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Health panel gives preliminary nod to Steward

May 2, 2012

WOONSOCKET — Steward Health Care System surpassed a preliminary but important regulatory hurdle in its bid to acquire Landmark Medical Center Tuesday as a health department subcommittee recommended approval of the Boston suitor’s application to assume “effective control” of the hospital.
An eight-member subcommittee of the powerful Health Services Council voted unanimously in favor of Steward’s application after airing issues of Steward’s financial strength, quality of care and commitment to the needy during a series of earlier meetings.
The full Health Services Council, which rarely goes against the advice of its subcommittees, is slated to take up Steward’s application next Tuesday. If the panel approves, Health Director David Fine would still have to sign off before the decision is binding.
“Tuesday’s decision was very significant because it’s the first time we’ve achieved a regulatory goal, and there have been a lot of goals during this process,” said Bill Fischer, spokesman for Landmark.
Meanwhile, Steward’s beefier application to acquire Landmark under the Hospital Conversions Act is pending. The review process involves scrutiny of a far more copious amount of paperwork by two state agencies, the health department and the office of Attorney General Peter Kilmartin.
“Right now the office is continuing to review the HCA application in partnership with the department of health,” said Amy Kempe, spokeswoman for the attorney general. “That’s about all I can say.”
The HCA statute calls for a review lasting no more than 180 days from the date regulators deemed the application complete. That means they must decide by July 17 whether to approve or reject Steward’s application to buy Landmark.
There is no provision in the law for an extension, according to Kempe.
But Landmark is hoping the process doesn’t go the full term. Fischer said Landmark realizes HCA review is a monumental task, but the sooner it’s finished the better for Landmark because the hospital is running out of cash.
“This cannot be an infinite process,” he said. “There have been a lot of people involved in managing cash but everybody in this process needs to understand cash on hand is dwindling and we need resolution to these regulatory matters.”
If approved, the deal includes Landmark, a 214-bed acute care hospital on Cass Avenue, and its affiliate, the Rehabilitation Hospital of Rhode Island in North Smithfield. Their parent corporation, Landmark Health Systems, filed for receivership four years ago, commencing a court-supervised search for a healthy partner capable of keeping the hospitals alive.
Steward is a for-profit hospital company that was formed in 2010 with some $830 million in backing from the New York private equity firm Cerberus Capital Management. The chain now owns 11 hospitals in Massachusetts, including most of the assets of the former Caritas Christi Health Care network.
Though Steward continues to funnel money into Landmark and says it is eager for the deal to go through, it has obtained the court’s blessing to walk away if several contingencies unrelated to HCA approval are not met. They include the purchase of Landmark’s cancer ward, which is partly owned by another party, and the completion of a memorandum of understanding with Thundermist Health Center regarding the scope of services the clinic would seek from Landmark.
Thundermist dealt Landmark a painful financial blow earlier this year when it began steering its maternity patients to Women and Infants Hospital, raising questions about the long-term sustainability of obstetric care at Landmark.

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