STEWARD HEALTH CARE voluntarily filed for bankruptcy protection at 3:30 a.m. Monday morning, a move that will force the company to finally put its financial cards on the table while it struggles to find a way out of its financial quagmire.
Steward CEO Ralph de la Torre issued a statement saying the company’s 30 hospitals in Arizona, Arkansas, Florida, Louisiana, Massachusetts, Ohio, Pennsylvania, and Texas would remain open with no disruption in day-to-day operations.
At a State House press conference with aides and local health care union and industry officials, Gov. Maura Healey sought to reassure patients, workers, and community officials that the eight Steward hospitals in Massachusetts would continue to operate normally even as the Dallas-based hospital chain goes through the bankruptcy process in Texas.
“The purpose of a Chapter 11 bankruptcy filing is to provide an orderly way to deal with debts and liabilities and to potentially transfer ownership [of the Steward hospitals] while continuing to operate and serve patients,” Healey said.
Healey and Steward agree on the purpose of the bankruptcy filing, but little else. Healey characterized the bankruptcy filing as the byproduct of a mismanaged company motivated by greed.
“One of the good things about bankruptcy is that Steward and its CEO and its management team will no longer be able to lie,” Healey said, referring to de la Torre. “We need clarity about debts and liabilities.”
De la Torre, by contrast, characterized the bankruptcy filing as something largely forced on the company by inadequate government payments for health services and regulatory delays in approving the sale of its physician network to Optum for an undisclosed amount of money. In the interim, de la Torre said, the company, “is finalizing the terms of debtor-in-possession financing from Medical Properties Trust for initial funding of $75 million and up to an additional $225 million upon the satisfaction of certain conditions acceptable to Medical Properties Trust.”
Medical Properties Trust is Steward’s landlord and a major creditor.
“By working collaboratively with stakeholders in this court-supervised controlled environment, and having the benefit of our earlier strategic efforts, 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 in a statement.
In one sense, the bankruptcy filing means the state of Massachusetts will be on the outside looking in as a judge in Texas tries to deal with the hospital system’s debt, much of it brought about by Steward’s decision to sell the properties on which its hospitals sit to the Alabama-based Medical Properties Trust. The sale of the properties provided a huge infusion of cash to Steward, but the rent the hospital system was then forced to pay put it in a precarious financial situation and ultimately precipitated the bankruptcy filing.
In most bankruptcies, creditors are forced to write off some of the debt they are owed and the bankrupt company is forced to liquidate some of its assets – all with the goal of giving the surviving company a chance to survive on its own or in partnership with a buyer.
The governor and her aides indicated the bankruptcy filing will allow everyone to deal with a common set of financial numbers and she indicated reducing the surviving hospital system’s debt may prompt interest from potential buyers. “This is failed management team and a failed institution that has incurred a boatload of debt,” Healey said.
Attorney General Andrea Campbell, however, indicated Massachusetts will be a somewhat peripheral player in the Texas legal proceedings.
“There are a lot of unknowns and a lot of variables that we do not have control over in the bankruptcy process,” Campbell said. “And I’m not naïve about that. This is not a perfect process.”
Kate Walsh, Healey’s secretary of health and human services, indicated navigating the bankruptcy process won’t be easy for Steward and the state. “Steward’s challenges are unique and pretty gargantuan right now,” she said. “There’s things we don’t know.”
Walsh also said the process could be especially disruptive for Steward patients in eastern Massachusetts.
Healey and her top aides said their focus right now is on making sure the Steward hospitals continue to operate safely for the benefit of their 16,000 employees and 200,000 patients in Massachusetts.
“Steward hospitals remain open,” Healey said. “Patients should keep their appointments and continue to seek care when you need it at these facilities.”
“Of course,” Healey added, “we cannot guarantee that there won’t be disruptions or inconveniences.”
The bankruptcy case is moving forward as Beacon Hill grapples with legislation to address the problems at Steward and make sure they don’t reoccur in the future.
“I don’t want to lose sight of the fact that the situation stems from greed, mismanagement, and lack of transparency on the part of Steward leadership in Dallas, Texas,” Healey said. “It’s a situation that should never have happened and working together we’ll make sure it never happens again.”
Campbell echoed that theme of never letting a situation like this occur again, but she also hinted that she may pursue her own legal action against Steward officials for the way they “strip-mined” their hospitals by selling off the underlying assets to acquire cash.
Sen. Elizabeth Warren seized on the bankruptcy filing to call for a “reexamination” of whether private equity should be allowed in health care. She said she would also be filing legislation to hole “corporate actors” responsible for financial mismanagement.
“After years of disastrous decisions, CEO Ralph de la Torre should be fired, along with Steward’s entire executive team,” she said in a statement. “Regulators need to seek all possible means to claw back the riches sucked out of these hospitals. No matter where they try to shift the blame, Steward executives are responsible for this crisis.”