A buyout firm that struck a deal to pay $245 million for bankrupt Steward Health Care’s national physicians network is getting a wary reception from some health care players in Massachusetts.
The purchase of the doctors group, called Stewardship Health, by an arm of private equity firm Kinderhook Industries was announced late Monday night after what a Steward executive called “a robust and active bidding process” overseen by the US Bankruptcy Court in Houston.
Stewardship has about 5,000 employed and affiliated physicians in Massachusetts and nine other states, including primary care doctors and specialists, Steward said. Roughly half, or 2,500, work in Massachusetts.
The buyer, Kinderhook affiliate Rural Healthcare Group of Nashville, Tenn., operates 14 medical group practices in Tennessee and North Carolina. A spokesperson, Rhonda Mims, said its acquisitions aim to further its “core value of serving the underserved.” She said the buyer plans “to reinvest in the critical resource needs of the providers.”
While the purchase must be approved by bankruptcy Judge Christopher Lopez, and also faces regulatory reviews in Massachusetts and other states, some early reactions to the deal reflected a growing skepticism of for-profit health care.
Dr. Hugh Taylor, president of the Massachusetts Medical Society, a trade association for doctors and medical students, called on Steward and Rural Healthcare Group “to establish and maintain transparency and accountability” to promote “equitable, affordable, and timely access to care for our patients.”
Steward, formerly backed by private equity giant Cerberus Capital Management, refused to file financial reports with Massachusetts regulators for years before moving its headquarters from Boston to Dallas in 2018. After the move, the company expanded to eight states before running up losses and filing for bankruptcy on May 6.
Senator Ed Markey, a persistent critic of private equity in health care, posted a statement Tuesday on the social network X that called for a law restricting private buyouts of health care assets. “Private equity did to Steward what it will keep doing to hospitals and physician networks across the US — unless we put guardrails on them,” Markey wrote.
The purchase of Stewardship by a private equity firm is also raising fears that the new owner, seeking higher profits, could sever physicians’ ties with Steward hospitals. Steward is in the final stages of negotiations to sell six of its hospitals in Massachusetts, which serve mostly low-income communities.
“For-profit medicine doesn’t work for us,” said Alan Sager, professor of health policy and management at Boston University’s School of Public Health. “It doesn’t give us the care we need. The connection between doctors and hospitals is essential. If the new buyer steers the doctors toward other hospitals, the Steward hospitals might be further undermined.”
The definitive agreement to sell Stewardship was Steward’s largest asset sale since the system filed for bankruptcy. It is also selling about 30 hospitals nationally to pay off its scores of creditors.
In a Tuesday statement Rural Healthcare’s chief executive, Benson Sloan, said, “We are excited to bring our mission and approach to the state of Massachusetts, and the other states where Stewardship operates and supports primary care clinics.” Sloan, through a spokesperson, declined a request for an interview.
Steward had put eight hospitals in Massachusetts up for sale earlier this year. Last month, it said it will close two of them, Carney Hospital in Dorchester and Nashoba Valley Medical Center in Ayer, by Aug. 31 because they had failed to attract qualified bids.
Because those hospitals are expected to change hands in the coming months, the future ties between Stewardship doctors and the Massachusetts hospitals remain to be determined.
In a bankruptcy court filing late Monday night, Steward listed the purchase price for Stewardship as $245 million in cash. That price is subject to change, the filing indicated, depending on several factors still to be determined, including whether US Family Plan at Brighton Marine, a Boston health insurance agency, is included in the transaction.
The filing listed the buyer as Brady Health Buyer LLC, a company set up by New York-based Kinderhook to purchase Stewardship.
It was the second time that Steward has announced a deal to sell its physicians network. On March 26, before its bankruptcy filing, Steward said it had signed a letter of intent to sell Stewardship to the Optum unit of health insurer UnitedHealth for an undisclosed price. But the parties were unable to finalize that transaction, amid promises of tough regulatory scrutiny, and Optum ultimately walked away from the deal.
The sale to Rural Healthcare is subject to the approval of Lopez at a Houston hearing scheduled for Friday. It’s also subject to regulatory approval in Massachusetts and other states.
A spokesperson for the state Health Policy Commission, which reviews ownership transfers of health care organizations, said it has yet to receive formal notice of the Rural Healthcare purchase. She said the commission will be in touch with the parties to review its regulatory requirements. A spokesperson for state Attorney General Andrea Joy Campbell said she also planned to review the acquisition.
At the Friday hearing, Lopez will also be asked to approve the sale of the Steward hospitals in Massachusetts, Arkansas, and Louisiana. The sales of the Massachusetts hospitals have yet to be completed. They include St. Elizabeth’s Medical Center in Boston, Holy Family Hospital in Methuen and Haverhill, Good Samaritan Medical Center in Brockton, Morton Hospital in Taunton, and St. Anne’s Hospital in Fall River.
Robert Weisman can be reached at robert.weisman@globe.com.