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September 21, 2010

Commissioner John Auerbach


Department of Public Health
250 Washington Street
Boston, MA 02108

RE: Caritas Christi/Cerberus Proposed Transaction

Dear Commissioner Auerbach:

We are writing to express our serious concerns with the rapidly moving
process for government approval regarding the purchase of the non-profit
Caritas Christi Health Care System (Caritas) by Steward Healthcare System
LLC (Steward), a subsidiary of the Wall Street private equity firm Cerberus
Capital Management (Cerberus). While we understand the desire of the
proponents to move this sale forward quickly, we urge the Department of
Public Health to conduct this review in a deliberate, transparent, and
inclusive manner.

As you are aware, this proposed conversion is unprecedented in the


Commonwealth. This complex transaction involves the state’s second largest
hospital chain and tenth leading employer. The sale could impact access to
vital public health services in many communities and has far reaching
implications for the future of the state’s healthcare system. News reports
detail Cerberus’ interest in purchasing as many as six additional hospitals to
add to their network.

We urge the Public Health Council to hold their vote on Steward’s application
for six Determination of Need (DON) licenses until after interested
stakeholders have the time and opportunity to discuss and negotiate
conditions in the proposed deal with the proponents and/or government
officials.

Cerberus ownership of the Caritas network brings with it many risks. As a


private equity fund, Cerberus’ bottom line obligation is to its investors, not to
the Commonwealth, or to the patients in the communities served by the
Caritas system. Cerberus, like many other private equity funds, has a track
record of saddling acquisitions with debt while extracting significant returns
for itself and investors. Cerberus’ history is marked by abandonment of
poorly performing companies without regard for community impact. In this
case, Cerberus is entering an industry where it has no experience, and is
placing itself in a fragile situation where the consequences of failure and
abandonment could be life threatening. Cerberus’ need to produce
investment returns raises real concerns about the potential for its financial
success to come at a great cost to Massachusetts’ healthcare system.

Specifically, we ask you to require Cerberus to provide a detailed business


plan for public comment and analysis and to provide the public a forum to
provide feedback. The public must have the opportunity to examine
Cerberus’ business plan and how it will spend its proposed $400+ million of
capital investment. Without this vital information about Cerberus’ financial
and operational plans, interested citizens, community groups, and elected
officials are unable to form or ask pertinent questions about this deal and
have no basis on which to truly evaluate if the transaction is indeed in the
public interest.

Secondly, we ask you to ensure a deliberative and transparent process is


followed. The six community hearings held in rapid fire succession in June
and July of this year provided limited opportunities for true engagement
between the community and the proponents. Given the stakes for the
Commonwealth and its citizens, we are concerned about the rush to approve such a
complicated transaction. Community-based groups have articulated a set of
issues and concerns that they would like addressed to protect and enhance
the health care services that these community hospitals provide. Other
transactions involving the sale and conversion of single non-profit to for-
profit hospitals, both in Massachusetts and in other states, have been
evaluated and approved on a much more extended timeframe.

Our understanding from our involvement with similar sales in the past and
from conversations with staff from the Determination of Need Program is
that individual communities are expected to broker agreements with Caritas
and Cerberus/Steward to create a list of enforceable conditions that will
attach to any DON licenses granted to Steward. Caritas has been preparing
for the deal for years-and Cerberus for numerous months-while communities
were only recently brought into the process. If the responsibility for
brokering a deal is to fall to individual communities throughout the state,
more time is needed to craft DON licensing conditions that will protect public
health, consumers, and satisfy the array of stakeholders.

The proposed sale would remove the Caritas hospitals from public
ownership, potentially impacting access to essential health services for our
state’s poorest residents while having far reaching implications for the future
of Massachusetts’ healthcare system. Patients, community organizations,
and Massachusetts’ taxpayers have the right not just to be heard quickly, but
to have the time and materials to fully engage in the public comment
process.

We look forward to speaking with you. Please contact Matt Wilson at Health
Care For All at 617-275-2940 or mwilson@hcfama.org.

Sincerely,

Amy Whitcomb Slemmer, Executive Director


Health Care For All

Health Access Coalition


Lawrence General Hospital
Signature Healthcare Brockton Hospital
Southcoast Hospital Group

Matt Selig, Executive Director


Health Law Advocates

Dan Driscoll, Chief Executive Officer


Harbor Health Services

Rob Restuccia, Executive Director


Community Catalyst

Representative David Torrisi

Representative Steven D’Amico

Senator Susan Tucker

Senator Patricia Jehlen

Allan Rodgers, Executive Director


The Massachusetts Law Reform Institute

Al Norman, Executive Director


Mass Home Care Association

Laurie Martinelli, Executive Director


NAMI Mass

Sheldon H. Barr, President and Chief Executive Officer


Health Imperatives
Sheila Casey, Executive Director
Neighborhood Legal Services, Lynn/Lawrence

Carol Trust, Executive Director


National Association of Social Workers (NASW-MA Chapter)

Juliana Langille, Executive Director


Community Connections of Brockton

Lucinda Williams
Dorchester House Governing Board

Elizabeth Saville, President


Brockton Interfaith Community

Glen Ohlund, Director


Self Help Community Development Corporation

Greater Brockton CHNA Steering Committee

Karen Hall, Director


Stoughton Youth Commission

Cc: Alice Bonner, Director, Division of Health Care Quality


Joan Gorga, Director, Determination of Need

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