StoneBridge Healthcare makes 2nd bid to acquire CNE

Updated at 4:57 p.m.

PROVIDENCE – For the second time since late 2020, a Pennsylvania company is making a bid to buy Care New England Health System, following the recent rejection of CNE’s  proposed merger with Lifespan Corp. by the Rhode Island attorney general and the Federal Trade Commission.

StoneBridge Healthcare LLC announced on Wednesday that it submitted a letter of intent to acquire Care New England in a $550 million transaction, including a $250 million purchase price and $300 million in capital investments over the course of seven years. StoneBridge, a for-profit entity, said it would fashion the transaction to keep Care New England as a nonprofit and collect a management fee for itself.

StoneBridge Healthcare proposed a similar deal to acquire Care New England in December 2020.

StoneBridge said the new proposal would stabilize the financially troubled Care New England, to allow the Rhode Island hospital system “to continue its mission to transform the future of health care for the communities” it serves.

- Advertisement -

“Care New England Health System has provided outstanding care to its patients for many years, and StoneBridge Healthcare is committed to the continuation of this high standard of care in Rhode Island,” said Joshua Nemzoff, StoneBridge CEO, in a statement. “We believe that StoneBridge Healthcare is in a strong position to help Care New England continue delivering cutting-edge care to the communities it serves for years to come.”

Care New England said it is not ready to comment on the proposal following the denial of the merger with Lifespan that was announced by Attorney General Peter Neronha on Feb. 17.

“It is important that we take a moment here at Care New England to meet, in person, with the staff at each of our operating units to answer any questions or concerns that they might have,” said Jess McCarthy, chief marketing officer for Care New England. “We are happy to speak with our friends in the media, but we must have conversations with our internal colleagues first and foremost, and we are rounding with them throughout this week.”

Lifespan and Care New England late Wednesday announced they will withdraw their merger application, rather than challenge Neronha’s ruling in court. They’ve also terminated an exclusivity agreement that prevented them from considering merger proposals from other parties.

“Leadership is focused on figuring out, with our academic partner, Brown University, the best path forward for the community in terms of cost, quality and access to health care in an extremely challenging environment,” read a statement from CNE.

Nemzoff told Providence Business News he thinks his company’s offer is the best CNE will get.

“I don’t think they have any other options right now,” Nemzoff said. “We tried to help a year ago. They said, ‘Sorry we have a deal with Lifespan. We tried to tell them, you have no chance of getting this past the FTC. We’re back again. Our only goal is to try to help them. We think we have the money and resources to do it. That’s what we’re trying to do.”

Asked about the impact of the proposed StoneBridge acquisition on staffing, Nemzoff said his company would preserve jobs. StoneBridge, however, would work to decrease Care New England’s reliance on pricy traveling nurses supplied by staffing agencies, he said.

“Obviously, we have no plans to eliminate their staffing at this time. As a matter of fact, we’d probably be looking for ways to recruit staff,” he said.

Nemzoff added that StoneBridge would “carefully [monitor] expenses” at Care New England, but would also maintain quality of care “at all costs.” He said StoneBridge would look to add acute care services and he expressed concern about an “extraordinarily” high proportion of the services offered by Care New England being focused on obstetrics and behavioral health.

StoneBridge also plans to bring in an unnamed academic medical center as an affiliation partner as part of its proposed Care New England acquisition. An academic partner would have a 20% stake in StoneBridge’s nonprofit acquisition of Care New England, Nemzoff said.

StoneBridge was formed three years ago with a mission of acquiring and turning around distressed hospitals, but thus far it doesn’t own any, Nemzoff said. The company originally raised funding through private equity, but then decided it didn’t want to go down that path, he added.

The company is also trying to acquire Tower Health in Pennsylvania through a $600 million acquisition deal it proposed last year in partnership with Lehigh Valley Health Network as its affiliation partner there. Nemzoff said his company has deals with four other academic medical centers around the country that it’s working with to acquire distressed hospital systems, although he declined to name them.

Care New England-operated hospitals include Women & Infants Hospital, Butler Hospital and Kent Hospital, and it also operates other health care facilities throughout the state.

StoneBridge noted its offer provides Care New England with the funding necessary to fully fund the Rhode Island hospital system’s employee pension plan, adding that the pension plan is currently underfunded by nearly $100 million.

Rhode Island House and Senate Democratic leaders said they will review StoneBridge’s proposal.

“Any hospital transaction must improve care and ensure that patients are protected. All Rhode Islanders deserve care that is accessible and affordable,” said Senate President Dominick J. Ruggerio. “I must stress that I am vehemently opposed to expanding the role for-profit entities play in our health care delivery system and I will once again submit legislation to impose a one-year moratorium on the sale of hospitals to for-profit entities.“

(UPDATES throughout with comment, details on proposal and withdrawal of CNE, Lifespan merger application.)

Marc Larocque is a PBN staff writer. Contact him at Larocque@PBN.com. You may also follow him on Twitter @LaRockPBN. PBN staff writer Cash Shuman contributed to this report.