Optum Steward deal is off as hospital chain struggles

Health care provider Optum has backed away from its plan to purchase Steward Health Care's national physicians group, dealing a major setback to Steward's efforts to bolster its finances after filing for bankruptcy.

Optum, an arm of health insurance giant UnitedHealth, struck a preliminary deal in March to acquire Stewardship Health for an undisclosed sum. Stewardship, a Steward affiliate, includes its primary care doctors and other clinicians in Massachusetts and seven other states, as well as its contracting network for physicians.

But the parties hadn't finalized an asset purchase agreement, and an Optum representative placed a call to a Massachusetts official this week to say it had decided not to go forward, said a state government official who was not authorized to discuss the situation publicly and asked not to be named.

A spokesperson for Steward said the Dallas-based company had been notified that Optum no longer planned to go forward but had no other comment. It wasn't clear whether Steward, the nation's largest for-profit hospital system, was negotiating with other potential buyers of Stewardship.

Get Trendlines A business newsletter from Globe Columnist Larry Edelman covering the trends shaping business and the economy in Boston and beyond.Enter Email A representative for Optum could not be reached for comment Thursday. Optum has yet to formally withdraw a "material change" notice it filed March 26 with the state Health Policy Commission disclosing the planned buyout, which prompted the commission to begin a review of the deal.

Steward, which filed for bankruptcy May 6, was required by the court to sell its assets through auctions. Even without a definitive purchase agreement, Optum had been seen as a potential "stalking horse" bidder for the physicians network, setting a floor for other possible bids.

State and federal officials, including Senators Elizabeth Warren and Ed Markey, accusing Steward of putting shareholders over public health, called for a careful review of the proposed buyout, warning that selling the doctors group to UnitedHealth could weaken Steward's hospitals.

Steward has also put its 31 hospitals up for sale, including eight in eastern Massachusetts. Last week, it postponed its planned auction of the Massachusetts facilities, among them St. Elizabeth's Medical Center and Carney Hospital in Boston, for three weeks to July 18.

The company offered no reason for the delay. In addition to the Boston hospitals, it operates Good Samaritan Medical Center in Brockton, Holy Family Hospital in Methuen and Haverhill, Morton Hospital in Taunton, St. Anne's Hospital in Fall River, and Nashoba Valley Medical Center in Ayer. Steward-owned Norwood Hospital has been closed since 2021 due to a flood, and isn't listed among the hospitals being auctioned off.

Hospital employees and people in the communities being served by Steward hospitals are awaiting the transition anxiously, uncertain if new operators will step forward and whether the hospitals can remain open.

Boston's City Council unanimously adopted a resolution Wednesday calling on the Healey Administration to take steps to guaranty the survival of Carney and St. Elizabeth's Medical Center, including by seizing the facilities through eminent domain if buyers aren't found.

Governor Maura Healey, while insisting the state won't give money to Steward, hasn't said whether it will provide interim financing or funds for infrastructure improvements to new hospital operators.

Healey, pressed on the question of state financial help in a short interview at Moderna's new Cambridge headquarters Wednesday, said "we're in a number of discussions right now" but wouldn't elaborate.

"We're committed to protecting patients, jobs, and the stability of the health care market, and that's all I'll say at this point," she said.

On Thursday, a Steward filing in US Bankruptcy Court in Houston said the company was also delaying auctions for five of its hospitals in Pennsylvania, Ohio, Arkansas, and Louisiana indefinitely. The bid deadline for those hospitals was Monday, and the auctions had been scheduled for Thursday. No reason for the delay was given.

Bidding for the Steward hospitals has been complicated by the company's sale of the hospitals' land and buildings to Medical Properties Trust, which is charging more than $100 million in annual rent to the eight hospitals in Massachusetts. Steward and MPT are at odds over how to divide the proceeds from the sale between themselves and Steward's scores of creditors, and are undergoing mediation this week.

Robert Weisman can be reached at .