St. Mary's Agrees To Join St. Francis Care Under Trinity Health

September 22, 2015 - St. Mary's Health System has agreed to become part of Trinity Health, the same national Catholic health care organization that is absorbing St. Francis Care, the hospitals announced Friday. Trinity Health, which operates 86 hospitals in 21 states, is not paying cash for St. Mary's but promises to spend $100 million over five years in Waterbury. The affiliation, if approved, would conclude a long effort by St. Mary's to join a larger partner, after previous proposals failed.

Under the deal, which requires approval from regulators and the Catholic Church, St. Mary's will not be controlled by St. Francis; rather, both hospital systems will be part of Trinity Health New England, though that regional name is not yet official.

Christopher Dadlez, the St. Francis CEO who has led the hospital for 11 years, will become the head of Trinity Health New England, which will supervise St. Mary's, St. Francis, Mt. Sinai Rehabilitation Hospital, Sisters of Providence Health System and Mercy Medical Center in Springfield, as well as a variety of medical practices, and, if state regulators approve the merger, Johnson Memorial Medical Center in Stafford.

St. Francis' deal to join Trinity is expected to close Oct. 1, Dadlez said. Trinity promised to spend $275 million at St. Francis over five years. A new CEO for St. Francis Care will be announced in coming months.

While it's not settled yet how the capital infusion at St. Mary's would be spent, some of it may go to build outpatient facilities, some may be spent hiring doctors, and some may be spent supporting St. Mary's transition to an electronic medical-records system.

St. Mary's CEO Chad Wable, who will continue in that role, said the system's board of directors "has spent nearly 10 years over about six different iterations with for-profit partnerships," none of which were ever consummated. Wable has led the hospital for 13 years.

The agreement continues the rapid pace of consolidation among hospitals, as debates over cost, public subsidies and excess capacity continue. Separately on Friday, Gov. Dannel P. Malloy announced state spending cutbacks, including further cuts in Medicaid reimbursements.

The debate has been intense in Waterbury, which, according to some officials — including Malloy — might not need two full-service hospitals. St. Mary's is stronger financially than nearby Waterbury Hospital, which is seeking to merge with Prospect Medical Holdings, a California for-profit chain that also has a deal to acquire Manchester Memorial and Rockville General hospitals.

Dadlez and Wable said Waterbury patients will not be encouraged to travel to Hartford for specialty care in any areas, even as they talked about "trying to standardize and integrate care from the Waterbury market to Hartford market."

Dadlez and Wable declined to speculate whether jobs would be eliminated in Waterbury because the same functions could be handled by an employee in Hartford. Dadlez said it may be that some jobs will go away but that the people in those jobs will be able to move to other positions within the system.

Richard O'Connell, executive vice president of Trinity Health for the East Coast, said that eliminating redundant jobs "happens over time. We're not coming in with any expectation that we're going to reduce staff at all at the onset."

Wable said the stumbling block to the hospital's previous merger attempts was not St. Mary's Catholic identity, which restricts what reproductive medicine the system will provide, but rather that the state regulators rejected selling the nonprofit hospital to a commercial parent company. The most recent failed attempt, to sell St. Mary's to Tenet Healthcare, also had Tenet buying Waterbury Hospital.

But, Wable said, because St. Mary's has been able to reduce its operating costs significantly over the last several years, it attracted physicians and patients, and therefore didn't need as much financial backing as for-profit hospitals can offer.

So this year, as the board looked for a merger partner, it decided to look for "the most robust not-for-profit for the future," he said.

Wable said even though St. Mary's financial health has improved, its leadership believed operating as an independent hospital would not work as health care shifts to pay for results rather than paying for services.

He said St. Mary's could not have enough scale in its primary care network to do population health management the way it wanted to.

Dadlez said that Trinity intends to convince insurers that restricting their clients' networks to Trinity-owned facilities will save money for the insurer, because it will be a low-cost, high-quality system.

"To really get economies of scale, we need to aggregate our business with other players and have a scale to take any kind of redundancy and waste out of our system," he said.

The Mercy Community in West Hartford, which is owned by Trinity, would not be part of the health care unit.

Dadlez said bringing Johnson Memorial, St. Francis and St. Mary's into this national chain could just be the start.

"Because our intent is not to stay stagnant, we think there are other opportunities to grow in New England," he said, and those acquisitions don't have to be Catholic. He said he'll be looking for physician groups and post-acute care facilities.

"I firmly believe that we're different because we're doing this for the right reasons," Dadlez said. "The whole aspect of what we're trying to accomplish is mission driven. It's not about return on investment, it's not about empire-building, it's about creating a contemporary organization that's all about health and wellness."

Wable said St. Mary will submit a certificate of need in November to the state, which will begin its review.

Dadlez said state regulators have accepted Johnson Memorial's certificate of need submission, and intend to hold public hearings on that piece of the merger in the first week in October. Regulators generally take 90 days to evaluate a proposal after public hearings, he said.

By:  Mara Lee
Posted on Courant.com.

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