UnitedHealth Group’s Optum is walking away from its tentative deal to purchase the bankrupt Steward Health Care’s physician group, according to a Massachusetts healthcare regulatory body.
The deal, unveiled in March, was a cornerstone of the for-profit’s liquidation plans but had come under fire from prominent lawmakers and other critics of the two companies.
The sale was being reviewed by the Massachusetts Health Policy Commission (HPC). As reported late Thursday by the Boston Globe, the regulator now says that Optum has begun to sever the deal.
“Optum has informed the [HPC] that they are no longer working to finalize an agreement with Steward,” Mickey O’Neill, the HPC’s communications director, confirmed in an email. “The parties have not yet withdrawn material change notice filings with the HPC.”
Steward Health Care, a for-profit that runs 31 hospitals in several states, is currently working its way through bankruptcy proceedings. There have yet been no updates to the case docket reflecting Optum’s apparent decision.
Optum and Steward have not immediately responded to emails seeking confirmation of the change.
Legal representation for Steward had lamented to the bankruptcy court that HPC's review had dragged well beyond its 30-day window.
However, O'Neill said that the particies had never submitted all of the information required for its 30-day review, including a definitive agreement of the deal. Though HPC staff had started to look over the deal with the information they had received, the incomplete material change notice filing meant that the 30-day review period had never begun.
"[A material change notice] cannot be deemed complete without the definitive agreement governing the transaction and other requested information and documents necessary to conduct a preliminary review of potential impacts on healthcare costs and market functioning," O'Neill said. "The parties were aware that the HPC was awaiting the definitive agreement and other key information to complete its review of the transaction."
Steward’s bankruptcy and asset selloff has become a closely watched affair amid concerns that its financial troubles could lead to care interruptions or degradation. The system’s prior relationship with private equity and management’s decisions to hobble its financial sustainability in exchange for short-term payout has also turned the organization into a case study for opponents of private equity in healthcare.
Last week Steward bumped back several deadlines for bidding and sale of its assets, including the physician group. Prior to that, it narrowly avoided running out of money by securing hundreds of millions via first-in, last-out debtor-in-possession loan.
Despite the urgency of the physician group deal, the choice to sell to Optum raised more than a few eyebrows.
Massachusetts’ federal legislators previously urged the HPC and federal regulators alike to take a hard stance. They noted that Optum already holds employment or affiliation with over 90,000 physicians—more than 10% of the country’s total—and that its “well-documented self-dealing” with other UnitedHealth Group subsidiaries opens the door to higher prices and reduced quality. Across multiple sessions, they called for assurances that the funds obtained through any sale would go toward protecting care delivery, rather than enriching management.
The White House also has a keen interest in combating anticompetitive dealmaking and, more broadly, the involvement of private equity in care delivery. It has instructed regulators and law enforcement to take a firmer stance against such deals as they occur.