Warren, Markey, Auchincloss, Lynch Raise Concerns Over Private Equity-Owned Rural HealthCare Group’s Acquisition of Steward’s Physician Network

September 30, 2024

Warren, Markey, Auchincloss, Lynch Raise Concerns Over Private Equity-Owned Rural HealthCare Group's Acquisition of Steward's Physician Network

"(W)e remain deeply concerned that this proposed transaction, if allowed to proceed, would empower yet another private equity firm to prey on Massachusetts patients and providers, sucking taxpayer dollars out of the system for the profit of a few corporate executives and shareholders."

Text of Letter (PDF)

Washington, D.C. - Today, U.S. Senators Elizabeth Warren (D-Mass.) and Ed Markey (D-Mass.), along with Representative Jake Auchincloss (D-Mass.) and Representative Stephen Lynch (D-Mass.), sent a letter to the CEO of Rural Healthcare Group (RHG) raising concerns over its proposed acquisition of Steward Health Care's (Steward's) physician group, Stewardship Health (Stewardship). Specifically, the lawmakers warned that RHG executives - who have a troubling history of putting profits over patient health - may structure the deal to evade state laws designed to insulate medical professionals from corporate influence.

Steward filed for bankruptcy on May 6, 2024, after corporate executives, private equity investors, and predatory landlords looted the company, putting patients and communities at risk and ultimately resulting in the closure of two Massachusetts hospitals. On August 12, 2024, Steward announced it had entered into an agreement to sell Stewardship to RHG, which is owned by Kinderhook, another private equity firm with a history of predatory practices.

"(W)e remain deeply concerned that this proposed transaction, if allowed to proceed, would empower yet another private equity firm to prey on Massachusetts patients and providers, sucking taxpayer dollars out of the system for the profit of a few corporate executives and shareholders," wrote the lawmakers.

Of particular concern is RHG's ties to health software company, NaviHealth, which is owned by UnitedHealth Group and the subject of a class action lawsuit stemming from its work to develop algorithms used by insurers to improperly deny health care for patients with severe injuries.

"We are particularly alarmed that allowing the same executives that ran NaviHealth when these dangerous tools were developed and sold to control physicians in the Commonwealth will put Stewardship's patients and clinicians in harm's way," wrote the lawmakers.

Additionally, the members of Congress raised concerns that RHG may structure its acquisition of Stewardship in a manner that shields it from state laws designed to protect patients and physicians. While most states, including Massachusetts, have laws banning the corporate practice of medicine - preventing corporate entities from owning physicians and interfering with their clinical judgment - private equity firms and large insurers have developed ways to circumvent these laws. One common tactic involves entering into "management service agreements," which allow the corporate entity to manage and operate the practice, while keeping physicians in place as nominal owners. Indeed, it appears that RHG has structured past acquisitions in this manner, raising questions about its plans to comply with state law and the clinical autonomy of Stewardship's physicians should this deal proceed.

"(W)e are troubled that RHG's pending acquisition may follow the same playbook that private equity firms and large insurers have deployed to aggressively acquire physician practices across the country and squeeze profits out of federal health programs," continued the lawmakers.

"Ultimately, RHG's executives' ties to NaviHealth and the potential for the transaction to evade state corporate practice of medicine laws raise serious concerns that the proposed acquisition may negatively impact the standard of care and clinical autonomy of Stewardship's patients and providers," concluded the lawmakers. "This comes at a particularly difficult time because all of these patients and providers have already suffered greatly at the hands of private equity."

The lawmakers have asked RHG to answer a series of questions by no later than October 15, 2024.

Senator Warren is one of the nation's leading bankruptcy experts, and has been leading congressional oversight of Steward's failures. Warren has repeatedly called out the harms of private equity ownership on health care costs and quality of care and has fought to prevent companies from taking advantage of the bankruptcy system:

• On September 4, 2024, Senator Warren urged the IRS to crack down on Real Estate Investment Trusts (REITs) squeezing the health care industry.
• On August 8, 2024, Senators Warren and Markey requested information from private equity firm Apollo Global Management (Apollo) on the company's role in Steward's bankruptcy, and urged Apollo to work in good faith to facilitate the sale of Steward's Massachusetts hospitals.
• On July 3, 2024, Senators Warren and Markey wrote to Medical Properties Trust and Macquarie Infrastructure Partners, owners of Steward's eight Massachusetts hospitals, urging them to offer lease concessions to keep the hospitals open and viable.
• On June 25, 2024, Senator Warren, Representative Chu, and Representative Nadler urged CMS to increase oversight of artificial intelligence (AI) and algorithmic software tools used to guide coverage decisions in Medicare Advantage (MA) plans, citing the NaviHealth scandal as cause for concern.
• On June 11, 2024, Senators Warren and Markey introduced the Corporate Crimes Against Health Care Act of 2024 to root out corporate greed and private equity abuse in the health care system, specifically preventing what happened with Steward from happening again.
• On June 5, Senator Warren wrote to the DOJ, FTC, and HHS calling out high health care costs due to vertically-integrated insurers, private equity companies, and pharmaceutical companies that are driving health care consolidation.
• On June 3, 2024, Senators Warren, Brown (D-Ohio), and Markey wrote to the Director of the U.S. Trustee Program (USTP), calling for USTP to move to appoint a Chapter 11 trustee to run the company in place of Steward's current management, and to monitor the hospitals' bankruptcy proceedings to protect patients and local communities.
• On May 24, 2024, Senator Warren sent a letter to the U.S. Department of Health and Human Services and the U.S. Centers for Medicare & Medicaid Services, urging them to support communities and health care providers affected by the crisis caused by Steward's financial mismanagement.
• On April 19, 2024, Senators Warren and Senator Markey (D-Mass.) sent a letter to six private credit funds that are holders of Steward's debt, asking them a series of questions about their loans and calling on them to offer loan modifications that could potentially help keep the hospitals afloat.
• On April 16, 2024, Senators Warren and Markey called out Medical Properties Trust and Macquarie Infrastructure Partners for exploiting Steward Hospitals, and urged them to help keep the hospitals open.
• On April 8, 2024, Senators Warren, Markey, and the rest of the MA delegation urged the FTC and DOJ to closely scrutinize UnitedHealth Group's proposed acquisition of Steward Health Care's physician group, Stewardship Health.
• On April 3, 2024, Senator Warren delivered remarks at a Senate hearing in Boston titled, "When Health Care Becomes Wealth Care: How Corporate Greed Puts Patient Care and Health Workers at Risk," which centered on Steward Health Care's Massachusetts hospitals.
• On April 2 Senators Warren and Ed Markey (D-Mass.) called out private equity firm Cerberus Capital Management (Cerberus) for its role in creating Steward Health Care's financial challenges, following Cerberus's reply to the Massachusetts congressional delegation's February 2024 probe.
• On February 9, 2024, Senator Warren slammed UnitedHealth Group for leveraging NaviHealth's unregulated artificial intelligence algorithm to unlawfully deny health care to seniors with severe injuries.
• On March 26, 2024, Senator Warren released a statement about Steward's plan to sell its physician group Stewardship Health to UnitedHealth Group's subsidiary Optum.
• On March 26, 2024, Senators Warren and Markey sent a letter to Steward CEO and Chairman Dr. Ralph de la Torre, calling on him to testify at a congressional hearing in Boston.
• On March 8, 2024, Senators Warren and Markey sent a letter to Dr. de la Torre, blasting him for years of financial mismanagement, private equity schemes, and executive profiteering that have led to Steward Health Care's financial crisis.
• On February 15, 2024, Senators Warren and Markey, along with all nine members of the Massachusetts congressional delegation, sent a letter to Cerberus seeking answers from the private equity firm for its role in creating the current financial challenges at Steward hospitals.
• On January 29, 2024, Senator Warren released a statement about Steward's financial situation and allegations of patient neglect at Steward facilities.
• On January 23, 2024, Senator Warren led the Massachusetts congressional delegation in a letter to the CEO of Steward Health Care pressing the company to brief them on Steward's financial position, the status of their Massachusetts facilities, and their plans to ensure the communities they serve are not abandoned.

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