🔒Amid Agwunobi’s return, UConn Health pursues statewide growth and acquisition strategy

About a year and a half after returning as CEO of UConn Health, Dr. Andrew Agwunobi is pushing a dramatic expansion of Connecticut’s public academic medical center through a series of proposed hospital acquisitions intended to achieve the economies of scale experts say the system needs. The strategy aims to address findings from a 2024 Cain Brothers report, which concluded UConn Health was among the smallest academic medical centers in the nation and struggles with high costs and limited scale. Agwunobi, who returned as CEO in May 2024 after previously leading UConn Health from 2014 to 2022, said the solution lies in building a multi-hospital network that can spread costs across a larger patient base while maintaining private-sector efficiency. UConn Health plans to acquire Waterbury Hospital, Bristol Hospital and Day Kimball Hospital in Putnam. In November, UConn Health bid $13 million to purchase Waterbury Hospital from bankrupt Prospect Medical Holdings, and subsequently outlined a $225 million, three-year turnaround plan that would return the facility to nonprofit status. Negotiations are ongoing with Bristol and Day Kimball. “Our focus, our primary focus, is on turning around those hospitals,” Agwunobi said. “But we believe that through this process, we will be able to achieve economies of scale by spreading some of our services.” At the same time, UConn Health has been engaged in tough negotiations with major commercial insurers, including Aetna, UnitedHealthcare and Cigna. Agwunobi said UConn Health receives some of the lowest commercial reimbursement rates of any hospital in Connecticut, despite being the state’s only public academic health system. Over the past several months, UConn Health negotiated with Aetna to address that disparity. But Aetna allowed its contract with UConn Health to expire Nov. 30, leaving many Aetna members without in-network access to UConn Health providers. Aetna has said UConn Health is demanding “significantly higher reimbursement rates,” and that its proposal would “substantially increase” healthcare costs for members. UConn Health’s contract with UnitedHealthcare ends Jan. 31, and its contract with Cigna expires April 30. The system said it remains open to continuing negotiations with all three carriers.

Financial picture

UConn Health’s finances have been a point of contention over the years as the health system continues to rely on state support. In fiscal 2024, UConn Health reported an operating loss of $433.6 million, according to its annual report. However, after accounting for $203.3 million in state funding, gift revenue and other nonoperating income, the system said it ended the year with an overall $12.6 million surplus. Chief Financial Officer Jeff Geoghegan recently reported an overall $15.2 million surplus in fiscal 2025, driven largely by stronger performance in the health system’s clinical operations, which include John Dempsey Hospital, UConn Medical Group and pharmacy programs. Reducing reliance on state appropriations has been a priority for Agwunobi since his return, and recent state budget decisions have accelerated that shift. UConn Health received $193.8 million in state support in fiscal 2025, and lawmakers approved $143.5 million for fiscal 2026 — a reduction of more than $50 million from the system’s request and well below its fiscal 2024 state allocation. The cut dropped state support from roughly 12% of UConn Health’s budget in fiscal 2025 to about 8% in fiscal 2026. To address the funding reduction, UConn Health in June launched an initiative called Project Thrive to identify $46.7 million in budget savings or additional revenue. It also hired Huron Consulting Group, which specializes in healthcare operational improvement and revenue cycle management, to support the effort. At UConn Health’s Dec. 1 Board of Directors meeting, Agwunobi said the system has realized $22.3 million toward that target, with annual savings estimated at $38.3 million. He said the system has boosted clinical revenue through higher patient volume, reduced travel and catering expenses, renegotiated vendor contracts, slowed hiring for noncritical positions, reduced overtime and achieved one-time savings on capital spending and workers’ compensation costs, among other efforts. Agwunobi said UConn Health chose to absorb the state funding reduction through clinical growth and operational changes rather than seek restored appropriations. State support for its clinical operations, he noted, has dropped to $10 million this year, down from $60 million last year. The rest of the state funding supports UConn Health’s academic and research enterprises. “In the next very short period of time, we expect to be able to eliminate that $10 million to the clinical enterprise,” Agwunobi said. “But that will require continuing on this path of public-private partnership growth.” Agwunobi said UConn Health has seen more than 30% clinical growth over the past three years. Net patient revenue has more than doubled, from roughly $450 million to more than $1 billion by the end of fiscal 2025. To support additional inpatient demand, John Dempsey Hospital received state approval earlier this year to add 23 licensed beds, which Agwunobi said will allow the hospital to serve more patients and reduce diversions to other facilities. “We’ve grown so fast because people want to access our care,” Agwunobi said, noting UConn Health has maintained an “A” grade from Leapfrog for hospital safety for 10 consecutive rating periods.

Private model

As UConn Health continues expanding its clinical capacity, it’s also pursuing a different ownership approach for future acquisitions. The three hospitals UConn Health is working to acquire would not become state entities. Instead, they would operate under a private community network through a newly formed nonprofit entity called UCHCFC Waterbury Health Corp., a subsidiary structure Agwunobi said is intended to maintain operational efficiency. “I think that’s because of the cost structure of a public entity, … it’s higher than the cost structure typically of a private entity,” he said. “As we looked at the due diligence on what it would take to turn around these hospitals, we felt like it was important to have the most efficient model of growth to do that.” The structure would also avoid one of UConn Health’s historic liabilities: elevated fringe benefit costs. Though hospital employees at Waterbury, Bristol and Day Kimball will not become state employees, all three hospitals will adopt the UConn Health brand, Agwunobi said.

$390M investment

To support the acquisition strategy, state lawmakers have backed significant capital spending. In November, they approved a $390 million bonding package to finance upgrades at the three hospitals over five years. The money would address deferred maintenance, update IT systems, fund equipment purchases and provide working capital. Waterbury Hospital, in particular, requires substantial infrastructure work following years of deteriorating conditions under Prospect Medical Holdings’ ownership. UConn Health would separately invest $31 million over five years beyond the state bonding, Agwunobi said. However, the expansion efforts haven’t been without critics. Some lawmakers have questioned the state’s financial exposure, raising concerns that stabilizing all three hospitals could require more funding than initially projected. The Yankee Institute, a conservative watchdog group, has called the proposal a “gamble,” warning that using state-backed bonding to finance hospital acquisitions and capital upgrades would obligate taxpayers to long-term debt. The group also questioned the wisdom of having a financially challenged organization take on other struggling hospitals.

Retention, not extraction

Beyond financing, UConn Health is also outlining how the hospitals would operate once acquired. Contrary to typical hospital acquisition strategies, Agwunobi emphasized that UConn Health’s primary goal is not to transfer patients from community hospitals to its flagship John Dempsey Hospital in Farmington. “Our first order of business is changing referral patterns so that Waterbury is able to retain more of its referrals, or more of its patients that are currently leaving the Waterbury area to other hospitals,” Agwunobi said. Only patients who need highly specialized treatment available at a major academic medical center would be referred to John Dempsey, he said. The approach seeks to keep patient revenue within the acquired hospitals rather than shift it elsewhere. “Obviously, what we’re trying to do at the end of the day is to, first and foremost, turn around the finances of Waterbury Hospital and then the other hospitals, making sure that they are financially feasible,” Agwunobi said. Agwunobi said the expansion will position UConn Health to compete more effectively with the state’s other large systems — Yale New Haven Health, Hartford HealthCare and Northwell Health — while offering what he characterized as a high-quality, lower-cost alternative. “I think overall, it’s a win for the state, it’s a win for UConn Health, and it’s a win for those communities,” Agwunobi said.