A Texas bankruptcy judge on Wednesday gave approval to a settlement that will allow Steward Health Care to keep open more than a dozen of its struggling hospitals open while new owners are found.
The hospitals include five in South Florida.
The arrangement temporally transfers ownership to Medical Properties Trust, which owns the hospital land and buildings and leases it to Steward. It also wipes out billions in dollars of debt Steward owes MPT in unpaid rent, according to court documents.
The deal includes appointing interim managers for each of facilities in several states. For the South Florida hospitals, Healthcare Systems of America-Florida has been designated for that role by Steward, according to court documents. The company assumed that role Wednesday.
The hospitals are Coral Gables Hospital, Hialeah Hospital, North Shore Medical Center and Palmetto General Hospital in Miami-Dade County and Florida Medical Center in Broward County.
The agreement comes a day after U.S. Bankruptcy Judge Christopher Lopez approved Orlando Health’s $439 million bid to purchase three hospitals in Florida’s Space Coast region owned by Steward.
That sale involves Melbourne Regional Medical Center and Rockledge Regional Medical Center in Brevard County and Sebastian River Medical Center in Indian River County, as well as certain affiliated Steward Medical Group practices in Florida.
Once the sale closes, Steward would retain $395 million of the sales proceeds in cash and transfer to MPT all proceeds in excess after paying liens and other obligations, court documents said. The closing is scheduled for Sept. 23.
The settlement approved Wednesday was negotiated with Steward’s creditors and MPT. To finance the ongoing hospital operations, an escrow account of more than $9 million, funded by the interim managers, will be maintained by MPT, according to court documents.
Outside of Florida, similar interim management arrangements will be set up at other Steward-operated hospitals all under the same master lease.
Dallas-based Steward Health, once the largest private hospital system in the nation, owns or had owned 31 hospitals in Arizona, Arkansas, Louisiana, Ohio, Pennsylvania, Texas and Massachusetts. The Massachusetts hospitals were owned under a different master lease with MPT.
Healthcare Systems of America also assumed the role of interim manager for two facilities in Texas and another in Louisiana.
“Healthcare Systems of America is devoted to providing these communities the quality health care they deserve while saving the jobs of the employees that give so much to these hospitals and their patients,” CEO Mike Sarian said in a news release. “Making sure that these communities have access to the critical care they need is our top priority.”
Other details of the transition will be provided in the coming weeks, according to the news release.
A final hearing on the plan is set for Sept. 17.
The agreement removes a major hurdle in Steward’s efforts to sell its hospitals. Since filing for Chapter 11 protection in May, Steward has had difficulty shedding assets because of more than $6 billion in debt owed to MPT. Complicating the process were legal squabbles between Steward and MPT over the debt, bidding procedures and claims of interference in sales.
Orlando Health was designated a “stalking horse bidder” by Steward for the Space Coast hospitals after making a qualified offer Aug. 14. Orlando Health was later deemed the successful bidder, and Lopez approved the bid Aug. 22.
Orlando Health is the Central Florida region’s fourth largest employer with nearly 29,000 employees and more than 4,500 affiliated physicians. The system currently operates 17 hospitals and other medical facilities.
The purchase is the latest move in an aggressive expansion plan that includes the Tampa Bay area, where Orlando Health already owns Bayfront Hospital in St. Petersburg. Also, construction began this summer on Wiregrass Ranch Hospital in Pasco County and Lakeland Highlands Hospital in Polk County. Both are scheduled to open in 2026.
Last month, Orlando Health entered a definitive agreement to purchase a 70 percent ownership stake in Tenet Healthcare’s Brookwood Baptist Health in Alabama. The $910 million cash deal includes five Birmingham-area hospitals, as well as affiliated physician practices and operations.
Dallas-based Steward owns or had owned 31 hospitals as the largest private hospital network in the nation.
