Lifespan and Care New England have announced plans for a merger that would include creating a nonprofit academic medical center with Brown University.

Board members of Rhode Island’s two largest health systems voted Tuesday night to sign a “letter of intent to merge Lifespan and Care New England into a single entity,” according to a joint statement released Wednesday.

The combined system would include seven hospitals and more than 23,500 employees.

The announcement comes about three months after the CEO’s of Lifespan and Care New England released a joint statement June 2 saying that their “unprecedented” cooperation during the coronavirus pandemic had prompted them to explore a “formal continuation of this collaboration.” Left unsaid were reports of mounting financial losses.

Care New England had reported an operating loss of $4.5 million for the three-month period ending Dec. 30, 2019. Once the pandemic hit, its losses escalated. By the end of February 2020, the company revealed operating losses of almost $9 million, according to Fitch Ratings, which in June downgraded Care New England’s bond rating to ‘BB-’ from ‘BB.’’

A lower bond rating signals an increased risk to investors, which generally drives up the cost to the borrower.

“The stay-at-home orders and suspension of elective procedures in March only served to exacerbate the losses, reversing the financial progress made by CNE in fiscal years 2018 and 2019,’’ Fitch said in its June report.

After Care New England suspended elective visits and procedures in late March, due to the pandemic, its losses “escalated rapidly to roughly $47 million” for the seven months ended April 30, according to Fitch. The loss is expected to be “partly offset” by the $20 million CNE had already received in federal stimulus money, Fitch said, along with  future disbursement of federal and state aid and FEMA grants. Care New England reported a second-quarter loss of $19.8 million.

Care New England's market share also has slipped to 28.5% in its primary service area, from 31% share reported for fiscal 2017, according to Fitch. 

Lifespan previously reported  a more than $15 million loss for the month of March due to the pandemic, and a second-quarter operating loss (not including the closed Memorial Hospital) of more than $19 million.

The leaders of both health systems said the proposed merger would improve health care for Rhode Islanders by combining their strength to create one integrated academic health system. 

“This affiliation will help build an even stronger future for our organizations while maintaining a strong commitment to Rhode Island and southeastern Massachusetts,’’ Charles R. Reppucci, chairman of the Care New England board of directors, said in a statement. “We look forward to continuing this collaboration, sharing additional details about our vision for health care delivery as we begin the regulatory process.” 

The merger would require regulatory approval from the state Department of Health.

The proposed merger of Lifespan and Care New England, the state’s largest and second-largest health systems, respectively, follows at least three failed attempts at combining their systems during the last two decades.

“By working together, Lifespan, Care New England, and Brown University can create a fully integrated academic healthcare system for the people of Rhode Island,” Lifespan president and CEO Timothy J. Babineau, said in a statement. “Combining our investment in our physicians, clinical staff, researchers, technology and other health care staff will greatly help us continue to fulfill our mission of providing world-class health care to our patients, advancing medical discoveries and serving as a vital economic engine for our state.”

Care New England’s president and CEO James E. Fanale said: “After careful consideration, there is clear recognition of the value of a more formal relationship. Overall benefit, regarding the capabilities and reach of what is possible for the health care of our local communities, has been defined with a clear, high-level vision of what could be possible,” said Care New England President and CEO James E. Fanale, M.D.

Christina H. Paxson, president of Brown University, said, “I could not be more thrilled with this announcement. Capitalizing on the complementary strengths of our health care institutions with Brown University will make it possible to provide high-quality low-cost health care, attract and retain the best physicians, and grow our research enterprise while powering the Rhode Island economy.”

“Intent is laudable, but details are what matter,’’ Linda McDonald, president of the United Nurses and Allied Professionals union (UNAP), said in a statement. “Our unbending priority will be the preservation of critical health services and jobs that are part of the community and provide care close to home. This level of care and the people who provide it have never been more needed then they are today.”

Linda McDonald, president of the United Nurses and Allied Professionals union (UNAP), said in a statement that the “intent is laudable, but details are what matter.’’ She said the union's "unbending priority will be the preservation of critical health services and jobs that are part of the community and provide care close to home. This level of care and the people who provide it have never been more needed then they are today.”

UNAP represents some 4,200 employees of Lifespan and Care New England.

Lifespan:

Rhode Island Hospital (including Hasbro Children’s Hospital )

The Miriam Hospital

Newport Hospital 

Bradley Hospital

Care New England:

Women & Infants Hospital

Kent Hospital

Butler Hospital

-- Health Reporter Lynn Arditi can be reached at larditi@thepublicsradio.org