Essent Healthcare, Nashville, had a busy week hunting acquisitions in the Northeast.
The company could emerge as a white knight for three parts of the troubled CareGroup system, which operates six hospitals in Massachusetts. And after 18 months of negotiations, Essent is inching closer to acquiring 78-bed Sharon (Conn.) Hospital for $16.4 million by agreeing to accept a modified set of conditions imposed by Connecticut Attorney General Richard Blumenthal. Essent officials still are negotiating with the Connecticut Office of Health Care Access, which also has to approve the sale. If the deal closes, Sharon would be the first for-profit hospital in Connecticut and Essent's third hospital."We certainly have a high degree of confidence (that the deal will close)," said W. Hudson "Hud" Connery Jr., Essent's president and chief executive officer. He said he expected the Connecticut deal to close within a few months.
In Massachusetts, David Spackman, a Boston lawyer representing Essent, said the company has made a proposal to CareGroup for 218-bed Deaconess Waltham (Mass.) Hospital that could form the basis of a letter of intent. Spackman, a partner with the law firm Greenberg, Trauwig, also said Essent would investigate purchasing two other CareGroup hospitals should they be put up for sale-41-bed Deaconess Glover in Needham, Mass., and 41-bed Deaconess-Nashoba in Ayer, Mass.
Not-for-profit CareGroup, Boston, announced last month that it planned to shut down 116-year-old Deaconess Waltham, which has lost money in eight of the past 10 years (Jan. 28, p. 30). That includes a $9.1 million loss for the fiscal year ended Sept. 30, 2001, more than double the $4.5 million operating loss in fiscal 2000, according to CareGroup. The hospital's share of CareGroup's debt is $24 million.
Geri Denterlein, a CareGroup spokeswoman, confirmed Essent's interest in Deaconess Waltham. She said investment bankers from Salomon Smith Barney, New York, who are advising CareGroup, are investigating whether to bring in a partner with capital for the Glover and Nashoba hospitals or sell them outright. Neither has been slated to close, Denterlein said.
She also confirmed that a local group led by Richard Lyons, M.D., director of Deaconess Waltham's emergency room, is interested in acquiring the hospital. Lyons said his group believes the hospital could survive as a stand-alone hospital for a year or two.
Essent officials said Deaconess Waltham can remain on the critical list only so long before it becomes a lost cause. Denterlein noted that Essent's most recent purchase, the former 129-bed Hale Hospital owned by the city of Haverhill, Mass., was threatened with closure before the company bought it. The hospital, which Essent purchased last September, is now known as Merrimack Valley Hospital.