Since it appears Attorney General Sheldon Whitehouse won’t rule on the controversial proposed merger of Lifespan and Care New England at least until August, the ultimate fate of what would be Rhode Island’s single largest health care system likely won’t be decided until 2001. “The Attorney General has not yet deemed the document complete,” said spokesperson Jim Martin last week. Investigators are continuing to gather documentation and testimony from Lifespan and Care New England officials and soliciting comments from the public. “He still believes we’re on track.”
Once deemed “complete,” which should be by summer’s end, Whitehouse would then have another 120 days ostensibly for more review. But Martin said because their office is analyzing data as they collect it, once they formally close the investigative phase Whitehouse would make a final decision on the merger soon after.
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Why is it taking so long?
“Well, this is the largest merger ever in Rhode Island’s history,” Martin said, a “very complicated, very complex” undertaking requiring great scrutiny and care. It’s also “the largest application” yet considered under the Hospital Conversions Act, the 1997 General Assembly law designed to protect public interests in a health care landscape rife with merger and acquisitions. “There are people [in the attorney general’s office] working on this daily,” Martin said.
In the fall of 1998, Care New England and Lifespan – whose flagship facility is Rhode Island Hospital – announced their intentions to merge and create a $1.4 billion in-state eight hospital network with more than a 63 percent market share. (The new network would also include Boston’s New England Medical Center, which Lifespan acquired in 1997).
The companies said the arrangement would improve their chances of surviving into the next century. The Lifespan network includes Rhode Island, Newport, Bradley and Miriam Hospitals in Rhode Island and New England Medical Center in Boston. Care New England includes Kent County, Women & Infants and Butler hospitals.
To get approval there are three separate hurdles to scale. Lifespan and Care New England scaled the first early this spring when the Federal Trade Commission decided not to oppose the merger, ruling that Rhode Island and Boston are within the same medical services region and that the coupling would violate no antitrust laws.
Now it’s up to the state, and under the Hospital Conversions Act, first the attorney general and then the state Department of Health review corporate documents including financial statements (including uncompensated care), real estate records, citations and violations, and a staffing plan, among other things.
Their mission – to protect the charitable assets of each of the seven Rhode Island hospitals involved in the proposed network, by deciding whether the proposed deal is in the public’s best interest. State reviews must also decide whether the transaction is for fair market value, whether the parties are committed to serving the uninsured, and whether the not-for-profit’s charitable assets will be protected and used toward community care.
Because hospitals are nonprofit, “it’s our responsibility to make sure the assets are protected,” Martin said. That means that the endowments and grants offered to each individual hospital are secure under the proposed business plan. Whitehouse held several public hearings throughout the state last summer, and as their fact gathering phase winds down over the next couple of months, “we will hold at least one more hearing, maybe more.”
Martin said future hearings will provide the public a “better idea of what the new institution would look like.” He also said Whitehouse has been disappointed in recent months that public response has dropped off since last summer and that he recently asked the medical community for more input. “It’s important to do so, because this affects every Rhode Islander.”
When and if Whitehouse approves the merger, the health department will review its merits not only under the Conversions Act but also under a fairly elaborate set of criteria called the Change in Effective Control Licensing Law. That procedure, while considering public trust, is more of a straightforward procedure that considers issues such as quality of care and administration.
Despite the fact that their review process hasn’t officially started – and may, in fact, never start – the DOH has already begun compiling initial information from Lifespan and Care New England’s initial application, said John Donahue, chief, health systems development for the Department of Health.
Health department officials also wrote to company CEOs this past March, requesting information similar to what they gave to the attorney general. Donahue said Lifespan and Care New England officials have indicated some documents “may not be of our interest” and that “much of this stuff has been deemed confidential” by the attorney general. Confidential information includes “trade secrets,” information companies need to keep from competitors regarding operating procedures.
Once the DOH gets the nod from Whitehouse, it would have 10 working days to advertise that fact in newspapers. At the same time, Donahue said they’d also set a date for a community hearing on the merger application and would have 20 calendar days to notify Lifespan and Care New England if they need any more information “in order for applications to be deemed complete.”
Ultimately they have “a 90-day clock,” Donahue said, and under the conversions act they may also hire experts, which Lifespan and Care New England would have to pay for. The department, based on the advice of its 22-member Health Services Council, would then make their recommendation, but it would be health department chief Dr. Patricia Nolan who would finally decide if the merger should go through.
Ed Quinlan, president of the Hospital Association of Rhode Island, a trade association with 12 member hospitals, said HARI is taking no formal stand on the proposed merger. He said HARI’s mission is to uphold individual rights of member hospitals “from a self determination point of view” to decide how best to survive into the future. When it comes to dealing with the bleak financial picture now facing hospitals, a merger is definitely “one way to best determine how their institutions can be guided,” but “those are judgments based on the individual hospital boards,” Quinlan said.
Calling the Hospital Conversions Act “the most comprehensive in the country,” Quinlan said the public “is well protected” even though “the early applications of the Conversions Act have proven to be somewhat lengthy.” He said there is also an amendment now in the General Assembly, which seeks to make the attorney general, and health department review processes concurrent, although the attorney general’s office would still have enormous time leeway in its investigation.
“It’s a public process. There’s plenty of opportunities for all interested parties” to make their feelings known, Quinlan said. He said HARI’s independent hospital members, which include Roger Williams, St. Joseph, Landmark Medical Center, Memorial, Westerly and South County hospitals “will have the same opportunity to participate,” along with physicians, private insurers, and anybody else who’d have a stake in the proposed merger.
Opponents speak out
Despite what may seem to be a public amnesia about the potential joining of Lifespan and Care New England, a new and vocal group called the Coalition for Responsible Health Care formed last month and has filed testimony with Whitehouse opposing the merger.
The coalition, founded by the R.I. Manufacturers Association, which represents more than 170 Rhode Island-based businesses that employ more than 20,000 people in the state, also includes the Employers’ Managed Health Association, Blue Cross/Blue Shield of Rhode Island, United Healthcare of New England and Landmark Medical Center. (Earlier this year, Lifespan formally opposed Landmark’s application to open a comprehensive cardiac services unit at its Woonsocket site.)
The coalition’s platform includes concerns that the merger would eliminate competition, resulting in higher health care costs and diminished quality. Coalition members also say the “New Lifespan” would control more than 66 percent of the state’s hospital revenues, almost 80 percent of maternity beds, 100 percent of neonatal intensive care beds, more than 80 percent of pediatric beds and more than 90 percent of psychiatric beds.
Members also point to Lifespan and Care New England’s “states of apparent organizational disarray and severe financial distress,” so linking them would not increase efficiency but would “severely undermine the cost and availability of health services in Rhode Island.”
Lifespan, in particular, has been criticized for its inability to restrain spending and high costs. Both Lifespan and Care New England together have lost more than $100 million dollars. The coalition reports that Lifespan had an operating loss of $46.3 million last year and Care New England nearly $12 million.
The group also predicts the merger would “rapidly increase health insurance premiums by as much as 100 percent” and substantially reduce access to health benefits and insurance coverage for all Rhode Islanders.
Besides the coalition, the AFL-CIO, the state’s largest labor group., composed of about 235 local unions and a collective membership of about 80,000 workers, issued formal opposition to the proposed merger in February.
