Care New England votes to stay independent, rejects merger offers

Updated at 4:30 p.m.

CARE NEW ENGLAND HEALTH SYSTEM’s board of directors on July 5 unanimously voted to reject all merger offers and remain independent. Kent Hospital in Warwick is owned by Care New England. / COURTESY KENT COUNTY MEMORIAL HOSPITAL

PROVIDENCE – Care New England Health System has decided to turn down all offers to either merge or be acquired by another hospital group.

Care New England’s board of directors voted Tuesday night to “pursue a strategy of operating the health system independently,” spurning at least one offer from a suitor to acquire the financially struggling nonprofit hospital group.

CNE, the second-largest health system in the state, said Wednesday that its strategy will be to seek “enhanced support from various clinical and operating partners” to improve Care New England’s financial situation.

“This plan, coupled with the financial support included in the recently-enacted state budget, will help ensure that Care New England will maintain a stable operating platform and continue to fulfill its mission to care for its community of patients and support our staff,” Care New England CEO and President Dr. James E. Fanale and board Chairman Charles Reppucci said in a joint statement.

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Care New England said it will now focus on working on “arrangements” with Brown University, its health plans, Lifespan Corp. and other local hospitals and health systems, and clinical partners.

CNE did not immediately provide details about these arrangements.

“At this point, Care New England will continue working through details of the various partnerships,” said Jessica McCarthy, vice president of marketing and communications at CNE. “It will look towards the future and it will be a bright future.”

McCarthy credited House Speaker K. Joseph Shekarchi and Senate President Dominick J. Ruggerio for working to “make sure that the hospital systems were recognized and taken care of.

“That really helps to put Care New England on more of a solid footing,” she added.

Care New England operates Women & Infants Hospital, Kent County Memorial Hospital, Butler Hospital and other health care facilities throughout the state. The group employs about 7,500 people.

Shekarchi noted said in a statement that Kent Hospital is located in his home city of Warwick.  “I worked hard throughout this year’s budget process to make certain that Kent will have the resources necessary to continue providing quality health care and to protect the jobs of the dedicated professional staff,” he said. “The state funding will help Kent and Care New England as it works to build a stronger health care delivery system.”

The fiscal 2023 state budget approved by legislators and signed by Gov. Daniel J. McKee in June includes several provisions that are meant to provide financial relief to hospitals across the state.

The plan invests a total of $77.5 million in funds from the American Rescue Plan Act to support health care facilities, including $45 million to be allocated to hospitals.

It invests over $10 million in federal funds and general revenue to increase Medicaid rates to hospitals by 5% relative to its 2021 rates.

The budget also increases Medicaid reimbursement rates for labor and delivery services by 20%, significant financial support for Care New England, which owns Women & Infants Hospital. The hospital has been dealing with increased costs for uncompensated care.

CNE said its board’s decision Tuesday followed months of analysis of various offers and partnership structures.

Board members examined the financial commitments made by potential partners, the experience of potential partners in operating and integrating hospitals, their track record of working productively with health care workers in Rhode Island and their experience in academic health system environments. Financial and regulatory barriers to implementing specific transactions also played a factor in the decision.

One of CNE’s suitors was StoneBridge Healthcare, a Pennsylvania-based hospital investment company. StoneBridge made a public offer in February after state and federal regulators shot down a merger attempt with Rhode Island’s largest hospital group, Lifespan Corp.

Following a similar offer that Care New England rejected in late 2020, StoneBridge proposed acquiring Care New England for $250 million, with $300 million more pledged in capital investments.

“Unfortunately, the leadership of CNE has led them to, once again, make the wrong decision. CNE is a critical community asset, one that deserves to be protected and preserved for the benefit of the people of Rhode Island,” said Joshua Nemzoff, StoneBridge Healthcare CEO. “Given the desperate financial position the hospital is in as evidenced by dismal financial results and serious concerns raised by its own medical staff regarding the quality of care, it will take hundreds of millions of dollars to fix their problems.”

Robert B. Hackey, a professor of health policy and management at Providence College, said he was surprised by Care New England’s decision.

“I had more questions than answers after reading the announcement because it was unclear to me as to how these things were supposed to happen,” Hackey said. “It was clear that they made a decision not to move forward with any other partnerships, but it was it was unclear to me as to how they would sustain the current status quo.”

While the state budget will offer significant financial relief to hospitals, Hackey said it will mainly address the operating side of Care New England’s financial needs, but it may not be enough to address its need to invest in its physical plant.

“They’re not in a great financial position,” Hackey said. “Some of their facilities are older, they need updating. I’m curious as to how they’re going to fill that need now.”

StoneBridge’s offer would have invested a significant amount of money in capital improvements, but the merger would not have come without challenges. State legislation approved by the General Assembly this session imposed stricter standards for the state review process for buying or selling hospitals in Rhode Island, adding new requirements around long-term staffing and retirement plan payments for employees in any hospital deal. Hackey said these changes made it less attractive for out-of-state buyers to make offers, so it would have made it more challenging for Care New England to go through with a merger.

Despite being in “constant search for a partner” for decades, Hackey said Wednesday’s announcement made it clear that Care New England is not envisioning a merger in its future.

But he does not think this decision is permanent.

“I tend to think this is a more short-term solution and that once a new permanent CEO takes the reins, they might have a different plan,” Hackey said.

Earlier this year, Attorney General Peter F. Neronha shut down an attempt by Care New England and Lifespan to merge and create a new health system in partnership with Brown University. Neronha argued that the merger would affect competition in the market and “negatively impact healthcare costs, quality and access to care.” He also said the proposal failed to outline in detail what the merged system would look like and what Brown’s role would be.

After CNE announced on Wednesday its decision to maintain its independence, Lifespan indicated that it was open to cooperating with CNE where it could.

“We continue to explore opportunities to collaborate with Care New England on efforts that best serve the health care needs of the community, and we wish them much success with this effort,” said Lifespan spokesperson Kathleen Hart.

And Brown University said CNE’s decision would not change the relationship between the hospital group and the university.

“Care New England has long been a valued partner to Brown University and our Warren Alpert Medical School, and we are eager to work further with CNE and other parties in the state to ensure that Rhode Islanders have access to high-quality health care within the context of an academic health system,” said Brown President Christina H. Paxson. “Independent of how the state’s health care systems are ultimately organized and structured, we remain focused on ensuring productive partnerships among the clinicians who treat patients in hospitals and the scientists developing new biomedical discoveries and treatments. These are essential to strengthened medical care, patient outcomes and solutions for pressing health challenges for communities across Rhode Island.

Updated at 12:30 p.m. to include additional comments from Care New England.

Updated at 2 p.m. to include a statement from House Speaker K. Joseph Shekarchi.

Updated at 2:30 to include a statement from StoneBridge Healthcare CEO Joshua Nemzoff

Updated at 4:30 p.m. to include state budget allocations for hospital systems and statements from Lifespan Corp. and Brown University.

Updated at 5:10 p.m. to add comments from Providence College Prof. Robert B. Hackey.


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