Local
AG approves Caritas Christi sale

By Jim Lockwood
Posted: 10/15/2010

BRAINTREE -- Attorney General Martha Coakley's office has given the go-ahead for a deal that would allow the archdiocese's Caritas Christi Health Care System to be sold to a private equity investment firm, but not before inserting a number of her own provisions.

On Oct. 6, Coakley announced that her office approved the proposed sale of the Caritas Christi Health Care System to Steward Health Care System, LLC, a subsidiary of Cerebus Capital Management, L.P.

However, the attorney general is requiring provisions that would prevent hospital closures in the short-term, protect certain health care services, require Steward to fund employee pensions and allow her office and the state health department oversight of the hospital for the next five years.

The deal now heads to the state Department of Health and then to the Supreme Judicial Court for approval. However, the deal also must be approved by the Holy See since it involves the sale of Church property.

Coakley said the deal will preserve access to health care for state residents, protect 12,000 jobs, create between 3,000 and 4,000 new jobs and provide over $400 million in capital improvements to Caritas' health care facilities.

"With the changes our office negotiated with Steward, we found that the transfer of assets will continue the vital services that these hospitals provide while protecting and creating jobs and preserving the pensions of 13,000 current and former Caritas employees," said Coakley.

"After considerable negotiations with our office, we have ensured further protections to prevent Steward from closing or transferring these hospitals and extended the state's ability to monitor Steward to five years. This will preserve access to health care for the residents who use these hospitals for important care and services," she added.

Through a review overseen by David Spackman, who heads the non-profit and public charities division of the attorney general's office, the office negotiated additional protections into the deal which would keep the Caritas hospitals open for at least three years.

Specifically, the attorney general's office brokered a term to assure that Steward could not transfer ownership of any of the hospitals for the next three years. Another provision states that none of the hospitals may be closed for two years after that, so long as certain financial benchmarks are met. Also the public must be made aware of any potential closing before it happens.

Other terms brokered by Coakley's office include preventing reductions in psychiatric and detoxification beds and a $1.5 million five-year evaluation conducted by the attorney general's office and the state health department.

The assessment would examine the impact of the transition on health care costs and services in the areas served by Caritas hospitals.

Another provision inserted by the attorney general's office requires Steward to provide $45 million to fully fund the pensions of 13,000 current and former Caritas employees.

Coakley maintained her office's authority to conduct a review of any proposal to transfer a non-profit hospital's charitable assets to a for-profit corporation.

The attorney general's office conducted a five-month investigation of the transaction, which included public hearings in the communities served by each of the six hospitals, a review of Caritas records, and interviews of the Caritas board and upper management.

In her review of the transaction, Coakley found that although Caritas could not continue in its current form, its board of trustees and management team had followed proper procedures during the process of developing the transaction. In addition, the transfer of Caritas to Steward affords fair value for the hospitals' assets and is in the public interest.

Caritas spokesman Christopher Murphy's statment affirmed the attorney general's office findings and was appreciative of the thoroughness of the attorney general's office.

He also praised the transaction that is "essential to the survival of Caritas Christi and our individual hospitals and will protect the pension of 13,000 pensioners, the economic security of 12,000 employees and the continued access to community health care for one million patients."

While Caritas officials and the attorney general point out the accomplishments of the deal, Catholic Action League of Massachusetts Executive Director C.J. Doyle said that Coakley's review does not guarantee that Catholic health care in the greater Boston area will be preserved.

The group criticized Coakley's recommendation that the deal to sell Caritas move forward, calling Coakley's report "a decisive turning point in the impending loss of Catholic health care in Greater Boston."

In an Oct. 6 statement, Doyle said that Coakley's review of the agreement preserved a termination clause that was originally part of the deal.

According to that clause, the hospitals' Catholic identity may be terminated by Steward, or any other party who comes to own the hospital network in the future, if compliance with Catholic medical ethics and directives is found to be "materially burdensome."

Under that clause, however, the owners must pay $25 million to a charity designated by the Archdiocese of Boston.

"Although Martha Coakley deserves some credit for extending the period during which the hospitals cannot be closed, and in trying to ensure care for the indigent, her refusal to address the issue of the termination clause will likely result in the secularization of the six hospitals under the new owners," Doyle's statement said.