Optum to buy struggling Steward Health Care's physician group under proposed deal

Steward Health Care is planning to sell off its physician group to UnitedHealth Group’s Optum in order to right its struggling finances, according to documents filed with Massachusetts state regulators Tuesday.

The group, Stewardship Health, spans nine states and includes primary care and other clinicians in addition to a physician contracting network. A sale price was not disclosed.

Massachusetts’ Health Policy Commission (HPC) has 30 days to review the deal or request more information from the companies, who said the sale could close during this year’s second quarter, according to the filings.

“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 healthcare across Massachusetts,” HPC Executive Director David Seltz said in a statement. “Details of the proposal will be reviewed by the HPC to examine potential impacts on healthcare costs, quality, access and equity. The sale cannot be completed until after the HPC’s review and any concurrent review by state or federal antitrust authorities.”

Dallas-based, for-profit Steward has been under fire for months over its substantial debts. The company runs several hospitals within Massachusetts at risk of closure, sparking demands from government officials for Steward to arrange an exit from the state that doesn’t involve any interruptions in care services or quality.

Steward said last month its lenders had approved a $150 million cash infusion, and that the company would be selling off the physician group along with other nonessential assets to “reset its operations and address vendor obligations.”

But the potential sale to Optum is already raising some alarm bells among prominent lawmakers. The business already employs over 90,000 physicians thanks to a series of buyups and is reportedly the subject of a federal antitrust probe over its relationship with UnitedHealthcare, the insurer arm of parent company UnitedHealth Group.

“After Steward recklessly took on massive debt that is continuing to put hospitals in Massachusetts and across the country into financial crisis, the Massachusetts healthcare system must move away from Steward’s financial insecurity,” Sen. Ed Markey, D-Massachusetts, said in a statement. “With this announcement, Optum must demonstrate that it can meet the even greater responsibility to preserve and protect health care access in the Commonwealth, and I hope they will live up to that responsibility by controlling costs and putting patients and providers first.”

Markey and Sen. Elizabeth Warren, D-Massachusetts, have both held Steward up as a prime example of corporate mismanagement in healthcare. They’ve also criticized its ties with private equity firm Cerberus Capital Management, which they and others say purchased the system in 2010 only to extract its resources and saddle it with liabilities.

Despite this, Warren, a leading antitrust advocate in federal politics, suggested that the proposed deal takes local care out of the frying pan and into the fire.

“My top priority is ensuring Steward’s Massachusetts hospitals remain open,” she said in a statement. “But Steward executives have no credibility, and I am concerned that this sale will not benefit patients or healthcare workers, or guarantee the survival of these facilities. It would be a terrible mistake for Steward to be allowed to walk away while looting Massachusetts hospitals one more time

“Optum, a UnitedHealth Group subsidiary, is already the largest employer of physicians in the country—controlling over 10% of American doctors—which means this deal raises significant antitrust concerns in Massachusetts and nationally,” she said.

Warren and Markey are calling on Ralph de la Torre, M.D., CEO and chairman of Steward Health Care, to testify at the Senate Health, Education, Labor and Pensions (HELP) Subcommittee on Primary Health and Retirement Security field hearing being held in Boston next week. Lawmakers said they plan to discuss Steward and the broader impacts of for-profit companies on healthcare access during the hearing.