Judge approves Westerly Hospital sale

THE SALE OF Westerly Hospital to Lawrence & Memorial Hospital was approved on Thursday by Superior Court Judge Brian Stern.
Posted 8/31/12

SOUTH KINGSTOWN – Superior Court Judge Brian Stern approved the sale of Westerly Hospital for $69 million to Lawrence & Memorial Hospital Thursday afternoon, reading his decision from the bench.

With the judge’s ruling, the sale moves to the next phase – state regulatory review by Rhode Island under the newly amended Hospital Conversions Act. Mark Russo, special master for Westerly Hospital, said he had filed for expedited 90-day review for distressed nonprofit hospitals under the new provisions in the law and expected that the deal would close by the end of January 2013.

“We’ll close sooner if they complete the review sooner,” Russo said, adding that it was more realistic to expect a January closing.

Connecticut does not require any regulatory review.

After the judge’s ruling, Lawrence & Memorial President and CEO Bruce D, Cummings announced that an agreement had been reached with Blue Cross & Blue Shield of Rhode Island for a one-year contract for Westerly Hospital. Payments under the previous contract with Blue Cross had become a contentious issue during the receivership, with Russo asking – and being denied by Stern – the ability to reduce payments to the health insurer.

Cummings said the reasons for Lawrence & Memorial’s acquisition of Westerly Hospital were a result of “the changing landscape” in health care delivery, with the move away from fee-for-service payments toward accountable care organizations, patient-centered medical homes and bundled payments.

By acquiring Westerly Hospital, Lawrence & Memorial future economics in the new landscape will be “better because of the size of the population served, from Old Saybrook, Conn., to the Charlestown, R.I.”

Currently, about 25 percent of the patients who use Westerly Hospital facilities are Connecticut residents, according to Cummings. Russo put that figure higher, at 40 percent.

In the future, Westerly Hospital will be run by a senior executive who reports directly to him, Cummings said. Because of state licensing requirements, both hospitals will maintain separate board of directors and nurses and physicians will be licensed through the respective states.

In addition to the $69 million price tag for the sale, Lawrence & Memorial will invest another $6.5 million in working capital, “available almost immediately,” according to Cummings. The money will be treated as a “loan” with the plan that it will be forgiven at the time of the closing.

Cummings provided details around some of the reductions in the workforce at Westerly Hospital and its affiliates, saying a total of 62 jobs had been eliminated, mostly at the facility located in North Stonington, Conn.

Addressing future opportunities that the acquisition of Westerly Hospital will provide, Cummings said new hospital system would be exploring “sub-acute” rehabilitation services for patients recovering from orthopedic procedures such as hip and knee replacements, something that neither facility currently offers.

Cummings also indicated that the new hospital system would be exploring opportunities to expand services related to home health care.

Lawrence & Memorial Hospital has 280 licensed beds, with an annual daily census of about 240 patients, according to Cummings. It has a $350 million operating budget, more than 400 medical professionals on staff, and more than 3,000 employees.

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