Steward stays open as it seeks bankruptcy protection

STEWARD HEALTH CARE said early Monday morning that it had filed for Chapter 11 bankruptcy, seeking the legal protection to restructure its debt while leaving its hospitals open.

The company, which operates eight hospitals in Massachusetts and has been sinking under a pile of debt to vendors and its de facto landlord, said it does not expect any interruption to day-to-day operations and that the bankruptcy filing was “a necessary measure to allow the Company to continue to provide necessary care to its patients in their communities without disruption.”

In a middle-of-the-night press release, the company said it was finalizing the terms of “debtor-in-possession financing from Medical Properties Trust for initial funding of $75 million and up to an additional $225 million upon the satisfaction of certain conditions acceptable to Medical Properties Trust.” Medical Properties Trust is the real estate investment trust that owns the land under Steward hospitals.

Steward also said the move will make it easier to transition its Massachusetts hospitals to another operator.

“Steward Health Care has done everything in its power to operate successfully in a highly challenging health care environment. Filing for Chapter 11 restructuring is in the best interests of our patients, physicians, employees, and communities at this time,” Steward CEO Ralph de la Torre said in a statement.

“In the past several months we have secured bridge financing and progressed the sale of our Stewardship Health business in order to help stabilize operations at all of our hospitals,” he said. “With the delay in closing of the Stewardship Health transaction, Steward was forced to seek alternative methods of bridging its operations. With the additional financing in this process, we are confident that we will keep hospitals open, supplied, and operating so that our care of our patients and our employees is maintained.”

Steward announced a deal to sell Stewardship Health, its doctor group, to Optum but that deal has faced opposition in Massachusetts and is facing scrutiny at the Health Policy Commission.

Steward is based in Dallas and its bankruptcy filing was filed in federal bankruptcy court in Texas.