Delay in sale of 10-state multispecialty radiology provider spurs Chapter 11 bankruptcy filing

A delay in the sale of a 10-state multispecialty radiology provider to UnitedHealth Group has prompted the hospital operator to file for Chapter 11 bankruptcy protection, leaders announced Monday.

UHG’s OptumCare subsidiary recently reached a deal to acquire Dallas-based Steward Medical Group. Part of the larger Steward Health Care hospital system, the physician group spans 450 practices and employs 1,700 providers including nearly 200 radiologists.

Massachusetts authorities in March announced plans to rigorously review the sale amid concerns about the impact it could have on competition. Meanwhile, Steward said it can’t wait any longer and needs to file for bankruptcy protection.

“Steward Health Care has done everything in its power to operate successfully in a highly challenging healthcare environment. Filing for Chapter 11 restructuring is in the best interests of our patients, physicians, employees and communities at this time,” CEO Ralph de la Torre, MD, said in a statement. “In the past several months we have secured bridge financing and progressed the sale of our Stewardship Health business in order to help stabilize operations at all of our hospitals. With the delay in closing of the Stewardship Health transaction, Steward was forced to seek alternative methods of bridging its operations.”

As part of the process, Steward is now finalizing the terms of a “debtor-in-possession” loan from landlord Medical Properties Trust for $75 million. Steward is hoping to secure up to an additional $225 million “upon the satisfaction of certain conditions” acceptable to its lender. The company operates 30 hospitals, and its medical practices span Arizona, Arkansas, Florida, Louisiana, Massachusetts, New Hampshire, Ohio, Pennsylvania, Rhode Island, and Texas. Leaders said their priority is keeping these medical centers and physician offices “open and continuing to serve patients.”

Along with delays in the sale of its physician group, Steward also blamed the “highly challenging healthcare environment.”

“The other primary factor driving this voluntary Chapter 11 case is, in large part, due to Steward continuing to face challenges created by insufficient reimbursement by government payers as a result of decreasing reimbursement rates while at the same time facing skyrocketing labor costs, increased material and operational costs due to inflation, and the continued impacts of the COVID-19 pandemic,” the company said in its statement. “It is Steward’s goal to resolve the Chapter 11 process as quickly as possible, with the help of the court, with a view to the long-term and sustainable financial health of the system.”