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Monday, September 30, 2024

Judge tells sides to close Steward hospital deals, before they expire

Lawyers representing the various parties with skin in the Steward Health Care game met for a rare weekend bankruptcy hearing, when they made clear they are working hard ahead of a looming deadline Monday to close the deal, but were not there yet.

“Unfortunately, there has not been a consensual resolution,” attorney David Cohen told the court on behalf of Steward.

Steward’s bankruptcy counsel, lawyers representing its lenders, landlords, various debt holders, and the Commonwealth of Massachusetts, spent hours in court with bankruptcy Judge Christopher Lopez on Sunday, and even retreated into recess twice to attempt compromise out of ear shot, all in an effort to provide the judge an answer he can be happy with before court again begins on Monday.

Monday is the day, Cohen reminded the court, that the asset purchase agreements for the sale of Steward’s hospitals will expire. The agreements are required, he said, to finish the deals he had also just warned were not yet done, despite the less than 36-hour window to wrap things up.

“If we fail to close, each of the buyers could terminate the APA,” Cohen said.

No buyers means no money to keep the hospitals going, Cohen said, and he cautioned there was still a lot of negotiating left to do.

The company that owns the land under the hospitals, Cohen told the judge, Massachusetts and other interested parties may have objections that still needed to be dealt with. The lawyers were committed, he said, to working through the night to get things done by morning, but the judge may have to just order the sale to go forward.

“I’m not here to call anyone’s bluff or play a game of chicken with anyone,” Lopez said in response. “There’s real stakes here, and we need to figure this out. And I’m not interested in blame, I’m not interested in any of that. I just want to know what people think the right solution is, and what they think I can and can’t do. So let’s have that conversation.”

The deal on the table will, in short, see six Massachusetts operators transferred two-apiece to a trio of new operators.

The problem, also said briefly, is money.

Steward doesn’t have any that’s isn’t already spoken for, and that’s why the company is in bankruptcy proceedings.

The company is so cash strapped, that according to attorneys for the Bay State, Massachusetts has so far put up $74 million keeping the lights on at some of the hospitals while the transactions transpire. That money is running out.

“The funding for the Massachusetts hospitals, that was provided by the Commonwealth, only runs through the end of September,” he said. “If we don’t close the sales tomorrow, the debtors will have to go back to the Commonwealth with a request for additional funding. We’ve gotten no sense that any more funding will be forthcoming.”

Massachusetts has already put up a lot of cash, but so have the company’s lenders, who say they’re being railroaded into giving up their investment.

“We are disappointed that we were not able to reach a reasonable agreement,” Andrew Leblanc said on their behalf. “We reached out to the parties with a construct that would have deferred today’s hearing, and allowed the sales to close tomorrow.”

“Unfortunately, these efforts have been dismissed out of hand. We’ve received no settlement offer from any party. We’re simply being asked to walk away, walk away from our collateral,” Leblanc said.

Steward is selling its Massachusetts properties as part of Chapter 11 proceedings, which it began in May.

The company, which operated more than 30 U.S. hospitals across half-a-dozen states, is exiting the hospital business entirely and off-loading its healthcare facilities.

Six in the Bay State sold to new operators through auction. St. Anne’s Hospital in Fall River and Morton Hospital in Taunton sold to Rhode Island-based Lifespan for $175 million. Lawrence General Hospital bought Holy Family Hospital facilities in Methuen and Haverhill for $28 million. Good Samaritan Medical Center in Brockton and St. Elizabeth’s Medical Center in Brighton are both going to Boston Medical Center, in a deal worth $140 million.

Not every hospital made it through the auction process. Two facilities — Carney Hospital, in Dorchester, and Nashoba Valley Medical Center, in Ayer — closed this summer after no deal for those properties came to fruition.

Massachusetts Gov. Maura Healey on Friday announced that her administration had seized control of St. Elizabeth’s Medical Center from Steward’s former landlord there, the Wall Street private equity firm Apollo Global, as part of a plan to turn the hospital over to Boston Medical Center.

Secretary of Health and Human Services Kate Walsh said she is confident the deals will go through.

“Bankruptcy is always a long and complicated process. The Healey-Driscoll administration remains confident that these sales will be finalized soon and the five Steward hospitals will transition to new operators,” she told the Herald in a statement.

Steward Health Care CEO Ralph de la Torre, also on Friday, announced he would be stepping down after refusing to testify before a U.S. Senate panel over how his health care company went belly up while he apparently made hundreds of millions in profit, which earned him a referral to a federal prosecutor for a criminal contempt charge.

“Just give me something I can sign,” Lopez said on Sunday, urging the lawyers to get the deal done.

Gov. Maura Healey (Photo By Matt Stone/Boston Herald, File)
Gov. Maura Healey (Photo By Matt Stone/Boston Herald, File)
Steward-owned Holy Family Hospital in Methuen. (Stuart Cahill/BostonHerald, File)
Steward-owned Holy Family Hospital in Methuen. (Stuart Cahill/BostonHerald, File)

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