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June 19, 2017 Editorial

Time to consider UConn Health merger

Like perennials blooming in the spring and leaves changing color in October, UConn Health held to its annual time-honored tradition last week of reporting a deficit.

UConn Health officials are projecting a nearly $60 million budget shortfall for the fiscal year that begins July 1, one of the worst deficits the institution has faced in a while. The worsening fiscal outlook comes despite state taxpayers having invested hundreds of millions of dollars in recent years to overhaul UConn Health's campus — upgrades that were supposedly going to make the state's only public hospital system more financially viable.

This isn't the first time UConn Health, which includes the state's medical and dental schools, has been unable to balance its budget. It's often in the red and needs taxpayer support to make ends meet. But with Connecticut once again facing its own fiscal crisis, it's time to re-think our funding strategy. And the best bet may be to put up a for sale sign and force the hospital into a merger or some other type of meaningful money-saving affiliation.

Ideally, UConn Health could use a partner that would be willing to cover the increasing costs of its unfunded retiree health and pension benefits, a major deficit driver.

According to the CT Mirror, UConn Health's expenses are on pace to increase $39 million next year, of which $27 million can be attributed to increased retiree benefits.

Projected state budget cuts and rolling over a $20 million deficit from the current fiscal year are other deficit contributors.

Rising pension costs have been a headache for many Connecticut hospitals in recent years. UConn's situation is exacerbated by the fact that state lawmakers for years failed to save money for future retirees, creating a huge unfunded liability now coming home to roost (UConn Health employees work for the state). Many recent hospital mergers that have occurred in Connecticut included the acquirer willing to cover the acquiree's debt, pension and other liabilities.

We are cognizant that a merger would be complicated. UConn Health attempted to join Hartford Hospital nearly a decade ago but the deal fell through.

UConn is a research hospital, which by its very nature makes it more expensive to run than a regular acute-care medical provider. We wouldn't want to derail its future role in making discoveries that could cure deadly diseases or improve the health of patients, but the status quo is no longer financially sustainable.

Any merger would require consent from the state legislature making it a political football. A core concern, particularly among Democrats, would likely be that UConn Health workers are state employees and would be threatened with reduced benefits and/or wages if they were kicked off the government's payroll. That, however, is the economic reality of the real world and any merger should include the transfer of ownership of UConn Health workers.

That was a key issue during UConn's merger talks with Hartford Hospital back in 2008 and 2009. That deal proposed to maintain Health Center workers' status as state employees, and required the state to pay the difference between their fringe benefits costs and those of other hospital employees. That wouldn't be an acceptable outcome this time around, although any efforts to deunionize workers would likely set off a legal fight.

That deal was also complicated by the fact that UConn Health needed millions of dollars in upgrades at the time that lawmakers were unwilling to fund. Those investments ($255 million to be exact), however, have now been made and UConn is sitting pretty with a new patient tower and outpatient center, among other upgrades.

The big question is how much debt would a suitor be willing to absorb?

Hospital mergers have become the norm in Connecticut over the last decade and UConn Health could attract interested buyers. Hartford Hospital's parent company — Hartford HealthCare — would probably come back to the bargaining table, although there would be some anti-trust concerns there.

Trinity Health - New England is now a formidable player in the market looking to expand its footprint. It owns St. Francis Hospital and Medical Center and St. Mary's Hospital in Waterbury, among others. Yale New Haven Health System too has been looking to grow its Greater Hartford presence. Let's see if we can make a deal and bring some fiscal stability to UConn Health, and in turn, the state of Connecticut.

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