R.I. hospital deal signals changing attitudes toward for-profit chains

For many towns, for-profit hospitals are the only option

Topics: Mergers and Acquisitions, Health Systems, Strategy, Finance

June 28, 2012

Communities and local governments were once skeptical of for-profit hospital operators—but a recent hospital deal in Woonsocket, R.I., highlights evolving attitudes, according to Modern Healthcare.

Steward acquires Landmark Medical Center

Steward Health Care System—a Boston-based, for-profit hospital chain owned by Cerberus Capital Management—and Landmark Medical Center in Woonsocket announced an asset-purchase agreement in 2011 to save the 133-bed R.I. hospital from closure.

However, a provision of the state's Hospital Conversion Act prevented for-profit companies from acquiring more than one not-for-profit hospital during a three-year period. Steward said changing that law was a condition of the acquisition agreement.

To allow the deal to proceed, the state Senate in April voted to remove the provision and Gov. Lincoln Chafee this month let the bill become law without his signature.

If the remaining conditions in the agreement are reached, the deal is expected to close at the end of July, says a Steward spokesperson.

Deal reflects national shift

According to Modern Healthcare, the effort that officials undertook to ensure the success of the deal reflect a national shift toward consolidation as for-profit and not-for-profit hospitals struggle with some similar reimbursement pressures.

"We're moving toward a situation where there's more acceptance of hospitals being owned by investors as opposed to being not-for-profit," says Barry Sagraves, a managing director at Juniper Advisory.

Moreover, Jill Horwitz—a University of Michigan Law School professor—notes that many states and cities face increased financial pressure and can no longer afford to support struggling, not-for-profit facilities.  For these hospitals and towns, she says, for-profit chains are "seen as the last hope" (Lee, Modern Healthcare, 6/23 [subscription required]).

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