RI Attorney General Rejects Lifespan, Care New England Merger

Rhode Island Attorney General Peter Neronha has rejected the application for the proposed healthcare merger between health systems Lifespan and Care New England.

In a 150-page decision, Attorney General Neronha stated that the merger would negatively impact competition across the inpatient general acute care market and violate state and federal antitrust laws.

According to Neronha, the lack of competition would lead to increased healthcare costs and lower quality of care for Rhode Island residents.

“Put simply, if this extraordinary and unprecedented level of control and consolidation were allowed to go forward, nearly all Rhode Islanders would see their healthcare costs go up, for healthcare that is lower in quality and harder to access,” Neronha said.

The decision indicated that the proposed merger between Lifespan and Care New England would create a monopoly within Rhode Island’s healthcare market. The new joint health system would control 80 percent of the inpatient hospital and psychiatric care market in Rhode Island and 60 percent or more of the market for many outpatient surgery specialties.

Additionally, the health system would control 75 percent of all inpatient acute hospital beds in the state and employ 67 percent of Rhode Island’s full-time registered nurses working at a hospital. The merged hospital system would also account for 50 percent of commercial healthcare spending on patients whose primary care physician is part of the system’s accountable care organizations, the decision stated.

This heightened market power could lead to an increase of at least 9 percent on top of the regular cost increases, according to Neronha. As health plans tend to pass rising costs on to consumers, Rhode Island residents could face higher premiums or out-of-pocket expenses due to the healthcare merger.

Attorney General Neronha also cited the lack of demonstrated financial feasibility as a reason for rejecting the proposed merger.

While Lifespan and Care New England staff members appear committed to the benefits of the proposed merger, Neronha stated that the health systems have failed to account for the finances behind it.

The review found that Lifespan and Care New England face their own financial challenges. The Attorney General’s office expressed doubt that the merger would leave Rhode Island with a health system that could invest in new programs without raising consumer costs, cutting services, or taking other steps to minimize labor costs.

“Taking the hospitals’ own estimates at face value, it is unclear where the new system would find the necessary revenue, savings, and financing to support the integration plan and make their proposed investments,” the press release stated. “Critically, this transaction would leave the vast majority of Rhode Island’s healthcare services in a single system that is too big to fail.”

The merger application did not explain what the new health system would look like, what role Brown University would play in the merger, and why the health systems could not advance some of the proposed innovations individually without merging.

“Our review clearly established that Lifespan and CNE compete aggressively with each other across many inpatient and outpatient service lines. Eliminating this competition will have the same effects here as seen across the country following mergers of this size: rising healthcare costs, lower quality, and reduced access,” Neronha stated in the decision.

“The Parties simply have not demonstrated why these results would not happen here and how they would be able to deliver on promised benefits that would outweigh these risks.”

Lifespan and Care New England first announced merger plans in February 2021. With the help of Brown University, the health systems planned to establish an integrated, academic health system that brought together key teaching hospitals across Rhode Island.

Since then, the health systems filed their initial merger application in April 2021. In May and September 2021, The Attorney General’s office notified the parties of substantial deficiencies in the application. The application was completed in November 2021, with requests for additional information following the completion.

Attorney General Neronha’s decision stated that Rhode Island would join the Federal Trade Commission in its recent lawsuit to block the merger transaction.