All 11 of Massachusetts’ federal legislators are calling on regulators to keep a short leash on UnitedHealth Group’s proposed acquisition of Steward Health Care’s physician group, even if that means risking the close of nine more hospitals.
Stewardship Health includes thousands of physicians in eight states. The pending deal, which came to light late last month, would help Steward Health Care address substantial debts to its vendors and landlord.
Ten hospitals run by the for-profit have been treading water for months, culminating last week with the close of New England Sinai Hospital in Stoughton, Massachusetts. Government leaders, policy researchers and representatives from clinician groups have widely attributed the financial troubles to intentional value extraction by Steward’s executive leadership and prior private equity owner, Cerberus Capital Management.
The proposed deal is currently undergoing a 30-day review from the Bay State’s own health regulator, which said it is considering issues of healthcare access, quality and costs. The deal would also need sign-offs from state and federal antitrust authorities.
It’s the latter group of regulators that Sen. Elizabeth Warren, Sen. Edward Markey and Massachusetts’ delegation to the House of Representatives, all of whom are Democrats, aimed to sway.
In a recent letter, they told the Federal Trade Commission (FTC) and the Department of Justice's (DOJ's) Antitrust Division’s heads to keep a sharp eye on UnitedHealth Group’s Optum, which already has “a stranglehold over U.S. physicians.”
“Steward’s threat to close hospitals should not prevent DOJ and FTC from conducting a close and careful review of the proposed UnitedHealth acquisition,” the legislators wrote. “A quick fix to the short-term crisis that creates an uncompetitive health care marketplace dominated by a vertically integrated UnitedHealth colossus—in Massachusetts or elsewhere—may do more harm than good in the long run.”
Optum’s employment or affiliation with 10% of the country’s physicians is concerning in light of “the company’s well-documented self-dealing,” the lawmakers said. UnitedHealth Group sent $138 billion to its various subsidiaries in 2023, with more than 60% of Optum’s 2023 revenue coming from its parent company’s insurance branch.
Such transactions have allowed the company to “evade” regulations for insurers to spend at least 85% of premium dollars on medical claims, they wrote. Meanwhile, UnitedHealth Group’s market dominance has allowed it to strong-arm smaller independent providers into “financial ruin” for later acquisition, which the lawmakers allege was the case last month with Optum’s expedited acquisition of Oregon-based Corvallis Clinic.
The legislators said they are “committed” to keeping the Steward hospitals open to preserve care in their surrounding communities.
“This proposed merger, however, does not guarantee they will stay open in the long-run, and in the meantime could lead to more expensive healthcare for vulnerable patients and create more opportunities for UnitedHealth to pad its profits with taxpayer dollars,” they wrote.
Warren and Markey had previewed their concerns over the deal last week during a congressional field hearing on “corporate greed” in healthcare.
There, Warren said she could “not understand how regulators can approve such a deal” and was concerned when witnesses said there have been no public guarantees that Steward’s proceeds from the sale would be used to support operations. Witnesses also agreed with Warren that the deal would likely lead to higher healthcare costs for Massachusetts residents.
Federal regulators have also signaled a hard line on vertical integration deals. In December, the FTC and the DOJ finalized merger and acquisition antitrust guidelines that take into account “modern market realities” such as integration and platform competition (which the legislators applauded in their recent letter). In workshops, heads of the agencies have also stressed their intent to crack down on opportunistic dealmaking by private equity and other corporate investors.