Bankrupt Steward Demands State Funds to Keep Hospital Open, Pennsylvania AG Says
(Bloomberg) -- Pennsylvania’s top law enforcement officer accused bankrupt hospital operator Steward Health of neglecting one of its hospitals and threatening to close the facility if authorities don’t immediately provide $1.5 million in government funding.
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Pennsylvania Attorney General Michelle A. Henry said in a Thursday court filing that her office is considering Steward’s request to provide Sharon Hospital support but requires detailed financial information and more time to secure approval to do so.
Steward, which has already made plans to close a few other hospitals, said it will send a notice of its intent to close the Pennsylvania facility if it doesn’t get $1.5 million in state funding by Friday, Henry said. Pennsylvania first learned of Steward’s request for financing on July 31, according to Thursday’s filing.
Steward bankruptcy lawyer Candace Arthur told a bankruptcy judge Thursday that its request for funding from the state isn’t intended to be a threat but does reflect the fact that the company can’t afford to continue funding hospitals that are losing money. Steward is working to find new owners for its medical facilities, including for those hospitals in which they’ve filed notices of potential closing, Arthur said.
The company’s request for funding emerged after Massachusetts provided a $30 million financial lifeline for six hospitals located in that state. Members of attorney general’s office have been working “around the clock” on efforts to transition Sharon Hospital to a new owner and has located a potential purchaser, Meadville Medical Center, Henry said.
Sharon Hospital is a 163-bed acute care hospital located between Pittsburgh and Cleveland, according to Thursday’s court filing. The hospital has more than 750 employees and is the largest employer in Mercer County, Pennsylvania, the attorney general said.
Selling Sharon Hospital will require substantial funding, Henry said. The facility requires “an enormous amount of deferred maintenance due to the debtors’ gross neglect, incompetence, and mismanagement,” she said. The attorney general alleged in Thursday’s court filing that the hospital “has been badly neglected” and accused Steward of breaching “their commitments to patient care and community care.”
Pennsylvania authorities have asked the bankruptcy judge overseeing Steward’s Chapter 11 case to enter a court order preventing the company from threatening to close Sharon Hospital. Although it’s possible a sale to Meadville Medical Center will not be consummated, Henry said state authorities have “worked out” possible funding.
State funding would carry restrictions and could only be used on patient care, payroll, facility maintenance and core hospital operating expenses, according to Thursday’s filing.
Steward filed Chapter 11 in May and has been working to sell its hospitals to new owners. The company operates about 30 hospitals in Florida, Massachusetts, Texas and other states. Earlier this week, Steward sued its landlord Medical Properties Trust Inc. of interfering with a court-approved plan to sell its hospitals. MPT has denied the allegation.
The bankruptcy case is Steward Health Care System LLC, 24-90213, US Bankruptcy Court for the Southern District Court of Texas.
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