PROVIDENCE, R.I. (WPRI) — A newly formed Pennsylvania company has made an unsolicited bid to buy the Care New England hospital system for $250 million, in what would be the company’s first successful transaction if approved.
StoneBridge Healthcare LLC of New Hope, Pennsylvania, said it has presented a non-binding letter of intent to Care New England, the owner of Women & Infants, Kent and Butler hospitals, which has been struggling financially for a number of years.
The proposal comes as Care New England is making another attempt to merge with its larger local rival, Lifespan, the owner of Rhode Island Hospital as well as Miriam, Newport and Bradley. The two sides are working to complete a definitive agreement by the end of January, and have an exclusivity agreement in place that bars negotiations with other parties.
In addition to the purchase price of $250 million, StoneBridge said it would spend $300 million on capital improvements at Care New England’s facilities if it takes over the organization, and pledged that a $125 million shortfall in the employee pension plan would be fully funded. StoneBridge’s proposal was first reported by the website GoLocalProv.
Last week Care New England disclosed a $13 million net loss for its 2019-20 fiscal year, which ended Sept. 30, due in part to a sharp drop in patient visits because of the pandemic.
“As the cost of care has risen and the COVID-19 pandemic has placed a tremendous strain on health systems across the nation, StoneBridge Healthcare is ready to assist Care New England during these challenging times to continue delivering an outstanding continuum of care to the region,” StoneBridge CEO Joshua Nemzoff said in a statement. “StoneBridge Healthcare has the expertise and financial resources needed to help lead Care New England to a promising future.”
StoneBridge would convert Care New England into a for-profit hospital company if the transaction goes through, Nemzoff told 12 News.
Care New England President and CEO Dr. James Fanale quickly dismissed the StoneBridge offer, saying “the best direction for Rhode Island’s health care future is the creation of a robust academic health system with the merger of Care New England and Lifespan, and a deep affiliation with Brown University.”
“Teams from Care New England and Lifespan are working now to solidify this exciting vision by marshaling data around the inner workings, financials, and metrics around quality of care and community care,” Fanale said in a statement. “Our plan hinges on a robust local system, where physicians and leaders can offer expertise across an affordable and accessible spectrum of care, where research flourishes and where Rhode Island becomes a national leader in health care areas that are important to our communities.”
Audrey Lucas, a spokesperson for Gov. Gina Raimondo, gave StoneBridge a cool reception.
“As she has said previously, the governor believes that a unified academic health system is in the best interest of Rhode Islanders,” Lucas said. “It is her understanding that Care New England, Lifespan and Brown University continue to have productive conversations, and she remains optimistic about the possibility of integration between these local institutions.”
The United Nurses and Allied Professionals union condemned StoneBridge’s proposal, comparing the company to Prospect Medical Holdings, the California-based firm that bought CharterCARE Health Partners in 2014. CharterCARE owns Roger Williams Medical Center and Fatima Hospital.
“We vehemently oppose the unchecked expansion of for-profit medicine in Rhode Island,” UNAP spokesperson Ray Sullivan said in a statement.
“Our experience with Prospect CharterCARE and others has taught us that out-of-state equity fund groups care more about enriching investors than Rhode Island patients and health workers,” he said. “While we still have a number of serious concerns and questions about a Lifespan/Care New England merger, we believe that deal has potential and should continue to be thoroughly vetted.”
Rhode Island Foundation President and CEO Neil Steinberg, who has been a leading voice in encouraging Lifespan and Care New England to reach a merger deal, said foundation leaders “aren’t familiar with the details of this unsolicited bid” but they continue to “strongly support a partnership between Care New England, Lifespan and Brown University.”
The goal of such a partnership, he said, should be “the creation of an integrated academic medical center with local presence and control and a strong commitment to eliminating disparities for more equitable health outcomes and affordable and accessible health care for all in our community.”
According to StoneBridge’s website, the company’s creation was announced just four months ago, and its initial focus has been on a similarly unsolicited effort to purchase Erlanger Health System in Chattanooga, Tennessee. That proposal has run into some opposition from local officials.
StoneBridge’s website does not appear to contain a full list of its investors, but the company describes itself as “capitalized through a multi-layered composite finance group.” Its financial backers include Medical Properties Trust, a publicly traded Alabama-based investor in health care real estate, and Oaktree Capital Management, an investment firm that focuses on distressed assets.
The prominent Rhode Island attorney Jonathan Savage of Shechtman Halperin Savage LLP confirmed in an email that he is serving as a legal counsel to StoneBridge in its Care New England offer.
Ted Nesi (email@example.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