Steward bulks up with hospital acquisitions

BOSTON – While the Steward Health Care System may have run into a wall in its efforts to acquire a troubled Miami hospital, two more acquisitions closer to home are heading to fruition, extending the for-profit chain’s reach in its home state of Massachusetts.

 

Steward, created last November in the wake of New York private equity firm Cerberus Capital Management’s $895 million purchase of the six-hospital Caritas Christi Health Care system, announced on April 4 plans to acquire Morton Hospital and Medical Center in Taunton, Mass. Three days earlier, Steward announced the signing of a letter of intent to acquire the 157-bed Saints Medical Center in Lowell, Mass.

 

In outbidding the New Bedford, Mass.-based Southcoast Hospital System for the 154-bed Morton Hospital, Steward offered a 10-year capital commitment of up to $120 million and will assume the hospital’s unfunded pension plan, which currently stands at $30.5 million. Steward will also repay $28 million in debt owed by the hospital and its affiliates.

 

Keith Hovan, Southcoast’s executive director, said his organization made “a fair and competitive offer” and had committed to keeping the hospital open, but ultimately fell to a private equity-backed group with deep pockets. “There is this for-profit phenomenon emerging in the state,” he told the Providence (R.I.) Business News.

 

Morton CEO Maureen Bryant said the hospital’s board of trustees has approved the deal, which would give the financially troubled hospital a chance to regain its footing and upgrade its infrastructure. At least one Lowell city official, meanwhile, urged officials to take their time, echoing others in saying that a for-profit entity acquiring a non-profit company might have negative consequences.

 

April’s two deals bring Steward’s stable of Massachusetts hospitals to 10, including six acquired in the Caritas Christi sale. The Massachusetts Public Health Council has given its unanimous approval to the transfer of licenses for Merrimack Valley Hospital in Haverhill and Nashoba Valley Medical Center in Ayer, setting the stage for closure on those two deals, which were announced in December 2010. Since both hospitals are for-profit, Steward doesn’t need approval from the Supreme Judicial Court of Massachusetts or the Attorney General.

 

Saints Medical Center, formed by the 1992 merger of two Catholic hospitals in Lowell – St. Joseph’s and St. John’s – and sponsored by the Sisters of Charity of Ottawa, Canada, will remain a Catholic hospital after its acquisition, according to hospital officials. No financial terms were disclosed, and officials said they hope to announce an asset purchase agreement this spring.

 

As with other Steward acquisitions, news of the Saints deal has stirred some dissent. Peter Gorlin, president of the Merrimack Valley Independent Physicians Association, which represents close to 40 primary care doctors and 160 specialists affiliated with Saints, said the deal “is the single worst for us.” He said the organization would be meeting to consider its options.

 

Saints has about 1,300 employees and 400 affiliated doctors and has been wrestling with merger questions for years. The hospital has turned down past overtures by nearby Lowell General Hospital to merge, and a deal to be acquired by Covenant Health Systems of Tewksbury, Mass., fell apart last year.

 

Stephen Guimond, Saints’ chief executive, told The Boston Globe that the deal with Steward is “the right choice for our future.”

 

“Strategically, they’re a very good fit,” he said. “I definitely think competition is good for all aspects of medicine.”

 

In a letter to the Taunton Daily Gazette, Bill Vernon, director of the National Federation for Independent Business in Boston, praised the for-profit influence on Massachusetts healthcare.

 

“We believe one solution is to encourage increased competition and consumer choice,” Vernon wrote. “For example, Massachusetts’ current system is dominated by non-profit hospital providers and not-for-profit insurers. Yet Massachusetts has the highest healthcare costs in the country and they continue to climb at double-digit annual percentage rates for all but the largest employers.”

 

According to recent new reports, Steward isn’t the only for-profit hospital operator setting its sights on Massachusetts. Northeast Health System in Beverly, Quincy Cambridge Medical Center and Cambridge Health Systems have all been the subjects of for-profit interest.

 

In addition, non-profits Milton Hospital in Milton, Mass., and Boston-based Beth Israel Deaconess Medical Center have been talking about a possible merger, though representatives for both hospitals have said nothing beyond short, written statements.

 

In Florida, meanwhile, a $1.1 billion offer made in February by Steward to buy the troubled Jackson Health System in Miami is likely dead. Miami city officials overseeing the public hospital system didn’t officially respond to Steward’s letter of interest and downplayed the possibility of a for-profit acquiring Florida’s largest public hospital.