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At 3:30 a.m. Monday, Steward Well being Care filed for Chapter 11 protections in U.S. Chapter Court docket for the Southern District of Texas.
Eleven minutes later, Steward staff had an e-mail ready from their CEO, Ralph de la Torre. The CEO advised his employees that industrywide financial headwinds and delays in Steward’s deliberate asset gross sales had pressured the physician-owned well being community to provoke restructuring proceedings.
“It’s incumbent on all of us to make sure that this course of has no influence on the standard care our sufferers, their households, and our communities can proceed to obtain at our hospitals,” de la Torre wrote in an e-mail seen by Healthcare Dive. “To the overwhelming majority of you, operations will both not be totally different or enhance.”
“To be clear, this can be a restructuring below chapter 11; it’s not a closure and it’s not a liquidation,” he wrote.
The e-mail was the primary time staff had heard immediately from Steward management concerning the firm’s monetary misery — although rumors and uncertainty concerning the operator had been festering for weeks, in response to Marlishia Aho, regional communications director for the union 1199SEIU United Healthcare Employees East.
Main as much as Monday’s submitting, state and federal lawmakers had been more and more apprehensive about how a chapter on the largest physician-led hospital operator within the nation would influence entry to care.
Regulators in Massachusetts — the place Steward operates eight hospitals — held closed-door technique periods to map out contingency in case of a chapter, and staff staged rallies to protest potential hospital closures.
Steward offers take care of greater than 2 million sufferers every year throughout 31 hospitals and 400 facility places, in response to chapter filings. The corporate additionally employs practically 30,000 staff throughout its eight-state portfolio, together with 4,500 main and specialty care physicians.
Steward’s first-day chapter motions make clear the operator’s future — and descriptions its technique for paying down its huge debt by promoting belongings. Listed here are the largest takeaways.
Steward’s sprawling debt
Steward has earned a status for being cagey about its funds — to the dismay of Massachusetts Gov. Maura Healey, who accused the corporate of working in a “black field” in a letter to its CEO earlier this 12 months.
The operator has refused to file routine funds with Massachusetts regulators for years, citing a necessity to guard confidential enterprise information. At the same time as the corporate shuttered hospitals this winter, regulators stated Steward nonetheless dragged its toes on offering monetary information, irritating policymakers’ efforts to construct out contingency plans.
“One of many good issues about chapter is that Steward and its CEO … will now not have the ability to lie,” stated Healey throughout a press convention Monday morning. “Transparency is admittedly vital right here, and that is why you realize we’re trying ahead to seeing what’s within the numerous paperwork … We’d like readability about money owed and liabilities.”
In a slew of first-day motions, Steward now revealed it owes round $1.2 billion in complete mortgage money owed and about $6.6 billion in long-term lease funds.
Steward owes north of $600 million to 30 of its largest lenders, which embrace UnitedHealth-owned Change Healthcare, Philips North America LLC, Medline Industries, AYA Healthcare and Cerner.
The healthcare operator owes $289.8 million in unpaid compensation obligations, together with $68 million to its personal staff in unpaid worker salaries, $105.6 million in funds for doctor companies and $47.7 million owed to staffing companies.
It additionally has roughly $979.4 million excellent in commerce obligations, of which roughly 70% are over 120 days late.
The filings comply with lawsuits from a mess distributors — together with staffing companies, consultants, medical gear corporations, electricians and advertising analysis corporations — who stated Steward reneged on fee obligations.
Steward’s interim funding tied to hospital gross sales
Although Steward had a consortium of six personal lenders financing its asset-based loans this 12 months, now just one lender is listed in chapter filings as funding its debtor-in-possession financing: its landlord, Medical Properties Belief.
The change in distributors is notable, in response to Laura Coordes, professor of legislation on the Sandra Day O’Connor Faculty of Regulation at Arizona State College.
“One thing went on to get these different lenders to drop out,” she stated.
The owner could also be opting to fund Steward throughout chapter proceedings in hopes of getting its personal a refund extra expediently, in response to Coordes.
Steward is MPT’s largest tenant and the healthcare community will owe MPT at the least $6.9 billion in debt and lease obligations by 2041, in response to the filings.
MPT agreed to finance $75 million debtor-in-possession financing and will fund as much as $225 million extra if Steward completes asset sale milestones on time.
Throughout Tuesday morning’s first day listening to a consultant for Steward advised Choose Chris Lopez that each one of Steward’s 31 hospitals are on the market. However to obtain the $225 million from MPT, Steward has to hit aggressive gross sales milestones. It should host an public sale for all non-Florida hospitals by June 28 and all Florida properties by July 30.
Since February, MPT executives have stated there may be sturdy curiosity from consumers in taking up Steward leases. Nonetheless, Steward has but to promote a hospital.
Consultants have advised Healthcare Dive they’re skeptical different operators would tackle Steward’s leases at MPT’s present rental charges.
“Given the unaffordability of the leases and provided that it hasn’t labored previously, I do suppose that basically materials hire concessions are going to be wanted to get this executed,” stated Rob Simone, sector head of actual property funding trusts at analyst agency Hedgeye.
Steward additionally signed a letter of intent to promote its doctor group, Stewardship Well being, to UnitedHealth. Though the deal was first introduced in March, regulators haven’t but begun reviewing the deal, in response to David Seltz, government director of the Massachusetts Well being Coverage Fee. Seltz stated lacking paperwork is delaying the evaluate.
The Stewardship deal is just not tied to additional funding. A consultant from UnitedHealth declined to touch upon the pending deal and whether or not the chapter continuing would influence the sale.
Way forward for Steward
Workers have obtained conflicting messages about the way forward for Steward hospitals.
On one hand, each de la Torre and Massachusetts officers stated Monday that Steward hospitals would stay open this week. Nonetheless, Healey additionally emphasised that she needs Steward out of the state.
“In the end, [bankruptcy] is a step towards our aim of getting Steward out of Massachusetts,” Healey stated throughout a press convention Monday.
Some Steward services could wind down throughout the chapter proceedings, stated Massachusetts Legal professional Normal Andrea Campbell. Her workplace will oversee that course of carefully, and Steward will likely be required to offer licensing and spot obligations.
A healthcare employee at Steward’s Nashoba Valley Hospital advised Healthcare Dive Monday she’s notably involved concerning the destiny of her facility, which she says serves 14 communities however is small in comparison with another hospitals in Steward’s portfolio. She doesn’t need regulators to overlook about Nashoba.
“What I am hoping for is that our state representatives and our native representatives actually push to maintain the hospital open,” she stated. “However my concern is we get missed.”
State officers stated they might proceed monitoring Steward services to make sure high quality care and push for the appointment of a affected person care ombudsman to signify the pursuits of sufferers and staff throughout chapter proceedings. Officers have already launched an internet site to supply sources concerning the chapter course of.
Nonetheless, staff are uncertain of the trail ahead.
The Nashoba Valley Hospital worker advised Healthcare Dive they’re conflicted about whether or not to remain on the hospital they’ve labored at for years or attempt to discover a new place whereas they’ll.
“I’ve used the hospital since I moved out right here. I have been dwelling out on this space for like 25 years … I’ve introduced my mom to this hospital,” the employee stated. “It is my hospital. It isn’t simply the place I work. It is what I exploit, and it is vitally vital to the group.”
