Merger denied

Financially struggling CNE urged to find a new partner

Posted 2/22/22

By JOHN HOWELL "Kent (Hospital) has a bright future; they have to find the right partner." That is the assessment of Dr. Michael Dacey, a former president of the hospital, following Attorney General Peter T. Neronha's issuance last week of his decision

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Merger denied

Financially struggling CNE urged to find a new partner


“Kent (Hospital) has a bright future; they have to find the right partner.”

That is the assessment of Dr. Michael Dacey, a former president of the hospital, following Attorney General Peter T. Neronha’s issuance last week of his decision denying the proposed merger between Lifespan and Care New England and that the state would join the Federal Trade Commission’s lawsuit to block the transaction.

Kent is one of three hospitals in the CNE system, the others being Women and Infants and Butler. Kent is the state’s second largest hospital behind Rhode Island Hospital, which is a Lifespan hospital, employing more than 2,000 and largely serving the central and southern positions of the state. A merger of the two health systems would give the resulting entity about 80 percent of the state’s health care services.

Dacey, who voiced his opposition to the merger in an opinion piece in this paper, is not alone in saying Lifespan and CNE should severe their agreement sooner than later. He suggests that CNE first turn to Mass General Brigham (formerly Partners) that knows CNE and was prepared to make a substantial investment in the system until the plan was nixed by former Gov. Gina Raimondo, who with Brown University pushed the merger with Lifespan.

In an interview Saturday, House Speaker K. Joseph Shekarchi likewise favored an end to the exclusivity agreement between Lifespan and CNE. Asked whether state legislators could circumvent the AG and FTC with a Certificate of Public Advantage (COPA) and grant a merger, Shekarchi said he had only read a summary of Neronha’s decision and would want to more thoroughly research the issue before reaching a personal decision. Regardless, he said, “if a COPA is requested it will be given fair consideration.”

Losses compiling

There doesn’t appear to be much time to waste. At a Jan. 20 Warwick Rotary Club meeting where he was the speaker Dr. James Fanale, president of CNE, said Kent Hospital is losing $2 million a month largely due to the pandemic and the interruption of non-emergency services. CNE lost $28.1 million in operations through the end of this January according to spokeswoman Raina Smith. It could not be substantiated whether the loss was inclusive of federal aid.

Dacey points out that Brigham has a long relationship with Kent and because of its acquisition offer four years ago knows the operation and the parties could process an application comparatively quickly.

“All the information is out there,” he said.

Dacey thinks a route to explore, whether the marriage is with Brigham or another group – he prefers a not for profit provider although, he said, there are good profit ones – would be for CNE to divest itself of Women and Infants while keeping Kent and Butler.

Fanale’s office declined an interview.

He was quoted last Thursday saying, “Of course, we are disappointed, but I will say that we can truly know that we did everything we could over the past few years of hard work to get this done. We thought it was the right thing to do, but now we will need to move on to a new path forward. There is always a path forward, and we will explore all options to find the best possible - and acceptable to regulatory bodies – solution for access to affordable, quality, health care.”

Elimination of competition would push up costs

Not surprisingly, as he opposed the merger, Dacey said Neronha’s decision “was very very good…I thought he hit all the important issues; his decision was well communicated.”

In a release issued Thursday Neronha said, “I recognize how critical healthcare is for the State and for every Rhode Islander. The COVID-19 pandemic has only further underscored the vital importance of affordable access to high-quality care for all. Put simply, if this extraordinary and unprecedented level of control and consolidation were allowed to go forward, nearly all Rhode Islanders would see their healthcare costs go up, for health care that is lower in quality and harder to access.”

He went on to say, “Our review clearly established that Lifespan and CNE compete aggressively with each other across many inpatient and outpatient service lines. Eliminating this competition will have the same effects here as seen across the country following mergers of this size: rising healthcare costs, lower quality, and reduced access. The Parties simply have not demonstrated why these results would not happen here and how they would be able to deliver on promised benefits that would outweigh these risks.”

Lynn Blais, R.N., President of the United Nurses and Allied Professionals (UNAP), the state’s largest healthcare union, representing more than 7,000 nurses and health professionals, issued a statement disagreeing with the rejection of the merger.

In a statement she said, “It is clear that Care New England is in dire financial straits, and in no financial condition to sustain their operations as they currently are. The merger of these two groups could be our last, best chance to ensure a healthy, stable, not-for-profit healthcare system that stays under Rhode Island control.”

She said the decision opens the door for the CNE hospitals to be sold to an out-of-state for-profit corporation that “will almost certainly put shareholder profits ahead of quality patient care, as we’ve seen time and again …The people of Rhode Island can’t afford another buyer who wants to come in and suck every last nickel out of these hospitals in the interest of making a bigger profit for shareholders.”

3.6 million documents reviewed

Following submission of the merger application in April 2021 with the Attorney General and the Rhode Island Department of Health, which has yet to issue a ruling, the process of review commenced. According to its release the office of the AG collected and analyzed more than 3.6 million documents and took statements under oath of over 20 Lifespan and CNE executives, consultants they used for the merger, and representatives of Brown University; reviewed scores of academic studies; and worked closely with retained experts to analyze the proposed transaction.

In his talk at the Rotary Club, Fanale said Lifespan and CNE each spent $14.2 million on the application process.

The AG’s office found a combined CNE, Lifespan system would control 75% of all inpatient acute care hospital beds in Rhode Island; 80% of the Rhode Island market for inpatient hospital care; 79% of the Rhode Island market for inpatient psychiatric care and 60% or more of the Rhode Island market for many outpatient surgery specialties. Furthermore, the system would account for 50% of commercial healthcare spending on patients whose primary care physician is part of the merged system’s Accountable Care Organizations and employ 67% of Rhode Island’s full-time registered nurses working at a hospital.

Currently, reads the AG’s release, Lifespan and Care New England invest in greater quality and access to compete for Rhode Islanders’ healthcare business. Following a merger, the combined system would be empowered to make important decisions - such as cutting service lines that have lower profit margins or delaying innovation or capital investment - without facing the pressure of competition from each other.

As the AG explains, “When a system is so big, so dominant, that it is the only system that the vast majority of patients will go to for, say, inpatient care, that system no longer has to do the hard work to be better than the alternative because, there is no alternative.”

Financial constraints

Assuming there was oversight as proposed in the application, Neronha could not reconcile the financial realities of Lifespan and CNE with the promise that, when combined Rhode Island would be left with a financially healthy system that can make substantial investments in ambitious programs without raising costs on consumers, cutting services, or taking steps to keep their labor costs down.

“Taking the hospitals’ own estimates at face value, it is unclear where the new system would find the necessary revenue, savings, and financing to support the integration plan and make their proposed investments. Critically, this transaction would leave the vast majority of Rhode Island’s healthcare services in a single system that is too big to fail,” reads the release.

merger, Neronha, hospitals


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