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Partners takeover is still Care New England’s best bet, CEO says

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WARWICK, R.I. (WPRI) — Care New England’s top executive said Tuesday he still thinks the best option for his hospital group is a takeover by Partners HealthCare, despite the governor’s continued doubts.

“The vision that our organization had was the Partners vision,” Care New England CEO Dr. James Fanale said in an interview with WPRI 12. “If you went and asked our staff, they’d all say that was the vision we really wanted. Whether that comes to fruition or not remains to be seen. I think we need to take some time off to keep working on our current situation.”

Fanale spoke hours after CNE announced it had abandoned merger talks with Rhode Island’s top hospital group, Lifespan, which Democratic Gov. Gina Raimondo had announced June 4. A combined Lifespan-CNE would have dominated Rhode Island medicine, with more than 20,000 employees and billions of dollars in annual revenue.

This was the group’s third failed merger attempt since the late 1990s.

“I’m really very disappointed that they have decided not to stay at the table,” Raimondo told reporters after attending an event with her neighboring-state counterparts in Willimantic, Connecticut. She had met with Care New England leaders at their offices Monday.

“Like many complicated deals it just didn’t happen, at least not right now,” Raimondo said. “It wasn’t in the cards right now for these parties to come together. I am hopeful that they’ll figure out a way to deepen their relationship and a year from now maybe it’ll be different.”

Care New England owns Women & Infants, Kent and Butler hospitals, while Lifespan owns Rhode Island Hospital, The Miriam, Newport and Bradley.

Lifespan President and CEO Dr. Timothy Babineau declined to be interviewed, but described himself in a statement as “extremely disappointed.” Brown University President Christina Paxson — who was also in the talks representing her institution’s medical school — called it “disappointing that Care New England decided not to move forward.”

Fanale declined to offer specifics about Care New England’s deal-breakers, saying the parties signed nondisclosure agreements. But he pointed to “fatigue” in his organization after four years of failed transactions as well as concerns about how the Federal Trade Commission would view the idea.

“If we have the two largest systems in Rhode Island coming together, the FTC is going to look at it, and we knew it would take many, many months to get there; we estimated between 12 to 24 months to get it accomplished,” he said. “Not to say it wouldn’t, but there’s no question it would take time.”

On that concern, Raimondo said, “It is a question and certainly would have been something that would have had to be dealt with, but it was too premature. We had only been at it for about a month and that’s a complicated question. So that was one of the things we were going to have to dig into had they stayed at the table longer.”

The governor said another thorny issue during the “very intense” closed-door talks had been “who’s going to run the combined entity.”

The move will leave Care New England as an independent organization for the foreseeable future. Fanale said that while his organization’s finances have improved substantially since a few years ago — partly due to the closure of money-losing Memorial Hospital — remaining on its own is not “a long-term” solution.

“We’re not making enough money to fulfill our capital requirements,” he said. “There’s no question about that.”

Raimondo’s intervention last month caused Partners, the biggest hospital group in Massachusetts, to abandon its two-year effort to acquire Care New England. On Tuesday a Partners spokesperson did not directly address whether the company would make a second bid for CNE, only saying its leaders “remain committed to the health of patients in Rhode Island.”

Fanale said it had been “kind of shocking” for Care New England’s leaders to have the Partners deal dissolve so suddenly despite two years of work. “That’s the vision we worked on for two years, and all of a sudden it was gone,” he said.

“All I know is that with the consolidation of health care, at some point we all have to grow into a larger consolidated organization,” he said. “Maybe Partners, Care New England and Lifespan are all together – that’s also a possibility and we actually like that possibility as well. So I think time will tell.”

Many CNE employees were already unhappy with Lifespan when the governor announced the new merger push, frustrated about the larger hospital group’s recent public attacks on the Partners deal. Fanale said CNE workers broke out in applause when he shared his decision to break off the talks during town hall meetings at the hospitals Tuesday.

Fanale said he will probably meet with Partners executives “in a couple weeks” to discuss next steps. (Partners’ Brigham Health division already has a program at Kent Hospital.) But he downplayed the chances that a Partners takeover would be back on the table quickly.

“People would love to have it come back right away, but I don’t think that’s in the offing,” he said, adding, “At this point they would like to have some assurance that they have a shot at it, and I don’t know if they do.”

Raimondo — whose Department of Health would need to approve a Partners takeover of CNE — remains unconvinced. “I don’t think that’s the right option right now,” she said.

“I believe the right option is a locally operated, locally run, integrated academic medical center,” she said. “When you have two systems across the street competing with one another it doesn’t do anyone any good. It results in increased prices and increased cost of health care.”

Plus, she added, “We had Brown at the table willing and interested to invest more.”

Fanale said that while “now is definitely not the right time” for a Lifespan-CNE merger in his view, he is open to lower-stakes discussions.

“We would like to work with Lifespan and Brown in terms of other collaborative opportunities: academics, research, teaching and maybe some business opportunities,” he said. “We agree with the governor that it would be a good idea for us to come back to the table soon and begin to maybe talk on how we can build on some of that in the future.”

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 2019 Nexstar Broadcasting, Inc. All rights reserved. This material may not be published, broadcast, rewritten, or redistributed.

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