Bidders emerge for Sharon Regional, two other struggling hospitals
By Kris B. Mamula / Pittsburgh Post-Gazette
A Mercer County philanthropy is a step closer to freeing the struggling 82-bed Sharon Regional Medical Center in Mercer County from the hospital’s real estate lease, following a bankruptcy court hearing Wednesday in Texas.
Also disclosed at the hearing in Houston: Late bids have been received for Sharon Regional and two affiliated hospitals in Warren, Ohio, which could save them from closure.
Sharon Regional’s for-profit corporate parent, Steward Health Care LLC of Dallas is undergoing voluntary reorganization under Chapter 11 of the U.S. Bankruptcy Code, which includes selling the system’s 31 hospitals, including Sharon Regional. But leases for hospital-related real estate, which have been described as onerous, have discouraged buyers and depressed hospital operating margins, attorneys say.
During the hearing, U.S. Bankruptcy Court Judge Christopher M. Lopez opened the door to a solution by granting a debtors’ motion to sever six Massachusetts hospitals from associated real estate leases, pending resolution of some contract details. Birmingham, Ala.-based Medical Properties Trust Inc. owns the real estate at the Massachusetts hospitals and also at Sharon Regional, but no agreement has yet been reached to reject the leases at the 82-bed Mercer County facility.
Previously, Steward said no bids had been received for Sharon Regional and two Steward hospitals in Warren, Ohio. Steward has said it would close hospitals that didn’t have bidders, including the 125-year-old Sharon Regional, Trumbull Regional Medical Center and Hillside Rehabilitation Hospital, both in Warren, Ohio.
But that might be changing.
“There is a very interested party in Sharon,” Austin, Texas attorney Raymond J. Urbanik, of Urbanic LLC, who represented the Pennsylvania Attorney General at the proceeding, told the court. “The problem with Sharon, like the other hospitals, is the lease. There’s also $10 million in deferred maintenance.”
Steward has proposed allowing only three days for interested parties to object to a hospital closing, which Mr. Urbanik said was not nearly enough time to allow negotiations with a new owner.
He didn’t name the entity interested in taking over Sharon Regional, but the Sharon-based nonprofit Christian H. Buhl Legacy Trust — the previous hospital owner — has joined the state attorney general in intervening in the Steward bankruptcy. Two people familiar with Buhl’s intentions, but were not authorized to speak publicly about it, said the philanthropy’s goal was to prepare the hospital for a new owner, unencumbered by the real estate lease.
Buhl representatives were not available for comment Thursday.
At the hearing, Ray C. Shrock, partner at New York City-based Weil, Gotshal & Manges LLP, which represents Steward in the bankruptcy, said “late bids” had been received for Sharon Regional and the two Ohio hospitals. The stumbling block is the MPT lease on all the medical office buildings and related hospital properties.
“The current rents are just not sustainable,” Mr. Schrock told the court, saying the leases were “above market rate.”
“We don’t have any buyers who want to buy all of the hospitals and accept a lease,” he said. “As the debtor, we need that solved. We need to get this done and we’re out of time.”
The bankruptcy hearing continues next week in Houston.
Kris B. Mamula: [email protected]