US hospital network Steward files for bankruptcy, aims for new loan

By Dietrich Knauth

NEW YORK (Reuters) -Steward Health Care, which operates 31 hospitals in eight U.S. states, filed for Chapter 11 bankruptcy in Texas on Monday, aiming to secure a new loan from its landlord Medical Properties Trust.

Steward, the largest private physician-owned for-profit healthcare network in the U.S., said it would continue serving patients as normal during its bankruptcy.

The company, which recently closed a hospital in Massachusetts, has been sharply criticized by officials in that state over what they call risky financial decisions made by its current management and former private equity owners, including a transaction that sold off the company’s real estate and saddled it with long-term rent costs at its hospitals.

Democratic Massachusetts Attorney General Andrea Joy Campbell said Steward’s bankruptcy should provide state officials with more insight into the company’s financial condition and whether it compromised patient care in its pursuit of profits.

“If those efforts have violated the law, those involved will absolutely hear from my office,” Campbell said at a Monday press conference.

Massachusetts Governor Maura Healey, a Democrat, said that her team has been working to ensure that Steward’s financial troubles do not imperil medical care in eight remaining hospitals it operates in the commonwealth.

Steward did not immediately respond to questions about Healey and Campbell’s comments.

Steward will seek up to $300 million in financing from Medical Properties Trust, after failing to quickly close a sale of its physician group Stewardship Health. The company is asking for $75 million to start its bankruptcy case, with up to $225 million at a later date.

“With the delay in closing of the Stewardship Health transaction, Steward was forced to seek alternative methods of bridging its operations,” Steward CEO Ralph de la Torre said on Monday.

“With the additional financing in this process, we are confident that we will keep hospitals open, supplied, and operating so that our care of our patients and our employees is maintained,” de la Torre added in a statement.

Steward has nearly 30,000 employees, including 4,500 primary and specialty care physicians, at 400 facility locations. Steward Health Care provides care to more than two million patients annually.

Several private equity-backed medical companies have filed for bankruptcy in recent years, including hospital staffing companies Envision Healthcare and American Physician Partners, and prison health company Tehum Care Services.

U.S. Senator Elizabeth Warren of Massachusetts, a Democrat, criticized Steward’s former owner, private equity firm Cerberus Capital Management, for the move that forced Steward to pay rent at its hospitals.

“Steward Health Care’s bankruptcy is a direct consequence of Wall Street private equity vultures looting our healthcare system,” Warren said in a Monday statement.

Cerberus has denied Warren’s characterization of its ownership, saying the money raised by the real estate sale helped Steward invest in expansions and improved medical care. Cerberus said that Steward was “financially healthy” when it sold the company to a physician group led by Steward’s CEO in 2020.

Steward filed for bankruptcy with between $1 billion and $10 billion in liabilities, according to its Chapter 11 petition filed in Houston, Texas bankruptcy court.

(Reporting by Dietrich Knauth in New York and Nate Raymond in Boston; Editing by Bill Berkrot and Alexia Garamfalvi)