PROVIDENCE – What happens when you bet two large companies’ future on a merger, and 31 months later, you still don’t know when the deal might go through, or whether it ever will?
That, the chief executives of Lifespan and Care New England said, is the prospect they faced on Thursday when they asked their respective boards for approval to discard their nearly three-year-old plan to merge by withdrawing the application pending with state regulators.
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It wasn’t that they’d stopped believing in the merger, both men stressed on Friday in a joint interview with Providence Business News. It’s that the economic imperatives driving the plan had only grown in urgency, and the wait was hindering the ability of both health systems to address critical issues.
“Our inability to be able to act … led to a level of frustration that we suggested that we needed to get going … rather than be tied up in a process with no real ending,” said John J. Hynes, president and CEO of Care New England, speaking along with his Lifespan counterpart, George A. Vecchione.
The two companies had filed their merger application with the state twice, most recently on Sept. 28, but Attorney General Patrick C. Lynch and the R.I. Department of Health deemed it incomplete and asked for more documents.
Both sides had been going back and forth for months, and in December regulators had given the companies until March 31 to file all the requested documents.
“We were actually working on some of the deficiencies that had been identified for us,” Vecchione said. “But frankly, I was unable to tell my board with any degree of certainty what the timeline would be for a) the public review process, and b) the decision.”
Meanwhile, Vecchione noted, regional competition was heating up. The Rhode Island economy had weakened and unemployment had soared – leading to more uninsured patients and more uncompensated care. And health care reform talks in Washington continued to raise the prospect of possible Medicare and Medicaid cuts.
“We need to make sure that these institutions … are solid and intact, and their programs are viable for generations to come,” Vecchione said. That meant the companies needed to act, but “we were kind of suspended in this process, and we were devoting a lot of senior management time to this.”
Asked what had been left undone because of uncertainty surrounding the pending merger, Vecchione said it was “hard to catalog.” But he did acknowledge that “we have spent millions on this process.”
What happens now, especially in terms of the collaborations the companies had planned, remains to be determined, the two CEOs said.
In fact, some ideas discussed when the merger plan was first unveiled, in July 2007, have since been reconsidered: Brown University won’t be moving its Warren Alpert Medical School to the Rhode Island Hospital campus; the school is refurbishing a building on Richmond Street instead. Similarly, Butler Hospital is no longer planning to leave its East Side campus; instead, it’s planning to expand its existing facility.
But Lifespan and Care New England already collaborate quite a bit, directly and in partnership with Brown, and those collaborations “will not be impacted whatsoever” by the withdrawal of the merger plan, Hynes said.
However, Hynes added that the merger would have allowed collaboration to “grow exponentially,” and both men said they expect to review their joint plans and decide how to move forward.
The CEOs also acknowledged that for employees at the two companies, the news was not entirely bad.
“In the Lifespan family, there’s a high degree of disappointment,” said Vecchione. “But frankly, from an operating perspective, people are well aware of the environment, and in some ways they appreciate that there will be greater focus on that.”
“I think the very people who supported the merger became very frustrated with the time elements,” Hynes added. “Most people do see that there was considerable value in this thing, but not proceeding on some important matters that we needed to do individually – we just couldn’t waste any more time.”
