Dive Brief:
- Beleaguered health system Steward Health Care has agreed to sell its physician network, Stewardship Health, to healthcare behemoth UnitedHealth Group for an undisclosed sum, according to documents filed with Massachusetts regulators on Tuesday.
- Under the deal, UnitedHealth’s care delivery subsidiary Optum Care would acquire Steward’s eight-state footprint of primary care providers and clinicians. It will also acquire all of Stewardship’s stock.
- The Health Policy Commission, an independent Massachusetts agency tasked with monitoring state healthcare spending, will have 30 days to assess the potential impact of a Optum-Steward deal on healthcare costs, quality and access, HPC director David Seltz said in a statement. Already, some legislators and health M&A experts are urging a close review of the transaction, citing antitrust concerns.
Dive Insight:
Steward has been hit with escalating allegations of financial and operational mismanagement in recent months, including falling so behind on debts to vendors that critical medical equipment is routinely repossessed.
Senior Massachusetts officials have waged a mounting pressure campaign on Steward, demanding it increase transparency into its practices. When Steward failed to adequately do so, the governor urged the private physician-owned network to seek buyers for its assets.
However, now that a possible sale has been announced, stakeholders — including state officials, health researchers and industry analysts — aren’t satisfied with the terms.
Experts said that the proposed deal could diminish Steward’s ability to sell its hospitals to good buyers by splitting Steward’s most valuable holding, its physicians, from its real estate. A further drop in value could be disastrous for Steward’s hospitals, which are already saddled with debt, analysts warned.
Physician practices are responsible for “significant portion” of a hospital’s value through referrals and procedure revenue, said Rob Simone, sector head of real estate investment trusts at analyst firm Hedgeye.
“If you split those apart, you at least theoretically change the value proposition for both — and I think it could make it tougher to sell [the physical space],” Simone said.
Others said they are disappointed that another massive corporation is coming in as a buyer, and shared concerns about reduced competition in Massachusetts’ healthcare market as a result of the deal.
“A sale of the physician group to Optum, a large and aggressive for-profit, would close off options to rebuild the Massachusetts Steward hospital network into patient-centered, locally-focused systems of care,” said John McDonough, a professor at the Harvard T.H. Chan School of Public Health, over email.
McDonough expressed hope the deal would be blocked by antitrust regulators. It’s almost certain to face a large degree of regulatory scrutiny, given Steward’s highly publicized breakdown and the fact that UnitedHealth has a massive physician network.
The Department of Justice is already reportedly investigating Optum to determine whether the company’s acquisition of doctor’s offices could be creating anticompetitive effects.
Optum is the largest employer of physicians in the U.S., controlling over 10% of the nation’s doctors. It’s unclear how many doctors the Stewardship buy would add to Optum’s roster. Tuesday’s regulatory filings do not detail how many doctors are employed by Stewardship, and the company does not share that information on its website.
Yet the deal “raises significant antitrust concerns in Massachusetts and nationally,” Sen. Elizabeth Warren, D-Mass., said in a statement Tuesday.
Optum has successfully expanded its presence in Massachusetts through a number of acquisitions, including its 2018 purchase of Reliant Medical Group and its 2022 purchase of Atrius Health.
Massachusetts’ HPC said it will review the proposed deal to determine whether it warrants a more extensive review. If it does, the HPC will refer the deal to the state’s attorney general.
The deal is also complicated by what could happen should Steward enter bankruptcy. A Healthcare Dive review found at least 35 pending lawsuits against the system as of this month, the majority of which were collections cases — typically a sign of an unhealthy company, according to lawyers.
Hedgeye’s Simone, who has been tracking Steward since 2022, also believes Steward to be insolvent. If Steward is insolvent, then Stewardship Health could be “clawed back” from Optum during a bankruptcy proceeding, he said.
“If the court determines that an asset was sold out of that company after it had already become insolvent ... the asset — in this case, Stewardship — can literally be clawed back to the bankruptcy estate then used to satisfy claims,” Simone said. “There’s a very real risk of that here.”
Steward declined to comment on the pending deal, while UnitedHealth did not respond to a request for comment by time of publication.
