PROVIDENCE, R.I. (WPRI) — The outgoing chief executive of Care New England said Tuesday he expects a decision as soon as next month about the system’s future, as it searches for a merger partner yet again.
Rhode Island’s second-largest hospital group has been struggling financially for years, leading to multiple attempts to join forces with another health care system — most recently Lifespan, the state’s biggest hospital group. Regulators rejected that deal in February.
In an interview with 12 News, Care New England President and CEO Dr. James Fanale said his executive team has hired consultants to vet potential suitors for their financial, operational and academic suitability. He expects to present the board of directors with options to consider by the end of June or July.
“We know we’ve got to get this done pretty quickly, but [the board is] not going to move too quickly that they make the wrong decision,” Fanale said.
“We’ve got this. We’re not going bankrupt. Nobody needs to worry,” he said. “But we have to evaluate every proposal and option, because we need to do it that way.”
Asked how soon an announcement could be made, Fanale said, “I’d love to say that, you know, in 35 days or so we’ll have some kind of idea — that’s what I really dream that we would. But as my CFO would say, we think it’s a 60-day timetable, maybe 90 — but not 180. So I think it’s imminent.”
The only potential takeover offer that has been made public so far is from Pennsylvania-based StoneBridge Healthcare, which bills itself as a company that buys and turns around distressed hospitals. Care New England executives spurned a previous unsolicited offer from StoneBridge back in 2020.
Fanale said Care New England has received acquisition interest from between three and five organizations, including “a couple of formal proposals,” though he didn’t offer names.
Care New England is the owner of Women & Infants, Kent and Butler hospitals. The organization has roughly 7,500 workers, making it one of the state’s largest employers. Fanale said executives there continue to think the best option would be keeping its current facilities together.
“That’s what we prefer, and right now I would say that all the evaluations are for the entire entity,” he said.
“You know, if an acquirer comes in and wants to change it, that’s a whole other issue,” he added, pointing out that any new owner of Care New England will face the same regulatory scrutiny from the attorney general’s office that the failed Lifespan merger just did.
Care New England’s current financial situation remains precarious. The system posted an operating loss of $35 million on about $600 million in revenue during the six months ended March 31, which Fanale attributed to the unexpected winter COVID surge as well as supply chain issues and rising labor costs.
Care New England is asking state leaders to allocate a share of Rhode Island’s roughly $1 billion in federal American Rescue Plan Act funding to stabilize the system, particularly Kent Hospital, Fanale said. A decision is expected within weeks as the state budget gets finalized.
At the same time, Fanale downplayed concerns about Care New England breaching its bond covenants, which are financial benchmarks put in place by its creditors. He said the hospital system should have no problem maintaining enough days of cash on hand, and expressed optimism that its debt coverage ratio will also be satisfied.
“I think the last two months’ operating performance has been a loss of less than $1 million, and a half a million each month,” he said. “There’s progress. We see things improving. But we still need a lot of help to get through it.”
Fanale himself is entering his final months leading Care New England, having announced earlier this month he plans to retire in early 2023. His counterpart at Lifespan, Dr. Tim Babineau, also just announced his own retirement — meaning both of Rhode Island’s biggest hospital groups will soon have new leaders.
Fanale said he has been thinking about retiring for a few years, and would have had a natural opportunity to exit if one of Care New England’s various unsuccessful mergers had gone through. But he was emphatic that the timing is of his own choosing.
“People need to understand, this transition of mine is a personal one,” he said. “It has nothing to do with anything else. I didn’t get fired — I mean, if I did, I’d be gone tomorrow. But my board has been very supportive.”
“I’ve got kids, a wife, and I really would like to do a few other things,” he added.
Ted Nesi (email@example.com) is a Target 12 investigative reporter and 12 News politics/business editor. He co-hosts Newsmakers and writes Nesi’s Notes on Saturdays. Connect with him on Twitter and Facebook