Curbing limits on acquisitions
R.I. Senate’s nod moves Steward a step closer to other possible deals
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.”