Florida health system plans $439M deal to buy 3 hospitals, but legal challenge arises

Shortly after Orlando Health announced plans to acquire five hospitals, the Florida health system is planning to move ahead with another transaction.

Orlando Health is planning to purchase three Florida hospitals from Steward Health Care in a $439 million deal. The transaction must be approved by regulators and federal bankruptcy court.

Orlando Health has put in a $439 million bid to purchase three hospitals from Steward Health Care, the for-profit system that has filed for bankruptcy and is selling its hospitals. Orlando Health is looking to buy Rockledge Regional Medical Center, Melbourne Regional Medical Center, Sebastian River Medical Center, and their associated medical practices. The hospitals sit along Florida’s east coast.

Orlando Health says it has been named the first qualified bidder for the hospitals and has been designated as the “stalking horse”, or the bid to beat.

Other applicants can submit higher or better qualified bids until Aug. 26, at which point a bankruptcy auction would occur.

David Strong, president and CEO of Orlando Health, issued a statement expressing confidence that the health system would be able to offer superior healthcare services.

“We have seen repeatedly that when Orlando Health enters a new area, patient care improves, relationships with physicians and team members grow stronger and surrounding communities benefit,” Strong said in a statement. “We believe we can recreate these same results for patients, team members, physicians and the communities in which these hospitals are located.”

However, Medical Properties Trust, which owns the hospital properties and leases them to Steward, has filed objections to Orlando Health’s bid, as reported by WUSF News.

Medical Properties Trust said in court papers filed this week with U.S. Bankruptcy Court in Houston that it’s improper for Orlando and Steward to set the terms of the transaction and expect MPT to agree to the price. MPT also contends that Orlando Health’s bid falls short of being a qualified bid because it doesn’t distinguish Steward’s property (the hospital operations) from MPT’s property (the land itself).

MPT argued that allowing the transaction to move forward “would be an abuse of the bankruptcy process and an affront to MPT’s property rights.”

In response, Steward contends in its own documents filed with the bankruptcy court this week that MPT is acting improperly in moving to block the transaction. “MPT has interfered in the bidding and sales process. Indeed, the Debtors’ sale process has been challenged by the self-interested involvement and interference of MPT,” Steward said in the court filing.

Orlando Health says that if the deal secures the approval of regulators and the bankruptcy court, it hopes to complete the acquisition of the hospitals in the fourth quarter of 2024.

Earlier this month, Orlando Health announced plans to acquire five Alabama hospitals from Tenet Healthcare in a $910 million deal. Tenet is selling its 70% majority ownership interest in Brookwood Baptist Health in Birmingham, Alabama.

In the Alabama deal, Orlando Health says it will manage day-to-day operations of Brookwood Baptist Health in partnership with Baptist Health System. Brookwood will remain a faith-based organization, Strong has said.

Orlando Health, based in central Florida, operates 17 hospitals and 10 freestanding emergency departments, along with nine hospital-at-home programs. The system says it has four other hospitals and six other emergency departments in development.

Steward owns five other hospitals in Florida that are to be sold: Coral Gables Hospital: Florida Medical Center; Hialeah Hospital; North Shore Medical Center; and Palmetto General Hospital.

In Massachusetts, Gov. Maura Healey has moved to line up new ownership for five Steward hospitals to keep them open. The plans don’t include two other Massachusetts hospitals that are slated for closure.

Read more:

Pennsylvania hospital systems complete mega-merger

Why hospital merger activity could rise in the second half of 2024