Dallas, Texas-based Steward Health Care filed for Chapter 11 bankruptcy and will receive millions in financing from Medical Properties Trust to maintain operations at existing hospitals and clinics, according to a May 6 health system news release.
The 30 hospitals in the Steward network will continue patient care during the bankruptcy proceedings, and the physician-led health system does not expect interruptions to daily operations.
"Steward Health Care has done everything in its power to operate successfully in a highly challenging healthcare environment," Ralph de la Torre, MD, CEO of Steward, said in the release. "Filing for Chapter 11 restructuring is in the best interests of our patients, physicians, employees and communities at this time."
The for-profit health system has faced financial challenges and liquidity issues in recent months, blaming low reimbursement from government payers and increasing costs for labor, materials and operations due to inflation. The system also reported continuing to experience negative financial effects from the COVID-19 pandemic.
In March, Steward revealed plans to sell its physician network to Optum, a subsidiary of UnitedHealth Group. If the deal closes, the system's physicians would become employed by Optum. Delays in finalizing the deal contributed to the system's financial issues, Dr. de la Torre said.
"In the past several months we have secured bridge financing and progressed the sale of our Stewardship Health business in order to help stabilize operations at our hospitals," he said. "With the delay in closing of the Stewardship Health transaction, Steward was forced to seek alternative methods of bridging its operations."
Lawmakers have been investigating Steward's financial situation over the last several months amid hospital closures and vendor complaints of unpaid bills. One of Steward's hospitals in San Antonio closed last year amid unpaid bills, and the system shut down New England Sinai Hospital in Stoughton, Mass., in April.
In some cases, vendors stopped sending supplies to Steward hospitals with unpaid bills, prompting surgery cancellations and other issues. Steward also fell $50 million behind on rent and took loans from its landlord, Medical Properties Trust.
Steward also announced May 6 plans to finalize terms of debtor-in-possession financing for initial funding of $75 million and up to another $225 million from MPT if it meets certain conditions.
"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," said Dr. de la Torre. "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."
The Massachusetts Nurses Association and 1199SSEIU United Healthcare Workers East released a joint statement responding to the bankruptcy filing, noting the possible loss of any facilities in Massachusetts would have "devastating consequences." The organizations call on legislators and healthcare industry leaders to take needed steps to preserve existing hospitals and clinics, and transition to nonprofit ownership.
"One only need look at what has happened in Southeastern Mass with the loss of Norwood Hospital and Brockton Hospital, where the influx of patients has stressed the region’s already overburdened emergency departments, to see what lies in store with the loss of these other facilities. No amount of contingency planning between the DPH and hospital executives can stem the inevitable and unnecessary injury and death that would result from a failure to preserve these resources," the statement reads.
Read more about Steward's financial situation here.