Steward To Hand Over Hospital Operations In Deal With Medical Properties Trust

An initial settlement between the U.S.’s largest hospital landlord, Medical Properties Trust, and its tenant Steward Health Care that will keep nearly two dozen hospitals open by turning over operations to other managers has received initial court approval. 

The new settlement would also mean that about $2B in lease obligations that were in jeopardy under Steward ownership will now be met by the new tenants, according to an announcement from MPT and reporting by Bloomberg. 

“From our initial underwriting of these properties, MPT has strongly believed in the mission critical nature of these hospitals as well as their cash flow potential under the right management,” MPT said in a statement. 

“We believe this global settlement is a positive outcome for all stakeholders. By replacing Steward, we are better positioned to protect the critical function of these facilities for the benefit of their communities and the value of our real estate for the benefit of our shareholders,” it added. 

The settlement calls for bankrupt Steward and its creditors dropping claims against MPT in exchange for MPT releasing Steward from leases it can’t pay. 

Final approval of the deal is expected later this month, according to Bloomberg. 

Steward’s turmoil has impacted healthcare systems across the country. In Massachusetts, state officials have gotten involved in keeping hospitals open that would otherwise have shuttered. The Senate has an ongoing investigation into Steward, its finances and “allegations of poor care, hospital closures and state bailouts aimed at preventing even more shuttering,” Bloomberg reported. 

However, in an unusual turn, Steward’s CEO, Ralph De La Torre, has refused to appear before the committee to testify. De La Torre has said that he is not going before Congress out of concerns that it could compromise the approval of the just-announced settlement as well as create complications in the firm’s bankruptcy process, according to Bloomberg. 

MPT built its business on sale-leasebacks with medical operators, buying their real estate and renting it back to them. It bought Seward in 2016, paying $1.25B for its real estate. Steward expanded its operations following the deal. 

Steward filed for bankruptcy in May, dragged down by $50M in rent that it could not pay. Its financial troubles put dozens of hospitals at risk of closure. It also proved costly for MPT, which tallied its losses as of February at more than $600M.