Release Date: 10/17/2017

In action taken at a special meeting last night, the Care New England (CNE) Board of Directors authorized the termination of negotiations with Prime Healthcare Foundation regarding their planned acquisition of Memorial Hospital of Rhode Island as a result of both sides being unable to reach mutually acceptable terms. The Board also authorized Care New England management to prepare necessary plans and filings with the Rhode Island Department of Health to maintain vital access to primary care and outpatient services in the community, while closing Memorial’s inpatient units and Emergency Department.

The impetus for the changes includes the chronic financial losses being incurred at Memorial, continuing a nearly 10-year slide. The 294-bed hospital has averaged a daily inpatient census of just 15 to 20 patients resulting in an operating loss in the past fiscal year of $23 million. According to Charles R. Reppucci, chairman of the CNE board, “The magnitude of the losses at Memorial cannot be sustained and jeopardizes our other hospitals and provider organizations. We have exhausted our very best efforts and those of some nationally-recognized consultants to improve the situation without the outcomes we had hoped to achieve.”

Care New England recorded a $68 million loss from operations in fiscal year 2016 and is projected to show a $49 million operating loss for the fiscal year that just ended on September 30. Its plan to restore financial well-being to the health care system focuses on continued work on revenue improvement and cost reduction, and resolution of the ongoing losses at Memorial.

Since the 2013 acquisition of Memorial by Care New England, Dennis D. Keefe, president and CEO, said the leadership of the system and the hospital have worked diligently to try to make Memorial successful. This includes significant investment in clinical information systems and facility improvements, bringing in new administrative leadership, establishment of new services, initiation of marketing plans to promote the hospital and its programs, and the hiring of restructuring experts to help turn around the hospital’s dire financial situation.

Despite these efforts and a 2016 improvement plan to relocate the obstetric unit and scale back inpatient capacity, Memorial has not drawn enough patient and community support to meet meaningful volume thresholds that would sustain a safe and viable inpatient operation.

Accordingly, in early 2017, Care New England initiated an exhaustive search to engage more than 70 potential parties that might be interested in the acquisition of Memorial. Prime ultimately emerged as the single bidder, and the execution of the Letter of Intent (LOI) between Prime and Care New England was announced in April 2017. In the time since, extensive work on due diligence and the negotiation of terms has taken place. However, the parties were unable to reach an ultimate agreement. Confidentiality provisions in the LOI prevent both organizations from sharing further details.

Care New England’s James E. Fanale, MD, EVP, chief operating officer and chief clinical officer, said it will be the utmost priority in the plan for Memorial to continue to provide high quality patient care, while working to address options to ensure access to care for patients in the community including maintaining a robust primary care presence. CNE will also develop a plan to address the Memorial-based medical residency training program with The Warren Alpert Medical School of Brown University.

“While difficult, these actions represent a necessary and critical step in restoring financial health to Care New England while ensuring the future of hospitals and facilities many have come to rely on for their care,” continued Reppucci. “This has been a long and complex process that has been met with unrelenting dedication and compassionate care from all who work at Memorial Hospital. We will support both the employees and the community in this transition so the well-established legacy of care in Pawtucket is not lost, but rather adapted for the demands of today’s health care landscape.”

Care New England will begin immediately working with the Memorial staff on transition plans. Until a definitive plan is developed and approved, there are no estimates on the number of employees who might be displaced. Care New England will attempt to place affected employees in other vacancies across Butler, Kent, Women & Infants, the VNA of Care New England, and The Providence Center.

Care New England officials say they hope to file the necessary regulatory application (Reverse Certificate of Need) as soon as possible.

Care New England remains committed to its affiliation with Partners HealthCare, and looks forward to ongoing progress in the negotiations and due diligence process.

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