PROVIDENCE — Rhode Island Attorney General Peter Neronha on Thursday rejected the proposed merger of Lifespan and Care New England, saying it would hurt consumers by creating a health care giant with a stranglehold on the local market.
“If this extraordinary and unprecedented level of control and consolidation were allowed to go forward, nearly all Rhode Islanders would see their healthcare costs go up, for health care that is lower in quality and harder to access, and Rhode Island’s healthcare workers would be harmed,” Neronha wrote in a 150-page decision denying the companies’ merger application.
At a news conference, Neronha said his office would join the Federal Trade Commission to file a lawsuit to block the merger. The joint opposition means the deal is all but dead.
Lifespan and Care New England, the state’s two largest health care systems, have been pressing the merger for a year and a half, arguing that Rhode Island would be better off with a bigger, financially solid health care network that could compete with top-level medical centers in New York and Boston.
The plan included a partnership with Brown University, which had committed $125 million to the new entity, dubbed Rhode Island Academic Health Care System Inc. It would have been Rhode Island’s largest employer.
But Neronha said the deal would mean one system would control about 80 percent of the market’s hospital beds and would own eight of the state’s 13 hospitals.
“This level and degree of healthcare consolidation in a small, but densely populated, state like Rhode Island is unprecedented and would concentrate Rhode Island’s healthcare market far beyond the levels in neighboring New England states,” Neronha said in his decision.
In Massachusetts, Mass General Brigham, formerly known as Partners, has around 20 percent of the state’s acute care hospital beds, while the Lifespan-Care New England merger would have controlled 75 percent of all inpatient acute care beds. In Connecticut, the largest system controls 31 percent of statewide inpatient hospital beds, according to Neronha.
The projected increase in market power from a merger in Rhode Island would be “the largest increase on record when compared with all other health system and hospital mergers the federal government has moved to block since 2004,” Neronha said.
The decision’s timing came as a surprise: Neronha had until March 16 to either approve, approve with conditions, or deny the proposed merger through the systems’ Hospital Conversion Act application.
Management teams from both health systems had offered 30 conditions to the FTC and the attorney general as a “starting point to address concerns about the merger but neither the FTC or the AG ever discussed these conditions or others with the two systems prior to the decisions,” said Raina Smith, a spokeswoman for Care New England.
“We are disappointed, but I will say that we can truly know that we did everything we could over the past few years of hard work to get this done,” said Dr. James Fanale, Care New England’s chief executive. “There is always a path forward, and we will explore all options.”
Lifespan CEO Dr. Timothy Babineau said Neronha’s focus on the merger’s impact on just Rhode Island was too narrow.
“The health care market for Rhode Island spans outside the borders of the state, well into Massachusetts and Connecticut, and so too should the economic and competitive considerations to allow us to create the same type of health care system that many other cities including Boston, New Haven, Pittsburgh, and many others are able to enjoy,” he said.
Neronha said the companies had failed to provide meaningful details on how the merger would benefit consumers.
“You’re asking me to approve a transaction for a plan [you don’t have]. That’s rubber stamping a plan. That’s something that this office, with me here, won’t do,” he said. “You don’t have to be an antitrust expert to see how this is bad for health care.”
Labor unions came out in support of the merger, saying that a “local, nonprofit” entity that could be controlled locally would be right for Rhode Island.
But executives at other health systems, including independently owned South County Health, opposed allowing a single provider to have so much market power.
South County CEO Aaron Robinson told the Globe this week that he hired a lawyer, spoke with the FTC, and even proposed breaking two hospitals (Kent Hospital from Care New England and Newport Hospital from Lifespan) out of the deal. But leadership at Lifespan and CNE, he said, wouldn’t hear him.
“I think they want to create scale and they want to create market power,” said Robinson.
House minority leader Blake Filippi, a Block Island Republican, called the proposed merger a “prescription for disaster” that Rhode Island “would live and die with for generations.”
“I respectfully suggest that Governor Dan McKee ask Partners Healthcare to resubmit their offer to buy CNE — and promise Partners that this time they will be treated fairly in Rhode Island,” wrote Filippi on Twitter.
In April 2017, Lifespan proposed merging with Care New England, but just a few days later Massachusetts-based Partners HealthCare [now called Mass General Brigham] and Care New England announced their intent to merge. In 2019, Lifespan launched a public campaign to shame the deal, and state leaders, including then-governor Gina M. Raimondo, requested an “in-state solution” between the systems, which she said she hoped included Brown University. Shortly after, Partners withdrew its merger application. In June 2020, Lifespan and Care New England announced their intent to try to merge again.
House speaker K. Joseph Shekarchi, a Warwick Democrat, said he encouraged the hospital groups to “immediately terminate their exclusivity agreement and explore all options available to them in the marketplace.”
Senate President Dominick J. Ruggerio, a North Providence Democrat, said he will review the attorney general’s decision fully “before taking any steps.”
Last year, Fanale and Babineau had discussions with Shekarchi and Ruggerio about granting a “certificate of public advantage,” or COPA, which could allow the state to approve a hospital merger that could be viewed as “anticompetitive” from the perspective of the FTC.
When asked if a COPA was still being considered in the General Assembly, spokespeople for the lawmakers offered little insight. In an e-mailed statement, they said Ruggerio and Shekarchi “have not had a chance to analyze the decisions issued” but would “thoroughly review all the information.”
Brown president Christina H. Paxson said in a statement that Brown has long believed that it’s in the best interest of Rhode Islanders to have a locally controlled, integrated academic health system and that any “potential negative impacts of a merger could be addressed through appropriate governance and oversight.”
“Although we respect their decision, we are disappointed that the FTC Commissioners and the Rhode Island Attorney General do not agree,” Paxson said.
Proponents of the plan said the attempt to merge was unique because of Brown’s involvement. But Neronha said he asked Brown’s leadership for months what their role in the merger would be.
“I can’t tell you now what Brown’s role is in this merger, still,” Neronha said. “Is there anyone out there that knows? They’re not part of this transaction.”
Executives at Lifespan and Care New England have warned previously that if this merger does not go through, the systems would fail and hospitals would close.
“That fear is overstated,” Neronha said. “We’ve dealt with for-profits in the past. We can control that.”
Read the entire decision as well as the FTC’s statement below: