After more than a year of planning and regulatory review, Yale-New Haven Hospital officially acquired the Hospital of St. Raphael for $160 million Tuesday morning, making the newly merged 1,519-bed institution the fourth-largest hospital in the United States.
Marna Borgstrom, the CEO of Yale-New Haven, and St. Raphael’s CEO Christopher O’Connor signed the closing documents for the deal during a press event held in Yale-New Haven’s 55 Park St. auditorium on Tuesday. Over 100 attendees attended the signing, including administrators from both hospital systems as well as city and state officials. The hospitals legally merged assets and became one healthcare entity at 12:01 a.m. this morning, according to Yale-New Haven spokesman Rob Hutchinson.
“This integration will be critical to meeting the extraordinary healthcare challenges that lie ahead,” Borgstrom said. “We are delighted that with all of the necessary approvals and due diligence behind us, we can begin the important work of integrating these two great hospitals.”
Hospital administrators said the acquisition, the planning and negotiation of which dates back to March 2011, is a strategic move for the two hospitals given the challenges each faces. According to the Certificate of Need application submitted to the Department of Health’s Office of Health Care Access on Feb. 9, YNHH needs at least 140 additional patient beds in the next five years to cope with increased demand. At the same time, patient volume is down 8 percent for 2012 at St. Raphael’s, and as a result the institution “cannot remain a viable standalone provider of hospital services,” according to an Agreed Settlement approved by the Office of Health Care Access in July 2012.
By integrating the two hospitals, St. Raphael’s can stabilize its finances while Yale-New Haven can acquire St. Raphael’s 511 beds and avoid constructing a new, $650 million patient care tower, which Borgstrom said would have otherwise been necessary to meet demand. She added that “those resources can be better invested in the care we provided.”
“To address our imminent financial difficulties … we looked across the nation considering a wide range of options,” O’Connor said. “At the end of the day we realized the most effective solution was to partner with a hospital … located just six blocks away.”
The path leading to the acquisition was not without obstacles — the deal drew some criticism that combining the Elm City’s two largest hospitals would limit consumer choice and would lessen competition for medical services. The Sisters of Charity of Saint Elizabeth, who have sponsored St. Raphael’s for over 150 years, raised concern over how the move would affect St. Raphael’s tradition of Catholic medicine.
Over the past year, the hospital deal cleared the necessary legislative and negotiating barriers. After the conclusion of an antitrust investigation coordinated with the Federal Trade Commission, State Attorney General George Jepsen announced on June 1 that he would not seek to block the acquisition. And in the final regulatory step for the deal’s approval, the state’s Department of Public Health approved the plan on June 27.
St. Raphael’s administrators were also assured that the hospital would be able to continue its Catholic tradition through post-acquisition operation, said Moynihan.
“We don’t view this as an end of our legacy of caring, instead we view this as an extension,” O’Connor said. Moynihan added that the Sisters of Charity of Saint Elizabeth “enter this new chapter with pride and gratitude … knowing our mission of caring will continue with distinction.”
With the necessary acquisition documents signed and the hospitals now operating as one, Mayor John DeStefano Jr. said in a speech at the event that the Elm City will reap economic benefits from the merger.
“Forty-two percent of our city’s workforce are in education and health care. Our medical district provides 11,600 jobs. Forty-two of the state’s 46 bioscience companies are right here in New Haven. This is due to an extraordinary institution called the Yale School of Medicine,” DeStefano said. “The combination of the Yale Medical School and these two clinical practices is essential not to just the city’s economic well being but to the region and the state.”
Yale-New Haven was founded as the fourth voluntary hospital in the U.S. in 1826, and the newly merged hospital will have a combined medical staff of 11,000 employees.