Is merger Rx for state health care?

Posted 1/19/22

The first of two virtual public hearings will be held today on the proposed merger of the state’s two largest health care systems. Combined they would constitute more than 75 percent of the …

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Is merger Rx for state health care?


The first of two virtual public hearings will be held today on the proposed merger of the state’s two largest health care systems. Combined they would constitute more than 75 percent of the state’s health care providers.

Lifespan, the largest of the two, operates Rhode Island and Miriam Hospitals. Care New England operates Kent, the state’s second largest hospital in addition to Women and Infants and Butler hospitals. Merger of the two systems has been talked about for years. There have been discussions and after the planned acquisition of CareNE by Partners came apart three years ago, then governor Gina Raimondo urged the merger of Lifespan and CareNE. It wasn’t pursued. However, with the pandemic the two systems developed a cooperative and trusting relationship that kindled merger talks. On November 16, 2021 the Attorney General and the RI Department of Health declared the merger application complete, thereby starting a 120-day clock to reach a decision. Critical to the success of the application is the Federal Trade Commission ruling on whether the merger of the systems meet anti-trust regulations. To gain perspectives on what this merger means to Rhode Islanders and the institutions, we asked Dr. Michael Dacey, who grew up in Warwick climbed the ranks at Kent where he was president and COO before becoming Executive Vice President of Riverside Healthcare

System based in Newport News, Va. four years ago and Dr. James E. Fanale to comment. Dr. Fanale’s career also has its roots in New England. He is the president and CEO of CareNE, a leadership post he has held since 2018.

The first of the public comment meetings is today from 5 to 7 p.m. and the second Wednesday, January 26 from 3 to 5 p.m.

Meetings are accessible on the RIAG web site: civil-division/public-protection/healthcare and the RIDOH web site:

Merger would hurt Kent, impact communities


The next two months will see several decisions made that will alter the healthcare landscape in Rhode Island forever. The proposed merger of Lifespan and Care New England (CNE) is under review by the Federal Trade Commission and the RI Attorney General’s office. If either decides to oppose it, the RI state legislature will have to decide if it wishes to intervene and effectively take over governance of both systems or let them seek other alternatives.

This merger proposal would form a healthcare monopoly that would decrease quality of care, raise costs, cause the loss of at least 1,000 well-paying jobs, cause extremely destructive effects on several local economies, and will not rescue CNE even as it simultaneously weakens Lifespan.  

The combination of the two systems would give control over almost 80% of hospital capacity and the majority of the state’s physicians to a single organization. The FTC uses a point system based on market share to determine if a merger would be anticompetitive and illegal. Generally, they oppose any merger with a value over 2,500 or an increase of 200 points. The result for Lifespan/CNE is a value of 6,300 and an increase of 2,800 points! The combination would clearly be a monopoly. Presently, both systems compete in numerous areas of medicine and surgery and this competition makes both organizations better. It drives improved patient access, better service and raises the overall quality of care. Even Pittsburgh, whose medical system is often held up as the model for Rhode Island by merger supporters, has two strong vigorously competing health systems.

The proposal would have numerous destructive economic effects: The only way to make the combined system even remotely viable is to severely consolidate services, mostly into Providence. This would hit Kent Hospital especially hard, and I strongly believe that Kent would see a brutal reduction in both its workforce and in the types of programs that many have worked so hard to grow over the years. Inpatient capacity at Kent would fall, critical services such as emergency cardiac care would be scaled down dramatically and hundreds of jobs would be lost from Kent alone. This would severely damage the Warwick, West Warwick, Cranston and North Kingstown economies and no “guarantees” from health system executives to the contrary would dissuade me of this view. There are just too many ways around those types of promises. Damaged also would be access to care by the underserved populations of Woonsocket served by Landmark Medical Center and large underserved sections of Providence served by Roger Williams and Fatima hospitals.

But the worst thing of all: It will fail in the end. Lifespan does not have the financial resources to see to its own needs and the capital requirements of CNE. Years of losses have prevented CNE from making needed investments in medical technology and the basic buildings, plant and other equipment so vital to good patient care. Most health systems aim to invest at least as much each year as is depreciated on their financial statements. Last year, CNE invested only 72% of this amount. This underinvestment in the physical structure and technology of the hospitals is a multiyear story, resulting in the age of CNE facilities approaching twice the national average. Just before I left CNE four years ago, we estimated that the system would fall almost half a billion dollars short of what it required for such investments over the coming decade. I’ve looked carefully at Lifespan’s recent financial statements, and they don’t come close to being able to meet that type of need. Nor will the debt markets be able to help. CNE’s credit rating is very deep into junk bond territory and Lifespan is barely investment grade. The combination will be too weak, even with many layoffs, cost reductions and consolidations, to be able to borrow what is needed. This is especially true with interest rates rising and inflation raging. The combination of Lifespan/CNE will fail to rescue CNE and severely weaken Lifespan.

So, what then is the solution? One approach that has been suggested is that if the FTC denies the merger application, the state use its regulatory authority to effectively take over governance of a combined system and guarantee that it would not act in an anticompetitive manner. No one knowledgeable about healthcare seriously believes that Rhode Island government would be successful in this effort.

A much better course would be to divide CNE. Place Women & Infants and Butler with Lifespan in order to facilitate formation of a larger academic medical complex. Separate Kent, those parts of the CNE medical group not tied to Women & Infants or Butler and most of the other parts of the system into a separate entity. Even after all the debts and assets have been settled, the Kent component would still be a very desirable acquisition and many health systems on the east coast would be eager to acquire and invest in it. This would preserve competition, create a unified academic medical center in Providence and allow health care in the state to succeed as the pandemic wanes without the loss of possibly thousands of jobs.

In the end, whatever is done should strengthen the states’ healthcare institutions and improve the care of our family members. A Lifespan/CNE merger would do just the opposite.

Care New England is proposing to merge with Lifespan, and together in an academic affiliation with Brown University, will form the first Integrated Academic Health System (IAHS) in Rhode Island. The goal of the merged entity will be to improve quality, access, cost, equity, academic medicine and spur tremendous growth in research and economic development in the state. Much has been written about the past history of such mergers and the effect on prices and quality. However, we feel very strongly that this proposed merger is far different than other mergers. And, it’s important to point out that a combined system’s size (approximately a $4 billion company) is vastly smaller than competing systems in Connecticut and Massachusetts whose sizes range from $9 billion to $16 billion. Rhode Island deserves better than a disjointed system that cannot serve as an economic engine in its current arrangement.

A few notes on why this proposed merger is so incredibly good for The State of Rhode Island: ● It creates the first integrated academic system in RI and allows these two systems, who frequently share patients as services are largely complementary, to have an integrated health record, which alone will reduce duplication of services, resources , time and costs.

  • The Office of the Health Insurance Commissioner (OHIC) currently limits hospital rates so the merged entity does not have the capacity to increase costs above the OHIC cap. Other states do not have an OHIC, and in a publication released last year in Health Affairs, it was demonstrated that OHIC rate caps have worked to limit the rise in costs. This is a key reason why this merger would be vastly different than others, as others have this concern about cost that is uniquely disallowed here.
  • The merged entity makes substantial and significant pledges to improve quality, equity and access. These pledges are specific, with measurable outcomes that can be tracked and enforced.
  • A recent report commissioned by Brown University demonstrates the extraordinary economic development that such an IAHS will produce, similar to what has been seen in other cities such as Pittsburgh, Boston and Worcester.
  • There are currently over 3,000 job openings between Care New England and Lifespan. To say that there will be a reduction in work force of 1,000 is not a factual statement whatsoever.
  • The COVID-19 pandemic has strained health care as we know it in the region. Bringing these two organizations together will ensure that they work together to be able to effectively shoulder the burden of the next catastrophic event or pandemic.
  • The merger also brings financial resilience to both organizations allowing them to succeed in their core missions to serve our community.

There is a lot of debate about the pros and cons of the proposed merger. I encourage everyone to think critically about who they listen to when gathering facts in order to formulate their own opinion. Current healthcare, finance and quality experts, who are living day in and out in these systems, are telling the truth.

There is a website where dozens of experts currently working in these disjointed systems have created briefs on how this would effect their work:

Folks who are not involved in the current backend, or maybe think that past experience or experience in another state might deem them qualified to opine, can seem irresponsible in their statements to those of us who have been working for years to strategize the best health care and economic solution for Rhode Islanders. We strongly feel that approving the merger will clearly improve the quality, service and access to health care and economic success of the Ocean State.

Dacey, Fanale, merger


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