PROVIDENCE, R.I. (WPRI) – Care New England executives said Thursday their timeline for selling Memorial Hospital has slipped due to complicated negotiations over the money-losing hospital’s future.
Rhode Island’s No. 2 hospital group announced in April it would spin off Memorial to Prime Healthcare Foundation, a nonprofit tied to Landmark Medical Center’s owner, and merge the rest of its operations with Partners HealthCare, the largest hospital group in Massachusetts. The transactions come as Care New England has been struggling financially, with the organization on track to lose an estimated $61 million in the current fiscal year, which ends Saturday.
Alyssa Boss, Care New England’s general counsel, told bondholders in a conference call Thursday that company executives had originally expected the Memorial transaction would be complete by late this year or early 2018, but they now think it will take until “well into 2018.” They had also hoped to sign an asset purchase agreement with Prime by now, but that is still up in the air, though Boss suggested it could be done in “the next couple of weeks.”
“Negotiations have been pretty complicated,” Boss said. She cited the difficulty of extracting Memorial from Care New England’s integrated system of hospitals, which also include Women & Infants, Kent and Butler, particularly when it comes to technology.
“We are working to try to get Prime there as quickly as possible. And we are emphasizing the importance of getting it done as quickly as possible,” Boss said.
Memorial has proved to be an enormous headache for Care New England, which purchased the hospital in 2013. The Pawtucket facility lost $16 million in the first nine months of the current fiscal year.
“If we are unable to agree on an asset purchase agreement with Prime … then we would need to revisit the strategic options the board has previously reviewed,” Boss warned. The board had examined the possibility of closing Memorial before opting for a sale to Prime.
Care New England President and CEO Dennis Keefe, who recently announced plans to retire, also updated bondholders on the Partners merger.
Keefe said Partners has been conducting “very extensive” due diligence as the two companies negotiate a definitive agreement for its takeover of the Rhode Island group. A Partners executive said last month they want to see Care New England’s operations break even in its 2017-18 fiscal year to feel comfortable doing the deal.
Keefe downplayed concerns about whether the Partners merger is still on track. “This is a very complicated, significant transaction,” he said.
“I think it’s the largest acquisition that Partners has ever done,” Keefe said. “So a part of it is just the complexity of what we’re going through that has really caused the time frame that we’ve been experiencing, and when you look at it from that perspective, to me six months isn’t really that long.”
Asked about the Partners executive’s comments, Keefe said: “It’s clearly their decision. I’m not going to get out ahead of the process here. We’re just working with them closely and providing information. And I think you can see the progress we’re making and draw your own conclusions about where we are and how far we’ve come in terms of that whole process.”
Keefe also said a new law Care New England pushed through the General Assembly this year will require the attorney general and the Department of Health to conduct expedited 90-day reviews of not only the Memorial transaction but also the Partners one. The Partners deal will also need to be approved by regulators in Massachusetts.
Care New England’s leaders offered an optimistic take on its financial outlook. Joseph Iannoni, the company’s chief financial officer, noted the hospital group’s operations lost nearly $40 million in the first half of this fiscal year but are only expected to lose an additional $10 million in the second half.
“So significant improvement,” Iannoni said, adding, “I think we’re moving in the right direction.”
Keefe said various efforts to cut expenses have been paying dividends. He singled out a downsizing of senior management at the corporate level, saying the high-level job cuts are on track to save Care New England about $10 million.