The Connecticut Office of Strategy has approved Hartford (Conn.) HealthCare’s acquisition of two hospitals owned by Los Angeles-based for-profit Prospect Medical Holdings, with several conditions.
Hartford HealthCare in October secured the winning bid to acquire Manchester Memorial Hospital and Rockville General Hospital in Vernon, Conn., for $86.1 million. No other buyers submitted bids before the Oct. 17 deadline, canceling a bankruptcy auction that had been scheduled for Oct. 22.
The Office of Strategy on Dec. 10 outlined several conditions on the transfer of ownership that are designed to address potential areas of concern the department identified with the transaction. Conditions require Hartford HealthCare to:
- Provide an assessment of the condition of the hospitals, as well as a strategic integration plan, within nine months.
- Engage the community in both strategic planning and community health needs assessment processes within nine months.
- Maintain services offered under the license for the later of three years from the closing of the transaction or 90 days after the publication of the second community health needs assessment, including current labor and delivery and intensive care services.
- Maintain service levels unless the Office of Strategy grants prior approval for reductions.
- Notify the Office of Strategy within 30 days of any reallocation of inpatient beds or relocation of outpatient services.
Hartford Healthcare must also preserve a 24/7 emergency department in Vernon for at least three years and maintain the complement of inpatient behavioral health services at or within 30 miles of the Rockville campus.
The Office of Strategy also outlined conditions it said are designed to slow growth. Those include adopting all existing reimbursement rates with insurers, and negotiating rates separately from the other hospitals in the Hartford HealthCare system. The system is also required to constrain growth in commercial reimbursements and tie negotiated rates to the Cost Growth Benchmark and the Consumer Price Index for Medical Care in New England.
The system must also maintain existing outpatient, non-hospital physician offices, or any offices resulting from future acquisitions, without converting to hospital-based status for billing or reimbursement purposes for three years.
The Connecticut Attorney General’s Office and Department of Public Health also have regulatory oversight of components of the transaction and could impose additional conditions.
Hartford HealthCare’s planned acquisition of the hospitals follows a previous, failed deal involving Yale New Haven Health, which sued Prospect last year to exit a $435 million agreement to acquire the same two hospitals along with Waterbury Hospital. Yale New Haven accused Prospect of financial mismanagement, including missed rent and tax payments and neglecting facility upkeep. Prospect denied the allegations and countersued, alleging breach of contract. The parties have since settled competing lawsuits.
Prospect filed for bankruptcy in January.
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