HEALTH CARE

Steward seeks changes in Landmark’s purchase agreement

COURTESY LANDMARK HEALTH SYSTEMS INC.
A HEARING is scheduled for Friday morning in Superior Court to consider a series of amendments requested by Steward Health Care and Jonathan N. Savage, the special master for Landmark Medical Center, to change the asset purchase agreement for the Woonsocket hospital.
Posted 3/8/12

PROVIDENCE – A hearing is scheduled for Friday morning in Superior Court to consider a series of amendments requested by Steward Health Care and Jonathan N. Savage, the special master for Landmark Medical Center, to change the asset purchase agreement for the Woonsocket hospital.

The changes detailed in the 13-page “emergency petition for instructions,” filed on March 2, include the ability by Steward to cut both services and employees at Landmark, in the future to be known as the Blackstone Medical Center, and its sister facility, now known as the Rehabilitation Hospital of Rhode Island.

Another change sought is a condition that Thundermist Health Center of Woonsocket enter into a new memorandum of understanding with Steward that is “acceptable to the buyer in its sole discretion” covering primary care, specialty care, imaging and ob/gyn services.

A third change seeks to attach Steward’s ability to purchase additional non-profit hospitals in Rhode Island in the same year as closing on the Landmark sale as a condition of the purchase agreement.

If these conditions are not met, under the new proposed language defining “material adverse” effects, Steward would have the right to withdraw from the asset purchase agreement and back out of the sale, according to Christopher Murphy, spokesman for Steward, the for-profit, Boston-based, 10-hospital system that is owned by a private equity firm, Cerberus Capital Management, in New York City.

Steward has hired two of Rhode Island’s top legislative lobbyists, Joseph Walsh and Robert Goldberg, to help persuade the R.I. General Assembly to change the current three-year ban on purchasing additional non-profit hospitals that is part of the Hospital Conversions Act. Bills were introduced in January in the House and Senate supporting removal of the ban, and committee hearings were held, but votes on the proposed legislation have yet to be taken. Under the proposed changes now being sought by Steward, removal of the ban would now be tied explicitly to Landmark’s sale.

The decision by Thundermist to enter into a partnership with Women & Infants Hospital in December 2011 to enable expecting mothers to deliver their newborns at the Providence hospital and not at Landmark has also emerged as a potential stumbling block to the sale, according to Steward. “Since the original asset purchase agreement was signed, Thundermist has announced that it would move maternity services out of Landmark,” Murphy said in an email response to questions. “As a result, patient volume is expected to decline.” There is a need, he continued, “to assess if the maternity … service lines at Landmark will have enough volume to maintain quality and safety standards.”

Charles Jones, the president and CEO of Thundermist, said he really could not speculate on Steward’s intentions. “Our top priority has always been to provide our patients with the best possible care available,” he said. Jones expressed some surprise about the newly proposed condition demanding that an agreement be reached between his community health center and Landmark. “We will continue to develop partnerships based on the partner’s ability to provide access to the best possible care,” Jone said.

Christopher Callaci, general counsel for United Nurses & Allied Professionals, Local 5067, which represents some 600 workers at the two facilities, about half of the total workforce, told the Providence Business News that he wasn’t surprised by the requested changes. The proposed provision requesting the ability by Steward to lay off workers and reduce services will not directly impact union workers, according to Callaci. “The language of the collective bargaining agreement reached with Steward is completely intact,” he said. “It goes into effect on the day of the closing.”

Callaci said that he supports the changes to remove the three-year ban on purchase of other non-profit hospitals in Rhode Island. “We want to bring this thing to a successful conclusion,” he said.

One unfinished task that remains to be done before the sale is closed are ongoing negotiations between Steward and Blue Cross & Blue Shield of Rhode Island regarding outstanding contract and debt issues. There was no mention of these issues in the proposed changes filed on March 2, and neither Blue Cross nor Steward had any comment on the negotiations.

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