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Lifespan-CNE merger needs guardrails to control new hospital giant, report argues

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PROVIDENCE, R.I. (WPRI) — Lifespan, Care New England and Brown University should commit $50 million to community investments and agree to a host of other conditions in order to win approval for their proposed hospital megamerger, according to a new report.

Lifespan and CNE announced plans last February to combine into a single hospital system affiliated with Brown University that would dominate health care in Rhode Island. In June, the three organizations asked the Rhode Island Foundation to convene a 25-member committee to provide feedback.

Summing up the committee’s findings, Rhode Island Foundation President and CEO Neil Steinberg said the hospital merger “needs a lot of bumpers.”

“It needs a lot of input from the community,” he said. “It needs very strong oversight so we do not create a system that is more expensive, less accessible, and without better outcomes.”

“This proposed new system is really an opportunity to transform the way health care is delivered in the state,” said Rhode Island Health Center Association President and CEO Jane Hayward, who co-chaired the committee with Steinberg. “And that requires the input of the community so that we can make sure that we meet the needs of the community, and not just the institutions.”

“We want this to be 1 + 1 + 1 equals 4 or 5,” Hayward said, “not 3.”

The 39 recommendations contained in the committee’s 69-page report are being released just as scrutiny of the proposed Lifespan-CNE merger kicks into high gear.

Attorney General Peter Neronha and the R.I. Department of Health announced Tuesday the two organizations’ merger application has been “deemed complete” — a formal step that kicks off a 120-day review period. Both agencies must decide by March 16 whether to approve the transaction, deny it, or approve it with conditions.

Separately, the two not-for-profit corporations are also facing an intense vetting by the Federal Trade Commission, which is examining the potential anti-competitive effects of letting one organization control most hospital services in Rhode Island. The FTC has given no public indication of when it will issue a decision.

The Rhode Island Foundation report divides its recommendations into eight categories: equity, oversight, access, cost, quality, workforce, community responsibility, and governance.

A theme across multiple categories is the need for Lifespan, CNE, and Brown to all do more for average Rhode Islanders, particularly in communities of color. Focus groups convened by the committee found significant district of all three institutions, and particularly Brown.

“Teaching hospitals are not necessarily viewed positively in the minority communities,” Hayward said. “There will need to be some work done to establish that level of trust.”

The report proposes that $50 million — half from the hospital groups, half from Brown — be directed over five years toward direct cash support for community agencies and organizations. The Rhode Island Foundation could potentially manage distribution of the money.

The committee also calls for expanding access to care and improving health outcomes, especially among communities of color; increasing the diversity of the hospitals’ workforces, including at the executive level; and doing more contracting with minority- and women-owned businesses. Bolstering primary care and behavioral health are also cited as key needs.

On the governance side, the report proposes creation of a community advisory board for the new hospital group, to be appointed jointly by the attorney general and the Health Department. Some members of that board would also serve on a reconstituted board of directors for the merged hospital group.

The report says the new board of directors should conduct a nationwide search for a new CEO to lead the new hospital group — a noteworthy recommendation amid ongoing speculation about whether one of the two current chief executives, Lifespan’s Timothy Babineau or CNE’s James Fanale, might seek the top job if the transaction is approved. (Steinberg and Hayward said both men could apply for the position.)

Amid concerns about a potential increase in costs as well as a more general lack of accountability over the long term, Hayward said the state should build some sort of new regulatory apparatus to act as a watchdog on the merged hospital group. She pointed to Maryland’s hospital rate-setting board or the Massachusetts Health Policy Commission as potential models.

“There currently is no one place in the state … that has the breadth and depth of being able to oversee an entity this large,” Hayward said, adding, “There needs to be something built — and it needs to be built quickly — in order to oversee an entity of this size.”

Transparency is also a concern. For example, Hayward suggested not enough detail has been provided about Brown’s exact role in the new hospital group. While the university is not a direct party to the merger, it plans to be closely involved in the new organization, including financially.

“It’s kind of like a black box,” Hayward said.

The leaders of Lifespan, CNE and Brown thanked the Rhode Island Foundation for the report in a joint statement, saying they share the committee’s focus on “equity, access and community responsibility to ensure affordable and quality health care.”

“We remain committed to working transparently with state and federal officials, as well as community members from across the state, in realizing our vision for improved health care for Rhode Island,” they said.

Some state lawmakers are also expressing increasing concern about the merger.

House Minority Leader Blake Filippi, a New Shoreham Republican, has argued the transaction is an “insider deal” that has its roots in then-Gov. Gina Raimondo’s 2019 move to squelch a takeover of CNE by the Boston-based parent of Brigham & Women’s Hospital.

State Rep. David Morales, a Providence Democrat, said Tuesday he remains wary of the proposal because it would create what he described as a “a gigantic conglomerate.”

“I am very concerned that allowing one entity to become overwhelmingly dominant within our health care system is going to have serious, detrimental effects for Rhode Islanders, as we would have a near-monopoly with little oversight and accountability,” Morales said in a statement.

But U.S. Sen. Sheldon Whitehouse, who in recent years has advocated for having the state’s largest hospital groups join forces, expressed optimism.

“A merger has great potential to be good for Rhode Islanders if the result is a new locally controlled system that provides affordable, high-quality health care,” Whitehouse said. “Oversight will be key, and the new governance structure should include unions, consumers, and payers.”

Ted Nesi (tnesi@wpri.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, Facebook, LinkedIn and Instagram

Copyright 2021 Nexstar Media Inc. All rights reserved. This material may not be published, broadcast, rewritten, or redistributed.

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