PROVIDENCE — An out-of-state turnaround hospital group has made a bid for Care New England, Rhode Island’s second largest health care system, on Wednesday just hours before Lifespan and CNE formally withdraw their plans to merge.
StoneBridge Healthcare, a nonprofit based in Pennsylvania, submitted a bid of $550 million — a purchase price of $250 million and a $300 million, seven-year investment in capital improvements. They also offered to provide Care New England with the funding necessary to “fully fund” the employee’s pension plan at closing, a plan which StoneBridge says is currently underfunded by nearly $100 million.
StoneBridge, which was founded in 2020, is led by Josh Nemzoff, who has more than 40 years of experience as a healthcare industry consultant.
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“Care New England Health System has provided outstanding care to its patients for many years, and StoneBridge Healthcare is committed to the continuation of this high standard of care in Rhode Island,” said Nemzoff on Wednesday. “We believe that StoneBridge Healthcare is in a strong position to help Care New England continue delivering cutting-edge care to the communities it serves for years to come.”
Care New England spokeswoman Raina Smith confirmed that the board of directors of Lifespan and Care New England met separately this week and have decided not to pursue litigation on their denied merger proposal. She said the systems would withdraw their Hospital Conversions Act the state and said they would not pursue a legislative solution, such as a Certificate of Public Advantage, or COPA.
Nemzoff said he’s been involved in “hundreds” of hospital mergers, sales, acquisitions, and joint ventures with a combined transaction value in excess of $15 billion. Under his new company, which does not yet own any hospitals, he said he’s in conversations to purchase four unnamed academic medical centers.
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This is Nemzoff’s second attempt to buy Care New England, and it comes just a week after Rhode Island Attorney General Peter Neronha denied Care New England’s merger with Lifespan, the state’s largest hospital system. If he approved the transaction, it would have formed the largest health system and employer in the state.
He told the Globe Wednesday that he had planned on making another offer on Care New England ahead of the attorney general’s decision, which he said “came as a surprise.”
“I deal with a lot of attorney generals. He should be commended” for striking down the deal, he said. “It’s shocking to me that the systems thought they would get that deal approved with all the antitrust issues.”
In December 2020, Nemzoff offered to buy Care New England for $250 million. It would have become StoneBridge’s first successful transaction at the time, if it had been approved. StoneBridge presented a non-binding letter of intent to the executives of Care New England, which owns Women & Infants, Butler, and Kent Hospitals, and has had its fair share of financial pressures.
Last summer, Nemzoff said he met with Governor Dan McKee, who has not publicly taken a stance on the formerly proposed Lifespan-Care New England deal, for more than an hour-and-a-half. Nemzoff said McKee expressed great concern about the future of Care New England.
But at the time, Care New England was in an exclusive agreement with Lifespan, which owns Rhode Island, Hasbro Children’s, Bradley, The Miriam, and Newport Hospitals, to explore a merger. The deal with StoneBridge was never considered.
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“Any hospital transaction must improve care and ensure that patients are protected. All Rhode Islanders deserve care that is accessible and affordable,” said Senate President Dominick J. Ruggerio, a North Providence Democrat, in a statement to the Globe.
Ruggerio said he was made aware of the offer from StoneBridge and looks forward to reviewing the proposal.
“I must stress that I am vehemently opposed to expanding the role for-profit entities play in our health care delivery system and I will once again submit legislation to impose a one-year moratorium on the sale of hospitals to for-profit entities,” said Ruggerio.
Nemzoff told the Globe he’s not in the business to “make a lot of money.”
When the systems decided on Wednesday to pull out of their merger attempt, the move also terminated their exclusivity clause. This means that Care New England can explore mergers or acquisitions with other entities, though Nemzoff said he had not heard any feedback on the offer from Care New England yet.
“Care New England is capital starved,” said Nemzoff.
Care New England executives told the Globe that, since the merger was denied, its chief executive, Dr. James Fanale has been spending “hours” each day at each operating unit, including at CNE-managed Integra, The Providence Center, CNE Medical Group, and the VNA (home and hospice care).
Jessica McCarthy, a spokeswoman for the system, said in light of last week’s news, “it’s important we take a moment here at Care New England to meet, in person, with the staff at each of our operating units to answer any questions or concerns they might have.”
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McCarthy declined to comment on StoneBridge’s offer.
“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,” Nemzoff said on Wednesday. “StoneBridge Healthcare has the expertise and financial resources needed to help lead Care New England to a promising future.”
The letter of intent is non-binding, and a definitive agreement would required if the systems were to move forward with the deal.
Alexa Gagosz can be reached at alexa.gagosz@globe.com. Follow her on Twitter @alexagagosz and on Instagram @AlexaGagosz.