Antitrust Law Daily Wrap Up, ACQUISITIONS & MERGERS NEWS: Connecticut hospital acquisition dropped in face of regulatory conditions, (Dec 12, 2014)

By Jeffrey May, J.D.

Tenet Healthcare Corporation has abandoned plans to acquire four hospitals in Connecticut in light of regulatory hurdles, the health care services company announced yesterday. Tenet sent a letter to state officials, informing them of its decision to withdraw its certificate-of-need applications with respect to the acquisitions.

According to the company, the proposal was being dropped in light of the extensive list of proposed conditions to be imposed on the acquisition of Waterbury Hospital, a teaching hospital in Waterbury, Connecticut. The Waterbury Hospital transaction was the first of four proposed acquisitions. Tenet concluded that “the approach to regulatory oversight in Connecticut would not enable Tenet to operate the hospitals successfully for the benefit of all stakeholders.” Tenet also has withdrawn applications to acquire Saint Mary’s Hospital in Waterbury, Bristol Hospital in Bristol, and Eastern Connecticut Health Network, which operates Manchester Memorial Hospital and Rockville General Hospital in eastern Connecticut.

Dallas-based Tenet operates hospitals around the country and intended to acquire the not-for-profit facilities in Connecticut and operate them as for-profits. The proposed acquisitions were part of larger expansion plans in the greater Northeast region.

In March, Tenet unveiled a partnership agreement with Yale New Haven Health System to create a comprehensive health care delivery network in Connecticut. Yale New Haven Health System, the largest and most comprehensive healthcare system in Connecticut, includes three hospitals: Bridgeport, Greenwich, and Yale-New Haven hospitals. According to Tenet, the company and Vanguard Health Systems—which Tenet acquired in 2013—worked with Yale-New Haven Health System for more than two years to reach a deal on the four hospitals.

Both the Connecticut Office of the Attorney General (AG) and the Department of Public Health Office of Health Care Access issued proposed final decisions conditionally approving the Tenet/Waterbury transaction on December 1. Pursuant to Connecticut law, the AG is responsible for reviewing certain proposed transfers of assets or operations of nonprofit hospitals to for-profit entities within the State of Connecticut, and the Office of Health Care Access is responsible for reviewing such proposed for-profit transactions for matters related to access to care.

The AG's decision did not discuss competition concerns as those issues were part of a separate review that was ongoing at that time. It is likely that antitrust issues would have been raised by Tenet's planned acquisition of St. Mary's, Waterbury's other non-profit hospital.

In a statement responding to Tenet's decision to pull the plug on the acquisitions, Connecticut AG George Jepsen said that he did not believe that the conditions proposed by the AG's office were a factor in the company's decision. According to Jepsen, the conditions imposed by the AG's office “focused on preserving and safeguarding the assets of the sale for healthcare purposes and not the day-to-day operation of the for-profit hospital going forward.”

“I am proud of the efforts of my staff over the past few years, working within our limited authority to ensure that charitable assets are preserved, and I am disappointed that we have landed at this juncture today,” said Jepsen.

Attorneys: Collin P. Baron (Pullman & Comley, LLC) for Tenet Healthcare Corp.

Companies: Tenet Healthcare Corp.

News: AcquisitionsMergers Antitrust ConnecticutNews