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Another suitor pulls out of Landmark deal

May 18, 2011

WOONSOCKET — Prime Healthcare has now withdrawn its offer for Landmark Medical Center, making it the second bidder to walk away from the court-supervised sale of the troubled hospital in four days.
But this time there was a familiar ring to the Ontario, Calif., company's justification for pulling out — problems with Blue Cross/Blue Shield of Rhode Island.
Echoing complaints raised by ex-Landmark suitor Caritas Christi, Prime blamed Blue Cross' “unwillingness to negotiate a fair and reasonable contract” on reimbursements with the company. The explanation was contained in a letter sent to Jonathan Savage, the court-appointed special master in charge of selling the hospital, dated May 16.
Prime's general counsel Michael J. Sarrao said the company withdrew “with much regret” but had come to the conclusion that it was unable to rely on a solid relationship with Blue Cross given the company's “take it or leave it” attitude.
“I think we're starting to see a disturbing pattern here,” said William Fischer, spokesman for Landmark. “Now we have a problem with multiple bidders who have stated to the court they believed they had agreements in principle with Blue Cross only to see the terms change after negotiations began.”
Laura Calenda, a spokeswoman for Blue Cross, flatly rejected the notion the company is to blame for problems Landmark is having finding a buyer.
She said the information in Prime's withdrawal letter contradicted the position Prime had taken with Blue Cross less than two weeks ago, when it accepted the terms of a proposed reimbursement contract put forth by the insurance company.
“That's interesting,” she said, “because we have a letter from Prime dated May 6 saying unequivocally they accepted our contract offer. We've worked actively and in good faith to come to a contract agreement with all three bidders.”
Shortly after the withdrawal of Caritas Christi in December, Landmark filed suit against Blue Cross over the reimbursement issue. Landmark contends the insurance company has provided disproportionately low reimbursements to Landmark, starving it to the point of financial collapse. Landmark filed for receivership in Superior Court in June 2008, the catalyzing event for the continuing effort to sell the facility to a healthy company that can preserve the only full-service hospital in the Greater Woonsocket area.
Landmark had been in talks with Caritas Christi for nearly two years before the negotiations collapsed, the event that prompted the special master to seek a new round of bids. Five companies initially surfaced, but by last Friday that figure had been whittled down to two, when Transition Healthcare of Franklin, Tenn., became the latest to drop out.
With Prime's exit, the only suitor left from that followup round of bids is RegionalCare Hospital Partners of Brentwood, Tenn., a company whose efforts to purchase the hospital have been marked by rancor with the United Nurses and Allied Professional Local 5067.
Superior Court Judge Michael Silverstein has instructed the for-profit company to conclude a collective bargaining agreement with the union by May 27 or risk being excluded from further consideration for the hospital.
Though RegionalCare previously told the court it had an agreement in principle on reimbursements with Blue Cross, Fischer said that is no longer a valid statement. Calenda said Blue Cross and RegionalCare are still talking, however.
“As far as we're concerned those negotiations are still in process,” she said.
Preparing for the possibility that this phase of the hospital sale will also founder, Silverstein has already granted permission for Savage to initiate what amounts to a third effort to reach out to potential buyers.
Fischer claimed Transition, too, had had problems with Blue Cross, but the only reason the company cited publicly for pulling out was Silverstein's decision to expand the search to outside buyers. Transition said it was unfair to change the rules of the acquisition proceedings while negotiations were ongoing with three other companies.
While it placed more emphasis on the problems with Blue Cross, Prime mentioned the expanded search as a secondary cause for withdrawing, telling the special master, “'We also have concerns about a process where you are permitted to communicate with new bidders at this late stage.”

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