PROVIDENCE — In a surprising move, the board at Care New England voted unanimously Tuesday night to remain independent and not merge with another entity.
For the last several years, Care New England’s executives have emphasized financial pressures that would give them no choice but to merge with another health care system. In fact, Dr. James E. Fanale, the system’s president and CEO, previously told the Globe that he thought a merger or acquisition of some type would be “necessary” for Care New England’s financial future.
The system is the second largest in Rhode Island and owns Women & Infants, Kent, and Butler hospitals, yet has long been starved for capital. Fanale said Care New England won’t go bankrupt, but it posted an operating loss of about $35 million during the six months prior to March 31.
This week, while voting to remain independent, the struggling hospital group declined offers from at least two potential suitors: StoneBridge Healthcare, a nonprofit based in Pennsylvania, which submitted its second bid for CNE in February 2022 for $550 million, and Prime Healthcare, which owns Landmark Medical Center in Woonsocket. It’s unclear what Prime was offering to Care New England.
The board’s commitment to remaining independent, Fanale said Wednesday, will last for the “foreseeable future.”
“We compared the acquisition offers as well as a standalone option against a number of criteria. ... These are projections that go out several years. We are not going to execute a standalone plan that will only be a year in duration,” Fanale said in a phone interview. “We have no interest in going out and doing the acquisition play again because it, obviously, is a very tough regulatory approval process throughout the country now with the [federal government] being anti-consolidation.
“We don’t want to go through that again. We don’t want to put our staff and organization through such an uncertain future,” he said.
Elizabeth Nikels, a spokeswoman for Prime, said Prime had expressed interest to Care New England’s board regarding the ability to “invest in the system and expand on its legacy.”
“Prime Healthcare Foundation is pleased that Care New England has identified an in-state solution and looks forward to further partnering with the system to ensure access to quality of care for the Rhode Island communities we both serve,” she said in an e-mailed statement.
However, Josh Nemzoff, the CEO of StoneBridge, was critical of Care New England’s board.
“Unfortunately, the leadership of CNE has led them to, once again, make the wrong decision,” he said in a statement. “CNE is a critical community asset, one that deserves to be protected and preserved for the benefit of the people of Rhode Island. Given the desperate financial position the hospital is in, as evidenced by dismal financial results and serious concerns raised by its own medical staff regarding the quality of care, it will take hundreds of millions of dollars to fix their problems.”
Nemzoff said he was “stunned” that the board, which is facing “massive quality and financial concerns” is “once again following its leadership team into yet another poor decision.”
“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,’” he said. “Instead, the board has watched one failed strategy after another over the past five years. This decision is just one more on the list.”
Fanale previously told the Globe that Care New England had hired two consulting firms they’ve worked with before, financial consultant Solic Capital Partners in Florida, and legal firm McDermott, Will, and Emery in Chicago, to evaluate each of the suitors. Fanale said in early June that the hospital group would be ready to strike a deal before the end of July.
That’s in stark contrast to Tuesday night, when the board, led by chairman Charles R. Reppucci, said Care New England would remain independent with “enhanced support” from clinical and financial partners, such as Brown University and Lifespan, along with other area hospitals. These arrangements do not require legal review or regulations, as would a full merger.
“This plan, coupled with the financial support included in the recently-enacted state budget, will help ensure that Care New England will maintain a stable operating platform and continue to fulfill its mission to care for its community of patients and support our staff,” said Reppucci and Fanale in a statement.
A source close to these conversations told the Globe that while the offers from Prime and StoneBridge sounded like they would bring serious cash to the system, that capital wouldn’t be distributed immediately, but would be spread out over time. “You can do the same things [Prime and StoneBridge were offering] with Lifespan and Brown, without a full merger,” the source said, explaining that Care New England would go forward with a “curated set of partnerships.”
Since summer 2020, Care New England, Lifespan Corp., and Brown University had a plan to merge under a new entity, Rhode Island Academic Health Care System Inc. It would have been Rhode Island’s largest employer. But in February, Attorney General Peter Neronha and the Federal Trade Commission, denied the merger, saying it would hurt consumers by creating a health care giant with a stranglehold on the local market.
Lifespan and Care New England had attempted to combine before. In 2018, after one of those deals fell apart, Massachusetts-based Partners HealthCare (now Mass General Brigham) swooped in and tried to acquire Care New England. They went as far as submitting an application to the state to request to merge, but former Governor Gina Raimondo, who is now the US commerce secretary under President Biden, stepped in and asked for an in-state solution. Her solution faced backlash, and critics said having a system with 80 percent market power would be a prescription for disaster.
Mass General pulled out of the deal so Lifespan and and Care New England could go back to the drawing board in 2019. After the attorney general denied the Lifespan-Care New England deal, however, many observers thought that it would be Mass General coming to strike a deal again.
Sources at Care New England who are privy to merger conversations told the Globe that there were conversations between Mass General and Care New England, but they could not say to what extent.
Fanale said if the “right organization” that fit into Care New England’s culture came forward with an offer, it could be considered. “But we’re not going out asking,” he said.
This story has been updated with comments from Care New England, Prime Healthcare, and StoneBridge Healthcare.