Catholic Hospital Owner Also Owns Connecticut Shooting Rampage Rifle Manufacturer

December 18, 2012

Our prayers at BCI go to the victims of the Newtown, CT shooting last Friday and their families. This horrible tragedy is still weighing heavy on our hearts.

The Boston Globe reported today that guns used to kill people and Catholic hospitals may seem an unusual pairing in an investment portfolio, but not for Cerberus Capital Management.

BCI readers know that Cerberus Capital, a private equity firm, purchased Caritas Christi Healthcare from the Boston Archdiocese back in 2010.  At the time, we knew that Cerberus owned a gun company.  Today we learned that gun company was the manufacturer of the semi-automatic rifle used in Newtown, Connecticut killings last Friday, and Cerberus has now decided to sell their investment in the company.

The Globe reported first the ownership situation this morning:

The New York investment firm that controls the Steward Health Care System hospital chain in Boston also owns the company that makes the semiautomatic rifle that Adam Lanza used to kill 20 children and six adults at Sandy Hook Elementary School in Newtown, Conn., last Friday.

Cerberus is one of the most powerful forces in the gun business. It owns Freedom Group Inc., a Madison, N.C., company that is the nation’s largest seller of firearms and the number two seller of ammunition. Freedom, according to its annual report, sold 1.1 million long guns and 2 billion rounds of ammunition that generated $775 million in sales last year.

Freedom’s chief executive, George Kollitides, worked previously for Cerberus, where he focused on buying companies in the firearms and defense businesses for the firm. Described as a “lifelong hunter, shooter, and firearms enthusiast” on the company’s website, he is also a trustee for the NRA Foundation and serves on several of the group’s committees.

Kollitides led the charge to acquire Bushmaster Firearms Inc. from Windham, Maine, native Dick Dyke in 2006. The gun used in the Newtown shootings, a Bushmaster .223 semiautomatic rifle, contained a 30-round ammunition clip that allowed the gunman to fire continuously inside the school.

That same model Bushmaster was also used in the 2002 Washington sniper shootings, in which 10 people were killed, according to published reports.

Dr. Robert D. Sege, director of ambulatory pediatrics at Boston Medical Center and coauthor of a policy statement on gun control by the American Academy of Pediatrics, said he strongly favors reinstituting the assault weapons ban. If Cerberus is not working for laws to make guns and the community safer, he said, “At the very least it calls into question the overall aims of Cerberus Capital.”

An executive at Cerberus did not return requests for comment Monday, and Ralph de la Torre, chief executive of Steward Health Care, was traveling and unavailable to comment, a spokesman said. An official from Freedom Group could not be reached for comment.

When Cerberus created Steward in Boston, by acquiring the former Caritas Christi hospitals, de la Torre conducted a public relations tour to present Cerberus as the best hope for saving a cash-strapped community hospital group. The Catholic hospital group includes St. Elizabeth’s Medical Center in Brighton and Carney Hospital in Dorchester.

While Cerberus’s wooing of the local hospital group was highly public, its amassing of gun companies was less well known.

If new gun controls are proposed in the wake of the Newtown tragedy, Freedom and Cerberus will have much at stake. In the past, company executives have said in earnings calls that when “political rhetoric heats up,” the furor typically dies down quickly.

But this week, gun critics expressed outrage that a company could both own hospitals and gun makers. “How can you promote good health and unrestricted access to deadly weapons at the same time?” said John Rosenthal, a Boston developer and cofounder of Stop Handgun Violence. “It’s clear to me all they care about is the profit motive.”

Well, the furor did not die down quickly.  This afternoon, the Globe reports that Cerberus plans to sell investment in gunmaker after Connecticut school shootings:

Cerberus Capital Management, the investment firm that controls the Steward Hospital Health Care System hospital chain in Boston, said that it will sell its investment in Freedom Group, the company that makes the rifle that was used in the Connecticut school killings.

“We have determined to immediately engage in a formal process to sell our investment in Freedom Group,” the New York firm said in a statement. “We will retain a financial advisor to design and execute a process to sell our interests in Freedom Group, and we will then return that capital to our investors.”

Together with its gun brands, from Bushmaster to Remington, Freedom is a major contributor to the National Rifle Association and the fight against gun control, according to the Violence Policy Center, a Washington group that tracks corporate funding of gun advocacy.

Reuters reported that pressure mounted on Cerberus as the California State Teachers’ Retirement System (CalSTRS) said on Monday it was reviewing its investment with the private equity firm after the Connecticut school shooting.

Indeed, it does not make sense at all how a firm can promote good health at the same time they are promoting unrestricted access to deadly weapons.  How could they even fathom investing in a company in 2006 that made the weapon used to kill 10 people just four years earlier?  That is Cerberus, which gets its name from the three-headed dog that guards the gates of hell in Greek mythology. We are glad to hear they are selling their investment in Freedom Group. But it is an investment that never should have been made in the first place. With principals of the firm whose code of ethics did not stop them from investing in the gun manufacturer, how exactly are they guiding what remains of the Catholic hospital network.


“King of the Cannibals” at Caritas?

February 10, 2011

Today is the last of our comments for now about Caritas Christi, but there was so much in the news about them in recent days we felt we should just highlight a few things for you.

You already know about the boring, ineffective, and very expensive Super Bowl commercials and how no one at Steward Health Care is apparently stewarding the Stewardship Agreement to maintain the Catholic identity of Caritas publicly–and in fact they are in the process of actively removing Christ from Caritas Christi’s website. In case you missed reading the two pieces in the Boston Globe in recent days,  selected details are offered today.

From the Boston Globe Sunday Magazine, we learned the following:

One day several years back, de la Torre’s father, Angel came to Massachusetts for a visit…”I realized over the last couple of years that I never should have worried about you,” Angel told his son. “We could drop you into a tribe of cannibals, and you’d either get eaten within the day or you’d become king of the cannibals.” Given how sparing with praise his loving but exacting dad had always been, that comment, Ralph says, was one of the most meaningful compliments he’d ever received.

As you know, cannibals eat the flesh of other humans.  BCI does not know about how other readers feel on this topic, but if we were dropped into a tribe of cannibals, we would rather escape from the cannibals, muster help from like-minded people opposed to the practice of killing other humans and eating their flesh, and return to capture and imprison the cannibals so they cannot go out and kill other people.

If the president of Caritas sees “king of the cannibals” as a compliment, is anyone else worried about the future of what little remains of Catholic healthcare in Massachusetts?

The Boston Globe Sunday Magazine article also mentions the swank $15,000/head fundraiser that de la Torre hosted at his Newton home for President Obama in the fall, which raised $900,000.  It remains unexplained how a person who “was not politically active until recently” managed to get the President of the United States to come to his house for a fundraiser.  Also unclear to us is how one can support a candidate who is in favor of abortion, while being a self-described “social liberal” leading a hospital system whose core values oppose abortion.  Maybe BCI missed something in the article, so we will re-read it and let you know when we figure out this inherent conflict.

On Tuesday, February 8, the Globe ran another piece, Ralph de la Torre’s biggest challenges are yet to come which gives additional perspective on what lies ahead for de la Torre and the former Caritas Christi.  They largely draw from the Sunday Globe piece, but the key points are noteworthy:

Can de la Torre and the private equity firm Cerberus transform the non-profit hospitals into for-profit money makers without upsetting Massachusetts’ fragile ecosystem of community hospitals?

If de la Torre fails, health care provided at Caritas hospitals and other hospitals around the state could suffer. Worse yet, they could close altogether. If de la Torre can pull it off, however, it could mean better quality health care at a better price for Bay State residents. And if de la Torre succeeds here in Massachusetts, he would also, no doubt, be called on to replicate his success in other states or at the national level.

According to a new profile by Neil Swidey, though, despite his obvious passion for the job, execution may not be de la Torre’s strong point. Swidey relates a story from earlier in de la Torre’s career to make this point. When de la Torre was chief of cardiac surgery at Beth Israel in 2004, he hatched a plan to revolutionize cardiac care at the hospital by creating a centralized CardioVascular Institute (CVI) there. Things started off well, both for the hospital and de la Torre:

de la Torre identified all his opponents and worked methodically to persuade them they would win under his plan. He promised patients improved care, doctors a piece of the enhanced revenues that would spring from reducing system waste, and the hospital a success story to distinguish itself in the hypercompetitive Boston market. The CVI officially opened in 2007, with de la Torre as president and CEO. He continued his work as a surgeon, maintaining the salary of more than $1.3 million that he had earned the previous year.[Dr. Frank Pomposelli, a veteran vascular surgeon at Beth Israel] says de la Torre’s enormous talent, intellect, and drive helped the CVI succeed in many ways, notably in removing waste from hospital operations and in building strong networks of affiliated physicians. De la Torre wined and dined community cardiologists around the region, persuading them to become affiliates and refer patients to Beth Israel for care.

But then reality set in, and de la Torre’s plans for the CVI fell short:

The silos were harder to break down than they thought, especially since “we didn’t pay enough attention to academics and research.” Also the “enhanced revenues” to physicians turned out to be far less than promised, leading to resentment. Pomposelli, who remains the chief of vascular surgery at Beth Israel, stresses that the CVI still exists, but in a much less ambitious form.

Pomposelli, a close friend of de la Torre, added this assessment of his friend: “Ralph’s a builder. He loves the deal, loves creating new things. … I don’t think he loves managing things as much. Running the CVI turned out to be tedious and difficult.”

This matters because there is a real risk of failure for Caritas — which de la Torre, despite his cheerleading for the Cerberus deal, is well aware of. In fact, the person who has best explained the risk is de la Torre himself, when he testified before the Public Health Council as a part the deal’s approval process. “What is the risk?” de la Torre repeated when asked to explain how he plans on turning his non-profit hospitals into money makers:

The risk is that we are wrong. The risk is that the people in Massachusetts fundamentally don’t care about the cost of health care or staying in their communities, and that they really just want to come to Boston. That is the risk. That is what we are gambling isn’t the case.

de la Torre added that, “from the start,” he has “been very clear with Cerberus” about these risks. In selling his vision to the people of Massachusetts, though, de la Torre hasn’t always been as clear. To be sure, de la Torre has shown plenty of political acumen, getting unions, Church officials, community activists, and investors all on the same page. But creating long-lasting success at Caritas will be “tedious and difficult” — something de la Torre didn’t show much patience for at Beth Israel.

Can the man who sees “becoming king of the cannibals” as a compliment pull off the challenge?  And will the self-described “social liberal” also steward the Stewardship agreement that calls for maintaining Catholic identity and Catholic ethical and moral directives all at the same time?

Based on what we have seen so far, we are not very hopeful.


Removing Christ from Caritas Christi

February 8, 2011

In our last post, Steward’s Super Bowl Sunday Spending, we talked about the expensive television ad by Steward Health Care, the new entity formed to oversee the Caritas Christi hospitals–you know, the hospitals that said they were out of money and needed to sell-out to get the infusion of cash by Cerberus in order to stay afloat.  Beyond the connections of powerbroker Jack Connors, Jr and his son John Connors, III to the ad campaign–and beyond the matter that the commercial strikes everyone we have spoken to as bland, unmemorable, confusing, and a waste of some $500K+ that could otherwise have been put toward healthcare–has anyone noticed how Steward has now removed “Jesus Christ” from Caritas Christi?

Last spring, everyone said the goal of the stewardship agreement that set out conditions of the sale was to preserve the Catholic identity of the hospitals forever.

Christopher Murphy, a spokesman for the network, said the stewardship agreement would be designed to permanently maintain the hospital’s Catholic identity….“The main point is that it’s designed to last forever,” he said. “That’s the prevailing hope of everyone involved, that . . . the Catholic tradition of Caritas Christi stays in place forever.”  (Boston Globe, April 28, 2010)

“The Stewardship Agreement memorializes Steward’s commitment to maintain the Catholic identity of the Caritas Christi Healthcare system and its fidelity to the mission of the Church’s healthcare ministry.” (Fr. Richard Erikson, Vicar General, The Boston Pilot, May 14, 2010)

“We announced yesterday that an agreement has been reached with Cerberus that ensures the Catholic identity of the Caritas Christi hospitals… this stewardship agreement was a key component for us because it will preserve the Catholic identity of Caritas.” (Cardinal Seans blog, May 7, 2010)

Well, that was then and this is now. With the Super Bowl launch of Steward Health Care, it already appears rather clear that Steward’s stewardship of the “Stewardship Agreement” to maintain the Catholic identity at Caritas is flimsy at best, at least publicly. Just look at how the Steward website says nothing about Catholic hospitals, and especially note how the description of Caritas has changed on the Caritas Christi website in the past week to remove mention of Jesus Christ.

Read on for the before and after.

February 3, 2011. The website at http://www.caritaschristi.org had the Caritas Christi logo, with a subtle image of a cross in the logo.  The “About Us” page referenced the Caritas Christi mission:

Caritas Christi Health Care, rooted in the healing ministry of Jesus, is committed to serving the physical and spiritual needs of our community by delivering the highest quality care with compassion and respect.

(Click on the graphic below to zoom the image of the site as of Feb. 3)

February 8, 2011: On the same page, the former Caritas Christi logo is now gone, replaced by the new Steward logo (no cross).

The description on the “About Us” page just says,

“Steward Health Care System is a community-based accountable care organization and community hospital network. Headquartered in Boston, Steward has more than 13,000 employees serving more than one million patients annually in 85 communities.”

Notice how there is no acknowledgment that it was formerly Caritas Christi.   Where is Jesus Christ?  Gone.

Just for the sake of posterity, let us look at how Caritas Christi presented the hospital network just three years ago, before Fr. Bryan Hehir, Jack Connors, and Ralph de la Torre got involved. To the right is the former logo, with a prominent cross.  Here is a cached version of the Caritas Christi website as of January 2008. They described themselves at the time as follows:

Caritas Christi is a Catholic Health Care System rooted in the history of the Archdiocese of Boston. As a community of health care providers, we affirm Christ’s healing ministry, foster excellence in care, and commit ourselves to those in need in accordance with the principles of the Catholic Church.

That Catholic identity–at least expressed publicly at the time–is almost ancient history.

Now, the former Caritas Christi website is still clearly a work-in-process as they replace the old Caritas Christi identity with the new Steward one, and thankfully, there is a small remnant of that former Caritas mission statement left under “mission and values” for now, but we expect that will be gone shortly–unless this blog post triggers the Catholic identity stewards at Steward Health Care who are responsible for stewardship of the “Stewardship Agreement” to do something about preserving the Catholic identity publicly before the name of Jesus Christ is completely expunged.

If this is what they are doing with the Catholic identity publicly where people can readily see it, is anyone else wondering what is happening behind closed doors?


Steward’s Super Bowl Sunday Spending

February 6, 2011

We were not sure whether to call this post by the name you see in the title, or something more like “Connors Continuing Caritas Coincidences.” We went with the Super Bowl title, and with game-time upon us, we will keep this one short.

On Friday, Steward Health Care System, the new entity formed to oversee the Caritas Christi hospitals, announced they were sponsoring a 30-second Super Bowl ad to launch themselves.  Here is the article in the Boston Globe about the new advertising campaign, and here is their spiffy new website.

In case you take a break during commercials to make a trip to the kitchen or bathroom and you miss the ad, here is the 30-second advertisement, seen here from Boston Catholic Insider even before it airs on TV:

According to the Globe article, 30-second advertising spots cost about $80,000 to air in the local market.  We saw one run during the game and one immediately after the game.  Brian Carty, chief marketing officer for Caritas and Steward and, coincidentally, a former exec with Jack Connors’ Hill Holliday advertising firm before Caritas,  would not disclose what the ad cost to produce.  BCI seems to recall that a key driver mentioned for selling Caritas was that they needed the infusion of capital to upgrade facilities and take care of the unfunded pension liability. We must have missed how that infusion of capital would be used to fund brand advertising campaigns.

BCI does not claim to have the marketing expertise of a Hill Holiday advertising exec or the progeny of advertising guru Jack Connors, but we must observe that the wording in the ad sounds frankly, glib:  “Believe compassion comes with a medical degree…Believe your neighborhood can save your life.”  Who writes this stuff anyway?  Is it the same people from Boathouse Group that brought us the “Quality to the people” ads a few years ago with the Socialism-style clenched fist? And what exactly is the brand-name they want viewers to remember?  Are they introducing “Steward” as the name of the new healthcare system, but people will still go visit their familiar local “Caritas” hospital? Or are they planning to re-brand the “Caritas” hospitals as “Steward”?  Who knows?  And the names of the local Caritas hospitals flash so quickly at the end that it was impossible to even read them.

By the way, in another coincidence, the Waltham, MA ad firm that Steward worked to create the ad, Boathouse Group, is run by Jack Connors’ son, John Connors III.

Also, in another remarkable coincidence, the Boston Sunday Globe Magazine has as its cover story a lengthy puff piece, I mean article about Caritas CEO, Ralph de la Torre.  It is called “The Healthcare Doctor.”  During the public debate over the acquisition price and how much Cerberus was really investing of its own cash, we asked repeatedly if the capital investments over future years were coming from Cerberus’ cash vs Caritas operating income and no one ever answered the question.  Now we have the answer:

Cerberus paid $495 million for the Caritas system, a sum that funded its pensions and retired most of its outstanding debt. It also committed to pumping another $400 million in capital improvements into the system over the next four years, although de la Torre acknowledges that those funds may come from hospital revenues in coming years, rather than from Cerberus itself.

We will let the focus of this post remain with the Steward campaign and the article about Ralph de la Torre, and will ask readers to refrain from commenting about the battle between the Steelers and Green Bay Packers.

 


Caritas Christi: Going…Going…Gone!

October 7, 2010

 As expected, yesterday we heard that Attorney General, Martha Coakley, approved selling Caritas Christi to Cerberus, with a few additional restrictions that make the deal less bad but still not all that great. Some readers are asking us for shorter posts, so we will try this time around and see how it goes.

All would probably agree this marks the beginning of the end of Catholic healthcare in Massachusetts. Do you remember Coakley’s comment during her failed U.S. Senate campaign that devout Catholic healthcare workers who abide by Church teachings on abortion and birth control, “can have religious freedom but you probably shouldn’t work in the emergency room“? Well, it looks like the chicken will be coming home to roost on that comment in the not-too-distant future.

Anyway, the 39-page report by the Attorney General’s office makes for an interesting read, and we learned quite a few things from a quick 15-minute review of it, including the 9-page appendix that answers some of the most frequently asked questions. Below we simply will share the high level conclusions of the report, and what we learned, including some disturbing gaps in what initially seemed like a fairly comprehensive assessment.

High Level Conclusions from the Report

“In any transaction involving the transfer of a hospital’s charitable assets to a for-profit entity, the Attorney General’s Office has statutory authority to conduct a review of the proposed transfer. In its review of the Caritas transaction, the Attorney General’s Office found that:
(1) it is impracticable for Caritas to continue to survive in its current charitable form;
(2) due care was followed by the Caritas Board and senior management during the transaction;
(3) the Board and senior management appropriately disclosed and managed conflicts of interest;
(4) the transfer of assets affords Caritas fair value for its assets and operations; and
(5) the transfer is in the public interest.”

What We Learned, Gaps in the Report

1) Impracticable for Caritas to have survived in its current charitable form?

Coakley’s report gives a list of all of the negative aspects of Caritas’ financial position through February 2009, including doom-and-gloom consultant reports, and reduced numbers of patient discharges, patient days, and outpatient surgery volume. These reports indicated Caritas had limited options to stay afloat and also fund pensions and needed facility improvements. We hear in 2009 that consultant Navigant projected Caritas “would default on its existing debt covenants (i.e., less than 30 days cash-on-hand) in less than one year.” You read the report, and it seems like there were no other options and the Cerberus deal sounds like a “white knight.”

But, conspicuously absent from Coakley’s report is one word about how Moody’s and Standard and Poor upgraded their long-term bond ratings on Caritas in late 2009 and February of 2010. In February of 2010, Caritas and the Boston Business Journal reported that Moodys upgraded their long-term bond ratings.

The upgrade reflects the turnaround in financial performance in FY 2009 and our belief that this new level of performance is sustainable. Moody’s said the hospital group has better cash flow to cover its debt service and experienced an upswing in unrestricted cash and its investment position, $235.3 million compared with $172 million at the end of fiscal 2009. Moody’s said its analysis takes into consideration a potential $100 million bond issue during fiscal 2010.

Why is this information from late 2009 and early 2010–which undermines the doom-and-gloom scenarios from the consultants up to early 2009–not mentioned in Coakley’s report? We do not know. Nor do we hear about how Caritas has the cash resources be off acquiring other hospitals like Landmark, and “quietly courting area hospitals about potential mergers” while claiming to be unable to fund their own operations. It makes no sense that Coakley omitted this from her report.

 (2) Due care was followed by the Caritas Board and senior management during the transaction?

The report details the history of trying to merge Caritas with a Catholic hospital chain and/or sell it over several years. Most interesting is how the Caritas Board approved entering into a letter of intent with Vanguard Health Systems to sell most of Caritas assets, and how Caritas and Vanguard Health Systems signed that letter of intent on November 4, 2009. Next thing we hear in the report was they were unable to reach agreement on material terms, including the underfunded pension liability and no-sale period, so the letter of intent was terminated in December 2009 (no exact date provided). The report says Cain Brothers was then engaged to help Caritas explore other options, which meant reaching out to private equity firms. We are told that of five approached, three responded, including Cerberus, and two were pitched in January of 2010.

Apparently no one in the Attorney General’s office read the March 28, 2010 Boston Globe, where the general public was told the deal to sell Caritas to Cerberus was actually set in motion in November of 2009 at the Marriott Desert Springs Resort & Spa in California. [We peg that date as being November 11-15, when Nardelli was a keynote speaker at the Ernst and Young Strategic Growth Forum 2009 at the Marriott Desert Springs]. Maybe the Vanguard negotiation was already problematic a week after the letter of intent was signed, and de la Torre was hedging his bets in case it went south, or maybe the prospect of the deal with the three-headed lion that guards the gates of hell (Cerberus’ symbol) looked better than Vanguard. We just find it curious that Coakley’s report attempts to paint a detailed timeline, but then we find stuff like this omitted that was right out in the public domain.

 (3) The Board and senior management appropriately disclosed and managed conflicts of interest?

 The report does not say anything about Coakley’s own conflict of interest of accepting $34,000 that was donated to her by de la Torre and Caritas executives during her U.S. Senate campaign. Also, folks like friend-of-Martha and campaign-donor-to-Martha, Jack Connors on the archdiocesan finance council, who may want selected Caritas properties for Partners and who gives direction to Caritas board member Fr. Bryan Hehir, were not considered in the report.

Catholic Action League of Massachusetts weighed in saying, 

“Although Martha Coakley deserves some credit for extending the period during which the hospitals cannot be closed, and in trying to ensure care for the indigent, her refusal to address the issue of the termination clause will likely result in the secularization of the six hospitals under the new owners. This means the abandonment of Catholic medical ethics, including the right to life from conception to natural death, the loss of conscience protections for pro-life doctors and nurses, a reduction in charitable care for the poor, and the replacement of Catholic social teaching in employee relations, such as the family wage, with the free market law of supply and demand. Catholics must now turn to the Holy See as the last court of appeal if one hundred and forty-seven years of Catholic health care in Boston is to be preserved.”

What do we think will happen ahead? The SJC and state Department of Public Health will approve the deal. If the Vatican does as well, look for Carney Hospital to eventually close (because the modified agreement says they can do that if it is unprofitable for 2 years), maybe St. Elizabeth’s will close as well, and Jack Connors’ Partners to likely pick-up whichever of the hospitals Cerberus closes or unloads at a great price.  That would leave only two more Archdiocesan assets available for Jack Connors to potentially try and grab—Regina Cleri for Partners and St. Johns Seminary for his alma mater, Boston College.

For now, just start practicing how to say adios, because that is the word we will use to describe what happens to the Catholic identity at Caritas and Catholic healthcare in Massachusetts.


Caritas Conundrum

October 1, 2010

The pending sale of Caritas Christi was in the news a fair amount during the past week or so as a result of threats to shut down two of their hospitals if the sale to Cerberus does not go through.  Opposition to the sale from community organizations and blogs is increasing, and we see evidence that is starting to bother some people in high places.  We have been asked by a number of readers to recap what has happened recently, so here are three things we are being asked which we think everyone should be asking about deal.

  1. Is Caritas management being two-faced?
  2. Is the threat to close 2 hospitals genuine?
  3. What’s with all of the complaints about the deal piling up?

1. Is Caritas management being two-faced?

The Boston Globe reported last Friday, September 24 on Caritas’ negotiations with the nurses’ union, where Caritas said they would have to shut St. Elizabeth’s Hospital and Carney Hospital if the Cerberus deal does not go through.  They also asked for concessions from the nurses union, including a wage freeze. 

We are having trouble figuring out which version of the Caritas financial story is true.  A year ago they announced they turned a $30 million profit and were on the rebound, then this spring they had to get acquired in order to survive, then around Labor Day they announced plans to acquire Landmark Hospital in Providence, and a few weeks later they need Cerberus in order to survive.  Which is it? Who from the Archdiocese of Boston is involved in this?  Here is what a Boston Globe reader commented on one of their latest OpEd pieces.

One week they are buying hospitals in RI (announced in the Globe on the Friday before the Labor Day weekend) 2 weeks later they are closing 2 hospitals because of “they can’t afford to keep them open unless the Cerberus deal is allowed to go through”. They have not released their business plan executive salaries, or how much other parties (e.g. Tufts Medical School) will get from this deal. They have lied constantly to the public and spread disinformation among employees. Is this the group that we want to give part of the states health care system to so they can cannibalize it for profit? If health care costs are really a problem why is the state even considering building a profit margin for Cerberus/Caritas into the system?

2. Is the threat to close 2 hospitals genuine?

It seems to us that the Caritas folks, and people like Jack Connors (Chair of Partners, which might want to pick up some Caritas hospitals in a couple of years) who endorsed the planned sale of Caritas as a “brilliant move,”  initially thought a fast-track “yes” by the Attorney General was a fait accompli.   Then people started complaining.  Now that the review by the Attorney General seems to have slowed down—for good reason—it seems that the folks who want this to go through may be getting impatient and are trying to work the “Caritas chessboard” from both ends. 

One end is the straight acquisition path we have seen already.  But if Carney Hospital were to close–as has been discussed for years due to its financial condition and likely will be necessary in order for Cerberus to earn its profit down the road—why not avoid a public relations disaster and get the closing over quickly now?  The same would hold for  St. Elizabeths in Brighton.  There is a nice plot of contiguous church-owned land, and this would be prime real estate for a lovely senior care or continuing care facility.  If one or both hospitals were to close, all Partners need do is wait a respectable mourning period, and then buy St. E’s after the public outcry died down.  This could be cheaper in the long-run and quicker too.  The threat to close hospitals now puts pressure on the Attorney General from a different angle to approve the deal.

Call this speculation if you wish.  But just look at the precedent set with Waltham Hospital back in 2003.  After a couple of years of various financial moves to keep Waltham Hospital afloat, they had to shut the hospital.  But, coincidentally, the final rescuer for Waltham Hospital at the point it closed was none other than Partners’ Newton-Wellesley Hospital.

Newton-Wellesley’s urgent care services are scheduled to begin July 29, 2003, the same day that Waltham Hospital is scheduled to close. Newton-Wellesley has also agreed to collaborate with Mr. MacDowell in exploring additional services they might provide in the future as part of a medical center redevelopment of the site.

Commenting on this agreement, Dawn Gideon, President & CEO of Waltham Hospital said, “We are thankful to Newton-Wellesley Hospital and Partners HealthCare network for their commitment to the Waltham community. Their presence at this site will ensure that patients’ urgent care needs will continue to be met in this community – right next door to their physicians’ offices at the Waltham Medical Building. We also appreciate the sincere efforts of Roy MacDowell for following through on his promise as the property’s owner to maintaining healthcare services at this property.”

Maybe we are just cynical here on this blog.  But keep your eyes open for a pattern that might look  something like a variation of the following: Sale to one group, then sale off.  Maybe a sale to another group, then perhaps another sale off.  In the middle, maybe the threat of closing if final sale doesn’t go through.  Then close it.  Shortly thereafter, Partners, who had never been in the picture, buys the hospital as a mere real estate parcel, and puts Children’s Hospital or Dana Farber remote locations there.  So a general hospital serving a stable population for everything from broken bones to emergency room to chemotherapy goes down, and then from the ashes rises up a Partners specialty branch.  Oh, by the way, did we mention how the Partners’ locations in the suburbs squeeze the local community hospitals because they get paid more for identical procedures by the insurance companies?  See “Fueled by profits, a healthcare giant takes aim at suburbs: community hospitals running scared, and crying foul.”

3. What’s with the complaints about the deal piling up?

Legitimate complaints about the deal are piling up. Here is what a former MA Attorney General and trustee of Lawrence General Hospital said on September 28 in a Globe Op-Ed piece:

It will operate with a different set of incentives and it can use its access to capital to undercut its competition. For example, it can lure doctors with the most patients who have private insurance away from the competing hospitals to pump up revenues. It can engage in predatory pricing where it subsidizes prices, for a period of time, to gain a greater market share from the other hospitals. It can enter into exclusive agreements with health plans to squeeze out the competition. And since it has only made a commitment to hold the hospitals for three years these kinds of practices might pay off very quickly.

In this process the competing hospitals could be seriously harmed and forced to cut back drastically on the services they provide to their communities. If, after all of that, Cerberus’s investment in Caritas Christi were to end up like Chrysler, the effect on the health care available to people in the Lawrence, Brockton, and Fall River areas would be catastrophic.

The Coalition to Save Catholic Healthcare recently released the following complaint:

Attorney General Martha Coakley was accused of playing pressure politics to avoid the bad publicity attached to her conflict of interest with the CEO of the Caritas Christi Health Care System…Not only has Martha Coakley failed to respond to our letter 6 weeks ago asking that she recuse herself from any approval of a buyout of Caritas Christi by Cerberus Capital Management L.P.,” said Coalition Chairman R. T. Neary, “but she appears to be involved with the foot-dragging of the Massachusetts Ethics Commission, as well”. 

Iin mid-September, a group of community hospitals, the Healthcare Access Coalition, went public asking for the state to impose strict rules on the sale including a commitment that Cerberus will not sell Caritas for seven years instead of three, as well as other restrictions they say are needed to keep them viable and ensure that low-income patients have access to health care services at reasonable prices.

What’s going on?  It seems to us that people are tired of being bulldozed and are standing up to speak their mind.  That is a good thing.  For Catholics, the future of Catholic healthcare in Massachusetts is at stake.  And for non-Catholics, the future of community-based healthcare for the poor, and even for the not-so-rich or not-so-well-insured is at stake.  We feel the issues raised above and in our previous Caritas posts are very legitimate and should be fully explored in the light of day.


Caritas / Landmark U-Turn

September 2, 2010

We got our first good news here on the blog last night with a statement from Cardinal O’Malley and Caritas CEO Ralph de la Torre about the future of a hospital Caritas is planning to acquire, but of course it still raises more questions  than it answers.

On Tuesday, we asked yet more questions about Caritas, and one of them was about their plans to acquire Landmark Hospital in Providence:

If Caritas Christi is planning to abide by Catholic religious and ethical directives after the acquisition by Cerberus, how do they explain the plan to keep Landmark secular (see Providence Journal report), which includes allowing them to continue doing sterilizations and performing family planning services that violate such directives (see Boston Globe report)?  How does that gibe with Cardinal O’Malley’s March 2009 statement that “Caritas Christi will never…in any way participate in actions that are contrary to Catholic moral teaching…and no arrangement will be entered into unless it is completely in accord with Church teaching.” Are we who question this still “doing a great disservice to the Catholic Church”?

Here are the statements of both Caritas and Landmark of just a few days ago saying Landmark would stay secular:

“The goal is to remain secular, and that’s what we’re aiming at,” a spokesman for Rhode Island’s Landmark hospital told the Providence Journal. A Caritas Christi spokesman confirmed: “Our intent is to preserve Landmark in its current form, which includes no religious affiliation.”

Well, yesterday Cardinal O’Malley consulted  with Ralph de la Torre about this situation and what emerged was this “U-turn” statement:

The Cardinal was concerned about public statements that Landmark would not be operated as a Catholic hospital if acquired by Caritas.

Dr. de la Torre said, “We wish to clarify statements that have been previously made regarding Landmark Medical Center and its affiliation with Caritas Christi. Currently, Caritas Christi advises Landmark Medical Center, but does not manage the hospital. If Landmark Medical Center is acquired by Caritas Christi or by any company owning the Caritas Christi hospitals, Landmark Medical Center will function within and abide by the Ethical and Religious Directives.”

We regard this as very good news and quick response.  But we are wondering why it took the public statements and public criticism by “those who said…this could result in Landmark providing services considered immoral by Catholics” to get this intervention and reversal.  Who voted on this deal in the first place and allowed it to go through such that it would violate the Ethical and Religious Directives?  What happened to the Ethics Committee that is supposed to be part of the Stewardship Agreement?

The group that votes on and approves deals like this–as well as the Cerberus acquisition of Caritas, as well as the morally-flawed Caritas/Centene financial partnership of 2009–would be the Caritas Board of Governors.  Go ahead and scour the Caritas or Boston Archdiocesan websites and see if you can find a current list of names of the anonymous Board members who make these decisions.  Actually, the only place we found names was on the Massachusetts Secretary of State website.  Here is the Caritas Chisti 2009 annual report that lists them (along with their email addresses).  Some terms have probably expired by now, so this list may not be completely accurate today, and new Board members may be in place voting, er, shall we say, anonymously.  Here are the 2009 names:

Ralph de la Torre, President and CEO of Caritas Christi
Joseph H. Feitelburg
Robert Gustafson (President, Crescent Credit Union)
Fr. Bryan Hehir, Archdiocese of Boston Secretary for Health Care and Social Services
James Karam, President First Bristol Corp
Ruben J King-Shaw, Jr, President, Mansa Equity Partners
Thomas Martin, President and CEO, Cramer
James F. O’Connor, CPA, Managing Director and CEO, The Chartwell Company
Rev. Nicholas Sanella, Immaculate Conception, Lowell

Terms expired 2009:
Neil Finnegan, Former Chairman, Citizens Bank
John Garvey, Dean of Boston College Law Schools (now former dean)
The Honorable Neil L. Lynch, Hingham

If something as straightforward as this was approved by Board and took public airing and public complaints to get reversed and clarified by the Cardinal, how many other questionable decisions does this Board make which never get proper review and scrutiny?  How can the public be assured that all of the conflicts of interest this blog and others have documented regarding the Caritas/Cerberus deal are not harmful to public interests, the Catholic Church, and the poor who most benefit from non-profit Catholic healthcare?  How do we know what back-door deals have already been discussed to sell selected Caritas properties to certain entities like Partners Healthcare.

The final part of the Cardinal’s statement says: “We look forward to the conclusion of the Caritas Christi transaction with Steward Health Care System LLC so that the system will receive much needed capital…while continuing to provide high quality healthcare in accord with the Ethical and Religious Directives for Catholic Health Care Services adopted by the United States Conference of Catholic Bishops.”

Given the $25 million exit clause and conflicts of interest with Partners Board members actively involved in key aspects of this deal, nothing we have seen or heard yet suggests this transaction will actually fulfill the last part of that promise.  We hope we are wrong and these concerns are “unfounded.”


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