Review of Caritas transfer begins

A for-profit equity firm’s proposal to acquire Caritas Christi, the Catholic hospital network that owns and operates the Carney and five other hospitals, has been formally filed with the state attorney general’s office, launching a review process that will include a hearing on the proposal in Dorchester.

Under state law, any transfer of a non-profit acute care hospital to a for-profit entity requires the review of the attorney general’s office. The Supreme Judicial Court, the state’s highest court, Catholic church officials, and the state Department of Public Health will also have to sign off on the $830 million deal with Cerberus Capital Management LP for it to go ahead.

The hearing in Dorchester, along with five others in the communities served by Caritas hospitals, will be scheduled at a later date. The other hospitals in the system include St. Elizabeth’s in Brighton, Saint Anne’s in Fall River, Holy Family Hospital in Methuen, Norwood Hospital, and Good Samaritan Medical Center in Brockton.

In a release, Attorney General Martha Coakley’s office said the review would take “a number of months.” Her office has set up a website for its review of the deal, located at: mass.gov/ago/caritas. Coakley’s review will include a look at how the deal squares with applicable non-profit and charities law; procedural due care; management of conflict of interests; fair and reasonable compensation; and the public interest.

In its filing with Coakley’s office, the firm representing Caritas, McDermott, Will and Emery, said the deal will give the Caritas system the ability to fund capital projects and other expenditures. Ralph de la Torre, the head of the Caritas system, told the Reporter last month that the Carney could see up to $20 million in capital investment. According to the filing on initial capital projects, Carney would receive a $10.2 million operating room. With the switch to a for-profit operation, the deal is also expected to bring nearly $10 million to the city’s tax rolls.

Overall, $400 million will be spent across the system within four years of the deal’s approval, including $110 million in facility improvements that will allow the Caritas system to “provide state-of-the-art facilities to some of the poorest communities in Massachusetts,” according to the filing. The improvements are expected to bring between 3,000 to 4,000 new construction jobs.

The deal also “guarantees that Carney, along with each of the Caritas hospitals, will continue to operate as a general acute care hospital for at least three years,” the filing says. Each hospital will have a “larger overall footprint,” de la Torre told the Reporter. “In other words, Carney will offer more services, St. E’s will probably offer more services, Norwood, etc. They may not be the same mix of services they offer now because we’re still figuring it out. You know, health care changes all the time and some things may not be needed. For example, not a lot of polio hospitals are left, right? I think we have to make sure we continue to evolve so we can move services around to where they’re most needed.”

While the deal guarantees the hospitals retain a Catholic identity, the filings also include a so-called escape clause, allowing the new owners to drop the identity if it becomes “unlawful or materially burdensome.”

If that happens, the company would have to pay $25 million to a Bay State charity designated by the Boston Archdiocese. The Archdiocese also will have the right to terminate the agreement with the company if “one or more of the hospitals is being operated in a manner inconsistent with” the hospitals’ Catholic identity, and the company will still donate $25 million to a Massachusetts charity.
Caritas employs 12,000 people and serves three million individuals.