R.I. Attorney General denies Lifespan-Care New England health care merger

Lifespan and Care New England are the two largest health care systems in the state. Executives had hoped to combine to create the Rhode Island Academic Health Care System, Inc., in partnership with Brown University, which had committed to investing $125 million as part of the merger. The combined entity would have been Rhode Island’s largest employer.

But Neronha pointed out that the deal would mean one system would control approximately 80 percent of the market’s hospital beds and would own eight of the state’s 13 hospitals.

“This level and degree of healthcare consolidation in a small, but densely populated, state like Rhode Island is unprecedented and would concentrate Rhode Island’s healthcare market for beyond the levels in neighboring New England states,” wrote Neronha in his decision.

In Massachusetts, Mass General Brigham, formerly known as Partners, has around 20 percent of the state’s acute care hospital beds, while the Lifespan-Care New England merger would have controlled 75 percent of all inpatient acute care beds. In Connecticut, Neronha explained, the largest system controls 31 percent of statewide inpatient hospital beds.

The projected increase in market power from a merger in Rhode Island would be “the largest increase on record when compared with all other health system and hospital mergers the federal government has moved to block since 2004.”

“By eliminating the competition between Lifespan and Care New England, the Proposed Merger would increase Rhode Islanders’ healthcare costs, threaten the quality of care they receive, limit their access to care, and disadvantage skilled healthcare workers,” he wrote.

The decision’s timing came as a surprise: Neronha had until March 16 to either approve, approve with conditions, or deny this proposed merger through the systems’ Hospital Conversion Act application.

Executives at both systems deemed the proposed merger critical for putting the systems in “stronger financial footing,” especially after the cost pressures surrounding the pandemic over the last two years. But Neronha decided that “The proposed merger would put Rhode Island’s healthcare system in greater financial peril.”

While the executives have spent nearly a year and a half touting the benefits of their merger, ”The parties’ have nothing more than a ‘plan to make a plan’ with respect to achieving the claimed benefits of combining, without accounting for the costs and challenges with achieving these benefits,” Neronha noted.

Neronha deemed the system’s HCA application complete late last year, and his office released pages to the public, though many of the documents have been redacted from the public.

“You don’t have to be an antitrust expert to see how this is bad for healthcare,” said Neronha.

In the final weeks of public comments, labor unions came out in support of the merger, saying that a “local, nonprofit” entity that could be controlled locally would be right for Rhode Island.

But executives at other systems, like independently owned South County Health, have come out in opposition of a single system having so much market power. CEO Robinson told the Globe this week that he hired a lawyer, has spoken to the Federal Trade Commission, and even voiced an idea of breaking two hospitals (Kent Hospital from CNE and Newport Hospital from Lifespan) out of the deal. But leadership at Lifespan and CNE, he said, wouldn’t hear him.

“I think they want to create scale and they want to create market power,” said Robinson.

Minority Leader Blake Filippi, a Block Island Republican, called the proposed merger a “prescription for disaster” that Rhode Island “would live and die with for generations.”

“I respectfully suggest that Governor Dan McKee ask Partners Healthcare [now Mass General Brigham] to resubmit their offer to buy CNE — and promise Partners that this time they will be treated fairly in Rhode Island,” wrote Filippi on Twitter.

Speaker K. Joseph Shekarchi, a Warwick Democrat, said he encouraged the hospital groups to “immediately terminate their exclusivity agreement and explore all options available to them in the marketplace.”

Brown President Christina H. Paxson said in a statement to the Globe that Brown has long believes that it’s in the best interest of Rhode Islanders to have a locally controlled, integrated academic health system and that any “potential negative impacts of a merger could be addressed through appropriate governance and oversight.”

“Although we respect their decision, we are disappointed that the FTC Commissioners and the Rhode Island Attorney General do not agree,” said Paxson. “Regardless of this decision, Brown remains steadfastly committed to supporting the work of the physicians who work in both Lifespan and Care New England, serving the health of Rhode Islanders and fueling the local economy through the teaching, research and service conducted by the Warren Alpert Medical School, Brown’s School of Public Health and other academic departments and programs.”

The attorney general could have approved the proposed merger with strict conditions. However, he said, the problems created by the merger could not be solved simply with “more regulations or conditions.”

Read the entire decision below:

Alexa Gagosz can be reached at alexa.gagosz@globe.com. Follow her on Twitter @alexagagosz and on Instagram @AlexaGagosz.

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