PROVIDENCE, R.I. (WPRI) — In an unexpected turn of events, Care New England’s leaders announced Wednesday they have put together a plan that will allow Rhode Island’s No. 2 hospital system to remain independent rather than merge with a bigger system.
“This is a new day,” CNE President and CEO Dr. James Fanale told 12 News. “It’s kind of exciting.”
The owner of Women & Infants, Kent and Butler hospitals, CNE is one of Rhode Island’s largest employers in addition to being one of the state’s most important medical providers. The not-for-profit corporation has been facing financial challenges for years, leading to a series of unsuccessful merger attempts, most recently a blockbuster deal with Lifespan that was blocked by regulators.
“Out of this morass of regulatory failures comes an option that lets us be a standalone not-for-profit,” Fanale said. The system’s board of directors has voted unanimously to endorse the strategy.
A linchpin of the new plan, according to Fanale, is the significant financial support that legislative leaders gave to the hospitals in the new state budget that passed last month. That includes a significant bump in the Medicaid reimbursement rate for delivering babies — a major boost to Women & Infants, where the vast majority of children are born in Rhode Island.
Fanale singled out the efforts of House Speaker Joe Shekarchi, whose chamber takes the lead on the state budget and who has expressed ongoing concern about the future of Kent in his hometown of Warwick. He also said state Sen. Lou DiPalma, a senior member of the Senate Finance Committee, played a key role in crafting the legislative language that aided CNE.
In a statement Wednesday, Shekarchi described Kent as “near and dear to my heart.”
“I worked hard throughout this year’s budget process to make certain that Kent will have the resources necessary to continue providing quality health care and to protect the jobs of the dedicated professional staff,” the speaker said. “The state funding will help Kent and Care New England as it works to build a stronger health care delivery system.”
In addition to the new state funding, CNE is also developing new agreements with business partners including Lifespan, Brown University and Blue Cross & Blue Shield of Rhode Island to ensure “an operating margin that will allow us to be stable financially and start investing on the capital side.”
A spokesperson for Lifespan, Kathleen Hart, said: “We continue to explore opportunities to collaborate with Care New England on efforts that best serve the health care needs of the community, and we wish them much success with this effort.”
Another source of cash: in March, Brown agreed to buy four Jewelry District buildings owned by Women & Infants from CNE, three of which the hospital system planned to lease back and continue using.
Brown President Christina Paxson said the school is “eager to work further with CNE and other parties in the state to ensure that Rhode Islanders have access to high-quality health care within the context of an academic health system.” She said Brown is “focused on ensuring productive partnerships among the clinicians who treat patients in hospitals and the scientists developing new biomedical discoveries and treatments.”
It remains unclear what Blue Cross is doing for CNE. Asked for more details, Blue Cross spokesperson Melanie Coon told 12 News the insurer’s executives “don’t have anything to add.”
CNE kicked off a major capital campaign earlier this year seeking to raise $33 million to renovate the decades-old Labor/Delivery/Recovery Unit at Women & Infants and fund a new women’s health research initiative. Fanale said about half the money has been raised so far.
Fanale said he has briefed a number of state leaders including Shekarchi, Gov. Dan McKee and Attorney General Peter Neronha on the plan, and that all expressed support.
In a statement, Neronha said his extensive review of the proposed Lifespan-CNE merger “confirmed that a robust, competitive environment among non-profit health care organizations would deliver the most affordable, most accessible and highest quality health care for Rhode Islanders.”
“Viewed in this light, today’s news that CNE intends to continue as an independent, non-profit health care organization – and appears to have the financial wherewithal to do so – is a positive development,” Neronha said.
A spokesperson for McKee said the governor views the CNE board’s decision as “encouraging” and he “looks forward to continued discussion about the details of Care New England’s plan.”
After the Lifespan deal ended, CNE executives reviewed a variety of merger proposals from other organizations interested in acquiring the hospital system, but Fanale said in the end they felt remaining independent was the best option.
The decision drew condemnation from Joshua Nemzoff, CEO of StoneBridge Healthcare LLC, a two-year-old Pennsylvania company that has now made two unsuccessful takeover offers for CNE. He argued CNE needs “hundreds of millions of dollars to fix their problems” and the new plan isn’t sufficient.
“As we have said for decades to hospital boards in similar positions, ‘If your leadership knew how to fix this problem, they would have done it by now,'” Nemzoff said in a statement. “Instead, the board has watched one failed strategy after another over the past five years. This decision is just one more on the list.”
Ted Nesi (firstname.lastname@example.org) 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