Hospital Seeks Approval

Waterbury Sends Letter To State Regarding Prospect Acquisition

BY MICHAEL C. JULIANO AND DAVID KRECHEVSKY
REPUBLICAN-AMERICAN

WATERBURY — For the third time in four years, Waterbury Hospital has formally applied to the state to be bought by a for-profit company.

The hospital’s parent company, Waterbury Health, on Thursday filed a Certificate of Need letter of determination with the state Office of the Attorney General and the Office of Health Care Access, seeking approval to be acquired by Los Angeles-based Prospect Medical Holdings Inc. in a $100 million deal, the two organizations announced Friday.

GWHN in May signed a letter of intent to be acquired by Prospect, which owns 13 hospitals and 40 clinics in California, Rhode Island and Texas. Prospect, whose hospitals have a total of 2,258 licensed beds, also manages the provision of healthcare services for about 257,000 members enrolled in its networks of almost 9,000 primary care physicians and specialists.

“Prospect is an innovative healthcare company that will provide the expertise and resources to help us strengthen and enhance access to the delivery of high quality, cost-effective services for the community,” GWHN President and CEO Darlene Stromstad said in a statement. “We are excited to be moving this partnership forward.”

Prospect Medical Holdings officials also issued a statement Friday, saying they “are pleased to have reached another milestone in our proposed affiliation with Waterbury Hospital, and we look forward to completing the regulatory process.”

A CERTIFICATE OF NEED, OR CON, is the formal authorization process required when a health care facility in Connecticut proposes a change in ownership or control.

The attorney general’s office and OHCA on Friday confirmed receipt of the determination letter.

The 10-page letter estimates the total cost for the acquisition at $100 million, “subject to certain adjustments based on the terms of the transaction documents.” Prospect would acquire all of GWHN’s assets, which in addition to the hospital consists of eight physician practices; two community-based diagnostic and imaging services; rehabilitation services in 11 community locations; home health services, and child care services.

The letter also states that no “service changes are currently anticipated” in the proposed deal, and “PMH will continue to provide care to the residents in the ... towns that have historically been served by GWHN.” Those communities are Beacon Falls, Bethlehem, Cheshire, Middlebury, Morris, Naugatuck, Plymouth, Prospect, Seymour, Southbury, Southington, Thomaston, Torrington, Waterbury, Wolcott and Woodbury, the letter said.

UNDER STATE LAW, A COMPANY looking to buy a nonprofit hospital must submit a CON letter of determination and then schedule a public hearing to share details of the transaction and its benefits to the community while also gathering feedback. Hospital officials set the hearing for 5 p.m. Wednesday, Aug. 5, at the Courtyard by Marriott hotel, 63 Grand St.

After the hearing, OHCA will send GWHN and Prospect a CON application, which they will have 60 days to complete and return. The application must include a transcript of the public hearing.

OHCA and the attorney general’s office will then inform both parties of any deficiencies in the application within 20 days. Once the agencies deem the application complete, they will review it and either approve it, approve it with conditions, or deny it within 120 days. During that period, GWHN and Prospect will hold a community forum on the proposed acquisition, and then OHCA and the attorney general’s office will hold a formal public hearing on it.

Earlier this year, state lawmakers approved changes to the application process, requiring OHCA and the attorney general’s office to consider certain factors when deciding whether to impose any conditions on their approval of a hospital sale. The new rules specifically require regulators to evaluate the benefits of a proposed condition on any hospital deal against its potential negative repercussions, including the failure of the sale to go forward. OHCA and the attorney general’s office must also assess the public health consequences for the host city and surrounding communities served by a hospital, including the effects on insured and uninsured residents.

The changes were approved after Tenet Healthcare Corp., a Dallas-based for-profit hospital group, abruptly abandoned plans in December to acquire Waterbury and Saint Mary’s hospitals and three other hospitals in the state. Tenet, which owns 80 hospitals nationwide, objected to 68 preliminary conditions OHCA and the attorney general’s office had placed on the Waterbury Hospital deal.

PROSPECT’S BID REPRESENTS GWHN’S third attempt in four years to be acquired by a for-profit company as it faces fiscal challenges due to the state’s hospital provider tax and cuts in Medicare and Medicaid reimbursements. The hospital cut 80 jobs in January after posting a $1.9 million loss for fiscal 2015’s first quarter, ended Dec. 31. Hospital officials would not disclose financial results for the second and third quarters of fiscal 2015.

In April 2012, Saint Mary’s and Waterbury hospitals filed a plan with state officials to merge under Plano, Texasbased for-profit LHP Hospital Group. The plan failed months later, however, because a solution resolving issues related to the Catholic ethical and religious directives that satisfied all sides could not be found.

In 2013, GWHN entered into a proposed $45 million joint venture with Nashville-based for-profit hospital group Vanguard Health Systems, which Tenet subsequently acquired in October 2013. Tenet then proposed to acquire Saint Mary’s in July 2014.