New England's largest community-based healthcare system has a new owner.
Caritas Christi Health Care, a Massachusetts-based, six-hospital system serving more than 600,000 patients annually in 85 communities, has signed an agreement to be acquired by the Steward Healthcare System LLC, a newly formed affiliate of Cerberus Capital Management, L.P., a New York-based private equity firm.
The transaction, if approved, is expected to bring approximately $830 million of value to Caritas Christi, including assumption of pension obligations, repayment of debt, funding for operations and $400 million of capital projects, including six major construction projects.
Under the terms of the acquisition, Caritas Christi will continue to be managed by its current Boston-based executive team, including president and CEO Ralph de la Torre, MD. The agreement also stipulates that the six Caritas Christi hospitals will retain their Catholic identities and their existing policies on charitable and pastoral care, community benefits and approach to labor relations from a social justice perspective.
“We are committed to creating an integrated community-based accountable care organization,” said de la Torre. “We are striving to further improve the quality of care our patients receive, attract talented new physicians, upgrade and expand the infrastructure at our facilities, maintain or grow our staffing levels and undertake additional investments to further improve the quality of care we provide. In Cerberus, we found an investor that shares our vision and commitment.”
“Caritas’ leadership and its 13,000 dedicated employees have done an outstanding job of stabilizing operations over the past few years in a very challenging economic environment,” said W. Brett Ingersoll, co-head of private equity at Cerberus. “Caritas is the region’s largest community hospital network, and our investment will give physicians, nurses and other health professionals the additional tools they need to deliver world-class care to patients in the communities where they live.”
In addition to the financial benefits, the deal will maintain medical residency and teaching programs.
“Cerberus’ planned investment in the Caritas hospitals will provide needed resources to serve patients with excellent quality and compassionate care long into the future,” said The Very Rev. Richard M. Erikson, vicar general and moderator of the Curia of the Archdiocese of Boston. “We look forward to the establishment of a stewardship agreement, whereby the Archbishop of Boston will assure Caritas continues to be guided by Catholic teaching, morals and the ethical and religious directives.”
The acquisition and the conversion of Caritas Christi to a taxable entity, upon approval, are expected to generate significant state and local tax revenues.
According to the Boston Globe, the sale still faces significant hurdles and would have to be approved by the state’s highest court, as well as government agencies and religious authorities.
The Massachusetts attorney general’s office must make a recommendation on the deal to the Massachusetts Supreme Judicial Court, after conducting a public hearing on the issue (the state Department of Public Health, which would have to approve such a deal, will also hold a public hearing).
Court approval is needed whenever a charity becomes a for-profit entity. Past efforts by for-profit healthcare companies to enter Massachusetts have raised alarms in state government and among healthcare advocates.
According to the Globe, Cardinal Sean P. O’Malley’s approval is also needed. The Catholic Archdiocese of Boston created the system in 1985 to manage existing Catholic community hospitals. It became an independent nonprofit charity in May 2008 through an agreement with Attorney General Martha Coakley, but it retains a strong church affiliation, and three archdiocese representatives sit on the board.