John J. Hynes, Care New England CEO, doesn’t care for the many “marriage metaphors” that have permeated the last few months of negotiations trying to merge Care New England and Lifespan hospital networks, a deal that officially ended last week. After the press conference where Hynes and Lifespan CEO George Vecchione discussed how the two systems would still seek to collaborate, Hynes bristled at a reporter’s comment that by thwarting the merger with regulations and lengthy reviews, the state was implying that though it wasn’t okay to get married, there was nothing wrong with living together.
I.E. – an all-out merger was out of the question, but trying to figure out cost-saving alliances and other efficiencies was fine and dandy.
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Hynes said such talk minimizes the true nature of the issue and that there’s nothing funny about trying to protect and strengthen two huge hospital organizations and the 12,000 people who work for them. “It’s pretty serious stuff,” he said, adding that the view is a lot different from the inside, when you’re trying to take care of people and run a business successfully into the future. “We thought this was a great opportunity to maintain that.”
Last Tuesday Hynes and Vecchione officially withdrew the merger application for the “New Lifespan,” which for more than a year has been under review, under the state’s Hospital Conversions Act, by Attorney General Sheldon Whitehouse.
The proposed merger, first announced in the fall of 1998, would have created a $1.4 billion in-state, eight hospital network with more than a 63 percent market share. The new system would have joined the Lifespan network of Rhode Island, Newport, Bradley and Miriam Hospitals in Rhode Island and New England Medical Center in Boston and the Care New England network of Kent County, Women & Infants and Butler hospitals – a joining that officials estimated would have saved $67 million over five years and help them compete on a regional basis.
The CEOs said they withdrew the merger because of a “fundamental disagreement” with Whitehouse about his need for additional authority to regulate business activity at the new Lifespan beyond current federal and state anti-trust law.
“The attorney general had needs. He was very open during this process,” Vecchione said, but in order to approve the merger, he wanted to set up a new standard for the new organization, and “we just couldn’t give it to him,” Vecchione said. “We agreed to disagree.”
While Hynes said it wasn’t as though Whitehouse was creating a new role for himself, he was setting up a standard that wasn’t “conducive to running an organization.”
Besides being “broad and undefined” the standard Whitehouse wanted was also ultimately unfair, Hynes said, since it wouldn’t have applied to other hospitals, in or out-of-state.
And while Whitehouse’s need for additional authority is within his right under the conversions act, Hynes, who is also a lawyer, said this additional government restraint would have killed their chances of acting effectively in a competitive and fast-changing regional market, where moving quickly can make the difference. “Any organization we’d be competing with wouldn’t have to do it.”
The press conference was a coming out, so to speak, for Vecchione and Hynes, who have been conspicuously silent these last few months, even after Whitehouse publicly halted his review and said the merging parties appeared to have changed their minds.
Hynes said he was relieved to have the chance to set the record straight on the real issues stalling the process and that “there was never [a point] where one party wanted to abandon the merger.” Afterward Hynes said he was disappointed Whitehouse chose to speak publicly about the matter while it was still going on.
Whitehouse could not be reached for direct comment, but in a statement released Tuesday he said it would be “a wise decision” for Lifespan and Care New England to “pursue the advantages of a merger through mechanisms that are less of a blunt instrument than a full corporate merger.”
Whitehouse also outlined several goals Lifespan and Care New England could mutually pursue, including joint purchasing, outcome reporting and creating a multi-hospital computer data system for the consolidation, management and retrieval of clinical information on patients. He also suggested working towards “the management consolidation of the three superb hospitals located on the Rhode Island Hospital Campus – Rhode Island Hospital, Women & Infants and Hasbro Children’s Hospital,” and said if this was done aggressively “the enormous effort they have expended and the thousands of hours dedicated by this office to the merger will not have been in vain.”
Calling the Hospital Conversions Act the broadest and most comprehensive law of its kind in the nation, Hospital Association of Rhode Island President Edward J. Quinlan said that because of the “degree of subjectivity in the law, the interpretation by the attorney general who is holding the office at the time can be a factor” in whether a merger is approved.
He also said what has happened in the case of the New Lifespan doesn’t make it clear whether the state can judge merger applications on their true merits or if hospital boards are given enough credit for being able to make informed and conscientious decisions “on how best to serve their communities.”
Pursuing the merger so far has cost $5.1 million – $2.7 million to be borne by Lifespan and $2.4 million by Care New England – and Hynes said two-thirds of these costs were related to gaining FTC approval.
The Rhode Island AFL-CIO and the Coalition for Responsible Health Care (which includes labor groups, Landmark Medical Center and the state’s two major health insurers) applauded the merger withdrawal last week.
RI AFL-CIO President Frank J. Montanaro called it a victory for working families because it prevented the New Lifespan from gaining too concentrated a market share. Coalition spokesman Nicholas R. DeRosa said it kept the merging parties from creating higher costs and less choice in health care.
