Steward Health Care Files for Chapter 11 Bankruptcy, Owes Creditors $600 Million
Dallas-based Steward Health Care Files for Chapter 11 Bankruptcy, Owes Creditors $600 Million
In a surprising turn of events, Dallas-based Steward Health Care has filed for Chapter 11 bankruptcy in the Southern District of Texas, owing top creditors a staggering $600 million. The health system’s financial woes have been a topic of discussion for months, with speculation about the possibility of bankruptcy looming.
Despite the bankruptcy filing, Steward Health Care announced that it is finalizing the terms of debtor-in-possession financing from Medical Properties Trust (MPT) for $75 million, with the potential for an additional $225 million if certain conditions are met. This comes after Steward received a $60 million bridge loan from MPT in January. The system, which overlooks Klyde Warren Park in Dallas, does not have any hospitals in North Texas but operates five in the state of Texas.
In a statement, Steward emphasized that the bankruptcy filing was a necessary step to ensure the continuity of care for its patients without any disruptions. The system reassured the public that its more than two dozen hospitals, 25 urgent care centers, and 107 skilled nursing facilities will continue to operate as usual.
The financial troubles faced by Steward Health Care have been attributed to various factors, including insufficient reimbursement rates from government payers, rising labor and supply costs, and the impact of the ongoing pandemic on healthcare finances. The system has been forced to offload multiple hospital properties and its physician group in recent weeks in an effort to stabilize its financial situation.
The news of Steward’s hospital closures and sales has drawn attention from lawmakers, including Senator Elizabeth Warren and the Massachusetts Congressional delegation, who have expressed concerns about the role of private equity firm Cerberus Capital Management in the system’s financial struggles. Cerberus helped form Steward in 2010 and made a significant profit from its exit from ownership.
A recent working paper from Cornell researchers highlighted the impact of Real Estate Investment Trusts on healthcare, using Steward’s financial activities as a case study. The paper found that the system’s acquisitions had left it with a poor debt ratio, which was exacerbated by the challenges brought on by the pandemic.
Despite the challenges, Steward Health Care remains committed to providing quality care to its patients and communities. Chief Executive Officer Dr. Ralph de la Torre expressed confidence in the system’s ability to navigate the bankruptcy process and ensure the continued operation of its hospitals. The future of Steward Health Care may be uncertain, but the system is determined to weather the storm and emerge stronger than ever.