PROVIDENCE, R.I. (WPRI) – Care New England’s leaders are moving quickly to try to sell Memorial Hospital and find a new suitor to take over the rest of their organization after running much more red ink than expected at the end of 2016.
Rhode Island’s second-largest hospital group posted an operating loss of $13.9 million in the three months ended Dec. 31, which was $10 million worse than its executives had forecast. It follows a net loss of $53 million for the prior fiscal year. They blamed an unexpected fall in patient volume, particularly at Women & Infants and Kent hospitals.
In a conference call with bondholders last week, Care New England President and CEO Dennis Keefe described the quarter’s results as “disappointing” and “disturbing.” More cuts to the nonprofit group’s workforce of roughly 8,000 employees will likely be announced “over the next week or two,” he said.
Care New England executives’ top priority remains dealing with Memorial, the cash-strapped Pawtucket facility they have been struggling to turn around ever since acquiring it in 2013. Memorial’s operating losses totaled nearly $6 million during the final three months of 2016, though that was an improvement from $9.3 million during the same period a year before.
The company has hired Solic Capital Advisors, an Illinois-based firm that focuses on distressed medical assets, to help figure out what to do with Memorial, and Solic recently recommended that the hospital be sold either on its own or as part of a larger takeover deal for the entire Care New England organization.
Keefe said his team is now envisioning “the potential for Memorial not being part of Care New England in the near future.” He said the company has received one offer for Memorial so far, with “more to come,” and he hopes to have a preliminary deal in place by the company’s March 23 board meeting.
“There is interest by organizations, and we view that as very positive,” Keefe said.
Separately, Keefe said Care New England is “moving very, very quickly” to find a new “strategic partner” after its proposed merger with New Bedford’s Southcoast Health Group collapsed last October. He hinted that the company is more likely to be taken over by a for-profit, but indicated all options are on the table.
Keefe said national and regional organizations have expressed “very, very significant” interest in a deal with Care New England, and said the company is whittling down an initial list of 12 possible partners. He described the suitors as “some really important players.”
“We’re optimistic that something positive will come out of this,” Keefe said, adding: “Compared to the Southcoast process, I think this is moving incredibly quickly.”
In the meantime, Care New England is working to get its finances back on track in the wake of its sizable operating loss last fall.
Keefe attributed the lower-than-expected volume of patients at Kent to two factors, a mild flu season and a transition happening in its surgery program, and said there were already signs of improvement at the Warwick facility since January. The decline at Women & Infants has been longer-lasting, due to a fall in the number of babies delivered, he said.
One relative bright spot on Care New England’s balance sheet is Butler, a psychiatric hospital in Providence, which cut its operating loss during the last three months of the year by more than half, to $1.1 million. Joseph Iannoni, Care New England’s chief financial officer, said demand for treatment for behavioral health and substance abuse issues has been “off the charts.”
Keefe said Care New England is focused on reducing expenses at the corporate level. He said the company is eliminating the jobs of four senior executives: Sandy Coletta, executive vice president and chief operating officer; Gail Costa, senior vice president for strategy; Marilyn Walsh, senior vice president for human resources; and May Kernan, senior vice president for marketing.
Iannoni said the company is also in negotiations with insurers Blue Cross & Blue Shield of Rhode Island and Neighborhood Health Plan to increase its payment rates after the state health insurance commissioner’s office raised its cap on rates, effective Jan. 1.