Medical Properties Trust, Inc.’s shares were losing around 10 percent in the initial trading on the NYSE after its tenant Steward Health Care System, the largest physician-led hospital operator in the United States, announced its filing for bankruptcy protection.

In a filing under Chapter 11 in the U.S. Bankruptcy Court for the Southern District of Texas, Steward has cited higher costs, including labor, material, and operation, insufficient reimbursement by Government payors, continued impact of Covid-19, and others as the major reasons for the move.

As part of the filing, the company is finalizing the terms of debtor-in-possession financing from Medical Properties Trust for initial funding of $75 million and up to an additional $225 million.

Ralph de la Torre, Chief Executive Officer of Steward, said, “In the past several months we have secured bridge financing and progressed the sale of our Stewardship Health business in order to help stabilize operations at all of our hospitals. With the delay in closing of the Stewardship Health transaction, Steward was forced to seek alternative methods of bridging its operations. With the additional financing in this process, we are confident that we will keep hospitals open, supplied, and operating so that our care of our patients and our employees is maintained.”

Steward said it continues to face challenges created by insufficient reimbursement by government payors as a result of decreasing reimbursement rates. At the same time, the company is struggling with skyrocketing labor costs, increased material and operational costs due to inflation, and the continued impacts of the COVID-19 pandemic.

In the process, Weil, Gotshal & Manges LLP is serving as the Company’s legal counsel, while AlixPartners, LLP is providing financial advisory services.

Dallas, Texas -based Steward Health Care, a major private for-profit health system, operated 33 hospitals and employed 33,000 people in the United States as of the start of 2024. The company currently operates hospitals across Arizona, Arkansas, Florida, Louisiana, Massachusetts, Ohio, Pennsylvania, and Texas.

Steward has been facing significant financial challenges. In January, Medical Properties Trust had stated that Steward owes about $50 million in unpaid rent and that it plans to reduce its exposure to Steward.

Medical properties also said then that Steward was pursuing several strategic transactions, including the potential sale or re-tenanting of certain hospital operations as well as the divestiture of non-core operations.

Steward now said it expects the latest move would allow it to continue to provide necessary care to its patients in their communities without disruption. There will not be any interruptions in its day-to-day operations, which will continue in the ordinary course throughout the Chapter 11 process, the company noted. Steward’s hospitals, medical centers and physician’s offices are open and continuing to serve patients.

On the NYSE, Medical Properties Trust shares were trading at $4.39, down 9.86%.