Rhode Island AG Strikes Down Lifespan, Care New England Merger

PROVIDENCE, RI — Rhode Island's attorney general denied the proposed merger between Care New England and Lifespan, ending a years-long process. In the wake of the AG's denial, Rhode Island will join the Federal Trade Commission’s lawsuit to block the proposal.

As was required by the Hospital Conversions Act, Peter Neronha's Office completed a "thorough and exhaustive review" of the proposed merger, including gathering public comment.

Neronha voiced concerns that the new hospital system would have "extraordinary market power," thus violating state and federal antitrust laws. The reduced competition would have negative impacts on patients, the AG said, including cost, quality and access to heath care.

"I recognize how critical healthcare is for the State and for every Rhode Islander," Neronha said. "The COVID-19 pandemic has only further underscored the vital importance of affordable access to high-quality care for all. Put simply, if this extraordinary and unprecedented level of control and consolidation were allowed to go forward, nearly all Rhode Islanders would see their healthcare costs go up, for health care that is lower in quality and harder to access."

The review found that Lifespan and Care New England "compete aggressively" with each out in both inpatient and outpatient settings, Neronha continued, encouraging both to maintain a high level of care for patients.

"Eliminating this competition will have the same effects here as seen across the country following mergers of this size: rising healthcare costs, lower quality, and reduced access," Neronha said. "The Parties simply have not demonstrated why these results would not happen here and how they would be able to deliver on promised benefits that would outweigh these risks."

Had the merger been approved, the new hospital system would control the vast majority of the state's health care systems, including 75 percent of all acute care inpatient beds in hospitals, 80 percent of the inpatient hospital market, 79 percent of inpatient psychiatric care and 60 percent of the state's market for specialized, outpatient surgery services. In addition, the group would employ more than two thirds of the full-time registered nurses in hospitals, Neronha said.

Along with concerns about monopolizing health care, the AG voiced concerns over whether it would even be financially feasible to combine the health care giants. In his decision, Neronha there was no solid plan to ensure a financially healthy system.

"Our review was unable to reconcile the financial realities of Lifespan and CNE, each of which faces its own distinct financial challenges, with their promise that, when they combine, Rhode Island would be left with a financially healthy system that can make substantial investments in ambitious programs without raising costs on consumers, cutting services, or taking steps to keep their labor costs down," the AG's office said in part. "Taking the hospitals’ own estimates at face value, it is unclear where the new system would find the necessary revenue, savings, and financing to support the integration plan and make their proposed investments."

The result would be a "single system that is too big to fail," it concluded.

"Today’s decision is significant not only because of the magnitude of the proposal, but because of what it means for the future healthcare outcomes for Rhode Islanders," Neronha concluded. "It is important to realize that this proposed transaction was never a substitute for a solution to overall healthcare strategy in Rhode Island. We all want affordable, accessible quality care. I believe Lifespan and CNE want to deliver on this promise as well. But allowing the creation of a virtual healthcare monopoly in the state is not the way to achieve these goals."

The merger process has been a long one in Rhode Island. Back in 2019, Care New England walked away from negotiations, saying it was no longer in the board's best interest to move forward. In September 2020, both companies signed a letter of intent after voting in favor. The merger officially moved forward starting last February.

The review and approval process began in April 2021, when the two companies filed their initial merger application. After several rounds of corrections, the Department of Health and AG's office deemed the application to be complete in November.