AG denies Lifespan-CNE merger over concerns about competition, quality of care; FTC also opposed

Updated at 2: 25 p.m.

AT A SECOND public comment meeting on the proposed Lifespan Corp. and Care New England Health System merger, many participants voiced concerns that the integrated health system, which would include Brown University, would monopolize the state's health care.
R.I. ATTORNEY GENERAL Peter Neronha has denied the application for a proposed merger between Lifespan and Care New England health systems.

PROVIDENCE – Attorney General Peter F. Neronha on Thursday denied the proposed merger between Lifespan Corp. and Care New England Health System, citing the “extraordinary” control the merged entity would have over the state’s health care system.

The Federal Trade Commission will join the attorney general’s office in filing to block the merger in federal district court, the agency announced, citing concerns about costs and quality of care.

The high degree of consolidation that would be created by the merger “would take Rhode Island’s health care market from one in which there is healthy competition to a virtual monopoly,” the attorney general’s office wrote in its decision, and would violate antitrust laws.

Throughout the application process, the health systems provided late or inadequate information, and ultimately failed to submit a plan detailing the impacts of the merger and how they would pay for it, Neronha said at a press conference on Thursday. 

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His office also concluded that the merger would amplify financial concerns for the state’s health care system, and that a lack of competition would increase expenses without improving patient outcomes. 

Together, Lifespan and CNE, which sought to enter into an integrated academic health system with Brown University, would control about 80% of the state’s market for inpatient hospital care, and 75% of inpatient acute care hospital beds, the decision notes. It would also include 79% of the state’s inpatient psychiatric care market and more than 60% of the outpatient surgery specialties.

“This level and degree of health care consolidation in a small, but densely populated, state like Rhode Island is unprecedented,” the attorney general’s office wrote, “and would concentrate Rhode Island’s health care market far beyond the levels in neighboring New England states.”

The FTC echoed Neronha’s concerns of the proposed system’s enormous control negatively impacting patient outcomes and expenses.

“This proposed merger is a bad deal for patients who are likely to see higher hospital bills, lower quality of care, and fewer cutting-edge medical services,” the agency’s Bureau of Competition director, Holly Vedova, said in a statement.

Compared to the 80% of inpatient hospital care the merged entities would oversee, Mass General Brigham controls 27% of inpatient hospital care in Massachusetts, while Yale New Haven Health controls 31% of Connecticut’s inpatient hospital care.

Neronha also noted differences between the health systems’ public and external statements: While the two health systems claimed they are not current competitors, and instead complement each other’s services, the attorney general office’s review found “the record is very clear that they do compete” across various services, Neronha said.

The application also does not provide a clear picture of Brown’s role in the merger, he added.

If the hospital systems choose to appeal the ruling, the attorney general’s office says they can do so in Superior Court, under the state’s Hospital Conversions Act.

Lifespan CEO and President Timothy J. Babineau responded to the attorney general’s denial, saying “A Rhode Island solution, that remains nonprofit, and creates the state’s first fully integrated academic health care system is what we seek to accomplish for the state and that remains our overriding goal.”

James E. Fanale, CNE’s CEO and president, acknowledged disappointment but said “now we will need to move on to a new path forward. There is always a path forward, and we will explore all options to find the best possible – and acceptable to regulatory bodies – solution for access to affordable, quality health care.”

Brown University President Christina H. Paxson said, “Brown remains steadfastly committed to supporting the work of the physicians who work in both Lifespan and Care New England, serving the health of Rhode Islanders and fueling the local economy through the teaching, research and service conducted by the Warren Alpert Medical School, Brown’s School of Public Health and other academic departments and programs.”

House Speaker K. Joseph Shekarchi said the next step for the applicants should be to  “immediately terminate their exclusivity agreement and explore all options available to them in the marketplace. My primary concern has always been to ensure continued high-quality health care for all Rhode Islanders and to protect the employment of the thousands of hard-working front-line professionals.”

The proposed merger drew mixed, often strong reactions from the public that the attorney general’s office collected at three virtual public comment meetings in January and February and through written comments, receiving a total of more than 250 public comments.

In the broadcast meetings, many members of the public highlighted the monopoly concerns that the attorney general’s office highlighted in its conclusion.

Others supported the merger, adding that a denied merger would leave the door open for a for-profit, out-of-state health system to absorb the state’s health systems. The merger eventually gained the support of union leaders, who said they had arrived at a strong agreement with the health systems.

R.I. ATTORNEY GENERAL Peter F. Neronha on Thursday said his office denied a proposed merger of the state’s two largest health systems due in part to the “virtual monopoly” it would create. / COURTESY R.I. OFFICE OF THE ATTORNEY GENERAL

Neronha said in the decision that the applicants’ “promises of achieving ‘population health’ for Rhode Islanders simply through a merger are also unrealistic. Research has consistently shown an inherent challenge in trying to achieve health – broadly defined – through the tool of a health care system.” He added that the applicants did not show “they have done the hard work and developed a rigorous, reality-based plan.”

The decision raised concerns that consolidation would reduce the quality and access to care because there would be no incentive to make investments to improve performance and patient experience. And the merged system would have increased power to set the wages of its workers.

“If this extraordinarily and unprecedented level of control and consolidation were allowed to go forward, nearly all Rhode Islanders would see their health care costs go up, for health care that is lower in quality and harder to access, and Rhode Island’s health care workers would be harmed,” the decision said.

In addition, Neronha’s denial was skeptical that a merger would put the two health care systems on stronger financial footing, saying that it would leave the combined system in “even greater financial peril.”

“If the transaction were approved, Rhode Island would be left with almost its entire health care infrastructure in one system that is both financially vulnerable and too big to fail at the same time,” the decision said, adding that based on financial projections raise “substantial concern” that merged hospital groups would become financially unstable within a few years.

Neronha’s denial noted the worries about an out-of-state entity leading to the loss of local control and talented health care specialists, and would have Rhode Island patients leaving the state for care.

But he found little merit in those concerns, saying in the decision that “these assertions overlook important realities.”

Data shows that 90% of Rhode Islanders receive inpatient care at hospitals in the state, and “it’s unlikely that a potential future merger with an out-of-state party would significantly change … these patterns,” the decision said. “On the contrary, we could expect the competition would continue to apply pressure on any new entities to meet the needs and preferences of Rhode Islanders by serving them locally.”

As far as local control and doctors shifting to neighboring states, Neronha’s decision said “these worries are not realistic.”

The decision said half of the doctors who completed studies at Brown University’s Alpert Medical School still practice in Rhode Island, “suggesting that the state already is an attractive home for talented medical professionals.”

As far as control shifting out of Rhode Island, the decision went to note that Lifespan’s board chairperson lives in Massachusetts and CNE’s president regularly sees patients at the University of Massachusetts Memorial Medical Center in Worcester.

The merger application marks the fourth time Lifespan and Care New England have attempted to merge since 1998. It needed approval from the R.I. Department of Health, R.I. Office of the Attorney General and the Federal Trade Commission.

R.I. Department of Health spokesperson Joseph Wendelken said his department “did share some of the concerns expressed today by the Rhode Island attorney general. However, we did not complete our review, so we had not arrived at a decision. We will be meeting with the transacting parties to discuss next steps.”

CNE spokesperson Raina Smith in a statement said, “Lifespan and Care New England had offered to the FTC and the [R.I. attorney general] 30 conditions that both systems would accept as a starting point to address concerns about the merger but neither the FTC or the AG ever discussed these conditions or others with the two systems prior to today’s decisions.”

(UPDATES throughout with comment from Neronha press conference, FTC.)

With PBN staff reports.

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  1. The buzzards of the Massachusetts mega-hospitals and health care industry were already circling over Rhode Island. Watch them swoop in and poach our professionals, patients and the medical industry.