Brigham and Women’s parent Partners to acquire Care New England

No. 2 RI hospital group also plans to spin off Memorial to Landmark's owner

PROVIDENCE, R.I. (WPRI) – Care New England, Rhode Island’s second-largest hospital group, announced Wednesday it has agreed to merge with Brigham and Women’s Hospital parent Partners HealthCare, in a deal that could significantly reshape the state’s medical sector if regulators approve it.

As part of the deal, Care New England said it will spin off long-struggling Memorial Hospital in Pawtucket to Prime Healthcare Foundation, a nonprofit affiliate of the same group that purchased Landmark Medical Center in Woonsocket in 2012.

Care New England said its board has signed letters of intent with both Partners and Prime and is now negotiating a definitive agreement. After that, regulators in both Rhode Island and Massachusetts would need to sign off on the twin transactions.

By taking over Care New England, Boston-based Partners would instantly become a huge and deep-pocketed force in Rhode Island health care, controlling multiple hospitals including Women & Infants, Kent and Butler. It would also significantly expand Partners’ reach outside Massachusetts, where it is already a powerhouse as the largest hospital network. (One sign of its clout: Partners CEO Dr. David Torchiana met with President Trump late last year.)

Partners, whose other hospitals include Massachusetts General and McLean, posted $12.5 billion in revenue last year and employs more than 68,000 people; by comparison, Rhode Island’s largest hospital group – Lifespan – posted $2 billion in revenue and employs almost 14,000. Care New England had $1.16 billion in revenue and about 8,000 workers, making it Rhode Island’s second-largest private employer.

In a statement, Care New England President and CEO Dennis Keefe called the deal “a tremendous opportunity.” Torchiana described the announcement as “the beginning of a process that will better meet the needs of the region’s patients,” with improved “access to specialized care” and “new efficiencies in the delivery of that care.”

“As health reform here and across the nation evolves, providers are developing more regional strategies and this affiliation between Partners and Care New England is a natural step in that evolution,” Torchiana said.

In a conference call with reporters later in the day, Keefe said he hopes the two sides can reach a definitive agreement within three months so the regulatory review can begin. He also acknowledged it’s possible some jobs could be lost, while noting “there are geographic barriers that mitigate some of the impacts.”

Lifespan argues against out-of-state ownership

Care New England, which has been losing money, began looking for a new suitor last fall after a proposed deal with New Bedford’s Southcoast Health Group collapsed. Lifespan tried and failed in recent months to convince the Care New England board to make a third attempt at merging their two organizations, with CEO Tim Babineau describing its proposal as a “very compelling” offer last week.

In a brief statement Wednesday, Babineau gave a thumbs-down to the Partners deal.

“Partners Healthcare is a Massachusetts-based health system,” Babineau said. “We continue to believe that keeping health care local will result in better patient care, keeping jobs in Rhode Island and will help to contain the rising costs of health care.”

But Keefe told Eyewitness News that Lifespan’s offer envisioned far fewer seats for Care New England’s representatives on the merged organization’s board compared with a prior proposal in 2015, and also included no additional cash. Keefe also said he was concerned the Federal Trade Commission would block a tie-up between them due to antitrust concerns.

The two groups are physically tied up already. Women & Infants, Care New England’s flagship facility, is located on the campus of Rhode Island Hospital, Lifespan’s flagship, under a 99-year lease. Keefe said Lifespan “can’t remove Women & Infants” but said he expects it to be “a central discussion point” between the two organizations going forward.

Partners, which is affiliated with Harvard Medical School, was founded in 1994 by Brigham and Women’s and Mass. General. (It also controls a money-losing Medicaid insurer, Neighborhood Health Plan, which is not affiliated with the Rhode Island insurer of the same name.) Partners and Care New England say they’ve had a “close working relationship” since 2009, when they established a clinical affiliation through Brigham and Women’s.

Another major player that could be affected by the transaction: Brown University, whose medical school has longstanding ties to Care New England’s hospitals – and which might be wary of a new partner with close ties to its much larger Ivy League rival Harvard.

Brown spokesman Brian Clark was noncommittal Wednesday. “We look forward to discussions with both Partners HealthCare and Prime Healthcare Foundation about future relationships and ways that we can work together to improve patient care, education and research in Rhode Island and the region,” he said.

Care New England Chairman Charles Reppucci said of Brown, “We want to take them with us arm-in-arm in this process as we go forward.”

The proposed Care New England acquisition comes as Partners is facing the possibility of stepped-up competition in its own backyard due to the merger of Beth Israel Deaconess Medical Center and Lahey Health. And Partners itself is trying to finalize a takeover of Massachusetts Eye and Ear, though its last significant expansion effort was scrapped in 2015 due to a backlash.

AG, mayors say they’ll review details

For Memorial Hospital, Care New England said California-based Prime would make a “significant investment” in the facility if and when it closes on the deal. “It is certainly no secret that we have had significant financial challenges there,” Keefe said, insisting the Prime transaction is the “only way” for the hospital to continue operating as it currently does. Memorial lost $32 million last fiscal year.

“Prime Healthcare’s motto is saving hospitals, saving jobs and saving lives, and we are confident Memorial Hospital will grow stronger under our management,” Prime Chairman, President and CEO Dr. Prem Reddy said in a statement. Care New England officials said 88 potential acquirers for Memorial were considered before Prime was chosen.

In a joint statement, Pawtucket Mayor Don Grebien and Central Falls Mayor James Diossa suggested the decision to Prime acquire Memorial “is far more positive and in stark contrast to the talks of closure that took place about a year and a half ago, there are still a number of unanswered questions as to the potential impacts of the proposals announced today.”

Patrick Quinn, executive vice-president of the SEIU District 1199 union that represents about 2,200 Care New England workers, offered a cautious response to the news.

“It is important that any proposed hospital merger ensures the continued provision of quality care for Rhode Islanders, safe staffing levels in our hospitals, and good jobs for health care workers,” he said, adding that the union “will evaluate this proposal fully.”

Linda McDonald, president of the United Nurses and Allied Professionals union that represents some Memorial Hospital workers, noted the deal “has the ability to impact thousands of jobs and the quality of care in Rhode Island and should be thoroughly scrutinized.”

“The onus is now on Care New England, Partners HealthCare and Prime Healthcare Services to make the details of this proposal public and to do it quickly so that workers, patients and state regulators may begin asking the appropriate questions,” she said.

The R.I. Department of Health and Attorney General Peter Kilmartin’s office will both need to approve the two Care New England transactions for them to go through.

Ted Nesi (tnesi@wpri.com) covers politics and the economy for WPRI.com. He writes Nesi’s Notes on Saturdays and hosts Executive Suite. Follow him on Twitter and Facebook