Steward Health Care, a Dallas-based healthcare system with hospitals across several states, including Florida, has filed for Chapter 11 bankruptcy protection. The company cited challenges such as insufficient reimbursement from government payors, skyrocketing labor costs, increased operational expenses due to inflation, and the lingering effects of the COVID-19 pandemic as factors leading to this decision. Steward aims to continue its operations without disruption during the restructuring process, keeping hospitals, doctor’s offices, and other facilities open. The company is finalizing an initial $75 million in debtor-in-possession financing and could receive up to an additional $225 million, subject to certain conditions.
Steward Health Care’s Bankruptcy Filing
Background
Steward Health Care, a healthcare system with hospitals in multiple states, announced its filing for Chapter 11 bankruptcy protection on Monday. The company emphasized that this step is a “necessary measure to allow the company to continue to provide necessary care to its patients in their communities without disruption.”
Operational Continuity
In the news release, Steward stated that it does not expect day-to-day operations to be interrupted, with hospitals, doctor’s offices, and other facilities remaining open during the restructuring process.
CEO’s Statement
Ralph de la Torre, Steward’s chief executive officer, said in a prepared statement, “Filing for Chapter 11 restructuring is in the best interests of our patients, physicians, employees and communities at this time.”
Steward’s Florida Presence
Steward operates several hospitals in Florida, including:
- Coral Gables Hospital, Hialeah Hospital, North Shore Medical Center, and Palmetto General Hospital in Miami-Dade County
- Florida Medical Center in Broward County
- Melbourne Regional Medical Center and Rockledge Regional Medical Center in Brevard County
- Sebastian River Medical Center in Indian River County
Financing and Restructuring
Debtor-in-Possession Financing
Steward is finalizing an initial $75 million in debtor-in-possession financing from Medical Properties Trust, Inc. This type of financing is a common funding source for companies undergoing Chapter 11 bankruptcy restructuring.
Potential Additional Financing
The company could receive up to an additional $225 million “upon the satisfaction of certain conditions acceptable to Medical Properties Trust.” Steward and Medical Properties Trust have established partnerships in the past, including a deal where Medical Properties Trust purchased South Florida hospitals from Tenet Healthcare Corp. and leased them to Steward.
Delayed Transaction and Financial Challenges
Stewardship Health Physician Group Sale
Steward had planned to sell its Stewardship Health physician group to Optum, a subsidiary of UnitedHealthcare. However, de la Torre’s statement indicated that the closing of this transaction had been delayed, contributing to Steward’s financial difficulties.
Factors Contributing to Financial Distress
In the news release, Steward cited several factors that have impacted its financial situation, including:
- Insufficient reimbursement by government payors and decreasing reimbursement rates
- Skyrocketing labor costs
- Increased material and operational costs due to inflation
- Continued impacts of the COVID-19 pandemic
Scrutiny and Criticism
Steward’s financial problems have drawn significant attention and criticism, particularly in Massachusetts, where it operates nine hospitals. Massachusetts Governor Maura Healey accused the company of refusing to submit financial records to the state, while U.S. Senators Elizabeth Warren and Edward Markey condemned Steward for “mismanagement, private equity schemes, and executive profiteering.”
As Steward Health Care navigates the Chapter 11 bankruptcy restructuring process, it aims to resolve the proceedings swiftly, with a focus on the long-term and sustainable financial health of the healthcare system.
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