Bankrupt Steward Health puts its hospitals up for sale, discloses $9 billion in debt

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

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

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

The privately owned company closed a hospital in Massachusetts earlier this year, and officials in that state have criticized Steward’s management and its former private equity owners for making short-sighted financial decisions that undermined patients’ care. Massachusetts officials in particular criticized a series of transactions that sold off the company’s real estate and saddled it with long-term rent costs at its hospitals.

In court documents filed before the hearing, Steward said it had over $9 billion in total liabilities, including $1.2 billion in loans, $6.6 billion in long-term rent obligations, nearly $1 billion in unpaid bills from medical vendors and suppliers, 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 been pursuing a sale of its physician group, Stewardship Health Care, to UnitedHealth subsidiary Optum Care for an amount that would repay the company’s loans and allow it to pay some of its vendors, Schrock said.

Steward had hoped to use the proceeds of that sale to avoid bankruptcy. But stalled regulatory approvals forced the company to seek short-term emergency financing that did not give Steward enough cash to continue operations for long, Schrock said.

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

At Tuesday’s hearing, Lopez allowed Steward to borrow $75 million from Medical Properties Trust, which owns the real estate where Steward’s hospitals are located and is owed $6.6 billion on leases that run until 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 intends to hold auctions on June 28 for its hospitals outside of Florida and July 30 for its nine hospitals in Florida. Schrock said those timelines were negotiated as part of the new $75 million bankruptcy loan, and that Steward would seek more time to sell its hospitals if necessary.

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