Partners-Care New England deal moves forward

Partners HealthCare will pursue a definitive agreement to acquire Care New England Health System. The announcement came Thursday, about two weeks after Brown University and Prospect Medical Holdings said they would intervene and take on Care New England if its deal with Partners fell through.

The definitive agreement caps a 10-month due-diligence process since Boston-based Partners and Providence, R.I.-based Care New England signed a letter of intent to combine. The organizations released a statement that the process produced a plan for Care New England to "regain solid financial footing." The providers will move forward with the customary regulatory approvals once they finalize a definitive agreement. Meanwhile, Partners and Care New England maintain exclusive negotiating privileges.

"We are aware of and deeply respectful of the other components of the Rhode Island healthcare landscape and hope to find common ground and mutually beneficial pathways to improve the academic strength of the hospital programs and maximize the benefit to the Rhode Island economy," Dr. David Torchiana, Partners' CEO, said in a statement.

Brown University President Christina Paxson's recent comments on the proposed Partners-Care New England deal struck a different tune.

Paxson said that if the arrangement goes through, 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, she said. Brown and Prospect pitched an alternative transaction to Care New England that they said would create an integrated academic health system poised to deliver affordable care through deeper collaborations with other Rhode Island providers and insurers.

Care New England responded by stating that Brown and Prospect aim to "acquire and split up the Care New England Health System—a process undertaken of their own independent action and interests."

Care New England has worked with Partners since 2009 through a clinical affiliation with Brigham and Women's Hospital—one of the founding members of Partners—in cardiology, and vascular, thoracic and colorectal surgery. Partners' McLean Hospital and Care New England's Butler Hospital have also collaborated on behavioral healthcare and research programs.

The Partners-Care New England deal would include Care New England-owned facilities Kent Hospital in Warwick, R.I.; Women & Infants Hospital of Rhode Island in Providence; the VNA of Care New England in Warwick; Butler Hospital in Providence; and the Providence Center in several locations across the state. Under the agreement, the educational and research relationship that Care New England has fostered with Brown University will continue to play a critical role in shaping the healthcare landscape, executives said in a news release.

Partners employs more than 73,000 people and reported $13.37 billion of total operating revenue in 2017, up from $12.52 billion the year prior. The company reported $52.6 million income from operations in 2017, up from a loss of $107.9 million in 2016.

The agreement announced Thursday does not include Care New England's struggling 294-bed Memorial Hospital in Pawtucket, R.I. After plans to sell the hospital to Prime Healthcare Foundation, the Ontario, Calif.-based not-for-profit arm of Prime Healthcare Services fell apart, Care New England announced plans to shut down Memorial Hospital's emergency department and will potentially cut its primary-care services as well. Memorial Hospital accounted for almost half of Care New England's 2017 loss of $47.1 million, which slightly improved from 2016's $68.3 million loss. The company reported $1.13 billion in total revenue in 2017, down from $1.16 billion in 2016. The slow financial turnaround and bond rating downgrade delayed Care New England and Prospect's due diligence talks.

Healthcare institutions across Massachusetts have been steadily consolidating, similar to other markets throughout the country. Beth Israel Deaconess Medical Center, Lahey Health and several other hospital systems also plan to merge.

That combined entity would have the second-largest inpatient, outpatient and primary-care market shares in the state—nearly equal to Partners—which would likely boost its leverage to negotiate hospital and physician prices, according to a preliminary report from the Massachusetts Health Policy Commission, which is reviewing the deal. A Beth Israel-Lahey system and Partners would control about half of the state's inpatient market.

The healthcare executives involved claim that they would be able to funnel more care from higher-cost institutions and ultimately lower spending. Aside from being able to compete with Partners, the executives said the merger will allow them to contain costs and improve care by offering "comprehensive, coordinated services across complementary geographies."

An edited version of this story can also be found in Modern Healthcare's Jan. 29 print edition.