Care New England CEO backs Lifespan merger – if Partners is included

Business News

PROVIDENCE, R.I. (WPRI) — Five months after pulling the plug on merger talks with rival Lifespan, the head of No. 2 hospital group Care New England says he is ready to restart negotiations — but only if the biggest health care system in Massachusetts is part of the conversation.

In an interview with WPRI 12, Care New England President and CEO Dr. James Fanale said the financial health of both Lifespan and his organization “is not as strong as it needs to be.” Last week Lifespan, owner of Rhode Island Hospital, reported a $35 million annual loss; Care New England, owner of Women & Infants, said it eked out only a small profit.

“If you look at the financial situation that Lifespan’s in and we were in, how does it make sense that you take an organization that’s barely turning a profit and one that’s now – Lifespan’s losing money – how does putting them together ensure financial success in the future?” Fanale said.

“I think, however, if we combine our resources, combine our efforts together with a fairly large and very powerful and very strong, high-quality organization like Partners, I think that’s a solution we should proceed down the path with,” he said.

Fanale’s comments could reignite the debate over the future of Rhode Island’s largest health care organizations as well as how big a role should be given to Partners, the powerful Boston-based parent company of Brigham & Women’s and Mass. General hospitals.

All the parties are intimately familiar with each other. Lifespan and Care New England made a failed attempt to merge in the 1990s and another in the 2000s. Then in 2017 CNE struck a deal to become a division of Partners, and the following year Lifespan entered three-way talks with CNE and Partners about some sort of combination along the lines of what Fanale is discussing now.

But the three-way talks ended without a deal involving Lifespan, and then this past June Partners walked away from its planned takeover of CNE when Gov. Gina Raimondo asked Fanale and his board to make one more attempt to merge with Lifespan. CNE abandoned those negotiations weeks later, triggering months of recriminations and leaving no clarity about what will happen next.

Lifespan reacted warily to Fanale’s latest overture.

“As we have stated many times, a local unified solution needs to be agreed upon first (CNE/Brown/Lifespan) — particularly as it pertains to local governance,” Lifespan spokesperson Jane Bruno told WPRI 12 in an email.

“If such an agreement could be reached then that new entity would conceivably entertain having conversations with other large regionally based healthcare systems including Mass General Brigham Health,” she said, alluding to Partners’ pending name change. “In that scenario, the local unified academic healthcare system has a much better chance of ‘negotiating’ a relationship with another entity where the interests of Rhode Island are better protected.”

Fanale said he has called Lifespan CEO Dr. Timothy Babineau “five times” in order “to begin to have discussions about how we might work better together,” but has not been able to convince him to have a meeting.

“You can’t have a path forward unless you can sit down and talk,” Fanale said.

Bruno indicated Babineau isn’t interested in talking with Fanale as long as Care New England continues to develop a closer relationship with Partners, because Lifespan’s leaders “struggle to understand how ‘re-engaging’ in discussions will be productive and better serve the interests of the state and patients.”

“As long as CNE continues to promote a major competitor expanding their reach into this state — to the detriment of all Rhode Islanders — it will be difficult to get the parties back to the table in a truly meaningful way,” she said. “CNE can decide how best to address that.”

Fanale acknowledged he talks regularly with officials at Partners, which has a decade-old Brigham-branded cardiovascular operation at CNE-owned Kent Hospital in Warwick. In the months since the various merger proposals were abandoned, CNE has also announced additional collaboration with Partners. But Fanale said there have been no discussions about “what the future relationship might be.”

As for Partners, spokesperson Rich Copp told WPRI 12, “We value our longstanding clinical affiliation with CNE and we remain committed to the health of patients in Rhode Island. Last summer at the request of the governor, we withdrew our application to acquire CNE. We have no plans to revisit merger talks at this time.”

Josh Block, a spokesperson for Governor Raimondo, said: “The governor’s priority is ensuring care remains local and costs stay down. She believes an integrated local hospital system is an important first step to accomplishing these goals, and she continues to encourage the parties to come back to the table in good faith.”

The tensions between Lifespan and Care New England have spilled over into other areas, too.

Lifespan was recently seeking a change to complex federal rules around Medicare rates to bolster its finances, but the tweak required Care New England’s consent — and CNE refused to provide it. Lifespan estimates the change will cost Providence County hospitals — other than Women & Infants — roughly $40 million annually.

Care New England says it was willing to go along, but only if in return Lifespan agreed that it would not try to use its ownership of the land underneath Women & Infants to block a Partners-CNE transaction.

“We were putting the financial situation at Women & Infants at somewhat of a risk to do this, but we thought we could work it out that it would work to everybody’s advantage,” Fanale said. “And everybody agreed — but it didn’t work for Lifespan. And that’s their decision.”

Bruno argued the request on the Women & Infants land lease was “completely and utterly unrelated” to the proposal to increase Lifespan’s Medicare reimbursement rate. She said when Rhode Island Hospital agreed to the century-long, $1-a-year lease in 1983, “the vision was for the two hospitals to combine into a single entity” — not to “potentially bring a major competitor onto the Rhode Island Hospital campus” in the form of Partners.

“Finally,” she added, “why would we essentially give the charitable assets of Rhode Island Hospital to a $12 billion Massachusetts-based corporation? The demand was absurd and would have put the charitable assets of Rhode Island Hospital at great risk.”

Fanale disagreed, saying, “We asked for some things that we thought were reasonable to do a deal like that, because there were risks for us to do this.”

Ted Nesi (tnesi@wpri.com) is WPRI 12’s politics and business editor and a Target 12 investigative reporter. He is a weekly panelist on Newsmakers and hosts Executive Suite. Follow him on Twitter and Facebook

Copyright 2020 Nexstar Broadcasting, Inc. All rights reserved. This material may not be published, broadcast, rewritten, or redistributed.

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