PROVIDENCE – Lifespan Corp. and Care New England said Friday they have abandoned their effort to merge, two and a half years after they first announced plans to combine into one organization.
The two nonprofit health systems withdrew their merger application on Thursday, citing many of the same reasons they once used to support their plans: a difficult economic climate, the rapid pace of change nationally and locally, and tough competition from Boston hospitals.
- Interview: Uncertainty forced Lifespan, CNE to part (Feb. 26)
The organizations’ decision ends nearly three years of wrangling with state regulators, who have repeatedly rejected their application as incomplete, stretching out the process and requiring the companies to seek antitrust clearance from the Federal Trade Commission three times.
Most recently, R.I. Attorney General Patrick C. Lynch and R.I. Health Department Director Dr. David R. Gifford had given the companies until March 31 to finish submitting the requested documents.
In a joint statement, Lifespan and Care New England noted that despite having submitted “tens of thousands of pages” to the state, “there is no clear timeline to complete this process.”
The “extensive resources” needed to work through the regulatory process are “detracting from our organizations’ ability to focus on sustaining our core missions” to serve their patients and “to confront the increasingly aggressive posture from hospitals and health systems in the region,” Care New England President and CEO John J. Hynes said.
In a lengthy statement, the attorney general defended his office’s handling of the aborted merger, saying due diligence was required on a proposal that could have ended with more than 70 percent of Rhode Island’s acute hospital beds controlled by one provider.
“I am not privy to why this decision was made, but feel it is important to be very clear about one basic premise: the decision to apply for this merger was made by Lifespan and Care New England, and the decision to withdraw it was made by them as well,” said Lynch, who is running for governor.
He added: “The merger of Lifespan and Care New England would have changed the landscape of our state’s health-care system forever.”
This is the second time Lifespan and Care New England have abandoned plans to merge. The two organizations also sought regulatory approval to combine in 1998, only to withdraw their application two years later.
Lifespan President and CEO George A. Vecchione noted Friday that since the merger plan was first announced in July 2007, “there has been dramatic and rapid change in the regional marketplace and in the national arena” that put more demands on the two companies.
“The deteriorating financial condition of the state, significant increases in uncompensated care, the uncertainty of federal reimbursements for health care services and the accelerating pace of regional competition require the full attention of these institutions at this crucial time,” Vecchione said.
In their statement, the companies noted that the Hospital Conversions Act, the state law that sets out the regulatory process for merger approvals, “was written to protect local nonprofit hospitals from out-of-state, for profit hospitals entering Rhode Island.”
The statute “was not designed for the merger of healthy, nonprofit hospital systems with the size and complexity of Lifespan and Care New England, which requires the merging of nine entities,” they added, referring to the two systems and their seven hospitals.
A smaller hospital merger was successfully completed recently under the law: Roger Williams Medical Center and St. Joseph Health Services of Rhode Island got final approval to combine into a new entity, CharterCARE Health Partners, last October.
Lifespan and Care New England filed the most recent version of their merger application last September, and since then had gone back and forth with Lynch and Gifford over follow-up requests for documents. The latest deadline they had been given, in December, extended the deadline for their responses until March 31.
That extension also gave state officials an extra 20 days beyond the statutory review period to determine if the revised application was complete, and it required the companies to stay in regular communication with regulators.
Despite their decision to end the process, Lifespan and Care New England said both companies “continue to believe the combination of both systems would have greatly enhanced the clinical, academic and research missions, reduced costs and improved the patient care environment.”
Looking ahead, they added, “both organizations are committed to partner in ways that are appropriate from a legal perspective and allow them to best serve the needs of the community.”
A spokeswoman for the R.I. Department of Health, Annemarie Beardsworth, said her agency was glad the hospital groups had not drawn out the process further. “This is their decision, and we appreciate that they made the decision now rather than having to go through the process and have wasted resources,” she said.
Beardsworth also defended the rigor of the state’s merger approval framework.
“The Hospital Conversions Act is a very thorough and detailed process, and there are two separate tracks, if you will – one is clearly for for-profits that are applying to merge, and then there is also a track for not-for-profits,” she said. “There is a lot of information that we ask for, but it’s all information that we need to make a decision when we review the application.”
The news spread quickly through the state’s health care community on Thursday, and the similarity between the arguments for withdrawing now and for merging three years ago were not lost on observers.
“I find the explanation pretty surprising, given that many of the reasons that they now give for abandoning the effort are very similar to the reasons they gave for pursuing it,” Rick Brooks, director of the United Nurses & Allied Health Professionals union, told Providence Business News. The union represents more than 2,100 Rhode Island Hospital employees.
UNAP had expressed concerns about the merger and had supported legislation – which didn’t pass – that would have imposed tougher regulatory oversight on any health care system that controlled more than 50 percent of the market, as the merged companies would have. But asked whether the withdrawal was a good thing, Brooks said he wasn’t sure.
“We had many unanswered questions about the merger,” he said. “I would have liked to hear some answers – about what the merger would have meant for employees, for patients, for the cost of health care. In some ways, I’m sorry it didn’t get a full airing.”
More importantly, Brooks said, “the hospital system is in real trouble in the United States,” and killing this deal won’t help individual hospitals survive in the long run.
“So I hope that someday, we can get to a point where we can have a more integrated hospital system, but one that’s responsive to and overseen by the public, rather than by a private board,” he said.
I was very disappointed to read that the two RI Health Systems have abandoned their efforts to Merge. I have lead two of the most successful Not For Profit Hospital mergers in the US during the past 10 years involving 9 Hospitals. Where there is a well thought out business plan, with Mission, Vision, and Values tied to COMMUNITY BENEFIT, a merger can occur. It seems that either the compelling community needs which could be better realized through merger, and the significant service, outcome and cost advantages were not sufficiently researched or articulated.
The Rhode Island community will suffer if its Hospitals are not positioned to provide the very best patient care possible within their means. Unfortunately, that risk is now more apparent.
This
Sounds like the guy from Morton Plant Mease in FL that was able to pull that together mby RI could hire a consultant.