Curb­ing lim­its on ac­qui­si­tions

R.I. Se­nate’s nod moves Stew­ard a step closer to other pos­si­ble deals

Modern Healthcare - - REGIONAL NEWS - Jaimy Lee

Stew­ard Health Care Sys­tem may soon be in po­si­tion to be­come a sig­nif­i­cant player in Rhode Is­land’s health­care mar­ket. The Rhode Is­land Se­nate unan­i­mously ap­proved a bill this month that would re­move a limit on the num­ber of hos­pi­tals a for-profit com­pany can buy in the state.

The state leg­is­la­tion is closely tied to the Bos­ton-based sys­tem’s ef­fort to ac­quire Land­mark Med­i­cal Cen­ter, a 133-bed not­for-profit hospi­tal in Woonsocket, R.I.

Last month, Stew­ard, which de­clined to com­ment for this story, won court ap­proval for an amended pur­chase agree­ment that al­lows the com­pany to walk away from the deal if law­mak­ers fail to clear the way for ad­di­tional ac­qui­si­tions in the state, and the state Se­nate de­scribed the leg­is­la­tion in a news re­lease as a re­sponse to Stew­ard’s pro­posed pur­chase of Land­mark and “sub­se­quent hospi­tal con­ver­sions in Rhode Is­land.” The deal also is pend­ing ap­proval by state reg­u­la­tors.

The Hospi­tal Con­ver­sion Act, passed in 1997, pro­hibits for-profit com­pa­nies from ac­quir­ing more than one hospi­tal in Rhode Is­land ev­ery three years. The bill would re­move lim­i­ta­tions on the sale of not-for­profit hos­pi­tals. The state has 16 hos­pi­tals. Seven hos­pi­tals are part of Life­span Corp. and Care New Eng­land Health Sys­tem, both of which are not-for-profit sys­tems. An­other six, in­clud­ing Land­mark, are stand­alone not-for­profit hos­pi­tals.

The Se­nate bill would also set some con­di­tions, such as keep­ing a hospi­tal open for a spec­i­fied amount of time, main­tain­ing a lo­cal gov­ern­ing board and re­strict­ing fi­nan­cial in­cen­tives to pa­tients who re­ceive care out­side of the state. It would also cre­ate an ex­pe­dited 90-day re­view for state-based not-for-profit or­ga­ni­za­tions to ac­quire “dis­tressed hos­pi­tals” and shorten the ap­pli­ca­tion and re­view process for deals to 120 days from 180 days.

“The goal here is to be flex­i­ble, since ev­ery hospi­tal’s sit­u­a­tion is dif­fer­ent, but to do what is in the in­ter­est of the public, public health and the strength of the com­mu­nity,” De­moc- ratic state Sen. Roger Pi­card, the chief spon­sor of the leg­is­la­tion, said in a news re­lease an­nounc­ing that the Se­nate had ap­proved the bill. The bill is now headed to the state House of Rep­re­sen­ta­tives.

Care New Eng­land sup­ports the leg­is­la­tion. A spokes­woman for the three-hospi­tal sys­tem, based in Prov­i­dence, R.I., said the law has had a “chill­ing ef­fect on not-for-profit hospi­tal trans­ac­tions.”

Care New Eng­land and Life­span called off a pro­posed merger in 2010, cit­ing bur­den­some re­quire­ments stem­ming from the Hospi­tal Con­ver­sion Act even though the law is in­tended to reg­u­late for-profit com­pa­nies en­ter­ing the Rhode Is­land mar­ket. With health­care re­form and pay­ment re­form on the hori­zon, the state’s hos­pi­tals need to grow to ef­fec­tively com­pete with for-profit hos­pi­tals and sys­tems, the spokes­woman added.

A Life­span spokes­woman said the four-hospi­tal sys­tem, also based in Prov­i­dence, sup­ports re­duc­ing the limit to two years. Blue Cross and Blue Shield of Rhode Is­land has expressed con­cerns about the pro­posed changes.

“At a min­i­mum, (the leg­is­la­tion) per­pet­u­ates the sta­tus quo,” BCBSRI said in an April 4 let­ter to Demo­cratic state Sen. Rhoda Perry. “More likely, the sig­nif­i­cant in­vest­ments that are nec­es­sary for a for­profit hospi­tal to ac­quire … mul­ti­ple non­profit hos­pi­tals would have to be re­couped from Rhode Is­lan­ders through health in­sur­ance pre­mi­ums.”

The ac­qui­si­tion of Land­mark would mark the first out-of-state hospi­tal ac­qui­si­tion for Stew­ard. The for-profit sys­tem has ac­quired four hos­pi­tals in Mas­sachusetts since De­cem­ber 2010. Most re­cently, Stew­ard an­nounced plans to ac­quire New Eng­land Si­nai Hospi­tal, a 212-bed long-term, acute­care hospi­tal in Stoughton that has in­pa­tient satel­lite units at Tufts Med­i­cal Cen­ter in Bos­ton and Car­ney Hospi­tal, a Stew­ard hospi­tal in Dorch­ester.

The sys­tem has also re­ported some re­cent up­heaval. A spokesman con­firmed that an undis­closed num­ber of lay­offs oc­curred this month at St. Anne’s Hospi­tal in Fall River and that Car­ney Hospi­tal Pres­i­dent Bill Wal­czak had stepped down. The spokesman de­clined to elab­o­rate.

The state Se­nate says the leg­is­la­tion is in re­sponse to Stew­ard’s at­tempt to buy Land­mark, above, and “sub­se­quent hospi­tal con­ver­sions in Rhode Is­land.”

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