opportunity for due process.

The committee argued that MPT, which bought Steward’s properties and then leased them back to Steward, should be considered someone who financed Steward and a creditor, not the legal owner.

Finally, the committee claimed MPT has attempted to delay the committee’s depositions of key executives. During Tuesday’s hearing it was noted that two such depositions, which have been rescheduled before, are scheduled for Wednesday and should still go forward.

And while the Ohio Nurses Association, which represents registered nurses at Hillside, indicated it is pleased the Steward/MPT settlement would keep Hillside operating, it does not believe Steward can sell the hospital “free and clear” because of obligations in the collective bargaining agreement. The ONA asked for the right to object in court should the MPT agreement modify or nullify the union’s agreement with Hillside.

Also objecting to the settlement are AFSCME Locals 2026, 2288 and 2804 and SEIU District 1199. AFSCME and SEIU represent various employee classifications at Trumbull Regional and Hillside.

Sharon Regional Medical Center got better news Tuesday morning, when the commonwealth of Pennsylvania agreed to pay $1.5 million per month to cover operational costs of the hospital. The $4.5 million would allow the hospital to continue serving patients while it is transitioned by Dec. 1 to either Meadville Medical Center, which has expressed an interest in operating it, or another purchaser.

Steward Health filed for Chapter 11 bankruptcy May 6, leading to the potential sale or closure of all 30 of its hospitals in eight states.

Six hospitals in Massachusetts have been sold, and two have been closed.

Copyright 2024 The Business Journal, Youngstown, Ohio.