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March 20, 2023 Focus: Health care

Hartford HealthCare at forefront of outpatient surgical center expansion trend

PHOTO | COSTAR Hartford HealthCare is taking a majority ownership stake in the Litchfield Hills Surgery Center in Torrington.
By Andrew Larson

As Hartford HealthCare seeks to expand its footprint in Fairfield, Windham and Litchfield counties, it’s facing some pushback from nearby competitors.

The second-largest healthcare system in the state — which operates seven acute-care hospitals — has been working to establish an outpatient surgical center in Plainfield, while seeking approvals to acquire more than 51% stakes in existing surgical centers in Torrington and Wilton.

HHC is also looking to take over governance control of a Trumbull-based surgical center.

All four deals have been working their way through the state’s regulatory approval process for years. One has faced a court challenge and the majority have encountered some opposition from local surgical centers raising competitiveness concerns.

Hartford HealthCare’s growth in Fairfield and Litchfield counties follows its 2019 purchase of Bridgeport’s St. Vincent’s Medical Center.

It also received approval in December 2017 to affiliate with Charlotte Hungerford Hospital, which came with a promise to invest up to $73 million in the Torrington-based care provider.

Hartford HealthCare, like many health systems, has been shifting non-emergency care out of its emergency departments, to lower-cost urgent care and ambulatory surgery centers, as well as home-based community services, said Rebecca Stewart, HHC’s vice president of content strategy.

That’s part of the strategy behind the ongoing surgical center deals.

“This helps lower healthcare costs for all, while improving access to care,” Stewart said.

HHC has reduced non-emergent emergency department visits by 10% since 2016, she said. Also, nearly 40% of surgeries are now performed outside of its hospitals.

Ambulatory surgical centers engender high-quality, convenient care at the most affordable cost, Stewart said.

The pandemic and growth in minimally invasive surgeries have accelerated hospitals’ interest in acquiring surgical centers, according to a report by research firm ResearchandMarkets.com, which projects the ambulatory surgery centers market to grow 7.5% through 2029.

Plainfield proposal

In Plainfield, HHC is proposing to open an outpatient surgical facility in a 13,000-square-foot space at 584 Norwich Road that it completed in 2018, adjacent to the Hartford HealthCare Plainfield Outpatient Center.

HHC said the facility will benefit the region because it will bring “enhancements in quality, patient management and reporting capabilities, care coordination, and access for patients,” according to its program application. In addition, HHC said it will invest in technology to provide quality, cost-effective care.

HHC will be the majority owner of the facility, with 49% of the interests held by physician investors and Avon-based Constitution Surgery Alliance, which develops surgical centers. It will have two operating rooms and focus on orthopedics, pain management, urology and gastroenterology.

HHC plans a $5.5 million capital expenditure.

The healthcare system’s growth in Windham County has been opposed by Day Kimball Hospital, located in the small town of Putnam with a population of just over 7,000.

Day Kimball, an independent hospital, declined to comment for this story due to pending litigation and regulatory proceedings.

HHC’s Plainfield Outpatient Center was originally approved in January 2021 via a settlement agreement with the Office of Health Strategy — the state’s healthcare industry regulator — but was tripped up after Day Kimball filed a lawsuit a few months later, claiming OHS did not follow statutory requirements and because the decision was inconsistent with the evidence presented.

During a March 2020 public hearing, Day Kimball, which was granted intervenor status, pointed out that the proposed surgical center overlapped with its service area.

Day Kimball said OHS failed to give proper weight to evidence it presented showing the “adverse and indeed devastating impact on Day Kimball Hospital and the economy” if HHC recruits its orthopedic surgeons.

It also claimed there would be a negative impact on healthcare delivery in northeastern Connecticut, including on two outpatient facilities in Norwich, one of which Day Kimball said has “documented excess capacity.”

Day Kimball estimates the proposed center would cause a 30% to 40% reduction in its outpatient surgery and endoscopy cases, resulting in a loss of $2.5 million to $3.5 million annually.

Hartford HealthCare filed a motion to dismiss the case, but it was denied. The case has been remanded to OHS with the instruction to add additional evidence to the record.

OHS has scheduled a new public hearing at 9:30 a.m. April 12.

Partial acquisitions

HHC’s expansion plans also involve a joint venture between its nonprofit HHC Surgery Center Holdings arm, and Litchfield Hills Surgery Center at 245 Alvord Park Road, in Torrington.

Litchfield Hills Surgery Center is currently part of Litchfield Hills Orthopedic Associates, an independently owned physician group.

HHC Surgery Center is a holding company, affiliated with Hartford HealthCare, created for the purpose of owning interests in outpatient surgical joint ventures such as the one proposed.

HHC is seeking approval to purchase a 51% stake in Litchfield Hills. The application, submitted in May 2021, is pending and OHS is drafting a decision. No members of the public testified for or against the proposal.

A $2.75 million capital investment will help fund renovations, along with equipment and technology upgrades, HHC said in its project application.

The physicians are mainly orthopedists, pain management specialists and podiatrists.

In addition, under the name HHC Surgery Center Holdings LLC, Hartford HealthCare has filed an application to acquire 51% of Southwest Connecticut Surgery Center in Wilton. The application was submitted in November 2020 and OHS is in the process of drafting a decision.

According to the application, HHC in October 2020 began a $1.6-million renovation to Southwest’s facility — formerly home to Plastic Surgery of Southern CT.

The acquisition will allow HHC to provide “enhancements in quality, patient management and reporting capabilities, care coordination, and access for patients,” the application said.

Wilton Surgery Center, an outpatient surgery center at 195 Danbury Road just more than a mile away, opposed the acquisition.

Wilton Surgery Center, which focuses on pain management procedures, said that about two-thirds of the services provided by HHC at the nearby facility would be the same as the ones it provides.

Rather than lower costs, Wilton Surgery said it believed HHC’s majority ownership would raise rates for insurers and patients. However, HHC challenged that contention and had some of its competitor’s comments stricken from the record.

David Shipley, the administrator of Norwalk Surgical Center, owned by Norwalk Hospital, also opposed the application in written comments and during a public hearing on Aug. 4, 2022, claiming the proposal would increase costs.

The deal is still awaiting regulatory approval.

Also in Fairfield County, Hartford HealthCare is proposing to take over governance control of Trumbull’s Surgical Center of Fairfield County. The proposal follows an equity buy-in by HHC Surgery to the majority owner, SCA-Connecticut Partners LLC, which currently owns 51% of the center.

The remaining 49% is owned by individual physician investors.

On June 1, 2021, HHC acquired 70.6% of the membership interests in SCA-Connecticut Partners, giving it a 36% indirect ownership interest in the overall center.

SunSurgery LLC, a subsidiary of insurance and healthcare giant UnitedHealth Group, owns 29.41% of SCA-Connecticut Partners LLC.

The governance change would give HHC the ability to appoint three of five Surgical Center board managers.

The application was filed in September 2021 and remains pending. A public hearing was held on Sept. 21, 2022.

A physician associated with Doctor & Associates, which provides general medical and surgical eye care in Nowalk, Wilton and Westport, submitted testimony urging OHS to deny the application.

Cost impacts

Hartford HealthCare’s pending surgical center deals come amid a broader debate about industry consolidation and its impact on care costs, quality and access.

A recently published study by Harvard Medical School and the National Bureau of Economic Research concluded that consolidated health systems offer patients “marginally better care at significantly higher costs.”

According to the study, patients whose primary care physicians are part of health systems, on average, receive slightly better experiences and care, compared with patients whose primary care physicians are part of independent practices.

However, physician services delivered within health systems cost between 12% and 26% more, compared with independent practices. System-based hospital services cost 31% more, on average, compared with care delivered by independent hospitals.

But surgery centers are considered lower-cost options than having procedures done at a regular hospital.

That’s one of the key reasons hospital systems, which face increasing pressure to lower costs, have been acquiring them.

Arnold Menchel, chair of Hartford law firm Halloran Sage’s healthcare practice, said advances in technology and technique allow many procedures to be done safely in ambulatory surgical centers, which in turn lowers the cost.

Arnold Menchel

“An example would be hip replacement surgery,” Menchel said. “Years ago, if it was attempted at all, hip replacement was definitely a hospital inpatient procedure with a lengthy inpatient stay. Now, that procedure is safely being done routinely on an outpatient basis in ambulatory surgical centers, with no overnight stay.”

Not only is the cost lower, the experience is better for providers and patients, who typically go home on the same day, he said.

“There used to be a clear line between hospitals, physicians as well as other types of providers,” Menchel said. “Now, health systems are constantly looking to provide a continuum of care and the lines are being blurred.”

Jeff Hogan, president of Farmington-based Upside Health Advisors, said surgical centers also tend to be predictable generators of revenue, which make them valuable for health systems like Hartford HealthCare to own.

Jeff Hogan

Just as hospitals are adding surgical centers to their portfolios, they’re also gobbling up medical practices and urgent care facilities for some of the same reasons.

National players are expanding as well, with some entering the Connecticut market, adding to the competition, Hogan noted.

For example, VillageMD, a company backed by pharmacy giant Walgreens, recently acquired one of Connecticut’s largest physician groups, Rocky Hill-based Starling Physicians.

“It’s not only a trend in this marketplace, but it’s a trend nationally as well,” Hogan said.

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