PART Two

PROVIDENCE – At the Thursday morning, Feb. 17 news conference, having presented all the compelling data and reasons why the proposed merger between Lifespan and Care New England was anticompetitive and violated antitrust laws, resulting in his decision to reject the merger application, R.I. Attorney General Peter Neronha also offered a detailed explanation of his efforts to find a way where, despite all of the overwhelming evidence presented, asking his team: Was there a situation where the benefits of such a proposed merger might outweigh the antitrust harms?

Conditions! Conditions!
Neronha first dealt with the oft suggested idea that he, as Attorney General, could impose “conditions” upon the transaction – guardrails as it were – such as those proposed by the Rhode Island Foundation under the leadership of Neil Steinberg, the president and CEO, as well as others.

To begin the conversation, he acknowledged that the leaders of four major unions in Rhode Island had voiced their support for the proposed merger.

NERONHA: I will probably get to it later as well, but I understand that labor supports the merger.

I have tremendous admiration for union leadership. And, more than that, for the men and women who have been working in these hospitals, not just during COVID, but well before COVID, and they will continue to do it, well beyond.

And, I applaud the concessions that they were able to get from these hospitals, in exchange for their support

I will only say this, I have said it before: We have the benefit of records – and of statements under oath – that nobody else has, other than the FTC, and the Department of Health.

And, that put us in what I believe is the unique position, relative to anyone else, to weigh the potential harm of this merger.

Now, we get asked occasionally, about conditions, [with people asking]: “Well, what can the Attorney General and the Department of Health do to solve for this problem?”

The reason that I have laid the problem out the way that I have [this morning, with a focus on the antitrust issues], is because it is not a small problem; it is a big problem.

How do you address the problem? Are there conditions that the Hospital Conversions Act allows us to put conditions in place to solve the problem?

With [Prospect Medical and sale of CharterCARE hospitals], we solved the problem of “financial weakness” by putting $80 million in escrow, under our control – this office’s control – to keep these hospitals going. We could solve for that financial weakness.

But, how do we solve for 80 percent market share?

One thing that has – I don’t know what the word is – that has given me pause, as I have heard others talk about the benefits of this merger, who have often said: “This is a great idea as long as…” Or, “this is a great idea, but…” and, “This is a great idea provided that…”

Ask yourself: How many of those people have told you what the “as long as” is, what the “but” is, or what the “provided that” is?

It is all well and good to say that you support something, as long as… And, we invited those people to share with me the conditions that [they] thought would work.

It is the conclusion of this office – to the extent that any have done that [and offered solutions] – that those conditions will not solve for this problem.

You know, the Rhode Island Foundation did a really good job here. I am not really talking about them, based on my last statement.

I want to be clear about that. I really applaud the work that the Rhode Island Foundation does. They really do great work. They came up with a bunch of conditions. Neil [Steinberg, the president and CEO of the Rhode Island Foundation] and I talked about it. But, all of [the conditions] assumed that the merger would get approved.

The fundamental, underlying problem
NERONHA: [continuing] It doesn’t fundamentally [address] the underlying problem with the proposed merger. So, while the initiatives in the Rhode Island Foundation report are laudable, and most if not all of them I support, they don’t solve the 80 percent market share [problem]. Frankly, these parties [Care New England and Lifespan] could be doing [those initiatives] right now, whether they merge or they don’t.

Frankly, [this proposed merger] is too big for any conditions to solve these problems. You know, we hear a little bit about, from time to time, about COPA, or a Certificate of Public Advantage, and I imagine we will have a conversation about that; somewhere in the state, there will be a conversation about that down the road.

Let me just say this: Our experience, looking at COPAs around the country, demonstrate that they don’t do a good job of solving for the antitrust issues that we have identified.

So, for those of you who may not be familiar with it, what a COPA does is to say: forget about the antitrust law, we are going to [remove the merger] out of the FTC crosshairs, out of the AG’s crosshairs,;we are going to let you do something, with the approval of the R.I. General Assembly, that allows you to have [this merger move forward], provided …

So, the issue then becomes: What is the “provided?” It is our view that a COPA can’t solve the [antitrust] problem.

You know, we often hear from the parties that OHIC [the R.I. Office of the Health Insurance Commissioner] – can solve for these problems. OHIC can’t solve for these problems. OHIC acknowledges that they can’t solve for these problems.

[Editor’s Note: Attorney General Neronha continued, saying he asked his team the rhetorical question: “Let’s see if everything that these parties are promising can outweigh these harms.”]

NERONHA: They have promised Rhode Islanders an academic health system, with a lot of new shiny things. I don’t mean that in a disrespectful way – I appreciate the work that they do; they do it really well. They provide great care.

But they have made promises and so, I need to evaluate those promises to see whether those promises outweigh the harm. I don’t know if we can get there, but we need to understand those benefits.

Are they deliverable? What is the plan? What are the costs? Can you pay for it? Because if I don’t know [the answers to] the [questions], I can’t weigh them against the potential harms.

So, this [line of inquiry] broke down into two separate [questions]: The first one is: Do the parties have a credible plan to effectuate the merger? Can they integrate these two systems? And, can they deliver on their promised benefits? Can they do it? Do they have a plan to do it?

And, the second question: Does the combined system have the financial wherewithal to deliver on these promises?

And, I will tell you, finding the answer to both of those questions was elusive.

Promises, promises
Neronha then discussed the difficulties his team faced in discerning what was meant by the language contained in the Chartis Report, regarding the new entity, which has been dubbed: the “Rhode Island Academic Healthcare System, or RIAHS.”

NERONHA: The Chartis Report makes big promises, like these:

The new entity “will expand the services at its Express Care Center.”

The new entity “can more effectively ensure programs and resources are developed and deployed in ways that will help [overcome] social barriers.”

Would you tell me what that means, please?

It sounds great; it’s a great goal, I am all for it. Can you tell me how you are going to do it?

And, the new system and Brown “can serve as catalysts to grow research and innovation across the state.”

How? Where? Where is the money coming from? Where are you going to be? What are you going to do? Nowhere in the Chartis Report, or anywhere else, is there that kind of plan.

You can’t approve a plan on that basis. You can’t [OK] a transaction on that basis. I can’t tell Rhode Islanders that I know how the [antitrust] harms would be outweighed by what they are proposing.

What does Brown mean to you?
Attorney General Neronha also discussed the apparent vagueness about the benefits of having Brown University involved in the merger proposal. [President Christina Paxson has been a strong proponent of the merger – and met personally with Attorney General Neronha.] Brown is on the record as promising to contribute $125 million to further the new academic medical entity.

NERONHA: You know, there is a lot of talk recently about the benefits of having Brown [involved], but the reality is that Care New England and Lifespan structured this transaction to really keep Brown on the sideline.

They [Brown] are not a party to this transaction. In many ways, Brown is not a true partner [to the merger].

I can’t tell you, as I stand here, what Brown’s role will be, because I don’t know. Does anybody out there know? I’ve been asking that question for a long time and I haven’t [gotten an answer].

Lifespan and Care New England already have deep affiliations with Brown. How is that going to change? How will it be better as a result of this merger? What about the role of Brown’s physician group [Brown Physicians, Inc.]? [It is] an unanswered question; it is not part of the transaction.

A loose affiliation of millionaires and billionaires and babies
The unanswered questions about Brown’s role in the merger led Neronha to discuss questions around the costs of the merger.

NERONHA: All right. Let’s assume that they had a plan. They don’t, but let’s assume they do. The next question is: Can you pay for it? What is the cost?

In our review, and in our expert analysis, it makes it pretty clear that they can’t demonstrate that they have the financial wherewithal to make this work.

So, what we risk is making these systems, at least one of them, arguably weaker, by combining them, or perhaps creating a system that is too big to fail.

What do I mean by “too big to fail?” If you control 80 percent of the market, you can’t fail. So, when systems fail, where do they go? [Do] they go to taxpayers, in a bailout?

[Editor’s Note: Neronha then pivoted in his discussion to the larger, financial challenges faced the state, raising the question of potential changes in Medicaid reimbursements.]

NERONHA: Potential changes in Medicaid reimbursement, which, by the way, is an issue that we need to address, but not in the context of a proposed merger.

This notion of whether or not Rhode Island reimburses Medicaid at the right level is a question and a concern and a problem, but where this transaction leads, because the system is so big, that they are deciding that issue, not us.

Mergers of health systems cost money. I remember sitting at that table [in this room] and I was talking to Drs. Babineau and Fanale, thinking: you don’t merge two businesses, two health systems, by welding a seam down the middle.

It is a lot more complicated than that. OK. You plan to do it; it costs money – money to put things together, the basic cost of integration, putting in an electronic medical record system that both parties can use, and making investments in actually improving care for patients.

As I said, these two systems are already under significant financial strain – both from COVID 19 and other factors. And so, after 10 months, we are still left with these kinds of questions: How much will it cost to integrate the two systems? How much will it cost to fund all the new initiatives? Does the combined Lifespan and Care New England system have the capacity to make those investments? And, if not, where will the money come from?

There is a substantial gap. The evidence in the record is very clear there is a substantial gap between what they have and what they need, just to put their systems together to make it stable, and to reach the operating margins that they need to be stable, they know what that it, and they know it is a lift.

Editor's Note: In PART Three, ConvergenceRI will explore the disconnect between the news media and their reporting on issues surrounding the merger, which in turn has led to many Rhode Islanders getting a distorted picture of what is happening.