Judge sets hospital auction dates as Steward scrambles to find cash

A federal judge Monday ordered Steward Health Care to sell its Massachusetts hospitals at auction by the end of the month, and to seek additional financing to keep the company operating during bankruptcy.

The company's 31 hospitals across eight states will be offered for sale in a pair of auctions, both slated to wrap up this summer.

The first round of bidding will include Steward’s doctors’ group, known as Stewardship Health, and a group of hospitals including seven Massachusetts locations. (An additional Massachusetts location, Norwood Hospital, is under construction and is not listed as part of the auction.)

Bids for the first set of hospitals are due June 24, and an auction will be held June 27, according to the plan approved by the judge.

“We’re not picking a winner today, we’re picking a process that will allow parties' rights and provides transparency,” Judge Christopher Lopez said during the hearing in U.S. Bankruptcy Court in Houston.

“Today is just step one in a process — and I understand that — but an important one,” he added. Lopez will consider the winning bids at a hearing on July 11.

Steward plans to hold a second auction in August for hospitals in Florida and Texas.

Potential buyers will submit bids for Steward’s hospital operations. They also will have to negotiate terms for the hospital properties, which are owned by an Alabama real estate firm called Medical Properties Trust, or MPT. The company's executives have told investors they hope new tenants will pay rent at similar levels to Steward, but they have not ruled out the possibility of property sales.

It’s unclear how many bidders will emerge, and whether all Steward hospitals will in fact draw buyers. Andrew Troop, a lawyer representing Massachusetts, noted that any hospital sales still will be subject to state laws.

“All of these sales are going to require some kind of regulatory approval,” he said.

Steward's locations in Massachusetts include Holy Family Hospital in Methuen and Haverhill, Nashoba Valley Medical Center in Ayer, St. Elizabeth’s Medical Center in Brighton, Carney Hospital in Dorchester, Good Samaritan Medical Center in Brockton, Morton Hospital in Taunton and Saint Anne’s Hospital in Fall River. Norwood Hospital has been temporarily closed since 2020.

Steward filed for Chapter 11 bankruptcy protection last month amid a mounting burden of debt. The privately-held, for-profit company is staying afloat with $75 million in funding from MPT. Steward officials are seeking another $225 million to get the company through the bankruptcy process, but they said MPT has not committed to any more funding, and they are in discussions with other potential lenders.

Without additional help from lenders, Steward officials have said they will run out of cash by June 14.

Steward’s representatives asked the judge to authorize them to pay certain expenses, including an estimated fee of $6.75 million, to attract and secure new lenders. Lopez approved the request, despite objections from a previous group of lenders.

Steward officials told the court they hope to strike a financing deal within the next week.

“We, for the first time, have several real, tangible opportunities for financing,” said Ray Schrock, one of Steward’s lawyers.

Schrock said Steward officials are meeting daily with potential buyers for their hospitals. He said they’re concerned about retaining physicians during the bankruptcy and restructuring process.

“Our competitors are circling,” he said. “Especially through a sale process, you have to keep people motivated and know that they have a future at Steward or with an acquirer.”

Schrock said Steward is “very focused” on selling its physician network to Optum, a division of UnitedHealth Group — or another buyer — and the company is in talks with the Department of Justice about antitrust concerns. Steward is also in discussions with various state and federal agencies about “confidential investigations,” Schrock said.