Bankrupt Steward Health Care Sues REIT Medical Properties Trust
Steward claims Medical Properties is illegally interfering with the Chapter 11 process.
Bankrupt Steward Health Care, once the largest privately owned, for-profit health system with 31 hospitals, has been trying to sell all of them. Now Steward is suing its landlord, REIT Medical Properties Trust (MPT), for allegedly interfering with trying to dump its hospitals to new operators.
As the lawsuit reveals, while Steward owns all the licenses to operate the hospitals, 30 of the 31 hospitals were subject to master leases with Medical Properties and that the companies have “competing interests as it relates to the value” of the properties.
Steward has been planning to auction off all 31 of its hospitals. It’s shaken up the healthcare industry and sent Massachusetts trying to prevent REITs like Medical Properties Trust from performing future sale-leasebacks with hospitals. “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,” said Governor Maura Healey. A bill out of the Massachusetts House of Representatives has a provision that would lock REITs out of future hospital ownership.
In the new lawsuit, Steward alleged that Medical Properties was trying to undermine the sales process — which would be necessary to raise capital to pay creditors under bankruptcy — by secretly communicating with bidders, asking them to enter revised leases with Medical Properties and “allocate all of the value of their bids” to Medical Properties real estate.
The “sales process interference and brinksmanship jeopardizes the future of dozens of hospitals, tens of thousands of jobs, and the safety of patients — not to mention wrongfully taking value from the estate,” the lawsuit claimed.
According to a filing from Medical Properties seen by Becker’s Hospital Review, “The Debtors can be expected to lash out at MPT and try to blame MPT for the poor progress of these cases and the delays in the sale process,” it read. The REIT blames Steward for forcing MPT into transferring its real-estate value to Steward Health.
“The procedures make clear that MPT alone (as the fee owner) will negotiate any disposition of its real estate, confirming expressly that MPT will ‘discuss and negotiate directly with any Potential Bidder regarding the treatment of any lease pertaining to the real estate owned by MPT Lessors,” the Medical Properties motion said.