Steward Health looks to acquire troubled Rhode Island hospital

The fast-growing Steward Health Care System is once again setting its sights on a hospital outside Massachusetts.

The Boston-based healthcare system operator, which was created last fall in the acquisition by New York-based Cerberus Capital Management of Caritas Christi Health Care, has received permission from a judge to move ahead with negotiations to acquire the Landmark Medical Center in Woonsocket, R.I. The 214-bed hospital, which has been in court-appointed receivership for three years, would be Steward's first successful acquisition outside the Bay State.

Landmark had been in negotiations with Caritas Christi system in 2009 before talks broke down. Steward took over the six-hospital Caritas Christi system last fall and later restarted negotiations with Landmark's management team.

Since its launch eight months ago, Steward has acquired Merrimack Valley Hospital in Haverhill and Nashoba Valley Medical Center in Ayer and has deals pending for two other non-profits, Morton Hospital and Medical Center in Taunton and Saints Medical Center in Lowell.

Steward had also sought to acquire the financially strapped Jackson Health System in Miami in March, but was rebuffed by city officials who manage the six-hospital chain.

A potential sticking point in the Landmark deal may be Blue Cross Blue Shield of Rhode Island, one of the hospital's biggest creditors. Blue Cross, which is reportedly owed $3 million by the hospital, hasn't been able to agree on a new insurance contract with Landmark and had courted several potential buyers. The insurer has filed an objection with the state over Landmark's negotiations with Steward.

"There are a number of unresolved issues, including Steward negotiating a contract with us, as well as how Blue Cross Blue Shield of Rhode Island will be made whole on the $3 million in back debt that is owed to us,'' Blue Cross spokeswoman Kimberly Reingold said in a statement. "Blue Cross Blue Shield of Rhode Island has been and remains willing to negotiate a fair and reasonable contract with any bidder, but we have not yet been approached on contract specifics since Steward re-entered negotiations.''

Another issue open for negotiation is Steward's reported interest in converting Landmark to a Catholic institution. Steward has allowed Caritas Christi hospitals to maintain their Catholic identity while allowing its other hospital to remain secular.

Rhode Island Superior Court Judge Michael A. Silverstein on May 31 allowed Steward to continue negotiations with Landmark while rejecting at least three other potential buyers. Any deal must be approved by Silverstein as well as state regulators.