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Dallas-based Steward Health Care, the nation's largest operator of physician-led hospitals, filed for Chapter 11 bankruptcy this morning in the United States Bankruptcy Court for the Southern District of Texas, after months of financial difficulties, including defaults payments to its owner and sellers.
Steward operates more than 30 hospitals in eight states, according to a company spokesperson. The filing marks the largest vendor bankruptcy in decades, according to Laura Coordes, a law professor at Arizona State University's Sandra Day O'Connor College of Law.
Regulators and experts I was waiting for the deposit since April 30, when the for-profit chain missed its deadline to repay at least part of its Debt of 750 million dollars to half a dozen lenders. It appears that private lenders refused to extend further credit to Steward.
The operator said it is working to finalize debtor-in-possession financing terms with its owner, Medical Properties Trust, for an initial $75 million in financing and up to an additional $225 million upon satisfaction of conditions. additional, according to a Monday. Press release.
Regulators react
In Massachusetts, where Steward operates eight hospitals, lawmakers have been preparing for this day for months.
Regulators stepped up efforts to receive financial information from troubled Steward starting this winter. They first letters sent request information on the financial health of the system and Action plan. Then they invited Steward to public hearings to inform the community of the brewing crisis – Steward officials were not present.
Finally, officials gathered late last month for closed-door contingency planning sessions to consider the impact of a possible Steward bankruptcy on the Massachusetts health care system as a whole.
Among those present at the April 24 strategy session were David Seltz, executive director of the Massachusetts Health Policy Commission, which oversees the state's hospital finances; Kate Walsh, Massachusetts Secretary of Health and Human Services; and Robbie Goldstein, commissioner of the state Department of Public Health.
Walsh described the meetings to the Boston Globe as go “to the school of bankruptcy» to map out all the possible outcomes that could accompany a deposit. Walsh emphasized that hospitals would not necessarily close when Steward declares bankruptcy and undertakes restructuring — at least in the short term — based on his conversations with experts.
However, Seltz fears the state's southeastern region won't be able to withstand any disruption in care given that the region is already classified by state officials as “high risk or actively constrained on capacity.” hospital,” according to testimony of Seltz on April 24.
Capacity constraints could worsen significantly with disruptions to health care services resulting from Steward's bankruptcy, Seltz warned. He added that southeastern Massachusetts residents are particularly vulnerable to care disruptions because they have lower-than-average incomes and “substantial” problems accessing care.
“These cumulative challenges signal the need for collaborative action to ensure the stability of the health care landscape in southeastern Massachusetts,” Seltz said in a statement accompanying his testimony.
Steward said he does not expect any interruption to its daily operations, which will continue as normal throughout the Chapter 11 process.
Monday morning, Massachusetts HHS released a statement onformerly known as Twitter, saying the state was preparing for this outcome and had plans in place to preserve access to care,
“Monitoring hospitals remain open and patients should not hesitate to seek treatment. The Healey-Driscoll Administration is working with Steward and all potential partners to support an orderly transfer of ownership that protects access to care, preserves jobs, and stabilizes our health care system,” HHS said.
The failure of Steward's recovery plan
Although Steward presented a plan to return to good financial situation in Februaryexperts wondered if the health system could execute a recovery in such a short time – especially since the plan depended on selling assets.
Steward said it would sell its physicians group, Stewardship Health, and lease back part of its hospital portfolio to free up cash to pay down debts.
However, as of April 24, the HPC said it had not yet begun its formal review of the deal, emphasizing that it had not yet received all the documents required to do so.
In a statement Monday regarding the bankruptcy, CEO Ralph de la Torre said the delay in the sale contributed to the bankruptcy filing.
“Steward Health Care has done everything in its power to operate successfully in a very challenging health care environment,” de la Torre said. “Over the past few months, we have secured interim financing and progressed the sale of our Stewardship Health business to help stabilize operations across all of our hospitals. With the delay in closing the Stewardship Health transaction, Steward was forced to seek alternative methods to connect its operations.
The CEO also said external factors contributed to the company's financial woes, citing insufficient reimbursements from government payers, high labor costs, inflationary pressures and lingering impacts of crisis. Covid-19 pandemic.
Why didn't analysts predict Steward's collapse?
Steward gained a reputation for being secretive about his finances. In February, Massachusetts Governor Maura Healey accused Steward of acting like a black box to obfuscate regulatory efforts and hide its financial situation.
The health system has spent years immersed in legal battle with Massachusetts regulators over the submission of routine financial data for audit purposes, citing the need to protect confidential business information.
The company also failed to provide its own owner with audited year-end financial statements, according to MPT's 2023 annual report. MPT was required to disclose Steward's 2022 audited financial statements to the Securities and Exchange Commission because Steward represented more than 20% of MPT's assets that year.
The watchdog agency requested Steward's financial information from MPT more than 200 days ago in July and has since sent two follow-up letters, according to MPT's annual report. Steward maintained that the documents are not available.
With limited data, analysts told Healthcare Dive it became very difficult to see the full extent of Steward's struggles. Even Stuart Altman, who chaired the Massachusetts regulatory agency charged with overseeing hospital spending between 2012 and 2022, said his board failed to grasp the full extent of Steward's problems.
“I wish I could help you,” he said. “At the Health Policy Commission, we have not heard in any way that they are in trouble. This has only been brought up recently. »