BOSTON — Another state agency is counting itself among the public officials who say they do not have the information and records they need from Steward Health Care, as red flags have been raised around a potential deal to sell Steward’s physician network to for-profit insurers Optum Care.
Steward remains in the spotlight after the for-profit network’s financial problems spilled into public view, in part stemming from a backlog of unpaid rent, and Gov. Maura Healey and state regulators have accused the company of not providing necessary financial documents.
The Health Policy Commission, whose job it is to monitor health care spending growth, plans to review the proposed sale to, among other things, “understand which Steward physicians are involved in the transaction, and what the relationship will be between the physicians and Steward’s hospitals,” according to a presentation given to the commission’s board on Thursday.
The proposed deal is to sell Stewardship Health Inc., the parent of Stewardship Health Medical Group Inc., which employs primary care physicians and other clinicians across nine states, to OptumCare, a subsidiary of UnitedHealth Group.
The agency said in late March that once all required information has been provided about the sale, the HPC will have 30 days to assess potential impacts of the transaction.
But as of Thursday’s meeting, the agency said it still does not have the documents they need to begin their 30-day preliminary review.
“We have begun reviewing what we can at this point, recognizing that key information from the parties is still outstanding,” said HPC Communications Director Mickey O’Neill.
Kate Scarborough Mills, senior director for market oversight and transparency at the agency, said Thursday that they could not publicly say what information they were waiting for from the companies.
“The materials being requested are confidential,” she said. “So, unfortunately, I can’t publicly disclose those things that are still pending. Certainly, we know this is something that is a priority for folks to move quickly on. So we have been working closely with the parties to try to get the information we need to conduct this review.”
A Steward Health Care spokesperson did not provide a comment about the missing information for HPC’s review when asked.
The unfolding situation has prompted a conversation on Beacon Hill about the role of private equity in health care.
Steward and its hospitals were owned for about a decade by private equity firm Cerberus, though it was transferred to a group led by Steward founder and CEO Ralph de la Torre in 2020.
Both the state’s Joint Committee on Health Care Financing and U.S. Sens. Ed Markey and Elizabeth Warren have held hearings at the State House this spring exploring the harms of private equity in the health care sector.
The HPC — which has long asked lawmakers to grant them more regulatory authority — is again suggesting “policy solutions” for Beacon Hill to grant the agency more powers in the wake of the situation with Steward and a broad expansion of private equity-owned health care in Massachusetts.
“I want to suggest here an opportunity to consider going further, which is to understand that the HPC, in our market oversight role, is truly just a public transparency role. We have no authority to deny or approve or impose conditions on any of the proposed transactions that come before us, even if we have identified significant negative harm to patients in the commonwealth,” agency executive director David Seltz said.
He said in other states, such as Oregon, state officials have empowered state health authorities to impose conditions on transactions.
“Similar to other states such as Oregon, further empower state oversight authorities (e.g., HPC, DPH, AGO) to ensure all proposed transactions are consistent with state goals on cost, quality, access, and equity (not limited to PE transactions). Potential conditions of approval could include: efforts to maintain or enhance access to needed services, quality standards or improvements, ongoing financial and compliance monitoring including on staffing, and, conditions on exit or sale,” says a slide from Thursday’s presentation to the board.
They are also urging officials to expand the HPC’s purview to include oversight of sectors frequently targeted by private equity firms, and “provide more public insight into the structure and financial health of provider organizations,” as well as strengthening enforceable penalties for non-compliance.
The topic is also top of mind for lawmakers, including Sen. Mark Montigny of New Bedford, who made a speech on the Senate floor Thursday saying greater regulation of private equity health care buyers is 13 years too late.
“I think there will be a more appropriate day for me to have much to say about the Steward issue, an issue that some of us in this chamber warned about 13 years ago, so we’ll have a lot to say generally about private equity. But specifically about this corrupt corporation, and I say that not lightly,” Montigny said.
He said he’d like to see “a pretty intense criminal investigation” about the unfolding situation.
“The fact that this private equity firm, that’s no longer involved, they took their $800 million and ran, and was allowed to take these charities into their hands and squeeze the money out of them, is exactly why private equity has no place in running acute care hospitals in Massachusetts,” Montigny said.
Following Markey and Warren’s hearing, Cerberus released a statement saying the private equity company saved a failing, insolvent Massachusetts hospital chain.
“Cerberus’ initial investment in Steward in 2010 not only rescued, but restored six struggling Massachusetts hospitals on the verge of closing that were critical to their communities. During our nearly 11-year ownership of Steward, we supported the revitalization of failing community hospitals into a leading healthcare system. Cerberus’ long-term investment made it possible for Steward to continue to serve its communities, employ tens of thousands of professionals, and positively impact millions of patients’ lives,” the company said in a statement.
It says the “rescue” of the Caritas Christi Health Care System resulted in over $800 million of capital support, including pension obligations for employees, repayment of “virtually all” outstanding debt, and a $400 million commitment to capital projects.
“It is incorrect and unfair to say that Cerberus’ executives ‘walked away with an $800 million profit.’ These returns primarily benefited our investors, including millions of teachers, firefighters, law enforcement personnel, and municipal workers as well as other pension funds, universities, and endowments. Like most private investment managers, we benefit only after the return of all capital to our investors, plus a preferred return, and only if the pooled investment vehicles that we manage make an overall return on investment. We do not receive incentive fees on an investment-by-investment basis.”
They added that since their controlling interest in Steward ended in 2020, they have had nothing to do with its operations.
