Earlier this year, Dr. David Hill testified in favor of a major acquisition he felt was crucial to the survival of the hospital he’s worked at for 26 years — a deal for Yale New Haven Health to purchase Waterbury Hospital, where Hill is an attending physician, and hospitals in Manchester and Vernon.
But seven months later, the agreement is still awaiting sign-off by the Office of Health Strategy, despite twice clearing federal antitrust requirements and receiving no opposition at the public hearing Hill attended in April. And conditions at the three hospitals — which suffered a devastating cyberattack in August and owe vendors millions of dollars — are decidedly worse.
“I walked out of that hearing thinking, ‘This went great and will get approved quickly,’ and yet here we are,” Hill said in a recent interview with The Connecticut Mirror.
Hill is one of a growing number of health care providers, lawmakers and local officials angry that the state has not yet approved the sale of the Prospect Medical Holdings-owned hospitals despite increasing fears about their ability to survive without a speedy takeover. At the center of these complaints are increasing calls for an overhaul of the state’s approval process, known as certificate of need, or CON.
“It’s been incredibly frustrating to me that the CON process has taken so long,” Rep. Jason Doucette, D-Manchester, said. “Let me be clear about this: the CON process is broken. It’s a quasi-legal, quasi-judicial process that needs to be reviewed.”
Records show that the YNNH/Prospect deal has already taken longer than several other Connecticut hospital mergers: YNHH’s purchase of Milford Hospital in 2019 took 204 days from the time a CON was filed, Hartford HealthCare’s acquisition of Saint Vincent’s Medical Center the same year took 267 days, YNHH’s purchase of the Hospital of Saint Raphael in 2012 took 147 days, YNHH’s merger with Lawrence + Memorial Hospital in 2016 took 337 days, and Hartford HealthCare’s 2017 acquisition of Charlotte Hungerford Hospital took 351 days.
As of Nov. 19, the YNHH acquisition of the three Prospect hospitals has taken 362 days.
Meanwhile, as the months pass, hospital executives, legislators and local officials say the threat of closure is growing, with the Prospect hospitals owing more than $40 million to vendors and physicians, and in taxes.
Surgeries have been postponed because health care providers don’t have the needed resources. Contracts with traveling nurses and technicians are in jeopardy and remain in place only on a “week-to-week” basis, physicians at the hospitals said. An anesthesiologist group is suing over nonpayment of more than $3 million. The hospitals were also hit with a cyberattack over the summer that crippled operations and set them back further financially.
“The bottom line is the state has taken way too long,” said Rep. Lezlye Zupkus, a Republican whose district includes Waterbury. “When we met with the governor, they were going to be moving that along, supposedly, but it’s been way too long.
“Waterbury is a two-hospital town. If one closes, the other will not survive. They’ll be swamped. They’re already swamped as it is. We need both of them open.”
Tina Kumar Hyde, a spokeswoman for the Office of Health Strategy, said the current deal is more complex than any the agency has dealt with over the past decade.
While many certificate of need applications were approved more quickly, some — such as Hartford HealthCare’s acquisition of Charlotte Hungerford Hospital — are similar to the YNHH/Prospect deal, she noted.
“There are three hospitals involved in this transaction, while most other transactions in the past 10 years have only involved one hospital. The process has involved three times the data collection, analysis and synthesis,” Kumar Hyde said.
“OHS’ obligation in reviewing Transfer of Ownership applications is to ensure that the statutory requirements of addressing quality, access and cost effectiveness are met. Our obligation is to ensure we have adequate information to address those concerns, and to protect the interests of the public in every transaction reviewed. It is not unusual for complex hospital acquisitions that require multiple layers of review to take a year or more to complete.”
Lawmakers say, however, that even if the state hasn’t violated the time limits allowed by law, the stakes are too high and the deal should be expedited. Some are calling for an overhaul of the certificate of need process.
"It is taking a much longer time. I'm not going to say the department is not doing its job, because they are doing their job as they're supposed to by law,” said Sen. Saud Anwar, co-chair of the Public Health Committee and a physician under contract at Manchester Memorial Hospital. “The issue is we do not have the luxury of time for the people who are providing the care. The patient advocates, they're saying we can't continue this way for an unlimited amount of time. Right now, we don't even know where the conversations are. That is concerning to the patients, but also to the people who are providing care."
OHS officials have been meeting with representatives from YNHH and Prospect Medical to iron out a deal. At the state’s insistence, the parties signed a confidentiality agreement in October that bars them from publicly discussing the status of negotiations.
Yale New Haven Health recently asked Prospect to lower its purchase price, saying the deal they signed a year ago has changed because of “deteriorating conditions” at the facilities. They also told Gov. Ned Lamont they need as much as $80 million from the state to offset the cost of upgrading the three hospitals' computer security systems and help them recover from the cyberattack.
April public hearing
The certificate of need application for the YNHH/Prospect deal was filed on Nov. 22, 2022. Under state statute, three steps must be completed before a public hearing can be held: a letter from OHS that details anything missing from the application, a response from the applicants to that letter, and a final note from OHS confirming that everything has been submitted.
Under state statute, OHS has 120 days to complete those steps and did so in 112 days. A review of other recent CON approvals involving Yale New Haven Health — the purchases of Milford Hospital, Lawrence + Memorial Hospital in New London and Saint Raphael in New Haven — shows similar time frames for those three steps.
The public hearing for the YNHH/Prospect deal was held April 26, with people testifying remotely from New Haven and Waterbury as well as in person in Hartford.
Twenty-seven people commented, including the mayors of Manchester and Waterbury, several state representatives, hospital employees and volunteers, and residents. None spoke against the proposed acquisition.
Twelve pieces of written testimony were also submitted, all but one in favor of the deal. The lone dissenter was Saint Mary’s Hospital Chief Administrative Officer Kimberly A. Kalajainen, but her concerns focused on what health care providers were paid by the state, rather than the deal itself.
Kalajainen wrote that OHS needs to consider the “significant commercial insurance price disparities between hospitals with market power and those without market power, such as Saint Mary’s.”
She said OHS needs to review the deal from the “perspective of patient impact, especially our most vulnerable patients” who rely on Medicaid and Medicare to pay their bills, not private insurance companies.
Kumar Hyde said the lack of opposition at the hearing is not a significant factor in how long the state takes to issue a decision.
“Whether an application has opposition has little bearing on the complexity of the application and has no impact on the duration of OHS’ review,” Kumar Hyde said. “Every application is analyzed on its own merits. CON applications are decided on a case-by-case basis and do not lend themselves to general applicability due to the unique facts of each case.”
Manchester Mayor Jay Moran testified at the hearing and has watched the city's only hospital struggle through the cyberattack.
“It’s been very, very frustrating, the time it’s taken. We have seen other mergers like this move along much quicker,” he said in an interview. “How long can we keep sitting here saying, ‘It’s going to happen, it’s going to happen’? We need to solve it. … If we don’t hear anything by the end of this calendar year, we should be very concerned.
“I’ve heard from the hospitals that, financially, how much longer can they hang on? Will they get to a point where they can’t afford payroll? Will it get to a point where they don’t have the services to protect their citizens?”
Federal approval
As part of the proposed merger, YNHH also had to submit the deal to the Federal Trade Commission for approval. Under the Hart-Scott-Rodino Act, the FTC and the Department of Justice review most of the proposed transactions and can take legal action to block deals that they believe would “substantially lessen competition.”
YNHH officials said the FTC approved the merger in March 2022, and they had one year to act under that approval. But because the state Certificate of Need process wasn’t complete by the time the FTC approval period expired, YNHH had to apply again. That application was approved in July 2023. Both of those applications also were reviewed by state Attorney General William Tong’s office.
Kumar Hyde said the FTC review has no bearing on the state’s decision.
“The U.S. Federal Trade Commission is responsible for reviewing transactions for potential antitrust implications under federal law. OHS is responsible for reviewing transactions under state laws, in particular CON law rather than antitrust laws,” she said. “They are separate processes, and approval under one set of criteria has very little if anything to do with approval under the other.”
Kumar Hyde said unlike some other hospital mergers, the Yale/Prospect deal required a Cost and Market Impact Review.
“The CMIR in this case involving three hospitals took longer to complete than prior acquisitions,” she said. “To rush any one of these reviews would not serve the interests of the public nor be in compliance with OHS’s governing statutes.”
The attorney general’s office has been asked to review the CMIR. A spokesperson for the office said the review is ongoing.
'The process is broken'
Mayor Dan Champagne of Vernon, where Rockville General Hospital is located, said he understands the need for OHS to carry out its regulatory responsibilities, but he is “disappointed it’s taken this long,” given the stakes.
“It’s excessive,” Champagne said. “I think it’s one of the main reasons the three hospitals are in the position they are right now. If they would have moved this along, maybe we would have had an updated computer system and that hack wouldn’t have happened. I’m squarely putting the blame on the state.”
He also criticized the confidentiality agreement the negotiating parties signed.
“Why is the state demanding a gag order? They do this so every time we ask a question, they can say, ‘There’s a gag order in place, we can’t answer you,’” he said. “The public has a right to know, especially when there are thousands of people who depend on the hospital for medical care, for jobs, or for their businesses to survive, because they deal exclusively with the hospitals.”
Kumar Hyde said the agreement promotes “open and honest” discussions and is crucial to maintaining the integrity of negotiations.
“The state has not demanded a gag order,” she said. “The parties have all agreed to maintain the confidentiality of the settlement negotiations. This is common practice for any settlement including those which do not involve a state entity at all. … OHS understands the concerns being expressed by affected citizens and is working towards concluding the matters as expeditiously as possible.”
Private equity, in my opinion, has no place in the health care business.REP. JASON DOUCETTE, D-MANCHESTER
State leaders have not offered a firm estimate for when a decision could be rendered on the deal. Speaking about the process in late September, Lamont said, “I think you are going to see some real clarity in the next 60 days.”
No matter the outcome of the YNHH/Prospect deal, legislators are vowing to examine the certificate of need process during the legislative session that begins in February and explore changes.
“Someone’s going to have to look into this and maybe put a cap on a ‘yes’ or ‘no’ timeframe, because it’s been very frustrating for Waterbury — for the residents, the patients and for the workers there,” said Rep. Michael DiGiovancarlo, D-Waterbury. “We’ve been waiting for a [state approval] process that obviously should not have taken this long.”
The certificate of need process has been “extremely heavy” when it comes to increasing services, Anwar said, and “loose” for some looking to decrease services.
“My feeling is it should be the other way around,” Anwar said. “I think the CON process should also improve to make sure that if anybody is going to come here for a for-profit perspective, we have to, as a state, have a pure lens of the wellness for our community. [We must] ensure those individuals cannot shortchange our community when they come.”
Doucette said he hopes state officials learned from the Prospect Medical venture that Connecticut should not allow for-profit companies to own hospitals here.
“Prospect Medical … has been in our community now for several years, and the situation has only gotten worse over that time,” Doucette said. “Private equity, in my opinion, has no place in the health care business. The sooner we can get this transaction done, the sooner we can, frankly, get Prospect Medical out of the state.”
Many health care providers who attended a rally at the state Capitol last week warned that the hospital closings are a real possibility.
Dr. Saqib Naseer, a cardiologist who has worked in the Eastern Connecticut Health Network — which includes Manchester and Rockville hospitals — for 28 years, said he is worried YNHH may walk away from the deal.
“This is the first time I'm seeing a real scenario, I'm sorry to say, that these hospitals could close,” he said. “This has dragged on too long to the extent that we are worried if they put enough conditions on Yale, they could walk away because they are under no obligation to do this. If Yale walks away, there is no other buyer for these hospitals.”
