Lifespan and Care New England withdrew their application to merge into one integrated health system Feb. 23 after Rhode Island Attorney General Peter Neronha and the Federal Trade Commission decided to file a lawsuit to block the merger last week. The merged entity would have owned 80% of the state’s hospital infrastructure, The Herald previously reported.
The two hospital systems have also terminated their exclusive negotiating agreement, according to a joint statement by Lifespan and CNE, allowing both to pursue mergers with other health organizations.
The organizations had the ability to appeal the decision in court under the Hospital Conversions Act, the state law that governs hospital merger applications, The Herald previously reported. According to WPRI, the parties also could have sought a certificate of public approval from the Attorney General’s office, which would have allowed the merger to go through despite antitrust concerns posed by the FTC.
Lifespan and CNE did not respond to requests for comment from The Herald by the time of publication, but CNE Spokesperson Raina Smith told The Boston Globe that the health systems will not pursue either option.
In a joint statement, Lifespan and CNE said that “both organizations are committed to partner in ways that are appropriate from a legal perspective, and allow them to best serve the needs of the community.”
“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 healthcare in an extremely challenging environment,” the statement continued.
When asked about the University’s future plans for collaboration with the two companies, University Spokesperson Brain Clark wrote in an email to The Herald that the University “has long-standing affiliation agreements in place with Lifespan and Care New England, both of which have been instrumental to our success in medical education and research, and this very much remains the case now.”
“Brown remains steadfastly committed to supporting the work of the physicians who work in both Lifespan and Care New England, serving the health of Rhode Islanders and fueling the local economy through the teaching, research and service conducted by the Warren Alpert Medical School, Brown’s School of Public Health and other academic departments and programs,” President Christina Paxson P ’19 said in a statement to The Herald.
Hours before the parties withdrew their application, StoneBridge Healthcare — a Pennsylvania-based company specializing in purchasing and turning around “financially distressed hospitals,” according to its website — announced in a press release an unsolicited bid for CNE with a purchasing price of $250 million and an additional $300 million invested over seven years for capital improvements. StoneBridge also offered to fully fund CNE’s employee pension program, which StoneBridge estimates is currently underfunded by $100 million, and pay off the health system’s liabilities, the press release said.
Joshua Nemzoff, CEO of StoneBridge, told The Herald that “at the end of the day, their pension liabilities (would be) gone, all their debt (would be) gone,” through this acquisition.
CNE has until March 25 to decide whether to sign the acquisition deal, Nemzoff said.
In StoneBridge’s letter of intent to acquire CNE, the company outlined avenues for improvement, including expanding services not currently provided by Lifespan or CNE and challenging the perception that the quality of out-of-state medical care “is better, even though those services are also available in Rhode Island.”
After Neronha announced he would reject the merger, President of the United Nurses and Allied Professionals Lynn Blaise expressed concern that the decision would allow hospitals in the state to be sold to out of state, for-profit organizations, ultimately to the detriment of patient care in Rhode Island, The Herald previously reported.
While StoneBridge is a for-profit company, the letter of intent explained that the company “will structure the transaction so that the hospitals will continue to be operated as part of a non-profit health system after the transaction is completed.”
“Now you have a not-for-profit foundation and all that money has to be used for the benefit of people,” Nemzoff said.
Nemzoff emphasized that “there’s only one hospital capable, from a business point of view, of operating Care New England, and that's Lifespan,” Nemzoff said. “That deal is now dead. There is no Rhode Island solution.”
While the University previously hoped to form an academic medical center through the rejected merger, “StoneBridge intends to utilize its unique partnership model to bring in an academic medical center as an affiliation partner in an effort to improve the quality of services being offered at Care New England and reduce the levels of outmigration to Boston and to a lesser extent New Haven,” according to StoneBridge’s press release.
Nemzoff expressed that StoneBridge is “very open to the idea of working with Brown University” in the event that an acquisition occurs.
“We will be more than happy to talk to Brown University and see what kind of relationship we can have with them,” Nemzoff said. “But we were very open to anything that makes sense for the provision of quality care.”
Nemzoff added that partnerships with academic medical centers are another way to improve quality.
According to The Boston Globe, StoneBridge previously made a $550 million bid for CNE in December 2020, which Lifespan and CNE’s exclusive negotiating contract prevented CNE from considering.
Now, Nemzoff said that “the exclusivity is gone, so the door is now open for them to talk to us.”
With the health systems free to consider other options, CNE Spokesperson Jess McCarthy told WPRI that “it is important that we take a moment here … to meet, in person, with the staff at each of our operating units to answer any questions or concerns that they might have.”
McCarthy declined to comment to The Boston Globe on the specifics of StoneBridge’s offer.