A confidential memo obtained by a major New England newspaper says that Steward Health Care System withdrew from a deal to acquire Mercy Health System because the Maine system misrepresented its finances.
In a story posted on the Boston Globe’s website Monday evening, the newspaper revealed parts of a confidential memo sent from Steward’s director of media relations, Christopher Murphy, to heads of Steward’s Massachusetts hospitals.
According to the Boston Globe, Murphy’s memo said that Mercy misrepresented its finances; that the hospital system’s patient volume and trends data were much worse than expected; that costs for its new Portland, Maine campus were significantly higher than Steward was lead to believe; and that after Steward and Mercy signed the letter of intent, Mercy’s parent, Catholic Health East, withdrew $9 million in cash from Mercy.
The Boston Globe quoted Murphy as writing in the memo: “With each day that passed during the due diligence process, our confidence in the numbers presented by Mercy eroded to the point that we were unable to responsibly submit a bid. We came to the conclusion that, even if Mercy were to give us their hospital for free, we couldn’t make the numbers work.”
The newspaper noted that Murphy confirmed he sent the memo, but he declined to discuss it with the Boston Globe. Murphy also declined to discuss the memo or the Boston Globe story with Healthcare Finance News.
"Mercy has never misrepresented its finances or volume trends," Susan Rouillard, Mercy's chief development and communications officer, told Healthcare Finance News Tuesday morning. "We maintain a normal course of busines relationship with our parent, Catholic Health East. As a community-oriented organization, we approach all of our relationships and parternships in good faith and with full transparency."
When the termination of the Mercy/Steward deal was announced last week, Mercy announced that it had signed a letter of intent to be acquired by the not-for-profit Eastern Maine Health Systems (EMHS), headquartered in Brewer, Maine.
In an email to Healthcare Finance News, Suzanne Spruce, EMHS’ director of community relations, said that EMHS couldn’t comment on what happened between Mercy and Steward, but that EMHS and Mercy “hope to have a signed definitive agreement prior to the end of the year.” Spruce said the letter of intent the two organizations signed last week does not allow for public comment at this time, but the organization looks “forward to providing additional information (about the Mercy/EMHS deal) when we are able.”