Lifespan and Care New England Health System scrapped their merger plans amid federal and state opposition, the not-for-profit heath systems said Wednesday.
The Federal Trade Commission and Rhode Island Attorney General's Office sued to block the deal last week, claiming it would increase prices, reduce quality and stifle wages. Lifespan and Care New England decided not to appeal nor pursue a legislative workaround, such as a Certificate of Public Advantage.
"The organizations continue to believe the combination of the systems would have greatly enhanced the clinical, academic and research missions, reduced costs and improved the patient care environment," the health systems said in a news release "Both organizations are committed to partner in ways that are appropriate from a legal perspective and allow them to best serve the needs of the community."
They withdrew their Hospital Conversation Act application from the Rhode Island Department of Health and terminated their definitive agreement.
Lifespan and CNE are the two largest providers in Rhode Island. Together, they would have controlled most of the general inpatient care, outpatient surgery and inpatient behavioral healthcare in the state. The combined health system would still have dominant market shares after looping in the surrounding 19 Massachusetts towns, regulators found.
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If they systems merged, insurers would be forced to accept price increases for lower-quality care, the FTC and state AG concluded. Lifespan and CNE compete on rates offered to commercial insurers and strive to improve their care quality in direct response to each other, according to the complaint. Healthcare workers' wages may also stagnate under a dominant employer, research shows.
The expected efficiencies associated with merging would not offset the anticompetitive impacts, regulators said.
The Lifespan-CNE deal is the latest in a series of failed mergers. CNE, which has been operating on thin or negative margins for years, will likely look to merge with another entity or pursue a more informal venture, merger and acquisition experts said.
