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Hospitals Seek Survival In Arms Of Health-Care Giant

Diane Weaver Dunne

August 10, 2009

The parent of Hartford Hospital is flexing its muscles as the state’s largest provider of in-patient services by staking out a greater geographical footprint.

Hartford HealthCare has been in talks with the 275-bed Middlesex Hospital, is seeking regulatory approval to integrate the 414-bed Hospital of Central Connecticut, and has been tapped by the state to partner with the 224-bed John Dempsey Hospital.

If those three hospitals join Hartford HealthCare, the organization’s bed count will increase by nearly 66 percent, from 1,373 beds to 2,286.

Middlesex Hospital is located in Middletown and also operates a mental health clinic as well as medical centers in Marlborough and Essex. The Hospital of Central Connecticut was created when the former New Britain General Hospital and Bradley Memorial Hospital in Southington merged in 2006. John Dempsey Hospital is affiliated with the University of Connecticut School of Medicine in Farmington.

Elliot Joseph, president and CEO of Hartford Hospital and Hartford HealthCare, said community hospitals are initiating the conversations about joining Hartford HealthCare.

“We have been quite surprised about the level of interest,” said Joseph, adding that local hospitals are anxious about how they will financially sustain themselves in the future.

That concern can be seen throughout the nation, said Margaret Au Brown, president and co-founder of CIT Healthcare, a New York City-based company that provides debt financing for mergers and acquisitions of health care organizations.

The trend of larger hospitals buying smaller hospitals has been a consistent over time, Brown said. But since 2007, there has been a rise in the number hospital mergers and acquisitions, with 63 announcements of imminent transactions.

“Part of a larger trend, hospitals are trying to consolidate their footprints in certain markets. I think it benefits the community and the weaker hospitals,” she said.

Access to capital and other resources, combined with greater operating efficiencies, are among the benefits of joining a larger hospital, Brown explained. “When you are part of a network as opposed to being a single hospital, you can benefit from contracting with insurance payers. That helps drive business to your hospitals,” she said.

Although the proposed hospital mergers solidify Hartford HealthCare as the state’s colossal in-patient provider, it means that “Saint Francis Hospital would have to try to go on the offense or defense with what Hartford can offer,” Brown said. “But Saint Francis is not out of the game with 617 beds. It’s still scale.”

Saint Francis Hospital officials declined to comment.

Conversations Ongoing

Hartford Hospital is expected to generate a profit by the end of its fiscal year ending Sept. 30, Joseph said.

“From a year ago, where our operating margins were negative, we will turn that into a 3 percent profit margin over the next two or three years ago,” Joseph said. “This year, we are watching inpatient volume grow by 5 percent inside a market place where there has been an overall 1 to 2 percent decline.”

Joseph acknowledged that Hartford HealthCare has been in talks with Middlesex Hospital officials. “They’ve been in the middle of their process of deciding whether they want to find a partner or not and enter into a larger, integrated health care system. We are having conversations with them and following their process.”

Middlesex Hospital officials were unavailable for comment at press time.

Officials at Eastern Connecticut Rehabilitation Network (ECHN), which operates the 249-bed Manchester Memorial Hospital and the 102-bed Rockville General Hospital, are also open to joining a larger health care institution.

“We’re always exploring those opportunities,” said Dennis McConville, senior vice president for planning, marketing and communications at ECHN.

McConville said that all hospitals are looking at the state of their financial situation to see if there could be a more economic advantage by joining a larger hospital.

“Are we open to discussions? Absolutely,” he said. “But we have no imminent announcements or plans about it.”

He points out that ECHN has partnered with other hospitals, including Saint Francis, Hartford, Johnson Memorial and Bristol hospitals, for more than a decade.

“We have looked to partner with the tertiary hospitals when it makes sense to provide service to our community,” McConville said.

Brown of CIT Healthcare said that consolidations are not a bad thing.

“I think some consumers fear that as health care systems grow larger and more community hospitals are acquired, it is a bad thing,” she said. “And it’s not. They can benefit from being part of a larger system that provides even more services to that community.”

Reader response:

"There should be concern about the size of the market share Hartford HealthCare would control. Hartford Health Care would be in a position to leverage the insurance providers, who would in turn raise premiums. This would hurt those businesses that provide health care. This was the result of the merger between Brigham & Women's and Mass General. See article by David P. Hamilton / Jan. 2, 2009, at //industry.bnet.com.'' -- Keith Inrig, University Health professionals