While the CEO and president of Care New England Health System is planning an exit in the wake of a failed merger, Dr. James E. Fanale and the board of directors at Rhode Island’s second-biggest hospital group will have their work cut out for them before his scheduled retirement in early 2023.
Care New England is still facing the same financial difficulties that drove the company to fight unsuccessfully for a merger with the state’s biggest hospital company, Lifespan Corp., an arrangement that was ultimately shot down in mid-February by state and federal authorities because of concerns about lowering the quality of care. But it’s unclear how long CNE leaders are willing to wait before arriving at another solution, such as an acquisition by a for-profit investor or a partnership with another nonprofit hospital system in the region.
Jessica McCarthy, a Care New England spokesperson, said a national search for a new CEO is kicking off soon, and that Fanale will be a “key part” of that search “while he also focuses on continuing the strategic work of how CNE will partner with others to gain financial traction” to make sure the company has the best operational efficiencies possible.
Care New England recently posted its fiscal year 2022 second-quarter report, showing that the company lost $35.1 million in the first six months of fiscal 2022, which ended on March 31. That loss was $19.4 million worse than the company’s forecast and a dramatic reversal from CNE’s profit of $42.5 million in the same time period a year earlier. CNE's results for the first half of fiscal 2022 factor in $10.1 million of federal COVID-19 stimulus funds granted to the company, and the $77.5 million of federal and state stimulus grants for the fiscal 2021 time period. That means the true operating results were a $35 million loss for the first half of fiscal 2021 and a $45.2 million loss so far in fiscal 2022.
McCarthy noted that “all hospitals took a hit” as a result of the COVID-19 pandemic, with fewer patients coming in for elective surgeries and “so much money” being spent on agency fees for traveling nurses to meet staffing shortages. She said it’s important to look at the S&P Ratings that also came out recently, affirming the company’s B-plus rating and showing that “operationally we’ve been doing the best we can.”
While the S&P Global Ratings revised its financial outlook on Care New England from “developing” to “negative,” McCarthy said this “merely reflects the termination of the application process” to merge with Lifespan.
“Our rating held through COVID,” McCarthy said. “It clearly illustrates the good work everyone has done throughout the pandemic.”
StoneBridge Healthcare LLC CEO Josh Nemzoff, whose Pennsylvania-based company made a second proposal in February to acquire CNE for $250 million and $300 million more in capital investments, said the recent financial reports show that remaining as a standalone, independent health care system could be “a very risky option” for Care New England.
“I frankly think Dr. Fanale has done a very good job and I heard him say in presentations that [CNE] would have been fine if it wasn’t for the pandemic. He’s absolutely right,” Nemzoff said. “It’s not anybody’s fault. It’s certainly not his fault. He’s done a good job at keeping the ship afloat. But they need to think about the future, not the past.”
Jane Hayward, former CEO and president of the Rhode Island Health Center Association, who helped the Rhode Island Foundation develop a list of recommendations related to the planned merger with Lifespan at the request of the nonprofit hospital groups, said Care New England is likely taking “a very deliberative approach to what the future looks like” and could benefit from “new eyes” in the company’s administrative offices to review the company’s options.
“Sometimes that brings up something that hadn't been considered before, or was considered but was discarded for whatever reason,” Hayward said.
Fanale said recently that it’s possible that Care New England returns to the table with nonprofit Partners HealthCare corporation in Massachusetts, now known as Mass General Brigham, after a proposed merger between the two companies was abandoned in 2019 after former Gov. Gina M. Raimondo pushed for a merger with Lifespan.
The United Nurses & Allied Professionals union, which represents 1,500 of the roughly 7,500 employees of Care New England, is now urging the General Assembly to step up during this period of transition and uncertainty by allocating federal American Rescue Plan Act funding “to help stabilize [the hospital group’s] finances and avoid a hasty selloff to a for-profit.” Such a transaction “could have long-lasting negative repercussions on Rhode Island's health care system,” UNAP said in a statement.
That’s a position shared by Patrick Quinn, executive vice president of Service Employees International Union 1199NE, which represents about 1,500 Care New England employees at facilities such as Women & Infants Hospital, Kent County Memorial Hospital and Butler Hospital.
“The state has to step up and support them so they don’t deteriorate financially and have to make a bad deal,” Quinn said. “We think CNE provides an amazing amount of critical and important care to Rhode Island. It’s a community asset. Everyone should be trying to help it get to a position of stability. That should be supported not only with words but funding.”
Quinn also said any future merger discussions and the search for a new CEO should take into consideration the interests of the front-line workers and patients, not just the executives and board members.
“It’s too important to be left up to the leaders of the organization,” he said. “The community, patients and workers need to have a voice in on that.”
