Company that operates Arizona hospitals files for bankruptcy: Here's what to know

PHOENIX - A company that operates hospitals in multiple states, including in Arizona, has filed for bankruptcy protection.

In a statement, officials with Steward Health Care wrote that the company, which operates 31 hospitals in eight states, filed for Chapter 11 Bankruptcy voluntarily, and described the step as a "necessary measure to allow the company to continue to provide necessary care to its patients in their communities without disruption."

Here's what to know about the bankruptcy, and whether you will feel the impact.

What Arizona hospitals are operated by Steward?

The company's website lists four hospitals or medical centers in Arizona that they operate. They include Florence Hospital, Tempe St. Luke's Hospital, Mountain Vista Medical Center in Mesa, and St. Luke's Behavioral Health Center in Phoenix.

What led to the bankruptcy?

Steward Health Care has shown signs of financial challenges in recent months.

In its statement, company officials said they are facing challenges "created by insufficient reimbursement by government payors [sic] as a result of decreasing reimbursement rates while at the same time facing skyrocketing labor costs, increased material and operational costs due to inflation, and the continued impacts of the COVID-19 pandemic."

Meanwhile, the Associated Press reported in March that the company struck a deal to sell its nationwide physician network to a subsidiary of UnitedHealth Group.

Others blame different factors for the current financial troubles, with Massachusetts Governor Maura Healey blaming the company for its own financial woes. The state's two senators, Democrats Edward Markey and Elizabeth Warren, said the company's previous private equity owners "sold (Steward) for parts" and "walked away with hundreds of millions of dollars."

The company operates eight hospitals in the Eastern U.S. state.

I'm a patient at a Steward-operated facility. What should I do?

In their statement, Steward officials say their hospitals, medical centers, and physician's offices remain open.

"Steward does not expect any interruptions in its day-to-day operations, which will continue in the ordinary course throughout the Chapter 11 process," the company said in a written statement. "Steward’s hospitals, medical centers and physician’s offices are open and continuing to serve patients and the broader community and our commitment to our employees will not change."

We have reached out to the Arizona Attorney General's Office, and a spokesperson has issued a statement that reads:

In response to Steward Health Care’s bankruptcy filing in a Texas bankruptcy court on May 6, 2024, and news of its planned auction of four Arizona hospitals, Attorney General Kris Mayes announced that she is opening an investigation into the circumstances leading up to Steward Health Care’s filing and is considering intervening in the bankruptcy proceeding due to its potential negative effects on Arizona patients, providers, healthcare workers, and vendors.

"Arizonans deserve to know more about the circumstances that led to Steward’s bankruptcy filing. I am deeply concerned about the potential impact this could have on Arizona patients and medical providers," said Attorney General Mayes. "No matter who ultimately ends up owning and operating these facilities, I am committed to ensuring that no Arizonan is harmed by this bankruptcy, and I will fight to ensure that these hospitals remain open at all times to care for patients without any degradation of service."

Steward announced it is selling all of its 31 hospitals nationwide. The auction of Steward’s Arizona-based hospitals is currently proposed for June 28, 2024. The affected hospitals include:

· Florence Hospital in Florence

· Mountain Vista Medical Center in Mesa

· St. Luke’s Behavioral Health Center in Phoenix

· Tempe St. Luke’s Hospital in Tempe

In addition to these four hospitals, Steward also operates numerous medical practices throughout the state. In March, Steward had announced its plan to sell its physician group to Optum, owned by UnitedHealth Group. Although that deal was not completed before the bankruptcy filing, it is not clear what Steward now intends to do with its provider groups or other non-hospital assets.

Attorney General Mayes will endeavor to protect the confidentiality of patient health information and employee records and advocate for employees and vendors to be paid what they are fairly owed. She will also fight to ensure that prospective buyers do not take advantage of Steward’s bankruptcy to acquire hospitals or medical practices when those buyers would otherwise be barred from acquiring them due to the antitrust laws.

Are health care company bankruptcies common?

According to a 2024 report by a Tennessee-based health care restructuring consulting firm, health care bankruptcies are getting more common, with 79 such filings in 2023, marking the highest level in the last five years.

The report listed a number of factors behind the financial distress of health care organizations, including cost increases in recent years and the impact of higher interest rates on refinancing, access to capital, valuations and transactions.