Chad Wable has a vision for health care in Waterbury.
In 10 years, the CEO of St. Mary’s Hospital sees a single hospital organization in the Brass City that is part of a regional and national multihospital system.
And he envisions a new, state-of-the art health care center that consolidates the outdated facilities held by St. Mary’s and neighboring competitor Waterbury Hospital.
Consolidation isn’t just a goal in Wable’s mind; it’s a necessity, he said.
“Scale is going to help us deal with the unfunded mandates and other issues around health care reform,” Wable explained in a recent interview.
Wable said he is in the process of leading St. Mary’s Hospital in the direction of his vision, but it will take some time and negotiation.
The hospital made headlines in March when it announced it was accepting a $200 million capital infusion from Texas-based LHP Hospital Group, a private hospital operator that will take a majority stake in the not-for-profit Catholic health care provider, turning it into a for-profit entity.
St. Mary’s, with 349 beds, plans to use LHP’s capital infusion to eliminate its debt, provide greater security to its pensioners and establish a sizable foundation that will focus on community health needs.
Regulators are taking a close look at the deal, which may not get final approval for more than a year because of the sensitivity of the transaction.
Even while the hospital waits for the regulatory nod, it isn’t standing idly by. St. Mary’s is in the process of acquiring full ownership of the Naugatuck Valley Surgical Center and plans to integrate the facility into the hospital.
St. Mary’s currently owns a majority stake in the surgical center, but it operates as a freestanding facility. A group of about two dozen doctors own a minority stake in the surgical center.
The deal is significant. Naugatuck Valley performs about 10,000 surgeries a year, which is more than the 8,700 surgeries performed annually at St. Mary’s Hospital.
Wable said the deal will allow the hospital to take more control of the facility, implementing hospital policy procedures and clinical protocols and hopefully creating more efficiencies to help boost their bottom line.
The addition should also allow the hospital to negotiate better contracts with health insurance companies, he said.
“We are focusing on how we can drive more revenues,” Wable said.
Although the number of surgeries in recent years has been stagnant as patients delayed procedures because of the poor economy, Wable said he sees surgical procedures as a long-term growth opportunity for the hospital.
“It will be a growth market especially with more Baby Boomers reaching age 65,” Wable said.
Other local health care providers have also recently been attracted to surgery centers. Hartford Healthcare, for example, completed a $28 million acquisition of Newington-based Constitution Eye Surgery Center in February, turning Hartford Hospital into a major player in Greater Hartford’s outpatient ambulatory eye surgery industry.
Before the deal, Hartford Hospital performed about 800 eye-related surgeries a year on its Hartford campus, compared to the 11,000 surgeries performed at the Constitution Eye Surgery Center.
Betty Bozzuto, executive director of the Naugatuck Valley Surgical Center, said the facility has 135 doctors on staff, seven operating rooms, and three treatment centers.
For Wable’s vision of a single hospital system in Waterbury to come to fruition, St. Mary’s and Waterbury hospitals would likely have to join forces or establish some type of affiliation.
But getting that done hasn’t been easy. Public health and other officials have been pushing for consolidation in that region, after years of financial problems that have plagued both institutions, which are less than two miles apart. That proximity has led to intense competition for market share, which has hampered each hospital’s finances.
The hospitals do collaborate on some cancer and cardiac services.
But the move by St. Mary’s to become a for-profit entity and partner with a private hospital operator that will provide a significant cash infusion, could spur that movement.
Wable has said he is open to having discussions with Waterbury Hospital, but he’s also interested in establishing relationships with health care providers beyond the borders of the Brass City. That’s where his vision of a regional and national multihospital system comes into to play.
If the deal with LHP Hospital Group is approved by regulators, the national part of that equation will be in place. The Texas-based firm already owns multiple hospitals in Texas and Idaho. Wable said he sees that company evolving into a chain of potentially 20 or more health care providers, which would create significant scale.
Within the health care industry, it is thought that health systems that get to over $3 billion in net revenue can distance themselves from the competition, in terms of financial performance and quality, as well as access to the bond market.
But one of the keys of being partnered with LHP, Wable said, is that St. Mary’s will no longer have to rely solely on the bond market to help finance capital expenditures, which is a good thing since investors increasingly have less of an appetite for hospital debt.
The agreement with LHP will provide St. Mary’s with at least $75 million for capital expenditures. A $12 million health information technology upgrade is underway.
“Bond markets have dried up for many nonprofit hospitals,” Wable said. “But we will have a well of money that is readily accessible. That’s a huge advantage.”
