ECHN Transaction Update - January 13, 2015
ECHN trustees and management are cautiously encouraged by a letter sent by Governor Dannel Malloy to Tenet Healthcare Corporation (THC) this week. This development comes after Tenet withdrew its applications to acquire five Connecticut hospitals, including ECHN, citing strict conditions proposed by the Office of Health Care Access (OHCA).
The Governor’s letter comes after steady appeals to his office to re-engage Tenet. Here are some key communications that have transpired:
• On December 17, Darlene Stromstad, the president & CEO of Waterbury Hospital, and Peter Karl submitted a joint letter to the Governor advocating the importance of our institutions’ stability to continue the care we provide to our communities. Just last week, Waterbury Hospital announced that it would need to lay off a significant number of employees including clinical care givers if no help was provided.
• An Advocacy Campaign request was launched asking local business owners, physicians, employees and community leaders to reach out to the Governor’s office and state senators in support of revitalizing the transactions between our network and THC and Yale New Haven Health System (YNHHS). We are grateful for the many friends who advocated on behalf of our network.
• Forty members of the CT legislative body rallied to revive the proposed Tenet and Yale transactions by submitting a letter of support to the Governor.
• An Op-Ed perspective was published in the January 11th Sunday edition of the Hartford Courant.
In a time of unprecedented change in healthcare regionally and nationally, we are invigorated by the numerous media outlets who have driven attention to the complex issues associated with healthcare. Responsible and investigative reporting has been seen in the Hartford Courant, the Hartford Business Journal, the Republican American and the CT News Junkie. Below are some of the links from the past week for your convenience:
We remain hopeful that the Tenet and Yale New Haven Health System transaction can be revived for the benefit of our programs and services and especially for the patients we serve. ECHN is simultaneously exploring other innovative affiliation opportunities that could provide a broader spectrum of services, financial stability along with quality, access and value for the communities east of the river. Our commitment to clinical excellence has guided ECHN for nearly a century and we continue to explore new ways to remain the provider of choice based on those key factors of quality, service, accessibility and value.
We will provide you with updates as this process unfolds. If you have questions or comments about our status or direction, please contact Dennis McConville, Chief Strategy Officer at 860.533.3429 or via email at firstname.lastname@example.org or Nina Kruse, Vice President of Corporate Communications & Public Affairs at 860.647.4767 or via email at email@example.com.
The following Op-Ed, by ECHN President and CEO Peter Karl, was published by the Hartford Courant on January 10, 2015:
Onerous State Conditions Killed Tenet Hospital Takeovers
In December, Tenet Healthcare decided to withdraw its applications to acquire several financially struggling community hospitals in Connecticut as part of an innovative clinical partnership with Yale New Haven Health System. This was a very big deal and, unfortunately, its undoing sent an extremely negative, anti-business message to a national audience.
On December 1, 2014, the Office of Health Care Access (OHCA) placed an extensive list of proposed conditions on its approval of the acquisition of Waterbury Hospital by Tenet Healthcare Corporation. On December 8, responding to a request by OHCA for comment on its proposed decision, ECHN submitted comments indicating the severe consequences the conditions of their decision would have, including the possible abandonment of the Connecticut transactions by Tenet. On December 11, ECHN infomred that Tenet was its applications to acquire ECHN as well as Waterbury, Saint Mary's and Bristol Hospitals.
The joint venture between Tenet and Yale New Haven Health System would have provided long-term viability, continued investment in world-class clinical care and the ability to help sustain jobs in eastern Connecticut. Recognizing this, ECHN urged the State to revise the proposed conditions and re-engage Tenet.
On December 22, the Governor reported that he “doesn't think that Tenet had any intent to proceed with a transaction in Connecticut.” ECHN feels otherwise. ECHN is discouraged by the inability of our Governor and his regulatory offices to actively engage Tenet to negotiate agreeable terms of these hospital conversions for the benefit of residents across Connecticut.
Moving forward, ECHN and the Board of Trustees will meet to review options for pursuing an affiliation with other healthcare systems that will enable us to ensure that the delivery of care is efficient and always focused on improving clinical outcomes and the quality of the patient care experience. We are an innovative organization and we remain focused on our goal: to provide high-quality, compassionate care that is accessible and affordable.
We greatly appreciate our corporators, trustees, physicians and employees who understand the importance of responding to the needs of our patient population in a responsible and responsive manner. Thank you to all who have reached out to our state and city elected officials to develop solutions to the challenges facing a dynamic and ever-changing healthcare environment.
Tenet had spent more than two years working with state leaders and local hospitals to develop a framework to acquire hospitals in Waterbury, Bristol, Manchester and Rockville. Tenet intended to infuse critically needed capital into these hospitals and preserve and enhance access to high-quality care in the most cost-efficient manner throughout Connecticut.
The Tenet proposal would have stabilized community providers, preserved critical health care jobs and, working with Yale New Haven, provided a network of exceptional care throughout the region. The imposition of 47 separate conditions by the State Office of Healthcare Access on Dec. 1, however, killed not only any chance of having Tenet come into Connecticut, but also sent a damaging message to any company considering investing in our state.
The state's conditions included restrictions on pricing, staffing and service level provisions, all of which would have affected the ability of Tenet to manage hospitals while achieving the efficiencies demanded by the Federal Trade Commission in such transactions. Under the conditions, a separate oversight monitor would have been appointed with broad powers and the state would have mandated that Tenet negotiate a "community benefit agreement" with local community activists.
Is it any wonder why Tenet decided to withdraw and invest its capital in a state without these types of onerous regulatory restrictions? No business could operate effectively with these types of restraints. Ironically, this type of unbridled regulatory interference jeopardizes the very jobs and access that Tenet hoped to preserve.
If these same conditions were imposed, for instance, on a grocery store, the state would control the number of employees hired and mandate what they could sell as well as the quantity and price of the products carried. If the grocery store didn't carry a lot of sardines because there wasn't a market for it, the mandates could determine that they had to carry them anyway and sell a certain volume of sardines at a certain price regardless of consumers' preference for salmon. And no jobs could be adjusted for five years even if the fish department no longer needed 20 people to staff it because no one was buying sardines.
Most recently some have suggested that more negotiations take place with Tenet and that those negotiations need to include unions and groups such as the Connecticut Center for a New Economy — the same group responsible for delaying the construction of a new cancer hospital at Yale New Haven. It is hard to imagine how this could be viewed as productive or any type of solution at all.
These types of massive interventions by the state government stunt innovation and improvement, prevent efficiency and turn a blind eye to the marketplace. Decisions of this nature have real and lasting implications. As we work hard to make Connecticut a friendlier place to do business, I fear we have taken a giant step backward. The time is now to make new resolutions for the coming year and to send a message to the rest of the nation that Connecticut is better than what we have demonstrated in the last month.