Almost two months ago, Rhode Island’s two large health care systems, Lifespan – a $1.3 billion company with more than 11,000 employees – and Care New England – a $600 million company with 6,000 workers – announced they wanted to merge and work with the Brown University Medical School to create a full-fledged academic medical center in Providence.
As of press time last week, no applications had been filed yet with the R.I. Department of Health or the Federal Trade Commission. But while the documents are prepared, Lifespan CEO George A. Vecchione and Care New England CEO John J. Hynes have been making the rounds, outlining their plans and explaining why they believe it is crucial to merge now.
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PBN: In speaking about the merger, you’ve emphasized the opportunities with Brown. But you’re doing that already. How does a merger take that farther?
VECCHIONE: When you look across the country at the leading hospitals, invariably you will find a close linkage and alignment with a very strong medical school. And if you look at how the Rhode Island market has matured since the reactivation of the Brown Medical School 30 years ago … the practice for Rhode Islanders who had a serious illness, they used to go to Boston by default … [but] over time, the quality of medicine that’s being provided in the community has been elevated. … [Now] Brown is making significant investments in its medical school, and that’s part of the alignment of opportunities that we see that make this combination so exciting.
PBN: How does that lead you to a merger, though?
VECCHIONE: What is happening is the academic opportunities are right in front of us. And when you look at Boston, and you look at Mass General and Brigham, why did they form Partners [HealthCare]? Individually they’re both strong … but they’re able to do other things on a collaborative basis. And now Partners is looking to expand. Mass General is planning to build a 100,000-square-foot health center in Foxboro. They’re coming south. And they just signed on a 60-plus physician group in Franklin. So the market is not static, and while we’ve made certain gains over the past eight to 10 years, with the lineup the way we have it, the commitment by Brown, the probable relocation of the medical school near Rhode Island Hospital or the Jewelry District … we’re lining up the opportunity to, in fact, create a competitive academic medical center so that the gains we’ve made in terms of market growth and in-migration of cases, we can hold onto and perhaps grow. It’s an economic development story.
PBN: Is working with Brown the primary factor in your decision to merge?
VECCHIONE: No, it’s one factor. It’s only one element.
PBN: Conversely, do you see a merger as necessary to be able to create the academic medical center you envision?
HYNES: It’s an incremental advantage that accrues to the institutions and to Brown. … If you had to boil it down, you’d look at this as a real improvement in the opportunity to enhance clinical programs. You’d look at it as an opportunity to generate additional research dollars including competing for major national grants. … You’d look at it as an opportunity to establish a brain science institute. And you’d look at it, as George indicated, as an economic development driver. And clearly there are some efficiencies that go along with this.
PBN: How might those play out?
HYNES: Let’s take a look at some of the women’s health programs. The collaborative effort that would be a byproduct of this merger would be significant. We wouldn’t have duplicate programs. We would have programs that are commonly driven. You’d be avoiding some duplicate expenses and committing those resources to other programs. That’s a very critical advantage in this endeavor.
PBN: So could we expect to see a lot of consolidation?
VECCHIONE: I firmly believe that we have done well over the last number of years. I think we’re into a very difficult phase here on a go-forward basis. State cuts, Medicaid and Medicare on a national basis. The marketplace is changing. If we don’t move aggressively, I think our existing business is going to erode and some of the services that may now be duplicative may not be around in Rhode Island if we’re not aggressive.
PBN: One of the biggest concerns raised about your merger is that it would hurt community hospitals. It seems they’ve been going into more specialized services, and this would give you more dominance in those services.
VECCHIONE: Community hospitals in general face a difficult road. … Cases that used to be hospitalized just a few years ago are now done on an outpatient basis. So when you’re a community hospital and you have most of the more routine hospital services, your volume is going to shrink. Without the volume, they have difficulty meeting expenses. And you’re right, some have identified higher-end services and gone with that. It’s not a long-term strategy, because you can’t just take a community hospital, identify a more sophisticated service and drop it in. There are support services that you need to provide that are most likely not in place. … [You’re also] seeing people dropping off the insurance rolls, and an increase in charity care and bad debt. That’s stressful as well. … And when you look at the number of community hospitals and the average daily census at each of them, it’s clear that something will have to be done from a health planning perspective. Does this transaction accelerate that? It might. And I’m not sure that it’s a bad thing. •
Interview: George A. Vecchione
Position: President and CEO, Lifespan, since 1998
Education: Bachelor of business administration in accounting, St. Francis College, Brooklyn, N.Y.; M.S. in health care management systems, Renssalaer Polytechnic Institute, Troy, N.Y.
Age: 61
Residence: Warwick
Interview: John J. Hynes
Position: President and CEO of Care New England since its founding in 1996
Education: Bachelor of science in accounting, Providence College, M.S. in health care administration, Trinity University, San Antonio, Texas; J.D., Suffolk University Law School.
Age: 62
Residence: Narragansett
