Dive Brief:
- Boston-based Partners HealthCare has backed out of its plan to acquire three-hospital health system Care New England, based in Providence, Rhode Island.
- The withdrawal, announced Tuesday, was in response to CNE reopening negotiations with Providence-based Lifespan and Brown University to create a locally-run, academic medical center in Rhode Island. Partners pulled out of the deal roughly a year after signing a definitive agreement to acquire CNE for an undisclosed amount.
- "In order to give this effort the best possible chance for success and to provide maximum flexibility to the governor and the leadership of these three institutions, we will be withdrawing our application to acquire CNE," Partners interim president and CEO Anne Klibanski said in a statement. "We look forward to reengaging at the appropriate time — especially with a fully integrated local system."
Dive Insight:
M&A is one popular strategy for struggling health systems to try to regain traction. For stronger hospital chains, it's a chance to strengthen their footprint, expand to new markets and increase bargaining power with commercial payers, especially in light of shrinking reimbursements.
CNE lost roughly $115 million in operations in the two years before agreeing to join the much larger Partners, which includes two of the country's most prestigious teaching institutions, Massachusetts General Hospital and Brigham and Women's. Partners, which runs eight hospitals and owns its own health insurer, would have provided some much-needed stability to CNE's balance sheet and support for critical infrastructure investments.
Through acquiring CNE, Rhode Island's second-smallest system, Partners planned to gain a foothold into the neighboring state and increase its regional market share. Antitrust reviews by the Rhode Island Department of Health and the Massachusetts health policy commission in October and November, respectively, found pressing need to prop up CNE, along with little overlap between the companies' geography and patient populations. Both states granted the merger an expedited review.
However, the seemingly cut-and-dry purchase was complicated by outside players.
Brown University, which previously had a medical research affiliation with CNE, also advocated for an alternate merger proposal while CNE was in exclusive talks with Partners early last year.
And CNE's rival and Rhode Island's largest health system, Lifespan, itself wanted to pursue a merger with CNE. A potential partnership between CNE and Partners would have weakened Lifespan's market share through stronger numbers, greater resources and solid branding.
Though Lifespan was briefly included in three-way merger negotiations, the deal ultimately fell through late last year after about nine months of talks.
However, Rhode Island Gov. Gina Raimondo is inviting Lifespan and CNE, along with Brown University, back to the bargaining table in hopes of creating a strong academic medical center to serve her state.
"I have increasingly heard from a number of stakeholders and understand the appeal of a locally-run, academic medical center based in Rhode Island. With that in mind, I have called on Care New England, Lifespan and Brown to sit down once again and consider a joint solution," Raimondo said in a statement Tuesday.
"While I have little control over private hospital systems, I do have the ability to bring these parties together and ask them to reconvene negotiations on a crucial decision that will impact all Rhode Islanders for decades," Raimondo continued.
CNE, Brown and Lifespan agreed to talk about a new merger deal over the summer.
That doesn't mean a future Partners-CNE deal is dead in the water. The two systems already collaborate on programs in cardiology, colorectal, thoracic and vascular surgery, and both parties said they're open to reconvening partnership talks after any Brown-Lifespan-CNE deal is finalized.
"I look forward to the continuation of our existing clinical affiliation with our Partners/Brigham Health colleagues as we explore this opportunity locally in depth," CNE President and CEO James Fanale said in a statement, noting the programs in place will continue to grow.