PROVIDENCE — Rhode Island Attorney General Peter Neronha has denied the application for Lifespan and Care New England health care systems to merge.
“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,” wrote Neronha in his 150-page decision, which was released Thursday.
In a press conference announcing his decision, Neronha said his office will join the Federal Trade Commission to file a lawsuit to block the merger.
“Just as we want firms to compete with each other to sell goods and services to their customers, we want employers to complete with each other to attract and retain workers,” said FTC Commissioner Rebecca Kelly Slaughter and Chair Lina M. Khan in a joint statement to the Globe.
Lifespan and Care New England are the two largest health care systems in the state. Executives had hoped to combine to create the Rhode Island Academic Health Care System, Inc., in partnership with Brown University, which had committed to investing $125 million as part of the merger. The combined entity would have been Rhode Island’s largest employer.
But Neronha pointed out that the deal would mean one system would control approximately 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 for beyond the levels in neighboring New England states,” wrote Neronha 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, Neronha explained, the largest system controls 31 percent of statewide inpatient hospital beds.
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.”
“By eliminating the competition between Lifespan and Care New England, the Proposed Merger would increase Rhode Islanders’ healthcare costs, threaten the quality of care they receive, limit their access to care, and disadvantage skilled healthcare workers,” he wrote.
The decision’s timing came as a surprise: Neronha had until March 16 to either approve, approve with conditions, or deny this proposed merger through the systems’ Hospital Conversion Act application.
Management teams from both parties had offered 30 conditions to the FTC and the attorney general that both systems would accept 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 CNE.
“We are extremely disappointed by the decision of the FTC, as we know that the status quo will not well serve the healthcare needs of the people of Rhode Island,” said Lawrence A. Aubin, Sr., Lifespan Board of Directors Chairman.
Dr. James Fanale, the CEO and president of Care New England, said he thought this merger was the “right thing to do,” but now will need to “move on to a new path forward.”
“Of course, 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 Fanale. “There is always a path forward, and we will explore all options.”
Executives at both systems deemed the proposed merger critical for putting the systems in “stronger financial footing,” especially after the cost pressures surrounding the pandemic over the last two years. But Neronha decided that “The proposed merger would put Rhode Island’s healthcare system in greater financial peril.”
“The healthcare 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,” said Lifespan president and CEO Dr. Timothy Babineau. “I am deeply disappointed in today’s decisions.”
While the executives have spent nearly a year and a half touting the benefits of their merger, ”The parties’ have nothing more than a ‘plan to make a plan’ with respect to achieving the claimed benefits of combining, without accounting for the costs and challenges with achieving these benefits,” Neronha noted. He said in a press conference that for months, in writing and in person, he asked for an integration plan.
“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.
Neronha deemed the system’s HCA application complete late last year, and his office released pages to the public, though many of the documents have been redacted from the public.
“You don’t have to be an antitrust expert to see how this is bad for healthcare,” said Neronha.
In the final weeks of public comments, 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 systems, like independently owned South County Health, have come out in opposition of a single system having so much market power. CEO Robinson told the Globe this week that he hired a lawyer, has spoken to the Federal Trade Commission, and even voiced an idea of breaking two hospitals (Kent Hospital from CNE 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.
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 [now Mass General Brigham] 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.
The proposed Lifespan-Brown-CNE healthcare monopoly was prescription for disaster - a merger we would live and die with for generations. Thank you @AGNeronha for coming down on the right side - the side of the People.
— Rep. Blake Filippi (@Blake_Filippi) February 17, 2022
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 said he will review the attorney general’s decision fully “before taking any steps.”
Brown President Christina H. Paxson said in a statement to the Globe that Brown has long believes 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,” said Paxson. “Regardless of this decision, Brown remains steadfastly committed to supporting the work of the physicians who work in both Lifespan and Care New England, serving the health of Rhode Islanders and fueling the local economy through the teaching, research and service conducted by the Warren Alpert Medical School, Brown’s School of Public Health and other academic departments and programs.”
Proponents of the plan said this 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,” said Neronha in his press conference. “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 that 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.”
The attorney general could have approved the proposed merger with strict conditions. However, he said, the problems created by the merger could not be solved simply with “more regulations or conditions.”
Read the entire decision as well as the FTC’s statement below:
Alexa Gagosz can be reached at alexa.gagosz@globe.com. Follow her on Twitter @alexagagosz and on Instagram @AlexaGagosz.
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