Steward to invest at least $110 million in Morton Hospital

By Robert Weisman, Globe Staff

Morton Hospital and Medical Center of Taunton notified its employees this morning that it will be acquired by Steward Health Care System, the investor-owned Boston chain that runs six hospitals in eastern Massachusetts and has agreements to buy two others.

Under the deal with Morton, which has 1,100 employees and more than 150 affiliated doctors, Steward agreed to invest $110 million to $120 million in capital improvements at the 154-bed hospital over the coming decade, of which $85 million will be spent in the next five years.

Steward will also assume the $30.5 million unfunded liability in Morton's pension plan and pay off $28 million in debt owed by Morton and its affiliates. The deal is structured much like last year's transaction that allowed New York private equity firm Cerberus Capital Management to take over the six Caritas Christi Health Care Hospitals across eastern Massachusetts. Cerberus created Steward to manage those Catholic hospitals and to purchase other secular and religious hospitals.

And like the Caritas deal, the Morton buyout will require approval by the state, including the attorney general's office and the Supreme Judicial Court of Massachusetts, to convert the non-profit Taunton hospital into a for-profit institution. It will also require approval by the state Department of Public Health, which must issue a new license. Those processes could take several months to complete.

Maureen Bryant, president of Morton Hospital, said Steward's growing health care network -- which already includes 1,700 doctors, most in private practice, and integrated clinical and information technology systems -- is the best outcome for Morton and its physicians. The cash-starved Taunton hospital's board also weighed other bids, including one from nearby Southcoast Hospitals Group in New Bedford, a nonprofit that pledged to preserve Morton's community mission.

But in addition to its capital commitment, Steward promised to keep all of Morton's employees, including members of the Massachusetts Nurses Association, and to maintain current their benefit levels, Bryant said. She said some of Morton's doctors will remain independent, while others will affiliate with Steward's physicians group.

"What was so impressive with Steward is all they have done to build the information technology that will help us to measure how we are doing in terms of quality outcomes and medical utilization," she said. Bryant, who took over as Morton president in 2009, said the hospital had been looking to affiliate with a stronger partner for several years.

Steward chief executive Ralph de la Torre said Morton will help build his company's growing hospital group, filling out critical territory between its existing hospitals in Brockton and Fall River.

"It's a geographic location that has no overlap with our hospitals, that we think is a perfect fit with our hospital system," de la Torre said. "Morton and Taunton are now part of our family."

Kevin Hovan, president of Southcoast, said after being notified Wednesday that his bid was rejected, "we really feel like we put a very fair and reasonable offer on the table. It seems like money talks."

Bryant declined to discuss the offers by Southcoast or other bidders. De la Torre said, "We spend what we have to spend to make it great."