THIS STORY HAS BEEN FORMATTED FOR EASY PRINTING

No decisions yet on Caritas deal, AG says

Selling Caritas ‘has significant impact both in the short term and long term,’ Attorney General Martha Coakley says. Selling Caritas ‘has significant impact both in the short term and long term,’ Attorney General Martha Coakley says.
By Beth Healy
Globe Staff / June 11, 2010

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Attorney General Martha Coakley said “nothing has been decided’’ on the takeover of the Caritas Christi hospital system by a New York investment firm and that the “process has just begun.’’

Caritas is moving forward with multimillion-dollar building plans and efforts to expand its chain of hospitals, but Coakley said the $830 million proposed purchase of six Catholic hospitals in the Boston area by Cerberus Capital Management is not a done deal.

“We’re going to try to move as efficiently and as thoroughly as possible,’’ Coakley said, but the nature of the deal, she noted, “is very complicated, and it has significant impact both in the short term and long term on the Massachusetts health care scene, and frankly on the Massachusetts economy.’’

The attorney general’s office must rule on whether the transaction — which would turn the hospitals from nonprofit to for-profit ventures — makes appropriate use of charitable assets and is in the public interest. Coakley’s charities chief, as well as the state Department of Public Health, are holding public hearings on the matter through early July.

Caritas has argued that its financial situation is dire, and that Cerberus offers it the best chance of survival. Publicly, the hospital group says it is 100 percent focused on getting approval for the Cerberus purchase.

Caritas spokesman Chris Murphy said, “By no means are we assuming anything is done.’’ He said the hospitals moved ahead with construction and renovation plans because they were long overdue. “We have the capital as a system to begin them,’’ Murphy said. “If the Cerberus transaction doesn’t get approved, then we will have to look for new sources of funding.’’

Cerberus pledged to spend $400 million on new emergency rooms, operating rooms, and other improvements over four years as part of the deal.

Jill R. Horwitz, a professor at the University of Michigan Law School who has studied hospital conversions, said it’s key for the attorney general to ask how Cerberus plans to do a better job than the current managers and owners — the Archdiocese of Boston. She said it’s also important to ensure that the hospital assets, which are currently charitable in nature, go to the good of the community. “If you give a for-profit hospital too good a deal, you’re giving away nonprofit assets,’’ she said.

Coakley’s office also will decide the fate of three charitable foundations associated with the hospitals, with several million dollars in assets.

It’s a two-step process, Coakley emphasized: The first question is whether the deal should be done. The second is, “What sorts of promises or other conditions will they have to comply with?’’

Many times, in hospital conversions around the country, officials have required for-profit buyers to set aside charitable money in order to maintain an acquired institution’s mission. Murphy, the Caritas spokesman, said the system has offered to maintain its current level of $67 million in annual spending on charitable care and community benefits.

Asked which direction her office might go, Coakley said, “It’s just too early to say what those conditions are.’’

Beth Healy can be reached at bhealy@globe.com.

Correction: Because of a reporting error, this story incorrectly described the ownership structure of the Caritas Christi hospital chain. The Catholic chain adopted an independent board in 2008; the Archdiocese of Boston maintains three of the 11 board seats and has the power to approve or veto the proposed sale of Caritas to a private equity firm.