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Caritas sale critics grow more vocal

Opponents raise fears at final public hearing

Rosemary Gallagher spoke about residents opposed to the sale. Rosemary Gallagher spoke about residents opposed to the sale. (Matthew J. Lee/Globe Staff)
By Megan Woolhouse and Robert Weisman
Globe Staff / July 2, 2010

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Outside last night’s public hearing on the proposed sale of Caritas Christi Health Care to a New York private equity firm, the message was clear. A 32-foot-long banner read: “Approve the Deal Save Carney,’’ referring to Carney Hospital, one of six Caritas hospitals. But inside the offices of Local 103 of the International Brotherhood of Electrical Workers in Dorchester, not everyone was sure that selling the Catholic chain — including Dorchester’s Carney — to Cerberus Capital Management is a good idea.

Rosemary Gallagher, a lifelong Dorchester resident, said seniors who depend on the financially struggling Carney worry about what will happen in three years, when Cerberus’s pledge to not sell the hospitals expires. “They’re petrified,’’ Gallagher, 77, said of older residents who receive medical care at Carney.

That view was reinforced by Matt Wilson, campaign director for Health Care for All, a Boston consumer advocacy group.

Cerberus could “flip’’ the chain after three years, Wilson said, cashing out by selling it to another company. “That means there’s no security.’’

Last night’s meeting, attended by about 150 people, marked the last of six sessions to solicit opinions on the planned sale of Caritas to the for-profit Cerberus. While sentiment for the deal was largely favorable at the first four meetings, last night — and during Tuesday’s five-hour session in Methuen — more skeptics made their views known. In addition to the potential sale of the chain three years from now, some question Cerberus’s commitment to community health programs and whether the deal has been properly valued.

Supporters say the cash infusion Cerberus will provide is needed to revitalize Caritas, which has been saddled with debt, delaying much-needed improvements at its hospitals.

The state Department of Public Health and the attorney general’s office will accept additional public comment even after the hearings.

Mayor Thomas M. Menino, who backs the deal, said that by running the hospitals for-profit, the city could realize $10 million in addition tax revenue. In addition to Carney, Boston is home to the flagship St. Elizabeth’s Medical Center in Brighton.

“I’m not just doing it for the tax dollars,’’ he said. “I see the benefits of Caritas every day and that’s why I’m here.’’

The sale of the state’s second largest hospital network must be approved by the state Department of Public Health — which would issue new licenses for the hospitals — and the Supreme Judicial Court of Massachusetts, charged with signing off on the transfer of state charitable assets to private entities. The court typically acts on the recommendation of the attorney general’s office, which is conducting a review of the proposed deal.

Yesterday, Caritas officials released a letter from members of the state’s congressional delegation endorsing the buyout.

Signed by US representatives Barney Frank, James P. McGovern, Michael E. Capuano, Niki Tsongas, and Stephen L. Lynch, the letter said transferring ownership to Cerberus “will improve the delivery of high-quality, low-cost health care services across the Commonwealth, protect and create jobs, and generate much needed tax revenue for the local communities served by Caritas’ six hospitals.’’

The other hospitals in the chain are Good Samaritan Medical Center in Brockton, Saint Anne’s Hospital in Fall River, Norwood Hospital, and Holy Family Hospital in Methuen. All will retain their Catholic identities under a stewardship agreement Cerberus reached with the Archdiocese of Boston, though an escape clause would allow the buyer to end the religious affiliation in exchange for donating $25 million to charity.

Under the deal, unveiled March 25, the buyer agreed to assume $430 million to $450 million in Caritas debt while committing to spend $400 million for capital improvements and other uses.

Caritas leaders, who have already begun renovation projects at their hospitals, have said they plan to use Cerberus money to expand their hospital network in Massachusetts and beyond. It will operate under a new holding company called Steward Health Care.

Critics of the deal fear that the chain could use Cerberus cash to buy physicians practices and recruit doctors from other hospitals. That, in turn, could help Caritas hospitals attract more privately insured patients, leaving rival hospitals with government-insured patients for whom they are reimbursed at lower rates. Such a scenario could threaten the financial viability of those competing hospitals.

Mark Pothier of the Globe staff contributed to this report. Robert Weisman can be reached at weisman@globe.com; Megan Woolhouse at mwoolhouse@globe.com.

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