Last week was a tough one for Rhode Island's largest hospital network. The Rhode Island Health Services Council refused to allow Lifespan to borrow $75.9 million to finish renovation and expansion projects at the Miriam and Rhode Island hospitals.

Lifespan, backed by bankers from Morgan Stanley & Company, Inc., says it will borrow the money anyway. "They're playing games with us," says Council president Robert Quigley, a Tiverton chiropractor, "and I'm disappointed in them."

On February 24, the council voted 6-5 to hire a health-care financial consultant, at Lifespan's expense, to review the proposed financing plan. Quigley worries that if Lifespan borrows $75.9 million in tax-free bonds through the Rhode Island Health and Education Building Corporation (RIHEBC), no money will be left for community hospital projects: "When you suck the money out of this system, what's going to happen when Roger Williams, Landmark, and some of the others need money?" The analyst's review should only delay the project "a couple of months," says Quigley.

Other council members and a Blue Cross & Blue Shield Rhode Island representative express concerns that the projected $106 million interest over 30 years will increase health insurance premiums.

Under state law, large hospital expenditures require approval (or a certificate of need) from the council, an arm of the Rhode Island Department of Health. In 2004, the council approved a request from Miriam for several additions and renovations. Two years later, a Rhode Island Hospital plan to expand the Bridge Building and renovate the Jane Brown North Building was endorsed. Both hospitals promised to finance the projects without borrowing.

Since then, however, cost overruns of $8.2 million at the Rhode Island Hospital project, cuts in Medicaid funding, and heavy losses to Lifespan's stock portfolio have forced Lifespan to seek council approval for the borrowing and a revised construction plan. (The Jane Brown renovations and new Miriam Emergency Department have yet to be completed.)

To illustrate Rhode Island Hospital's financial problems, Frederick Macri, Lifespan's vice president for shared services, told the council that in September, the hospital had enough cash to run for 117 days. By December it had only 91 days of cash. And, Macri said, Lifespan is doing everything it can to limit costs.

That comment prompted council member Catherine Graziano to ask if Lifespan planned to support state Senator Michael McCaffrey's (D-Warwick) bill to cap hospital executive salaries at $300,000 a year.

"No," responded Macri, whose 2007 compensation package equaled $569,777.

"I didn't think so," replied the former Providence state senator.

Macri also informed the council that if Lifespan did not receive approval for the RIHEBC loan, it would borrow money elsewhere for smaller expenses, like rewiring and a new CT scanner, and divert the saved cash to the construction project.

In an interview after the meeting, Quigley said Lifespan could not move ahead because the project changes had not been approved. But on March 2, Jane Bruno, Lifespan vice president of marketing and communications, said in an email that Lifespan planned to withdraw the proposal: "We are going to market for routine projects that do not require a [certificate of need]."

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