By Dietrich Knauth
NEW YORK (Reuters) – Bankrupt hospital operator Steward Health Care received approval from a bankruptcy judge on Friday to sell its nationwide network of doctors to a private equity buyer, while its stalled efforts to sell Massachusetts hospitals prompted the state to step in and seize one hospital.
U.S. Bankruptcy Judge Christopher Lopez on Friday approved the $245 million sale of the Stewardship Health physician network to Rural Healthcare Group, a network of primary care providers owned by Kinderhook Industries that operates in Tennessee and North Carolina. Lopez said at a court hearing in Houston that the deal was the best offer available to Steward, which is seeking to sell all of its roughly 30 hospitals separately from the physician network.
Steward had previously planned to sell the physician network to a subsidiary of UnitedHealth Group (NYSE:), but that deal fell through after Steward filed for bankruptcy in May.
Steward told Lopez that he has found a buyer for three of his Florida hospitals and is moving forward with efforts to sell six hospitals in Massachusetts.
Steward put its 31 hospitals up for sale when it filed for bankruptcy in an effort to address its $9 billion debt.
According to court documents, Steward received a $439.4 million offer from Orlando Health Inc. for Steward Melbourne Hospital, Steward Rockledge Hospital and Steward Sebastian River Medical Center. That offer is still subject to higher and better offers.
Steward's attorney, Ray Schrock, said Friday that the company was “very, very close” to finalizing deals for Massachusetts hospitals, but state officials, unhappy with the delays, moved to seize one hospital on Friday.
Massachusetts Gov. Maura Healey said Friday that the state will take control of Saint Elizabeth's Medical Center in Boston through eminent domain, to ease the transition to new ownership and keep the hospital open.
Steward declined to comment on the state's seizure of St. Elizabeth's Church.
Steward previously decided to close two hospitals in Massachusetts and plans to transfer the remaining hospitals to new operators.
The company's bankruptcy has drawn scrutiny from Massachusetts officials and U.S. senators, who criticized the company and its former private equity owners for selling the land beneath its hospitals to a real estate firm, saddling the company with more than $6.6 billion in long-term lease obligations and leaving it in an unstable financial position.
A U.S. Senate committee plans to question the company's CEO about Steward's decline at a public hearing in September.
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