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Caritas looks to buy R.I. hospital

System awaiting OK on its own sale

By Robert Weisman
Globe Staff / August 28, 2010

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Caritas Christi Health Care, the Boston hospital system that is awaiting state approval of its agreement to be purchased by a New York buyout firm, wants to move forward with an acquisition of its own — the first of what could be many deals under a new owner.

Reaching across state lines, Caritas asked a Rhode Island judge yesterday to allow it to buy Landmark Medical Center, a 214-bed community hospital in Woonsocket, R.I., for an undisclosed sum.

Caritas, a chain of six Catholic hospitals in eastern Massachusetts, hopes to use the financial muscle of its proposed acquirer, private equity firm Cerberus Capital Management, to build a larger health care network across Massachusetts and beyond.

But the submission of a signed asset purchase agreement between Caritas and Landmark is just a first step toward the Massachusetts chain taking over the troubled Rhode Island hospital. Landmark has been in court-appointed receivership for more than two years, and Rhode Island Superior Court Judge Michael A. Silverstein would have to approve the deal before it could be referred to state regulators for a final sign-off.

Caritas executives have been negotiating to buy Landmark for more than a year, long before striking their deal with Cerberus in March. Earlier this summer, Silverstein approved a management agreement under which Caritas took over some Landmark operations and set a deadline of yesterday for the parties to reach a purchase deal.

Transfer of Landmark to Caritas would require approval by Rhode Island Attorney General Patrick C. Lynch and that state’s health department, though both would be under pressure to preserve the northern Rhode Island hospital and its 1,200 jobs. More than half of the employees belong to Local 5067 of the United Nurses and Allied Professionals.

Massachusetts regulators, who are studying the proposed Caritas agreement with Cerberus, would not have to formally approve the Landmark deal. But they would likely consider its impact on the financial strength of the Caritas system.

“As part of our review of the Caritas transaction, our office is looking at the overall strategic plan of Cerberus in Massachusetts,’’ said Corey Welford, spokesman for Massachusetts Attorney General Martha Coakley. “And we are reviewing the extent, if any, that the acquisition of Landmark Medical Center impacts that plan.’’

Caritas spokesman Chris Murphy said the purchase of Landmark would create “economies of scale’’ for the system in southeastern Massachusetts. Its facilities include Saint Anne’s Hospital in Fall River, Good Samaritan Hospital in Brockton, and Norwood Hospital, as well as a business office and a Norwood Hospital-affiliated oncology center in Foxborough.

“Given that we have three hospitals with overlapping primary and secondary service areas in that region, adding Landmark Medical Center would benefit our patients,’’ Murphy said.

Judge Silverstein limited distribution of the asset purchase agreement to court officials and regulators until he could review it. He is expected to discuss a timeline for making a ruling when he meets next week with special master Jonathan N. Savage, who was appointed by the court in 2008 to supervise Landmark until it could find a buyer. Murphy and Bill Fischer, a spokesman for Landmark and Savage, both declined to discuss the deal’s financial terms.

“From Landmark’s perspective, we’re pretty excited about this development,’’ Fischer said of the asset purchase deal. “But it’s not finalized. It’s a complex and lengthy process.’’

Coakley’s office is expected to make a recommendation to the Supreme Judicial Court some time after Labor Day on Cerberus’s acquisition of Caritas. That deal also needs approval from the state Department of Public Health and the Vatican, which must agree to ownership changes at Catholic hospitals.

Even before the completion of the Caritas-Cerberus deal, Caritas chief executive Ralph de la Torre has been courting other potential acquisition candidates, according to Massachusetts health care professionals.

Among those with whom Caritas executives have held informal discussions are Essent Healthcare Inc., owner of Merrimack Valley Hospital in Haverhill and Nashoba Valley Medical Center in Ayer, and Cambridge Health Alliance, which operates Cambridge Hospital, Somerville Hospital, and Whidden Memorial Hospital in Everett.

Robert Weisman can be reached at weisman@globe.com.