Steward Health Care to Sell 31 US Hospitals at Auctions

Steward Health Care, the largest privately owned, for-profit health system in the U.S., announced after filing for bankruptcy this week that it will sell all of its 31 hospitals in auction sales.

The Dallas-based company said during a hearing at the U.S. Bankruptcy Court for the Southern District of Texas that its hospitals, located in eight states, will remain operating during the bankruptcy process.

The company’s bankruptcy filing lists 30 creditors who are owed a total of more than $500M, including the federal government, which is owned more than $32M in reimbursements for insurance overpayments.

In order to keep operating, Steward said it is finalizing the terms of debtor-in-possession financing from landlord Medical Properties Trust (MPT) for initial funding of $75M and “up to an additional $225M upon satisfaction of certain conditions.”

In an earnings call with investors this week, MPT disclosed losses of $736M in the first quarter. The REIT reported impairment charges that included the write-off of a $360M loan it made to Steward Health Care in 2021.

According to CBS News, which has been investigating Steward for more than a year, Steward is facing debts totaling billions of dollars after acquiring dozens of community hospitals in the past decade with backing from private equity investors.

The CBS probe alleges that Steward and its investors “siphoned hundreds of millions of dollars” in dividends while leaving community hospitals around the country with “a trail of unpaid bills,” at times risking a shortage of lifesaving supplies.

In Massachusetts, where Steward operates eight hospitals, Gov. Maura Healey responded to the bankruptcy filing with a scathing statement aimed at the leadership of the company.

“I do not want to lose sight of the fact that the situation stems from and is rooted in greed, mismanagement, and lack of transparency on the part of Steward leadership in Dallas, Texas. I have been clear about that, and I will continue to be clear about that,” Healey said. “It is a situation that should never have happened, and we will be working together to ensure that there are steps taken to make sure that this does not happen again.”

In a statement announcing the bankruptcy filing on Monday, Dr. Ralph de la Torre, Steward’s CEO, said the company’s financial problems are primarily due to “insufficient reimbursement” from the government and inflation.

“This voluntary 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,” de la Torre said.

Steward’s hospitals are located in Arizona, Arkansas, Florida, Louisiana, Massachusetts, Ohio, Pennsylvania and Texas. Steward plans to hold auctions for hospitals outside of Florida on June 28; its hospitals in Florida will be auctioned off on July 30, CNN reported.

The company started buying up Massachusetts hospitals in 2010, with backing from private equity giant Cerberus. Cerberus shed its stake in Steward in 2021, after making an $800M profit, according to a report from Bloomberg.

Financial records show Steward also has sold off more than $1B of its hospitals’ land and buildings since 2016 to Medical Properties Trust, CBS reported.