Rhode Island news
Merger plan for hospitals will undergo close scrutiny
01:00 AM EDT on Wednesday, August 1, 2007
The application has not even arrived yet, but yesterday Attorney General Patrick C. Lynch and Health Director David R. Gifford got together to discuss how to deal with the proposed merger of two hospital groups, Lifespan and Care New England.
Lynch and Gifford are responsible for carrying out the 10-year-old state law that governs such mergers, the Hospital Conversions Act. Each has a different charge under that law: the health director to protect public health and welfare; the attorney general to guard charitable assets, the gains from money donated over the years.
But their reviews will take place concurrently, and they hope to coordinate their efforts, sharing as much information as possible. “We want to work very closely together,” Gifford said. “This is a big decision for the state.… This is going to require a lot of scrutiny.”
The merger proposal, announced Friday, would bring seven hospitals under the umbrella of a $2-billion corporation controlling two-thirds of hospital services in Rhode Island.
The Hospital Conversions Act sprang from the “merger mania” of the 1990s, which included big for-profit hospital chains buying up nonprofits. In other states, the chains sometimes got bargain prices and then paid lavish severance agreements to the executives who made the deal. Many people also worried that for-profits would not care for the poor or sustain money-losing services.
The Rhode Island legislature passed the Hospital Conversions Act to give government a strong hand in preventing such practices.
In the end, the for-profit mergers in Rhode Island all fell through, and the state’s hospitals remain charitable institutions. But the law also applies to nonprofit hospitals. On two occasions, nonprofit hospitals applied to merge under the act, but withdrew before the process was complete. One of those proposals was a previous merger attempt by Lifespan and Care New England, abandoned in 2000. If their current merger proposal survives, it will be the first time the Hospital Conversions Act is fully put to the test.
For the hospitals, it’s a big test. The attorney general has 21 criteria to consider, including whether the merger would endanger charitable assets, involve conflicts of interest, or change the hospitals’ mission. The health director has seven criteria, including the public’s access to affordable care, the rights of workers, and “balanced health care delivery.”
Lifespan has the “goal” of filing its application in 30 days, said spokeswoman Jane Bruno.
The next step will be amassing enough information to satisfy the regulators before they start their review. “We hope they will be very forthcoming in providing information to us,” Gifford said. Sometimes applicants, he said, answer a question with information that raises a second question — but fail to answer the second question, forcing more time-consuming requests for information.
Lynch said that much of the excitement over the merger has emanated from “the corporate boardroom.” “My boardroom is on a city block in South Providence. My boardroom is in Prospect Heights in Pawtucket, on Tonomy Hill in Newport,” Lynch said, referring to poorer neighborhoods around the state.
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