(Bloomberg) -- Massachusetts paused a $30 million lifeline to Steward Health, which is closing two hospitals and warned it could soon be forced to move patients if it can’t overcome obstacles in its effort to sell six other medical centers.
Steward has binding bids but said Wednesday sales haven’t been finalized because of issues it must work out with potential buyers and hospital landlord Medical Properties Trust Inc. Massachusetts authorities won’t extend taxpayer-backed financing until the deals are signed.
The dynamic described by lawyers during a Texas bankruptcy hearing Wednesday creates a potential impasse in Steward’s bankruptcy at a time when the failed for-profit hospital operator is tight on cash and facing congressional scrutiny.
Steward lawyer Ray Schrock said the company and its financial stakeholders will hold negotiations in New York in an effort to resolve the problem. Those talks would include MPT and affiliates of Macquarie Asset Management, which jointly own a master lease for the two hospitals. MPT and Macquarie’s lender, Apollo Global Management, should also attend, Schrock said.
If successful, Schrock said Steward could come back within the next week to seek court permission to start tapping the $30 million financing. But if Steward is unable to obtain financing, the company may need to move patients to other medical facilities, Schrock said.
“That is not where anyone wants to be, I think that’s a nightmare for everybody,” he said.
‘Significantly Impaired’
Steward hospitals located in the state incur roughly $114 million in rent obligations annually, according to court documents.
Steward said bids its received represent a fraction of the hospitals’ rent obligations and that MPT and Macquarie’s real estate investment in the Massachusetts hospitals “is significantly impaired.”
Judge Christopher Lopez on Wednesday granted Steward’s request to reject the master lease for the Massachusetts hospitals. Steward said in court papers that bids its received “are significantly less than the value of the real estate implied by the rent obligations” and no potential purchaser has offered to assume the master lease.
Judge Lopez also said he would grant Steward’s request to close two Massachusetts hospitals that didn’t net “viable” bids. Carney Hospital in Dorchester and Nashoba Valley Medical Center located in rural northeastern Massachusetts are acute care hospitals that serve patients on Medicare and Medicaid, a labor union representing its nurses said in court papers.
The closing of Nashoba Valley Medical Center “could result in the tripling or quadrupling of local EMT travel time in responding to calls for help,” the Massachusetts Nurses Association said. Carney, meanwhile, is a “safety net” hospital serving neighborhoods with large Black and Hispanic communities, the union said.
The bankruptcy case is Steward Health Care System LLC, 24-90213, US Bankruptcy Court for the Southern District Court of Texas.
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