Connecticut hospitals have been racing to build and buy surgery centers across the state to boost market share and bring care closer to patients.
Now the competition is about to get stiffer.
The parent company of St. Francis Hospital and Medical Center has signed a deal with Alabama-based Surgical Care Affiliates to co-develop and manage ambulatory surgery centers in Greater Hartford.
The goal of the new agreement, officials say, is to combine the resources of two organizations with varying strengths and expertise to grow their surgery care footprint.
And they plan to do that by acquiring surgery centers in Greater Hartford or developing new centers from the ground-up.
That means hospitals vying to expand their reach in the region will have increased competition, as St. Francis looks to increase the size and scope of its network.
“Hartford is a marketplace where we are looking to grow,” said Jaime Tanner, operations director at Surgical Care Affiliates. “With the potential direction health care is moving, it makes sense to align ourselves with health care systems to manage patient populations.”
Surgical Care Affiliates is not an entirely new player in the market. The company, which operates 145 surgical facilities across the country, already owns, with physician partners, four surgery centers in the state — Hartford Surgical Center, Connecticut Surgery Center in Hartford, Surgery Center of Fairfield County and Danbury Surgical Center.
The company’s portfolio includes ambulatory surgery centers, surgical hospitals, and hospital surgery departments developed in partnership with about 2,000 physicians and in affiliation with 30 not-for-profit health systems across the country.
Tanner said Surgical Care Affiliates has co-development agreements with hospitals only in regions where they believe there is potential for significant growth. That includes Greater Hartford, which has seen increased activity in recent years.
Consolidation in the health care industry has been fast and furious in Connecticut and across the country as providers look to build scale, gain financial support, and establish a continuum of care that better manages patient populations.
Health care reform is pushing providers to lower health care costs, in part, by more effectively coordinating the care of patients. Lax reimbursements from government payers is also making it harder for independent practices to do business on their own.
To make the system more effective, hospitals have been buying up smaller medical practices to better align their interests. It also helps hospitals drive more patients to their facilities.
Connecticut hospitals have been particularly active opening or acquiring new ambulatory or surgical care centers.
Hartford Hospital, St. Francis’ cross-town rival, has made several significant purchases in recent years. That includes the acquisition in late 2011 of the Connecticut Surgical Group, a 200-employee practice with 12 office locations in Greater Hartford.
Also last year, Hartford Healthcare spent $28 million to acquire Newington-based Constitution Eye Surgery Center, which has turned Hartford Healthcare into a major player in Greater Hartford’s outpatient ambulatory eye surgery industry.
St. Francis Hospital currently has three surgery centers within its footprint, said Chris Dadlez, the hospital’s CEO.
Dadlez wouldn’t say how many more surgery centers the hospital wants to add, but St. Francis already has a list of centers it is looking to target with its new co-developer.
Under the agreement, St. Francis and Surgical Care Affiliates will create a new joint venture limited liability company to work with local physicians to invest in subsidiary organizations that may own and operate one or more ambulatory surgery centers.
The partnership, Dadlez said, makes sense because St. Francis has deep experience in managing large hospital systems, while Surgical Care Affiliates has more specific expertise in the surgery center space.
Dr. Art DeTore, St. Francis’ senior vice president and chief physician executive, said any surgery centers St. Francis purchases would likely operate independently, but be aligned through a set of common quality and efficiency processes.
Dadlez said St. Francis has an appetite to build up its network in order to create a continuum of care that focuses on population management. That means providing access points to patients at all levels of care from preventative treatment to acute care.
It also means getting patients to the proper, most cost effective location for care. Surgery centers are considered lower cost alternatives to hospitals, which is why they have been gaining in popularity.
“It’s about providing care at the right place and the right time and in the lowest cost setting,” Dadlez said.
As the consolidation trend continues regulators are also starting to take a closer look at deals. In California, for example, Attorney General Kamala Harris recently launched an investigation into whether growing consolidation among hospitals and doctor groups in that state is increasing medical care prices.
In Connecticut, the attorney general’s office is not engaged in an independent probe, but it does review any hospital merger for issues related to access to care, quality of care and pricing.
In June, for example, Attorney General George Jepsen completed an antitrust investigation of the proposed merger of Yale-New Haven Hospital and The Hospital of St. Raphael. Jepsen chose not to block the deal.
Jepsen’s office is reviewing LHP Hospital Group’s proposed acquisition of St. Mary’s Hospital and Waterbury Hospital, and Lawrence & Memorial Hospital’s acquisition of Westerly Hospital, said Susan Kinsman, a spokesperson for the Office of the Attorney General.
“The office invariably includes in any health system/hospital merger investigation a review of the extent to which the entities own or control physician practices, and whether a merger would enable the merged entity to raise and sustain higher prices for health care, which will be passed on to consumers through higher premiums and co-pays,” Kinsman said.