No lease, no hospitals: Landlord plays hardball with bankrupt Steward

If Steward Health Care wants to cancel their lease they have to give up their hospitals, the company’s landlords say as Steward delays sales hearing again.

The drama surrounding Steward Health Care’s decision to close a pair of its Massachusetts hospitals and sell a half-dozen others seemed to be coming to a close recently, after the Dallas-based company and the governor both indicated buyers had been found for those facilities, but the story continues.

On Monday, the company pushed back their sales hearing for those six Bay State hospitals into September and for a seventh time. That hearing, a requirement as the company moves through Chapter 11 bankruptcy proceedings, was originally set for July 2.

“Pursuant to the Bidding Procedures Order, the Sale Hearing for the Debtors’ Hospitals in Arkansas, Louisiana, and Massachusetts, previously scheduled for August 27, 2024 at 1:00 p.m. (Central Time), is hereby adjourned to September 4, 2024 at 10:00 a.m. (Central Time),” the company’s lawyers said in court filings.

The company also, as they have before, noted that they may “further adjourn any Sale Hearing or other dates and deadlines in accordance with the Bidding Procedures Order and the Global Bidding Procedures.”

The night before, lawyers representing the company’s landlords, Medical Properties Trust, pushed back on Steward’s plan to cancel their leases with the landowners.

According to court filings, if Steward wants to cancel their leases, they will have to give up their hospitals in the process.

“It is frivolous for the Debtors to claim that they can continue to operate their businesses in MPT’s property, generate revenue for the benefit of the estate and secured lenders, but not pay any rent. Any order granting the MLI Rejection Motion must instead condition rejection on surrender and on payment of rent and all other lease obligations until surrender,” they wrote.

If MPT were to take over those hospitals, they say, the company is both able and willing to keep them running until they can find new operators, which is more than Steward seems to claim.

“The Debtors’ surrender of the relevant hospitals, as required by law given their decision to reject, does not mean that the hospitals have to close and stop serving patients and communities. MPT is ready and willing to help find replacement operators for as many hospitals as possible and to facilitate a safe and orderly transition to those interim operators. The Debtors, on the other hand, have made clear that they are no longer capable of operating hospitals in a safe and appropriate manner,” they wrote.

According to the property owners, Steward chose to ask the court to reject the “master lease” governing their rent despite MPT advising them against it. In doing so, they chose to put themselves in this circumstance.

“The Debtors have moved to reject Master Lease I, but in doing so have ignored the text of Section 365 and the considerable case law interpreting it. If the Debtors reject Master Lease I, under that statute and those cases, they must live with the consequences: surrender of the premises, and payment of rent and other lease obligations prior to such surrender,” they wrote.

Last week, an attorney representing the company told bankruptcy Judge Christopher Lopez that they were “very close to the finish line” but that they hadn’t yet “executed asset purchase agreements related to the six hospitals.”

“We hope to be back before the court in very short order in connection with the Massachusetts hospitals,” attorney Candace Arthur said.

That came after Gov. Maura Healey, on August 16, said that buyers had surfaced for most of the company’s Bay State facilities.

Healey suggested that Lawrence General Hospital would buy the pair of Holy Family Hospitals in Haverhill and Methuen and that Rhode Island-based Lifespan would buy Taunton’s Morton Hospital and Fall River’s Saint Anne’s Hospital. St. Elizabeth’s Medical Center, in Boston, and Good Samaritan Medical Center, in Brockton, would go to Boston Medical Center, provided the state succeeds in their plan to take the land under St. Elizabeth’s via eminent domain, Healey said.

Carney Hospital, in Boston’s Dorchester neighborhood, and Nashoba Valley Medical Center, both of which Steward also operates, are scheduled to close by Saturday. Their closure has been approved by Judge Lopez as in Steward’s best business interests as they attempt to settle $9 billion in outstanding debt obligations.

A Steward spokesperson did not immediately return a late filed request for comment.

Governor Maura Healey (Matt Stone/Boston Herald, File)

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