New York, Connecticut health systems merge to form $2.4B provider
- New York-based Health Quest and Danbury-based Western Connecticut Health Network are joining to form a $2.4 billion not-for-profit health system called Nuvance Health, the two companies announced Wednesday. Connecticut regulators approved the Certificate of Need application the same day, a little more than a year after the two systems originally agreed to combine.
- The merger will stretch the coverage net of the systems to Hudson Valley and western Connecticut, including the WCHN Connecticut hospitals in Danbury, Norwalk and New Milford, and Sharon Hospital and three other New York facilities under the Health Quest umbrella. It will serve an estimated 1.5 million people over its seven hospitals.
- The merger is projected to save both companies' hospitals more than $100 million for fiscal years 2019-2021 through standardizing health reimbursements, better pharmaceutical and supplies contracting and consolidating administrative functions.
Mergers and acquisitions dominated 2018, with a slew of high-profile provider, payer and PBM marriages shifting the bedrock of the U.S. healthcare industry. Most notable was retail pharmacy powerhouse CVS snapping up health insurer Aetna in a massive deal finalized late last year, though its implementation continues to drag out in court.
Studies are conflicted on whether M&A will grow, decrease or stay the same in 2019. Either way, management consultancy Kaufman Hall found dealmaking is less now about saving a struggling hospital. M&A is more of a strategic decision than one about opportunistic growth as strong health systems look to expand into new areas.
The WCHN-Health Quest marriage seems to be along those lines, with Nuvance officials saying it's about strengthening care across both their communities.
The agreement with federal and state regulators includes a cost growth cap that links healthcare cost growth to the consumer price index, meant to slow the climb of healthcare prices. "This decision moves us towards Connecticut's overall health policy goals to improve access to high-quality care and contain healthcare costs," Connecticut Office of Health Strategy Executive Director Vicki Veltri said in a statement.
However, the Center for American Progress found provider consolidation actually raises healthcare costs due to decreased market competition, without leading to better care quality for patients.
With about 2,600 physicians and 12,000 employees, Nuvance will be able to offer a greater breadth of services, including specialty physicians and population health programs, officials said, along with attracting top clinical talent and a bigger pool of data for analytics.
"By coming together, we will bring our communities more healthcare options through new programs and services, especially to help prevent disease and effectively manage chronic conditions," Health Quest President and CEO Robert Friedberg said in a statement.
Nuvance Health must also add 14 community representatives overall to its hospitals' boards of directors, expand participation in value-based care models and increase community benefit program funding by a minimum of 1% annually.
John Murphy, president and CEO of WCHN, will be Nuvance's CEO. Friedberg will serve as its president. The new system's board of directors will mingle eight members nominated by Health Quest with eight nominated by WCHN.
- Western Connecticut Health Network Health Quest and Western Connecticut Health Network combine to form new health system to be called Nuvance Health
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