The fate of Rhode Island’s health care industry is about to be decided – The Boston Globe

The fate of Rhode Island’s health care industry is about to be decided – The Boston Globe

PROVIDENCE — The application has been deemed complete, the public comment period is over, and Rhode Island Attorney General Peter Neronha has less than 30 days to make his decision on whether he will allow the state’s two largest hospital systems to combine.
But as the state’s deadline to ultimately decide if Lifespan and Care New England can merge or not comes down to the wire, union leaders are endorsing the deal and executives at other health care systems are shifting their priorities.
“It was always ‘no merger without us.’ Not ‘no merger,’” said Patrick Quinn, executive vice president of Service Employees International Union, District 1199 New England, in an interview Wednesday. “We want this entity to be locally owned, locally controlled, and be a nonprofit so it can be regulated under the Hospital Conversion Act.”
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United Nurses and Allied Professions, or UNAP, which advocates for workers in both systems, announced their support for the proposed deal earlier this month.
“We support the merger of the two health systems into a truly local, integrated, and comprehensive health care system,” Lynn Blais, UNAP’s president, said recently. “In recent years, we have seen for-profit corporations and private equity money flow into our state’s health care system from out of state. These corporations and private equity firms are not, in our view, committed to the state, our members, and/or the Rhode Island community. Lifespan and Care New England most certainly are.”
Lifespan and Care New England are seeking to merge to become the the Rhode Island Academic Health Care System, Inc., in partnership with Brown University, which has committed to investing $125 million as part of the merger. 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.
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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. He has until March 16 to either approve, approve with conditions, or deny the merger.
“We brought up our concerns. And many — not all — were addressed” by Lifespan and Care New England, said Quinn.
In negotiations with the union, the companies agreed to largely avoid layoffs through 2025, have union representation at any new facilities that could open, and have a labor representative serve on the board of directors.
Despite union backing, executives at other hospitals are still voicing strong objections to the merger.
Independently-owned South County Health has publicly opposed the proposed merger in the past, but CEO Aaron Robinson confirmed to the Globe this week that it has hired law firm Jones Day in order to better understand how the Federal Trade Commission and the U.S. Justice Department would look at the deal. Robinson said they’ve worked with attorney Kenneth Field, who was a former counsel to the director of the Bureau of Competition at the FTC.
Jones Day wrote a report for South County that examined the Herfindahl-Hirschman Index (HHI) of the merger, which is how the FTC classifies markets based on market shares. The FTC considers a market with less than 1,500 HHI points to be “concentrated,”between 1,500 and 2,500 HHI points to be “moderately concentrated,” and for anything above 2,500 HHI points to be “highly concentrated.”
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Jones Day said a merger between Lifespan and CNE would “substantially exceed” all other successfully litigated hospital cases by the FTC with 6,282 HHI points, according to the report.
Robinson said he’s not interested in completely breaking up the proposed merger, and believes that an integrated academic medical center would be good for Rhode Island. However, he said CNE-owned Kent Hospital and Lifespan-owned Newport Hospital wouldn’t need to be part of the equation.
“Do you need small community hospitals to be part of an academic medical center? No, you don’t. Academic medical centers are on different missions than community-based hospitals and systems,” Robinson told the Globe in a phone interview. “The parties could decouple multiple assets if that was truly the goal of the merger.”
“But I think they want to create scale and they want to create market power,” he added.
Robinson said his team has spoken with representatives from the FTC throughout the last year and shared their concerns about the proposal being “monopolistic.” And he said he attempted to speak with the leaders of both systems to discuss an arrangement with Kent and Newport Hospitals. But the system leaders, he said, were not interested in speaking. (As part of the proposed merger, both systems have an exclusivity clause.)
“Perhaps a community health system could be formed… rather than having one with 80 percent monopoly,” said Robinson. He has shared these ideas with the attorney general’s office and other elected officials. “There are mechanisms where you can bring these community assets together.”
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Robinson said he would “be very open” to having those discussions again if the merger is not fully approved.
Other entities are interested in community hospitals like Kent as well.
In a letter sent to the Attorney General’s office, Michael R. Souza, the CEO of Prime Healthcare Services, which operates Woonsocket’s Landmark Medical Center, wrote that he strongly opposed the merger because it would “create a health care monopoly, limit access, and increase the cost of care.”
Souza also made an offer to buy Kent “in order to minimize the anti-trust issue” and “infuse much needed capital, along with a cash consideration.”
It’s unclear what any deal between Landmark and CNE would look like, but under Rhode Island state law, the transaction would have to be approved by the Attorney General’s office and state health department. Carolyn Kyle, a spokeswoman for Landmark, did not respond to requests for comment as to whether this offer was on the table.
But union leaders are opposed to the idea.
In 2018, Prime was forced to pay the federal government $65 million to settle a lawsuit in which they allegedly knowingly submitted false claims to Medicare by admitting patients who required less costly, outpatient care and by billing more-expensive patient diagnoses than the patients actually had. Last year, the company had to pay another $37.5 million to settle allegations of kickbacks and other false claims.
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“The for-profit alternative, of course, is a non-starter. Indeed, our experience with for-profits has been horrifying,” said Blais in a letter to the attorney general on Feb. 1.
The health care landscape in Rhode Island could change regardless of the merger. Roger Williams Medical Center in Providence and Our Lady of Fatima Hospital in North Providence, both of which are owned by Prospect Medical Holdings, a Los Angeles-based company, have had a long history of financial instability and grueling fights with local lawmakers over ownership changes. In 2018, Prospect borrowed about $1 billion, which was used to pay a nearly half a billion dollar dividend.
Prospect may be looking to unload their Rhode Island properties. Yale New Haven Health announced last week that it would acquire two health networks, including three Connecticut-based hospitals, from Prospect. Under the agreement’s terms, Yale New Haven would purchase Rockville General Hospital in Vernon, Waterbury Hospital, and Manchester Memorial Hospital, along with the facilities’ real estate assets, outpatient services, and physician clinic operations.
Yale, which also owns and controls Westerly Hospital, could be a viable buyer. But Fiona Phelan, a spokesman for Westerly Hospital, said she was unaware of any interest. And Prospect spokesmen Bill Fischer and Otis Brown did not respond to multiple inquiries from the Globe.
Blais said the market forces that are causing health care facilities to consolidate are not unique to Rhode Island.
“Whether we like it or not, such forces have been at work here and all over the country for decades,” she said. “It is foolhardy to think… that if this proposed merger is denied, that the consolidation we see in health care will cease.”
Alexa Gagosz can be reached at alexa.gagosz@globe.com. Follow her on Twitter @alexagagosz and on Instagram @AlexaGagosz.
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