Care New England Health System reported a healthy operating income in the third quarter after the Providence, R.I.-based health system dropped multiple merger discussions.
Care New England recorded a $7.4 million operating income on revenue of $290.7 million in the third quarter, up from $863,000 of operating income on $278.8 million over the same period the year prior. The health system announced earlier this month that it withdrew from talks with Lifespan and Brown University, about a month after Partners HealthCare said it would back out to facilitate the three-system deal.
The board weighed capital requirements and financial stability of the combined entity, community need, antitrust considerations, organizational stability and implementation risks.
"CNE has implemented a remarkable turnaround with significant improvements," the organization said in a statement. "With this in mind, it is the respectful position of CNE to step back and continue on the dedicated path of improving quality, service and access to health care for our patients."
The health systems have been contemplating potential combinations for years. Early last year, Brown University and California-based hospital company Prospect Medical Holdings submitted an unsolicited pitch to acquire Care New England if the talks with Partners fell through, in an attempt to retain local control. Soon after, Lifespan joined the discussion in place of Prospect Medical.
After a plea from Rhode Island Gov. Gina Raimondo for CNE, Lifespan and Brown University to resume their own merger talks, Partners bowed out in June.
CNE, which trails only Lifespan in terms of Rhode Island market share, has been under financial duress over the past several years. The health system closed one troubled hospital, Memorial Hospital, in January last year, which widened its financial losses in the short term.
While CNE still feels the impact, as Memorial recorded a $2.7 million operating loss through the third quarter of 2019, it has implemented a turnaround plan related to volume growth, care retention, revenue cycle, supply chain and labor productivity that is expected to net the organization at least $42.5 million by the end of its fiscal 2019 on Sept. 30. Additional restructuring is expected to yield another $23.7 million at the end of the fiscal year, the company said in its financial statement.
To date, CNE, including Memorial Hospital, recorded income from operations of $2.3 million over the past nine months. Without Memorial, the health system recorded $4.9 million of operating income, which marks an improvement from $1.8 million of operating income reported through the first nine months of fiscal 2018.
Still, CNE has endured waning patient volumes, including a steep decline at Women's & Infants Hospital starting in the second quarter of 2019 as a MassHealth accountable care organization model drew away Medicaid patients.
"The greatest financial challenges facing the system this year include patient volumes, specifically, NICU, medical/surgical, obstetrics and deliveries," the system said in prepared remarks. "However, action plans are stabilizing these patient trends, as well as the careful management of appropriate staffing to the patient volume levels. Additionally, action plans across the system are all addressing the critical components of quality, service and access."
