Steward Health Care’s landlords fire back at hospital operator over sale delays

Steward Health Care’s landlords are firing back in court after the hospital operator accused them of interfering with their efforts to transition their healthcare facilities to new owners.

Dallas-based Steward, on Monday, told a Southern Texas district bankruptcy court that Medical Properties Trust had placed itself between them and potential bidders for their 31 hospital properties, and that the land owners have been putting their thumbs on the scales to increase the value of interests in the real estate under the hospitals.

However, according to lawyers representing Medical Properties Trust, Steward’s inability to secure bidders or find favorable terms for the sale of their hospitals lies with the health care provider, not the company they rent from.

“The Debtors can be expected to lash out at MPT and try to blame MPT for the poor progress of these cases and the delays in the sale process,” the lawyers wrote. “That narrative is not just irrelevant as a legal matter — it does not change the fact that the Debtors are tenants whose rights are determined by Section 365 of the Bankruptcy Code — but it is also fundamentally inaccurate.

“In reality, it is the Debtors who have prevented sales from going forward, not to protect public health or the like but to attempt to force MPT to transfer real-estate value to the Debtors and their lenders as the price of allowing sales to go forward that are necessary to avoid closures,” they added.

According to Steward’s attorneys, MPT has “attempted to undermine” the sales process by communicating with the companies who might bid on Steward properties, and without the health care operator’s written consent.

MPT, Steward’s lawyers say, is advising bidders “to allocate all of the value of their bids to MPT’s real estate.” MPT also, Steward says through its legal team, is “attempting to pressure” Steward into siphoning “all value” from the hospitals to their landlords.

Steward has asked federal bankruptcy Judge Christopher Lopez for “entry of an order allocating the amount of value attributable to hospital operations and other estate assets, on one hand, and hospital real estate, on the other.”

Steward, which filed for Chapter 11 protections in May, operates eight hospitals in Massachusetts.

Gov. Maura Healey announced last week that the state will take St. Elizabeth’s Hospital in Brighton by eminent domain until it can be placed under the Boston Medical Center label along with Good Samaritan Medical Center in Brockton.

Other sale arrangements announced Friday would see Lawrence General Hospital take over Holy Family Hospital campuses in Haverhill and Methuen. Lifespan system, a Rhode Island-based company, would buy Morton Hospital in Taunton and St. Anne’s Hospital in Fall River.

Two of Steward’s hospitals, Carney Hospital in Dorchester and Nashoba Valley Medical Center in Ayer, were not sold and are instead scheduled to close at the end of August.

It’s worth noting, MPT’s lawyers told the court, that none of the sales are finalized yet, and they aren’t the one’s standing in the way.

“As of this filing, the Debtors have not obtained approval for any hospital sales, and they have repeatedly delayed the sale processes. As the Debtors acknowledged in court on July 31, they are ‘holding’ up the sales, despite the risks involved, because they want more money than the bidders offered for hospital operations,” MPT’s lawyers wrote.

Steward’s ask of the judge, that the health care company get to include the land they sold to MPT in their sales offers, is also not part of the deal, according to MPT.

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“The Global Bidding Procedures, accordingly, do not give the Debtors authority to sell MPT’s property,” they wrote.

Judge Lopez is scheduled to review Steward’s hospital sales during a hearing currently set for Thursday. Steward has delayed that sales hearing at least five times.

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