MEMBERS OF THE HEALTH Policy Commission board this week began to grapple with the mammoth, complex task of evaluating the proposed sale of Steward Health Care’s physician network to UnitedHealth Group’s Optum.
“I think the underpinning piece is what happens to patients, and what happens to the small community hospitals out there in terms of their ability to stay viable and to provide care,” said commissioner Barbara Blakeney at a Thursday meeting. “The impact of this is just mind-bogglingly complex and potentially harmful.”
Stewardship Health, Steward’s physician network, would be sold to Optum, according to initial filings with the commission. The Steward group, imperiled by the cash-strapped Texas-based hospital system’s financial spiral, employs 2,950 physicians as the third largest physician network in the state.
Optum currently has two physician practices in Massachusetts – Reliant Medical Group, purchased in 2018, and Atrius Health Services, purchased in 2022 – as well as the chain of urgent care centers MedExpress with nine locations in Massachusetts. All told, Optum manages about 975 physicians in the state, said Kate Mills, senior director of the commission’s market oversight and transparency department.
The move to absorb Stewardship Health is the latest expansion move by UnitedHealth, which now employs or is affiliated with 10 percent of all physicians in the US and acquired or hired 20,000 doctors last year alone.
As part of the HPC review, staff is working to identify which physicians would be impacted by the sale, and what the relationship would be between the physicians and Steward’s hospitals. The physical practice sale is part of Steward’s six-point recovery framework released in February.
Mills cautioned that the HPC review process, which must be completed along with other reviews by state or federal antitrust authorities before any sale can move forward, is in the very early stages.
The Steward system has not yet filed a complete notice of material change, which then kicks off a 30-day preliminary review period. If the committee determines that the sale would likely have significant impact on the market, it can decide to embark on a review process that would stretch for months.
“It’s going to be very tricky, because it’s not just this single transaction,” said commissioner David Cutler, professor of applied economics at Harvard University. “It’s going to have implications for the hospitals and for other medical care providers in the community. So, it’s both going to be difficult to do because of the filling out, if you will, the ‘what it is’ and also difficult to do because of the scope of the implications for patients and for spending. And so we’re going to have to take our time and make sure that we’re getting all of that right.”
Asked by Cutler about what is missing in Steward’s initial filing and when the commission can expect the process to begin in earnest, Mills said their requested information is confidential and she could not answer publicly.
“This is something that is a priority for folks to move quickly on,” she said. “So we have been working closely with the parties to try to get the information we need to conduct this review.”
Since 2013, Mills said, the HPC received notice of 168 provider transactions, such as mergers, changes of ownership, or creating a contracting entity or new affiliation between a health provider and carrier. Over half of those transactions – 86 total – involve a for-profit entity like Steward.
Steward’s financial spiral and the proposed transaction with Optum has drawn the ire of the state congressional delegation and top Massachusetts state officials.
“I approach this with a deeply skeptical eye,” Sen. Elizabeth Warren told the Boston Globe on Monday. In a letter last week, the Massachusetts delegation urged the US Department of Justice and the Federal Trade Commission “to closely scrutinize this acquisition, and oppose it if it would reduce competition and increase UnitedHealth’s market dominance.”
Steward Health Care’s cash crunch – leaving it unable to pay vendors or rent and impacting its 31 private hospitals across eight states, including nine hospitals in Massachusetts – kicked off fierce inquiry into private equity’s role in the state health care system. Lawmakers at the state and federal level are weighing their options to regulate private equity investments more tightly.
A recent special hearing on the impacts of private equity on the health care system took Steward and its CEO, Ralph de la Torre, who was not in attendance, to task. HPC commissioners Thursday received a presentation on private equity’s healthcare chokehold, as private equity expands and the healthcare system consolidates.
The goal of private equity firms “is to increase the value of the companies that they buy and and quickly turn them around and, within three to seven years, sell them for profit,” HPC policy researcher Yue Huang said. “So because they operate on such a short timeline, private equity firms pursue some strategies that are unique and introduce instability to the healthcare market.”
Huang pointed to leveraged buyouts and sale leasebacks as examples. A private equity firm may acquire a company with debt and then use that company as collateral, shifting liability to the company acquired rather than the private equity group. In a sale-leaseback, “which many of us are sort of learning for the first time, partly as a result of the Steward situation,” Huang said, a private equity owner of a physical plant will sell the real estate to an investment trust, leaving health care providers with rent on property they previously owned.
Private equity health care investments have accelerated in Massachusetts, Huang said, particularly among behavioral health, dental, and home health providers, as well as certain specialty providers. Many transactions found in the HPC research, executive director David Seltz said, were never noticed to the committee through the normal process because of definitional loopholes or financial thresholds.
Panelists at a State House hearing on private equity recommended strengthening state oversight authority over health care transactions, closing loopholes in statutes that restrict corporations from employing practicing physicians, and boosting transparency through requirements like public reporting of ownership and business structure.
Broadly, Huang said, the HPC research found that private equity acquisitions often result in higher prices and are also often associated with higher utilization and worse quality of care, although outcomes may vary by industry.
“I liked what I’m hearing with all of the proposals in terms of regulatory and procedural processes, and I would happily support all of that,” said Blakeney, former president of the American Nurses’ Association. “But I think there’s an additional layer above that, and that layer has to do with how predatory private equity is, and why in the world would we allow a predatory process to engage in our health care system? I know this might be very naive – I’m not a lawyer, I’m not an economist – but it strikes me that part of the discussion needs to be how do we keep them out of our health care.”
Commissioner Renato Mastrogiovanni, president and CEO of HealthView Services, offered a measured counterpoint.
“The more regulations we have, the less valuable those businesses are and the less interest you’ll have from private equity,” he said. “So that raises another potential issue. We’ve seen a lot of negatives related to private equity and equity involvement. If they started backing out, how does that impact the health care industry?”
Seltz said the HPC is planning to put together a white paper for publication, which will include their research, scans of academic literature to date, and also some policy considerations. Briskly concluding their meeting, the commissioners voted to keep the state’s health care cost growth benchmark – the subject of much debate last month – at 3.6 percent.
“Even as we vote today to set the health care cost growth benchmark for calendar year 2025,” Seltz said, “HPC has advanced a comprehensive set of recommendations to evolve and modernize our entire approach to monitoring health care cost containment growth, and moderating those areas where we see spending growth is the highest.”