In setback, Steward and Optum walk away from deal for physician network

The proposed sale of struggling Steward Health Care's physician network, Stewardship Health, to a sister company of the insurer United HealthCare is off, raising still more questions about the company's efforts to bring its finances under control through bankruptcy.

OptumCare, a national for-profit owner of tens of thousands of physician groups, and Steward told state regulators they have decided not to move forward with a deal. Steward cited a "challenging" review process at the federal Department of Justice but said it continues to seek other buyers.

"Stewardship Health remains a valuable asset that provides excellent care for its patients; there are multiple other parties that remain interested in acquiring the business and Steward is in active negotiations," the company told WBUR in a written statement.

Steward filed for Chapter 11 bankruptcy in May and is scheduled to auction off the doctors' group this month. But the company has already delayed the sale by several weeks and also delayed auctions for its hospitals in Massachusetts and some other states.

While Steward obtained loans to keep its hospitals open during the bankruptcy process, some of its financing depends on the sale of the doctors' group. It is unclear what will happen if the company is unsuccessful in its efforts to sell Stewardship, which represents doctors in nine states, including Massachusetts.

Earlier this year, Steward notified the Massachusetts Health Policy Commission that it had reached an agreement to sell Stewardship Health to OptumCare. The terms of the deal were not disclosed.

The sale was part of a broader effort by Steward, a Dallas-based, private hospital network, to avoid bankruptcy. The for-profit chain announced in February that it had obtained a bridge loan and would try to sell its physician network.

The announcement came after public disclosures that Steward owes millions of dollars in back rent to the real estate investment company Medical Properties Trust, which owns Steward's hospital real estate. Steward operates more than 30 hospitals in eight states.

Massachusetts officials have been monitoring Steward's hospitals to preserve patients' access to health care and avoid the sudden closure of any medical centers. In March, Steward closed a facility in Massachusetts and has closed or sold hospitals in other states in recent years.

Several state and federal lawmakers had questioned the proposal to sell Steward's physician group to Optum, and wondered whether the deal could be structured to help Steward's eight Massachusetts hospitals. During a congressional field hearing in Boston in April, U.S. Sen. Elizabeth Warren, a Democrat, noted Optum already employs more than 50,000 doctors in Massachusetts which, she said, should be a concern to regulators.

"The net result [ of a deal ] could be a disaster," Warren said at the hearing. "Optum isn't offering to pay hundreds of millions of dollars so that they can make health care better in Massachusetts. This is all about making more money, and Optum has run this same play in other states."

Warren accused Optum of boosting profits by over-billing Medicare and "cutting care for the patients who need it most.

"I do not understand how regulators can approve such a deal," she said at the time.