Steward Health Care: $9.2B Collapse and Largest Hospital System Bankruptcy

Steward Health Care’s chapter 11 case became a stress test for the U.S. hospital ecosystem: a multi-state operator entered bankruptcy with a footprint large enough to trigger immediate public-sector involvement, a real-estate structure that effectively put a landlord at the center of liquidity decisions, and a sale process that had to protect patient care continuity while converting dozens of hospitals into separate “assets” saleable to new operators. Public coverage described Steward as one of the largest for-profit private hospital systems in the country and characterized the filing as one of the largest healthcare bankruptcies in decades (Healthcare Dive and WBUR). Bankruptcy filings described a system spanning 31 hospitals across 10 states, serving more than two million patients annually with a workforce of nearly 30,000, and framed the chapter 11 as an operational stabilization effort paired with a rapid sales-and-transition timeline (bankruptcy filings).

The restructuring also became a reference case for how sale-leaseback financing can reshape creditor dynamics in provider distress. Steward’s filings described long-term lease obligations of approximately $6.6 billion, tied to master leases with Medical Properties Trust (MPT) affiliates that carried annual lease payments described at approximately $341 million and included significant deferred and unpaid rent amounts (bankruptcy filings). Reporting and political scrutiny connected those rent burdens to the system’s deterioration and raised broader policy questions about private equity ownership, real estate monetization, and healthcare access—especially after Massachusetts and other states intervened to manage patient transitions and mitigate closures (Massachusetts transition resource, Boston Globe investigative series, and OCCRP investigation).

| --- | --- | | Debtors | Steward Health Care System LLC, et al. (bankruptcy filings) | | Court | U.S. Bankruptcy Court, Southern District of Texas (Houston Division) (Healthcare Dive and bankruptcy filings) | | Lead case number | 24-90213 (bankruptcy filings) | | Judge | Christopher M. Lopez (bankruptcy filings) | | Petition date | 2024-05-06 (Healthcare Dive and bankruptcy filings) | | Footprint at filing (as described) | 31 hospitals across 10 states; 400+ locations; ~30,000 workforce; 2+ million patients annually (bankruptcy filings) | | Core restructuring path | Freefall chapter 11 with a global 363 sale process and a later liquidation plan supported by trust structures (bankruptcy filings; plan confirmation described by Weil) | | Real estate overhang (as described) | Master leases with MPT affiliates; long-term lease obligations described at ~$6.6B with annual rent described at ~$341M (bankruptcy filings; deal context covered in Boston Globe) | | DIP structure (high level) | Junior DIP and FILO DIP facilities structured to fund operations and to drive the sale timeline (bankruptcy filings; Steward announced financing arrangements with MPT around the filing (Steward release)) | | Plan endpoint (high level) | Liquidation trust architecture (Plan Trust + Litigation Trust), including litigation funding described as up to $125M and an administrative claims consent program described around a $12.5M cash pool (bankruptcy filings; confirmation described by Weil and Becker’s) |

Table: Case Snapshot

363 Sales, MPT Lease Overhang, and Litigation-Funded Liquidation Plan

The operating footprint: why this case immediately became “public interest” bankruptcy. Steward was not a single-hospital filing where patient impact is localized. Bankruptcy filings described an integrated network across 10 states, with 31 hospitals and hundreds of outpatient and physician practice locations, serving more than two million patients per year and employing nearly 30,000. In practice, that scale changes the bankruptcy playbook: regulators, governors, and attorneys general become de facto stakeholders because hospital operations are regulated at the state level and closures can create emergency room gaps, maternal care deserts, and behavioral health access failures. Massachusetts created a centralized public-facing transition resource for Steward facilities, reflecting how quickly the bankruptcy became a coordinated transition project rather than a conventional creditor-only proceeding (Mass.gov).

That “public interest” feature also explains why Steward’s case became a durable policy story. Investigative reporting framed the bankruptcy as a cautionary tale about private equity’s role in hospital systems and about financial engineering that extracts value from real estate while leaving operating companies with escalating rent burdens (Boston Globe investigative series, OCCRP, and Becker’s sale-leaseback study coverage). That framing matters for restructuring professionals because it influences how stakeholders litigate and settle: reputational risk, political pressure, and patient-care narratives can materially affect sale approvals, lease settlements, and settlement releases.

How Steward described the immediate drivers of the filing. Bankruptcy filings tied the chapter 11 decision to a post-pandemic operating environment with multiple concurrent pressures: increased labor costs, inflation, and a shift of volume to outpatient settings, alongside reimbursement constraints and a liquidity squeeze that fed vendor stress. The debtor described having to pursue emergency bridge loans and concessions with secured parties and its landlord to maintain operations, and it described recurring liquidity shortfalls that ultimately made an in-court process necessary (bankruptcy filings). That narrative aligns with external reporting that emphasized liquidity distress and the need to transition hospitals through sales quickly to preserve care continuity (Healthcare Dive and WGBH).

Steward also publicly announced a “six-point action plan” before the bankruptcy, signaling that the company was already attempting a structured turnaround that ultimately proved insufficient for the scale of rent and debt burdens (Business Wire). In complex provider cases, these pre-filing plans often matter because they reveal (i) what management thought was feasible without court protection and (ii) which constituencies were unwilling to provide concessions absent a bankruptcy framework.

The capital structure reality: funded debt vs. lease math. Steward’s filings described approximately $1.2 billion of funded debt obligations as of the petition date, but the more structurally constraining figure was the lease burden: approximately $6.6 billion of long-term lease obligations described as future rent due through 2041 plus deferred and other amounts (bankruptcy filings). For restructuring analysis, the key takeaway is that the “largest number” in this case was not a bank debt maturity wall. It was a long-dated, non-severable lease obligation profile tied to hospital properties that are difficult to monetize quickly without triggering patient-care disruptions.

The filing also illustrates why sale-leaseback structures can create binary outcomes in distress. A hospital operator can survive a bad year with covenant amendments or liquidity facilities if it owns its real estate and can borrow against it, sell it, or close and repurpose it. But when the real estate has been sold to a REIT and leased back on long-term master leases, the operator’s flexibility collapses into a narrow band: pay rent, negotiate rent, or reject leases in bankruptcy and accept the operational consequences. Research highlighted by Becker’s has linked REIT-acquired hospitals to higher closure risk, underscoring why these structures are now under heightened scrutiny in provider restructurings (Becker’s).

The following table is a practical “distress balance sheet” view that separates what is typically refinanced (funded debt) from what is operationally existential (lease obligations and deferred amounts).

The MPT relationship: master leases, deferrals, and the landlord’s economic role. Steward’s filings described leasing 36 facilities from MPT affiliates under two master leases and described the master leases as non-severable operating leases (bankruptcy filings). The filings also described significant rent deferrals and delinquencies leading into chapter 11, including deferred and unpaid rent plus delinquent property taxes and other amounts, and described a forbearance arrangement beginning in late 2023 tied to rent deferrals (bankruptcy filings). In a traditional retail or industrial bankruptcy, landlords are one stakeholder group among many. In Steward’s case, the landlord was also (through financing structures) a liquidity gatekeeper, which compressed the time to a global settlement.

This is where the case becomes a template for “landlord-driven” healthcare restructurings. External reporting emphasized how MPT and Steward “grew in tandem” through sale-leaseback transactions and how the long-term rent burdens became a structural driver of hospital instability (Boston Globe on the MPT relationship and Axios). Steward itself publicly framed its bankruptcy-era financing arrangements as intertwined with MPT (Steward release).

For professionals, the analytical point is not whether sale-leasebacks are “good” or “bad” in the abstract. It is that sale-leasebacks change the control plane in distress. The operator may have medical staff and community obligations, but the landlord can still influence which buyers are viable because new operators often need a workable lease structure to assume operations. That is why Steward’s sale process and settlement architecture frequently required landlord involvement, consultation rights, and consent mechanics embedded into bidding procedures and sale implementations (bankruptcy filings).

DIP financing as “care continuity financing,” with milestones that forced the sale calendar. Bankruptcy filings described a Junior DIP facility designed as a junior lien DIP, with new-money and roll-up components, and with a milestone schedule that effectively functioned as the case’s operational timeline. The debtor’s filings described pricing for the junior DIP tranches in the “SOFR + margin” format with a floor, plus upfront and exit premiums, and described a maturity tied to an outside date and typical DIP termination events (bankruptcy filings). The filings also described a set of milestones with specific dates for bidding procedures approval, final DIP order timing, bid deadlines, auctions, and sale hearing windows (bankruptcy filings).

In practical terms, that milestone design signals a “sell now, stabilize operations, and transition to new operators” posture rather than a multi-year standalone turnaround. Steward’s milestones included a two-round hospital sale framework (first round excluding Florida; second round focused on Florida), with bid deadlines and auction/hearing dates set within weeks of the petition date (bankruptcy filings). That is a restructuring professional’s tell: when the DIP milestone grid sets multiple auctions and hearings within the first 60–90 days, the case is designed for asset transition, not a protracted operational restructuring inside chapter 11.

The DIP also matters because it bridged the patient-care continuity problem. Hospitals cannot simply stop paying vendors or staff during a bankruptcy “quiet period.” External reporting described patient-care stress and state scrutiny in connection with Steward’s liquidity crisis, and state transition resources were designed to keep patients informed as ownership transitions and closures occurred (WBUR and Mass.gov). In this setting, DIP proceeds are less about refinancing legacy debt and more about ensuring that payroll, supplies, and operational spending can continue while buyers conduct regulatory diligence and while lease and transition disputes are negotiated.

The following table captures the “headline” DIP design as described in bankruptcy filings (pricing and milestone-driven structure), framed the way a healthcare restructuring team typically uses it: as a governance tool and timeline enforcer.

Global bidding procedures: how the court created a scalable sale machine. Steward’s sale task was not to run one auction; it was to run multiple auctions and sale hearings across different hospital groups, states, and regulatory regimes. Bankruptcy filings describe a global bidding procedures order that set two parallel tracks (Stewardship Health & first-round hospitals vs. second-round hospitals/other assets) with structured deadlines for cure notices, cure objections, bid deadlines, qualified bid designations, auction dates, sale objections, and sale hearings (bankruptcy filings). That structure turned a multi-asset, multi-state system into a repeatable sale process with standard notice and objection mechanics.

The bidding procedures order also authorized stalking horse bid protections, including break-up fees capped at 3% of purchase price (including assumed liabilities) absent further court order or required consents, and allowed expense reimbursement subject to caps negotiated with consultation parties (bankruptcy filings). For professionals, this is a critical point: in hospital sales, buyers may require bid protections because diligence and regulatory approvals are expensive and time-consuming, and because “winning” a hospital sale often means inheriting operational risk before full stabilization. But bid protections also create objection risk when they are perceived to constrain competitive bidding. Capping break-up fees and requiring consultation-party involvement is a common way to keep bid protections within “customary” bounds while still enabling stalking horse commitments.

The sale calendar described in filings can be summarized as follows, combining DIP milestone framing and the global bidding procedure structure:

In a more traditional retail 363 sale, the sale process is the restructuring. In Steward, the sale process was the operational transition mechanism, and the “restructuring” was the set of agreements that allowed new operators to assume control without inheriting the entire historical liability stack. This is a subtle but important distinction: for many hospitals, the operator matters more than the balance sheet, because operations and staffing stability are the “value.”

Hospital transitions and community impact: sales, closures, and state-by-state complexity. Steward’s hospital transitions became a central narrative because the company’s footprint included multiple Massachusetts facilities with high public visibility and because closures would create immediate gaps in community access. WBUR and other local reporting tracked Massachusetts hospitals and the path toward selling multiple facilities, reflecting how the bankruptcy process played out not just in court but in state oversight and community response (WBUR sale progress reporting and Mass.gov).

At a system level, the case also produced closures and layoffs. Reporting described closure outcomes and workforce impacts, including closures of major facilities and substantial job losses, turning a financial restructuring into a public health access story (Healthcare Dive one-year anniversary analysis and WBUR). In provider restructurings, these impacts matter because they can influence regulators’ willingness to approve operator transitions and because they shape stakeholder urgency for settlements that keep hospitals open.

The following table is a pragmatic “stakeholder map” of why hospital transitions are uniquely hard to execute inside chapter 11. It is not a legal analysis; it is a checklist of what typically constrains speed and choice of buyers.

The MPT global settlement: why a portfolio sale process needed a portfolio settlement. Steward’s chapter 11 demonstrates a recurring theme in “REIT landlord + operator” restructurings: you cannot run a clean sale process if the landlord and secured parties remain structurally misaligned about bid structure, sale proceeds allocation, and the liabilities that will follow assets into new operators. Bankruptcy filings describe a global settlement order with MPT and other consultation parties that approved a framework for transitioning certain hospitals and addressed lease termination, claims releases, receivables allocation, and interim management funding mechanics (bankruptcy filings).

Several mechanics in the settlement order are especially important for restructuring professionals:

• Lease termination and claim release mechanics. Bankruptcy filings describe Master Lease I being deemed terminated on entry of an interim order and describe a set of releases that, on a settlement effective date, discharged and canceled obligations under MPT facilities and released liens, guarantees, and MPT claims (subject to terms preserved in the settlement term sheet) (bankruptcy filings).
• “No successor liability” framing for landlord and operators. The settlement order described that MPT and related parties would not be successors to the debtors and would not be responsible for debtor liabilities except as explicitly provided, which is functionally essential in hospital transitions because buyers and interim operators cannot inherit an open-ended historical liability stack (bankruptcy filings).
• Receivables allocation. The settlement order described transferring pre-sale receivables to a dedicated A/R entity and allocating go-forward receivables to designated operators after a defined funding commencement time, separating prepetition value capture from post-transition operations (bankruptcy filings).

Public reporting frequently described the settlement outcome as involving MPT waiving roughly $7.5 billion in claims to facilitate hospital sales (Boston Globe and Axios). Even if the exact claim amount is better attributed to public sources than to the settlement order text alone, the restructuring meaning is clear: the landlord’s willingness to collapse or waive claims was a gating item for achieving clean transitions and for avoiding a prolonged “lease litigation” chapter 11 that could have left hospitals in operational limbo.

Private equity ownership and the “extraction narrative”: why this case attracted congressional scrutiny. Steward’s story is inseparable from the policy debate about private equity in healthcare. Reporting described Cerberus Capital Management’s stewardship-era economics, with the Boston Globe reporting that Cerberus’s Steward investment generated substantial returns (Boston Globe on Cerberus). Senators publicly criticized Cerberus’s role in Steward’s trajectory, framing the bankruptcy as a case study in how financial extraction can undermine system stability and patient care (Senator Warren statement and Senator Markey statement).

The CEO controversy further amplified that scrutiny. Reporting described the Senate voting to hold Steward’s CEO in criminal contempt after he failed to testify, a step described as unusually rare (Healthcare Dive and PBS NewsHour). The practical restructuring takeaway is that governance and oversight narratives can become as important as financial terms when providers are involved: they shape how states negotiate transitions, how buyers view reputational risk, and how judges evaluate whether proposed settlements and sale structures are in the best interests of estates and patient communities.

Liquidation plan structure: Plan Trust + Litigation Trust as the “endgame” architecture. The endgame of Steward’s case, as described in bankruptcy filings and in public law firm and trade coverage, was a liquidation plan rather than a reorganized, scaled-down hospital operator. Weil described securing confirmation of a chapter 11 plan after a process involving significant objection practice and a portfolio of hospital sales (Weil). Becker’s described a judge approving the plan and reported that it contemplated a litigation trust and liquidation framework (Becker’s).

Bankruptcy filings describe the plan using a two-trust structure:

• A Plan Trust designed to receive certain assets, manage plan distributions, and administer post-confirmation matters (bankruptcy filings).
• A Litigation Trust designed to receive estate claims and causes of action and to pursue recoveries for creditors, with dedicated funding commitments and a distribution waterfall (bankruptcy filings).

This is a familiar pattern in large liquidating cases, but Steward’s version is notable for how explicitly it incorporated litigation finance into the trust design. Bankruptcy filings described litigation funding commitments to the litigation trust of up to $125 million (initial commitment amount), with an accordion component and a waterfall that included a variable component tied to gross litigation proceeds (bankruptcy filings). In effect, the plan converted “potential claims against insiders and other parties” into a funded asset class, allowing the estate to pursue litigation aggressively without relying on the residual cash from hospital sales alone.

The litigation-finance design is not just an ancillary feature; it changes the economics and posture of the liquidation. When a litigation trust has dedicated funding and a defined repayment/participation waterfall, it can pursue larger and longer cases (fraudulent transfer, breach of fiduciary duty, lender liability, contract disputes) without being forced into early low-dollar settlements due to litigation budget constraints. It also means general unsecured recoveries can become more sensitive to litigation outcomes than to hospital sale price alone.

The following table distills the plan’s post-confirmation structure in the way practitioners typically use it: as a “who does what” operating model and as a map of where recoveries are expected to come from.

Projected recoveries: why Steward’s ranges are inherently wide. Steward’s disclosure statement described estimated recoveries for general unsecured and PBGC-related claims in a range that extended into the low-20% level, with recoveries sensitive to trust asset realizations and litigation outcomes (bankruptcy filings). In a sale-heavy healthcare liquidation, this wide band is predictable for two reasons:

1. Sale proceeds are not a single number. Dozens of hospital transactions can close at different times, with different assumed liabilities, different working capital adjustments, and different lease arrangements that affect net proceeds available to estates.
2. Litigation outcomes are inherently probabilistic. Even with $125 million of funding, claims can be won, settled, or dismissed, and recoveries can be delayed by years.

For drafting purposes, the safe professional posture is to treat recovery figures as estimates and to state the drivers: plan trust asset recoveries, litigation trust proceeds, and the allowed-claim denominator. External coverage provided additional context on how communities and stakeholders viewed the plan’s adequacy and whether it meaningfully addressed harms to patients and workers (Healthcare Dive one-year analysis and Boston Globe investigative series).

Administrative expense claims consent program: accelerating payments by taking a haircut. One distinctive plan feature described in bankruptcy filings was an administrative expense claims consent program. The disclosure statement described a $12.5 million settled administrative expense claims cash pool, and described a default mechanism under which non-opt-out holders would receive distributions that, once equal to 50% of the allowed administrative claim, would satisfy those claims in full (bankruptcy filings). The program was also described as requiring a 75% participation threshold by dollar amount, making it a “mass consent” framework rather than a simple elective early-pay program (bankruptcy filings).

For professionals, this kind of program is often a settlement tool for the post-sale phase of a hospital chapter 11. After hospitals are transitioned, many vendors and service providers assert administrative claims for postpetition goods and services provided during the “patient care continuity” period. Litigating each claim can consume post-confirmation resources and delay distributions. A structured consent program trades claim face value for speed and certainty, and it can be especially attractive when estates want to preserve cash for litigation trust funding and wind-down costs.

Why this case is a “pattern” case for healthcare restructuring. Steward’s chapter 11 contains a set of structural lessons that will likely recur in other healthcare provider distress situations:

• Real estate is not just collateral; it is operational governance. When hospital real estate is owned by a REIT and leased back under master leases, the landlord’s consent and settlement posture can determine which buyer structures are viable and how quickly operations can transition (bankruptcy filings; landlord context in Boston Globe and Axios).
• DIP financing is often “patient care continuity financing.” In multi-hospital cases, DIP facilities and milestones are designed to preserve operations and force near-term sale outcomes rather than to fund long-term reorganizations (bankruptcy filings).
• Trust structures are increasingly paired with litigation funding. The plan’s litigation trust and funding mechanics show how large estates increasingly treat claims as monetizable assets that need capital to pursue (bankruptcy filings; plan confirmation context in Becker’s).
• Public-sector oversight can become a parallel governance channel. State transition guidance and federal scrutiny (including Senate contempt proceedings) reflect how healthcare bankruptcies can generate governance constraints beyond the bankruptcy court itself (Mass.gov, Healthcare Dive, and PBS).

In short, Steward’s case was not merely a large bankruptcy. It was a restructuring in which patient-care continuity, landlord economics, and political accountability were intertwined with the sale mechanics and liquidation trust design. For practitioners, that makes it one of the most instructive healthcare chapter 11 processes of the period.

Frequently Asked Questions

When did Steward Health Care file for chapter 11 bankruptcy, and where was the case filed?

Steward filed chapter 11 petitions on May 6, 2024 in the U.S. Bankruptcy Court for the Southern District of Texas in Houston (Healthcare Dive and bankruptcy filings).

How large was Steward’s hospital footprint at filing?

Bankruptcy filings described Steward as operating 31 hospitals across 10 states with more than 400 facility locations, serving more than two million patients annually with a workforce of nearly 30,000.

What did Steward identify as the main drivers of the bankruptcy filing?

Bankruptcy filings described post-COVID operating pressures including labor and inflation headwinds and reimbursement challenges, leading to recurring liquidity shortfalls, vendor stress, and reliance on bridge financing and concessions (bankruptcy filings). External reporting similarly emphasized liquidity strain and operational pressure (WBUR and WGBH).

Why did Medical Properties Trust (MPT) matter so much in the case?

Bankruptcy filings described master leases with MPT affiliates that carried long-term lease obligations of about $6.6 billion through 2041 and annual lease payments described at about $341 million, making landlord economics central to any viable hospital transition (bankruptcy filings). Reporting highlighted the sale-leaseback relationship and how it shaped the restructuring (Boston Globe and Axios).

What was the purpose of the DIP financing in a hospital bankruptcy like Steward’s?

In a multi-hospital provider case, DIP proceeds function as “care continuity financing”: they fund payroll, supplies, and ongoing operations while a court-supervised sale process transitions hospitals to new operators (bankruptcy filings). Steward publicly described financing arrangements being pursued in connection with the filing (Steward release).

How did the chapter 11 process transition hospitals to new operators?

Bankruptcy filings described a global bidding procedures framework that set deadlines for bids, auctions, and sale hearings and authorized stalking horse bid protections within defined caps, allowing multiple hospital sale processes to run on a structured timeline (bankruptcy filings). Local reporting tracked Massachusetts transactions and transitions as the process advanced (WBUR and Mass.gov).

What did the liquidation plan do after the hospital sales phase?

Bankruptcy filings described a liquidation plan implemented through a Plan Trust and a Litigation Trust, with the litigation trust designed to pursue estate causes of action and distribute recoveries under a defined waterfall (bankruptcy filings). Plan confirmation was described publicly by counsel and healthcare press (Weil and Becker’s).

What is the “litigation funding” component described in the plan materials?

Bankruptcy filings described litigation funding commitments to the litigation trust of up to $125 million (initial commitment amount), with a variable component tied to gross litigation proceeds and a defined priority waterfall for distributions (bankruptcy filings).

What is the administrative expense claims consent program described in the disclosure statement?

Bankruptcy filings described a consent program intended to accelerate payments to administrative claimants by using a $12.5 million cash pool and a default “50% satisfaction” structure for holders who do not opt out, subject to participation thresholds and an opt-out process (bankruptcy filings).

Who is the claims agent for Steward Health Care?

Kroll Restructuring Administration LLC serves as the claims, noticing, and solicitation agent (bankruptcy filings).

For more chapter 11 case research, see the ElevenFlo blog.