UPDATE: July 16, 2024: Steward Health Care has once again delayed selling its physician group Stewardship Health, days after pushing back the sale timeline of its hospitals in Arizona, according to bankruptcy documents. Bids for Stewardship are now due July 22, a week after the original deadline of July 15.
UPDATE: July 10, 2024: Steward Health Care has delayed an asset sale hearing for its hospitals in Ohio, Pennsylvania, Arkansas and Louisiana indefinitely, according to documents filed in bankruptcy court on July 9. It's the latest in a series of delays for the sales, after an auction for the hospitals was also pushed back. Bids for facilities were due on June 24.
Dive Brief:
- Steward Health Care this week pushed back the auction timeline for the sale of its physician group and about half of its hospitals — less than a week before bids were due.
- The delay impacts the sale of Arizona and Massachusetts hospitals as well as the St. Joseph Medical Center in Texas. The new deadline for bids is July 15, with an auction following July 18 and a proposed sales hearing on July 31. Steward did not change the timeline for the sale of its other assets.
- One expert told Healthcare Dive it was “very possible” Steward would delay the sale timeline again if creditors agreed it was the best business move — especially since the company just re-upped its debtor-in-possession financing, which provides cash to fund operations through restructuring.
Dive Insight:
Since Steward filed for Chapter 11 bankruptcy in May, it has been sprinting to sell its 31 hospitals and physician group, Stewardship Health.
Steward entered bankruptcy proceedings intending to begin the bidding process in June and finalize sales by July — a timeline that Steward’s own attorneys called “not feasible” during court proceedings.
Instead, a U.S. bankruptcy court judge approved a comparatively lengthier sales process that was set to kick off June 24.
Now, the Dallas-based health system is pushing back the timeline yet again. Steward didn’t include a reason for the delay in bankruptcy documents, choosing to cite its right to push the date for “for any reason whatsoever, in their reasonable business judgment.”
The extension may be tied to its ongoing mediation with its landlord, Medical Properties Trust, and Steward’s creditors over how to divvy up the proceeds of asset sales, according to Ross Martin, an adjunct professor at Boston College Law School who specializes in bankruptcy.
Parties are hashing out how much of the sale proceeds will go to MPT, which owns the real estate, and how much will go to Steward or its creditors. In addition, they’re resolving any potential challenges to severing MPT leases, which Martin said could impact bidders’ interest in properties.
“Bidders might say we want clarity on [that result],” Martin said. “We're not going to come in and bid and be in the middle of a fight between the two of you. You go straighten that out.”
Although the mediation sessions kicked off this week, Steward attorneys are not optimistic that the parties will come to an agreement quickly.
“It’s going to take more than one day,” said Ray Schrock, a lawyer for Steward, during a June 13 bankruptcy hearing. “I would love to tell you that it's going to result in a day, but there's no way.”
It’s “very possible” Steward will delay the process even further, according to Martin, especially after the health system just received $225 million in further debtor-in-possession financing to fund operations absent a sale.
The current delay — and possible future delays — may offer a bright side for would-be bidders, by giving them more time to conduct due diligence on Steward assets, according to Nathan Ray, head of healthcare mergers and acquisitions at consultancy West Monroe.
Although Steward attorneys say they contacted hundreds of potential buyers prior to filing for bankruptcy, an expedited bidding process still likely favored regional players with a previous knowledge of Steward facilities, Ray said.
“[The delay] makes a wider range of folks available to potentially think about what they want to do,” Ray said.
