Bankrupt Steward Health puts its hospital up for sale, revealing $9 billion in debt

Bankrupt Steward Health puts its hospital up for sale, revealing $9 billion in debt

Bankrupt Steward Health Care has put all 31 of its US hospitals up for sale, hoping to finalize a deal by the end of the summer to address its $9 billion in total liabilities, its lawyers said at a court hearing Tuesday in Houston.

Steward, which filed for bankruptcy protection on Monday, hopes to keep all of its hospitals open long-term, Steward attorney Ray Schrock told U.S. Bankruptcy Judge Chris Lopez, who is overseeing the Chapter 11 proceedings.

“Our goal remains that there are zero hospitals that close on our watch,” Schrock said. “There will be changes in ownership at many hospitals, we recognize that. But we don’t want to see any of these communities fail to be served.”

The privately held company closed a hospital in Massachusetts earlier this year, and officials in the state have criticized Steward’s management and its former private equity owner for making short-sighted financial decisions that hurt patient care. Massachusetts officials in particular criticized a series of transactions that sold the company real estate and burdened it with long-term rental costs at its hospitals.

In court documents filed before the trial, Steward said it has more than $9 billion in total liabilities, including $1.2 billion in loans, $6.6 billion in long-term lease obligations, nearly $1 billion in unpaid bills from vendors and medical providers, and $290 million in unpaid employee wages and benefits.

Schrock said Steward has real value, despite carrying a $9 billion debt load. The company had $6 billion in annual revenue before filing for bankruptcy, and it has gone ahead with the sale of its physician group, Stewardship Healthcare, to UnitedHealth subsidiary Optum Care for an amount that will repay the company’s loans and allow it to pay some of its vendors, Schrock said.

Steward hopes to use the proceeds of the sale to avoid bankruptcy. But stalled regulatory approvals forced the company to seek short-term emergency financing that didn’t provide Steward with enough cash to continue operations over the long term, Schrock said.

“It never really stabilized the company,” Schrock said. “The company is always close to running out of cash.”

At Tuesday’s hearing, Lopez authorized Steward to borrow $75 million from Medical Properties Trust, which owns the property where Steward’s hospital is located and owes $6.6 billion on a lease that runs through 2041. Steward hopes to borrow an additional $225 million from Medical Properties Trust later in its bankruptcy.

Steward is putting all of its hospitals up for sale. It plans to hold auctions on June 28 for its hospitals outside Florida and July 30 for its nine hospitals in Florida. Schrock said the timeline was negotiated as part of a new $75 million bankruptcy loan, and that Steward will seek more time to sell his hospital if necessary.

“What we don’t want to do is have a fire sale of assets,” Schrock said. “There’s a lot of value here.”