PROVIDENCE – Lifespan Corp. is the winning bidder to purchase two cash-strapped hospitals in Massachusetts from Steward Health Care.
Steward has accepted Lifespan's offer to purchase Morton and Saint Anne’s hospitals in Taunton and Fall River respectively for $175 million, and the terms of the deal have been filed with a U.S. bankruptcy judge in Houston.
An
asset purchase agreement was signed Thursday and is expected to close by Oct. 1, said Lifespan Chief Financial Officer Peter Markell.
The terms of the sale are still subject to court, state and federal regulatory approvals. Also, Lifespan and Steward must satisfy several conditions included in the asset purchase agreement. Markell said he is hopeful the approvals will come by Sept. 30.
The purchase would be debt-financed with most of the money going toward the land and buildings. Also, Lifespan says it is finalizing an agreement to receive “modest” financial support from Massachusetts for hospital operations.
Markell said the state has covered funding through September because the target for closing the agreement is Sept. 30 or Oct.1. Massachusetts will provide $42 million to Lifespan to support the hospital operations through September and accrued payroll before the transactions are closed.
If approved by regulators, the hospitals would be transferred to Lifespan’s control from the for-profit, Texas-based Steward, which is in the process of unloading its Massachusetts facilities after filing for Chapter 11 bankruptcy in May.
“I am confident our team has the experience and know-how to rebuild the infrastructure of these two hospitals and operate them as successful and thriving not-for-profit organizations,” said Lifespan President and CEO John Fernandez
.
While Lifespan’s third quarter 2024 report shows it's likely not going to hit its goal of a 3% operating margin, Markell said he expects the transition to help the health system’s finances. He was confident that Lifespan would get closer to its goal of a 3% operating margin in 2025. “But it takes work," he said.
He noted that the health system conducted detailed financial due diligence that showed acquiring the hospitals would be “accretive to Lifespan, not dilutive to Lifespan” and they are not expected to pull resources from Rhode Island operations.
Markell said Lifespan collects around $3 billion in revenue annually and adding Morton and Saint Anne’s hospitals would contribute another $500 million.
He said adding the two hospitals gives the health system a larger base to spread overhead costs, which is beneficial given ongoing technological developments.
However, the number one reason the health system bid on the hospitals is the belief that Fall River and Taunton are part of Lifespan’s service areas and helping those communities get the care they need is crucial.
“It's our mission. It's what we're about,” Markell said. “When you put that mission imperative with our financial analysis of what we could do, it made a lot of sense, and it fits with our overall strategy, slowly but surely becoming more of a regional player in health care.”
Within Rhode Island, California-based private equity firm Prospect Medical Holdings recently put Roger Williams Medical Center and Our Lady of Fatima Hospital up for sale. Markell said Lifespan did not bid on those facilities because the health system was told it shouldn’t acquire more hospitals in Rhode Island – especially given the outcome of the failed merger attempt with Care New England.
Markell said the two Massachusetts hospitals have done relatively better than Steward’s other facilities, noting he has visited Morton Hospital and plans to visit Saint Anne’s Hospital on Thursday.
“The attitude of the people who are working at these hospitals, the staff, the nurses, the physicians, is just phenomenal,” Markell said. “They want to make this work for themselves in their communities. So I'm actually pretty bullish that we can work with them, work with the communities and build it back.”
He expected that transitioning the Massachusetts hospitals to Lifespan’s ownership and necessary infrastructure replacements would take about a year to 18 months.
“Adding Saint Anne’s and Morton hospitals creates a unique opportunity to build our regional healthcare organization that will benefit the health of the communities in both states,” Fernandez said, thanking the staff of the two facilities. “If we are successful in completing this transition, I and the entire Lifespan team look forward to working with you to rebuild the infrastructure of these important community assets and to help stabilize the environment and the workforce. We look forward to working closely with the Commonwealth of Massachusetts and other state agencies and federal authorities to ensure that the patients served by these two institutions receive the exemplary care that they deserve.”
(Correction: An earlier version of this story gave an incorrect account of the U.S. bankruptcy judge's action on Lifespan's purchase bid. The terms of the asset purchase agreement have been filed with the court and are still subject to approval by the judge.)
Katie Castellani is a PBN staff writer. You may contact her at Castellani@PBN.com.
