CT health care industry sees reasons for optimism, says WCHN chief

The state may be on the cusp of operating under a new governor, but Connecticut’s hospitals still have a list of grievances. However, according to Dr. John Murphy, president and CEO of the Western Connecticut Health Network, (WCHN) there may be rays of hope when it comes to Gov.-elect Ned Lamont.

“He’s very bright, and he understands that health care is one of the central issues that the state faces,” Murphy — whose WCHN is comprised of Danbury, Norwalk and New Milford hospitals — said. Lamont’s past statements about protecting the Affordable Care Act, expanding access and reducing premiums on Access Health CT, and working to lower the costs of prescription drugs “represent a sensible approach that I think is entirely appropriate,” Murphy said. “There’s nothing not to like.”

However, he added, “The question in my mind is what kind of financing mechanisms he’s looking at for those ideas. How will his programs get funded, and at whose expense? We (Connecticut’s hospitals) have been a punching bag for the last several years and the tax system we’re under has done a great deal of harm.”

Indeed, the hospital tax has long been a thorn in the institutions’ collective side. The Connecticut Hospital Association filed a lawsuit against the tax in 2016, asking the federal government to declare that the state is violating federal law by paying inadequate rates for treating Medicaid patients and imposing what was then a $556 million tax on the industry.

The suit has since dragged on. Murphy said he believed that, having “exhausted our administrative remedies, we will begin oral arguments in early 2019.” Nevertheless, he added, “We are most interested in finding a way to sit at the table with the new administration to reach a sensible solution.”

Murphy said that since 2013, WCHN has paid over $175 million to the state. As a result, he said, a couple of thousand jobs have been eliminated on a statewide basis, which in turn hurts the kind of care that can be provided to patients.

In June, the U.S. Centers for Medicare and Medicaid Services (CMS) approved a major increase in the state’s annual tax on hospitals, from $556 million to $900 million. However, the state also has said it will increase reimbursements to the hospital industry by about $208 million per year, a move in the right direction, according to the CHA, which has endorsed the arrangement.

Murphy said he was also encouraged, but added: “The money we put into the state should ultimately be returned to those providers. We all need to work together to make sure that that money stays in health care.”

The WCHN chief further described health care as “an economic engine for the state” whose full potential for creating jobs and facilities is not being realized.

On the national level, the elimination of the individual mandate under the Affordable Care Act — the IRS will no longer levy a fine on people for failing to maintain qualifying health insurance coverage — is another sticky issue.

“When it comes to pre-existing conditions, we’ve got to figure it out,” Murphy said. “Those people can have the rug pulled out from under them when they change plans. I wish the principle could be recognized, that health care is a right.”

Conceding that the individual mandate is “a political hot potato,” he added: “I do wish that society and our citizenry would recognize that for insurance to really work, all of us have to distribute the risk over a large population that includes healthy people, so that everyone can be covered.”

On another front, Murphy said that the rash of mergers taking place over the past year in Connecticut’s hospital landscape — Hartford HealthCare’s plans to acquire Bridgeport’s St. Vincent’s Medical Center, announced in October; Bridgeport Hospital’s acquisition of Milford Hospital, unveiled in September; and WCHN’s own merger with Health Quest Systems to create a seven-hospital, $2.4 billion enterprise, announced in March — is reflective of a national trend.

“The industry has been under pretty intense financial pressure over the last seven or eight years, as reimbursement has fallen on both the federal and state levels,” he said. “With consolidation you can realize greater economies of scale. Costs tend to fall, as you no longer need the capital to operate two neonatal ICUs or have two senior executives with the same titles.”

In the case of WCHN-Health Quest, Murphy said, “We expect to save tens of millions of dollars within the first couple of years. We plan to take those dollars and reinvest them in our communities to help make care less expensive.”

Being such a capital-intensive industry, hospitals can also benefit from M&A when it comes to the all-important rating agencies, Murphy said. “If you’re on an upward trajectory and have some geographic diversity” — Health Quest is in Dutchess County, New York — “that can count for a lot. In our case we will be about twice the size we were — one of the largest systems in the Northeast. That supplies the agencies with the confidence that we will be here in 50 years.” Government approval could take place by the end of this year, he added.

Looking ahead to 2019, Murphy said the hospital tax lawsuit remains “a top priority for us — we hope we can settle it in a way that works for all parties.” Much of his time will be taken up by overseeing the integration with Health Quest, he said, adding that he did not foresee more M&A taking place in the state: “Those hospitals that are still standing by themselves I suspect will still be that way a year from now.”

Murphy further said that he believed the industrywide migration from fee-for-service to value-based care will continue. “Quality and safety are always at the top of the list,” he said, “and that’s just one way we work to achieve that.”