EXCLUSIVE: Care New England Turned Down $400M+ Offer in 2015 — Would Have Saved Jobs and Memorial
Tuesday, January 23, 2018
According to documents secured by GoLocalProv, Care New England’s (CNE) board turned down an offer to be purchased in 2015 that would have provided the struggling healthcare group with $170 million in cash and $250 million for capital improvements. The deal also gave CNE a 20 percent share of ownership — in total, the deal was worth an estimated value of nearly $500 million.
The proposal was made by Prospect of California, the for-profit hospital group which owns CharterCARE in Rhode Island. The offer was made in April 2015, just when CNE was beginning to financially falter. Some CNE officials regret that the offer was not pursued in hindsight it would have stabilized RI’s healthcare industry and saved jobs.
As GoLocal first reported in April of 2017, the financially failing CNE has entered into an agreement with Boston-based Partners HealthCare to be acquired.
Since entering the Rhode Island market in 2014 with the purchase of CharterCARE (Fatima and Roger Williams Hospitals), Prospect states that they have invested more than $70 million in capital improvements and new construction projects at the two hospitals. Prospect promised to keep Memorial Hospital open and sustain the jobs. CNE is now closing Memorial. According to the closure documents submitted to the RI Department of Health by CNE, “As of October 16, 2017, MHRI maintains a staff of 590 employees comprising 520.4 FTEs.”
Prospect officials in California could not be reached for comment.
Since the rejection of the Prospect offer in 2015, CNE has been hit by a series of financial and business failures, including the following:
- Losing more than $120 million in the last two-plus fiscal years
- Entering into merger negotiations with Southcoast Hospital — which failed in part due to CNE’s deteriorating financial condition
- Implementing staff reductions in April of 2017, eliminating positions, and putting a hold on other jobs
- Seeing downgraded bonds by Moody’s – “The negative outlook reflects uncertainties related to CNE’s ability to achieve its financial targets for fiscal 2018 and close Memorial in a timely and cost-effective manner, along with its continued challenge formalizing a strategic partnership with another health care provider. Our outlook currently covers a period of one year,” wrote S&P.
- Closing Memorial Hospital and the loss of hundreds of jobs
- Reductions of staff across CNE
- Departure of nearly all of the senior leadership
Care New England refused to respond to questions about the 2015 decision to reject Prospect’s offer.
“I would not be able to comment on anything related to a confidential process,” said Jim Beardsworth, spokesman for CNE. Prospect officials also refused to comment on the documents.
Presently, CNE is in a period of exclusive negotiations with the mega-healthcare giant Partners HealthCare — a business that now employs more than 70,000 and has a reported income last fiscal year in excess of $13.5 billion — which is a nearly 50 percent higher than Rhode Island’s annual state budget. The now depleted has significantly less value after the past two years of financial chaos.
Brown Blast Impact of Partners on RI’s Economy.
In a letter to the Brown University community last week, Brown President Christina Paxson took the unusual step opposing the effort by Partners HealthCare of Boston to purchase CNE.
“I feel strongly that letting this acquisition go forward would be wrong for Rhode Island and for Brown. Doing so is likely to lead to specialty healthcare shifting to Massachusetts, impeding access to healthcare for Rhode Islanders and especially for members of the state’s underserved communities. It also would likely increase the cost of care and reduce the ability of Rhode Islanders — consumers, businesses, healthcare workers and policy-makers — to have a voice in how our healthcare system works,” wrote Paxson.
“If the focal point of Rhode Island healthcare shifts to Boston, excellent physicians (many of them Brown-trained) could be less likely to choose Rhode Island as a place to practice. In addition, the full economic benefits of a strong local academic health system — one that brings in federal grants, generates spin-off companies and creates new jobs in Rhode Island— would be lost, perhaps forever,” continued Paxson.
Now, Prospect has teamed with Brown University in what has been dubbed, “The Rhode Island Solution.” Combined, the two are working to purchase the now financially depleted CNE.
Former CNE board member and now GOP candidate for United State Senate Robert Flanders declined to comment on Monday.
“I am not going to comment on CNE’s cash flow as I am no longer on the board there and such questions should be put to CNE to obtain accurate up to date information,” said Flanders.
“Nor do I have any comment to make about the board’s previous decision to accept the Partners’ offer, rather than the one Prospect made in 2015 beyond the obvious that the Board considered the former to be the better one for all the reasons that CNE publicly stated at that time,” said Flanders.