Alleged financial woes lead to work stoppage

TEXARKANA, TX – Work has apparently stopped on construction of a new $227 million Wadley Regional Medical Center facility in Texarkana, TX. That’s according to a report in Monday’s edition of the Texarkana Gazette. Wadley is part of Steward Health Care system and operates the Wadley Regional facility in Hope.

Media reports in the regions where Steward has holdings across the country have reported apparent financial issues, including in Texas and Massachusetts. On February 2nd, a Steward operation, the Beaumont campus of The Medical Center of Southeast Texas ended all hospital-related services.

Steward Health Care broke ground in September 2021 on the new Wadley Regional Medical Center in northwest Texarkana. The 400,000 square-foot medical campus has been forecast to open in the summer of 2025.

Wadley Regional Medical Center has served the Texarkana community for nearly 125 years. The new $227 million facility – will feature a Medical Office building and offer a full range of hospital services including a 24/7 emergency room with expanded bed capacity, orthopedics, cardiovascular area, neurosurgery, maternity care, and other outpatient services. The hospital will have 123 beds with the ability to expand to 291.

Just after the new year, Quest Diagnostics, the world’s leading provider of diagnostic information services, announced it has acquired select assets of Steward Health Care System’s outreach laboratory services business serving patients and physicians in Pennsylvania and Ohio.

Quest has a long-standing relationship with Steward that includes providing professional lab management services and acquiring select outreach lab assets.

About the same time, Medical Properties Trust, Inc. announced plans to accelerate its efforts to recover uncollected rents and outstanding loan obligations from Steward Health Care System and related processes designed to significantly reduce its exposure to Steward.

As disclosed in the Company’s third quarter 2023 Form 10-Q, Steward delayed paying a portion of its September and October rent to MPT. Despite its obtaining additional working capital financing and selling its non-core laboratory business in the fourth quarter of 2023, Steward recently informed MPT that its liquidity has been negatively impacted by significant changes to vendors’ payment terms. As a result, Steward has continued to make partial monthly rent payments, and total unpaid rent under its consolidated master lease with MPT is approximately $50 million as of December 31, 2023 (exclusive of approximately $50 million that was previously deferred and not currently payable related to the Norwood Hospital, which is under reconstruction).

As part of this plan, Steward is pursuing several strategic transactions, including the potential sale or re-tenanting of certain hospital operations as well as the divestiture of non-core operations. Further, Steward has committed to seeking a third-party capital partner for its managed care business, net proceeds from which will be used in part to repay all outstanding obligations to MPT. Steward has also intensified measures to improve collections and overall governance, including establishment of a transformation committee comprised of newly appointed independent directors.

To protect the value of MPT’s assets and hospital operations while Steward executes on its strategic plan, MPT has agreed to fund a new $60 million bridge loan secured by all MPT’s existing collateral plus new second liens on Steward’s managed care business, subordinate only to Steward’s ABL lenders.

Steward Health Care System is the country’s largest physician-led, minority-owned, integrated health care system. Based in Dallas, Steward currently operates 33 hospitals across Arizona, Arkansas, Florida, Louisiana, Massachusetts, Ohio, Pennsylvania, and Texas.

In 2017, Steward Health Care LLC and IASIS Healthcare LLC announced they have entered into a definitive agreement to merge their operations. The transaction made Steward the largest private for-profit hospital operator in the United States with 36 hospitals across ten states – including Wadley in Hope.

In 2020, Steward Health Care structured a recapitalization transaction with Cerberus Capital Management that transfers controlling interest of the company to a management group of Steward Health Care physicians led by the Company’s CEO and founder, Dr. Ralph de la Torre. With the transaction, Steward Health Care became the largest physician-owned and operated health care system in the United States. Wadley Regional Medical Center in Hope was also part of that transaction.