WOONSOCKET – The financially distressed Landmark Medical Center successfully petitioned R.I. Superior Court today to appoint a special master to oversee its operations and negotiate with potential buyers, aiming to save the hospital while it still has enough cash to function.

The move came after a last-minute effort to get a bill passed to facilitate the prompt sale of Landmark to another Rhode Island hospital failed in the last days of the legislative session amid opposition from key state officials and some community representatives.

Dr. David R. Gifford, the state health director, had suggested receivership as a preferable alternative, but Landmark executives had said they feared that would put the hospital out of business, because staff and patients alike would lose confidence in it.

Today’s petition, made before Superior Court Judge Michael A. Silverstein, was an effort to avoid the negative aspects of receivership while getting the benefits of a court-appointed expert to help the hospital, spokesman Bill Fischer said.

“The court did not appoint a receiver today - the court appointed a special master, and there are differences in those processes,” he said. “In a normal receivership, it’s a failed business that goes before the court and says, we don’t have money to pay our debts ... and they seek protection of the court. Today we went before the court and said we are financially distressed. But we are a going concern. This is a proactive attempt to stave off an actual failure.”

Silverstein appointed Jonathan N. Savage, a partner with Shechtman, Halperin and Savage in Pawtucket, to serve as the special master, and he asked him and hospital officials to return in 21 days for a progress report, Fischer said. He gave Savage great flexibility in how to proceed, Fischer added, and said “he’s very open about some out-of-the-box thinking about how we can preserve this entity.”

Savage’s firm has served as a special master and receiver in numerous cases – though never before, Savage said, in one involving a hospital. And while in receivership, the goal is usually to sell off an entity’s assets for the highest possible value, whether that means shutting down or maintaining a going concern, selling Landmark is only one of the options here, Savage said, and closing the hospital is off the table.

“If we had to identify a goal, it’s to keep the hospital a vibrant, active asset of the Woonsocket community and surrounding areas,” Savage said. “It serves a valuable function out there and is still the third most active emergency room in the state. And there’s an elderly population up there that needs it. ... So if there’s a goal, it’s to keep a stable hospital presence in Woonsocket, and I have every expectation that that goal will be met.”

Landmark, which has been struggling financially for years now, is in this position because its debts have piled up so high that it now has negative net worth. It’s still an active operation, however, and has enough cash on hand, hospital officials said, to get it through the first quarter of 2009 at least. But the urgency of the situation has been escalating.

Last year, in an effort to save the hospital, officials there reached out to Lifespan to try to join the large health care system; after that didn’t work, they began talking with Memorial Hospital of Rhode Island, which has expressed an interest in acquiring the hospital, but has yet to agree to a deal.

Concerned that if they did pursue the Memorial deal – or any other deal – the approval process required under the state Hospital Conversions Act would take too long to avert a closure, Landmark officials sought to be exempted from the law’s requirements and instead go through a less burdensome process.

But bills to that effect were introduced only in the last days of the General Assembly session, and despite a general consensus among legislators that something must be done to save Landmark, there were too many concerns about the requested exemption, and the bills never made it out of committee in either chamber.

Ironically, one of the facts that emerged in testimony about the bills was that Landmark is one of the most financially efficient hospital in the state, according to an analysis by the R.I. Department of Health. But the hospital’s patient mix and the set of services it provides make it a money-losing operation, Health Director Gifford testified, so any effort to save Landmark will have to involve retooling those services to make the hospital profitable.

Savage, who said he is still getting to know the Landmark operation, said it is his understanding that the hospital provides “very, very high-quality” care and services that are valuable to the community.

One of the first things he will do, Savage said, is talk with the employees and doctors, make sure to answer all their questions, and “assure them that we’re really operating in a very stable environment there now.” Then he will begin exploring options “for perhaps strategic alliances, modifications that might enable the hospital to operate more profitably and contain some of the costs and expenses that they currently operate with.”

In a news release, Richard R. Charest, president of Landmark, stressed that the hospital will keep operating as usual during this process.

“I want to assure Landmark’s 1,100 employees that normal business operations will continue,” he said. “Today’s action is the first step under a court-supervised process to maintain Landmark’s operations. Landmark will continue to deliver high quality health care to the residents of northern Rhode Island.”

To learn more about Landmark Medical Center, visit www.LandmarkMedical.org.