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Application filed in hospitals merger

01:00 AM EST on Wednesday, November 21, 2007

By Felice J. Freyer

Journal Medical Writer

The Lifespan and Care New England hospital groups have taken a step forward in their plan to merge into a seven-hospital company, by filing an application for federal review of the merger’s effects on the marketplace.

The basic merger plan — to create a not-for-profit corporation with 17,600 employees and $2 billion in patient-care revenues, based in Providence — has not changed since the merger was announced four months ago, according to spokeswoman Jane Bruno.

But Lifespan, she said, is no longer talking with Landmark Medical Center about the possibility of bringing the Woonsocket hospital into the new group.

Meanwhile, three other hospitals in the Providence area — Roger Williams Medical Center, St. Joseph Health Services and Memorial Hospital of Rhode Island — are contemplating their own three-way merger.

Late last week, Lifespan and Care New England filed an application with the Federal Trade Commission, which has 30 days to rule on whether the combination would be illegally anticompetitive.

The hospital groups, once merged, would control two-thirds of hospital services in the state. But they say they would not create a monopoly because the market extends beyond Rhode Island and because consumers’ choices would not change.

Lifespan and Care New England proposed merging once before, in 1998, but then abandoned the plans two years later. However, the FTC ruled in 1998 that such a merger was allowable.

The merger also needs approval from the Department of Health and the state attorney general. Although Lifespan originally said its “goal” was to file its state application in the end of August, that application has not yet been submitted.

“We’re actively working on the state regulatory filings,” Bruno said. She said the hospitals hope that if the application is thorough and satisfactory, the approval process will go faster, she said. Asked whether Lifespan will wait for the FTC ruling before submitting its state application, Bruno said, “It hasn’t been determined yet.”

The attorney general will weigh, among other things, whether the merger would endanger charitable assets, involve conflicts of interest, or change the hospitals’ mission. The health director’s concerns include the public’s access to affordable care, the rights of workers, and the right balance of health-care services.

If approved, the newly merged company will be called Lifespan and will encompass Rhode Island Hospital, Miriam Hospital, Bradley Hospital and Newport Hospital (the current Lifespan groups) along with Women & Infants Hospital, Butler Hospital and Kent Hospital (now part of Care New England).

Hospital leaders say the merger would lead to the establishment an academic medical center at Rhode Island Hospital (where Brown University plans to build a new medical school), and a better ability to compete with Boston hospitals, attract researchers and win grants.

Plans include selling or developing the 110-acre Butler Hospital campus and building a replacement psychiatric hospital at Rhode Island Hospital.

The other merger proposal, involving Roger Williams, Memorial and St. Joseph, is “still in the exploratory phase,” according to Brett Davey, Roger Williams spokesman. Davey said that a consultant has been hired to do a feasibility study, but that the hospitals’ boards of trustees are not even involved yet.

Otis Brown, St. Joseph spokesman, confirmed that “we’ve been in discussions.”

As for Landmark Medical Center, the Woonsocket hospital that had considered merging with Lifespan, chief executive officer Gary Gaube said yesterday that confidentiality agreements prevent him from talking about any potential affiliations.

ffreyer@projo.com

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