Steward Health Care Reaches Agreement to Sell its National Physician Network

BOSTON– Steward Health Care said it has reached an agreement to sell its national physician network to a private equity firm.

The deal comes as Steward is scheduled to appear before a bankruptcy court judge on Friday over his plan to sell six hospitals in Massachusetts. The Dallas-based company announced its bankruptcy on May 6.

In a statement released Monday, Steward said it has entered into a “definitive agreement” to sell its Stewardship Health business — which includes about 5,000 physicians in Massachusetts and nine other states who treat about 400,000 patients — to Rural Healthcare Group, an affiliate of Kinderhook Industries. LLC, a private equity firm.

Steward said the deal, which is subject to review by regulators, will result in good outcomes for patients and doctors. “Stewardship Health will continue to serve its loyal patients in the commonwealth of Massachusetts under new ownership,” the company said in a statement Monday.

Mark Rich, president of Steward Health Care, said Kinderhook has “more than 20 years of experience investing in mid-sized healthcare companies serving the nation’s most vulnerable populations.”

Steward had already announced a deal to sell your network of doctors. Steward announced in March that it had signed a letter of intent to sell Stewardship to health insurer UnitedHealth’s Optum unit. That agreement was never finalized.

Steward and its CEO, Ralph de la Torre, have come under intense criticism for a series of decisions that critics — including Gov. Maura Healey — say led to its bankruptcy. Healey said she focused on trying to save the remaining Steward hospitals, which found qualified bidders.

“I have spoken repeatedly about my disgust for Ralph de la Torre, disgust for Steward’s management,” the former attorney general said Monday. “I hope the feds go after him hard and he ends up in prison.”

Butler announced its bankruptcy on May 6 and two days later he said he planned sell the 30 hospitals it operates across the country

A bankruptcy judge last month allowed Steward’s decision to close two Massachusetts hospitals. Steward announced on July 26 its plan to close the hospitals – Carney Hospital in Boston and Nashoba Valley Medical Center in Ayer – around Aug. 31 because it did not receive qualified bids for either facility.

Boston Mayor Michelle Wu said Tuesday she will use the city’s planning, zoning and licensing process to push to keep some kind of healthcare resource on the Carney Hospital property — and out of reach of luxury developers.

“We wanted to make it very clear that the zoning here, even though it’s still zoned as multifamily residential, doesn’t mean that they could, without going through any process, suddenly build a giant luxury condominium complex that could make them a lot of money,” he said. Wu on radio station WBUR. “So they shouldn’t see that as an option in question.”

Steward owes rent payments after selling its hospitals’ physical properties – including land and buildings – to another company. Both Steward and the state argued that requiring potential buyers to shoulder those payments rather than negotiating their own leases — or purchasing the hospital properties outright — was making it difficult to transfer ownership of the hospitals.

Judge Christopher Lopez of the U.S. Bankruptcy Court in Houston last month approved a motion by Steward on Wednesday to reject the master lease binding the Massachusetts hospitals.

Massachusetts also agreed to provide around US$30 million to help support the operations of six hospitals that Steward Health Care is trying to transfer to new owners. The payments are advances on Medicaid funds that the state owes the Steward.

A U.S. Senate committee voted last month to authorize an investigation in Steward’s bankruptcy and in la Torre’s subpoena.

Steward currently operates more than 30 hospitals in Arizona, Ohio, Pennsylvania, Arkansas, Florida, Louisiana, Texas and Massachusetts.