Dive Brief:
- Steward Health Care has signed definitive agreements to sell four Massachusetts hospitals and is close to finalizing agreements to transition two other facilities to new operators, according to documents filed in U.S. federal bankruptcy court Thursday.
- Rhode Island-based Lifespan Health System will pay $175 millionfor the operating licenses, buildings and land associated with St. Anne’s Hospital in Fall River and Morton Hospital in Taunton,according to the purchase agreement.Massachusetts-based Lawrence General Hospital plans to take over both Holy Family Hospital campuses in Methuen and Haverhill for approximately $28 million.
- Steward is “continuing to work to finalize” deals to sell St. Elizabeth’s Medical Center and Good Samaritan Medical Center to Boston Medical Center, according to a press release Thursday.
Dive Insight:
Steward entered Chapter 11 restructuring in May and hoped to quickly sell off its 31-hospitals and other assets, including a major physician group, to satisfy $9 billion in outstanding debt and generate liquidity.
However, the Dallas-based health system’s asset sales have been complicated by the varying levels of profitability and desirability of its hospitals, Steward’s attorneys have said in court.
Two Steward hospitals in Massachusetts —Carney Hospital in Boston and Nashoba Hospital in Ayer — will close this weekendafter failing to attract a qualified bidder at auction, in part due to their lack of profitability and low patient volumes. The closures will trigger layoffs of over a thousand workers.
In Ohio, Steward plans to close two more hospitals —Trumbull Regional Medical Center and Hillside Rehabilitation Hospital in Warren, Ohio. Local stakeholders are currently appealing those closures.
In court this month, Steward’s attorneys told Judge Christopher Lopez that they’re racing against the clock to secure deals for remaining hospitals before cash reserves run out. Otherwise, Steward might be forced to close more facilities,the lawyers warned.
The Massachusetts hospital deals could indicate that Steward,its landlord Medical Properties Trust and their lender Apollo Global Management have made progress in negotiating how to divvy up proceeds from hospital sales between those that own operating licenses and those that own real estate.
Throughout the summer, hospital sales hearings have been scheduled just to be postponed as Steward attorneys reported to the court that the parties remained deadlocked on terms. Sales hearings in Massachussets, for example, have been rescheduled seven times.
The Lifespan deal terms offer a glimpse into how those negotiations might be going. Of the $175 million purchase price, MPT will take home $166.8 million.
In the case of Lawrence General, Steward could walk away with almost nothing. While Lawrence General is set to pay $28.02 million in addition to working capital for the Holy Family hospitals, one real estate firm affiliated with MPT could take up to $28.01 million, according to the filing.
Lawrence General and that firm, called ACREFI CS U,have also signed another controversial MPT lease for Holy Family, the filing reveals.MPT did not respond to a request to comment by press time about new lease terms.
The definitive agreements could help ease nerves in a state that has held rallies since the spring to preserve care accessat Steward facilities.
Notably, the deals would transition Steward’s Massachusetts hospitals back to nonprofit status — a goal Massachusetts Gov. Maura Healey, as well as several public health experts familiar with the Steward saga, have supported since the onset of the crisis.
Yet final terms with Boston Medical Center remain outstanding, and all deals must be approved at a sales hearing slated forSept. 4.
Massachusetts could also take on additional financial burden to keep the hospitals afloat through the transition process.
Steward is asking the state to pony up $42 million in funding to support operations, as well as any accrued payroll obligations prior to new operators taking over Steward facilities,according to Thursday’s filing.
Massachusetts already gave Steward $30 million in August.
The state is also financially supporting buyersto help with repairs,according to reporting from WBUR. Prior to declaring bankruptcy, Steward had allegedly underinvested in technology, equipment and repairs. To get hospitals up to speed, it could cost the administration — and taxpayers — $700 million by 2027, according to the outlet.
Steward has also made recent progress on sales in other states.
On Wednesday, Steward said it was moving forward with Orlando Health as its bidder for its three Space Coast Florida hospitals — Melbourne Regional Medical Center, Rockledge Regional Medical Center and Sebastian River Medical Center — for $439 million. A sales hearing is scheduled for Sept. 10.
Orlando Health was declared the stalking horse bidder on Aug. 14, setting the floor price for auction. However, no other bidders came forward prior to the Aug. 16 deadline, according to the court filing.
In Pennsylvania, state attorneys general have a Friday deadline to offer Steward funds to keep operating Sharon Hospital through September, according to an order from Judge Lopez. Otherwise, Steward may file a closure notice today or over the long weekend.
