Rhode Island Attorney General Peter F. Neronha has rejected a proposed merger of Rhode Island’s two largest hospital systems, saying that consolidating Lifespan and Care New England would create a single system with “extraordinary market power” in violation of state and federal antitrust laws.
On Friday, the Federal Trade Commission released a redacted copy of its complaint against the proposed Lifespan and Care New England deal. In the complaint, federal regulators described to the two health systems as “close competitors” who refer to each other by terms which have been redacted.
The FTC said it is seeking a temporary restraining order and preliminary injunction to block the transaction. An administrative trial is scheduled for July 20.
In announcing his decision Thursday, Neronha said that Rhode Island will join a lawsuit by the FTC.
Christina H. Paxson, president of Brown University, which had committed to investing $125 million to the merged entity to create an academic health system, said “we are disappointed’’ in the decision.
“Brown has long believed that it is in the best interest of Rhode Islanders to have an integrated academic health system that is locally controlled and accountable to residents of our state,’’ Paxson said in a statement, “and that any potential negative impacts of a merger could be addressed through appropriate governance and oversight.”
Rhode Island House Speaker K. Joseph Shekarchi, a Democrat from Warwick, encouraged leaders of the two hospital systems and Brown University to “immediately terminate their exclusivity agreement” and explore other potential partnerships. “My primary concern has always been to ensure continued high-quality health care for all Rhode Islanders,’’ Shekarchi said in a statement, “and to protect the employment of the thousands of hard-working front-line professionals.”
Unionized health care workers who recently threw their support behind the proposed merger said they fear the rejection of the deal has “opened the door” for a for-profit company to scoop up more hospitals.
Care New England, the second-largest hospital system, has historically been financially weaker than Lifespan. If Care New England is sold to an out-of-state, for-profit corporation, that would Women & Infants, Kent and Butler Hospitals under a company that “will almost certainly put shareholder profits ahead of quality patient care, as we’ve seen time and again,” Lynn Blais, president of the United Nurses and Allied Professionals (UNAP), said in a statement. The UNAP represents more than 7,000 nurses and health professionals.
The Lifespan-Care New England merger “could be our last, best chance,’’ Blais said, “to ensure a healthy, stable, not-for-profit healthcare system that stays under Rhode Island control.”
Speaking at a news conference Thursday, Neronha said that Lifespan and Care New England failed to make an effective case for their vision even after being pressed for details on their April 2021 proposal. A supplemental filing last October, Neronha said, focused more on general goals than a roadmap of how to achieve them.
“You’re asking me to approve a transaction where you don’t have a plan.” Neronha said. “Effectively, what they want this office to do under the Hospital Conversion Act is make a decision and let them figure it out later.”
Lifespan and Care New England’s chief executive officers, Timothy J. Babineau and James E. Fanale, respectively, expressed disappointment in the rejection by Neronha and the FTC. Fanale said the search will continue for other options.
Lifespan’s goal remains to create “a Rhode Island solution, that remains nonprofit, and creates the state’s first fully integrated academic health care system,’’ Babineau said in a statement.
In rejecting the merger, Neronha said that the consolidation would not solve the two health systems financial problems and instead create one giant system that is likely to substantially reduce competition, particularly among hospital inpatient general and acute care. And that, in turn, will drive up healthcare costs for “nearly all Rhode Islanders,” he said in a statement, and result in health care that is “lower in quality and harder to access.”
Instead of two health care systems which “compete aggressively with each other across many inpatient and outpatient service lines,’’ Neronha said, the merger would eliminate this competition and “have the same effects here as seen across the country following mergers of this size: rising healthcare costs, lower quality, and reduced access.”
“When a system is so big, so dominant, that it is the only system that the vast majority of patients will go to for, say, inpatient care,’’ Neronha said in his decision, “that system no longer has to do the hard work to be better than the alternative because, there is no alternative.”
Neronha also said it was unclear how a merger would improve the financial stability of the two hospital systems “without raising costs on consumers, cutting services, or taking steps to keep their labor costs down.”
Lifespan and Care New England “simply have not demonstrated why these results would not happen here,’’ Neronha said, “and how they would be able to deliver on promised benefits that would outweigh these risks.”
The merged company would have had control of Care England’s three hospitals as well Lifespan’s Rhode Island Hospital, Hasbro Children’s Hospital, The Miriam Hospital, Newport Hospital and Bradley Hospital.
In his decision, Neronha said that a combined Lifespan-Care New England health system would:
- Control 75% of all inpatient acute care hospital beds in Rhode Island
- Control 80% of the Rhode Island market for inpatient hospital care
- Control 79% of the Rhode Island market for inpatient psychiatric care
- Control 60% or more of the Rhode Island market for many outpatient surgery specialties
- Account for 50% of commercial healthcare spending on patients whose primary care physician is part of the merged system’s Accountable Care Organizations
- Employ 67% of Rhode Island’s full-time registered nurses working at a hospital
This story has been updated.
Health reporter Lynn Arditi can be reached at larditi@thepublicsradio.org. Follow her on Twitter @LynnArditi
