Deal To Acquire Landmark Approved

Oct 28, 2013

Woonsocket’s Landmark Medical Center is about to turn the page on a long and challenging chapter in its history. The struggling hospital has received regulatory approval to be acquired by a for-profit hospital chain called Prime Healthcare. That means an end to five years of uncertainty for employees, patients, and the community.

This hospital has been around for 140 years. Since before Woonsocket was even a city. Since just after the civil war and right around the time French Canadians began streaming in to work in the textile mills. Fast forward and Landmark is still here, enmeshed in this community. In his tidy, bright office, Landmark President and CEO Richard Charest  explained just how much.

“It’s an asset for health care, it’s an asset for the employees in terms of their livelihood," said Charest. "It’s an asset for the city - we’re the second largest employer in the city. So, obviously, we support the economy in northern Rhode Island, and the city of Woonsocket is struggling financially, as I’m sure you know.”

But Landmark’s long presence in the community almost came to an end five years ago. That’s when the hospital entered receivership – a kind of bankruptcy – to keep its creditors at bay while it waited for a lifeline – a bigger hospital or health care system to buy it and infuse it with cash.  How did that happen? Charest says it wasn’t for a lack of business.

“We struggle not because we’re not busy. We struggle because most of our patients have either Medicare, Medicaid or self-pay," said Charest. "Less than a quarter of our patients have commercial insurance. And the governmental payers don’t pay all of your costs.”

That’s partly why Landmark dipped into its modest endowment to keep the doors open. Charest says they tried to streamline and be more efficient. But they ran out of money and fell behind on bills.

Their only hope: find a buyer willing to help turn the hospital around. And, like a country gentleman’s daughter in a Bronte novel, Landmark flirted with several suitors. There was Caritas Christi. RegionalCare Hospital Partners. Transition Healthcare. HealthSouth. Capella. Prime. None made it past the early hurdles.

Rhode Island’s Hospital Conversions Act requires state approval to turn a nonprofit hospital into a for-profit one. The process derailed a few deals. Delay followed delay. Hopes rose. Hopes fell.                                                                                          

Then, the most serious offer to-date came from the for-profit outfit Steward. But a bitter and public fight broke out between Steward and insurer Blue Cross and Blue Shield of Rhode Island over the contract with Landmark. And Steward backed out at the last minute, too. But finally, like that heroine in a Bronte novel, it turned out that one of Landmark’s first suitors was the one all along: Prime Healthcare. Landmark president Richard Charest.

“We’re delighted with Prime," he beamed. "They’re a fabulous company.”

Prime Healthcare Services is a California-based for-profit, known for turning struggling hospitals around. It owns 23 in five states and seems to be on a buying spree. And delighted though Charest may be with Prime, the company isn’t without controversy. It’s under federal investigation for allegedly over-billing Medicare (see this recent LA Times coverage of that investigation and other legal troubles; and see this California Watch section, which broke the news about Prime's practices in Northern California). It’s battled unions at more than one of its hospitals. And a columnist with the Los Angeles Times has reported that when Prime comes in to resuscitate an ailing hospital, it privileges profits over patient care. Prime disagrees. And a handful of its hospitals have been recognized for quality by the federal hospital accrediting body. Charest says they’ve already done wonders for Landmark.

“We have been working with them under a management advisory agreement for the last year," Charest said. "They have helped us do things that I wondered if were possible. So we’ve seen our financial performance improve. Last year, before we met them, we lost about $11 million dollars. This year we will have more than halved that loss.”

Prime says it plans to invest $30 million dollars in upgrading Landmark, and spend another $30 million on closing costs. It says it will also forgive part of a loan it made to help keep Landmark afloat. The money matters, but Charest says so does ending all the uncertainty. He leads a tour through the hospital’s busy intensive care unit.

“Dennis Ayotte. Nice to meet you. I’m a registered nurse in the ICU.

"Transition is always hard," explained Ayotte, "going through the different processes of people wanting to buy you…then they back out at the last minute, so you get your hopes up. So that’s been difficult. And not knowing where you’re heading, what direction you’re going in.”

Ayotte has been with Landmark for 30 years. He says he’s looking forward to replacing some of his unit’s aging equipment with Prime’s multi-million dollar investment. Like the hospital beds.

“Number one, they’re ancient. For us, the newer technology with beds are, they can rotate the patient, they can perform chest percussion on the patient. They can actually vibrate and shake the patient so it helps with lung therapy.”

Downstairs, the hospital’s ER is busy triaging patients from Northern Rhode Island and Southern Massachusetts - patients who many supporters of this acquisition said could suffer if Landmark was allowed to close and they had to travel to a hospital farther away. But for many supporters, saving the hospital was about more than having a local emergency room. It was about preserving a place where their children were born, where their grandparents died, where someone saved their own lives. A 25-year veteran of the department stops to explain why she stayed on, even during receivership.

“My name’s Lisa Kuscu and I’m a registered nurse here in the ER staff," said Kuscu. "It’s family. It’s community. I was born and raised here. Love my French Canadian population. Love a lot of the population. But it’s just, we all value this hospital. We need it.”

Prime must meet a few conditions in order to buy Landmark. It has to resolve its legal troubles and it must maintain the hospital’s current services for a while, including providing charity care. Now, Landmark president Richard Charest says he expects the deal to close sometime in December. And after that?

“One of the first things I want to see done is my employees will get a raise," said Charest. "I think the employees need to be recognized for towing the line and sticking it out.”

For five years, without raises. So it’s not hard to understand why Woonsocket and the Landmark community feel ready to celebrate.