- Care New England, based in Providence, Rhode Island, has pulled out of three-way discussions with Providence-based Lifespan, the largest health system in the state, and Brown University about creating a locally run academic medical center. The three organizations reopened merger discussions last month at the request of Rhode Island Gov. Gina Raimondo.
- In a statement explaining the decision, CNE's board said it weighed many factors, including the "capital requirements and financial stability of the combined system, community need, anti-trust considerations, organizational stability, and implementation risks."
- While the Democratic governor expressed her disappointment with CNE's decision, she clearly wasn't giving up, saying, "I have encouraged the parties to keep an open mind, remain open to future discussions, and to continue to pursue expanded collaboration that could pave the way to further integration down the road."
The breakdown in merger discussions follows a complicated dance among the players. It began when three-hospital CNE, the second largest system in Rhode Island, entered into a definitive agreement in January 2018 to be acquired by Boston-based Partners HealthCare, the largest health system in Massachusetts. The agreement followed a 10-month due-diligence process.
The acquisition would have given Partners a foothold in neighboring Rhode Island and CNE access to financial resources. CNE lost about $115 million in the two fiscal years prior to the deal with Partners.
A month later, Lifespan joined those discussions, even though CNE had a history of rebuffing consolidation overtures from Lifespan.
But the three-way plan came to a halt In October 2018 when Lifespan bowed out, leaving CNE and Partners on track to complete their deal.
In the end, the Partners-CNE arrangement wasn't in the cards either. In June, Partners said it was backing out of the acquisition plan, so CNE could pursue discussions with Lifespan and Brown University about creating a locally run academic medical center.
With Tuesday's announcement, CNE's board didn't shut the door completely on cross-town cooperation, saying, "We also look forward to expanding our collaboration with Lifespan and Brown University on new clinical and academic opportunities."
Lifespan said it was "extremely disappointed" by CNE's decision. "We believe that a partnership with Lifespan, Care New England and Brown University remains the very best approach to ensure high quality, affordable health care and economic vitality for our state," according to a statement. "We were optimistic that achieving a complete and unified academic medical center for the people of Rhode Island could become a reality and were working in good faith to achieve that goal."
The potential deals in New England are but one example of M&A activity in healthcare. Horizontal mergers and acquisitions continue to be hot. They often occur because financially strong health systems want to increase market share and bargaining power with commercial payers and reduce costs to offset a tough reimbursement environment. Weaker systems look to partners for financial stability.
Two high-profile deals were completed this year. Dignity Health and Catholic Health Initiatives combined to create CommonSpirit Health — a $29 billion, 142-hospital system spanning 21 states. HCA, which now has 185 hospitals and about 1,800 sites of care in 21 states and the United Kingdom, acquired Mission Health, which serves western North Carolina.
At the same time, a potential marriage between Dallas-based Baylor Scott & White Health and Houston-based Memorial Hermann Health System fell apart. If they had merged, the combined system would have had 68 hospitals, two health plans and more than 14,000 affiliated physicians in Texas.
The size and pace of the deals raise concerns about whether market concentration among providers leads to price and cost increases. In a study of health system consolidation in California, researchers at the University of California-Berkeley found that highly concentrated markets resulted in higher fees for hospital and physician services, as well as higher Affordable Care Act premiums.