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March 13, 2023

CT healthcare regulator opens inquiry into VillageMD-Starling Physicians deal

COSTAR Starling Physicians’ New Britain campus on Kensington Avenue in New Britain.

In one of the more high-profile healthcare merger and acquisition deals in Connecticut in recent years, VillageMD announced earlier this month it acquired Rocky Hill-based Starling Physicians, which offers primary, specialty and urgent care services across 30 Greater Hartford locations. 

VillageMD, which is backed by pharmacy giant Walgreens Boots Alliance, employs 20,000 people nationwide at 680 practice locations in 26 markets. 

The deal, terms of which weren’t disclosed, came as a surprise to some, including Connecticut state healthcare regulators. 

The Office of Health Strategy, which oversees certain healthcare mergers, confirmed to the Hartford Business Journal it was not notified of the deal before VillageMD announced on March 3 it finalized its purchase of Starling Physicians. 

Steven W. Lazarus, certificate of need program supervisor within the Office of Health Strategy, said neither Starling nor VillageMD filed a merger application with OHS, which has purview over deals that involve ownership transfers of large group practices.

The Office of Health Strategy, Lazarus added, plans to inquire into the corporate structures of, and relationship between/among, Starling, VillageMD, and Walgreens to determine if a merger application — known as a certificate of need — and state approval were required.

Neither he nor OHS provided an opinion on whether the deal required a certificate of need.

Lazarus, citing state law, said a certificate of need is required when there is a transfer of ownership of a large group practice to any entity other than a physician, or group of two or more physicians, legally organized in a partnership, professional corporation or limited liability company formed to render professional services and not employed by or an affiliate of any hospital, medical foundation, insurance company or other similar entity.

In a statement, VillageMD said following the transaction, “Starling remains a physician owned medical practice and will continue to provide high quality medical care to the communities it currently serves. As a result, a CON was not required for the transaction.”

The company also said “physicians, providers and staff will not be negatively impacted as a result of this transaction.  Starling will continue to provide care to its patients and remain in-network with all insurance plans it currently participates with in the State of Connecticut. VillageMD looks forward to bringing its value-based care delivery model to continue to improve clinical outcomes, while lowering the cost of care, to its patients in Connecticut.”

When asked what remedies the Office of Health Strategy has if it determines the VillageMD-Starling deal needed state approval, Lazarus said OHS didn’t want to speculate. However, he did note that state law does allow for civil penalties for willful failure to seek a certificate of need when one is required.

The Starling deal represents VillageMD’s first Connecticut presence as well as the growing influence of its parent company, Walgreens Boots Alliance.

Last year, Walgreens completed its acquisition of Hartford-based CareCentrix, a healthcare technology company focused on post-acute and home care. 

The Starling acquisition also reflects the rapid consolidation of the healthcare industry and the growing influence of giant retailers and health insurers buying up physician groups. 

Last month, CVS Health, parent company of Hartford health insurer Aetna, announced it was going to buy national primary care physician group Oak Street Health for $10.6 billion.

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