PROVIDENCE – A Pennsylvania-based health care company is looking to purchase Care New England Health System.
StoneBridge Healthcare LLC, of New Hope, Pa., sent a letter to the board of CNE Monday offering $550 million package, including a purchase price of $250 million and an investment of $300 million over the course of six years. In addition, StoneBridge said it would fully fund CNE’s pension plan at closing.
CNE was not able to fund the employees’ pension plan and it resulted in a $125 million unfunded pension liability.
“We believe we can offer an urgent and lasting solution to you and the people you serve, and we appreciate this chance to explain why,” read StoneBridge’s letter to CNE’s board of directors, which was obtained by Providence Business News.
StoneBridge said it was launched in August, and the organization’s website says it is looking to buy, save and turn around financially distressed hospitals. StoneBridge is led by CEO Joshua Nemzoff, who has more than 40 years of consulting experience in the industry.
Nemzoff told PBN on Monday that StoneBridge has been monitoring the situation at CNE for more than a year, including the financial struggles the system has faced throughout the coronavirus pandemic.
If the transaction were go to through, StoneBridge would convert CNE to a for-profit health system.
The news comes as CNE, the second-largest health system in Rhode Island, continues merger negotiations with Lifespan Corp. for the fourth time in nearly 20 years. CNE has piqued the interest of other organizations in the past, including the failed merger attempt with Boston-based Mass General Brigham, previously known as Partners HealthCare. Lifespan had publicly attacked CNE’s deal with Partners before Gov. Gina M. Raimondo stepped in and Partners withdrew its bid for CNE.
Dr. James E. Fanale, Care New England CEO and president, said in a statement Monday afternoon that merger conversations are happening only with Lifespan.
“It’s abundantly clear that the best direction for Rhode Island’s health care future is the creation of a robust academic health system with the merger of Care New England and Lifespan, and a deep affiliation with Brown University,” Fanale said. “We are united in our commitment that a merger must only serve to strengthen Rhode Island’s health care system. The merger conversations we’ve embarked on are the right ones, and they will continue expeditiously and exclusively.”
Fanale said officials at Lifespan and CNE are working to solidify the details of one, comprehensive system. On Sept. 15, CNE entered into a letter of intent with Lifespan, an agreement that bars CNE and its executives from talking to any other suitors.
Dr. Timothy J. Babineau, CEO and president of Lifespan, said in a statement Monday afternoon that the two systems have collaborated “remarkably well during the pandemic” while also working to bring a merger to fruition.
“There is now even more appreciation and recognition – within Lifespan and Care New England as well as across the state – of the invaluable benefits to all Rhode Islanders of our creating an academic medical center with Brown University that is not-for profit, locally-owned, and locally-controlled,” said Babineau.
Nemzoff told PBN he believes an eventual merger application between Rhode Island’s two systems could be problematic in the regulatory process.
“I don’t think [a Lifespan-CNE merger] will get past the regulators with an 80% market share,” said Nemzoff. He said the Federal Trade Commission, which reviews merger and acquisition applications, has been blocking deals with more than 60% market share.
Nemzoff said he believes an application for CNE and Lifespan to merge would trigger a full review by the FTC, which will take an extended period of time, in which “CNE does not have.”
Raimondo has been pushing for merger of in-state entities.
She was “cautiously optimistic” that there will be a Rhode Island-based academic medical center with Brown’s involvement, spokeswoman Audrey Lucas said in September when Lifespan and CNE had announced that they were looking to attempt to merge again.
Nemzoff said StoneBridge has no intention of going “head-to-head with any governor,” down the line.
“Raimondo is a competent governor with a financial background,” said Nemzoff. “This is an easy opportunity for CNE to be competitive.”
Patrick Quinn, executive vice president of Rhode Island for Service Employees International Union District 1199 New England, which represents about 2,300 Care New England employees, said CNE should get through the pandemic before making any business decisions.
He added, “We’re not a big fan of for-profits in health care, either. Especially when there’s so much public money.”
According to a recent press release, StoneBridge is capitalized through a multi-layered composite finance group that includes Medical Properties Trust, Oaktree Capital Management and other nationally known debt and equity sources.
StoneBridge said its board consists of nationally recognized experts in health care operations, finance, acquisitions and turnarounds.
The story was updated to add statements from Care New England CEO and President Dr. James E. Fanale, Lifespan CEO and President Dr. Timothy J. Babineau, and Patrick Quinn, executive vice president of Rhode Island for Service Employees International Union District 1199 New England.
Alexa Gagosz is a PBN staff writer. Contact her at Gagosz@PBN.com. You may also follow her on Twitter at @AlexaGagosz.
