PROVIDENCE — Top officials at Rhode Island’s largest hospital group offered to resign over the summer in order to advance the high-stakes negotiations to establish a local academic health center in Providence, a spokesman for one of the hospitals disclosed this week.
A proposed merger among Lifespan, Care New England, and Brown University fell apart long before Lifespan president and CEO Dr. Tim Babineau and board chairman Larry Aubin could step aside, but their resignation offers were seemingly designed to address a significant obstacle in the negotiations: leadership of the new health center.
The details are coming to light two months after the negotiations stalled, dashing the hopes of Governor Gina Raimondo and other stakeholders who say a locally run health system would be preferable to Massachusetts-based Partners HealthCare’s attempt to acquire Care New England.
“Dr. Babineau and board chair Larry Aubin agreed to do whatever was in the best interest of the community to continue to advance the creation of a complete Rhode Island-based academic medical center that includes Lifespan, Care New England, and Brown University,” Lifespan spokeswoman Jane Bruno said in written statement. “As stewards of community assets, that is their sole responsibility and is in the best interest of patients, physicians, and the state.”
A spokesperson for Care New England declined to comment, citing a nondisclosure agreement.
With Raimondo’s support, the three institutions agreed in June to spend the summer discussing a potential merger. At the time, Partners also agreed it would back away from its attempt to acquire Care New England.
Lifespan is the state’s largest employer, operating Rhode Island Hospital, Hasbro Children’s Hospital, The Miriam Hospital, Bradley Hospital, and Newport Hospital. Care New England runs Women & Infants Hospital, Butler Hospital, and Kent Hospital.
State leaders have urged the two groups to merge for years, but talks have repeatedly fallen by the wayside.
Care New England quickly pulled out of the most recent negotiations in July, with its chief executive James E. Fanale and board chairman Charles R. Reppucci citing “capital requirements and financial stability of the combined system, community need, anti-trust considerations, organizational stability, and implementation risks” as reasons for their withdrawal.
The abrupt end of the merger talks has touched off a bitter dispute between the two hospital groups that has spilled out in public in recent months.
In August, the Globe obtained a letter from Fanale to Babineau accusing Lifespan of retaliation for ending a partnership with an accountable care organization run by Care New England. Babineau cited “significant operational and financial challenges this fiscal year” at Lifespan as the reason it ended the partnership.
The Providence Journal reported last week that Raimondo penned a letter accusing Fanale of derailing negotiations by insisting that he be named chief executive of the merged group. A spokesperson for Raimondo confirmed the authenticity of the letter.
But tensions between Lifespan and Care New England started before the merger discussions ended. Throughout the spring, Lifespan ran a public relations campaign opposing Partners’ attempt to acquire Care New England, arguing that rates would increase and patients would be forced to travel to Boston for care.
Lifespan’s crusade was successful, but supporters of the merger say it soured the relationship between the two groups just as they started negotiations.
As negotiations fell apart, the financial conditions of the two hospital groups have also seen sudden shifts.
While Care New England still has hundreds of millions in dollars in capital needs, it reported $2.3 million in income from operations during the first nine months of 2019. If the figures hold for the rest of the year, it would mark the second straight profitable year for the group, after losing $70 million in 2016 and 2017.
Lifespan, meanwhile, has reported losing $22.3 million from operations through the first three quarters of 2019 after posting a profit of $24 million last year. It has hired consulting firm Alvarez & Marsal to craft a corrective action plan to address its financial challenges.
Despite the recent challenges, Bruno, Lifespan’s spokeswoman, said the group has a “history of long-term financial stability.” She said Lifespan invests $100 million a year to “keep our buildings and equipment up to date.”
“We have been very transparent about having a challenging financial year,” Bruno said. “We are seeing many more patients but receiving far less reimbursement as our payor mix continues to shift from commercial payors to more government.”