Lifespan and Care New England have withdrawn their application to merge with one another
Lifespan, Care New England withdraw merger application
February 28, 2022
by John R. Fischer, Senior Reporter
Lifespan and Care New England will not be merging following opposition from the Rhode Island attorney general and the Federal Trade Commission.
In the works since last March, the agreement would have turned the two into one entity with up to 80% ownership over the state’s hospital infrastructure. But criticism that the deal would decrease competition and possibly increase overall healthcare costs led Attorney General Peter Neronha to reject the proposal this month and file a lawsuit with the FTC to block it from moving forward.
As a result, the two chose to withdraw their application to combine. They also have terminated their exclusive negotiating agreement, which will allow them to pursue mergers with other healthcare organizations, reported The Brown Daily Herald. “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," said CNE and Lifespan in a statement.
The merged entity would have consisted of eight hospitals with more options for protocol-driven therapies, according to Care New England and Lifespan. It would also eliminate health disparities and improve access to women’s health.
Backing the deal was Brown University’s Warren Alpert Medical School, which contributed $125 million toward it in the hope of forming an academic medical center through the deal. “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 told The Herald.
Lifespan and CNE have been attempting to combine since the 1990s, with the current deal being their fourth try. The FTC approved of a deal back in 2007, only for the state to reject it on the grounds that it was incomplete.
Under the Hospital Conversions Act, both organizations could have appealed the Neronha’s rejection of the merger in court. They also could have sought a certificate of public approval from the attorney general’s office to allow the merger to move forward despite antitrust concerns of the FTC, reported WPRI.
Hours before the two withdrew their application, StoneBridge Healthcare, a Pennsylvania company that purchases and helps “financially distressed hospitals”, according to its website, offered a $550 million bid for CNE. The transaction would include $250 million upfront and an additional $300 million invested over seven years for capital improvements.
The company previously offered the same amount for CNE in December 2020. The healthcare system rejected the bid in favor of a possible merger with Lifespan. With this more current offer, Stonebridge said it would also fully fund CNE’s employee pension program, which it estimates is currently underfunded by $100 million, as well as pay off the healthcare system’s liabilities.
“At the end of the day, their pension liabilities [would be] gone, all their debt [would be] gone,” through this acquisition,” Joshua Nemzoff, CEO of StoneBridge, told The Herald.
He has given CNE until March 25 to decide on StoneBridge’s offer, which includes expanding services not currently provided by Lifespan or CNE. He adds that he is also open to working with Brown University should CNE accept the deal. “We will be more than happy to talk to Brown University and see what kind of relationship we can have with them. But we were very open to anything that makes sense for the provision of quality care.”
In a statement Thursday, Raina Smith, a spokeswoman for Care New England, said it was too early to consider any sort of deal following the failure of the merger with Lifespan, according to The Providence Journal. “There are a number of viable paths forward that we are examining in the coming weeks."
Lynn Blaise, president of the United Nurses and Allied Professionals, said in a statement that Neronha’s rejection puts patient care in Rhode Island at risk of being plunged "further into the depths of for-profit healthcare" by opening up the potential for more out-of-state acquisition deals like the one offered by StoneBridge. “Our union has major concerns about this potential sale, and we urge Care New England and state leaders to ask the tough questions. Is StoneBridge, which was just created in 2020 and has never owned a single hospital, truly a “not-for-profit” or are they a for-profit masquerading as a not-for-profit?”
While a for-profit company, StoneBridge says it will complete the transaction as a nonprofit entity. It also plans to use 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.”
In the works since last March, the agreement would have turned the two into one entity with up to 80% ownership over the state’s hospital infrastructure. But criticism that the deal would decrease competition and possibly increase overall healthcare costs led Attorney General Peter Neronha to reject the proposal this month and file a lawsuit with the FTC to block it from moving forward.
As a result, the two chose to withdraw their application to combine. They also have terminated their exclusive negotiating agreement, which will allow them to pursue mergers with other healthcare organizations, reported The Brown Daily Herald. “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," said CNE and Lifespan in a statement.
The merged entity would have consisted of eight hospitals with more options for protocol-driven therapies, according to Care New England and Lifespan. It would also eliminate health disparities and improve access to women’s health.
Backing the deal was Brown University’s Warren Alpert Medical School, which contributed $125 million toward it in the hope of forming an academic medical center through the deal. “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 told The Herald.
Lifespan and CNE have been attempting to combine since the 1990s, with the current deal being their fourth try. The FTC approved of a deal back in 2007, only for the state to reject it on the grounds that it was incomplete.
Under the Hospital Conversions Act, both organizations could have appealed the Neronha’s rejection of the merger in court. They also could have sought a certificate of public approval from the attorney general’s office to allow the merger to move forward despite antitrust concerns of the FTC, reported WPRI.
Hours before the two withdrew their application, StoneBridge Healthcare, a Pennsylvania company that purchases and helps “financially distressed hospitals”, according to its website, offered a $550 million bid for CNE. The transaction would include $250 million upfront and an additional $300 million invested over seven years for capital improvements.
The company previously offered the same amount for CNE in December 2020. The healthcare system rejected the bid in favor of a possible merger with Lifespan. With this more current offer, Stonebridge said it would also fully fund CNE’s employee pension program, which it estimates is currently underfunded by $100 million, as well as pay off the healthcare system’s liabilities.
“At the end of the day, their pension liabilities [would be] gone, all their debt [would be] gone,” through this acquisition,” Joshua Nemzoff, CEO of StoneBridge, told The Herald.
He has given CNE until March 25 to decide on StoneBridge’s offer, which includes expanding services not currently provided by Lifespan or CNE. He adds that he is also open to working with Brown University should CNE accept the deal. “We will be more than happy to talk to Brown University and see what kind of relationship we can have with them. But we were very open to anything that makes sense for the provision of quality care.”
In a statement Thursday, Raina Smith, a spokeswoman for Care New England, said it was too early to consider any sort of deal following the failure of the merger with Lifespan, according to The Providence Journal. “There are a number of viable paths forward that we are examining in the coming weeks."
Lynn Blaise, president of the United Nurses and Allied Professionals, said in a statement that Neronha’s rejection puts patient care in Rhode Island at risk of being plunged "further into the depths of for-profit healthcare" by opening up the potential for more out-of-state acquisition deals like the one offered by StoneBridge. “Our union has major concerns about this potential sale, and we urge Care New England and state leaders to ask the tough questions. Is StoneBridge, which was just created in 2020 and has never owned a single hospital, truly a “not-for-profit” or are they a for-profit masquerading as a not-for-profit?”
While a for-profit company, StoneBridge says it will complete the transaction as a nonprofit entity. It also plans to use 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.”