Hearing resumes Wednesday as Insight Health Systems likely to assume Steward Health operations

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In a surprise move, a Michigan-based nonprofit has emerged to potentially take over operations at Trumbull Regional Medical Center and Hillside Rehabilitation Hospital as early as Wednesday.

Insight Health Systems, originally based out of Flint, Michigan, could assume operations in partnership with Medical Properties Trust, or MPT, with plans to eventually purchase the hospital outright.

MPT is the landlord for Steward Health facilities and had previously agreed in principle to take over operations of Steward's hospitals while Steward sought out buyers.

Steward's bankruptcy came after falling millions behind in rent payments to MPT, although there have been questions about their relationship, particularly at the highest levels.

Hours before a hearing that was scheduled Tuesday afternoon in bankruptcy court in the Southern District of Texas to approve the agreement between Steward and MPT, a group of Steward's creditors filed an objection, saying MPT holds too much power in the negotiations.

"At the very last minute, MPT came in and said, 'We're not going to be running the hospitals, we're going to be handing them off to our chosen operators. So, the creditors committee said, 'Hey, listen, we were trying to work with you but all bets are off," explained Moe Tkacik, Senior Fellow at the Economic Prosperity Institute.

"They think that Steward and MPT aren't playing fair," explained Niki Frenchko, Trumbull County Commissioner. "They're trying to keep them out of it and they're trying to brush some maleficence that is happening under the carpet."

The creditors argued that the agreement as written provided no assurances that MPT would cover all of the costs of operating the hospital, leading to a concern that once Steward transferred ownership to a new buyer, MPT would be in a position to pull back funding or raise rent, leaving the new owners in a similar position and the community without a hospital or the millions that may be committed to saving them.

"Indeed, the MPT settlement motion makes clear (in a footnote) that neither MPT nor the proposed Designated Operators have committed to provide funding for these costs. The result is that one of the most fundamental tenets of this settlement---the certainty of the cessation of costs the debtors can no longer afford---is at best, contingent and subject to the whims and credit risk of no fewer than six new operators and at worst, entirely illusory. The likely result will be that the estates bear millions of dollars in stranded costs, risking recovery of the debtors' creditors," the objection reads.

"No matter who comes in, we want them to be successful," Frenchko said. "But at the end of the day, there's still that lease that they're not negotiating. That was largely the reason for the bankruptcy of Steward in the first place and for some of the problems with other hospitals that MPT has across the country."

"MPT cannot be permitted to --yet again---leverage debtorstors' desperate liquidity situation for its benefit to the detriment of the debtorstors' estates and their creditors."

The creditors had been asking the court to add language to any agreement with MPT that would have initiated a formal complaint against MPT to recover their losses if the company did not honor the spirit of the agreement.


Their concerns echo those of Frenchko and Moe Tkacik, who have written extensively about Steward Health and MPT for the American Prospect.

"There's really low trust with the community in these local hospitals," Tkacik added. "They have not been paying their bills for so long. The creditors committee would like to conduct a thorough investigation about what happened here. They could stand to claw back some money from MPT or from Steward's executives who have taken enormous sums from the company."

Insight, which was founded in 2008 by Dr. Jawad Shah in a former General Motors technology center in Flint, Michigan, specializes in hospitals in underserved areas.

MPT has the upper hand in deciding which health system will assume operations, looking for a group that will pay their bills and be a good partner to MPT.

"I don't think that MPT can come out and publically negotiate lower leases because they still have the shareholders that believe that these properties are valued at what they say they are," Frenchko explained.

"In lieu of taking losses and lowering the rent and having to take that fall, they'll try to find a tenant that they like," Tkacik said. "A hospital operator that will do whatever MPT asks them to do."

Sources tell 21 News that at this point, Insight has not asked any local entity to contribute funding towards the purchase, although that could change.

Before Tuesday, local nonprofit Western Reserve Health Education and Warren City Hospital had appeared to be the most likely entities to take over the hospitals. Still, they would have needed to raise roughly $30 million.

"Hopefully this is a step in the right direction," Frenchko added. "They realize that there are assets there, that there is a viable business. But, at the root of it, as a problem for whoever steps in moving forward is MPT's lease."