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Hospital merger back on track

01:00 AM EDT on Friday, July 10, 2009

By Felice J. Freyer

Journal Medical Writer

The proposal to unite the state’s two hospital groups into a seven-hospital conglomerate is back on track, almost two years after it was announced.

Lifespan and Care New England on Thursday afternoon submitted 110,000 pages of documents to the Department of Health and the attorney general’s office, formally reaffirming a plan whose fate had been called into question by months of delays.

Those documents constitute an application to form a single company overseeing Rhode Island, Miriam, Bradley and Newport hospitals — now Lifespan institutions — and Women & Infants, Kent and Butler hospitals — which make up the Care New England network. The company would control two-thirds to three-quarters of hospital services in Rhode Island.

With 18,400 employees and patient revenues totaling $2.1 billion, the “new Lifespan” would be, by far, the biggest company doing business primarily in Rhode Island. The Federal Trade Commission has already ruled that the merger would not violate antitrust laws.

Proponents say the Lifespan-Care New England affiliation would enable local hospitals to fend off growing competition from Boston, boost medical research, attract and retain top doctors and strengthen the state’s economy. Critics have raised fears that the new Lifespan’s clout would lead to higher health-insurance premiums and weaken the struggling community hospitals that are not part of it.

As with the 2007 proposal, the plan calls for bringing under one corporate umbrella five of the seven hospitals affiliated with the Warren Alpert Medical School of Brown University, moving toward creating an “academic medical center.” It calls for developing a Level 2 trauma center at Kent Hospital, in Warwick; situating Women & Infants Hospital as leader of a statewide women’s health program, investing in developing the health-care work force and unifying the electronic medical-records systems at all seven hospitals. Hospital officials have said the merger would add jobs rather than lead to layoffs.

In a significant change from two years ago, however, the hospitals have shelved a plan to sell or lease the Butler Hospital campus and use the proceeds to build a brain science institute near Rhode Island Hospital, citing the decline in real estate values. Instead the hospitals plan to pool the psychiatric and neuroscience expertise at Rhode Island, Butler and Bradley hospitals, and Brown University, into an “entity” –– minus its own building –– that would support research but not provide health care.

Lifespan and Care New England had also proposed joining together a decade earlier. They announced their plans in 1998 –– and abandoned them 23 months later. And at times over the past two years, it seemed the latest merger plan might also be dying on the vine.

The hospitals announced their most recent proposal to affiliate on July 26, 2007, expressing hope that it could all be wrapped up in six to nine months. But not till June 2008 did they start submitting their application (then merely 55,000 pages) –– and immediately they became ensnared in disputes with regulators over the wording and confidentiality of certain documents. The application was never accepted, and no further documents were submitted.

The public, meanwhile, was left to speculate on whether the parties had lost interest in the whole thing or were waiting for something else to happen first.

Asked whether Lifespan and Care New England were hoping the legislature would amend the law governing hospital mergers, Lifespan spokeswoman Linda Shelton acknowledged that hospitals did “look at a legislative solution.” But she said they ultimately decided to meet the arduous terms of the Hospital Conversions Act.

Shelton said the disagreements with regulators had all been resolved. Preparing the application took so long, she said, because “it’s very complex and detailed. It really took a lot of trying to understand the statute and work through it. It is a very complex process when you’re looking at seven hospitals and two health systems.”

She added: “We’re really looking forward to a public debate about the merits of the affiliation.”

Now, the health director and attorney general have 30 days to request any additional information in the application, and the hospitals have 30 days after that to supply it. If they do, the regulators have 10 days after that point to declare whether the application is complete.

Then, the review process, which will include public hearings, will begin in earnest. Health Director David R. Gifford will examine the proposal’s effect on health care in the state, while Attorney General Patrick C. Lynch is responsible for safeguarding the hospitals’ charitable assets, among other concerns.

Lynch, who had clashed with hospital leaders last year, had nothing but praise on Thursday, saying that once his team starts reviewing the applications he expects to find that all the documentation issues have been addressed.

“The cooperation has been tremendous,” he said. “I feel good about the meetings we’ve had, the access to documents, and I feel very good about the tone all the parties have taken. …They’ve been very much focused on making this accessible and as easy for review as possible.”

Gifford, Lynch and their teams are facing a busy year. They are already dealing with another hospital-affiliation proposal –– to join Roger Williams Medical Center with St. Joseph Health Services –– and could face a third if a buyer is found for Landmark Medical Center. Landmark, in Woonsocket, has been under Superior Court supervision –– a form of receivership –– for a year because it was on the verge of financial collapse. The special master who is running the hospital has said he expects to announce an affiliation agreement within weeks.

With both the Roger Williams-St. Joseph and Lifespan-Care New England proposals, hospital officials are shunning the commonly used word “merger” in favor of “affiliation.” Lifespan’s Shelton said that a merger involves pooling all the assets together, but in fact each hospital would maintain control over its finances. The switch from “merger” to “affiliation” reflects an effort to use a more accurate term rather than any change in the substance of the proposal, she said.Joining forces

The proposed merger of Lifespan and Care New England would include:

•The four Lifespan hospitals: Rhode Island, Miriam, Newport and Bradley

•The three Care New England hospitals: Women & Infants, Kent and Butler

•18,400 employees

•$2.1 billion in annual patient revenues

•A new level 2 trauma center at Kent Hospital

•A new “brain science institute” focused on research

•Integration of electronic medical records

ffreyer@projo.com

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