Steward Health Care has deal to sell its doctor network to UnitedHealth
Growing market power of Optum brings concerns
Troubled hospital operator steward health Care, grappling with a financial crisis that’s engulfed its eight massachusetts hospitals, has struck a deal to sell its nationwide physician network to insurance giant Unitedhealth’s Optum Care unit.
The proposed sale of the doctors group, called stewardship health, is part of steward’s plan to shore up its finances and bolster its nationwide network of 33 hospitals after the Dallas-based company last year fell behind in paying bills and rents.
The sale will be reviewed closely in massachusetts, where policymakers are looking for a potential leverage point to force steward to plow the proceeds into its struggling hospitals and to prevent closure of crucial facilities. Already, some elected officials who have repeatedly accused for-profit steward of prioritizing shareholders over public health are sounding warnings about the sale of the physicians practice.
“After years of gross profiteering and mismanagement, steward’s latest plan raises more serious questions about the future of the massachusetts health care system,” senator Elizabeth warren said in a statement. “my top priority is ensuring steward’s massachusetts hospitals remain open. But steward executives have no credibility, and I am concerned that this sale will not benefit patients or health care workers, or guarantee the survival of these facilities.”
On Tuesday, a subsidiary of Optum, called Collaborative Care holdings, filed notice with the massachusetts health Policy Commission over the sale. A price tag was
not included in documents filed with the state, and Optum officials did not immediately respond to comment.
Steward did not respond to requests for comment.
The commissions executive director, David Seltz, said the agency would examine the impact of the deal on health care costs, quality, access, and equity before the sale can be completed. The commission will have 30 days after receiving the required information to assess the impacts of the transaction, but could conduct a more extensive review. If it finds the sale would worsen quality or drive up health care costs, the commission can refer its findings to the Massachusetts attorney general.
The deal may also be scrutinized by other state regulators or federal antitrust authorities.
“This is a significant proposed change involving two large medical providers, both in Massachusetts and nationally, with important implications for the delivery and cost of health care across Massachusetts,” Seltz said.
But Julie Pinkham, executive director for the Massachusetts Nurses Association, said state officials might not have enough authority to stop or influence the deal.
“While it is essential that the Health Policy Commission conduct a thorough review of this sale and its impact on the Commonwealth, the key question is if the HPC or other agencies of the state have the requisite authority to reject the proposal or assign any obligations to the proposal to protect the public,” Pinkham said in a statement.
Under the proposed deal, Optum would acquire Stewardship Health, a Steward affiliate that includes the company’s primary care doctors and other clinicians in nine states, as well as its contracting network for physicians. It was unclear whether the sale might alter the value of the hospitals, which Steward has also been trying to sell.
Massachusetts political and community leaders said they worried about whether the deal would further weaken Steward hospitals in the state because its former physicians could soon refer patients to other hospitals.
Boston City Councilor Liz Breadon, who represents the Brighton neighborhood of Steward’s flagship Massachusetts hospital, St. Elizabeth’s, said she wants to study the Optum deal but is worried that UnitedHealth may be “cherrypicking” Steward’s more profitable assets at the expense of vital community hospitals.
“We need quality hospitals that deliver comprehensive care,” Breadon said. “But I’m not sure they want to take hospitals.”
Noting that the hospital buildings are saddled with rent obligations to an out-of-state landlord, Medical Properties Trust, she said, “When you don’t own the buildings and you’re going to be liable for a lot of rent,” the hospitals become less attractive to another prospective operator.
Others worried about the growing market power of Optum.
“Optum is particularly aggressive, and they’re growing their footprint in Massachusetts in a significant way,” said John McDonough, professor at the Harvard T.H. Chan School of Public Health. “It’s not a good sign with where we’re headed with Steward, and we need to hear from state government about what their strategy is, what are they trying to achieve.”
David E. Williams, president of Health Business Group, a Boston management consulting firm, said Optum is focused on buying more profitable physicians practices rather than brickand-mortar hospitals.
“They don’t want the facilities,” Williams said. “They want to control more primary care, control the patient flow.”
The purchase of Stewardship Health could potentially be challenged on antitrust grounds, since Optum’s doctor network — the largest employer of physicians nationally — is also one of the largest in Massachusetts.
The Justice Department is investigating the relationship between UnitedHealth’s insurance unit and its doctor networks for potentially anticompetitive practices, the Wall Street Journal reported last month.
Optum has already expanded its Massachusetts presence through two major acquisitions. In 2018, Optum bought Reliant Medical Group, a nonprofit network with more than 500 care providers, for $28 million plus agreements to pour more resources into the network. And in 2022, Optum paid $236 million for nonprofit Atrius Health and its network of close to 1,000 doctors and providers.
Nationwide, the unit includes 90,000 doctors, a major pharmacy benefits manager, surgery centers, and a health data business.
Optum’s Change Healthcare unit, which processes insurance payments at pharmacies and other providers has also caused headaches in Massachusetts. Due to a cyberattack last month, Change was unable to process payments, forcing doctors and patients to scramble for coverage of prescriptions.
Steward Health was formed in 2010 when chief executive Ralph de la Torre led an effort to convert what was then a chain of financially shaky Catholic hospitals to a for-profit system backed by a private equity firm. In the years since, de la Torre struck a deal to sell Steward’s hospital buildings to Medical Properties Trust, freeing capital to expand nationally but saddling its hospitals with large rent payments.
He also moved Steward’s headquarters from Boston to Dallas, bought out its private equity investor, and went on a personal spending spree, buying a Dallas mansion, a super yacht, and a high-end sports fishing boat.
Steward’s financial crisis has prompted lawsuits from suppliers and the loss of leased medical equipment. In October, a woman died after giving birth at St. Elizabeth’s Medical Center, where a vital device called an embolism coil had been repossessed by creditors.
Last month, Steward obtained new loans from its landlord, MPT, and other creditors as part of a plan that depended on selling assets such as its physician network. Other hospital operators in Massachusetts are also in the running to take over Steward facilities. Governor Maura Healey and other politicians have called for Steward to leave the state.