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Area docs get little information about physician network sale

STORY BY PIETER VANBENNEKOM (Week of September 5, 2024)

A number of local doctors – and the thousands of patients they serve – got few answers last week about how the announced sale of the bankrupt Stewardship Health physician network will affect them.

At a meeting of local physicians associated with the bankrupt network, a Steward representative said that for the moment, there will no change in the chain of command, and Steward itself will continue to communicate with the physicians, according one doctor who attended the meeting but asked not to be named.

The new buyers, the local doctors were told, would start communicating with individual physician practices one by one, starting in Massachusetts and working their way slowly down to Florida, maybe in a month or so.

The physician practices that include 5,000 doctors across nine states, some of them along the Treasure and Space Coasts, have been termed “highly profitable” by the bankrupt parent company, Steward Health Systems.

The bankruptcy court last week approved in principle the $245 million sale of the physician network to a new company that also operates the Rural Healthcare Group (RHG), a relatively small corporation headquartered in Nashville that has about 17 small rural health clinics in Tennessee and other nearby Southern States.

The proposed sale still faces legal objections from virtually all major insurance companies, who allege that the sale terms make no provisions for either Steward or the new buyer to pay them millions of dollars they’re owed, or for how to provide continuing care to thousands of patients in the area whose physicians serve their patients under contracts between the doctors and the insurance companies.

Insurance companies may find out only a few days prior to the sale closing that the new owner will not continue on with contracts which put their physicians in network for local patients, leaving patients to either switch doctors to one in network, pay hefty out-of-network fees for care, or cancel long-scheduled appointments and procedures.

Most local physicians who are subject to the group sale learned about the identity of their new owner through sporadic news media reports and professed they knew nothing about their new boss.

“I must admit I’d never heard of them before,” said Val Zudans, an independent Vero Beach ophthalmologist who participates in some Steward group contracts with insurance companies where he can get slightly higher reimbursement rates as a participant in a group than as an individual practitioner. “They seem to be fairly small. I can’t help wondering if they haven’t bitten off more than they can chew.”

Local doctors hoped to find out more information at a meeting last week of the Board of Directors of the local Sebastian chapter of the Steward Health Care Network, but they didn’t learn much. The board includes one general practitioner of a doctors’ office owned outright by Steward as well as an independent GP affiliated with the network for billing and group contract purposes only, plus a specialist owned by Steward and an independent specialist affiliated with the hospital group for the same reason. Each Steward hospital has such a chapter grouping together the associated physicians in the area.

It now appears virtually certain that the physician practices and the Sebastian hospital itself will be sold separately to different entities, but insiders say that having two different companies own a hospital and the associated physician practices around it grouped together in a network is not necessarily a negative for either party from a business point of view.

“There are a lot of complex moving parts here, but there’s no reason it can’t work,” said one leading physician.

The physician practices around the Sebastian hospital involved in the sale include two family medicine practices, one in Sebastian and one in Barefoot Bay in Brevard County just north of the Sebastian River, as well as specialists in gastroenterology, cardiology, sports medicine and orthopedics, pulmonology and a thoracic surgery clinic. However, many other independent physicians are aligned with Steward to take advantage of its group contracts with insurance companies and billing arrangements.

Physicians whose offices are located on hospital campuses can also charge patients a so-called “facility fee” on top of regular rates, even if patients were not treated at the hospital, an extra fee which goes to the hospital, but this aggressive billing practice has received considerable pushback from Medicare as well as from patients themselves.

The insurance companies objecting to the sale of Steward’s physician network include all the big players like United HealthCare, Aetna, Cigna, Blue Cross/Blue Shield and Humana. The objections covered a wide range of considerations, from United HealthCare’s allegation that the Sebastian Hospital itself owes it a $200,000 reimbursement for “overpayments,” and that the proposed sale makes no provisions for which company will pay this debt, the seller Steward or the buyer RHG.

Others allege not enough notice was given to allow them to file a proof of claim, and Humana specifically objects to the fact that no arrangements were made as to who will assume the duties of providing medical services to patients in the CareMax network arrangement with Stewardship Health in the Sebastian, Melbourne and Rockledge.

The buyer of the Steward physician practices is officially known as Brady Health Buyer LLC, but it is a new company formed for the specific purpose of this acquisition. The people behind the company also operate RHG, which promised in a press release to make “significant investments in Stewardship’s infrastructure,” without providing specifics on dates, amounts or areas of investments.

RHG in turn is owned by the Kinderhook group of private venture capital investors, which owns other healthcare enterprises, as well as recycling, car parts and pet food companies, among others.

An intriguing sidelight is the fact that the CEO of the Rural Health Group, Benson Sloan, who started his career with Bank of America in healthcare banking, is a former vice president of Optum, the physicians group subsidiary of United HealthCare.

Optum had negotiated a deal last year to acquire Steward’s physician practices, but the Justice Department had been planning to file an objection to the deal because of anti-trust considerations. Shortly after the May 6 voluntary bankruptcy declaration by Steward and its various subsidiaries, Optum withdrew its offer and bowed out of the deal.