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Yale New Haven Health to acquire three hospitals in central CT

Arielle Levin Becker

Yale New Haven Health is looking to add three hospitals to its network, the latest in an ongoing spate of consolidation in the state’s acute care sector.

The New Haven-based health system, the state’s largest by revenue, said Thursday it had signed an agreement with Los Angeles-based Prospect Medical Holdings to acquire its three Connecticut-based hospitals: Waterbury Hospital, Manchester Memorial Hospital and Rockville General Hospital. The deal would add more than 700 beds to the roughly 2,700 YNHH currently maintains.

The deal would return local ownership to the hospitals, said YNHH president Chris O’Connor.

“When they are converted — assuming that process takes place, however long it’s going to take — they’ll become part of this community, and they’re not going anywhere,” O’Connor said. That means the dollars and jobs the hospitals generate will stay local, O’Connor added. “That is an important aspect we’re very excited about ensuring for these communities.”

Representatives for Prospect did not respond to a request for comment. Leaders of Prospect’s Connecticut hospitals said in a news release they were “proud” of their accomplishments and the investments Prospect made in their respective communities.

“We are confident YNHH will continue this legacy,” Dr. Justin Lundbye, president of Waterbury HEALTH, said in a statement.

The parties expect to negotiate a definitive agreement over the next two months or so before submitting it for regulatory approval and antitrust review. “It’s the first step,” O’Connor said of Thursday’s announcement.

If the deal goes through, it would amount to significant consolidation within the statewide hospital landscape, resulting in more than half the state’s 27 hospitals owned by either YNHH or Hartford HealthCare. Trinity Health and Nuvance each own another three hospitals, and the state’s remaining seven hospitals are independent.

In an emailed statement, state Attorney General William Tong said, “We are deeply concerned about the impact of hospital consolidation on patient care and our front-line medical workers.” He said his office, as well as federal and state agencies, would be closely reviewing the deal once it’s submitted.

“Overall, [the state Office of Health Strategy] is concerned about the market in CT, and if any application is submitted to us, it will be reviewed with the issue of any additional market concentration as one of the major factors,” Tina Hyde, spokeswoman for OHS, wrote in an email. Hyde said the office can’t comment on the deal specifically since it has yet to be filed.

A national trend

Hospital consolidation is not just happening in Connecticut. Nationally, the trillion-dollar health care sector has seen an acceleration in health care mergers and acquisitions in recent years. The trend is raising concerns about the potential effects on costs and access for patients as well as the quality of care. According to researchers, most U.S. markets are very concentrated, with between one and three large hospital systems. Less competition leads to higher prices and lower quality, research has shown.

“At some point, the question will be asked: Does it raise competitive pricing issues?” said state Rep. Jonathan Steinberg, D-Westport, co-chair of the General Assembly’s Public Health Committee. “These potential acquisitions really bring the issue to the fore.”

The issue was already on lawmakers’ radar after Hartford-based Saint Francis Hospital and Medical Center sued Hartford HealthCare last month, alleging the system’s aggressive efforts to acquire physician practices in the state amounted to “anticompetitive conduct.” (YNHH and Prospect have also sought to acquire physician practices in various Connecticut markets.)

OHS’s Hyde said the state plans to hire a consultant to study anti-competitive practices across the health care industry. Indeed, tucked into the governor’s budget, released Wednesday, was a $400,000 allocation to cover the cost of that consultant.

The YNHH-Prospect deal would amount to the system’s largest hospital acquisition ever, bringing the total number of hospitals within YNHH to seven. That would match the number in Hartford HealthCare’s hospital network, according to the state Office of Healthcare Strategy’s most recent annual report on the financial status of the state’s hospitals.

Most recently, YNHH acquired Lawrence + Memorial in 2016. Before that, the health system had not added new hospitals in nearly two decades, adding Bridgeport Hospital in 1996 and Greenwich Hospital in 1998 to its network.

“We are certainly aware of those concerns of increasing costs, and we work hard to prevent that,” YNHH’s O’Connor said. The system has demonstrated that, he said, by successfully maintaining cost structures at the hospitals that have joined the YNHH system to date.

“We have tried to be alert to those concerns and ensure we are improving quality — that is ultimately what we are here to do.”

O’Connor added that the goal is to “be smart and not just grow for growth’s sake.”

Prospect’s reputation

Los Angeles-based Prospect Medical Holdings owns and operates 17 hospitals across five states. A ProPublica investigation published in 2020 found systemic financial mismanagement and patient safety violations across the entire network.

According to the investigation, the company’s founders built the business by acquiring small hospitals in predominantly low-income neighborhoods and then convincing health care providers to “feed Medicaid and Medicare patients” to those facilities. They also slashed costs, often at the expense of staff and patient safety, ProPublica reported.

In 2010, private equity firm Leonard Green & Partners bought a 61% stake in Prospect and by 2021 the company’s revenue had grown to $2.7 billion from $470 million, according to ProPublica.

The private equity firm sold its holding back to Prospect in 2021. Now, Prospect appears to be on a selling spree of its own. In addition to the proposed sale of its Connecticut hospitals, the system is reportedly also looking to sell four Pennsylvania hospitals.

O’Connor said that if the Prospect hospitals join YNHH, “they’ll really become community assets, which is to say the sole purpose of the investment is to provide benefit to the communities they’re in.”

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