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S&P cuts outlook for Care New England after Partners deal dies

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PROVIDENCE, R.I. (WPRI) – A global rating agency on Monday downgraded its outlook for Care New England following last week’s decision by Partners HealthCare to withdraw a bid to take over the hospital system.

S&P Global Ratings downgraded its outlook on CNE debt to stable from positive. The global credit rating company said the downgrade was a direct result of the deal not happening between Massachusetts-based Partners, parent of Brigham & Women’s Hospital, and CNE, the second largest hospital system in Rhode Island.

“The withdrawal reflects recent developments within Rhode Island that made it clear a regulatory approval of the acquisition by Brigham Health was highly unlikely,” S&P analysts wrote in an explanation of the new rating. 

Partners withdrew at the same time that Democratic Gov. Gina Raimondo called for renewed merger talks between CNE, parent of Women & Infants Hospital, and Lifespan, parent of Rhode Island Hospital, along with Brown University’s medical school.

The governor has said she is hopeful such talks will result in a locally controlled hospital deal, although two previous efforts have failed in the past.

Given all that, CNE spokesman Jim Beardsworth said the S&P downgrade comes as no surprise.

“The fact remains, CNE has aggressively worked to develop and implement action plans that have resulted in a highly positive turnaround, while better positioning the system for future growth and new clinical leadership opportunities in the state,” he said.

CNE for years has struggled financially, which has hurt its creditworthiness. The budgetary challenges fueled a 2017 decision to close Memorial Hospital in Pawtucket, which S&P cited as one reason the hospital group’s outlook hasn’t fallen more.

“The closure of Memorial Hospital has provided enough near-term financial relief, in combination with an action plan to improve operations, to allow the rating to be stable,” according to S&P. 

In addition to its downgrade, the agency affirmed CNE’s BB- long-term rating on $138 million in debt issued by the R.I. Health and Educational Building Corp. in 2016 and $22 million in taxable notes for CNE. 

Lifespan and CNE are expected to meet throughout the summer to try and crack a deal, and the outcome could affect CNE future ratings, the analysts said.

S&P said sharp losses, weakening reserves or even a moderate increase in debt without improvement in overall finances would likely result in a negative outlook or downgrade for CNE.

A higher rating, meanwhile, could come if CNE merged with an organization with a higher rating, or if the hospital could “significantly improve financial performance.”

The latter, according to S&P, is “highly unlikely.”

Eli Sherman (esherman@wpri.com) is a Target 12 investigative reporter for WPRI 12. Follow him on Twitter

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

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