PROVIDENCE — There were some dramatic changes in the bid picture as the parties vying to buy Landmark Medical Center began making their sales pitches in Superior Court yesterday.
The original pool of contenders for both Landmark and its sister facility, the Rehabilitation Hospital of Rhode Island, was pared down from four to three, as Capella Health Care of Tennessee withdrew.
RegionalCare Hospital Partners, also of Tennessee, still appeared to have the most aggressive bid on the table, offering a total investment of up $69.8 million in the two hospitals over five years. But two contestants whose offers seemed a distant second to RegionalCare when the packages were unveiled last week have since upped the ante significantly.
Transition Healthcare — yet anther Tennesee-based contender — initially submitted a $14 million package, but that figure suddenly morphed into $45.7 million. And Prime Health Care of Ontario, California, originally offering $31.9 million, is now willing to go as high as $53.5 million.
Landmark is entering the final stages of a process that began nearly three years ago, when the hospital petitioned the Superior Court for protection from creditors, saying it was on the brink of insolvency. Judge Michael Silverstein appointed Pawtucket lawyer Jonathan Savage as special master to find a buyer to save the Woonsocket hospital, a linchpin of health care services in northern Rhode Island.
It will be up to Silverstein to decide who may purchase the hospital, but it's still unclear how soon after the close of hearing that decision will come. A second day of hearings was scheduled for today.
With some two dozen lawyers and a passel of hospital executives amassed before him, Silverstein made it clear from the outset that dollars and cents is not his only concern. “This is an equitable hearing” that is “tinged with the public interest,” he said.
“Please stress in your presentations for my benefit not only the the dollars involved, but the benefit for the hospital, its constituency and the northern part of Rhode Island,” Silverstein said.
Under questioning by Preston Halperin, a lawyer who represents the special master, acquisitions consultant Joshua Nemzoff summarized the bids, including the last-minute changes.
In addition to the three remaining contenders for the two hospitals, HealthSouth of Birmingham, Ala., is making a bid for RHRI only, Nemzoff said.
Even from Nemzoff's hasty summary, it was clear that it's impossible to evaluate the bids on the basis of total investment projections only. All of the bids contain unique contingencies which do not boil down to the same dollar value.
“Over the last week information has been coming in at a rather fast and furious pace to our office,” Halperin told the judge at one point. “We understand there's not a clear apples-to-apples comparison but we're doing the best we can.”
To make matters even more complex, the bidders can modify their offers until the judge formally concludes the hearing, according to Bill Fischer, a spokesman for Landmark.
“It's an evolving process,” he said.
One of the most obvious differences in the bids has already become the most controversial — the bidders' relationship with the United Nurses and Allied Professionals — the union that represents health care workers at Landmark and RHRI. Transition and Prime HealthCare have already concluded a successor collective bargaining agreement with the membership. RegionalCare hasn't merely failed to reach such an agreement, it appears to have already alienated the membership of the union.
As lawyers for RegionalCare strode to the steps of the Licht Judicial Complex yesterday morning, they were greeted by a slogan-chanting, picket-carrying phalanx of angry union members, telling them to go home. “RegionalCare Wrong 4 Rhode Island,” one sign read. “RegionalCare Bad 4 Community,” said another.
A barrage of press releases from the union in the days leading up to the hearing said salaries would erode so much under RegionalCare that it would be impossible to retain skilled health care professionals at Landmark for very long.
No matter how much money RegionalCare pledges for the hospital its business model “is dead on arrival,” UNAP's general counsel, Chris Callaci said during a break in the hearing.
“It doesn't work,” Callaci said. “They can't do it without the support of the employees and they don't have that.”
While the bidders are throwing out some big numbers, there is plenty of documentation that most — but not all — have sufficient access to capital to follow through on their offers, Nemzoff told the court. He said he was unable, so far, to vouch for Transition, which supplied no material to demonstrate the strength of its financial backers, Falcon Investors of New York.
By mid-day Thursday, principals of Prime HealthCare were called to the witness stand to begin elaborating on the details of their proposals and their plans for Landmark.
Dr. Prem Reddy, the chairman of Prime HealthCare, said his company is basically a family-owned operation that includes a dozen acute care hospitals in southern California. Generally, he said, they were salvaged from the ruins of bankruptcy and some have become award-winning models of “compassionate, quality health care” delivered in a cost-effective fashion.
“That's our forte — turning around financially distressed hospitals and turning them into community assets,” said Reddy.
At one point, Silverstein asked Reddy why Prime Healthcare was suddenly looking to grow outside of California. Though his for-profit hospital chain is largely family-owned, Reddy said he may be interested in seeking some private backing in the future and financial advisors suggest the company would be regarded as a better investment risk if it diversified geographically.
Lex Reddy, the president and chief executive officer of Prime Healthcare, said the company would begin pouring resources into Landmark as soon as the merger is approved under the complex Hospital Conversions Act, a regulatory law requiring approval by the attorney general and the state health director. He said the company envisions releasing up to 250 full-time equivalents, but many of them would be per-diem workers and outside contractors.
“It's a very abstract number,” he said.
In an ominous preamble to the testimony, Theodore Orson, a lawyer for the state Department of Health, admonished the bidders to be mindful of the possibility, however remote, that the regulators might reject the merger, even after the suitor is accepted by the court.
“We must prepare for any eventuality,” Orson said.
For that reason, Orson said, the successful bidder should offer “a closure plan” setting forth provisions for the shutdown of Landmark and RHRI. The purpose of the plan is “to make sure the hospitals could be closed in a manner that would not compromise patient care.”