U.S. Bankruptcy Judge Christopher Lopez approved the closure of Dallas-based Steward Health Care's two Massachusetts hospitals, Boston-based Carney Hospital and Ayer-based Nashoba Valley Medical Center, by Aug. 31 during a July 31 hearing.
Mr. Lopez also granted a request from Steward to reject "Master Lease II" agreements for its Massachusetts hospitals, which lets new hospital buyers negotiate new leases with the landlords of each facility.
"There's no question that business judgment has been satisfied today, as painful as that is, to whether they should close these hospitals, the debtors are going to be authorized to close the hospitals," Mr. Lopez said during the hearing. "The legal standard has been met. My job is to enforce the law. I hope people understand how to keep those hospitals open based upon the evidence before me, threatens the entire hospital system in Massachusetts."
The health system, which sought Chapter 11 protection May 6, shared plans to close the hospitals July 26. It is actively working to offload all of its 31 hospitals and physician group, Stewardship Health.
Mr. Lopez pointed to how Steward is experiencing "an incredible amount of loss on a weekly basis" and has no funding secured to keep its assets afloat for much longer.
In early May, Steward's landlord Medical Properties Trust approved $75 million in debtor-in-possession financing for the health system. In mid-June, Steward then received a $225 million loan from "first-in, last-out" lenders at WhiteHawk Finance, OneIM, MidOcean and Owl Creek Investments to help keep its hospitals and Stewardship Health afloat.
Most recently, Massachusetts Gov. Maura Healey's administration dedicated $30 million to Steward to ensure operations through the end of August, which will be further discussed during an Aug. 6 hybrid hearing.
During the July 31 hearing, a spokesperson for the FILO lenders told Mr. Lopez that lenders are "deeply concerned" about the cases and that time is running out to develop a solution.
"Liquidity is dwindling," the FILO lenders' spokesperson said. "The losses that are being incurred are unsustainable, and no rational party is going to fund them [Steward] indefinitely."
Steward representative David Cohen disclosed that both Carney Hospital and Nashoba Valley received no actionable bids, and are operating at a significant loss and serving a limited patient population.
"Although there were certain parties that indicated an interest in assuming the operations, [there were] really no actionable bids with parties with financial wherewithal or financial support to actually transact and acquire the operation, the underlying real property, let alone to actually operate the hospitals in a manner that would be acceptable to state regulators," Mr. Cohen said.
A spokesperson for the Massachusetts Nurses Association pushed back on Steward's reasoning behind wanting to close the two hospitals, urging Mr. Lopez to allot more time to find viable bidders for the facilities. However, Mr. Lopez told the MNA spokesperson that he cannot force Steward to accept bids they do not want to accept.
Hugh McDonald, a lawyer for the Commonwealth of Massachusetts and the Executive Office of Health and Human Services, told Mr. Lopez that the state will work with Steward to relocate patients.
"We have seen this coming," Mr. McDonald said. "We have prepared for this, and we are trying our very best to make sure, through cooperation, we are going to get these patients into safe facilities."