News & Events AG should demand oversight as condition of Caritas sale

Globe Editorial

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THE PROPOSED sale of Caritas Christi Health Care to the private-equity firm Cerberus Capital Management won’t just affect the chain’s six nonprofit hospitals; it could mark the first stage in a significant remaking of the health care system in Massachusetts. Attorney General Martha Coakley should withhold her support from the transfer unless Cerberus agrees to continued state oversight after the deal goes through.

By law, the attorney general’s office reviews proposals to convert nonprofits into for-profit enterprises, and Coakley is expected to announce her ruling on the Caritas sale in the coming days. Coakley’s office has kept much of its review process under wraps, and the speed at which Coakley may be arriving at a decision has fueled concerns among others in the health care system that she may sign off without obtaining necessary concessions.

Caritas CEO Ralph de la Torre has cast the deal as the best way to preserve a struggling chain. But the sale would mark a major shift in a health care market long dominated by nonprofits, and there’s every reason to think a for-profit Caritas would seek much greater power in that market.

The state must prepare for that possibility. If the transaction turns out to have unintended consequences — or if Cerberus engages in predatory practices to force competing hospitals out of business — the state should reserve the power to recognize and correct any problems that arise.

To carry this out, the attorney general should demand that Cerberus continue to provide as much information to the state about its pricing policies and operations as non-profit hospitals. With this information, the attorney general would be in a better position to determine whether the sale has harmed the state’s health care system. Under law, she would continue to have the power to take action against the new hospital chain for predatory pricing and other potential anti-trust violations.

Attaching such conditions to the sale of the hospitals would be unprecedented, but so is the deal Cerberus has proposed: The venture capital firm, which has no experience owning a hospital chain, is asking Massachusetts to approve its offer without providing many specifics as to how it expects to convert Caritas’s nonprofit hospitals into for-profit money makers, and without committing to own Caritas for more than three years.

Coakley is reportedly negotiating to extend that commitment to five years, which would be an improvement. Seven years would provide even greater reassurance to Massachusetts citizens.

But if the deal is approved without granting the state ongoing power to monitor and oversee the new hospital chain, Massachusetts would essentially be handing over a big part of the future of its health care system to Cerberus and de la Torre. Coakley must ensure that the public’s interest is protected.