🔒Hartford HealthCare proposes $311.8M investment in Manchester, Rockville hospitals

Hartford HealthCare filed an application this week with state regulators seeking emergency approval to acquire Manchester Memorial and Rockville General hospitals. The emergency certificate of need application, filed with the state Office of Health Strategy on Tuesday, also states that Hartford HealthCare plans to invest $311.8 million in the two hospitals. The total includes paying $86.1 million to acquire the hospitals from Prospect Medical Holdings. Friday afternoon, OHS sent a letter to Barbara A. Durdy,  senior director of Policy & Regulatory Affairs for HHC, informing her that the agency has deemed HHC's application complete. It adds that the 60-day period to review the application and issue a decision began Friday and will expire on Dec. 30. The application was filed four days after a federal bankruptcy court judge gave final approval for Hartford HealthCare to acquire the hospitals. Prospect filed a Chapter 11 petition in federal bankruptcy court in Dallas in January. Its three Connecticut hospitals — Manchester Memorial, Rockville General in Vernon and Waterbury Hospital — were subsequently scheduled to be sold at auction on Oct. 22. Hartford HealthCare, the state’s second-largest health system, was selected in September as the “stalking horse bidder” for Manchester Memorial and Rockville General hospitals after submitting its $86.1 million bid via a newly formed subsidiary, ECHN Holdings Inc. That month, HHC also entered into an asset purchase agreement with Prospect ECHN Inc., the entity that holds the Manchester and Vernon hospitals. HHC’s bid was the only one received for the two hospitals by the court’s Oct. 16 deadline. Since no other bids were received, Prospect chose to cancel the Oct. 22 auction and instead designated ECHN Holdings Inc. as the successful bidder. With the judge approving Hartford HealthCare’s bid, the health system is seeking state approval to gain ownership of the two hospitals. HHC officials declined to answer any questions about the application, stating through a spokesperson that it is “unable to comment at this time due to pending regulatory review.” The application is the first filed under a new state law that took effect on March 3. The act created the E-CON process for an expedited certificate of need review “for a hospital subject to transfer of ownership that has filed for bankruptcy protection.” The E-CON application notes that on or about Oct. 1, Prospect ECHN consolidated Rockville General Hospital Inc. under Prospect MMH hospital’s license. “Upon approval of this application, HHC MMH will maintain two main hospital campuses,” one in Rockville and one in Manchester, the application states. In addition to acquiring the hospitals, HHC also seeks regulatory approval to acquire “certain assets of Prospect MMH, including imaging equipment owned by Prospect MMH, Prospect ECHN’s medical foundation, and ownership interests in three joint ventures held by Prospect ECHN and its affiliates,” the application states. The three joint ventures cited are:

• NRRON LLC, which provides radiation oncology services for cancer patients. Prospect MMH and Rockville General Hospital each own a 25% interest.
• Evergreen Endoscopy Center LLC, an outpatient surgical center for gastrointestinal care. Prospect ECHN holds a 50% interest, and
• Tolland Imaging Center LLC. HHC MMH is seeking to acquire Prospect ECHN’s equity interest in the venture.

In addition, the asset purchase agreement includes Hartford HealthCare Medical Group acquiring the assets of Prospect CT Medical Foundation Inc. The application also notes that HHC will acquire the land on which the two hospitals are located from Medical Properties Trust, a real estate investment trust. Prospect sold the land to Medical Properties Trust after acquiring the hospitals, which then required the hospitals to pay rent. HHC also states that once it acquires the two hospitals it will conduct a community health needs assessment for each, and that it “anticipates making service enhancements in the areas of rehabilitative medicine, orthopedics, general surgery and cardiology to name a few.” The application states that it is “well known that Prospect MMH is a distressed hospital (as was Rockville General Hospital prior to consolidation under Prospect MMH’s license).” It adds that, “Given the underperforming status of Prospect ECHN, HHC is uniquely positioned to swiftly and seamlessly support and perform a successful turnaround.” HHC notes that it has “acquired several struggling hospitals during the past two decades,” including Charlotte Hungerford Hospital in Torrington in 2018 and St. Vincent’s Medical Center in Bridgeport in 2019. HHC invested approximately $72 million in Charlotte Hungerford and about $200 million in St. Vincent’s, and has since improved each hospital's Leap Frog Group safety grades to an A. “HHC would make comparable investments in the HHC MMH and would expect similar improvements in quality,” the application states. According to a chart included with the application, HHC projects investing a total of $2176.5 million in the two hospitals in the first two years following their acquisition. That includes the $86.1 million purchase price and a capital investment of $190.4 million. It projects a capital investment of $35.3 million in the third year following acquisition, for a total three-year investment of $311.8 million.