Dallas-based Steward Health Care System filed for bankruptcy early Monday as it’s finalizing a rescue loan with landlord Medical Properties Trust Inc.
The firm sought Chapter 11 protection in the Southern District Court of Texas and listed assets and liabilities of $1 billion to $10 billion. The bankruptcy petition allows Steward Health to keep operating while it seeks approval for a restructuring plan.
The company, which operates 33 community hospitals in nine US states with more than 30,000 employees, has been struggling with its liquidity in recent months. While the company is based in Dallas, it does not have any hospitals in Dallas-Fort Worth. It operates five facilities in Texas in Texarkana, Houston, Odessa, Port Arthur and Big Spring.
“Steward Health Care has done everything in its power to operate successfully in a highly challenging health care environment. Filing for Chapter 11 restructuring is in the best interests of our patients, physicians, employees, and communities at this time,” said Steward CEO Dr. Ralph de la Torre in a statement. “In the past several months we have secured bridge financing and progressed the sale of our Stewardship Health business in order to help stabilize operations at all of our hospitals.”
As part of the restructuring deal, Medical Properties — a US real estate trust focused on health care facilities — is set to provide initial debtor-in-possession funding of $75 million debt and an additional loan of as much as $225 million if certain conditions are met, it said in a statement. In January, Medical Properties provided Steward Health with a $60 million bridge loan and deferred some of its rent arrears.
Among the other factors in the Chapter 11 filing, de la Torre cited higher costs and “insufficient reimbursement by government payors.” The delay in the sale of its physician business unit Stewardship Health forced it to look for an alternative source of funding.
In the bankruptcy process “Steward will be better positioned to responsibly transition ownership of its Massachusetts-based hospitals, keep all of its hospitals open to treat patients, and ensure the continued care and service of our patients and our communities,” de la Torre said.
— Janine Phakdeetham for Bloomberg with assistance from Bre Bradham.
