It’s not easy getting from the letter-of-intent stage, through due diligence, to a definitive agreement. Many hospitals that announce an LOI agreement go into due diligence and don’t end up on the altar after all.
That seemed to be the fate of the LOI announced last April (2017) between Boston-based Partners HealthCare System and Providence, Rhode Island-based Care New England (CNE). The two not-for-profit systems had held on-again, off-again talks previously, and now both organizations’ boards were willing to give a merger a go.
CNE includes Kent Hospital (323 beds), Women & Infants Hospital of Rhode Island (247 beds), the VNA of Care New England, Butler Hospital, an inpatient psychiatric hospital, and The Providence Center in several Rhode Island locations.
Partners owns 10 hospitals in Massachusetts, primarily in the Boston area. Massachusetts General Hospital and Brigham and Women’s Hospital founded the organization in 1994. Its proposed acquisition of Boston-based specialty hospital, Mass. Eye and Ear, was just approved by the Massachusetts attorney general’s office and the Massachusetts Department of Public Health on January 29.
Three months later, in late July 2017, Rhode Island media outlet WPRI-12 News asked how much longer the parties expected to take to reach a definitive agreement. Fair question, since the president and CEO of Care New England had said in April he hoped to have the financial and legal due diligence worked out by August. In response, the organizations issued a joint statement saying they were still working out the details of the deal.
A week later, CNE reported an operating loss of $6.5 million in the Q3:17. Not good, but better than its previous two quarters when it reported first-quarter losses of $13.9 million and second-quarter losses of $26 million. CNE was in the process of selling Memorial Hospital in Pawtucket to Prime Healthcare Foundation, the not-for-profit arm of the for-profit Prime Healthcare.
Soon after, Fitch Ratings downgraded CNE series 2016B and 2016C revenue bonds to BB from BBB-, and placed the health system on Rating Watch Evolving based on the LOI with Partners. Fitch cited CNE’s continued operating losses, decreased liquidity measures and reduced patient volumes, but acknowledged the debt burden would be feasible if the Memorial Hospital sale went through, and CNE merged with Partners.
Prime Healthcare Foundation pulled out of the deal to buy Memorial Hospital, and CNE filed plans with the state to close it.
Late in December, Partners and CNE issued another joint statement that the prior deal deadline of December 31, 2017 was being extended to January 31, 2018. Just got a little behind with the holidays and all, it seemed.
On January 11, 2018, Brown University and Prospect Medical Holdings, a for-profit company, confirmed to WPRI that they were interested in acquiring CNE. Prospect owns a majority stake in Roger Williams Medical Center. Brown University president Christina Paxson had long opposed the Partners-CNE merger, aruging it would lead to higher healthcare costs and reduce Rhode Island residents’ voice in healthcare operations.
That didn’t faze Partners or CNE. The two organizations finally announced their definitive agreement to merge on January 25. All that’s needed now are state and federal regulatory approvals. That could prove to be the easy part.