UConn Health files to acquire financially distressed Waterbury Hospital in $225M plan

UConn Health has filed an emergency certificate of need application (E-CON) with the state seeking approval to acquire Waterbury Hospital, outlining a $225 million turnaround plan that would convert the for-profit facility back to nonprofit status.

UConn Health has filed an emergency certificate of need application (E-CON) with the state seeking approval to acquire Waterbury Hospital, outlining a $225 million turnaround plan that would convert the for-profit facility back to nonprofit status.

The application, dated Dec. 4, also states that UConn Health will create a subsidiary to hold the real estate on which Waterbury Hospital and its affiliates stand and then lease the property to those entities.

The E-CON filing came less than a month after the state General Assembly approved legislation to allow Farmington-based UConn Health to acquire Waterbury Hospital from California-based Prospect Medical Holdings, which filed for federal bankruptcy protection in Texas in January.

UConn Health was the lone bidder in bankruptcy court for Waterbury Hospital. According to the E-CON application, the proposed deal includes a $13 million purchase price and more than $200 million in capital investment over three years aimed at stabilizing operations, upgrading facilities and expanding clinical services.

The new public act allows UConn Health, which includes John Dempsey Hospital and the university’s medical and dental schools, to purchase Waterbury Hospital, while opening the door to allowing it to also acquire two independent nonprofit hospitals, Bristol and Day Kimball.

Those acquisition efforts, however, aren’t as far along at the Waterbury Hospital deal.

The law allows UConn Health to create subsidiaries or joint ventures in order to purchase the hospitals, while authorizing $390 million in bonding to support capital improvements at the facilities the health network acquires. The debt will be added to the “UConn 2000” bonding package, the state’s financing program for capital projects at the University of Connecticut.

On Nov. 22, University of Connecticut Health Center Finance Corp. (UCHCFC) Waterbury Health Corp., a subsidiary created by UConn Health, was approved by the Texas bankruptcy court to acquire Waterbury Hospital.

In addition, Waterbury Hospital’s real estate, which is held by a real estate investment trust, also will be transferred to a UCHCFC subsidiary known as UCHCFC Robbins Street Corp., which will in turn lease the real estate to new Waterbury Hospital and its related affiliates.

In addition to acquiring Waterbury Hospital and its real estate, UConn Health also will acquire Prospect’s stake in six affiliate organizations, including Valley Imaging Partners, Access Rehab Centers, Greater Waterbury Imaging Center Limited Partnership, the Harold Leever Regional Cancer Center, Imaging Partners LLC and Naugatuck Valley Endoscopy Center.

UConn Health’s asset purchase agreement to acquire the hospital also includes the purchase of certain assets of the Alliance Medical Group, the application states.

Specifically, AMG affiliated “physicians and mid-levels” will be asked to join UCHCFC’s medical foundation, known as “The UCHCFC System Medical Foundation.

“Once the asset transfer is consummated, 126 Alliance Medical Group employed clinicians will be offered the opportunity to continue to serve the patients and communities they currently serve as employees of UCHCFC System Medical Foundation,” the application states.

The application adds that coordination of care and “the opportunity for accountable care will be enhanced for the former Alliance Medical Group clinicians once they join UCHCFC System Medical Foundation through the implementation of the Epic electronic health record.”
The filing also requests state permission to shift licensed inpatient beds between Waterbury Hospital and UConn’s John Dempsey Hospital in Farmington, a step UConn says would improve patient access and allow regional service alignment. Any future service expansions or relocations would require additional regulatory approvals.
The applicants say they “intend to transform Prospect Waterbury Hospital by rebuilding local capabilities and expanding services offerings.”

That could include expanding surgical services, stabilizing primary care and expanding community offerings in women’s and cancer care, as well as developing more ambulatory services “in cost-effective settings.”

UConn Health adds that such investments “will restore the community’s trust and confidence in UCHCFC Waterbury Hospital, resulting in patients seeking care locally instead of travelling to other communities.”

OHS is expected to set a date for a public hearing on the application within the next month.

Under a separate state law approved earlier this year, the state Office of Health Strategy is required to review and rule on the E-CON application within 60 days. Based on the filing date, a decision would be required by the first week of February.