Medical Properties Trust Inc. (NYSE: MPW) is facing a challenging situation as its tenant, Steward Health Care, has filed for Chapter 11 bankruptcy. This development has raised significant concerns about the financial stability of hospitals across eight states.
State regulators have heightened their oversight of the Steward Health Care System in response to its precarious financial situation. With a network of 30 hospitals serving 2.2 million patients annually, recent incidents such as the evacuation of an intensive-care unit due to bats, unpaid travel nurses, and equipment shortages have underscored the severity of the situation.
What sets Steward’s bankruptcy apart is its lack of secured financing. The company’s reliance on Medical Properties Trust, its landlord, for liquidity has drawn attention.
Despite owing billions, Steward is reportedly negotiating a $300 million loan from Medical Properties Trust to support its operations during the bankruptcy process, as reported by the Wall Street Journal.
While Steward Health Care has assured that its operations will continue uninterrupted, concerns persist. CEO Dr. Ralph de la Torre acknowledges the challenges facing the healthcare industry but remains committed to operational success.
In Massachusetts, where Steward plays a significant role in hospital capacity, regulators and competitors are actively preparing contingency plans. The state is seeking new owners for Steward hospitals to ensure continued medical access, job security, and healthcare stability.
The complexity of Steward’s bankruptcy is compounded by its close relationship with Medical Properties Trust, potentially leading to conflicts between creditor interests and regulatory mandates. Experts like Laura Coordes highlight the inherent tension between regulatory objectives and bankruptcy proceedings.
Regulatory interventions may impact creditor returns, particularly for Medical Properties Trust, which is already heavily exposed as Steward’s largest tenant and lender. The company faces potential losses amid restructuring efforts.
Regulators wield considerable influence in bankruptcy proceedings, aiming to protect public health and community welfare. Their involvement could shape the outcome of Steward’s restructuring, affecting stakeholders and healthcare services.
On Monday, Medical Properties Trust approved $75 million in debtor-in-possession financing, stating that it has not committed to providing additional funding beyond this amount.
