Construction paused at new Wadley Hospital
TEXARKANA, Texas — Construction work at Wadley Regional Medical Center’s new $227-million campus halted Thursday as the woes of its financially distressed parent, Steward Health Care, took effect in Texarkana.
A number of sources confirmed the temporary stop in construction. Steward Healthcare representatives did not respond to requests for comment despite multiple efforts.
A memorandum from Robins & Morton, the firm tasked with orchestrating the construction of the new facility, was sent out to all sub-contractors calling for a work stoppage.
“We requested evidence of their (Steward Healthcare) having made financial arrangements that will allow them to fulfill their payment obligations under the contract,” the memorandum states. “Unfortunately, they have not been able to provide reasonable evidence of financing, and we are now exercising our right to stop further work on the project under Section 2.2.2 of the General Conditions.”
Specifics on Robins & Morton’s financial concerns were unavailable Monday evening.
“We can’t discuss specific contractual or financial details with anyone other than our client,” Rachael Farr, director of corporate communications, said in an email to the Gazette.
The memo states the contract cannot be terminated at the moment, but can be after 60 days plus an additional 10-day notice.
“We will be closely monitoring the situation for the next 60 days,” the memo states. “It is possible that the project might be restarted after financing arrangements are made.”
Sub-contractors at the construction site offered no comment on the work stoppage.
Realtor Landon Huffer, who is
acquainted with the project, said Thursday was the first official day for work to stop at the new hospital near the University Avenue exit off Interstate 30.
The construction site sits on a 55 acres sold seven years ago to Iasis Healthcare, then the owner of Wadley Regional Medical Center. Steward acquired Iasis in 2017.
Commercial developer Richard Reynolds sold the land to Iasis. He also is brokering the sale of Wadley’s Pine Street campus, from which the hospital operates.
The current listing price is about $10 million, Reynolds said Monday to the Gazette.
“There is a high degree of interest,” Reynolds said of the downtown property.
Wadley Regional filed for bankruptcy in 2009 and was subsequently acquired by Brim Healthcare. Iasis eventually purchased Brim.
On Friday, a parking lot normally filled with worker’s vehicles was empty. Two or three workers were moving items around, but two cranes towering over a planned 254,000-square-foot hospital and 143,000-square-foot office building stood silent and still.
Huffer said he expects that in time the new hospital will be built.
“There is just too much opportunity for that site to sit dark,” he said. “I’m still optimistic that either Steward will finish it or someone else will come and complete it. This is still a developing situation.”
The stoppage is the latest development in a series of events that has Steward, a private-equity health care system, careening toward bankruptcy. A week earlier, the Dallas-based company, which operates 33 hospitals in nine states, said it retained bankruptcy specialists Weil, Gotshall & Manges, which advertises on its website that it served as chief debtors’ counsel in six of the 10 largest bankruptcy filings in U.S. history.
That followed a Jan. 4 announcement from Steward’s publicly traded landlord, Medical Properties Trust, that it had hired outside counsel to accelerate collection of $50 million in unpaid rent plus past-due payments on $215 million in loans it provided Steward for projects and working capital. Additionally, an action was filed in Bowie County from a Steward contractor alleging the company owed them more than $80,000 from unpaid invoices.
From Massachusetts to Florida to Texas, investigations of Steward by journalists, U.S. attorneys, and state and federal legislators have turned up a tsunami of problems: substandard care resulting from understaffing, a lack of supplies, questionable business practices and lawsuits over unpaid bills.
“In a single Texas county, Steward has been sued by a linens provider, two staffing agencies, an HVAC contractor, a supplier of cadaver carriers, and a drug detoxification service for amounts totaling more than $13 million,” The American Prospect reported last August.
There also have been closures — several sudden — of hospitals in Florida, Ohio, Texas and Massachusetts. Last Tuesday Steward told Beaumont, Texas, that its only hospital would close Friday morning.
WHAT HAPPENS NEXT?
It is too soon to tell how this will affect Texarkana, where Wadley has operated for more than 120 years. Steward purchased Wadley in May 2021. The city is also served by CHRISTUS Health, which operates 60 hospitals and is the nation’s 11th largest healthcare system, according to Becker’s Hospital Review.
“I don’t have any idea if this is going to be something temporary or not,” Texarkana, Texas, Mayor Bob Bruggeman said Monday. “I really haven’t heard anything, so I don’t know what the status is on that. … I don’t have any specifics at this time since that was done just last week.”
THE POSSIBILITIES
In addition to the lawyers at Weil Gotshell & Manges, Steward retained Alixpartners, an international CPA firm that specializes in bankruptcies.
The federal bankruptcy code allows companies to file under either Chapter 7 or Chapter 11. Under Chapter 7, creditors are paid in order of priority, with secured creditors receiving payment first, and unsecured creditors getting what is left.
Under Chapter 11, creditors are paid according to a court-approved plan that outlines how the business will restructure its debts and operation.