Westerly draws suitors
Nine offers made to acquire ailing R.I. hospital
At least nine healthcare organizations, including six out-of-state hospitals, have made bids to acquire a small, struggling hospital in a beachfront Rhode Island town. Westerly (R.I.) Hospital, a 100-bed facility, is under receivership. Lawrence & Memorial Hospital, a 252-bed in New London, Conn; South County Hospital, a 77-bed hospital in Wakefield, R.I.; and Westerly Hospital Holdco confirmed that they have submitted bids for the hospital.
Westerly Hospital Holdco shares “some common ownership” with the owners of Bayonne Medical Center and Hoboken University Medical Center, both in New Jersey, according to a spokeswoman.
Mark Russo, a lawyer in Providence, R.I., and the hospital’s special master, said in an April 24 e-mail that nine hospital systems have provided confidential offering memorandums. Of the nine organizations, three have submitted preliminary proposals. Russo declined to provide additional information about the bidders, although he said that six of the nine are not based in Rhode Island. According to bond documents, the deadline to submit letters of interest is June 1.
“We are at the beginning stages of a very rigorous and transparent bidding process,” Russo said. “With the level of activity that we have enjoyed, we are confident that we will receive credible proposals.”
Westerly Hospital filed for receivership protection in December. In a February ratings update, Moody’s Investors Service cited the hospital’s very weak cash position, with less than 11 days’ cash on hand and an operating loss of $5.8 million through 10 months of fiscal 2011.
Westerly announced last year an exclusive nonbinding letter of intent with Lawrence & Memorial Hospital. At the time, Westerly officials said they had been searching for a partner for four years. “Our preliminary proposal shows the significance of our interest in Westerly Hospital,” a Lawrence & Memorial spokesman said.
Westerly Hospital isn’t the only Rhode Island hospital generating interest from neighboring states.
Steward Health Care System is pursuing the acquisition of the 133-bed Landmark Medical Center in Woonsocket. The Boston-based for-profit health system is also seeking changes to legislation that currently limits for-profit companies from buying more than one hospital in Rhode Island every three years. The state Senate passed the bill this month that would amend the Hospital Conversion Act (April 23, p. 17).
However, the bill includes provisions that would also benefit state providers, such as requiring local government boards, restricting financial incentives to patients who receive care outside of Rhode Island, and reducing the application and review process for all deals.
Moody’s noted last week that the legislation, which it expects to pass, “would be a credit positive for Rhode Island’s struggling small community hospitals, but a credit negative for the larger not- for- profit providers in the state.”
In a news release announcing its discussions with Westerly Hospital, South County Hospital President and CEO Louis Giancola emphasized the need for “healthcare that is non-profit, community-based, high quality and affordable.”