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December 2, 2014

Regulators grant initial OK to Waterbury Hospital acquisition

State regulators have granted preliminary approval to allow for-profit hospital operator Tenet Healthcare to acquire Greater Waterbury Health Network.

The Attorney General’s office and the Office of Healthcare Access on Monday issued their respective decisions, both of which approved the proposed $45 million deal, with numerous conditions.

Tenet also wants to buy Eastern Connecticut Health Network, which contains Manchester Memorial and Rockville General hospitals and Bristol Hospital, as well as St. Mary's Hospital in Waterbury. Currently, Sharon Hospital is the only for-profit hospital in Connecticut.

The Tenet-Waterbury joint venture — the ownership of which would be split 80-20 among Tenet and the Waterbury Hospital Foundation — must maintain its service and clinical workforce staffing levels for at least five years, according to the decisions released this week.

As nonprofit hospitals are required to do, the new joint venture would also be required to continue to submit financial reports to OHCA for five years. An accounting of cost savings achieved is also mandated.

Tenet has also promised to spend $55 million on capital investments and ambulatory service over seven years. But the company has not yet detailed exactly where it would make those investments. OHCA is demanding that Tenet submit a seven-year strategic plan for those investments within 150 days of the deal’s closure.

The AG’s office said it will require Tenet to spend the $55 million exclusively on projects related to Waterbury Hospital, though the spending won’t be restricted to the hospital campus itself.

Tenet will not be allowed to sell the joint venture before the $55 million is spent, unless a buyer commits to continuing the capital program.

Vanguard Health Systems filed an application for the Waterbury acquisition in May 2013. The company was acquired by Tenet in Oct. 2013.

Final rulings on the proposed deal are expected Dec. 17.

GWHN has said it needs the capital infusion, purchasing power and other efficiencies Tenet can offer. GWHN lost money every year between 2005 and 2011, and a hired consultant concluded that the hospital needed $50 million to stay operational. 

The proposed deal would allow the network to pay down debt and retire its pension liability, which was more than $8 million as of fiscal year 2013.

Even if GWHN wins final approval for the Tenet acquisition, it projects operating losses until fiscal year 2019.

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