The Justice Department has rejected bankrupt Dallas-based Steward Health Care's suggested auction timeline for its physician group Stewardship Health to be sold to UnitedHealth Group's subsidiary Optum.
In a May 28 bankruptcy court filing, obtained by Becker's, Brian Boynton, principal deputy attorney general for the justice department, detailed how the debtor-in-possession financial deal between Steward and its landlord Medical Properties Trust interferes with the health system's "obligation to comply with the United States' antitrust review" of the Stewardship Health, Optum deal and should not be approved.
Medical Properties Trust dedicated $75 million in debtor-in-possession financing to Steward in early May after it filed for bankruptcy May 6. The funding was issued to help Steward accelerate the sale of its hospitals to new operators.
While Steward said in a May 6 news release that it could receive up to another $225 million from MPT, the landlord has "not committed to providing additional funding" beyond the $75 million, according to MPT's own release.
Along with the planned auctioning off of its 31 hospitals, Steward proposed the sale of Stewardship Health to Optum in late March. The bid deadline for Stewardship Health is proposed for June 24, with an auction date set for June 27 and a sale hearing planned for July 2.
Bankruptcy court documents filed May 15 revealed that a letter of intent had been executed between the two parties and that Steward remains in "advanced discussions" with UnitedHealth Group affiliate Collaborative Care Holdings to be a stalking horse purchaser for Stewardship Health, which is when a potential buyer is hidden from creditors, the public and the court in a bankruptcy case.
"The debtors have represented they intend to use the proposed sale to United as a “stalking horse” bid for a bankruptcy sale," Mr. Boynton said in the filing. "The United States’ ongoing review is in its early stages and may require extensive production of documents and data before the United States determines whether to oppose the transaction."
Mr. Boynton shared how MPT's financial plan with Steward does not address the justice department's review of the proposed Optum sale, and that the department "reserves its right to conduct a full antitrust review and, if necessary, file an enforcement action concerning the proposed sale regardless of any milestones agreed to by the debtors and MPT."
Steward declined to provide Becker's with a comment at this time.