Steward Health Care suffered a major setback in its financial recovery plans after Optum, a subsidiary of UnitedHealth Group, opted out of bidding for its physician group, Stewardship Health, according to a Massachusetts state official.
This news comes as a blow to Steward, which had repeatedly emphasized the sale of Stewardship as crucial for stabilizing its finances. In February, the struggling health system secured $150 million in loans specifically to fund the transaction. During ongoing federal bankruptcy proceedings, Steward’s attorneys maintained that the sale proceeds would cover debts owed to specific lenders. As recently as June 13th, the Dallas-based company tied $75 million of new debtor-in-possession financing, used to fund operations during restructuring, to the successful completion of the Stewardship sale.
Despite Steward’s focus on selling Stewardship, only one public buyer, Optum, emerged. Discussions regarding the deal began in December 2023, and a letter of intent outlining the sale’s completion was signed in March. However, progress stalled soon after, according to representatives from the Massachusetts Health Policy Commission, the state agency responsible for reviewing healthcare deals. Notably, a definitive agreement, necessary to initiate the approval process, was never submitted by either party.
While Steward’s attorneys repeatedly expressed near-completion of the deal during bankruptcy hearings in May and June, Optum remained silent on the matter. The reasons behind Optum’s withdrawal remain unclear, although concerns surrounding the regulatory review process might be a contributing factor, according to Arielle Trzcinski, a principal healthcare analyst at Forrester.
Prior to Steward’s bankruptcy filing, state and federal lawmakers expressed concerns about potential antitrust issues stemming from the deal. This stemmed from Optum already employing or having affiliations with roughly 10% of all physicians nationwide. These concerns intensified last month when the Department of Justice (DOJ) filed an objection to the proposed sale timeline for Stewardship, reminding the court that any sale would require regulatory approval.
With Optum out of the picture, the identity of potential bidders for Stewardship remains uncertain. While Steward’s attorneys touted Stewardship as “highly sought after” and “extremely valuable” in court, the health system also delayed its planned auction by three weeks earlier this month without explanation. Experts posit that this delay could be due to ongoing discussions with Steward’s landlord, Medical Properties Trust, regarding the division of proceeds from asset sales. Alternatively, it could indicate a lack of significant interest in Steward’s assets.
The Boston Globe first reported Optum’s decision to withdraw from the deal.
