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December 15, 2023

YNHH sale ‘paramount’ to CT Prospect hospitals’ survival, CEO says

SHAHRZAD RASEKH / CT MIRROR Manchester Memorial Hospital is one of three hospitals owned by Prospect Medical Holdings that would be sold to Yale New Haven Health under a pending deal.
By Jenna Carlesso and Dave Altimari, CT Mirror

The head of Manchester Memorial and Rockville General hospitals told Gov. Ned Lamont in October that Yale New Haven Health’s bid to buy those two facilities and Waterbury Hospital is “paramount” to their survival, and that “time is of the essence” in the state’s approval of the acquisition, according to a letter obtained by The Connecticut Mirror.

Deborah Weymouth, CEO of Eastern Connecticut Health Network, which includes the Manchester and Rockville hospitals, sent a letter to Lamont on Oct. 2 outlining her concerns about the pace of the deal and financial difficulties ECHN faced after a devastating cyberattack in early August. The CT Mirror obtained the letter from the state Department of Public Health through a Freedom of Information Act request.

Yale New Haven Health has moved to purchase the Manchester, Rockville and Waterbury hospitals owned by Prospect Medical Holdings. The state has taken more than a year to approve the sale.

“The successful completion of this transaction is paramount to the survival of three hospitals and the continued services they provide for the residents of Connecticut,” Weymouth wrote to Lamont. “We implore you to consider the urgent nature of our situation. Time is of the essence, and we cannot afford to let this opportunity slip through our fingers.”

Manchester and Rockville hospitals were unable to bill insurance companies for six weeks following the cyberattack, Weymouth said in the letter, and during that time insurers were “unwilling” to grant repeated requests for cash advances or “even to extend the time we need to submit bills given the attack.”

“We find these actions contradictory to the known operating margins of these firms and their commitment to compensate providers for quality care,” she wrote.

Weymouth could not be reached for comment.

In a statement Wednesday, Lamont’s chief spokesperson said the governor understands the urgency of reaching an agreement.

“The governor continues to urge the two private parties, Yale New Haven Health Systems and Prospect, to come to a deal under the terms negotiated with the Office of Health Strategy,” the spokesperson, Julia Bergman, said. “The governor’s top priority is ensuring patient health and safety and quality of care. He is in regular contact with the Department of Public Health, which continues to perform routine inspections at all three hospitals. He has also met with the various parties involved to hear their concerns and understands the urgency of reaching an agreement.”

A spokeswoman for the insurance sector said there have been “good faith” initiatives offered by the carriers, but she declined to elaborate.

“Many, if not all, carriers have had discussions with both hospitals about how they can assist during this crisis. I am not at liberty to discuss the details of those arrangements, but suffice it to say there have been good faith initiatives offered and/or put in place,” said Susan Halpin, executive director of the Connecticut Association of Health Plans, which lobbies on behalf of insurers.

Emails obtained by CT Mirror show the hospitals were also unable to bill Medicaid for payment following the cyberattack, forcing the state Department of Social Services to advance them about $7.5 million. “Please note, we do appreciate the State of Connecticut’s Medicaid program for supporting our requests,” Weymouth wrote to Lamont.

Her letter was sent one day after the CT Mirror published a report on the aftermath of the cyberattack at the Manchester, Rockville and Waterbury hospitals that showed patients were diverted to hospitals as far away as Massachusetts, that facilities had to cancel nearly half of their elective procedures and at times over the nearly six-week period couldn’t process X-rays or CT scans that are vital for treating potential stroke or heart attack victims, among other problems.

In her letter, Weymouth also noted that the Yale New Haven Health acquisition of the Prospect hospitals faced a “significant hurdle” in obtaining state approval, and she pointed to concerns raised by officials at Connecticut’s Office of Health Strategy, which must sign off on the deal.

“We face a significant hurdle in completing this transaction. This roadblock has proven to be challenging to navigate coupled with a protracted time to complete,” she wrote. “We respect the concerns of the Office of Health Strategy leadership regarding the potential impact on health care costs and market share. Nevertheless, it is important to emphasize that both the Connecticut Office of the Attorney General and the Federal Trade Commission have already reviewed and approved our transaction, recognizing its potential benefits and the absence of anti-competitive consequences, twice.”

A spokeswoman for OHS said Wednesday the office is tasked with ensuring there is adequate information to address whether consolidation would drive up health care costs.

“OHS’s obligation in reviewing Transfer of Ownership applications is to ensure that the statutory requirements of addressing quality, access and cost effectiveness are met. In general, research has found that health care consolidation leads to higher prices and more spending for many health care needs,” Tina Kumar Hyde, the spokeswoman, said. “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.”

Representatives with Yale New Haven Health and Prospect Medical could not be reached for comment.

As part of the proposed merger, Yale New Haven Health 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’s Certificate of Need process wasn’t completed 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 told CT Mirror previously that 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.”

In her letter, Weymouth also asked Lamont to help expedite the deal and ensure it proceeded without “excessive” conditions from the state.

“I kindly request your support in ensuring that the [certificate of need] process for our transaction with YNHH proceeds swiftly and without excessive conditions that could jeopardize the deal,” she wrote. “The proposed acquisition will not only secure the future of our hospitals, but also enhance the overall health care landscape in our state. Your leadership and influence can make a significant difference in securing the health and well-being of our communities.”

Hospital executives, including Weymouth, met with Lamont and lawmakers in September to highlight financial issues at the hospitals, both from the cyberattack and from payments owed to hospital vendors and physicians, and to urge swift approval of the Prospect-YNHH sale.

Last month, health care workers from the Prospect Medical-owned hospitals in Connecticut rallied at the state Capitol in support of the acquisition.

Yale New Haven Health has asked the state for as much as $80 million to offset the cost of upgrading the three hospitals’ computer security systems and help them recover from the cyberattack. The health system has also asked Prospect Medical to adjust the previously agreed upon purchase price of $435 million for the hospitals.

Kumar Hyde has pointed out the complexity of the deal when asked about the length of time the state has taken to approve it.

“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,” she said.

She added Wednesday: “Unlike many other hospital acquisition applications, there is a sister application for the transfer of ownership of the medical group. OHS has also needed to consider that application both individually and as it relates to the hospital application. … To shortchange any one of these reviews would not serve the interests of the public nor be in compliance with OHS’s governing statutes.”

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.

CT Mirror Reporter José Luis Martínez contributed to this story.

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