May 16, 2011 | last updated May 31, 2012 6:14 pm

Ailing hospital in play | Area groups among potential suitors

Two Hartford-based medical centers and a pair of Springfield groups are among the institutions engaged in affiliation talks with Johnson Memorial Medical Center, which emerged from bankruptcy last October.

The hospital's interim CEO, David Morgan, said he hopes a deal can be reached for the Stafford Springs hospital to join a larger system by the end of the summer.

Johnson Memorial Medical Center is the non-profit parent company of Johnson Memorial Hospital, which also operates the Evergreen Health Care Center and Home & Community Health Services.

Morgan, who recently took over as CEO after the sudden resignation of Peter J. Betts, said he's had affiliation talks recently with four hospitals including Hartford Healthcare and St. Francis Hospital and Medical Center. Massachusetts health care providers, including Baystate and Mercy medical centers in Springfield, are also in play.

Morgan said finding a larger partner is key to ensuring the hospital's long-term survival, as the changing health care landscape and continued financial pressures are making it harder to exist as a solo, independent hospital operator.

"In order for us to survive we need to be affiliated with a larger network," Morgan said in a recent interview.

Johnson Memorial emerged from bankruptcy in October as an independent organization, a surprising turnaround for the company, which some hospital officials predicted would likely not survive long-term without a merger.

But, even with bankruptcy behind it, the hospital continues to struggle financially and has little to no capital resources, Morgan said. The hospital is making an aggressive push to find a larger partner, so it can leverage a group's purchasing power and gain greater access to capital for needed investments in electronic medical records and other infrastructure.

The hospital was close to being acquired by the Eastern Connecticut Health Network in 2009, but a proposed $65 million deal abruptly fell apart after ECHN cited concerns about cost.

Morgan said he has not had recent affiliation discussions with ECHN, but he's open to listening to any offers.

The hospital also already has some existing relationships with Hartford and St. Francis hospitals, so establishing a formal affiliation would be a logical next step.

"I will talk to anyone who is willing to talk to me," Morgan said.

Hartford Healthcare officials declined to comment. In a statement, St. Francis said "While we are always interested in opportunities to consider new relationships, we do not comment on the specifics of any individual considerations."

Johnson Memorial Hospital posted about a $6 million operating loss in fiscal 2010.

Morgan said the medical center posted a surplus in the month of March, which is a positive sign, and if the trend continues the organization may be able to end fiscal 2011 in the black.

"But we are definitely walking on a thin razor here," he said.

Morgan has taken over the CEO position from the recently departed Betts, who abruptly resigned as chief executive officer last month.

Betts, who was brought in as a corporate turnaround specialist and was one of the key architects of the hospital's emergence from bankruptcy, told the Hartford Business Journal last month that his resignation was spurred by a disagreement he had with the rest of his management team over how to implement the hospital's strategic plan.

Morgan declined to discuss the specific disagreements, but he did say Betts strengths were as a turnaround specialist, whereas he is more of a relationship builder.

As the newly minted interim CEO, Morgan said he sees his main role as trying to rebuild the franchise, which has been through a tumultuous last three years. During the bankruptcy, Morgan said the hospital had to aggressively cut programs and rein in expenses, including making some layoffs.

"We had to do it because the survival of the organization was at stake," Morgan said. "Now we are taking a very aggressive approach to rebuilding what we've torn down. That includes bringing back services slowly but surely."

Morgan said affiliating with a larger organization would make everyone more comfortable with the hospital's long-term prospects and help in recruiting physicians.

He said he spends two or three hours a day talking to doctors and other members of the medical staff, discussing their needs. He's also making a conscious effort to market the selling points of the hospital to the community.

Morgan said the hospital is also adding new services that will be more profitable. With an expected matching grant of $150,000 from S. Prestley Blake, the founder of the Friendly's restaurant chain, and support of private donors, immediate plans include adding an infusion center and wound care center on its Enfield campus.

The hospital is also bringing back smaller services that were idled during bankruptcy. That includes reopening their nuclear medicine camera in Enfield, and upgrading ultrasound and radiation services.

"We need to start building programs that will generate significant revenue," Morgan said.


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