WOONSOCKET – As Landmark Medical Center marks five years in receivership this month, a federal agency has stepped in to shore up the struggling hospital’s pension system before it runs out of money to pay beneficiaries.
The Pension Benefit Guarantee Corporation will continue paying benefits to retirees and make good on promises to active employees who will be due benefits when they retire – a group of about 750 individuals in all, said Marc Hopkins, a spokesman for the PBGC.
The PBGC, which is similar to the Federal Deposit Insurance Corporation, except it guarantees pensions instead of bank deposits, stepped in because Landmark’s pension system is on the verge of collapse.
The hospital doesn’t have the money to pay beneficiaries, and the for-profit hospital chain that wants to buy Landmark – Prime Healthcare Services – isn’t going to take over the pension system if the sale goes through, said Hopkins.
“The agency stepped in because the medical center can’t pay benefits, and the pension plan will be abandoned after Landmark sells all of its assets,” said Hopkins.
Hopkins said the PBGC hasn’t received official actuarial documents regarding the plan’s assets and liabilities. But the agency estimates that as of June 7, the plan termination date, the pension plan had an unfunded liability of about $35 million, with total assets worth about $23 million.
He said the PBGC would cover about $25 million of the shortfall and pay pension benefits earned by retirees up to the legal limit of $51,750 a year for a 65-year-old.
Retirees will continue to get benefits without interruption, and future retirees can apply for benefits as soon as they are eligible, but the plan has been closed to new members. Participants will be notified by letter after the assets are formally transferred to PBGC, which should be within several weeks, according to Hopkins.
The takeover of Landmark’s retirement plan is paid for with funds derived from insurance premiums generated by scores of pension systems covered by the PBGC, according to Hopkins.
“It doesn’t cost taxpayers anything,” he said.
Chris Callaci, general counsel for the United Nurses and Allied Professionals, the union that represents about half of Landmark’s roughly 1,200 employees, said he was aware of the impending takeover of the pension system.
He said the special master in charge of Landmark has been advocating for the dissolution of the defined benefit plan for some time because of the hospital’s financial troubles.
Callaci said he believes the takeover will make most UNAP beneficiaries whole because few, if any, are entitled to payouts exceeding the maximum legal benefit.
“I don’t think there’ll be any bargaining unit employees who will be taking a haircut,” he said. “There may be folks who are not in the bargaining unit who were above the threshold who made more than that but I don’t know because we don’t represent them.”
Callaci said it’s possible the union could negotiate a new defined benefit plan with the future owners of Landmark.
“This development was anticipated as we have continued to work with the PBGC on this matter,” said Bill Fischer, a spokesman for Landmark. “This is actually a good development for employees as the buyer never intended to take over the existing retirement plan.”
The pension bailout comes amid lingering uncertainty about the future of Landmark, which has been under the supervision of a court-appointed special master since the hospital filed for receivership on June 26, 2008. Landmark says its very survival depends on whether it can successfully be acquired by a financially sound hospital chain, but the latest effort remains in limbo.
Prime, a 21-hospital, for-profit chain headquartered in Ontario, Calif., is the third suitor for Landmark’s assets since the hospital filed for receivership. On March 29, however, state regulators suspended their review of Prime’s application to purchase the hospital, saying the company had twice failed to provide sufficient information to deem the application complete.
The regulators, including the state Department of Health and the Office of the Attorney General, said they could have terminated the review, but they suspended it to provide Prime with an open-ended window to supply information critical to evaluating the application. At the same time, however, the regulators said they were no longer required to make a decision on whether to approve the application within any of the timelines normally set forth in the Hospital Conversions Act, the law the governs hospital mergers.
Emily Martineau, spokeswoman for Attorney General Peter Kilmartin, said Monday there has been no change in the status of Prime’s application to purchase Landmark since the review was suspended, but the parties are still talking.
“The process remains suspended and the transacting parties continue to provide the department with the necessary information to deem the application complete,” she said.
Martineau couldn’t say how much longer it might take for the regulators to determine whether Prime’s application is in sufficiently satisfactory condition for the regulators to begin evaluating it in earnest.
Documents obtained by The Call, however, indicate that the regulators reiterated their position on the application to Prime as recently as May 30.
A letter signed by Deputy Attorney General Gerald Coyne and Michael K. Dexter of DOH’s office of health systems development says at least two more corporate entities related to Prime Healthcare must be listed as parties to the merger for the application to be deemed complete. The parties were identified as Prime Healthcare Holdings Inc. and Prime Healthcare Management, Inc.
The regulators also said it appears the proposed board composition of Prime Healthcare Services-Landmark, LLC, may run afoul of state hospital regulations and they asked for a memorandum to clarify the situation.
Edward Barrera, spokesman for Prime, said the hospital chain is still following through on its efforts to buy Landmark and its sister facility in North Smithfield, the Rehabilitation Hospital of Rhode Island.
Prime owns 21 hospitals in Nevada, Pennsylvania, New Jersey, Texas and California. It tendered a $62 million offer to purchase Landmark last fall after Steward Health Care of Boston abruptly terminated some 16 months of negotiations for the hospital. Steward is the for-profit arm of Cerberus Capital Management of New York, which was formed in 2010 when Cerberus acquired the Caritas Christi network of Massachusetts, the first suitor for Landmark.
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