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If you walk into almost any urgent care, clinic, laboratory, or hospital in Rhode Island, there is about a four in five chance that it will be operated by one of two companies: Lifespan or Care New England. Rhode Island has historically ranked among the best states for healthcare, but in recent years, costs have been rising and nurses have been leaving. Critics of the healthcare system often propose either implementing a public option—a government-run insurance plan for all Americans—or doing away with private insurance entirely through a single-payer “Medicare for All” system.
While these solutions tackle the absurd costs of insurance, they do not directly address a large reason costs are so high: hospitals and healthcare providers themselves. Prices for medicine, procedures, and care are grossly inflated by hospitals across the country, including here in Rhode Island. To address this, the State of Rhode Island should acquire Lifespan and Care New England (CNE), its two largest healthcare providers, to quickly and effectively bring down the cost of care.
Lifespan, the larger of the two companies, was founded in 1994 by Rhode Island Hospital (and its Hasbro Children’s Hospital) and The Miriam Hospital. The system now also includes Newport Hospital and Bradley Hospital alongside other multi-location healthcare services including laboratories, psychological treatment, and urgent care. Given the scope of its operations, Lifespan is also one of the largest employers in the state. However, the corporation is facing serious problems. In September 2022, the CFO of Lifespan described the state’s healthcare system as “in crisis,” and it is not hard to see why. In 2020, Rhode Island had the 13th highest healthcare spending per capita in the country. Despite this spending, Lifespan had an operating loss of $49 million in the third quarter of 2022. In the second quarter of 2023, that deficit had gone down to $3.7 million—an improvement to be sure, but still a large sum of money to lose. Moreover, with the healthcare system in an ongoing crisis due to pandemic burnout, Lifespan still had a shortage of 530 full-time nurses as of June.
All the while, healthcare in Rhode Island continues to worsen, especially in the emergency room (ER). At its worst, in February 2022, the state’s ER wait time was 185 minutes, ranking fourth worst in the country. As of this month, average time spent waiting for urgent medical care has climbed to 214 minutes, or around three and a half hours. Only Maryland and DC residents spend longer in the ER.
Although Lifespan is officially a not-for-profit health system, its actions show that its priority is, in fact, making money. One of its current initiatives is consolidating its real estate assets and downsizing its administrative expenses in hopes of becoming profitable again. In 2021, Lifespan paid its then-CEO and President a compensation package of $3.2 million, an amount that the president of United Nurses and Allied Professionals called “obscene.”
Lifespan is also particularly aggressive in bill collection: In 2017, it sued a single mother for $1157.55 (plus $113.21 in court fees) over an unpaid bill. She eventually settled with a $20 per month payment plan for five years. Troublingly, this case was not an anomaly. Lifespan has a history of suing low-income patients at its hospitals for unpaid bills, a history that is at odds with its “mission” to provide care.
Lifespan’s intent to grow and make a profit is perhaps best exemplified in its failed bid to merge with Rhode Island’s second largest healthcare provider, CNE, which operates Butler, Kent, Memorial, and the Women & Infants Hospitals. Such a merger would have led to the new company controlling roughly 80 percent of hospital infrastructure in Rhode Island, violating antitrust laws. As such, it was dismissed by Rhode Island Attorney General Peter Neronha and the Federal Trade Commission, but since the denial of the merger, CNE has received two more acquisition offers. Both times, CNE has elected to remain independent, but it is open to merging with Lifespan in the future. As recently as March, a merger between the two was again on the table.
If such a merger were to be approved in the future, Rhode Island’s healthcare system would effectively be reliant on one company with priorities that might not align with those of Rhode Islanders seeking care at the hospital. If the system is not held accountable, the residents of Rhode Island could end up in a similar situation as their northern neighbors in Maine, who have been squeezed by the two private companies that provide most of the state’s electricity. These two companies, Central Maine Power (CMP) and Versant, are investor-owned and therefore do not answer to Mainers. The former is owned by Ibedrola, a Spanish multinational conglomerate whose biggest single shareholders are the governments of Norway and Qatar; the latter is essentially wholly owned by the city of Calgary in Alberta, Canada. That CMP and Versant are some of the worst rated companies in the nation does not particularly matter to them; they are still making profit due to exorbitant power costs.
Our northern New England relative has not just rolled over, however. In an attempt to put power in the hands of those who rely on it, the residents of Maine have put forth a ballot initiative to acquire these two companies and turn them into a publicly-owned utility, tentatively called Pine Tree Power. Rhode Island should do the same with Lifespan and CNE to bring down healthcare costs and refocus the system’s energy on care.
Turning Lifespan and CNE into a consumer-owned healthcare system would relieve Rhode Island’s hospitals of their profit motive (which, again, exists in spite of “not-for-profit” declarations). Rather than charging arbitrary numbers and haggling with insurance, this public utility could bill at the break-even point. A 2020 study from National Nurses United found that the average markup on care across Rhode Island’s 10 hospitals was 346 percent. On average, for every $100 Rhode Island hospitals spend on care, Rhode Islanders are charged around $450. Decreasing prices would increase savings, which could help fund the public utility––either directly through household taxes or indirectly through increased economic activity. Furthermore, by lifting the profit incentive, Rhode Island’s healthcare system could focus more on its quality of care than the quality of its real estate portfolio.
Perhaps the greatest challenge to the public acquisition of Lifespan and CNE à la Pine Tree Power is that Rhode Island, unlike Maine, does not have a ballot initiative and referendum process, despite a 1996 vote to adopt one. Thus, an acquisition could only be put forth to voters after passing both chambers of the General Assembly, a tricky feat considering that Lifespan is also one of the biggest political donors in the state. However, the state is not a stranger to takeovers of institutions in crisis: Following a report from Johns Hopkins in 2019 documenting systemic underperformance, the State of Rhode Island moved to take over Providence Public Schools in what was a bombshell for Rhode Island politics at the time (the process is expected to finish in 2026).
Although Providence Public Schools were already a public institution, similar reasoning could be applied to Lifespan and CNE, especially considering the vested interest and investment residents have in their success and efficiency. Rhode Island needs accountability in a healthcare system where profits are treated as more important than patients. Rhode Islanders deserve a healthcare system that reflects what they pay for, instead of ever-increasing ER wait times and staffing shortages. They deserve a system that Lifespan currently seems uninterested in and incapable of providing. Acquiring Lifespan and Care New England would address many of the root causes of exorbitant healthcare costs and inefficient administration at the source. By following Maine’s example framework, Rhode Island can set an example for the country and provide its citizens with a high-quality public healthcare system.
I do like the analogy between hospitals and utilities in terms of public service and accountability. However, that is where the analogy ends.
Hospital costs are always going to be higher than community-based outpatient costs. The biggest problems in cost control are that people go to the hospital too much. The insurance industry, both public and private, has to bear much of the responsibility for that. I get paid about $220 to perform an initial psychiatric evaluation of a patient that takes 45 minutes or more. If that same patient goes to an ED, an overnight stay could cost thousands. There is no economic incentive for large health systems to divert patients to outpatient providers. Once a patient enters the large health system, the economic incentives are to bill for more procedures, more cross referrals, etc.
The pharmaceutical industry is another huge sinkhole. Yes, R and D costs are large so there has to be a ROI. But with direct-to-consumer advertising, pharmaceutical companies are marketing patented drugs that cost $2k per month, when there are equally effective generics that cost $10 per month. The American public has no way of knowing the difference. And nurse practitioners who are taking over ambulatory care, seem remarkably vulnerable to being manipulated by free dinners.
And the elephant in the room is agribusiness. Our supermarkets are flooded with heavily processed foods with a long shelf life and poor nutritional value. Americans are fatter than ever before and obesity contributes to metabolic disorders (T2D), heart disease, and joint degeneration (leading to expensive orthopedic surgery).
Hospitals will never be the answer to what ails us. We need the USDA and FDA to step up and do their jobs to keep the food supply more in alignment with public health. We need reimbursement to support cognitive specialties like primary care and psychiatry to keep patients away from the hospital. If not, we will continue our death spiral until healthcare costs exceed 30% of GDP.
While you may be sincere in your ideas, you do lack some understanding of how hospital finances work. I worked at Lifespan for six years as a manager in the Finance area (I left in early 2019 for advancement reasons). The biggest costs at hospitals are the employees, which are significantly related to various union contracts, so those are virtually fixed costs. That issue was made worse by the pandemic. Nursing, and other clinical staff, were burned out by the extra toll of COVID patients, and many nursing staff became travel nurses, where the rates charged by nursing agencies was extremely exorbitant and basically held hospitals hostage across the country. It worked for the nurses (not complaining at all about that, it was an opportunity for them), but the agencies made incredible profits at further expense to the hospitals. Most hospitals are not for-profit, but that doesn’t mean they are in business to lose money. It requires being an ongoing concern to be able to fund capital purchases of new technology, renovations, etc. I cannot comment on specific persons’ salaries, but you do need to take into consideration the size of these organizations compared to other companies. There are thousands of employees. You would not find executive level employees for companies of such size with low compensation. That doesn’t mean there shouldn’t be an eye on the level, but you aren’t going to get a CEO for $100K, either. Also, you need to understand how hospitals are paid. At most hospitals the overwhelming majority of patients are either on Medicare or Medicaid, government programs where you cannot negotiate what you receive in reimbursement. Any yearly increases (if any, especially with Medicaid) are determined by the federal and state government agencies, and they don’t tend to fully keep up with inflation. In Rhode Island there are only a couple of private insurance companies of any real size (Blue Cross and United) that provide any opportunity to try to make up for the costs not covered by the government payers. Virtually all payers – governmental and private – pay based on prospective payment systems or fee schedules that have nothing to do with billed charges. Billed charges are almost meaningless, and even the portion that winds up as the patient’s reponsibility (deductibles and coinsurance) are carveouts from the payers who want to hold down their costs by making their beneficiaries or customers pay a portion. These amounts are held back from the hospital by the payers, forcing the hospital to then bill the patients for the full amount they were told they would receive (governmental payers) or were contracted to receive (private payers). There is a lot more depth needed to your understanding of how the system works in order to make constructive changes.