The additional terms of the Caritas sale, outlined in today’s statement by Attorney General Martha Coakley. I have attached the full statement below.
Initial Terms of the APA and the Transaction
(a) Purchase consideration for the assets to be transferred of between $430
million and $450 million consisting of Steward’s (i) assumption of all pension obligations
for approximately 13,000 current and former Caritas employees, (ii) payment of virtually
all of Caritas’ outstanding debt, and (iii) assumption of certain liabilities.
(b) Steward will spend or commit to spend, within four years from the
Transaction closing date (the “Closing”), no less than $400 million in capital
expenditures to promote the financial health, well-being, or growth of the health system
post-Closing. If Steward fails to so spend or commit to spend no less than $400 million,
then Steward shall donate such shortfall to a charitable foundation selected by the
Attorney General.2 Part of this $400 million commitment is to complete funding of
approximately $116 million in major construction projects identified by Caritas as
priority capital projects, which have been initiated at the Caritas Hospitals.
(c) Steward will adhere to and comply with the current Caritas policies
concerning indigent and charity care, which Caritas estimates at approximately $37
(d) Steward will maintain community benefit expenditures at the current level
for Caritas Hospitals, which Caritas estimates at approximately $26 million annually,
plus an additional $3 million annually in pastoral care and related services.
(e) Steward will continue to accept Medicare and Medicaid patients consistent
with current practices, to accept emergency room patients regardless of ability to pay
consistent with relevant law, and to provide culturally and linguistically appropriate
services consistent with those currently provided at the Caritas Hospitals.
(f) Steward will not close, or limit the general purpose of, any Caritas
Hospital within three years from the Closing.
footnote 2 In the unlikely event that this occurs, the Attorney General will establish a selection committee to advise her. The membership of that committee will include representatives of the Department of Public Health and health care providers from, and representatives of, the affected communities.
(g) Steward will not engage in any initial public offering, sale, issuance of
debt for the purpose of making dividends or distributions, or certain other fundamental
transactions (the “Prohibited Transactions”) within three years from the Closing.
(h) The Catholic identity of the Caritas Hospitals will be preserved through a
Stewardship Agreement between Steward and RCAB dated April 30, 2010 (the
“Stewardship Agreement”), which, among other things, provides that Caritas Hospitals
will continue to abide by the Ethical and Religious Directives for Catholic Health Care
Services (the “Directives”).
(i) Steward will preserve jobs for the approximately 12,000 Caritas
employees by offering continued employment on the same terms, and Steward will
recognize existing union and collective bargaining agreements.
(j) All commitments made in the past to Caritas donors will be honored.
(k) Local governing boards for each Caritas Hospital will be continued, in
function and general composition.
(l) Steward will be a health care system with headquarters in the greater
Boston area. Current Caritas senior management is expected to remain in place, two
current Board members have agreed to serve on the initial Steward board (the “Steward
Board”), and one additional Massachusetts based Steward Board member is expected to
be appointed. It is anticipated that local participation and continuity will help promote
Additional Terms of the Amended APA and the Transaction
In addition, at the urging of the Attorney General, Steward has agreed to the
(m) The purchase consideration, referenced in subsection (a), above, has been
increased by $45 million to $495 million to cover, among other increased liabilities,
increases in the pension liability since the APA was first executed in March.
(n) During the three-year hold period referenced in subsection (g), above,
Steward has agreed to expand the scope of Prohibited Transactions to include selling or
transferring a majority ownership interest in, or all or substantially all of the assets of,
any of the Caritas Hospitals.
(o) During the no-close period referenced in subsection (f), above, Steward
has agreed that it will not close or reduce the number of any inpatient psychiatric and
detoxification hospital beds in any of the Caritas Hospitals. The need for inpatient
psychiatric and detoxification hospital beds is critical and their availability, in part due to
unfavorable reimbursement, is well-below demand. Any further reduction in these
services would have a significant negative impact on the ability of the Commonwealth to
provide for mental health services.
(p) In addition to agreeing to maintain inpatient psychiatric beds, Steward has
also agreed to conditionally extend the three-year period referenced in subsection (f),
above, for an additional two years. During that additional two-year period, Steward may
not close a Caritas Hospital, limit its general purposes, or close any of its inpatient
psychiatric and detoxification beds, unless the following conditions are met: the Caritas
Hospital has experienced two consecutive years of negative operating margins, an
eighteen-month review and reporting period has been completed, and a six-month closure
notice has been provided. This provision will ensure that any closure during years four
and five post-Closing will occur only after a robust and open dialogue in which all
stakeholders will have the ability to seek both solutions to the underlying problems and
alternatives to the closure.
(q) Steward will comply with the Recommended Hospital Debt Collection
Practices set forth in the Attorney General’s Community Benefits Guidelines for Non
(r) Community benefit and charity care provisions set forth in the APA will
apply to any successor-in-interest to Steward; and further, any Massachusetts hospital
acquired post-Closing by Steward from a for-profit entity will, at a minimum, comply
with the for-profit hospital’s then-existing community benefit and charity care
(s) The Attorney General shall have the right to enforce the Pension Transfer
Agreement (described in Section V(b), below), and certain post-Closing provisions of the
APA related to the public interest.
(t) Any enforcement action brought by the Attorney General under the APA
or any of the ancillary agreements (described in Section V, below) shall be brought solely
in the courts of the Commonwealth of Massachusetts.
(u) Steward will assure and fund the orderly reorganization, dissolution, and
windup of the Caritas entities. This will assure that remaining assets, including
endowment funds, are appropriately segregated and used for appropriate purposes.
(v) Steward, and any successor-in-interest to Steward, will, notwithstanding
its for-profit status, fully cooperate with any investigation, inquiry, study, report, or
evaluation conducted by the Attorney General under her oversight authority of the nonprofit
charitable hospital industry to the same extent and subject to the same protections
and privileges as if Steward were a public charity.
Steward will cooperate with, and fund with a Closing payment of $1.5
million, a five-year monitoring, assessment, and evaluation of the impact of the
Transaction on health care costs and services within the communities served by Steward.
Certain aspects of this monitoring will be conducted by the Attorney General, and certain
other aspects by the Department of Public Health, consistent with an Assessment and
Monitoring Agreement with the Attorney General (described in Section V(c), below).
The Attorney General received formal notice of the Transaction from Caritas, as
required by G.L. c. 180, § 8A(d)(1), in a letter dated May 5, 2010, which initiated this