🔒Office of Health Strategy, legislators and hospitals seek common ground on regulatory oversight reforms

Dr. Deidre Gifford, commissioner of the state Office of Health Strategy (OHS), keeps a square yellow note stuck to her computer monitor.

The handwritten message on it states that 46% of Connecticut residents report going without or delaying health care due to the cost, a statistic that motivates her to remain focused on the department’s mission.

“That’s not an acceptable set of circumstances,” Gifford said of the 46% figure. “So, I think our biggest challenge and opportunity is to continue to work on making health care affordable, accessible and high quality for the people of Connecticut.”

There are those who disagree with her about what the biggest challenge is for OHS and how it conducts business.

In the two years since she was appointed by Gov. Ned Lamont to lead OHS, the department’s highest-profile issue has been the fate of three hospitals owned by California-based Prospect Medical Holdings — Waterbury, Manchester Memorial and Rockville General in Vernon.

OHS and Gifford have faced criticism from legislators on both sides of the aisle, hospitals, and others for the amount of time it took to approve Prospect’s sale of its hospitals to Yale New Haven Health (YNHH), and then for failing to help pass legislation to reform its regulatory approval process — formally known as the certificate of need (CON) application process — in the 2024 legislative session.

Prospect subsequently filed for Chapter 11 bankruptcy on Jan. 11, while the sale of the three hospitals remains mired in dueling lawsuits.

Sen. Jeff Gordon (R-Woodstock), a member of the legislature’s Public Health Committee and a physician, says the CON process is broken. He cited YNHH’s bid to buy the Prospect hospitals, which took 16 months to be approved.

“That took way, way too long and that shouldn’t have happened,” he said. “If the Office of Health Strategy had gotten their game together and worked on this … in a more timely manner, perhaps the Yale approval would have gone through and things would have been already taken care of, and we wouldn’t be in this bankruptcy mess with Prospect.”

Hartford Business Journal recently sat down with Gifford and W. Boyd Jackson, director of legislation and regulation for OHS, to discuss certificate of need reform efforts, as well as some of the lessons learned about regulating the healthcare industry.

‘Nonfactual’ things

Gifford was appointed by Lamont after serving from 2019 to 2023 as commissioner of the state Department of Social Services, and as an adviser to the governor during the COVID-19 pandemic.

While Gifford, an obstetrician and gynecologist, has the demeanor of an experienced physician, she also has thick skin when it comes to her critics.

As the 2024 legislative session drew to a close last June, a Lamont-supported bill that would have reformed the certificate of need process died without being brought up for a vote in either chamber, largely due to disagreements between the Office of Health Strategy and hospitals.

That raised the level of vitriol aimed at Gifford and OHS.

House Minority Leader Vincent Candelora (R-North Branford), said of OHS, “There are a lot of problems with that agency,” calling it “an obstacle for appropriate reform in our healthcare industry.”

House Speaker Matt Ritter (D-Hartford) added that any future effort to reform the CON process would have to be “legislatively led, because there’s just a lack of trust right now” in OHS from the Connecticut Hospital Association and state hospitals.

Gifford deflects those comments as merely politics.

“There’s heated rhetoric all the time in the heat of the session,” she said. “People said what they said. Some of it was probably based on inaccurate information that they had been given by other parties. But our attitude is ‘head down, go to work, get back in the saddle and do the work on behalf of the people of Connecticut.’ So, that’s what we’ve been doing.”

Gifford said there’s been “a lot of non-factual or inferential kinds of things in the press” about the CON process that OHS has been trying to correct, including what types of deals and activities it has oversight of, “and how long it takes” to make a ruling.

Simply put, the certificate of need program requires certain healthcare providers to get state approval before making major changes in the healthcare landscape, such as establishing a new healthcare facility, ownership transfers/mergers, significant new investments in equipment or facilities, and a termination of services, among other things.

Gifford referred to an updated chart posted on the OHS website that shows the significant decline in the median length of time for a CON application to be processed.

According to OHS data, from 2021 through the end of 2024 there has been:

• A 33% reduction in the number of days between when a CON application is filed and is deemed complete;
• A 68% reduction in the number of days between applications being deemed complete and the hearing date; and
• A 64% reduction in the number of days between when an application was filed and when final action was taken.

Gifford said the improvement came after OHS examined “every aspect” of the CON process, “streamlined it where possible within existing law,” hired more staff, and targeted steps in the process that had “been prolonged in the past.”

Even with the 277-day reduction from the time of filing to final decision, the 157-day median time means half of the applications still take longer than that.

Expedited reviews

Gordon, the GOP senator, believes the state should require a set timeline for the CON process.

“For example, the bill that I submitted has some timelines of 180 days, because other states can do that within that time frame by law, but Connecticut, for some reason, didn’t seem to be able to do that,” he said.

Jackson, OHS’ legislation and regulation director, says the department doesn’t disagree, and has proposed a new bill this session to speed up the process.

He says last year’s bill wasn’t just “reform, it was a real overhaul.” And he believes that is what ultimately caused it to fail.

“I think it tried to give everyone something to be excited about, and in the process, gave everyone something to dislike,” Jackson said. “And ultimately, that was not a winning recipe.”

The agency’s proposed bill this year includes ways to expedite the process, particularly for certificate of need applications that involve the acquisition of technology, like MRI machines and CT scanners. OHS is proposing a streamlined process that would take just 30 days.

Jackson said there are other categories of service that could be done via an expedited review, such as applications to create new behavioral health services. He said some areas have a “glut” of such services, while others are underserved.

If an applicant can show they would provide an unmet need in an underserved area, “your application is going to be reviewed on an expedited timeline,” he said.

Other issues

There are other oversight issues critics want addressed besides the amount of time a CON application takes.

In 2018, Prospect Medical took out a $1.1 billion loan, using part of it to pay its executives and shareholders a $457 million dividend, CBS News reported.

To repay the loan, Prospect signed a sale-leaseback agreement, selling the land and buildings from its hospitals in Connecticut, California and Pennsylvania to Medical Properties Trust (MPT) for $1.4 billion, then leasing the property back from the trust. The deal was a disaster for the already financially strapped hospitals, which now had to pay rent.

Last month, Lamont proposed a bill to strengthen state oversight of major mergers, acquisitions and asset transfers in the healthcare sector. Gifford was at his side to support the idea.

“We have people saying, ‘How did the state allow that to occur?’” Gifford said. “The state did not have an opportunity to review that transaction. We weren’t notified.”

That’s because there is no state law mandating it. Lamont’s bill would change that, requiring entities doing those types of transactions to notify the Attorney General’s office.

Finding a way to ‘yes’

Leaders in both chambers have set their legislative priorities for the current session, but it remains unclear whether certificate of need reform will pass.

Rep. Cristin McCarthy Vahey (D-Fairfield), the House co-chair of the Public Health Committee, said the committee will pursue CON legislation this year, though her focus seemed more on the governor’s proposal than reforming the application process.

Paul Kidwell, the Connecticut Hospital Association’s senior vice president for policy, said there are other key healthcare issues beyond CON reform that interest his organization and members.

He said CHA has been “actively engaged” with OHS for the past four years to determine the best way to benchmark the growth of costs in the healthcare system.

He also noted that the historic, seven-year settlement reached between Lamont and state hospitals in 2019 to end a dispute around the hospital tax expires in June 2026.

“Right now is the time to start to talk about what this looks like, post-settlement,” Kidwell said.

Of course, CHA would like to see reforms of the CON process as well, he said.

“From the CHA side, we’ve shown over the years that we want to find a way to ‘yes,’” Kidwell said. “… Those are difficult conversations, but I think there’s certainly a willingness to find common ground.”