Steward Wants to Sell Quickly as Legal Claims Mount
YOUNGSTOWN, Ohio – Bankrupt Steward Health Care says it has “generated interest” in the hospitals it operates in the Mahoning and Shenango valleys. But newly filed court documents offer no further information, only a June 24 deadline for bids to buy the local hospitals.
Steward operates Trumbull Regional Medical Center in Warren, Hillside Rehabilitation Hospital in Howland Township and Sharon Regional Hospital in Sharon, Pa. Across eight states, the Dallas-based hospital system operates 31 hospitals.
The privately owned company filed Chapter 11 in U.S. Bankruptcy Court in Houston on May 6, listing $9 billion in debt.
Before taking that step, Steward “conducted broad outreach with respect to Stewardship Health and hospitals, contacting over 25 potential bidders in the aggregate,” court papers say. “The market solicitation process has yielded significant interest in the assets and debtors engaged in active discussions with numerous bidders for those interested in continuing to operate the hospitals and value-based care business.”
On Wednesday, Steward filed an “emergency motion” seeking court approval of how it proposes to auction its assets, designate stalking horse bidders “setting a floor” for bids and a quick timetable to complete the process. A hearing before U.S Judge Christopher Lopez is scheduled for June 3.
Steward said it has “received attractive indications of interest from multiple potential buyers for its Southern Massachusetts and Arizona hospital operations [and the company is] in discussions with various third parties interested in purchasing and operating [its] hospitals in Northern Massachusetts …”
Steward also said it has “executed a letter of intent and [is] in advanced discussions with Collaborative Care Holdings LLC, an affiliate of UnitedHealth Group Inc. to act as a stalking horse purchaser for the Stewardship Health business,” the unit that employs the company’s physicians.
“It cannot be overemphasized that time is of the essence,” the motion states. Steward and its debtor-in-possession lender, Alabama-based Medical Properties Trust, have “agreed to the sale process milestones.”
MPT is Steward’s major landlord and has loaned the company $75 million to fund ongoing operations and transition the hospitals to new owners.
For its hospitals in Florida, Steward says it will consider bids to buy each of the operations individually or collectively. But it will also create a reorganization plan that would preserve the company’s ownership and future management in these hospitals, according to the motion.
The deadline for these bids would be July 26, the auctions July 30 and sale hearing Aug. 5, if Steward’s motion is approved.
For the hospitals Steward operates in Ohio, Pennsylvania and five other states, once bids are received June 24, the company wants the court to oversee auctions June 27 and hold a hearing on the results July 2.
Given the long-standing dispute between Steward and the commonwealth of Massachusetts, a rapid timetable may not be feasible.
Steward’s eight hospitals in Massachusetts have been embroiled in litigation since 2017 over the company’s refusal to provide quarterly and annual financial reports as required by regulators. Gov. Maura Healey, who sued Steward when she was attorney general, has accused Steward’s CEO and management team of corporate greed and stripping the company of its assets.
Steward says the claims are “unfounded and unsubstantiated” and it will not “tolerate” Massachusetts interfering in the asset sale process “that will benefit all stakeholders …”
Late Thursday, new litigation was filed against Steward, this time in the form of a bankruptcy adversary complaint by Brighton Marine Inc., which has a contract with the U.S. Department of Defense to provide health care and social services to members of the military and their families.
Brighton Marine is a 501 (c) (3) charitable organization based in Brighton, Mass., where Steward operates St. Elizabeth’s Hospital. It subcontracted with Steward to provide medical and pharmacy services. As “public reporting revealed that Steward’s financial health was shaky, at best,” Brighton requested financial reports.
“Steward sometimes provided incomplete responses. More often, Steward did not respond at all,” the complaint states.
BMI terminated the contract April 26. “Steward is now interfering with BMI’s efforts to ensure an orderly transition to a new provider,” the organization says.
BMI is seeking a declaratory judgment validating the contract termination “so that it may move forward with transitioning to a new partner with sufficient financial stability to ensure that first-rate health care remains available for those who deserve it most: military service members and their families.”
Copyright 2024 The Business Journal, Youngstown, Ohio.
