Seeking Merger OK,
YNHH Vows Cost ​“Neutrality”

As it sought the final regulatory OK for its takeover of the Hospital of St. Raphael, Yale-New Haven Hospital vowed to keep costs ​“neutral” overall for patients and find new savings.

Yale-New Haven Hospital (YNHH) Vice President Vin Petrini made that pledge in response to a concern raised at a public hearing Tuesday over the proposed takeover of the Hospital of St. Raphael. The two New Haven-based hospitals, previously seen as competitors, struck a deal last year to become one 12,000-employee, 1,477-bed entity at under the Yale-New Haven banner.

Last Friday, the state attorney general and Federal Trade Commission gave the deal their blessing, wrapping up an antitrust investigation by agreeing not to block the takeover. On Tuesday, the hospitals sought to convince one final regulatory agency — the state Office of Health Care Access — to sign off on the deal. The state held a hearing from 10 a.m. to 4 p.m. at Gateway Community College to examine a ​“certificate of need” the hospitals filed justifying the acquisition.

If they get state approval, the hospitals plan to close the acquisition deal on July 27.

Fifteen members of the public spoke at Tuesday’s hearing. All but John Courtney (pictured) gave favorable testimony, according to people present for the duration of the hearing.

Courtney, who said he was recently laid off as St. Raphael’s administrative director of surgery, came forward with several concerns. He suggested an independent council oversee the transition, focusing on three issues: access, cost, and quality of care. He also called for a more careful analysis of the ​“financial impact” of the deal, including for patients.

Courtney’s concern, he said later in the day after his testimony, is that reimbursement for patient services to YNHH are higher than for St.
Raphael’s. When YNHH takes over, patients at St. Raphael’s could see the cost of care rise.

YNHH VP Petrini responded to that concern in a hallway interview. He said because the two hospitals are competitors, they don’t share how much each other is charging insurance companies for medical care.

“We’re not privy to what they charge,” he said.

If the takeover is approved by the state, Petrini said, YNHH has agreed to continue to keep costs the same at St. Raphael’s for three to four months. YNHH would bill at St. Raphael’s current rates for that time period. Then the newly unified hospital would have to renegotiate contracts with the private insurance companies it deals with. For example, Aetna would no longer have separate contracts for St. Raphael’s and YNHH; it would have one big contract with YNHH covering both campuses.

Petrini said in renegotiating the contracts, YNHH has vowed to stay ​“budget-neutral.” That means the total cost to Aetna would stay the same.

By extension, that could mean if patients with Aetna insurance are paying lower rates at St. Raphael’s than at Yale-New Haven, they could see a price hike under a new contract, but that overall costs would stay the same.

Petrini said in the bigger picture, YNHH hopes to save money through the acquisition. For example, if it successfully merges with St. Raphael’s, YNHH will have access to an extra 511 hospital beds. That means YNHH won’t have to spend $600 million on a new patient tower to alleviate a space crunch.

Cost efficiency was one argument hospital executives gave Tuesday morning before hearing officer Joanne V. Yandow (at right in photo), a staff attorney for the state Department of Public Health. Yandow will be weighing the evidence to see whether the hospitals meet the criteria required by law before the takeover is allowed.

Criteria include the public need, access to services, financial feasibility, cost-effectiveness, and quality of service, according to Kimberly Martone (at left in photo), director of operations for the Office of Health Care Access.

According to state law, Yandow’s department has 60 days to come up with a final decision approving or rejecting the takeover. She’ll issue a proposed decision to Deputy Commissioner of the Department of Public Health Lisa Davis, who will come forward with a final decision within 60 days.

Among those who lobbied in favor of the acquisition was New Haven Mayor John DeStefano. In an era when many jobs have shifted from manufacturing to education and health care, he argued, the hospitals’ well-being is ​“essential” to the greater New Haven economy, and by extension to the state’s economy. Yale-New Haven is the second-largest employer in the city. DeStefano said he would leave it to the hospital executives to argue for the financial urgency of the deal.

St. Raphael’s CEO and President Chris O’Connor later filled in that gap in an interview.

“St. Raphael’s capability to remain independent was not sustainable in the long term,” he said. He pointed to recent layoffs and cuts to employee benefits.

O’Connor stressed that by many measures, patients would not see a dramatic change in care at St. Raphael’s under the takeover. Under the acquisition, St. Raphael’s will retain its ​“ethical and religious” restrictions as a Catholic hospital.

“The bulk of what we do in both hospitals will remain the same,” O’Connor pledged.

The biggest planned improvement, he said, is that YNHH plans to roll out electronic health records system to be shared with both campuses. In some cases, medical procedures of ​“high-resource intensity” and that rely heavily on technology would be shifted to YNHH, O’Connor said.

There will be two emergency rooms, but all trauma care would take place at YNHH.

YNHH CEO Marna Borgstrom said while Tuesday represented the beginning of the final regulatory step, much work remains to be done to make a smooth transition. For example, YNHH will have to bring on board 3,500 employees from St. Raphael’s. Then begins the process of ​“clinical integration” of the hospitals, deciding which services may be consolidated and where they’d be based.

“There’s a lot ahead of us,” Borgstrom said. ​“We’re looking forward to getting on with it.”