Hartford Business Journal

12 Hartford Business Journal • July 18, 2016 www.HartfordBusiness.com The rest of the equity in the two compa- nies is owned by Eastern Connecticut Health Network, whose pending for-profit acquirer, Prospect Medical Holdings, has received reg- ulatory permission to absorb those stakes. It doesn't appear that Hartford Health- Care or St. FrancisCare intend to stay in business together for the long term, but the joint ventures underscore the complex, even confusing nature of the industry deal mak- ing that has ensued over the years, as health systems have aggressively added new pieces in search of greater size and scope. "It creates an awkward situation, so we're going to just try to make sense of it," said Trinity Health-New England CEO Christo- pher M. Dadlez. "We're working through [it]." Trinity says it intends to sell its stake in Tolland Imaging Center, though it couldn't say when that might happen. Meanwhile, Trinity said its understanding is that it would control NRRON's Enfield location while Prospect, once its acquisition is complete, would con- trol the Manchester facility. "Hartford Hospital owns 25 percent of NRRON, so we're not sure if they'll divest or if they'll continue to own a piece of the Man- chester site," said St. Francis spokeswoman Fiona Phelan. Hartford HealthCare spokesman Shawn Mawhiney didn't disclose the system's exact plans for its stakes in the two side businesses, but he didn't rule out any possibilities. "As new healthcare ownerships and affili- ations occur, we examine the status of our existing partnerships on a case-by-case basis," Mawhiney said. "Meeting community need is our top priority, and in today's complex healthcare world that can mean changing existing arrange- ments — or participating in alliances that would not have been possible just a short while ago." In a written statement, California-based Prospect Medical Holdings declined to com- ment on both facilities because they don't own them yet. The company said it hopes to close its ECHN purchase later this summer. In the grand scheme of things, Tolland Imaging and NRRON wouldn't make much of a dent in either competitor's overall business. The jointly owned companies are projected to bring in combined revenue of $8.4 million for fiscal year 2017. Hartford HealthCare recorded $2.2 billion in net patient revenue in its most recent fiscal year. Meanwhile, the newly formed Trinity, which also includes Springfield-based Sisters of Providence and their Mercy Hospi- tal along with St. Francis Hospital and Medi- cal Center and Johnson Memorial, anticipates revenue of $1.7 billion, assuming its pending acquisition of Waterbury's St. Mary's Hospital is approved this summer, Dadlez said. A new system Dadlez, formerly CEO of St. Francis, is now overseeing a new regional system that's set to have five licensed hospitals, several hundred ambulatory centers and more than 12,000 full-time employees. There may be more pieces to add, though Dadlez didn't reveal any potential targets in a recent interview. Already, Trinity has acquired, through Sisters of Providence, a 600-employee medical group in Springfield, Mass., which could signal the kinds of deals Dadlez and his team would consider in Connecticut. Trinity Health-New England is a signifi- cant new system in Connecticut and Western Massachusetts. Its formation will add about 10 percent in revenues to its parent company, Trinity Health. The Michigan-based Catholic hospital operator calls its regional health sys- tems "regional ministries," and its New Eng- land outpost is set to be among its largest yet. Trinity Health-New England is solidifying itself just as several other deals are being done around the state: Prospect recently received preliminary approval to acquire ECHN and Waterbury Hospital; Yale has applied to acquire New London's Lawrence + Memorial Hospital; and Charlotte Hungerford Hospital in Torrington expressed interest in February to affiliate with Hartford HealthCare. While the deals involve both for-profit and nonprofit providers, Dadlez said some of the reasons such consolidation is happening in Connecticut and across the country overlap: cheaper access to capital, eliminating dupli- cate functions, and building up large bases of patients to help spread financial risk increas- ingly included in insurance contracts. He dismisses the notion that hospital consol- idation is about gaining leverage over insurers. "There may be some large regional [hos- pital] players, but the insurance industry has way more leverage than the hospitals will ever have," he said. He said changing the delivery system is the biggest focus for Trinity Health-New England. Risk-based contracts with insurers pay according to certain metrics being met related to costs and health outcomes. Those contracts are being pushed by Medicare and commercial payers alike. Dadlez said St. Francis' management con- cluded five years ago that it wouldn't be able to compete with Hartford HealthCare or Yale New Haven Health System in that new envi- ronment unless it could add more patients and upgrade its infrastructure to move towards population health management and away from fee for service. "Bigger isn't necessarily better, but you have to have some scale to be effective," Dadlez said. He estimates that the majority of Trinity Health-New England's insurance contracts will contain both upside and downside risk within several years. The system is just start- ing to delve into downside risk, which means it will bet some of its own money that it can hit financial and health metrics. It's a risk St. Francis may not have been eager to take when it was on its own, he said. That march towards a population health system, advocates hope, will lower or slow the growth of healthcare costs. Does Dadlez believe it? "If it's done right and for the right reasons it should be better," he said. If costs are lowered, Dadlez said the sav- ings would go into the health system and towards lowering patient bills. "In order to keep innovating … you have to have enough money to reinvest in your own organization," Dadlez said. One planned capital expenditure in the next several years is the installation of an Epic electronic medical record system at Sis- ters of Providence and St. Mary's. Johnson Memorial went live with the system in Janu- ary, and St. Francis already has it. Using one system will allow the hospitals to share records and data, boosting popula- tion health efforts, Dadlez said. "If you really want to do real accountable care and risk contracting, you can't be on paper," he said. "You all have to be on a com- mon information system." Cost cutting In an effort to trim spending, Trin- ity recently offered nearly 300 employees an early retirement incentive. Nearly one-third applied for it. The retirements are expected to happen later this year. Dadlez said the offering could result in ongoing annual savings of as much as $5 mil- lion for the system. "We need to slim down our operations," he said. "We need to be efficient." Dadlez said he was happy to be able to offer a retirement incentive rather than issue pink slips. In May, St. Francis settled a lawsuit that alleged it had underfunded its employee pen- sion fund. The settlement requires St. Francis to make an immediate payment of $17 million and then $10 million per year for the next nine years. Dadlez said the early retirement incen- tives were not related to the legal settlement. He said St. Francis had already been con- tributing $9 million per year to the pension fund, so while the net impact in the first year is larger, the net annual increase for the next nine years will be $1 million, which Dadlez called immaterial to the hospital. n from page 1 Consolidation trend continues To view the full list, please visit HartfordBusiness.com THE LIST Largest defense contracts in Connecticut (Ranked by dollars obligated in 2015) Rank Vendor $ Obligated Contracting agency Date signed Product/service description Vendor contact 1 Electric Boat Corp. (1) 75 Eastern Point Road Groton 06340 860-433-3000; www.gdeb.com $3,741,548,790 Navy Jan. 27, 2015 Combat ships and landing vessels Jeffrey S. Geiger President 2 Sikorsky, A Lockheed Martin Company (2) 6900 Main St. Stratford 06615 800-946-4337; www.sikorsky.com $833,339,080 Army Nov. 30, 2015 Aircraft, rotary wing Robert Leduc President 3 Sikorsky, A Lockheed Martin Company (2) 6900 Main St. Stratford 06615 800-946-4337; www.sikorsky.com $354,156,878 Army Dec. 7, 2015 Aircraft, rotary wing Robert Leduc President 4 Sikorsky, A Lockheed Martin Company (2) 6900 Main St. Stratford 06615 800-946-4337; www.sikorsky.com $241,701,155 Army March 2, 2015 Aircraft, rotary wing Robert Leduc President 5 United Technologies Corp. 10 Farm Springs Road Farmington 06032 860-728-7000; www.utc.com $237,915,769 Navy Sept. 4, 2015 Gas turbines and jet engines, aircraft, prime moving and components Gregory J. Hayes President & CEO 6 Electric Boat Corp. (1) 75 Eastern Point Road Groton 06340 860-433-3000; www.gdeb.com $222,300,000 Navy Feb. 9, 2015 Combat ships and landing vessels Jeffrey S. Geiger President 7 United Technologies Corp. 10 Farm Springs Road Farmington 06032 860-728-7000; www.utc.com $212,080,732 Navy Nov. 25, 2015 Gas turbines and jet engines, aircraft, prime moving and components Gregory J. Hayes President & CEO 8 Sikorsky, A Lockheed Martin Company (2) 6900 Main St. Stratford 06615 800-946-4337; www.sikorsky.com $146,205,000 Navy Feb. 5, 2015 R&D defense system aircraft, engineering development Robert Leduc President 9 Sikorsky, A Lockheed Martin Company (2) 6900 Main St. Stratford 06615 800-946-4337; www.sikorsky.com $145,136,040 Army Dec. 17, 2015 Aircraft, rotary wing Robert Leduc President 10 Sikorsky, A Lockheed Martin Company (2) 6900 Main St. Stratford 06615 800-946-4337; www.sikorsky.com $140,741,674 Air Force March 13, 2015 Aircraft, rotary wing Robert Leduc President 11 United Technologies Corp. 10 Farm Springs Road Farmington 06032 860-728-7000; www.utc.com $139,590,659 Navy Apr. 30, 2015 Gas turbines and jet engines, aircraft, prime moving and components Gregory J. Hayes President & CEO 12 United Technologies Corp. 10 Farm Springs Road Farmington 06032 860-728-7000; www.utc.com $132,575,824 Air Force June 30, 2015 Engines, turbines and components; maintenance, repair or rebuild Gregory J. Hayes President & CEO 13 United Technologies Corp. 10 Farm Springs Road Farmington 06032 860-728-7000; www.utc.com $120,611,109 Navy March 20, 2015 R&D defense system aircraft, operational development Gregory J. Hayes President & CEO 14 United Technologies Corp. 10 Farm Springs Road Farmington 06032 860-728-7000; www.utc.com $104,290,158 Navy Nov. 3, 2015 Gas turbines and jet engines, aircraft, prime moving and components Gregory J. Hayes President & CEO 15 United Technologies Corp. 10 Farm Springs Road Farmington 06032 860-728-7000; www.utc.com $97,866,523 Air Force Dec. 31, 2015 Engines, turbines and components; maintenance, repair or rebuild Gregory J. Hayes President & CEO 16 Sikorsky, A Lockheed Martin Company (2) 6900 Main St. Stratford 06615 800-946-4337; www.sikorsky.com $93,939,272 Army March 17, 2015 Aircraft, rotary wing Robert Leduc President 17 Electric Boat Corp. (1) 75 Eastern Point Road Groton 06340 860-433-3000; www.gdeb.com $90,100,000 Navy Oct. 19, 2015 Combat ships and landing vessels Jeffrey S. Geiger President 18 United Technologies Corp. 10 Farm Springs Road Farmington 06032 860-728-7000; www.utc.com $85,597,000 Air Force Dec. 7, 2015 Engines, turbines and components; maintenance, repair or rebuild Gregory J. Hayes President & CEO 19 United Technologies Corp. 10 Farm Springs Road Farmington 06032 860-728-7000; www.utc.com $72,604,695 Navy Oct. 29, 2015 R&D defense system aircraft, operational development Gregory J. Hayes President & CEO 20 Lane Construction Corp. 90 Fieldstone Court Cheshire 06410 203-235-3351; www.laneconstruct.com $67,337,000 Navy June 30, 2015 Airport runways and taxiways Robert E. Alger President & CEO Source: Federal Procurement Data System, www.fpds.gov. Notes: A single contract can comprise multiple contract actions; however, each action involves discrete dollars. Only definitive contracts are included. (1) Subsidiary of General Dynamics Corp. (2) On Nov. 6, 2015, Lockheed Martin acquired Sikorsky Aircraft from Farmington-based United Technologies Corp. for $9 billion. Sikorsky will remain headquartered in Stratford. —Compiled by Stephanie R. Meagher. 11 10 Farm Springs Road Farmington 06032 860-728-7000; www.utc.com $139,590,659 Navy Apr. 30, 2015 Gas turbines and jet engines, aircraft, prime moving and components Gregory J. Hayes President & CEO 12 United Technologies Corp. 10 Farm Springs Road Farmington 06032 860-728-7000; www.utc.com $132,575,824 Air Force June 30, 2015 Engines, turbines and components; maintenance, repair or rebuild Gregory J. Hayes President & CEO 13 United Technologies Corp. 10 Farm Springs Road Farmington 06032 860-728-7000; www.utc.com $120,611,109 Navy March 20, 2015 R&D defense system aircraft, operational development Gregory J. Hayes President & CEO 14 United Technologies Corp. 10 Farm Springs Road Farmington 06032 860-728-7000; www.utc.com $104,290,158 Navy Nov. 3, 2015 Gas turbines and jet engines, aircraft, prime moving and components Gregory J. Hayes President & CEO 15 United Technologies Corp. 10 Farm Springs Road Farmington 06032 860-728-7000; www.utc.com $97,866,523 Air Force Dec. 31, 2015 Engines, turbines and components; maintenance, repair or rebuild Gregory J. Hayes President & CEO 16 Sikorsky, A Lockheed Martin Company (2) 6900 Main St. Stratford 06615 800-946-4337; www.sikorsky.com $93,939,272 Army March 17, 2015 Aircraft, rotary wing Robert Leduc President 17 Electric Boat Corp. (1) 75 Eastern Point Road Groton 06340 860-433-3000; www.gdeb.com $90,100,000 Navy Oct. 19, 2015 Combat ships and landing vessels Jeffrey S. Geiger President 18 United Technologies Corp. 10 Farm Springs Road Farmington 06032 860-728-7000; www.utc.com $85,597,000 Air Force Dec. 7, 2015 Engines, turbines and components; maintenance, repair or rebuild Gregory J. Hayes President & CEO 19 United Technologies Corp. 10 Farm Springs Road Farmington 06032 860-728-7000; www.utc.com $72,604,695 Navy Oct. 29, 2015 R&D defense system aircraft, operational development Gregory J. Hayes President & CEO 20 Lane Construction Corp. 90 Fieldstone Court Cheshire 06410 203-235-3351; www.laneconstruct.com $67,337,000 Navy June 30, 2015 Airport runways and taxiways Robert E. Alger President & CEO Source: Federal Procurement Data System, www.fpds.gov. Notes: A single contract can comprise multiple contract actions; however, each action involves discrete dollars. Only definitive contracts are included. (1) Subsidiary of General Dynamics Corp. (2) On Nov. 6, 2015, Lockheed Martin acquired Sikorsky Aircraft from Farmington-based United Technologies Corp. for $9 billion. Sikorsky will remain headquartered in Stratford. —Compiled by Stephanie R. Meagher.

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