Steward Health Care’s impasse with its mega-landlord Medical Properties Trust, which owns the Sebastian River Medical Center buildings and the ground under them, has sadly not been resolved in closed-door mediation, so Steward resorted to an open-warfare option late Monday.

Steward asked federal bankruptcy Judge Christopher Lopez to determine the value of the real property versus the ongoing business concern of each of the 26 hospitals still on the auction block.

In a 24-page, scathing Adversary Complaint, which amounts to a lawsuit within the larger bankruptcy case, Steward charged that MPT has blocked efforts to sell the hospitals, and was interfering directly in the process of bidding on Steward hospitals.

MPT just hours later filed a response and counterclaim, accusing Steward of illegally trying to sell MPT owned real property, and of attempting to deprive MPT of the fair market value of the land and buildings that house Steward hospitals.

Steward alleged that MPT had approached buyers “out of self-interest” outside of Steward’s marketing process, undermining the bidding.  It accused MPT of pressuring prospective bidders with whom it had a business relationship “to allocate all of the value of their bids to MPT’s real estate.”

The result of this, it charged, would have siphoned off all the value of the hospitals to MPT, leaving Steward with nothing to use to repay its estimated $9 billion in debt. Steward said MPT’s actions were aimed at robbing the bankruptcy estate and the creditors who hope to recoup money through the bankruptcy process.

“MPT’s sales process interference and brinksmanship jeopardizes the future of dozens of hospitals, tens of thousands of jobs, and safety of patients – not to mention taking value from the estate,” Steward said.

Steward says MPT breached an earlier “side agreement” signed by the parties which stated that MPT would “act reasonably and in good faith to agree on an allocation of value.”

Such an agreement was necessary because, instead of having detailed leases for each individual hospital listing which assets of each building convey with the real property and which assets belong to Steward as part of the going business concern of the hospital, Steward had entered into two “master leases” with MPT covering 30 of its 31 hospitals.

In order to sell its hospitals, Steward and MPT had to tweeze out – hospital by hospital – what belonged to Steward, and what was being leased from MPT.

Instead, Steward claims MPT “engaged in covert and improper discussions and exerting undue influence on potential bidders in a desperate attempt to save its above-market, burdensome and inflated leases,”

All of this, Steward charged, has caused “irreparable harm,” delaying the sale process, causing bidders to become discouraged and drop out, and costing Steward immense legal and administrative fees.

Steward asked Judge Lopez for “an order allocating the amount of value attributable to hospital operations and other estate assets, on one hand, and hospital real estate, on the other.”

MPT, in filing a cross-motion countering Steward’s filing, objected to the declaration of Orlando Health as a “stalking horse bidder” for Sebastian River Medical Center, plus Steward’s Melbourne and Rockledge hospitals.

MPT contended that Steward had no authority to broker package deals which included MPT’s “bespoke hospital properties” where MPT was not represented at the bargaining table.  Since MPT has not filed bankruptcy, it argued it is under no legal obligation to liquidate its properties.

Since the $439.4 million Orlando Health bid is the type of package deal for both hospital operations and real property that MPT is claiming violated its rights under federal bankruptcy code, MPT aims to block the bid from going forward, declaring it not to be a “qualified bid” under the bid procedures Steward filed with the bankruptcy court.

Details of the Orlando Health bid include a cap of $275 million for MPT’s real property assets at the three hospitals combined, with the other $164 million going to the Steward estate for the hospital operations.

“The Debtors’ proposed scheme has no legal support,” MPT said. “The Bankruptcy Act simply does not authorize a trustee to distribute other peoples’ property among a bankrupt’s creditors.”

MPT asked Judge Lopez to enforce the bidding procedures filed with the court and force Steward to comply with federal bankruptcy code, which MPT says prohibits the type of combined “enterprise bids” Steward has brokered with Orlando Health, along with bidders for its Massachusetts hospitals.

On top of the dispute between Steward and MPT, the venture capital firms which have loaned Steward nearly $600 million to date also filed objections to the Orlando Health bid on Monday.

Steward in its Adversary Complaint stated that the Committee for Unsecured Creditors also would be filing something opposing MPT’s interference in the bidding process. The committee represents hundreds of thousands of large and small vendors, utilities and local landlords who rent ancillary office space to Steward medical offices and clinics.

While Lopez figures out how to referee Steward, MPT and the various creditors, sales of the remaining hospitals, including Sebastian River, seem stalled indefinitely.

Meanwhile, the beleaguered Steward hospitals continue to bleed cash. In May when the Dallas-based hospital corporation founded by Dr. Ralph de la Torre declared Chapter 11 bankruptcy, chief restructuring attorney Ray Schrock said Steward was "burning through” approximately $25 million per week.

Since then, the hospitals have ceased paying rent and utilities and scaled back to the essentials – paying employees, keeping liability and malpractice insurance policies current, using up inventory and purchasing only the bare minimum like patient meals and absolutely vital supplies.

Now, Steward officials say the company is spending $10 million per week beyond what it’s taking in – money it does not have to burn.