UPDATE: AG Vows Scrutiny As Special Master Seeks New Buyer For Landmark

Landmark Medical Center's Special Master Jonathan Savage has filed a Superior Court response to delay a required $5,585,024 license tax to keep the hospital operating while seeking a new buyer to take Steward Healthcare's place.

Following the apparent logic in Savage's plea, Attorney General Peter Kilmartin's office, the regulator and frequent mediator of the deal to sell Landmark to Steward Healthcare, criticized the would-be buyer for its lack of commitment to rescue the failing hospital and pursuing the bottom line over the welfare of Landmark's patients. 

"While neither Steward nor the Special Master for Landmark have informed the Attorney General of their intentions, it appears, based on documents filed by the Special Master in Superior Court and comments by the Landmark spokesperson, that Steward has no intention to move forward in acquiring Landmark," wrote Amy Kempe, public information officer for Kilmartin's office.

A report today from WPRI.com, drew attention to the likelihood that Steward may back out of a long-anticipated deal to purchase the hospital, which has been seeking a buyer to rescue it from closing and restore it to fiscal solvency.  

Landmark spokesman Bill Fischer said that Steward Healthcare, which has until Sept. 30 to close on its deal to purchase Landmark Medical Center, has not formally backed out of the agreement.

However, he said, in the event that the deadline passes and the deal has not been finalized, or Steward does formally back out, Landmark needs to have a contingency plan in place, and they've been working on that contingency.

"We have had significant and productive conversations with one healthcare organization in particular," Fischer said. He would not say which one, however.

Fischer also said he could not comment on how likely it is that Steward would back out.

From the start, Kempe said, the state accommodated Steward’s every request for extraordinary treatment in hopes of returning Landmark to fiscal stability. "The Court amended the Asset Purchase Agreement between Landmark and Steward at Steward’s request. The General Assembly amended the Hospital Conversion Act (HCA) at Steward’s request. The regulators – the Department of Health and the Attorney General – completed the review and approval of the HCA application well in advance of the statutory 180-day deadline.  Further, the Attorney General has approved multiple requests to extend the closing deadline," she wrote.

But, despite Kilmartin's efforts and a request that both parties keep the Attorney General apprised of progress, "In fact, it is clear that neither Steward nor the Special Master have made a real effort to meet the conditions set forth in the HCA approval granted on May 25, 2012," Kempe wrote.

"In view of the apparent withdrawal of Steward Healthcare as the purchaser of the hospital assets, it is essential that the Special Master have additional time to negotiate a sale to another prospective purchaser," Savage wrote, "Requiring immediate payment of the license tax will surely foreclose that possibility."

Savage's response was filed to a motion from RI Tax Administrator David Sullivan to compel Landmark Medical Center to make the payment. 

The failure of the Hospital would create severe harm for other creditors, who have made administrative super-priority secured loans to Landmark and would "extinquish the prospect for successful conclusion of the mastership," Savage wrote. "In contrast, the hardship to the state would not be nearly as great."

Savage added that forestalling the immediate payment of the licensing fee would be consistent with the legislative intent of the General Assembly, and "...advance the paramount public interest in preserving LMC as an essential healthcare resource in Northern Rhode Island."

Savage further argued that the courts have discretion to determine when, if at all, administrative claims such as the RI Tax Administrator has made should be paid.

"If the estate were required to direct funds to pay the License Tax now rather than direct those funds towards patient care, the public welfare the operations of the hospital, patients and patient care will all be subjected to substantial risk. Clearly, the potential risk to patient care and LMC's operations outweighs the State's interest in immediate payment," Savage wrote. 

"This process has been very stressful on the patients who rely on Landmark for quality healthcare services, the 1,200 employees and the Woonsocket community, who embraced Steward as a savior for the City.  It has become very clear that Steward’s only interest was the bottom line, not, as the company claimed, the patients, the employees or the Woonsocket community.  Sadly, it appears that Steward has left the hospital, its patients and its employees in a worse position, as the process seems to be moving back to square one after four and one half years," Kempe wrote.

"After two failed attempts to find a suitable buyer for Landmark, however, Attorney General Kilmartin cautions that the level of scrutiny of any potential buyer cannot be lessened.  It is more important than ever to ensure that the next suitor is serious and qualified," Kempe wrote.