What Will Happen if Cerberus’s Gamble Goes Bust?
Last Sunday's Boston Globe lead editorial echoes many of the concerns of consumers across the Commonwealth who are questioning the proposed sale of the Caritas Christi hospital chain to the Wall Street private equity firm Cerberus.
While acknowledging that the proposal “sounds good” and would bring capital and jobs to the state, The Globe raises a number of questions that need to be answered before the state moves ahead with the largest conversion of a non-profit hospital chain to a for-profit business in the state’s history.
Just as important, the Globe puts the responsibility of protecting the interests of Main Street over the interests of Wall Street exactly where it should be, on the desk of Attorney General Martha Coakley. Coakley’s review of the sale and subsequent conditions and stipulations on the sale are the key to keeping this deal safe for consumers.
For the past three months consumers have been demanding to see more details of Cerberus’ business plan. They asked, “How are they going to meet all its new financial obligations as a for-profit (local taxes, state taxes, and healthy dividends to its investors) while maintaining accessible, affordable and high quality health care?” The Globe editorial demands, “a clearer sense of how [Cerberus] plans to achieve these goals. . .” The Globe question the process saying the “firm should have already shared a detailed business plan with the public.”
As with residents in host communities, the editorial highlights concerns about the long-term commitment of this private equity firm (which has never run a hospital) to operating these six hospitals and serving the communities. “The Attorney General should press Cerberus to extend its time commitment to at least 7 years. . . it would illustrate the firm’s commitment to the long term viability of the state’s health care system.”
In a perfect world, private equity deals are win-win situations in which the public gains and the investors make a lot of money. We all know that there are always bumps in the road and The Globe asks the public and Attorney General Coakley - “Consider what happens if Cerberus’s gamble goes bust? . . . Will Caritas raise prices? Cut services? Close facilities?”
With the health of so many residents at stake, we need to make sure Attorney General Coakley puts conditions 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.