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Hope, hesitation over Caritas deal

Some see gain, others friction in for-profit plan

By Robert Weisman
Globe Staff / March 26, 2010

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Employees, patients, and community leaders said yesterday they are wary but hopeful after learning that the Caritas Christi Health Care system has agreed to be acquired by a New York private equity firm, while state regulators said the complicated approval process will probably stretch into the fall.

Members of labor unions representing nurses and service workers at the chain of Catholic community hospitals in Eastern Massachusetts said the $830 million cash infusion promised by Cerberus Capital Management could pay for needed repairs and other improvements.

“We’re hoping this will take care of our facilities that leak in a rainstorm,’’ said Linda Burton, a nurse at Norwood Hospital.

But many said they were uneasy about the prospect of the hospitals being under the control of a firm that typically snaps up underperforming companies, improves their operations, and sells them at a big profit for investors.

“We knew they were looking for a partner for the past two years,’’ said Betsy Prescott, a registered nurse at St. Elizabeth’s Medical Center in Brighton. “But this particular partner was a surprise because it was a for-profit company. Part of the mission at Caritas has always been support for all patients, regardless of their insurance company, race, creed, anything. We hope that will continue.’’

David Schildmeier, spokesman for the Massachusetts Nurses Association, which represents 1,712 registered nurses at Caritas hospitals, was more blunt. “The concern is that this firm is blatantly about making money for shareholders,’’ he said. “These hospitals, as Catholic facilities, have always been about serving the health care needs of low-income populations in their communities.’’

Under the deal, all six hospitals would remain open and follow the Catholic Church’s tenets, with current management based in Boston. In addition, Cerberus would keep all 12,000 Caritas employees and has agreed not to sell the hospitals or take them public for at least three years.

The deals needs approval from state regulators, as well as from Cardinal Sean P. O’Malley of the Archdiocese of Boston.

Outside Carney Hospital in Dorchester yesterday, patient Peggy Anne Canty, a former Carney nurse, said she was perplexed by the choice of buyer. “The word on that sign out there says Caritas, and Caritas means charity,’’ she said. “But now they are going to be for profit. . . . How can you call a charity a for-profit?’’

The sale was also the subject of talk during a Boston College Chief Executives’ Club luncheon yesterday. Some in attendance cited the economic benefits promised by the Cerberus deal, ranging from money for renovations and other projects to tax revenue for the state and some communities if the hospitals are converted to for-profit businesses, as called for by the agreement between Cerberus and the Caritas governing board.

Kevin C. Phelan, board chairman of St. Elizabeth’s Medical Center and president of the Boston commercial real estate firm Colliers Meredith & Grew, summed up the view of many of the deal’s supporters at the BC event. “If [Cerberus’s] money is green, and the deal that was negotiated between management and Cerberus is as represented, I think it’s a very square, fair deal,’’ he said.

Phelan said the Cerberus investment would benefit staff and patients by allowing for first-class operating rooms at St. Elizabeth’s. “I think we’ll start inside before we go building new buildings,’’ he said, referring to much-needed remodeling work, “but it’s all part of the grand rubric of what we’re going to be doing.’’

Boston Mayor Thomas M. Menino said the hospitals’ switch to for-profit status would bring the city about $7 million in real estate tax revenue annually. “It must continue its charity work,’’ Menino said of Caritas. “I think part of the agreement between Caritas and this firm is that it maintains its mission, and it also maintains its mission with the Catholic faith.’’

Hospital presidents at St. Elizabeth’s, Carney, Norwood, and the other Caritas hospitals — Good Samaritan Medical Center in Brockton, St. Anne’s Hospital in Fall River, and Holy Family Hospital in Methuen — held employee meetings yesterday, providing details about the deal and fielding questions.

Caritas spokesman Chris Murphy said Cerberus and Caritas agreed to continue setting aside $66 million annually that the hospital system provides for charitable care, treating people without insurance; community benefits; and pastoral care, such as aiding earthquake victims in Haiti.

While the state’s Supreme Judicial Court will have final say on the transfer of Caritas to for-profit status, the attorney general’s office will review the Cerberus plan and make a recommendation to the court. The attorney general is required to hold a public hearing on the sale.

“We have several criteria we look at, including whether this will be in the best interest of the public,’’ Attorney General Martha Coakley said. “I anticipate it will take several months. It’s fairly complicated. There are a lot of individuals involved, even within the Caritas chain, and a lot of money involved.’’

The Department of Public Health also must sign off on the acquisition, through a two-step approval process. Cerberus must file “determination of need’’ applications for its hospitals, specifying any planned changes in clinical care or geographic coverage. Such changes would have to be approved by a 15-member public health panel based on staff recommendations. It must also seek new hospital licenses and undergo a suitability review centered on its track record. As part of the process, the department will probably hold several public hearings around the state and consult with the Centers for Medicare & Medicaid Services.

“Fundamentally, we’re protecting the residents of the Commonwealth to assure these institutions that are providing critical care are being run well and safely, and that the public can rely that they will be there,’’ said John Auerbach, public health commissioner. He said Cerberus is not likely to file its applications until May, and final approval is not expected until September.

For members of one labor union, trepidation about being bought by a private equity firm was tempered by the security of a four-year contract they signed with Caritas officials late last year — a pact that will remain in effect under new ownership.

“We know $830 million is a lot of money and can be good for the system,’’ said Veronica Turner, vice president of Local 1199 of the Service Employees International Union, which represents about 3,000 housekeepers, maintenance workers, respiratory therapists, and other Caritas employees.

“But we also know we have a four-year contract in place. We have very strong succession language to make sure that the rights and benefits of employees are maintained in this sale.’’

Employees also said they were concerned about preserving the hospitals’ Catholic mission — something the new owner has pledged to do.

The Archdiocese of Boston established the chain in 1985 to run existing Catholic community hospitals.

“We accept and treat all patients equally, whether they’re on Park Avenue or the park bench,’’ said Maureen Healy, a nurse at Good Samaritan. “We don’t want that to change.’’

Meghan E. Irons of the Globe staff and correspondent Gal Tziperman Lotan contributed to this report. Weisman can be reached at weisman@globe.com.