The U.S. Federal Trade Commission and the Rhode Island Attorney General are taking legal action to prevent the state's two largest healthcare systems from merging together.

Lifespan Corporation and Care New England Health System inked a deal in March of last year to merge into an integrated health system made up of eight hospitals across the state. Together, the two believe their complementary medical specialties and biomedical research would offer patients more options for protocol-driven therapies, eliminate health disparities and improve access to women’s health.

Backing the deal was Brown University’s Warren Alpert Medical School, which said it would increase economic opportunities and protect patients and community hospitals. It agreed to contribute $125 million toward the new entity.

But critics say the merger would decrease competition and possibly increase overall healthcare costs. In a vote, the agency unanimously opposed the deal out of concern that it would create a “healthcare conglomerate with outsized power” and said that it plans to file a lawsuit to block the deal, according to Reuters.

"This proposed merger is a bad deal for patients who are likely to see higher hospital bills, lower quality of care, and fewer cutting-edge medical services," said FTC Bureau of Competition Director Holly Vedova in a statement.

Joining the lawsuit is State Attorney General Peter Neronha, who also rejected the proposal, reported WPRI. “Rather than putting the healthcare systems on stronger financial footing, the proposed merger would leave Rhode Island’s healthcare system in even greater financial peril,” he wrote in his 150-page decision.

The deal would give the newly combined hospital system roughly 70% to 80% of treatments in the Rhode Island market that require hospital stays, as well as an equally high share of the market for in-patient behavioral health services, according to the FTC. It plans to use this as its main complaint in court. Neronha added that the biggest hospital groups in Massachusetts and Connecticut, Mass General Brigham and Yale New Haven Health, respectively, already control less than one-third of inpatient care in their states.

A spokeswoman for Care New England refused to say if both companies were terminating the deal. It could also appeal the attorney general's decision under the Hospital Conversions Act, but would likely face a challenging legal battle.

But in a statement, Care New England President James Fanale expressed disappointment with the FTC’s decision. "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.”

If the merger were approved, the two would employ over 23,600 staff members in Lifespan’s Rhode Island, Miriam, Hasbro Children’s, Newport and Bradley hospitals, and Care New England’s Women and Infants, Kent and Butler hospitals. Lifespan would offer its expertise in neurology, cardiology, orthopedics, pediatrics and cancer treatment, while Care New England would bring specializations in family medicine, obstetrics, gynecology, neonatology and adult psychiatry.

Care New England and Lifespan have explored a possible merger four times since the 1990s. The FTC approved of a deal back in 2007, only for the state to reject it on the grounds that it was incomplete.

Talks on the most recent attempt started in September 2020, a year after similar talks failed. Both companies expected a lengthy regulatory process. Pennsylvania’s StoneBridge Healthcare also made a $550 million buyout offer to Care New England. The healthcare system offered to buy out CNE for $250 million and invest $300 million in capital improvements over six years. Employees' pension plans would also have been fully funded.

CNE rejected it due to its interest in a possible merger with Lifespan. It even signed an exclusivity agreement that barred it and its executives from entering similar talks with other interested buyers.