News Analysis
On the eve of the final court hearing that had been scheduled for this past Tuesday to confirm the bankruptcy sale of Sebastian River Medical Center to nonprofit Orlando Health, the owner of the hospital’s land and buildings threatened to block the nearly half-billion-dollar transaction.
Still in dispute at press time were the terms by which Steward Health Care, the bankrupt owner of Sebastian River, can revoke two master leases which have burdened 30 of its 31 hospitals nationwide with what it contends were “unsustainable rents.”
Mega-landlord Medical Properties Trust has been demanding that its company and its shareholders be made whole, yet that had not happened so far.
As August came to a close, Steward and MPT brokered a complex deal that also involved six Massachusetts hospitals and five South Florida hospitals in order to wrap up the sale of Sebastian River and two Brevard hospitals to Orlando Health.
But landlord MPT claimed that as of Sunday night, it was still in the dark about important portions of the Orlando Health deal.
“As of the date of this filing, the parties have not reached agreement on all necessary terms of the global settlement. MPT, accordingly, files this protective objection and reservation of rights with respect to the Space Coast Hospitals transaction,” the pleading MPT filed said.
The last-minute objection by MPT revealed how fraught negotiations have been.
MPT claimed its veto power was derived from “Master Lease I” which governs all the Steward hospitals outside Massachusetts. Steward filed notice and motions to revoke Master Lease 1 to facilitate the sale of the hospitals, but the effective date of the revocation had not been finalized. So as MPT pointed out, the leases on Sebastian River Medical Center and the two Brevard hospitals were still in effect, even though Steward had stopped paying the rent.
“To date, no particular terms have been proposed to MPT for the sale of the real estate.
Among other things, MPT has not been offered any particular price. Since no terms (including price) have been offered to MPT for its real estate, MPT has no basis to consent to the proposed sale,” the objection said.
Steward then canceled hearings related to Master Lease I and Master Lease II that were supposed to be held this Tuesday, adjourning them “to a date to be determined.”
As of press time, the final hearing to approve the sale of Sebastian River Medical Center and the two Brevard hospitals to Orlando Health was still a go. But if all the parties stipulate to a delay, and Judge Christopher Lopez determined that sending Steward and MPT back into mediation for a few days was the only way to salvage the deal and keep the three hospitals open and functioning, most anything could happen.
If, on the other hand, Lopez feels the objections by MPT were intended purely to hold the Orlando sale hostage for financial gain, purposely putting patients and whole communities in limbo, he could lose patience with the warring parties and rule from the bench to approve the sale to Orlando Health, disregarding landlord MPT’s objections.
Everyone in the communities served by Sebastian River Medical Center and the two Brevard hospitals hoped this Tuesday’s final sale hearing would end with a handover of the keys to Orlando Health.
Thirteen physicians from Rockledge Regional Medical Center signed a letter urging Lopez to order the sale to Orlando Health.
The doctors said they had “diligently focused our efforts on delivering the best care possible to our patients, while the financial collapse of Steward Medical consumed our hospital. By and large we have stayed on the sidelines during these difficult and stressful times in order to devote our undivided attention to our primary mission, which is delivering, excellent medical care to our patients.”
The doctors called the Orlando Health bid generous, fair, reasonable and the best available option for the three hospitals, saying a takeover by Orlando Health “is absolutely in the best interests of our patients’ communities and our practice of medicine. We also believe that any attempts to undermine the sale to Orlando Health also undermine our primary medical mission which is to render excellent care to our patients.”
The letter concluded by asking Judge Lopez to approve the sale ASAP.
