December 11, 2014

Hospital execs express frustration over failed Tenet deals

Submitted photo
Submitted photo
Waterbury Hospital

[Editor's note: This story has been updated to include statements from hospital executives released Friday morning. Further updates to this developing story may be pending.]

After warning state regulators on Wednesday that conditions placed on its acquisition of Waterbury Hospital could scuttle the deal, Tenet Healthcare pulled the plug on its plans to purchase five Connecticut hospitals.

Tenet notified the state Office of Health Care Access and the attorney general late Thursday evening that it would not continue its purchase of Waterbury, St. Mary's, Bristol, Manchester Memorial, and Rockville General hospitals and convert them from nonprofit to a for-profit model.

"We respect the role the state regulators have in providing guidance and oversight to the healthcare industry, and understand the responsibility they take in discharging their duties. Nonetheless, the extensive list of proposed conditions to be imposed on the Waterbury Hospital transaction, which is only the first of four transactions for which we've made applications, has led us to conclude that the approach to regulatory oversight in Connecticut would not enable Tenet to operate the hospitals successfully for the benefit of all stakeholders," Tenet said in a statement on its website.

Executives of hospitals Tenet was hoping to acquire responded with disappointment Friday over the collapsed deals.

St. Mary's CEO Chad Wable said in a phone interview Friday morning that he has received no indication that Tenet's announcement is a negotiating tactic.

"They were very clear in their announcement that they're out, so from my standpoint, they've abandoned all their applications and they're going to spend zero time thinking about Connecticut," Wable said.

Despite that, Wable said he holds out hope the two sides can come to terms.

"I always remain hopeful that good sustainable solutions will win out," he said.

Multiple other hospital executives released statements Friday morning.

Darlene Stromstad, Waterbury Hospital's president and CEO, said that the conditions OHCA placed on the deal "were clearly one obstacle too many."

"Obviously we have seen this coming and have been talking with the board of directors about options," she said.

Peter Karl, ECHN's president and CEO, said the deal would have strengthened healthcare options for residents east of the Connecticut River.

"The ECHN Board of Trustees will assess alternative measures with the goal of preserving high-quality, community-based healthcare for the communities we serve," Karl said.

Though Bristol Hospital officials have said they needed capital from Tenet, CEO Kurt Barwis said Friday that the hospital is "strong and will be here for generations to come."

The Connecticut Hospital Association said regulatory conditions placed on the deal restricted flexibility at a time when hospitals must be nimble to meet new challenges.

"We are disappointed for the hospitals in Connecticut that worked very hard on partnerships with Tenet," CHA said.

Representatives of the American Federation of State, County and Municipal Employees, which represents more than 500 nurses and other workers at Waterbury Hospital and was supportive of the conditions on the deal, said Friday afternoon that Tenet's announcement proved that the union was right to be concerned about for-profit health care.

"From the start our union had serious concerns that a for-profit company with Tenet's history was the right solution for helping Waterbury Hospital meet its challenges," Barbara Simonetta, president of Connecticut Healthcare Associates/AFSCME said in a statement. "Tenet's choice to abandon Waterbury, and the other four hospitals it had targeted for takeover, rather than be held accountable to community stakeholders, shows that our fears were well founded."

The American Federation of Teachers, which represents 700 workers at ECHN, said Friday just after noon that the state's conditions were "responsible" and "patient-centered."

"Going forward, we look forward to continuing our collaborative relationship with ECHN, the statement said. "Together, we have worked to preserve the Manchester and Rockville communities' access to high quality care and good, stable jobs. We're ready to continue this partnership in order to navigate a changing healthcare landscape for the sake of the entire region that relies on both facilities' professional caregivers."

Tenet's decision to withdraw from its Connecticut deals will have widespread impact on Connecticut's healthcare industry. It also creates a huge political problem for Gov. Dannel P. Malloy and the state legislature.

All Connecticut hospitals that were vying for a Tenet acquisition are in need of capital injections. If Tenet doesn't come back to the negotiating table, the hospitals will need to find other partners, or ask the state legislature for significant funding increases.

But the hospital's merger options have now been significantly narrowed, because there are few other Connecticut hospitals with the capital to take on financially struggling care providers. At the same time, the state may have alienated the entire for-profit hospital industry with the strict conditions it imposed on Tenet, including requiring the appointment of an independent monitor, the freezing of pricing and staff levels for five or more years, the filing of strategic spending and hiring plans, and various other oversight and disclosures.

Waterbury Hospital's Stromstad said earlier this week, before Tenet's announcement, that her hospital is running out of time and needs to find a capital partner quickly. It's operating in the red this fiscal year due to $9.7 million in reimbursement reductions.

"There is a point – and it is very close – when there are no more options," Stromstad wrote. "If these conditions remain in place, no other hospital company will come forward to partner in Connecticut."

Attorney General George Jepsen, whose office was involved in overseeing how hospital's charitable assets were preserved in the deals, released a statement Thursday expressing disappointment over Tenet's decision and also raising concerns about the future of healthcare delivery in communities with financially struggling hospitals.

"It is unfortunate that Tenet has decided to withdraw its applications," Jepsen said. "Based on conversations my office has had subsequent to the release of our proposed final decision last week, I do not believe that the conditions proposed by my office – which focused on preserving and safeguarding the assets of the sale for healthcare purposes and not the day-to-day operation of the for-profit hospital going forward – were a contributing factor in Tenet's decision. This decision raises substantial and immediate questions about the future of healthcare delivery in some of our communities. Those questions deserve the closest attention of policymakers at the local and state levels."

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