The agreement with Medical Properties Trust allows the hospital operator to continue digging out of financial turmoil.
Steward Health Care has overcome a significant hurdle as it attempts to make its way back from bankruptcy.
The troubled health system reached a settlement with its landlord Medical Properties Trust that will absolve Steward of billions of dollars in outstanding debt and pave the way for it to sell its remaining hospitals.
The deal results in MPT waiving its claim of $7.5 billion, including $6.6 in future rent obligations, and allowing Steward to keep $395 million from the sale of three Florida hospitals to pay its lenders and creditors.
In return, Steward will drop its lawsuit against the real estate company, which alleged that MPT had interfered in its sales to improve its position.
U.S. Bankruptcy Judge Christopher Lopez approved the agreement on the heels of Steward selling Rockledge Regional Medical Center, Melbourne Regional Medical Center, and Sebastian River Medical Center to Orlando Health for $439 million. Final approval of the settlement by Lopez is expected to come later this month.
By coming together with MPT, Steward will be able to keep most of its hospitals open. The agreement involves 23 hospitals that will remain operational, including 15 facilities in Arizona, Florida, Louisiana, Ohio, and Texas that already have four new tenants taking over on an interim basis, effective September 11.
MPT expects to bring in around $160 million in annual rent payments upon stabilization in the fourth quarter of 2026, which represents 95% of what Steward would have owed in rent in Q4 2026.
While the new tenants take control, MPT has agreed to defer cash rent payments for the 15 hospitals until the end of the year.
Steward filed for Chapter 11 bankruptcy and put all 31 of its U.S. hospitals on the market in May.
As the hospital operator attempts to turn around its financial instability, its CEO, Ralph de la Torre has come under fire for his mismanagement.
After being subpoenaed to testify at a hearing on Capitol Hill last week, de la Torre declined to appear. Senators are now expected to hold the CEO in contempt when they vote on September 19, allowing for a criminal prosecution of de la Torre.
Jay Asser is the CEO editor for HealthLeaders.
KEY TAKEAWAYS
Following a contentious battle, Steward Health Care and Medical Properties Trust reached agreement on a settlement that will forgive the health system of $7.5 billion in obligations while dropping the lawsuit against the landlord.
Fifteen of the 23 hospitals involved in the deal immediately have new tenants on an interim basis that will support the facilities, preventing them from closing.
Steward CEO Ralph de la Torre is expected to be held in contempt by lawmakers this week after being subpoenaed and declining to testify at a hearing.