Steward reaches deal to sell multispecialty physician group to private equity affiliate for $245M

Steward Health Care has struck a deal to sell its multispecialty physician group to a private equity affiliate for $245 million, those involved announced Monday.

Nashville-based Rural Healthcare Group, owned by PE firm Kinderhook Industries, is the buyer, with plans to make “significant” investments in the organization. The nine-figure deal includes Steward Medical Group and the Steward Healthcare Network, a physician-led multispecialty organization offering primary care, diagnostic imaging and other specialty services.

SMG employs more than 1,700 providers operating across several states. It was recently put up for sale after parent organization Steward Health Care filed for Chapter 11 bankruptcy protection in May.

"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," Benson Sloan, CEO of Rural Healthcare Group, said in a statement. “A thriving primary care infrastructure is critical to supporting local hospitals and specialists, as primary care providers are instrumental in ensuring patients are directed to the appropriate facilities at the right time," he added later.

The transaction is still subject to bankruptcy court and regulatory approval. Sloan and colleagues said their investment in Steward will allow physicians to continue seeing patients in existing clinics. They plan to separate Steward Medical Group from the hospital system, transitioning clinics from “health system-owned to independent,” “ultimately a benefit to patients.” RHG currently operates 17 clinics across Tennessee and North Carolina.

“Working together, we will improve the patient and provider experience while enhancing the overall quality of care," Joseph Weinstein, MD, president of Steward Medical Group and Steward Health Care Network, said in the same announcement.

Kinderhook Industries is based in New York and focused on midsized healthcare businesses that serve the nation’s most vulnerable populations. Its portfolio includes Life Line Screening, a firm which provides annual testing for the risk of cardiovascular disease, stroke and other chronic diseases.

Steward Health Care System fell into financial insolvency after its sale to PE firm Cerberus Capital and alleged mismanagement by CEO Ralph de la Torre and other executives. It previously planned to sell the medical group to UnitedHealth Group, but the deal fell through amid scrutiny from lawmakers.

The Massachusetts Health Policy Commission is among those tasked with reviewing the sale. HPC had not yet received notice of the Rural Healthcare Group acquisition as of Tuesday. Authorities emphasized the sale cannot be completed until after the commission’s appraisal and any other concurrent review by state and federal antitrust authorities.

“The dissolution and bankruptcy of Steward Health Care has been an unprecedented disruption for communities, patients, and healthcare workers in Massachusetts,” HPC Executive Director David Seltz said in a statement. “As we move forward past this crisis, the HPC’s rigorous market oversight role is essential to making important information transparent and protecting the residents of the Commonwealth.” 

Dallas-based Steward Health Care—which operates about 30 hospitals across Arizona, Ohio, Pennsylvania, Arkansas, Florida, Louisiana, Texas and Massachusetts—issued its own statement about the deal Aug. 12. President Mark Rich called RHG a “a well-respected group of healthcare professionals” and expressed confidence that Steward Health will “continue its stellar treatment of the patient population as a result of this transaction.”