Memorial Hospital to close after deal falls apart

Memorial Hospital in Pawtucket.

PAWTUCKET, R.I. (WPRI) – Care New England’s board voted Monday night to close Memorial Hospital after a proposed takeover deal for the cash-strapped facility fell through, the company revealed Tuesday.

The Pawtucket hospital, which Care New England took over in 2013, has been struggling financially for at least a decade. The company had announced earlier this year it planned to spin off Memorial to Prime Healthcare while selling its other facilities to Partners HealthCare, Massachusetts’ biggest hospital group.

Negotiations between Prime and Care New England fell apart over the last two weeks when the two sides could not agree on terms, Dr. James Fanale, Care New England’s incoming CEO, told Eyewitness News. Staff members were being informed of the development Tuesday afternoon.

“I’m disappointed,” Fanale said. “Until a week ago we did everything we could to try to get that agreement done.”

Memorial is licensed for 290 hospitals beds, but in recent months it has had just 15 to 20 inpatients a day. “It leaves you in a devastating situation,” Fanale said, adding that “the hospital financially can’t survive in that environment.”

Care New England hopes to convert some of Memorial’s nearly 600,000-square-foot campus to other medical uses, such as primary care or specialty services, and those details will be worked out “over the next couple of weeks.” The hospital already closed its obstetrics unit and reduced its inpatient capacity last year.

“The magnitude of the losses at Memorial cannot be sustained and jeopardizes our other hospitals and provider organizations,” Charles Reppucci, chairman of Care New England’s board, said in a statement. “We have exhausted our very best efforts and those of some nationally-recognized consultants to improve the situation without the outcomes we had hoped to achieve.”

Pawtucket Mayor Donald Grebien quickly condemned the move. “I am extremely disappointed in this decision by Care New England to abandon our community hospital during their transactions, putting their agreement with Partners above the one with Prime,” he said in a statement, adding that he is considering legal action.

The R.I. Department of Health will need to sign off on the hospital’s closure. Fanale declined to put a timeline on when he hopes Memorial will stop operations, but said he hopes state regulators will review the proposal “expeditiously” in order to stabilize the full Care New England system, which also includes Women & Infants, Butler and Kent hospitals.

But state Sen. Elizabeth Crowley, a Democrat who represents part of Pawtucket, called on Care New England and Prime to resume negotiations, and urged the Department of Health to reject the closure plan and put the hospital into receivership, citing the example of Landmark Medical Center in Woonsocket a decade ago. (Prime later acquired Landmark.)

Partly due to Memorial’s troubles, Care New England’s operations lost $68 million in its 2015-16 fiscal year and a projected $49 million in 2016-17, which closed last month. “We’ve got to ensure that Care New England is stable as an employer and all the attendant things there, and we’re going to do that,” Fanale said, adding that resolving Memorial’s situation is a requirement before Partners will agree to take over the hospital system.

Fanale said Memorial currently employs nearly 700 people, some of them part-time, and jobs are likely to be found for some of them at Care New England’s other facilities. “We’re not going to be able to save every one, but to the extent we’re able to [we will],” he said. He also emphasized that patient safety will be a priority as the hospital winds down.

Chris Callaci, general counsel for the United Nurses and Allied Professionals union, said Memorial employees were “devastated” by the news. “You’re talking about a hospital that’s been operating in that community for over 100 years,” he said. “Generations of people have worked there. Generations have gone in for care. And now it’s going to close?”

Callaci also criticized Care New England’s management of the hospital in recent years, and said his union will be active as the regulatory process moves forward. “Our union is a fighting institution,” he said.

But Fanale insisted Memorial’s troubles predated Care New England, and said the company has invested significant money in the facility during its four years of ownership. “Memorial’s been financially stressed for over 10 years, and everybody knows that,” he said. He also cited a 2013 study that found Rhode Island has roughly 200 more hospital beds than it needs, suggesting it was inevitable the sector would need to shrink.

While about 13 entities initially expressed some interest in taking over Memorial when Care New England put it on the market earlier this year, Prime was the only one that actually put in a bid, according to Fanale. He said that left hospital executives with no reason to think a new buyer would come along.

Fanale said Care New England has been engaged in talks for months with Brown University, whose medical school has a residency program at Memorial, about shifting those trainee doctors to Kent in Warwick. Brown has not yet agreed to do so, but Fanale expressed hope that it will.

Care New England executives had told bondholders last month their timeline for completing the Prime transaction had slipped considerably due to complications in negotiations.

Prime is separately trying to convert Landmark Medical Center from a for-profit entity to its original nonprofit status. The R.I. Health Services Council, a body that oversees medical facility licensing, is scheduled to take up that proposal on Thursday.

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