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Yvonne Abraham

Whistle up a watchdog

By Yvonne Abraham
Globe Columnist / July 8, 2010

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LAWRENCE — We should be taking a very hard look at a plan to sell six of our community hospitals to Cerberus Capital Management — and not just because the buyer is named for the three-headed dog that guards the gates of hell

People are excited about this $830 million deal, which would put Caritas Christi hospitals in Brighton, Dorchester, Brockton, and other communities in the hands of a flush New York private equity firm. The down-at-heel hospitals need a giant cash infusion to survive and complete renovations. By converting them to for-profits, Cerberus would send cities $20 million a year in taxes. And the deal would save 12,000 employees’ jobs and pensions, at least for three years.

So what’s not to love? Plenty, if you’re Joe Gravel, medical director at the Greater Lawrence Family Health Center, which is not affiliated with Caritas. The facility gets 200,000 visits a year, many from poor people without health insurance.

“When you’ve got investors in New York calling the shots, I’m extremely skeptical that the right thing is going to happen for patients,’’ Gravel said.

Cerberus specializes in aggressive, high-yield deals, turning around distressed companies and selling them at a huge profit. Sometimes that has worked out spectacularly well. Sometimes it has gone terribly wrong: Chrysler Corp. and GMAC were two of its prize pups. Enough said.

The purchase would be the company’s first foray into health care. Managing director Timothy F. Price says Cerberus is interested in Caritas because the chain, while facing a credit crunch, is “already doing well, is well managed, . . . and we can be helpful.’’

They’re also hoping they can make serious money, if not by flipping the hospitals (Price says Cerberus will hold the chain, though he declined to say for how long), then by making big annual profits.

But it’s hard to see how a community hospital makes serious money without cutting corners: closing hospitals that aren’t profitable enough, eliminating money-losing services like mental health, or providing less free care, for example. Or using scads of cash to build flashy facilities and hire popular doctors that allow it to dominate a market and squeeze higher payments from health insurance companies, à la Partners HealthCare.

“It’s like Wal-Mart coming in, doing loss leaders,’’ Gravel said. “They can recruit doctors from centers like ours by offering more money.’’

Caritas spokesman Chris Murphy rejected those possibilities: Caritas is committed to maintaining mental health services, he said, and to keeping hospitals like the struggling Carney in Dorchester open as long as possible. He said Caritas won’t poach patients from other community hospitals, but seek out those who go to Boston teaching hospitals.

“If just one-third of the patients who left the Merrimack Valley for treatment stayed, every hospital in the area would be overwhelmed,’’ he said.

Maybe everything will play out as Murphy says, and this marriage will be long and happy. But in Cerberus, we’re dealing with a suitor that has never walked down this aisle before and isn’t exactly into long-term relationships.

That’s why we need a very tough pre-nup here, and Attorney General Martha Coakley should write it. She must sign off on this sale before the SJC approves it. She can and should use her leverage to impose conditions on Cerberus that would make this a less risky proposition for Massachusetts. She should demand that the company hold onto the hospitals for the long haul and that the hospitals maintain their less profitable services. She should demand that they not drain patients and doctors away from local institutions like Gravel’s.

According to her spokesman, Coakley “takes this responsibility very seriously.’’

That’s good. Coakley often errs on the side of caution, but this time she simply can’t. She is our guardian at the gate.

Yvonne Abraham is a Globe columnist. She can be reached at abraham@globe.com.

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