Rhode Island health officials have granted approval for a fast-track regulatory review of Massachusetts-based Partners HealthCare’s proposed takeover of Care New England.
The approval, signed Friday by Dr. Nicole Alexander-Scott, means state health regulators will have 90 days, as opposed to the usual 120 days, to review Rhode Island’s largest ever hospital merger.
Care New England, Rhode Island's second-largest hospital system, operates Women & Infants, Butler & Kent Hospitals. Care New England announced last May that it had signed an agreement to become part of Partners HealthCare, which operates Massachussetts General and Brigham & Women's Hospitals. The deal, if approved by federal and state regulators, would mark a giant shift in Rhode Island’s healthcare market, granting Massachusetts’ largest health system huge influence -- and pricing power -- over Rhode Island’s health system.
Rhode Island's curtailed regulatory review will reduce the amount of documentation the two hospital systems will be required to submit to state regulators for approval of the deal. The shortened review also means state health officals will not be required to hold a public hearing on the application, though state law provides for a period for public comment, generally in writing.
Rhode Island law allows for an “expedited” regulatory review if the company meets specific criteria of a distressed hospital system.
Rhode Island’s health department said in the approval letter released Friday that it based its decision on materials submitted by Partners and Care New England in three separate letters last August and September. “Based on the information,” the department said, “(the department) has determined that Care New England operates one or more distressed Rhode Island hospitals and hereby grants this request for expedited review.”
Care New England reported last August that its financial operations were continuing to improve. The company reported that Kent Hospital, Women & Infants Hospital, Butler Hospital and the Visiting Nurses Association all had profitable operations through the three-month period ending June 30, 2018.
In a Sept. 18, 2018 letter to Care New England's chief executive, James E. Fanale, a state health regulator questioned apparent descrepancies between the company's statements to the media about its hospitals' improved finances and those to regulators about the hospitals being financially distressed.
Fanale responded in a Sept. 20 letter that the media statements reported Care New England's finances excluding Memorial Hospital, which closed last year. However, he said, the company overall -- including Memorial--- recorded a nearly $40 million loss for the nine-month period that ended June 20, 2018.
"The focus of the press release was the CNE Obligated Group's operating performance," Fanale said in the letter, "and while such profitability may be improving, the balance sheet conditions for CNE, as a whole, and its individual hospitals are still lagging."
Fanale also said that Butler Hospital has less than 50 days cash-on-hand, and an asset-to-liability ration of less than 1.5, which by statute qualifies it as distressed.
Rhode Island health department officials "determined that Butler Hospital met the criteria for a distressed hospital,'' Sophie O'Connell, a spokeswoman for the state Department of Health, said in an email.
Lifespan, Rhode Island’s largest hospital system, said it was “surprised” by the health department’s decision to grant the fast-track review.
“Given Care New England’s reported strong financial performance, we do not believe they meet the criteria, which includes operating one or more distressed hospitals in Rhode Island, to qualify for an expedited review,’’ Lifespan said in a statement. “We respect the decision of the Department of Health and trust they will do the appropriate due diligence to ensure we keep health care and jobs in Rhode Island.”
Lifespan said in February that it was participating in the talks with Care New England and Partners, though details were never spelled out.
Last year, state lawmakers, at the request of Care New England, approved legislation to speed the regulatory review process for the hospital system. At the time, hospital officials and state lawmakers said the changes to Rhode Island's Hospital Conversion Act were designed to cut red tape that could delay the sale of the ailing Memorial Hospital. Union officials said at the time they feared the changes would undermine regulatory oversight of the state’s biggest ever hospital deal, since the information and disclosures are far less than what’s required under a full review. Memorial’s sale fell through, however, and the hospital was later closed, save for some out-patient services.
The Partners-Care New England deal also needs approval from Massachusetts regulators as well as federal regulators.
story updated as of 7:22 p.m.
correction: An earlier version of this story misspelled James Fanale's name.