The creditor litigation trust for the Texas Chapter 11 case of hospital operator Steward Health Care has filed adversary suits against six groups of health insurance companies, seeking payment of covered medical bills totaling more than $56 million.
The trustee for the Steward creditor litigation trust filed a series of adversary complaints late Tuesday against insurers across four states — Texas, Florida, Ohio, and Massachusetts — saying they systematically stonewalled or underpaid insurance claims filed by the hospitals, including by ignoring evidence provided by medical professionals to justify the claims.
The insurers should pay the balance "instead of saddling Steward's creditors with that cost," according to the complaints.
The lead defendants in each complaint are Medicare and Medicaid affiliate Wellpoint Texas Inc., Blue Cross and Blue Shield of Florida Inc., Simply Healthcare Plans Inc., Leon Health Inc., Caresource Ohio Inc., and Mass General Brigham Health Plan Inc.
Each of the insurers "took inappropriate advantage of Steward's financial condition by spuriously denying the hospitals' reimbursement claims," the six similar complaints read.
By the time Steward either shut down or sold its six hospitals in Texas, seven in Florida, and eight in Massachusetts, the insurers had racked up over $56 million in backlogged reimbursements across three states, according to the complaint.
The complaints allege the insurers refused to pay for claims under false pretenses, such as inaccurately claiming a treatment did not qualify for reimbursement or had not been adequately documented. They would also deny claims on the grounds that they were filed late despite the relevant hospital having proof, including certified mail, that it had filed on time, according to the complaints.
The insurers also downgraded health care services in order to pay lower costs, such as reimbursing an inpatient procedure at the rate of an outpatient one, or assigning a claim a less serious diagnosis than the one provided by the patient's doctor, according to the complaints.
Wellpoint owes $10.4 million for healthcare provided to patients insured by Wellpoint, having denied or underpaid 5,713 valid claims under cover of the chaos of Steward's collapse, according to the Wellpoint complaint.
In one example, Wellpoint allegedly denied coverage for a newborn's 27-day neonatal intensive care unit stay in 2024 at a hospital that had gotten prior authorization from Wellpoint Medicaid and from the parent's other insurance. The non-Wellpoint insurance denied the $168,000 claim, and the hospital then billed Wellpoint only to be told the claim was untimely, according to the complaint.
Blue Cross and Blue Shield of Florida and affiliates owe $25.4 million for 5,462 unpaid or underpaid claims, and the Mass General insurers owe $4.39 million for 2,538 claims, according to the relevant complaints. Simply Healthcare is allegedly holding out on 3,028 claims collectively worth $5.1 million, Leon owes $8.2 million for 1,952 claims, and Caresource Ohio owes $3.4 million for 7,748 claims, according to the complaints.
Steward filed for Chapter 11 protection in May 2024 with $9.2 billion in debt, and has since sold or closed its 31 hospitals.
In addition to the creditor liquidation trust, the liquidation plan established a trust to pursue claims on behalf of the estate. Steward in July filed an adversary action against ex-CEO Ralph de la Torre and other former execs seeking to claw back more than $1.5 billion in dividend payments and additional transfers they had approved.
The complaint alleges the dividend payment to Steward's then-owners — private equity firm Cerberus Capital Management — was what definitively drove Steward into insolvency, saying the hospital chain was showing signs of financial distress before the transaction and the deal left the company burdened with significant lease and mortgage costs.
Counsel information for the insurers wasn't immediately available.
Mark Kronfeld is represented by Hale Neilson, James W. Boswell, Thaddeus D. Wilson, Sarah L. Primrose, Matthew Kelsey, and Dana Berkowitz of King & Spalding LLP.
The adversary suits are Mark Kronfeld v. Blue Cross and Blue Shield of Florida Inc. et al., case number 4:26-ap-03039, Mark Kronfeld v. Wellpoint Texas Inc. et al., case number 4:26-ap-03040, Mark Kronfeld v. CareSource Ohio Inc., case number 4:26-ap-03041, Mark Kronfeld v. Leon Health Inc., case number 4:26-ap-03042, Mark Kronfeld v. Simply Healthcare Plans Inc. et al., case number 4:26-ap-03043, and Mark Kronfeld v. Mass General Brigham Health Plan Inc. et al., case number 4:26-ap-03044, and the underlying bankruptcy case is In re: Steward Health Care System LLC et al., case number 4:24-bk-90213, all in the U.S. Bankruptcy Court for the Southern District of Texas.
Deal Summary
