State must approve hospitals’ purchase by private equity firm
By Robert Weisman, Globe Staff | May 12, 2010
The state Department of Public Health plans to hold a half-dozen public hearings jointly with the state attorney general’s office to consider a private equity firm’s plan to buy Caritas Christi Health Care, which owns six Catholic hospitals in Eastern Massachusetts.
While the attorney general’s office will review the plans of New York-based Cerberus Capital Management, which agreed in March to buy the Caritas Christi system, and make a recommendation to the state Supreme Judicial Court, the public health department must also sign off on the proposed purchase by granting new hospital licenses.
“We are coordinating our planning efforts so we can work as efficiently as possible’’ in reviewing the applications, Public Health commissioner John Auerbach said yesterday.
Auerbach said the agencies have yet to set hearing dates, but that they will probably be held next month in each of the communities served by the Caritas Christi hospitals.
The hospitals are St. Elizabeth’s Medical Center in Brighton, Carney Hospital in Dorchester, Norwood Hospital, Good Samaritan Medical Center in Brockton, St. Anne’s Hospital in Fall River, and Holy Family Hospital in Methuen.
In new filings with the public health department, Cerberus disclosed it is setting up a new corporate structure with six separate affiliates — Steward St. Elizabeth’s, Steward Carney, Steward Norwood, Steward Good Samaritan, Steward St. Anne’s, and Steward Holy Family — all operating under the umbrella of a new Cerberus holding company, Steward Hospital Holdings LLC.
The hospitals themselves will retain their current names and their Caritas affiliation, Caritas spokesman Chris Murphy said yesterday.
Cerberus also negotiated a stewardship agreement with the Archdiocese of Boston, released last week in a separate filing with Attorney General Martha Coakley, in which it said it intends to preserve the hospitals’ Catholic identity.
The agreement contained an escape clause that would allow the private equity firm to end the religious affiliation in exchange for a $25 million donation to charity, but Cerberus and Caritas officials say they have no plans to do that.
The filings with the public health department were applications for “determination of need’’ requiring the department’s approval when hospitals change ownership. It is typically a two-step process: Any planned changes in clinical care or geographic coverage must be approved by a 15-member public health panel based on staff recommendations and the department must also conduct a suitability review of the proposed new owners and grant new hospital licenses.
While they stressed that Cerberus will invest about $830 million to repay debt, assume pension obligations, and make capital improvements at the six hospitals, the filings also noted that the new owner intends to retain their current employees, labor contracts, and community benefit programs. They also said there would be no efforts to quickly resell the hospitals.
“Steward has agreed to refrain from making an initial public offering, issuing debt for the purposes of dividends or otherwise selling or transferring the health care system for at least three years after the completion of the proposed transaction,’’ the filings said.
Robert Weisman can be reached at weisman@globe.com.
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