Healthcare Merger Mania - Is Lifespan Next for Boston’s Partners HealthCare?
GoLocalProv News Team
Healthcare Merger Mania - Is Lifespan Next for Boston’s Partners HealthCare?
While the PawSox have fewer than 25 full-time employees, healthcare in Rhode Island employs more than 57,000.
The latest blockbuster is the announcement that Boston’s Partners HealthCare is expanding its deal for the financially floundering Care New England (CNE) to include Providence-based Lifespan. The joint announcement was vague at best.
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Healthcare is the largest sector of the Rhode Island economy and Lifespan and CNE are among the largest private employers — the two RI healthcare groups claim nearly 20,000 employees.
Economic projections for the future of Rhode Island’s economy show that healthcare will be an ever-increasingly more important sector of the economy.
According to the Rhode Island Department of Labor and Training, “Employment in 2024 is projected to reach 542,400, an increase of 36,000 (7.1%) from our 2014 employment. Much of this growth is attributed to the increased demand for the products and services provided by the Health Care & Social Assistance…Healthcare Support (11.3%).”
And according to RI DLT, healthcare is expected to grow to more than 62,000 by 2024.
Some experts worry that many of the jobs and much of the growth could be realized in Boston rather than Rhode Island, if Partners’ move to acquire CNE goes forward and the adverse impact could be even more devastating for Rhode Island’s economy if a Partners Lifespan deal develops.
Brown University President Christina Paxson has been sounding the alarms about the Partners CNE deal.
On Tuesday, Paxson reacted strongly to the announcement, “We continue to be concerned about the impact of the acquisition of Care New England by Massachusetts-based Partners — and now a possible business relationship between Partners and Lifespan — on the cost of and access to healthcare in the state. Previously, we have noted that the acquisition of Care New England by Partners could undermine competition in the healthcare market and lead to higher healthcare costs. A business relationship between Partners and Lifespan that further consolidates market power could have additional adverse effects on Rhode Islanders.”
The announcement of Lifespan joining the CNE-Partners garnered reaction from labor.
"We are curious to see what develops from talks between Lifespan, Partners HealthCare and Care New England. Should a three-way deal be consummated, we would expect to begin discussions with management on how to strengthen resources for bedside caregivers and support staff as part of a wider effort to improve healthcare delivery in Rhode Island,” said United Nurses and Allied Professionals spokesman Ray Sullivan.
“While we cautiously await further details, Lifespan's involvement in this proposed merger is significant and must be given serious consideration. We hope it helps ends the ill-thought effort between Prospect Medical Holdings and Brown University to break up Care New England,” said Sullivan.
Both Lifespan and Partners refused to answer questions about the potential Partners, CNE and Lifespan deal.
In the Spring of 2017, Lifespan entered into another Boston hospital agreement. That agreement is with Dana-Farber Cancer Institute and is a long-term agreement with the goal of advancing cancer treatment and research.
Lifespan however previously entered into an agreement with New England Medical Center and that deal led to years of protracted litigation to unwind. Lifespan also ran into a legal battle with Tufts Medical Center. Lifespan was ordered to pay millions.
Regarding the 2017 Dana-Farber agreement, Lifespan reported:
This Boston hospital agreement will support expansion of clinical trials, offer access for Lifespan physicians to cancer-specific disease expertise for complex cases, and create a program to coordinate the treatment of bone marrow transplant patients.
“Lifespan Cancer Institute’s patients will continue to receive excellent cancer care in Rhode Island, but patients with rare and more complex cancers will benefit from seamless referrals and coordination of care with Dana-Farber. The new agreement gives us the ability to offer the latest and most cutting-edge clinical trials to patients from Rhode Island and surrounding areas. Successful cancer programs and new discovery depend on access to large populations of patients. We are proud to be working with one of the leading cancer centers in the United States,” said Timothy Babineau, M.D., president and CEO of Lifespan.
About the potential new deal with CNE and Partners, Babineau said in a statement on Tuesday, “I am excited about what this could mean; for our patients, our mission and the Rhode Island and regional health care delivery system. Lifespan has always been interested in partnering with like-minded, superb organizations, and I look forward to the discussions and the potential to continually improve the seamless and coordinated care we deliver to our patients.”
RI Healthcare Chaos - February, 2018
St. Joseph Pension Fund Collapses
In August, Rhode Island realized its largest pension fund collapse when the orphaned pension fund of St. Joseph Health Services was forced into a receivership.
After months of legal wrangling -- one of the major learnings is that over 2,700 plan members face an uncertain financial future. The receiver has identified that the fund is underfunded by approximately $118 million. The shortfall is a devastating number as the existing fund has less than $90 million,
Fined $1 Million
In October, the Rhode Island Department of Health fined Prime Healthcare -- which has operated Landmark Hospital in Woonsocket and the Rehabilitation Hospital of Rhode Island in North Smithfield -- $1 million dollars for knowingly giving false or incorrect information as it pertains to the Hospital Conversion Act.
According to the Department of Health, it is the largest fine issued by them "in at least the last 30 years."
About the Fine
Prime Healthcare -- Prime's for-profit entity -- has a pending application with the state to transfer the two entities to the Prime Foundation, its not-for-profit entity.
According to the Consent Agreement signed by all parties, Prime had led the state to believe it would change its status retroactively when the transfer was approved.
The Department of Health then discovered Prime knowingly transferred the status in 2016, prior to approval.
Memorial Closes
In December, the Department of Health approved CNE's application to close Memorial Hospital.
The closure led to more than 800 employees losing their jobs.
Care New England's Financials Are Worse than Expected
GoLocal secured key financial documents of Care New England’s (CNE) and those documents unveil that the hospital group continues to struggle financially and miss budget targets even after the closure of Memorial Hospital.
According to documents filed by CNE, the group continues to overspend its budget even after closing Memorial Hospital, “Total expenses for the System were over budget by $10.2 million or 3.4 percent and $23.4 million higher than last year.”
The overspending is just one of the problems facing Care New England and raises more questions about the management and viability of CNE.
According to CNE financial documents, “The System’s cash remains a primary focus of management; overall days cash on hand were 43 days."
In contrast, hospital groups with strong bond ratings have more than one-year of cash on hand. “Standard & Poors Global Ratings has outstanding ratings on 156 health systems of which 142 are included in the median ratios…AA+ rating..Days cash on hand: 426.2 days,” writes Beckers Hospital Review.
The lack of cash on hand is putting tremendous pressure on CNE’s management and is not improving despite the closure of Memorial Hospital.
Pension Shortfall
According to CNE financials, the pension fund is underfunded by over $100 million. The fund did realize substantial gains which mirrored the performance of the stock-market.
Trending the Wrong Way
For FY 2018, even after shedding Memorial, key indicators show that CNE's budgeting and financial performance are flawed, “Inpatient volume for the System (excluding Memorial) through the first quarter was overall unfavorable to the budget…”
More Staff Cuts and Cost Controls
Beyond the layoffs at Memorial -- over 600 employees, overall salaries and wages were reduced. Full-time employees across CNE’s other hospitals were also reduced — Butler, Kent, and Women and Infants all saw cost reductions.
Merger Between South County Hospital and Westerly Hospital is Off
The negotiations between South County and Yale-New Havens' Westerly Hospital was called off on Tuesday, February 27, 2018.
“Unfortunately, we were not able to identify a mutually acceptable plan that would meet the needs of our respective communities. “We believe this is the right course at this point in time and we each remain committed to delivering excellent care for the communities we serve," said the two hospitals in a statement.
It is not the last we will hear from Yale-New Haven -- a mega-hospital group headquartered in Connecticut.
Brown and Prospect
In an effort to ward off Partners HealthCare's entrance to the market, Brown and Prospect of California have teamed up. The unlikely alliance between the Ivy League college and the for-profit group is making a strong pitch to keep jobs and local control in RI.
In January, Paxson wrote to the Brown community, "I feel strongly that letting this acquisition [Partners' purchase of CNE] go forward would be wrong for Rhode Island and for Brown. Doing so is likely to lead to specialty healthcare shifting to Massachusetts, impeding access to healthcare for Rhode Islanders and especially for members of the state’s underserved communities. It also would likely increase the cost of care and reduce the ability of Rhode Islanders — consumers, businesses, healthcare workers and policy-makers — to have a voice in how our healthcare system works. If the focal point of Rhode Island healthcare shifts to Boston, excellent physicians (many of them Brown-trained) could be less likely to choose Rhode Island as a place to practice. In addition, the full economic benefits of a strong local academic health system — one that brings in federal grants, generates spin-off companies and creates new jobs in Rhode Island— would be lost, perhaps forever.
Failed Hospital Merger Process
The collapse of the St. Joseph Health Services pension fund unveils that the Hospital Conversion Act review process is flawed. Just three years after Kilmartin approved the merger of CharterCare into Prospect of California, the orphaned pension fund collapsed.
At the time of the agreement in 2014, Kilmartin said, “The transacting parties have worked diligently to provide regulators with the necessary documentation and information throughout this review process to make this decision, a decision I believe is in the best interest of Rhode Island’s healthcare marketplace, the community, the employees, and most importantly, the patients.”
Kilmartin said in his statement, “Conducting a hospital conversion review requires the commitment of a substantial amount of resources for the Office of Attorney General. I commend my staff for the time and careful consideration put into this review process.” Kilmartin's office has refused to respond to questions from GoLocal regarding the collapse of the fund.
