Landmark could be state’s first for-profit hospital

If RegionalCare Hospital Partners acquires Woonsocket’s Landmark Medical Center, Rhode Island for the first time would be home to a for-profit hospital. For community leaders, however, keeping the hospital a full-service, acute-care facility is their primary concern.
RegionalCare, a for-profit company based in Brentwood, Tenn., that owns four other community hospitals in the country, has signed a nonbinding, nonexclusive letter of intent to acquire Landmark and its affiliate, the Rhode Island Rehabilitation Hospital in North Smithfield, for an undisclosed sum. Both would become for-profit facilities.
RegionalCare says it is backed by a $300 million equity commitment from the New York City investment firm of Warburg Pincus, primary shareholder.
Bill Fischer, of True North Communications in Providence, spokesman for Landmark, and its special court-appointed master, attorney Jonathan N. Savage of Pawtucket, noted that the RegionalCare letter of intent, although nonbinding and nonexclusive, is “an offer in hand” and that bodes well for Landmark, in receivership since June 26, 2008.
The court has set a March 25 deadline for the receipt of formal bids for Landmark Health Systems, Fischer said, and scheduled an April 6 hearing to consider approval of the best bid, which Savage will select.
Steward Health Care Systems in Boston, the Massachusetts hospital chain that was interested in acquiring Landmark last year, will not be a bidder, spokesman Christopher Murphy told Providence Business News.
Lifespan, the state’s largest health care system, did not rule out a bid.
“We are reaching out to our constituents in that area to see if this is something [submitting a bid] that Lifespan needs to explore,” said spokeswoman Gail Carvelli, manager of media relations. She said Lifespan has been “reviewing and researching” acquisition of the Landmark hospitals for several weeks.
Lifespan officials, however, declined to discuss the pros and cons of having a for-profit competitor in the Ocean State. Edward J. Quinlan, president of the Hospital Association of Rhode Island, said he expects that the application of any potential buyer will receive “significant scrutiny” during the eight-month, state-approval process, but not because of the buyer’s status. Added scrutiny will come, he said, because the hospital has been operating under court receivership for more than two years.
Former R.I. Department of Health Director David Gifford, in an interview before he left his post last week, said that any Landmark buyer, regardless of ownership status, will be subject to the same state laws and regulations as a nonprofit would be. “The Landmark community needs hospital services,” Gifford said, “and if [a for-profit company] is the entity willing to provide it, that’s good.”
Woonsocket Mayor Leo T. Fontaine, whose city stands to gain almost $650,000 in new property tax revenue every year if the hospital becomes for-profit, said the “most important” factor to the city is not the money.
“What’s most important is to ensure that it is a full-service hospital,” Fontaine said. “[New revenue] is not our overall concern at this point.” The hospital on Cass Avenue is currently assessed at $18.9 million. The city’s tax rate for commercial property is $34.30 per $1,000 of assessment, for an annual tax bill of $649,865.
Few dispute the need for a hospital in northern Rhode Island.
The 214-bed hospital operates the fourth-busiest emergency room in the state, logging 45,000 visits per year, Fischer said. While the hospital had been running with million-dollar deficits in recent years, he said savings of approximately $8 million were realized since the receivership through the renegotiation of bonded debt and other efficiencies. In 2010, the hospital’s operating loss was $1.5 million, he said, far less than the $7 million annual deficits posted in previous years.
In an effort to assist the ailing hospital, the General Assembly last year enacted a law that exempts Landmark from paying state sales taxes for 12 years. Fischer said no layoffs are anticipated for the 1,300 employees of Landmark and the rehabilitation hospital. “It is a very good signal that RegionalCare embraced the full-service hospital model and is not looking to make Landmark a treat-and-transport center,” Fischer said.
Jeff Atwood, vice president of communications for RegionalCare, said there has been no discussion of layoffs at Landmark.
“We want to grow the hospital,” he said in a telephone interview from Tennessee. “We want to make sure we establish a strong hospital in the community. Access to capital is a big problem for hospitals and we have access to capital to do the things that need to be done.”
Atwood, however, did not deny the need for profits. “Everybody has to be successful financially, but profit is not our motive,” he said. “Profit would be a byproduct of growth.” If it becomes the court-approved buyer, the company has no specific timeline for taking over Landmark, according to Atwood.
RegionalCare operates four hospitals: Clinton Memorial Hospital in Wilmington, Ohio; Eliza Coffee Memorial Hospital, Florence, Ala.; Shoals Hospital, Muscle Shoals, Ala.; and Ottumwa Regional Hospital, Ottumwa, Iowa. None is unionized, but Atwood said RegionalCare executives over the years have operated more than 300 hospitals in 25 states and “there must have been a union presence in some of those.”
Christopher Callaci, general counsel for the Rhode Island chapter of the United Nurses and Allied Professionals – whose Local 5067 represents about 600 health care professionals at both Landmark sites – said the local’s two contracts expired in 2008 and in 2009, but remain in effect until new agreements are reached. The union most wants to see services preserved, regardless of who owns Landmark.
“We are not just about terms of employment,” Callaci said. “Our folks live in and serve that community.” &#8226

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