Updated March 30 at 6:25am
health care

As Steward withdraws, Prime Healthcare to be Landmark buyer


PROVIDENCE – Three days before the Sept. 30 deadline was to expire, Steward Health Care issued a statement late Thursday afternoon officially announcing it had terminated the asset purchase agreement to acquire Landmark Medical Center.

In turn, Bill Fischer, a spokesman for Jonathan N. Savage, the special master for Landmark, said that a new agreement had been reached with another health care entity to buy Landmark. “We signed an asset purchase agreement with another health care organization,” Fischer told the Providence Business News in a phone interview Thursday evening. “It will be submitted tomorrow [to Superior Court Judge Michael A. Silverstein]. We will petition the court for instructions.”

The new buyer, according to a local hospital CEO, is the for-profit Prime HealthCare Services of Ontario, Calif.

Prime Healthcare had previously been one of four for-profit hospital systems that had made bids in 2011 to purchase Landmark.

At that time, Prime Healthcare had offered $58.5 million in purchase price and investment over five years.

PrimeHealthcare then withdrew from the bidding on May 16, 2011, claiming that it was unable “negotiate a fair and reasonable contract” with Blue Cross & Blue Shield of Rhode Island. Blue Cross had adamantly denied Prime Healthcare’s claim, saying that it had been “absolutely blind-sided” by the withdrawal. The health insurer pointed to a May 6, 2011, letter from Prime Healthcare saying that the hospital network had “unequivocally accepted” Blue Cross’s proposal to enter into a two-year contract agreement.

Prime Healthcare has been under investigation in California from both state and federal authorities regarding allegedly fraudulent billing practices for both Medicaid and Medicare patients.

California Watch, a reporting group created by the Center for Investigative Reporting, found that over a two-year period, Shasta Regional Medical Center, owned by Prime Healthcare, billed Medicare for more than 1,000 cases of a rare form of malnutrition known as kwashiorkor, most common among starving children in Africa.

Fischer declined to answer or discuss any questions about the identity of the new buyer, saying the matter was now before the court.

In its statement, Steward blamed its decision to walk away from the agreement on its inability to accomplish a number of goals it had for the deal, goals it had set that would support the for-profit hospital system’s model for health care delivery.

“These conditions were clearly spelled out in the asset purchase agreement and accepted by the court. These conditions were not met.” Steward, however, did not identify exactly what those unmet conditions were.

Steward said that it has loaned Landmark $7 million since May 2010, as part of the acquisition process to help the Woonsocket community hospital eliminate debt, fund operations and maintain payroll.

Steward also blamed what it called “a number of private health care entities” that it left unnamed. “Despite support from many of Rhode Island’s elected officials, regulators, unions and communities, a number of private health care entities are not in support of Steward’s model of integrated community care,” the statement said.

Fischer also declined to discuss what had gone wrong. “We’re not interested in doing a post-mortem. We want to move forward,” he said.

R.I. Attorney General Peter F. Kilmartin issued a statement on Wednesday afternoon after it became apparent, according to the attorney general, that “Steward has no intention to move forward” in acquiring Landmark.

From the very outset, Kilmartin said, Rhode Island “has accommodated Steward’s every request for extraordinary treatment in hopes of returning Landmark to fiscal stability.”

The process, Kilmartin continued, “has been very stressful on the patients who rely on Landmark for quality health care services, the 1,200 employees and the Woonsocket community, who embraced Steward as a savior for the city.”

Kilmartin also challenged Steward’s intention. “It has become very clear that Steward’s only interest was the bottom line, not, as the company claimed, the patients, the employees or the Woonsocket community,” he said. “Sadly, it appears that Steward has left the hospital, its patients and its employees in a worse position, as the process seems to be moving back to square one after four-and-one-half years.”


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