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Judge gives Landmark bidders until May 6 to fix offers

April 28, 2011

PROVIDENCE — As Landmark Medical Center's financial health grows increasingly frail, a Superior Court judge said yesterday he's not ready to accept any of the offers on the table for the Woonsocket hospital because they all contain contingencies that could cause the sale to founder or they advance unsatisfactory models of patient care.
But Judge Michael Silverstein didn't reject the offers, not yet anyway — he gave the bidders until May 6 to resolve the issues and said he would decide whether to choose one by May 10.
The bids, adjusted for charitable care and commitments to labor, range from roughly $90 million for Transition Healthcare of Franklin, Tenn., to some $51 million for Prime Healthcare of Ontario, Calif. RegionalCare Hospital Partners of Brentwood, Tenn., has an offer of some $70 million on the table.
Calling all of them “qualified bidders” who appear to be bargaining in good faith, Silverstein said money isn't the cause of the holdup. Rather, Transition demands the right to terminate the deal if it can't reach a satisfactory agreement on insurance reimbursements with Blue Cross/Blue Shield of Rhode Island. RegionalCare Hospital Partners wants the same leeway if it can't come to terms with the hospital employees' union, the United Nurses and Allied Professionals.
For Prime Healthcare, the problem is that it wants to derive nearly all the hospital's income from Medicare and Medicaid, the government's insurance programs for the elderly and poor, respectively.
Silverstein said such a scenario would be particularly disruptive to health care in the region because a sizable population covered by private insurance would be forced to seek services elsewhere.
Silverstein said it would have been ‘easy’ to select one of the bids despite the flaws, but he could not have done so without risk to the goal of preserving a cornerstone of health care in the northern part of the state.
‘I will not, under those circumstances, take the easy way,’ said Silverstein. ‘It is my firm belief that the public interest in the northern part of the state mandates that these issues be resolved. The court would hope that within the time allotted that many of these issues, if not all of them, will no longer be issues.’
Silverstein also clarified the status of a fourth bidder, HealthSouth of Birmingham, Ala., interested in purchasing only Landmark's sister facility, the Rehabilitation Hospital of Rhode Island in North Smithfield.
He told lawyers for the company they are free to attempt to purchase the hospital from one of the other bidders, all of whom are vying for both facilities.
Though unexpected, the judge's decision to relax the timetable was almost universally applauded by all the parties of interest who packed Silverstein's courtroom, but it also touched off some of the sharpest debate about the handling of the sale since Landmark went into receivership in June 2008.
The jousting began when Pawtucket lawyer Jonathan Savage, the court-appointed special master in charge of the hospital, begged the judge for permission to solicit new bids, saying time – and money – are fast running out for Landmark.
‘Cash is disappearing at a rapid rate,’ an impassioned Savage said. ‘The issues the court has brought up today are not new. They are issues I've been dealing with as special master for weeks, if not months....’
Savage said he wanted to ‘survey the landscape and see if there are others out there willing to return to the table,’ comments that triggered speculation that Lifespan or former suitor Caritas Christi might be interested in tendering an offer for Landmark.
The only support for Savage's position came from Chris Callaci, general counsel for UNAP, which has been engaged in public relations warfare with RegionalCare – the only potential buyer which has been unable to reach a collective bargaining agreement with the union. Portraying RegionalCare as a ‘corporate shark,’ the union claims pay hikes would be more than eclipsed by increases in health care contributions under the company's management; RegionalCare, meanwhile, pledges to strive for common ground with UNAP, despite their highly publicized differences.
‘If there's an opportunity here for another bidder to come forward in the time frame proscribed...if another bidder can come in and do what the other bidders have not yet done, why would we not allow that to happen?’ Callaci asked the judge.
After a caucus, the health department's legal counsel, Theodore Orson, and Attorney General Peter Kilmartin, urged Silverstein to squash the plan. Tampering with the process so late in the game, Orson said, would serve as a signal to other potential hospital investors that the state doesn't play fair and, possibly, set the stage for an appeal of the judge's final decision in the case.
‘Due to the cash concerns we need to act quickly,’ Orson said, but the selection process should be honored as a ‘template’ for how similar situations should be handled in the future.
‘It's no secret that Landmark is not the only hospital in financial distress,’ he said. ‘At the health department we need to think globally.’
Kilmartin called Savage's request ‘a step backward rather than a step forward.’ His stand, if not his terminology, seemed to have touched a nerve with Savage because the two men were seen confronting each other nose-to-nose as they exchanged words when the hearing ended, moments later.
Asked what it was all about as he exited the courtroom, Kilmartin politely brushed aside the question. He and Savage were later seen in the jury lounge, near Silverstein's courtroom, speaking in what appeared to be a more civil fashion.
In the end, the judge gave Orson and Kilmartin what they asked for – an explicit order barring Savage from reaching out to any new parties in attempts to sell the hospital. But it may not be over yet.
‘Well see what happens on the 10th (of May),’ Silverstein told Savage, ‘but until then you are prohibited from entertaining other bidders.’

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