New England Medical Center in Boston could receive as much as $175 million over a 20-year period for operating expenses and program initiatives under terms of its affiliation agreement with Lifespan, a Providence, R.I-based healthcare network.
But the agreement on financial and other commitments, completed in June and recently made available, draws the line at debt repayment.
Lifespan's intent to affiliate with 434-bed New England Medical initially drew criticism from some quarters in Rhode Island because of concerns that money from patients would leave the state to ease the debt load of the hospital. Lifespan's annual revenues total $600 million, not including New England Medical, which had $353 million in revenues in fiscal 1996 ended Sept. 30.
The agreement stipulates that Lifespan won't become a guarantor and won't assume any of the $240 million in debt owed by New England Medical, mainly for new facilities built in the heady 1980s before managed care put the brakes on revenue growth in Massachusetts.
The financial commitment to operations and initiatives, however, is tied to the timetable of New England Medical's debt repayment. Lifespan's annual investment of $8.7 million will end when the hospital's long-term debt is eliminated in about 20 years.
The duration of annual payments was linked to the debt-repayment term "as a matter of convenience," said Lifespan spokesman Rick Piester, explaining it "gives us a definite period of time" instead of making the duration uncertain or open-ended.
Piester acknowledged, however, that if New England Medical keeps receiving payments as long as debt is due, it can take money that otherwise would be used for operations and commit it to debt repayment.
But that leeway would meet Life-span's commitment to bolster patient care and strengthen an affiliate. "That, after all, is the reason for creating networks and systems," he said.
With plans to expand into Massachusetts anyway, he added, "Lifespan would be targeting at least that much to establish and nurture a system in Massachusetts if New England Medical Center wasn't a part of it."
The annual payments may end sooner, according to the agreement, if debt is refinanced to take advantage of more favorable market rates in the future. While Lifespan won't assume any of New England Medical's debt as it's now structured, "it's conceivable" the network could include New England Medical's obligations in the rewritten debt agreement, he said.
The affiliation awaits the approval of attorneys general in Rhode Island and Massachusetts and the Massachusetts Department of Public Health. Lifespan is hoping to complete the affiliation by the end of September, Piester said.