Brown University and Prospect Medical Holdings pitch alternative merger for Care New England

Brown University and Prospect Medical Holdings announced plans to acquire Care New England Health System while condemning the health system's ongoing merger talks with Partners HealthCare.

Brown University President Christina Paxson said that if Providence, R.I.-based Care New England merges with Boston-based Partners, specialty care would shift to Massachusetts, reducing access for Rhode Island consumers and increasing the cost of care. Rhode Island would also have less control of local healthcare operations and the state would suffer from fewer federal grants and stunted job growth, Paxson said on a conference call with reporters Thursday.

"Today's announcement by Prospect Medical Holdings and Brown University represents their intention to acquire and split up the Care New England Health System—a process undertaken of their own independent action and interests," Care New England said in a statement, adding that exclusive negotiations will continue with Partners.

The largest healthcare provider in Boston, Partners signed a letter of intent to acquire Care New England in April, just a few months after Care New England's proposed merger with New Bedford, Mass.-based Southcoast Health System fell through.

Talks with Partners slowed as Care New England's financial turnaround stumbled and its bond rating was downgraded. Care New England reported a $47.1 million operating loss in fiscal year 2017, compared to a $68.3 million loss in 2016.

Almost half of its 2017 loss, $21.5 million, was attributed to Pawtucket, R.I.-based Memorial Hospital. Care New England recently shut down Memorial Hospital's emergency department and will potentially cut its primary-care services as well. The not-for-profit system has also been laying off workers to combat persistent low patient volumes, a trend that's been impacting all hospitals, as well as a shift in payer mix to lower-paying Medicare and Medicaid programs.

Partners and Care New England executives said they plan to make a final decision by February. If the talks fall through, Brown and Prospect pitched Care New England on a deal that would create an integrated academic health system poised to deliver affordable care through deeper collaborations with other Rhode Island providers and insurers. Plans include Brown acquiring Care New England's Women & Infants Hospital of Rhode Island, Prospect Medical taking over Kent Hospital and affiliated assets, and either Brown or Prospect taking on Butler Hospital. The majority of any operating margins received by Brown would be reinvested in clinical care, medical research and education, Paxson wrote in a letter issued Thursday. Currently, about 30% of Brown's medical education takes place in Care New England's facilities.

Brown and Prospect have not been able to discuss the plan with Care New England given its exclusive merger talks with Partners.