Medical Properties Trust Inc’s MPW tenant Steward Health Care plunged into Chapter 11 bankruptcy, posing significant financial risks for hospitals across eight states.
State regulators, alarmed by the precarious situation, have intensified scrutiny over the Steward Health Care System. With a network of 30 hospitals catering to 2.2 million patients annually, the chain’s recent struggles have underscored alarming incidents, including the evacuation of an intensive-care unit due to bats, unpaid travel nurses, and equipment shortages.
Unlike typical bankruptcies, Steward’s predicament stands out as it lacks secured financing. The company’s reliance on its landlord, Medical Properties Trust, for liquidity has raised eyebrows.
Despite owing billions, the Wall Street Journal noted that Steward is negotiating a $300 million loan from Medical Properties Trust to sustain its operations through the bankruptcy proceedings.
Steward Health Care’s assurance regarding uninterrupted operations has done little to assuage concerns. Dr. Ralph de la Torre, the CEO, maintains that despite the challenging healthcare landscape, the company has strived for operational success.
In Massachusetts, where Steward represents a significant portion of hospital capacity, regulators and competitors are mobilizing contingency plans. The state is actively seeking new owners for Steward hospitals to safeguard medical access, jobs, and healthcare stability.
The complexity of Steward’s bankruptcy is exacerbated by its intricate ties with Medical Properties Trust, potentially leading to conflicts between creditor interests and regulatory imperatives. Laura Coordes, an expert in hospital bankruptcy, highlights the inherent conflict between regulatory and bankruptcy goals.
Regulatory interventions could translate into diminished returns for creditors like Medical Properties Trust. Medical Properties Trust, already bearing substantial exposure as Steward’s largest Tenant and lender, faces potential losses amid restructuring efforts.
Regulators wield significant influence in bankruptcy proceedings, aiming to safeguard public health and community well-being. Their interventions could shape the outcome of Steward’s restructuring, impacting stakeholders and healthcare delivery.
Monday, Medical Properties Trust approved the funding of $75 million in debtor-in-possession financing and said it has not committed to providing additional funding beyond this amount.
In March, Steward Health Care entered a deal to sell its nationwide physician network to UnitedHealth Group Inc’s UNH Optum Care unit.
Price Action: MPW shares closed at $4.5 on Monday.
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