Business & Tech

Partners HealthCare, R.I. hospital system finalize merger deal

Partners and Care New England Health System first announced their discussions to merge in April 2017.
David L. Ryan/Globe Staff/file
Partners and Care New England Health System first announced their discussions to merge in April 2017.

After more than a year of sometimes tenuous discussions, Partners HealthCare announced Wednesday that it had finalized a deal to acquire Rhode Island’s second-largest hospital system.

The health systems said they have signed a “definitive agreement” for Partners to acquire Care New England Health System. While the deal must be reviewed by federal regulators and officials in Massachusetts and Rhode Island, the announcement marked a key step toward Boston-based Partners’ goal of expanding its reach out of state.

Dr. James E. Fanale, chief executive of Care New England, said the company has worked hard to improve its finances so it could reach a final agreement with Partners, Massachusetts’ largest health care provider.

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By joining Partners, “We have the opportunity to augment and improve all sorts of care for patients who come and see us,” Fanale said. “We have the opportunity to advance our care, improve our clinical programs, grow our teaching programs, [and] access some of the best specialists in the world.”

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Plans for the deal advanced as hospital systems across the country seek mergers and other partnerships to try to cut their own costs and reach more patients. In Massachusetts, Beth Israel Deaconess Medical Center and Lahey Health are planning a merger to create a large new health system.

Partners and Care New England first announced their discussions in April 2017. Care New England had planned to join Partners while spinning off its most troubled property, Memorial Hospital in Pawtucket, R.I., to another company. But when that deal fell through, Care New England instead closed the struggling hospital.

Partners executives monitored the Rhode Island company’s financial performance over the past several months, indicating that a merger agreement was dependent on Care New England shoring up its losses.

Care New England collected revenue of $1.1 billion and lost $47 million on operations in the 2017 fiscal year. Fanale said the system is expected to break even this year, except for the one-time costs of closing Memorial Hospital, which could be about $40 million.

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Partners has higher costs than its competitors, but Fanale argued that Care New England patients would not face higher prices through the deal because the vast majority of them would continue to receive care locally.

Partners and Care New England are also in discussions with Lifespan, Rhode Island’s largest health system, about a potential three-way partnership. Those talks are continuing.

The health systems on Wednesday revealed that Brown University also has joined the talks. In January, Brown’s president, Christina Paxson, said she was concerned about a Massachusetts company taking over a Rhode Island health care provider. Brown, along with a California hospital company, made an unsolicited offer to acquire Care New England instead.

“Preserving and strengthening health care and biomedical research and innovation in Rhode Island continues to be an important priority,” Paxson said in a statement Wednesday. “As Brown’s discussions with Partners and Care New England continue, I am optimistic that we can address the various concerns that I raised earlier this year.”

Partners owns several Massachusetts hospitals, including Massachusetts General and Brigham and Women’s in Boston. It has been working more aggressively to expand beyond Massachusetts.

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Partners’ largest hospital, Mass. General, said this month that it was exploring creating a new regional health system in New Hampshire with Wentworth-Douglass Hospital in Dover, N.H., (which it already owns) and Exeter Hospital in Exeter, N.H.

In April, Mass. General signed a clinical affiliation agreement with Eastern Maine Healthcare Systems, one of Maine’s largest health systems.

Within Massachusetts, Partners this year acquired Massachusetts Eye and Ear, a specialty hospital in Boston. And the company is exploring an acquisition of Harvard Pilgrim Health Care, one of the state’s largest health insurers.

Partners’ chief executive, Dr. David F. Torchiana, said the Care New England acquisition will “provide opportunities for new investments in patient care, research, and health care innovation in Rhode Island.”

Care New England includes Butler Hospital, Kent Hospital, and Women & Infants Hospital in Rhode Island. It has a teaching and research partnership with Brown’s Warren Alpert Medical School, which executives said they will continue even if they join Partners, whose hospitals are affiliated with Harvard.

For Care New England, the Partners deal provides a financial advantage: Partners, because of its size, can buy supplies more cheaply and borrow and spend more on capital projects. It would also give the Rhode Island system and its patients closer access to many Partners medical specialists.

Care New England employs about 7,500 people.

Patrick J. Quinn, executive vice president of District 1199 SEIU New England, a labor union that represents many workers at Care New England, said union members will review the details of the proposed acquisition.

“Any plan for a health system to merge must ensure access to high quality health care for Rhode Island patients and good jobs for hospital workers,” he said in a statement.

Priyanka Dayal McCluskey
can be reached at priyanka.mccluskey@globe.com. Follow her on Twitter @priyanka_dayal.