Steward reaches deal to sell physicians network to Rural Healthcare Group

Steward Health Care has reached a deal to sell its 5,000-doctor physicians network to Rural Healthcare Group for a proposed $245 million, the companies announced Monday night.

The sale of Stewardship Health, which operates across nine states including Massachusetts and serves 400,000 patients, is a major step in Steward's bankruptcy. It still requires approval from a federal judge in Texas. The private, for-profit Steward is also working to sell five hospitals in Massachusetts, as well as facilities in other states.

Tennessee-based Rural Healthcare Group is owned by the private equity firm Kinderhook Industries, LLC.  Kinderhook's portfolio includes other health care-related companies, several automotive and light manufacturing companies, recycling and waste service companies and a pet food company, according to its website.

U.S. Sen. Elizabeth Warren blasted the deal, writing on X, formerly Twitter, that Massachusetts is already losing two hospitals “because of private equity’s looting of Steward.”

She was referring to the planned closures of Carney Hospital in Dorchester and Nashoba Valley Medical Center in Ayer, after the company said they did not receive any “qualified” bids.

The comment was also a reference to the private equity firm Cerberus Capital Management, which created Steward in 2010 when it struck a deal to purchase a struggling Catholic hospital chain. The company reportedly made $800 million by the time it cashed out the investment a decade later.

“Selling Massachusetts doctors to another private equity firm could be a disaster,” Warren wrote. “We can’t make the same mistake again. Regulators must scrutinize the deal.”

A spokeswoman for Gov. Maura Healey’s administration said the state’s Health Policy Commission will review the proposed transaction while Steward pursues approval from federal regulators and the bankruptcy court. Commission director David Seltz said the sale can’t go through until state and federal investigators complete their review.

“The dissolution and bankruptcy of Steward Health Care has been an unprecedented disruption for communities, patients, and health care workers in Massachusetts,” Seltz said in a statement. “The HPC’s rigorous market oversight role is essential.”

Seltz did not say how long the review might take. He said it will be important to see how this sale relates to deals, not yet finalized, for the other five Steward hospitals. Some creditors are anxious to resolve Steward’s bankruptcy case and recoup as much of the projected $9.2 billion in debt as possible.

Stewardship Health is a network of primary care clinics and physicians. Steward said specialists are not part of this sale. They are employed by the hospitals or in independent practices with hospital affiliations.

Some specialists could choose to stay with hospitals under new owners if Steward can reach purchase agreements for Morton Hospital, Saint Anne’s Hospital, Holy Family Hospital in Methuen and Haverhill, and Saint Elizabeth’s and Good Samaritan Medical Centers. A date for the bankruptcy court judge to review signed purchase agreements was delayed, again, from last Tuesday to this Friday.

In a press release, Rural Healthcare Group's chief executive Benson Sloan said the company is excited to bring its mission and approach to the state of Massachusetts.

"Our intention is to reinvest in the critical resource needs of the providers, and we look forward to engaging with our new colleagues to further empower them to improve the lives of people through high-quality primary care," Sloan said in an email.

If the deal is approved, the company said patients would be able to continue seeing doctors at their existing clinics.

The Healey administration must make sure the transition for patients goes smoothly, the Massachusetts Medical Society said in a statement.

"We will continue to advocate for patients and physicians and partner with state agencies to mitigate any potential disruption resulting from the process of completing the transaction," said society president, Dr. Hugh Taylor.

According to court filings, Steward's lenders also bid on the physicians network. An earlier deal to sell the group to OptumCare, fell through amid concerns about regulatory scrutiny.

The agreement with Rural Healthcare Group is scheduled for a hearing before Steward's bankruptcy judge on Friday in Houston.