Caritas and Cerberus: The Train has left the Station – Looking to DPH and AG to Protect Communities and Consumers

The proposed conversion of the Caritas Christi Hospital network from a non-profit to a for-profit owned by the Wall Street public equity firm Cerberus appears to be on the fast track. Health Care For All and residents in the hospitals’ host communities are looking to the Department of Public Health and Attorney General Martha Coakley to slow down the train and do their due diligence on this project before they give it the OK.

In comments submitted today to the DPH’s Public Health Council, Health Care For All requested that conditions be put on the sale to reduce the risk that comes with private equity money and ownership and what that means to the accessibility, affordability and quality care at the six Caritas hospitals.

The proposed purchase and for profit conversion of the six community hospitals that comprise Caritas Christi Health Care is unprecedented for the Commonwealth of Massachusetts and has significant implications for the future of health care in the state. In particular, Health Care For All has concerns about Cerberus’ long term commitment to the operation of the hospitals, Cerberus’ commitment to serving the broad needs of the community, and the ability of the Commonwealth to monitor operations and enforce future conditions at the hospitals.

Cerberus Capital Management is a Wall Street private equity firm that has never run a hospital. Its traditional business model consists of purchasing distressed properties, cutting expenses, and then selling the newly-slimmed down business for profit. The public has concerns on how this business model will apply to a network of hospitals providing health care to many of eastern Massachusetts’ most vulnerable residents. Many of the vital services that community hospitals traditionally provide are not money making practices.

With the conversion from a non-profit entity to a for-profit, Cerberus will take on four additional, and significant, financial obligations – taxes, investment return, staff at Cerberus, and continued funding of the pension fund. It is incumbent upon all parties to determine how Cerberus plans to maintain a commitment to the health of community residents currently served by Caritas Christi Health Care while also fulfilling its new fiscal obligations. We are concerned that Cerberus may cut vital services, such as behavioral health care, that have historically been money-losing enterprises. Will Cerberus reduce staffing levels? Will it close money-losing hospitals?

Health Care for All requests that the Public Health Council keeps the following four principles at the forefront in its deliberations and includes the following specific recommendation as conditions for their approval.

  1. Continue to run a transparent, accessible, and inclusive review process.
    While understanding the need for the review process to move along in a timely manner, we want to make sure consumers, community groups and advocacy groups have the necessary time to negotiate with the network and the specific hospitals to develop conditions for the conversion. We encourage the DPH to work with the public to ensure the Determination of Need decision occurs after these negotiations are completed.
  2. Ensure Cerberus’ Commitment to the Hospital Network, the Host Community, and its History
    The provisions of the sale, as currently structured, call for a three year period during which Cerberus is obligated to maintain Caritas’ level of charity care and scope of services. (At around three years, private equity firms tend to sell, or flip the company.) When compared to other similar sales around the country, this is an unusually short time period. In at least one case, a twenty-five year clause was included. To ensure the long-term access to health care for the Caritas communities, Health Care For All calls for a seven-year minimum ownership period in which Cerberus commits to operate all six hospitals and to maintain or increase the percentage of patient service allocated to free.
  3. Ensure Cerberus’ Commitment to Community Hospitals
    Cerberus must continue its dedication to the community hospital ideal in its priorities and practices. Since its inception, the Caritas hospitals have been driven by an unwavering commitment to community health care. Community hospitals represent a cost-effective, culturally competent, and efficient acute care delivery system. Health Care For All believes that community hospitals are an integral part of the fabric and the well-being of a community. When run well, these hospitals provide vibrant and robust outreach, care and support for the communities they serve. In addition, community hospitals are vital to a community’s economic well-being as they are often the largest employers in the area.

    To provide a comprehensive assessment of the health needs of the community, Cerberus should carry out a Community Health Needs Assessment in all the six Hospital catchment areas within one year. Cerberus must address the results of the needs assessment, to the satisfaction of the DPH, through its services and community benefits program. Until this assessment is completed, all current services and community benefit programs must be maintained at current or higher levels.

    A robust, well-funded and accountable Community Benefits Program provides vital health services for a community. Programs should be developed in coordination with the concerns of community groups and the Community Health Needs Assessment. In addition, a process with public review needs to be established when the hospital wished to eliminate a program or service.

    We ask the Public Health Council to endorse the Attorney General’s Community Benefit Guidelines for Non Profit Acute Care Hospitals (2009) and encourage the development and implementation of model community benefit programs in a number of areas including cultural competency, mental health, transportation, childhood obesity, elder care, HIV/infectious disease, green building and operations, substance abuse, violence and diabetes.

  4. Ensure that the Conditions are Measurable and Enforceable
    As outlined in Attorney General an independent Health Care Access Monitor should be hired by DPH to report quarterly on community health care access at each respective Cerberus hospital.

    In addition, Cerberus agrees to appear before the Public Health Council within six months after the date of sale, and on an annual basis thereafter, to report on compliance with the aforementioned conditions.

With the health of so many residents at stake, Health Care For All wants to make sure conditions are in place to ensure that the new owners will have the capacity and the will, now and in the future, to continue to provide accessible, affordable and high quality care across the Commonwealth.
-Matt Wilson

About HCFA

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5 Responses to Caritas and Cerberus: The Train has left the Station – Looking to DPH and AG to Protect Communities and Consumers

  1. Pingback: Sale of Caritas Hospital Chain Approved – With Conditions « Homepage

  2. Pingback: AG Mandates Consumer Protections in Sale of Caritas |

  3. Rand Argon says:

    I don’t see why a non profit supposedly working to make healthcare affordable has such a measured tone on what must be a disaster in the making.

    How on earth are the wall str money guys gonna get their PROFIT back without deep cuts ?
    I am also astonished that changes in the CEO’s salary are not mentioned – typically, for profits have huge CEO salarys (although the non profit sector is doing its best here [sarcasm])

    It would be nice if someone from HCFA explained this.

  4. Jody James Avtges says:

    Glad HCFA is keeping a watch on this and pushing for more than 3 years of ownership. Let’s make sure this does not become “Crueltus” takeover. Thanks for the well written summary.

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