PORTLAND, Maine — Mercy Health System of Maine on Monday said its board of directors has agreed to negotiate its sale to Steward Health Care System LLC, a for-profit health care company based in Boston.
Steward, which is owned by private equity firm Cerberus Capital Management, currently operates 10 community hospitals in Massachusetts and is that state’s third largest employer, according to a media release.Cerberus also owns the NewPage mill in Rumford, which filed for bankruptcy in September 2011 and filed a joint Chapter 11 plan earlier this month.
Mercy, established in 1918, has five campuses, three of which have a total of 230 inpatient beds.
Terms of the deal were not released.
“The Mercy Board of Directors has taken a bold and transformative step which benefits the communities of the greater Portland region now and into the future,” Mercy President and CEO Eileen Skinner said in a statement. “Steward’s commitment to our employees, patients, medical staff, mission and vision of community-focused care, made them Mercy’s first choice for partnership.”
It is expected Steward would make significant investments in the Mercy system, according to Mercy’s media release. Steward has made nearly $600 million in capital investments in their hospitals in Massachusetts, the release says.
Mercy has expanded its operations over the past decade, including the completion of Phase I of its new health care campus on the Fore River in Portland. Phase II is expected to be completed by 2018, according to the hospital. The media release notes that this expansion “was accomplished with the generous support of Catholic Health East” — Mercy’s owner — “and private donors.”
Catholic Health East, or CHE, is based in Pennsylvania and operates 35 acute care hospitals across the eastern seaboard, among many other health care-related facilities.
In its announcement, Mercy mentions that “as the health care climate and reimbursements have changed,” its board began “exploring strategies to further strengthen and expand the organization’s capacity to provide quality, affordable, health care choices for the communities it serves.”
CHE supported the exploration of new strategies, according to the announcement, including the sale of Mercy Health System of Maine.
“The decision to seek a new partner for Mercy was actively supported by Catholic Health East as part of our strategic planning process,” said Judy Persichilli, CHE’s president and CEO. “Several alternatives were explored, and we feel that Steward is the best fit to help Mercy achieve its mission goals, preserve its Catholic legacy, and continue to provide quality, cost-effective care for residents of the greater Portland area.”
Mercy patients “will not be impacted in any way by the regulatory process or the transition,” according to the announcement.
The acquisition is far from over, however. A number of federal and state regulatory hurdles remain, as well as the papal variety. Given Mercy’s Catholic roots, the Vatican must approve the sale, as it did Steward’s 2010 acquisition of several Caritas Christi Health Care Catholic hospitals in Massachusetts, according to the Boston Globe.
Mercy intends to remain a Catholic hospital and continue the mission of the Sisters of Mercy, the order of Catholic nuns who founded it, according to the announcement. In order to maintain that mission, Steward as part of the transaction would enter into a Stewardship Agreement with the Sisters of Mercy Northeast Community and the Bishop of the Diocese of Portland to make sure it continues to oversee Mercy’s commitment to the Ethical and Religious Directives for Catholic Health Care, the announcement said.
As a for-profit company, Steward’s hospitals — including Mercy, if the deal goes through — pay applicable state and local taxes, including property tax, in the communities where they operate.
If the deal is finalized, Steward said it intends to retain Mercy’s current management team and employees, according to the announcement.