🔒UConn Health’s expansion bid could reshape CT’s medical landscape, shrink number of independent care providers

Connecticut’s remaining independent hospitals are dwindling — and the list could soon get shorter. UConn Health, which operates John Dempsey Hospital in Farmington, is exploring potential affiliations with Bristol and Day Kimball hospitals — two of the half-dozen remaining independents left in Connecticut — and a major investment in Waterbury Hospital, which has been owned by California-based Prospect Medical Holdings, the maligned private-equity firm now in Chapter 11 bankruptcy. The moves would further consolidate the state’s healthcare market while testing the limits of public involvement in hospital ownership. While state and UConn officials believe expanding UConn Health is the answer to its financial woes, other healthcare industry experts aren’t as certain. They suggest that while the plan has its merits, it won’t resolve some key issues faced not just by UConn Health, but by all hospitals in the state, particularly those not part of larger health systems.

A question of scale

The idea of UConn Health affiliating with or investing in other hospitals stems from a 2024 state-commissioned report by healthcare investment firm Cain Brothers, which identified the state-backed hospital system’s limited “operating scale” as a major factor behind its long-term financial struggles. The report said UConn Health lacks the market leverage of larger competitors, forcing it to spread fixed costs for billing, IT and administration over a much smaller base. Cain Brothers also cited high employee-benefit costs as the “largest reason” for the health system’s lack of profitability. UConn Health operates only one hospital — John Dempsey, with about 234 beds — but also includes medical and dental schools, a faculty physician group, and various research facilities and programs. The Cain Brothers report found that the system generates only about 20% of the revenue of comparable public university health systems, receives roughly 13% of its funding from the state, and recorded average annual cash-flow losses of $140 million between 2020 and 2023, though performance improved in 2024. Cain Brothers outlined several potential strategies to strengthen UConn Health’s finances, including leasing or monetizing hospital space, consolidating back-office operations, or pursuing a merger or broader partnership with another health system. Steps have already been taken to move the process forward. The boards of both UConn and UConn Health this month approved submitting a bid to purchase Waterbury Hospital. How that or any other UConn Health deal would be structured remains unclear. The cost of any acquisition or affiliation also has not been finalized, though published reports estimate a purchase of Waterbury Hospital alone could exceed $400 million over the coming years. Gov. Ned Lamont said discussions about possible partnerships remain in the early stages but acknowledged the need to grow UConn Health’s scale. “We continue to work collaboratively with all stakeholders to position the institution for greater financial independence over the long term, strengthen their clinical operations, including finding ways to enhance services, and provide more opportunities for hands-on learning for students and for research for faculty,” Lamont said.

Independents weigh in

Vincent Capece Jr. and Patrick Charmel know a few things about independent hospitals — they’ve each operated one for decades. Capece is CEO of Middlesex Health in Middletown. He’s worked for the organization for nearly 30 years, including the past 15 as CEO. Charmel has been CEO of Griffin Health in Derby for the past 27 years and has spent nearly four decades with the organization. Both say UConn Health affiliating with or investing in other hospitals would address only some of its financial woes. Charmel said he met with UConn Health officials two years ago to discuss strengthening the organization’s financial stability. There was agreement that UConn Health needed to build a stronger patient referral base to generate more business. “It’s pretty rare for hospitals in that region to be referring to UConn versus Hartford or St. Francis or even down into New Haven,” he said. “If they are going to be able to sustain the organization and wean themselves from the state subsidy, they are going to have to build that referral base.” Gaining referrals from Bristol Hospital makes sense, he said, because it’s relatively close to Farmington. Day Kimball, by contrast, is more than an hour away in the eastern part of the state. Expanding also would give UConn Health greater leverage to negotiate commercial insurance rates, Charmel said, noting that it is reimbursed at levels similar to smaller community hospitals that don’t offer as many services or specialties. In fact, John Dempsey, Bristol, Day Kimball and Waterbury hospitals are four of the eight lowest-reimbursed facilities in Connecticut, according to a 2024 RAND Corp. report, suggesting all could benefit from greater scale. UConn Health has recently sought to negotiate better rates with insurers. It ended a dispute over a new multiyear contract with ConnectiCare in June, two months after the previous contract had expired. It’s currently seeking higher rates in a new contract with Aetna; the existing agreement is set to expire at midnight Nov. 30. Capece said government reimbursement rates also present challenges for hospitals. “The reimbursement that hospitals in general get from government programs has never been sufficient to cover the cost of the services provided to Medicare and Medicaid patients.” Both he and Charmel said Medicaid pays just over 60% of the cost of care, while Medicare pays more than 80%. They also raised concerns about the state’s potential investment in any deal for the hospitals. “I hope it’s not just the state pouring cash into those hospitals and kind of funding their losses,” Capece said. “That would not be good for everyone else, because that would mean there’s less resources to assist the industry as a whole.”

Value-based care

In an effort to help manage its costs, UConn Health last November joined a group called the Value Care Alliance. The alliance was founded in 2013 by Griffin Health and Middlesex Health “because we wanted to see if we could get the benefit of ‘systemness’ without giving up our independence,” Charmel said. The alliance allows members not only to leverage purchasing power, but also promote value-based care and negotiate reimbursement rates with insurers based on that model. Value-based care seeks to move away from the traditional fee-for-service model, and instead pay providers based on the health outcomes of their patients and quality of care. “UConn is a value player,” Charmel said. “Their rates are really low, and they’re a capable organization. So the question is, the new system that they’re developing, is that going to be the model of value-based care delivery?” He said he’s not sure, because UConn and the other three hospitals all have “overhead that needs to be covered. So, they’ll have one foot in each boat.” Both Charmel and Capece said their independent hospitals have had conversations about joining larger health systems over the years, but have rejected them. “We’re independent because we believe that’s the best way to serve the healthcare needs of the communities we serve,” Capece said.

No good alternative

But maintaining that independence is getting harder, according to Angela Mattie, a professor in the schools of business and medicine at Quinnipiac University. She has also served on hospital boards and has 20 years of experience in health care, including with insurer Anthem. Mattie said UConn Health affiliating with or investing in other hospitals would be a positive if it helps save community players like Day Kimball. “The reality of the marketplace is that the small community hospitals are having difficulty surviving,” Mattie said. “And you can see Day Kimball … has debt and back taxes of $40 million, and they continue to have operating losses.” The public does need answers to some questions about the proposed deals, Mattie said. “Is the state best equipped to lead and manage a healthcare system?” she asked. “And what are the accountability measures that we’re going to require to assure that, whomever leads this, is providing the best value and care, the lowest cost and the highest quality and safety possible?”

Those are all questions Sen. Jeff Gordon (R-Woodstock) hopes will be answered before any investment is finalized. While he has reservations about any potential UConn Health deals, Gordon said he believes the state has little choice, especially if the alternative is a private equity firm acquiring the hospitals, something which he said resulted in a disaster for Prospect Medical’s hospitals. “I think this could be a positive in the long run, and could save the state money in the long run, if it makes wise investments,” said Gordon, who is a member of both the legislature’s Appropriations and Public Health committees.