Six days after my post "Will Nonprofit Community Hospitals Make it to 2014?" a large Catholic hospital system in Massachusetts sold out to Cerberus Capital Management, a private equity underwriter (PEU). Note two years under Massachusetts health reform did not help Caritas Christi Health Care, comprised of six nonprofit community hospitals and 13,000 employees.
Caritas will shift to for-profit status. They will pay $7 million a year in property taxes on their two Boston hospitals.
Commenting on the deal is Stuart Altman, health economist and White House adviser on health reform. Stuart is consistent in failing to declare his conflicts of interest.
Turning the system around and making a profit for investors will be a challenge, said Stuart Altman, professor of national health policy at Brandeis University in Waltham, Massachusetts.
Altman clearly stated Cerberus' aim in the deal. Will John Snow, Dan Quayle and the rest of the Cerberus team expect 30% returns like their peer, The Carlyle Group?
A consumer advocate said. “People are often reluctant to turn over their health system to a set of stockholders that are not part of the community.”
White House health reformer Nancy-Ann DeParle has such activity on her resume. Reform is stacked in favor of For-Profiteers, which explains PEU's salivating over health care deals.
What clue did the media miss indicating nonprofit community hospitals were in trouble? The bill renames them "private tax-exempt facilities." Enough to chill your pre-bypass heart.
Caritas has 3,000 employees under the auspices of the Service Employees International Union. SEIU President Andy Stern raised Cain over Carlyle's purchase of huge nursing home provider, ManorCare. His union's 2007 concerns proved hollow.
That fits with Stern's 2006 position that employer sponsored health coverage was "dead and not coming back." How might he partner with Cerberus in shedding that pesky benefit? Dumping responsibility to the individual is clearly part of Obama's health reform.
What Cerberus did for Chrysler, it can do for hospital care. Expect poor quality and lack of innovation. How fast can Caritas bleed dividends back to the parent? How many millions will it charge Caritas in annual management fees? How much will health care costs go up to pay interest on deal debt or taxes as a for-profit entity? How many employees will be shed or benefits cuts as operations are streamlined?
Warning: Sharks are in the waters of safety net providers.
Update: Moody's upgraded Caritas Chriti's bonds in February 2010 citing improved profit margin, debt coverage and cash flow. They noted $235 million in unrestricted cash and investments at the of FY2009. While much can change in six months, this flies against the "cash poor" rationale for the sellout.