For-profit firm pulls out of deal<br> to buy Rehab Hospital of Rhode Island

WOONSOCKET – St. Louis-based RehabCare Group Inc. (NYSE: RHB) has withdrawn its agreement to purchase Landmark Health Systems Inc.’s Rehabilitation Hospital of Rhode Island, citing a dispute over employee benefits, the health care providers said.
“Today, RehabCare informed both the Department of Health and the Department of Attorney General that they were withdrawing their application,” Landmark officials said in a statement this afternoon.
The $1.8 million deal, which would have converted the nonprofit Rehab Hospital to a for-profit operation, was announced by Landmark and RehabCare on Sept. 4, 2007, 11 days after the parties reached a purchase and merger agreement. (READ MORE)
The transaction became the first planned health care “conversion” to come under review by the R.I. Department of the Attorney General and Department in Health under new state procedures developed in anticipation of the planned merger of nonprofit health care networks Lifespan and Care New England.
RehabCare, which had submitted an application to merge with the North Smithfield-based facility to both departments in August 2007, this spring filed amended documents for review under Rhode Island’s new health care conversion rules. But the process moved slowly: That application was accepted as complete only last week.
Meanwhile, this morning, the labor union representing nearly five dozen nurses, therapists and other employees of Landmark’s North Smithfield-based rehab facility said it had filed of an unfair labor-practices complaint related to the planned sale. (READ MORE)
The United Nurses & Allied Professionals (UNAP) said the hospital had been “insisting that employees accept a substantially inferior health plan that is provided to RehabCare employees in other parts of the country.” RehabCare had been threatening to withdraw its bid for the hospital if those benefit changes were not imposed, or if the state did not grant full approval for the deal by Dec. 31, the union added.
In a note to state officials, however, RehabCare cited only the labor dispute: “In light of the issues raised by United Nurses & Allied Professionals, we respectfully withdraw our above-referenced applications,” CEO and President John H. Short wrote in the letter to Lynch and Gifford, which is dated Dec. 4.
“Obviously, today we are disappointed that RehabCare made the decision to withdraw their application,” said Richard R. Charest, president of the Rehabilitation Hospital of Rhode Island and Landmark Medical Center.
“We have worked closely with RehabCare to comply with all requests from the Department of Attorney General and the Department of Health to keep this process moving forward,” Charest said. He offered thanks to R.I. Attorney General Patrick C. Lynch, R.I. Health Department chief Dr. David R. Gifford and both their staffs “for the time and effort they have dedicated to this process.”
Going forward, “the Rehabilitation Hospital of Rhode Island will continue to offer high-quality acute rehabilitation services to patients from Rhode Island and southeastern Massachusetts,” Charest said.
“I have informed the dedicated employees of the rehab hospital that we will continue offering the highest quality rehabilitation services and it will be business as usual at the hospital,” which he noted is “the only freestanding acute-care rehabilitation hospital in Rhode Island.”
“Patients will not encounter any interruption or discontinuation of services,” the Landmark president added. The financial impact of the deal’s collapse on the struggling health-care system was not immediately clear.
For more information about the nonprofit Landmark Health Systems Inc. parent of the Landmark Medical Center in Woonsocket and the Rehabilitation Hospital of Rhode Island, formerly the Eleanor Slater Rehabilitation Hospital, in North Smithfield – visit www.LandmarkMedical.org.
To learn more about St. Louis-based RehabCare Group Inc. (NYSE: RHB) – a for-profit provider of physical rehabilitation services in conjunction with hospitals and nursing facilities nationwide, and the owner or operator of 10 freestanding rehab hospitals – go to www.RehabCare.com.