Steward strikes deal in R.I.
Will pay $71m for hospital
Steward Health Care System LLC, moving to cement its first out-of-state acquisition, said yesterday that it has signed an agreement to pay more than $71 million for Landmark Medical Center, a financially troubled hospital in Woonsocket, R.I.
The deal, which must be approved by Rhode Island’s attorney general and health department, would convert Landmark into that state’s first for-profit hospital.
Under a summary of Steward’s bid, which the parties released yesterday after signing their asset purchase agreement, the Boston hospital group committed to putting up between $71.6 million and $76.6 million through a mix of investments, debt forgiveness, and other payments. The precise amount will hinge on how much Landmark draws from a Steward line of credit.
The largest part of the deal — a total of $49 million — consists of capital improvements and routine repairs Steward has agreed to make at Landmark, according to the bid summary. Steward also committed to provide $7.5 million in working capital, forgive a $2 million loan its predecessor made to Landmark, and set aside $2 million to cover a possible payout to insurer Blue Cross Blue Shield of Rhode Island to settle a longstanding court dispute, the bid summary said.
Steward, formed last year by New York private equity firm Cerberus Capital Management, operates eight for-profit community hospitals across Eastern Massachusetts, including six Catholic hospitals in the Caritas Christi Health Care chain. Steward has struck agreements to buy two other Massachusetts hospitals and has been shopping for others around New England and beyond.
The company’s courtship of Landmark, which has been in court-ordered receivership for the past three years, began in 2009 under its predecessor organization, Caritas Christi. Rhode Island Superior Court Judge Michael A. Silverstein granted Caritas the right to negotiate exclusively to buy Landmark. Those talks broke down last year, however, and Silverstein set in motion a process that allowed Landmark’s court-appointed special master to field other bids.
The special master, Jonathan Savage, received three bids earlier this year from investor-owned health care companies in Tennessee and California. But none met all of the criteria laid out by Silverstein, which ranged from financial investments to negotiating a collective bargaining agreement with unionized hospital workers.
Savage got back in touch with Steward chief executive Ralph de la Torre, who formerly ran Caritas, after the judge last month gave Landmark approval to contact other parties. Steward’s ultimate financial commitment was as much as $7 million more than the offer from RegionalCare Hospital Partners of Brentwood, Tenn., the highest bid Landmark had received earlier.
“It’s very good news for Landmark, its employees, and its patients,’’ Bill Fischer, a spokesman for Savage, said yesterday. “We’ve always believed they were the best fit, and we’re very happy we wound up under their umbrella. To have a health care system with the stature of Steward come into Rhode Island is extraordinarily good news for the state’s health care industry.’’
The takeover would convert Landmark from a nonprofit to an investor-owned organization. But Rhode Island Attorney General Peter Kilmartin and the state Department of Health must first sign off on the purchase, a process that is expected to take between six and nine months.
“This is a significant step for us in that it represents the first hospital outside Massachusetts to join our system,’’ said Chris Murphy, a Steward spokesman.
Although most of Steward’s hospitals are Catholic, the company plans to continue operating Landmark as a secular community hospital. Caritas said last year that it would convert Landmark to a Catholic institution.
Robert Weisman can be reached at email@example.com.