Brown U., Prospect reveal they want to buy Care New England hospital group

PROVIDENCE, R.I. (WPRI) – Brown University and Prospect Medical Holdings confirmed Thursday they are interested in buying Care New England, a dramatic move that could change the debate over the future of Rhode Island’s second-largest hospital system.

Details about the proposal from the Ivy League school and the California for-profit company — which already has a majority stake in Roger Williams Medical Center and its sister facilities — were disclosed in a letter Brown President Christina Paxson sent to the school community Thursday afternoon. It was also released publicly.

The Brown-Prospect announcement comes as Care New England remains in merger talks with Partners HealthCare, the largest hospital group in Massachusetts. Care New England and Partners recently extended their exclusive negotiating window through the end of January, and a top Partners executive has said the company will make a final decision by February. The transaction was first announced last April.

“I feel strongly that letting this acquisition go forward would be wrong for Rhode Island and for Brown,” Paxson warned in her email. She argued a Partners takeover of the CNE hospitals “would likely increase the cost of care and reduce the ability of Rhode Islanders – consumers, businesses, health care workers and policy-makers – to have a voice in how our health care system works.”

“If the focal point of Rhode Island health care shifts to Boston, excellent physicians (many of them Brown-trained) could be less likely to choose Rhode Island as a place to practice,” she continued. “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.”

Care New England owns three hospitals — Women & Infants, Kent and Butler — following the effective closure last month of long-struggling Memorial Hospital in Pawtucket. Its non-hospital divisions include The Providence Center and Integra, an accountable care organization. The health system is one of the state’s largest employers, but it has lost more than $100 million over the last two years, partly due to the turmoil at Memorial.

Care New England spokesman Jim Beardsworth quickly panned the Brown-Prospect idea, saying it “represents their intention to acquire and split up the Care New England Health System – a process undertaken of their own independent action and interests.” He said Care New England executives still think the Partners deal is in the “best interest” of the company and its patients, and they plan to proceed with it.

Paxson later told reporters she was “surprised by Care New England’s reaction.”

“We are outlining an alternative that seeks to assist Care New England by offering significant investment to join with them in keeping health care in Rhode Island,” she said, “and we’re taking a position on an issue of vital public importance … which should be a concern to everyone who lives and works in this state.”

Partners spokesman Rich Copp had no direct comment on the Brown-Prospect proposal, but said: “We continue to work closely with Care New England and remain committed to improving the availability and accessibility of high-quality medical and surgical services to the Rhode Island community.”

Gov. Gina Raimondo appeared to welcome the news. “I’m encouraged that there might be even more options for Care New England’s future,” she said in a statement. “Having a financially sustainable hospital system in Rhode Island is critical to the health and prosperity of our people.”

Brown is unusual among top-tier medical schools in not owning any hospitals, and a bid for Care New England would allow the university to dip its toes into those waters for the first time. For Prospect, it would give the company a much more prominent role in Rhode Island health care, with a stake in multiple major hospitals.

Under its proposal, Brown or a nonprofit subsidiary of the school would acquire Women & Infants, while Prospect would acquire Kent and the Care New England non-hospital divisions; Brown would also have right of first refusal on acquiring Butler. Medical school faculty at the hospitals “would either be invited to join a Brown faculty practice plan or to become Brown employees,” Paxson said.

Paxson acknowledged the Brown-Prospect takeover of CNE will only happen if either Partners walks away from its acquisition or the Department of Health refuses to approve it. She said Brown is “committed to working with Partners to maintain the productive relationship that Brown has enjoyed with CNE” if the deal goes through.

Paxson also hinted that she hopes to see Lifespan, Rhode Island’s largest hospital group, support its acquisition of Women & Infants and potentially Butler to create “an integrated academic health system” involving the two systems. Women & Infants is located on the campus of Rhode Island Hospital, Lifespan’s flagship, under a 99-year lease.

Lifespan President and CEO Dr. Timothy Babineau said Thursday his group “has not been party to the conversations announced today” and added it would be “inappropriate to comment further” while the Partners exclusivity period is still active.

Brown has close ties to Lifespan, just as it does with Care New England, and Lifespan’s leaders have appeared wary of Partners moving into Rhode Island. But they were also unhappy that Care New England spurred their own acquisition offer, the latest in multiple failed merger attempts by the two systems.

“As the principal academic affiliate of the Warren Alpert Medical School of Brown University, Lifespan has a vested interest in the future of our collective academic mission and our faculty,” Babineau said. “As always, Lifespan remains committed to providing world-class care to our patients and our communities irrespective of any changes in the marketplace.”

Prospect has already been taking steps to raise its profile locally in recent weeks: the company began airing a TV ad Jan. 1 hailing its stewardship of Roger Williams and Fatima Hospital. “To kick off the new year, and three-plus years into it, we felt it was a good time to remind folks that PMH has delivered on its promise and commitment to invest in these hospitals and RI,” spokesman Otis Brown said in an email.

Prospect has also faced some criticism locally. The United Nurses and Allied Professionals union, which represents nurses at Fatima, has questioned its safety record, and the company’s decision not to take responsibility for the old Fatima pension fund has been partly blamed for the plan’s present financial troubles.

The union’s general counsel, Chris Callaci, quickly condemned the Brown-Prospect proposal as a “bad deal” for Rhode Island and hospital workers.

“We find it difficult to understand why Brown University would risk its stellar academic reputation through a partnership with Prospect Medical Holdings – an out-of-state run, for-profit corporation with a documented history of jeopardizing patient safety and care,” he said. “Prospect management represents the worst in profit-based medicine and we believe this move would be calamitous for Rhode Island patients and health workers.”

A more positive reaction came from Lt. Gov. Dan McKee, who several months ago expressed reservations about Care New England falling into out-of-state hands. “Rhode Island residents need a solution that will protect industry talent and jobs and promote maintaining health services right here in our state,” he said 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