The second-largest hospital system in Rhode Island has suffered massive financial losses and now faces the prospect of losing out on a merger with Massachusetts’ largest hospital network.
Earlier this month, Care New England reported a loss of $46.5 million over a nine-month period. According to the Providence Journal:
The nonprofit health system — which is in the midst of a planned sale to Massachusetts-based Partners HealthCare — reported a nine-month operating loss of $46.5 million. … The company reported that its “cash position remains a significant concern,” as available cash fell to 40.3 days, compared with 50 days on Sept. 30, 2016. The company is required to maintain at least 30 days of available cash, or “cash on hand,” to comply with the terms of its agreements with bondholders.
In response to the posted loss, Care New England was downgraded. WPRI reported:
Fitch Ratings cut Care New England’s rating by two notches to below investment grade, from BBB- to BB, and put a watch on the rating for possible further downgrades depending on what happens over the coming months. Fitch noted the hospital group’s operations have lost $46 million in the first nine months of this fiscal year, a number that is expected to rise to $61 million by Sept. 30.
Care New England’s financial woes could put its merger with Partners Healthcare at risk. A top executive at Partners said the company is “holding off” on their deal to purchase of Care New England, citing financial concerns. According to WPRI:
A top executive at Partners HealthCare said the company is holding off on finalizing its proposed takeover of Rhode Island’s No. 2 hospital group, Care New England, until a viable turnaround plan is in place.
Partners CFO Peter Markell said his company wanted Care New England to show them a plan for a “near-term break even.” According to Go Local Prov:
“The devil is in the details in the assumptions, but we’d like to see them showing us pretty near-term break even, and getting to a 1 to 2 percent margin within three years or so,” said Partners CFO Peter Markell.
One stipulation of the deal was that Care New England would pass off Memorial Hospital, yet another struggling entity in the Rhode Island hospital system, to Prime Healthcare. But even that part of the deal faces questions. Prime is also in financial trouble, having had its bond rating downgraded and faces a Department of Justice investigation into its practices.
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