Steward Medical Group Bankruptcies: A Closer Look at the Financial Issues

Steward Medical Group's financial struggles have been well-documented, with multiple bankruptcy filings in recent years.

The group's debt burden is staggering, with over $1.5 billion in liabilities as of 2020.

This financial strain has led to significant restructuring efforts, including the sale of several hospitals and clinics.

In 2020, Steward Medical Group filed for Chapter 11 bankruptcy protection, citing significant debt and declining revenue.

The bankruptcy filing revealed that the group had over $1.1 billion in assets, but still faced significant financial challenges.

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Steward has a whopping $1.2 billion in total loan debts and about $6.6 billion in long-term lease payments.

The company owes north of $600 million to 30 of its largest lenders, including UnitedHealth-owned Change Healthcare and Philips North America LLC.

Steward also owes $289.8 million in unpaid compensation obligations, including $68 million to its own workers in unpaid employee salaries.

This is on top of $105.6 million in payments for physician services and $47.7 million owed to staffing agencies.

The company has approximately $979.4 million outstanding in trade obligations, with about 70% being over 120 days past due.

Steward's financial secrecy has been a major point of contention, with Massachusetts Gov. Maura Healey accusing the company of operating in a "black box".

The Steward Medical Group's business practices played a significant role in their eventual bankruptcy. They had a complex network of over 300 clinics and medical facilities across the country.

The company's aggressive expansion strategy led to significant financial strain, with the group's debt exceeding $2 billion. This was partly due to their decision to acquire multiple medical groups at once, which added to their financial burden.

Steward's business model relied heavily on referrals from their own physicians, which created a conflict of interest and led to accusations of self-referral schemes.

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Steward Health Care's executives were paid millions of dollars before the company filed for Chapter 11 bankruptcy.

The private equity company Cerberus Capital Management, which previously owned Steward, generated $800 million in profit from the healthcare system.

This raises questions about the priorities of the company's leadership.

Steward's interim funding is tied to hospital sales, with its landlord, Medical Properties Trust, providing debtor-in-possession financing.

The change in vendors is notable, as Steward had a consortium of six private lenders financing its asset-based loans earlier this year.

Only one lender, Medical Properties Trust, is listed in bankruptcy filings as funding Steward's debtor-in-possession financing.

This change is likely due to Medical Properties Trust's interest in getting its own money back more expediently, as it is Steward's largest tenant and will owe the company at least $6.9 billion in debt and lease obligations by 2041.

Steward must hit aggressive sales milestones to receive additional funding from Medical Properties Trust, including hosting an auction for all non-Florida hospitals by June 28 and all Florida properties by July 30.

Experts are skeptical that other operators would take on Steward's leases at Medical Properties Trust's current rental rates, and material rent concessions may be needed to get the sales done.

Steward has signed a letter of intent to sell its physician group, Stewardship Health, to UnitedHealth, but the deal is not tied to further funding and is still pending review by regulators.

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Steward hospitals will remain open this week, but the state wants them out of Massachusetts. This conflicting message is causing uncertainty among employees.

Some Steward facilities may wind down during bankruptcy proceedings, overseen by the Massachusetts Attorney General's office.

Employees, like a healthcare worker at Nashoba Valley Hospital, are particularly concerned about the fate of their facilities. Nashoba Valley Hospital serves 14 communities and is small compared to other hospitals in Steward's portfolio.

The state will continue to monitor Steward facilities to ensure quality care. They'll also push for the appointment of a patient care ombudsman to represent patients and employees during bankruptcy proceedings.

A website has been launched to offer resources about the bankruptcy process. This is a positive step to keep employees and patients informed.

Sen. Bernie Sanders and Sen. Bill Cassidy have taken a promising first step in addressing private equity's role in healthcare with a recent hearing.

Two bills, The Health Over Wealth Act and the Corporate Crimes Against Health Care Act of 2024, aim to tackle corporate greed in healthcare. These bills have been endorsed by Community Catalyst.

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The proposed bills require private equity-owned healthcare entities to report on debt, executive pay, lobbying, and health care costs to patients. This transparency is a crucial step in holding these entities accountable.

Community Catalyst is also advocating for administrative action at the federal level. They're requesting that the Biden-Harris administration increase transparency on private equity ownership of Medicare providers.

The proposed bills establish a task force to review the role of private equity and consolidation in healthcare. This task force would be based at the Department of Health and Human Services (HHS).

Here are some key proposals from the bills:

Community Catalyst is also pushing for administrative action, including investigating and reporting on the impacts of private equity and consolidation in healthcare.