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A New York-based private equity firm is set to acquire Massachusetts’ second-largest hospital group, Caritas Christi Health Care. If approved by the state's Supreme Court, the move would transform the nonprofit — which was originally created by the Archdiocese of Boston — into a for-profit entity.
Under the announced deal, Cerberus Capital Management will pay $830 million for the network. Ralph de la Torre, CEO of Caritas, told WBUR Thursday that the deal would provide the hospital with much-needed capital to resolve debts and begin major improvements.
"We needed capital to address some of our past issues like pensions, and we needed capital to address our current issues, which are facilities and the underfunded depreciation," de la Torre said.
As part of the agreement, Cerberus has agreed not to sell any of Caritas’ six network hospitals — which would continue to be run by current management — for at least three years. Cerberus has also pledged to retain the system’s 12,000 existing employees.
"The capital firm is really a financial sponsor in this deal," de la Torre said. “They own the shares of the company but we are the company."
De la Torre said the relationship would allow Caritas to retain its Catholic roots and ethical and religious directives — most notably the ban on performing abortions in network hospitals. "The Catholic identity is baked into the deal and it will forever be in place," he said.
The Caritas group would also remain a Boston-based entity, despite Cerberus’ New York home.
"They have a commitment not only to Boston and Massachusetts, but really to the individual communities that these hospitals serve,” de la Torre said.
Gov. Deval Patrick said to WBUR that he is looking for the hospital network to retain that local commitment.
"I think that they will continue to be strong and solid corporate citizen in the community, and certainly I'll be watching to see if that's so," Patrick said.
According to de la Torre, community involvement means that jobs, resulting from new hospital investments, are headed to the state.
“Beginning immediately, we’re going to have really large-scale construction projects that are going to generate large numbers of jobs and revenues, in every single hospital, literally starting within a week," de la Torre said.
The deal is not expected to change the costs of service for the network’s patients, de la Torre said, though Caritas’ new for-profit status means it will have to start paying state and federal taxes.
The acquisition comes after several years of failed talks with potential new owners or partners for Caritas. In 2007, St. Louis-based Ascension Health was close to a takeover but backed out after discovering unfunded pension liabilities, decreasing referrals and overstated revenues on Caritas’ books.
Last June, Caritas pulled out of a joint-insurance venture with Centene Corporation due to concerns that a partnership with a secular company might endanger its Catholic directives.
This program aired on March 25, 2010.
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