PROVIDENCE — In late 2023, Rhode Island Attorney General Peter Neronha was sitting in a conference room in his office with the heads of the state’s largest health care systems, discussing the fate of Roger Williams Medical Center and Our Lady of Fatima Hospital — two failing hospitals owned by the same for-profit, out-of-state owner, Prospect Medical Holdings.
With oversight powers on hospital transfers, Neronha asked John Fernandez, chief executive of Lifespan Health System, and Dr. Michael Wagner, CEO of Care New England, if either of their not-for-profit organizations could acquire the two struggling hospitals. He’d even sweeten the deal by throwing in $20 million each, he said, to help support some of the costs.
He was mostly jesting in his offer,Neronha told the Globe later; but still, Fernandez and Wagner didn’t bite.
Instead, Neronha was left months later to watch as one of those Rhode Island health systems, Lifespan, stepped forward to rescue two other struggling hospitals — across the state line in Massachusetts.
After months of haggling, Lifespan on Thursday signed a purchase agreement to take over St. Anne’s in Fall River and Morton Hospital in Taunton from bankrupt Steward Health Care for $175 million. If approved by a bankruptcy judge on Sept. 4, the deal will give Rhode Island’s largest hospital system a foothold in Southeastern Massachusetts. About 30,000 patients from the area are already served by Lifespan hospitals in Rhode Island.
“When we think about where we would go to grab scale, we could either build it or we could buy it,” Marcia Neiberg, Lifespan’s chief strategy officer, said of the company’s decision-making. “As we looked at it, this made a lot of sense geographically. . . . It’s patients we’re already taking care of.”
Fernandez said this week that taking over Roger Williams or Lady Fatima would not have been feasible for Lifespan.
“I’ve taken the approach leading this organization to focus on things we can get done,” Fernandez said, “and not spend time on things that are long shots.”
Fernandez said any effort to take over the two Rhode Island hospitals would have raised anticompetitive concerns among federal regulators. And indeed, one of the many previous efforts by Lifespan and Care New England to merge, in 2022, was blocked by state and federal regulators who said it would hurt consumers by creating a health care giant with a stranglehold on the local market. Lifespan controls five of Rhode Island’s 13 hospitals; Care New England controls three.
Fernandez added that Neronha, when making the request last year, “didn’t say. . . ‘We’ll also help you get through the regulatory process.’ The FTC told us we had too much market share in Rhode Island. Then we’re going to turn around and spend time and money to get that deal done without any assurances?”
He also called the $20 million a “very small drop in the bucket” compared to the “tens of millions of dollars of neglected” issues at the two Prospect hospitals. And acquiring one of Prospect’s hospitals “just wouldn’t be financially advantageous” because of the large number of patients who are on government health insurance.
“They’re big Medicaid pay, and Medicaid doesn’t pay,” he said. “They have very little commercial mix. Their payer mix is worse than ours.”
John Fernandez, president and CEO, of Lifespan, unveils the new logo for Brown University Health during a press conference on June 20, 2024.Bill Murphy / Lifespan
But there is a key reason why buying a hospital in Massachusetts makes sense for Lifespan: Reimbursement rates paid to hospitals there are much higher than in Rhode Island. A comprehensive study by the Rhode Island Foundation this year found that the average inpatient reimbursement from private insurers is 20 percent more in Massachusetts than in Rhode Island, while outpatient reimbursement in Connecticut is 40 percent higher than in Rhode Island.
For Rhode Island’s largest health care system to cross the border into Massachusetts “makes a lot of financial sense. I understand why they’re doing it,” said Neronha.
“Buying a struggling Rhode Island hospital doesn’t make any sense,” Neronha said. “Leave out the regulatory challenges. It’s not a money maker. It’s hard enough to run a big hospital system in this state.”
Prospect still owns Roger Williams Medical Center and Fatima Hospital, critical safety-net hospitals that are falling into disrepair, riddled with bedbugs, dirty water, and serious safety hazards. Surgeries have had to be rescheduled in the past because of the lack of supplies, Roger Williams’s affiliation agreement with Boston University is on shaky ground, vendors at both hospitals have gone without payment, and state regulators — including Neronha — are keeping a watchful eye.
Prospect is also under investigation by the Justice Department andhas closed some hospitals in other states and is attempting to close others.
The hospitals owned by Steward in Massachusetts and by Prospect in Rhode Island have many of the sameattributes and problems, including for-profit owners who some critics say have prioritized profits over patient care. But while six of Steward’s eight Massachusetts hospitals are expected to be taken over by local nonprofit hospital groups as well as get as much as $700 million in state funding, only one prospective buyer, The Centurion Foundation, came forward to buy Prospect’s hospitals. Centurion does not have any experience running or owning hospitals, which Neronha said is why he imposed a set of 40 conditions on the proposed deal with Centurion, which has yet to close.
Though he didn’t take Neronha up on his offer to take on one of Prospect’s Rhode Island hospitals, Wagner of Care New England said he’s concerned Roger Williams and Lady Fatima could end up closing. That would put pressure on other hospitals in Rhode Island.
“Roger Williams and Fatima can’t close. They are really important,” Wagner said Friday. Care New England, Lifespan, and Prospect’s hospitals are competitors, but they are reliant on one another’s successes.
“If [Prospect’s hospitals] were to close, it would have a real impact on the Rhode Island marketplace in terms of emergency department boarding and critical services they provide.”
Wagner has gotten Care New England to balance its books after experiencing multimillion dollar losses. One part of Care New England’s turnaround plan, he said,is to “not be evaluating mergers and acquisitions that we don’t need to be looking at.”
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Alexa Gagosz can be reached at [email protected]. Follow her @alexagagosz and on Instagram @AlexaGagosz.
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Publish date : 2024-08-30 23:00:00
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