Steward Fails To Spark Competitive Auction During First Round Of Hospital Sales

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Dive Brief:

• Steward Health Care is canceling its auction for its first round hospitals, which include facilities in Ohio, Pennsylvania, Arkansas and Louisiana, after failing to drum up competition for properties, according to bankruptcy documents filed Sunday.
• The health system found potential buyers for two facilities, according to court filings. AHS South LLC seeks to purchase Glenwood Regional Medical Center in Louisiana for $500,000, and Pafford Health Systems has bid on Arkansas-based Wadley Regional Medical Center for $200,000. While the new owners would assume the facilities’ existing liabilities, they would be let out of rental agreements with Steward’s landlord, Medical Properties Trust.
• Steward’s Ohio and Pennsylvania hospitals failed to lure any buyers during the months-long marketing process.

Dive Insight:

Since filing for Chapter 11 restructuring, Steward’s team has been racing to find buyers for its 31-hospital portfolio, as well as its physician group, Stewardship Health.

Steward attorneys say they have reached out to hundreds of possible buyers to publicize the sale process and pitch the facilities as attractive, high-value assets. However the sales timeline has been pushed back multiple times and would-be bidders that were once thought to be certain players in the auction process — like UnitedHealth’s Optum — have publicly dropped out in recent weeks.

Sunday’s filing reveals how much Steward may be struggling to make sales. 

Steward received no qualified bids for its Ohio and Pennsylvania hospitals: Trumbull Regional Medical Center, Hillside Rehabilitation Hospital and Sharon Regional Medical Center.

The filing says Steward will later announce an alternative approach to dealing with these facilities. Previously, Steward’s debtor-in-possession financiers — who provide capital for the health system during restructuring — said Steward would have to put a transition plan in place, which could include closing facilities, within 10 days of failing to receive a qualified bid.

The Pennsylvania Office of the Attorney General and the Christian H. Buhl Legacy Trust, a watchdog organization in the state, may have foreseen this auction outcome. Last week, the parties filed a joint objection against a possible closure of Sharon Regional Medical Center, writing, “it is important for all parties to understand in advance that hospitals cannot quickly, or unilaterally, be closed in Pennsylvania.”

The state requires 90 days notice and a closure plan.

“The Debtors’ obligation to obtain Commonwealth of Pennsylvania approval of its closure plan – if and when closure is contemplated – is not limited by the filing of the Debtors’ bankruptcy cases,” the objection said.

Steward’s problems are further complicated by recent federal investigations. The Department of Justice has launched a probe into Steward’s affairs abroad, while a U.S. Senate subcommittee will vote Thursday whether to subpoena CEO Ralph de la Torre, possibly launching a Senate investigation into Steward’s bankruptcy.