health services

Judge ponders Landmark’s short-term viability

SUPERIOR COURT JUDGE Michael A. Silverstein discussed Landmark Medical Center's short-term survival and long-term viability at a two-hour hearing approving the deal between Blue Cross Blue Shield of Rhode Island and the hospital.
Posted 9/12/12

PROVIDENCE – A hearing to approve a memorandum of understanding reached on Sept. 5 between Blue Cross & Blue Shield of Rhode Island and Landmark Medical Center on extension of a health insurance contract turned into a stark discussion of the hospital’s short-term survival and long-term viability.

Toward the end of the two-hour hearing, Jonathan N. Savage, special master representing Landmark, told Superior Court Judge Michael A. Silverstein that the pending agreement between Blue Cross and Landmark was “a full and absolute capitulation.”

Savage told Silverstein that he felt he had no choice but to agree to the terms, which would restore Landmark to the Blue Cross network of providers and enable the hospital to receive immediate payment in the range of $1.8 million to $2.3 million for services delivered to Blue Cross members.

In addition to extending the existing contract, which expired on July 16, Landmark would agree to make an initial payment of $500,000 to be followed by a schedule of $250,000 payments until the hospital’s outstanding debt of roughly $2.7 million was retired.

Landmark also agreed to dismiss its suit, with prejudice, it had filed against Blue Cross for alleged inadequate reimbursements.

A lawyer representing Steward Health Care, Jeffrey Chase-Lubitz, argued against the judge approving the MOU. But when Silverstein asked if he did not approve the MOU, would Steward move ahead immediately with closing the deal on its purchase of Landmark, Chase-Lubitz said no, saying there were still outstanding issues, to the judge’s apparent displeasure.

Joseph M. DiOrio, the lawyer representing Blue Cross, argued that the MOU represented “negotiations” between the two parties, despite Savage’s contention. DiOrio said that after four years of carrying a substantial debt, the MOU put Blue Cross at the head of the list of creditors to receive payments.

The ability of Landmark to make regular payments of $250,000 against the pressing demands of other creditors was raised by a lawyer representing National Grid.

When Silverstein asked DiOrio if there was flexibility with the terms for the schedule of $250,000 payments, DiOrio initially said no.

Silverstein concluded the hearing with a lengthy discourse, expressing his view on the importance of the case being not just about repaying creditors, but about the public interest being served. “A year or so ago, in connection with the court’s approval of Steward as the buyer,” Silverstein said, “the court deemed the public interest [in this case] to be mandating the continued existence of a hospital serving the people in Northern Rhode Island.” Silverstein also cited the importance of preserving the 1,000 to 1,200 jobs associated with the hospital. Whether or not he decides to approve the MOU, Silverstein continued, “the court believes it must satisfy itself that the hospital will be able to continue.” In addition, the decision will also need to “lead to the hospital’s acquisition by Steward – or by someone else.”

Silverstein said he would render his decision no later than Tuesday, Sept. 18.

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