Massachusetts Lawmakers Call On Regulators To Review Steward-UnitedHealth Deal

Dive Brief:

• Massachusetts’ congressional delegation has asked the Federal Trade Commission and the Department of Justice to “closely scrutinize” UnitedHealth’s proposed acquisition of Steward Health Care’s physician group. 
• The proposed deal, which was announced late last month, could offer indebted Steward a needed influx of cash as it seeks to restructure and keep hospitals open. However, a “quick fix” sale to “a vertically integrated UnitedHealth colossus” could do more harm than good if it stifles competition, lawmakers warned in a letter sent last week.
• The deal, which is expected to close in the second quarter of this year, is also being reviewed by the Massachusetts Health Policy Commission, which oversees healthcare spending in the state. The HPC has until April 25 to decide whether to refer the proposed transaction to state Attorney General Andrea Campbell for further review.

Dive Insight:

Resolving Steward’s financial problems has proved vexing for stakeholders.

On one hand, Steward appears to be insolvent. It owes hundreds of millions to a wide array of vendors and to its landlord, Medical Properties Trust. Squeezed for cash, the Dallas-based, for-profit health network has abruptly shuttered several hospitals in recent months.

Massachusetts Gov. Maura Healey has sworn there will be no bailout for Steward and called on the company to swiftly exit the state. 

Selling Steward’s physician group — which Sen. Elizabeth Warren, D-Mass., called “the last asset of any value left at Steward” during a Senate field hearing last week — could be one of the health network’s few options to secure the liquidity it needs to keep operations running. In February, Steward listed the possible sale of its physician group as step one of its six-point action plan toward becoming a sustainable business. 

Regulators might be sympathetic to the deal given Steward’s financial troubles, according to Nathan Ray, who leads the healthcare merger and acquisitions practice at consultancy West Monroe.

“The government [isn’t] in the business of not allowing struggling businesses to figure out how to continue existing,” Ray said.

However, Steward’s problems don’t grant the deal a “hall pass” to close without regulatory review, he cautioned.

Scrutiny of healthcare deals has increased in recent months, Ray said. In December, the FTC and DOJ overhauled guidance they could use to challenge industry tie-ups.

While regulators and lawmakers generally want Steward to remain open, Ray said the deal is further complicated by UnitedHealth’s involvement, which he called the “largest acquisitive asset in healthcare.”

Federal regulators have recently scrutinized UnitedHealth.

The FTC and DOJ challenged UnitedHealth’s acquisition of technology firm Change Healthcare in 2022. However, the antitrust agencies lost the case and the deal closed later that year, in what was viewed as a major setback for the DOJ.

The healthcare conglomerate is currently under investigation by the DOJ for possible anticompetitive practices related to its acquisition of doctor’s offices, according to reports from the Wall Street Journal. UnitedHealth’s subsidiary Optum Care, which would purchase Stewardship Health, employs 10% of all physicians nationwide.

Lawmakers in their letter accused UnitedHealth of purposefully buying distressed physician groups to extend its grip on the market.

The proposed merger also does not guarantee Steward facilities will remain open long-term and UnitedHealth could increase associated care costs, the lawmakers said.

In testimony last week before the Senate’s Health, Education, Labor & Pensions subcommittee, experts noted how UnitedHealth could worsen healthcare quality should the deal go through.

“[Optum is] absolutely the world’s expert on upcoding; they actually own companies for the purpose of upcoding,” said Don Berwick, former health policy adviser to the White House and current president emeritus and senior fellow at the Institute for Healthcare Improvement. “They have done that all over the country, and I suspect that we’re going to see costs rise [here, too].”

Berwick expressed concern that profits from the deal could be redirected as dividends to investors or as executive bonuses, instead of Steward’s hospitals.

Steward declined to comment. Optum Care and United Health did not respond to requests for comment.