Objection to hospital closures is filed

Group wants time to submit bid, closure deadline extended to November

Attorneys for the group trying to fend off closure of Steward Health Care's two local hospitals and other satellite facilities have stepped into the company's bankruptcy case, objecting to the decision to close the sites.

A motion Tuesday -- one day ahead of the deadline to object to the closure notices filed Aug. 21 -- asks the court to give the group 15 days to submit a bid and / or extend Steward Health's closure deadline for Trumbull Regional Medical Center, Hillside Rehabilitation Hospital and connected sites from Sept. 20 to Nov. 20.

Steward Health, the motion states, "will not be prejudiced" by the requests, but closing the facilities Sept. 20 "will certainly prejudice the health care needs" of patients and the community and their closures "will create an irreparable harm to the rural areas of this community as there are no other hospitals in the near vicinity."

The objecting parties in the filing are Warren, Trumbull County, Western Reserve Health Education, Inc. and Warren City Hospital Inc., the nonprofit that's leading the effort to acquire the hospitals' assets and operate them.

The motion claims a court order June 3 that approved bidding and sale procedures for the local facilities that gave 21 days for parties to submit bids "was not sufficient or equitable" to meet the numerous requirements of Steward Health, its landlord, Medical Properties Trust, or Cain Brothers, the investment banking firm hired by Steward Health to market and sell some of its hospitals.

Also, those included in Tuesday's objection and other interested bidders were "hindered," in part, the document states, because guidance from MPT and Cain Brothers "led to a negotiation impasse."

"Both parties were requiring the bidder to resolve the issue with the other party before proceeding, creating a catch 22 situation," the filing states. "Further, negotiations with MPT have often been marked with weeks of a lack of responsiveness to requests for contact or resolution."

The motion also states the Trumbull County hospitals and facilities "are in subpar condition" and suffer from "millions of dollars in deferred maintenance, and MPT, which is based in Birmingham, Alabama, has tried to change the assets under the lease during negotiation.

"The original lease listed specific property included during negotiations. Subsequently, MPT attempted to diminish the leased assets by excluding certain outpatient facilities that are integral to providing healthcare to the community," the motion states. The result would dramatically reduce the hospital valuation. Further, the estimated $5 million earnings reduction could lead to a cash flow deficit."

The motion also claims, when it comes to Steward Health and Cain Brothers, that Western Reserve Health Education -- a medical education and residency training program affiliated with Trumbull Regional, Hillside and Sharon Regional Medical Center -- and other bidders were impeded because, in part, the local assets have been fragmented, "making it extremely difficult to value."

Also, other assets that "add value to a normal operation," like real estate, working capital, physicians and outpatient lab, "have all been sold," and the bid process "has been difficult and on an accelerated and unrealistic time frame," the filing states.

It also states Steward and Cain Brothers "have not been transparent in the sale process or have not communicated in a meaningful way" with the bidders and / or those filing the objection, "including the disclosure of closures."

Emails seeking comment were sent late Tuesday afternoon to investor relations media contacts with MPT and KeyCorp. Cain Brothers is a division of KeyBanc Capital Markets Inc., a wholly-owned broker / dealer of KeyCorp and an affiliate of KeyBank National Association.

On Friday, Trumbull County commissioners and eight members of Warren City Council approved conditional letters of support to commit up to $3 million each toward the effort to stave off closure.

It's estimated there needs to be an initial investment of between $20 million and $30 million to acquire the health care centers' assets and keep the facilities operational for at least 90 days.

Other sources of possible help, from individual donors to foundations to banks to the state, also were being sought for funding help, but they, according to Trumbull County Commissioner Denny Malloy, want to see a credible business plan before committing.

He said Monday that Delta Health, the hospital and health care management firm consulting the local group, is targeting today to have the plan filed with the bankruptcy court in Houston.

There would be more than 760 who would lose their job at Trumbull Regional and nearly 170 at Hillside should the facilities close, according to documents filed with the Ohio Department of Job and Family Services. The income tax hit to Warren would be about a $1.5 million loss.

OTHER COURT DEVELOPMENTS

Medical Properties Trust in a filing Sunday said it won't stand in the way if Steward Health wants out of a master lease -- one that applies to local operations -- but the company needs to "abide by the law governing rejection."

And that means Steward Health should be "prepared to surrender the properties immediately" on the date of rejection and pay full rent until the rejection is effective, the filing states.

"It is frivolous for the debtors to claim that they can continue to operate their businesses in MPT's property, generate revenue for the benefit of the estate and secured lenders, but not pay any rent," the filing states.

The filing is in response to a request Steward Health made Aug. 16 to U.S. Bankruptcy Court Judge Christopher M. Lopez to liberate the company from what it called "expensive and burdensome" lease agreements.

Steward Health argued doing so would allow it to more easily sell Trumbull Regional, Hillside, Sharon Regional and other facilities in Louisiana, Arkansas, Arizona, Texas and Florida.

In the latest filing, Medical Properties Trust states surrendering the hospitals "does not mean the hospitals have to close and stop serving patients and communities."

"MPT is ready and willing to help find replacement operators for as many hospitals as possible and to facilitate a safe and orderly transition to those interim operators," the filing states.

Also, MPT is "prepared to look for solutions, on a hospital-by-hospital basis, to avoid closure (wherever possible) that would otherwise result from" Steward Health's decision to reject the master lease, the filing states.