Hartford HealthCare has expanded across Connecticut, but anti-competitive lawsuit ‘seems pretty novel,’ analyst says

Over the last decade, Hartford Healthcare has transformed itself, growing into a massive statewide health system employing 33,000 people as it acquired medical practices and hospitals across Connecticut.

It acquired the Hospital of Central Connecticut in New Britain in 2011, Backus Hospital in Norwich in 2013 and Charlotte Hungerford Hospital in Torrington in 2018. In 2019, it acquired St. Vincent’s Medical Center in Bridgeport, challenging Yale New Haven Health System in southwest Connecticut. In recent years Hartford HealthCare also added the Southington Surgery Center, other Hartford and Waterford surgery centers, as well as Middlesex Cardiology and Soundview Medical Associates.

This impressive growth has made Hartford Healthcare a leading health care system in the state. But to St. Francis Hospital and Medical Center — the other major hospital in Hartford — this is monopolistic expansion that could limit consumer choice and drive up prices.

Last week, St. Francis sued Hartford Healthcare in U.S. District Court in New Haven, accusing its larger rival of jeopardizing competition and limiting consumer choice. It’s seeking unspecified damages and an order prohibiting Hartford HealthCare from continuing its acquisitions.

“Hartford HealthCare’s anti-competitive actions were taken not to compete, but specifically to increase its market dominance and ability to charge higher than market rates,” St. Francis claims in its lawsuit. “It seeks to do so, in significant part, by seeking to foreclose the opportunities to compete for patients by other hospitals in Hartford County, including its most significant competitor, St. Francis.”

Consumers could face higher costs. One study cited by Kaiser Family Foundation that analyzed highly concentrated hospital markets in California found that an increase in the share of physicians in practices owned by a hospital was associated with a 12% increase in premiums for private plans.

Another study that used private insurer data found an increase in physician-hospital integration was associated with an average price increase of 14% for the same service.

Frances Padilla, president of the Universal Health Care Foundation of Connecticut, an advocacy group, said Hartford HealthCare is “particularly aggressive” in broadening market share through acquisitions and can raise prices as it reduces competition. Cardiac and orthopedic surgeries – knee and hip replacements, for example — are particularly high-margin practices, she said.

Access, too, is affected as Hartford HealthCare frequently requires patients in eastern Connecticut to seek service in Hartford, Padilla said.

Recruiting the ‘greatest experts’

Jeffrey Flaks, chief executive officer of Hartford HealthCare, said the lawsuit is “without merit, and we will defend against this legal action in the courts. That will be the proper place to respond.”

Hartford HealthCare is improving access and affordability and recruits the “greatest experts to be our colleagues,” he said in a message to Hartford HealthCare employees.

‘Market share’

Spencer Perlman, managing partner and director of health care research at Veda Partners in Washington, D.C., said a health care anti-competitive lawsuit “seems pretty novel” even as hospitals snap up physician practices in what he said is a common practice to drive up revenue with patient referrals.

Hospitals “battle for market share all the time, and it can definitely get ugly,” he said.

He cited a recently settled eight-year battle between the University of Pittsburgh Medical Center and Highmark, a health care company, over accusations Highmark steered thousands of patients to its network.

Another lucrative reason to acquire physician practices is to take advantage of higher Medicare reimbursements available to “satellite outpatient” departments, he said. Previously physician practices, they are now rebranded to capture more government money, Perlman said.

However, administrative and legislative changes are bringing Medicare reimbursement at hospital outpatient departments in line with what’s paid at physicians’ offices, Perlman said.

Siphoning off physicians to a dominant health care network that often has “brand recognition” also is successful as it attracts more patients, he said.

Ted Doolittle, Connecticut’s health care advocate, said hospitals infrequently sue each other, making the St. Francis lawsuit surprising. But the issue of industry acquisitions is not new.

“Both competitors and people are getting gobbled up,” he said.

In its lawsuit, St. Francis Hospital says Hartford HealthCare brought in two dozen surgeons and specialists in hematology, oncology, cardiology and neurology over the last four years. Another nine specialists and primary care physicians have been recruited to work exclusively in a Hartford HealthCare physician hospital network, it says.

St. Francis says Hartford HealthCare has acquired the practices of more than 50 physicians, established control over doctor referrals and insists on exclusive access to medical equipment.

“These actions do not involve competition to attract patients based on price and quality,” St. Francis said in the suit. “Instead, they prevent such competition, by controlling large numbers of physicians and effectively locking up referrals of their patients.”

Monopoly claim

In its lawsuit, St. Francis accuses Hartford HealthCare of bullying physician practices to establish a monopoly. In one case, it told physicians that if they balked at joining its health care system it would “crush” them, St. Francis claims. And it accused Hartford HealthCare of increasing its market share as it reduced volume at Bristol Hospital.

A spokesman said Bristol Hospital is not a party to the lawsuit and will not comment.

Lisa Freeman, executive director of the Connecticut Center for Patient Safety, a nonprofit group that speaks for patients, said the merits of the lawsuit have yet to be decided and no one knows “whose truth bears out.”

Still, a concern is that health care is “turning into business decisions,” she said. Surveys show that trust is a key consideration among patients, and her advice is to check physician referrals.

With 33,000 employees and operating revenue of $4.9 billion, Hartford HealthCare dwarfs Trinity Health of New England, the parent company of St. Francis and four other hospitals in Connecticut and Massachusetts. Trinity posted revenue of about $2 billion and employs about 11,000 workers.

Hartford HealthCare also outstrips Yale New Haven Health, another dominant hospital system in the state. It includes Bridgeport Hospital, Greenwich Hospital, Lawrence + Memorial Hospital in New London, Yale New Haven Hospital, Westerly Hospital in Rhode Island and a physician foundation.

Yale New Haven Health posted revenue of $4.6 billion and employs more than 26,000 workers and 6,685 medical staff.

State steps in with a study

Legislation enacted last year by the General Assembly and Gov. Ned Lamont directs the Office of Health Strategy to study ways to improve oversight and regulation of physician practice mergers and acquisitions.

The study, included in broader legislation related to hospital billing and collections, will review laws, regulations and transactions of physician practices. The study, which must be completed by Feb. 1, 2023, will look at ways to ensure the viability of physician practices and develop legislative recommendations to improve reporting and oversight of physician practice mergers and acquisitions.

State Rep. Jonathan Steinberg, House chairman of the public health committee, said lawmakers responded to a trend that private equity firms are acquiring physician practices. “As with other industries, it’s often about cost-cutting and not about delivering quality service,” he said.

Steinberg, a Westport Democrat, said the acquisitions of physician groups is “hardly a new phenomenon.” Research published in February 2020 by the Journal of the American Medical Association said physician practice acquisitions by private equity firms increased to 136 in 2016, up from 59 in 2013.

Questions now focus on whether the change in ownership of physician practices has reached a tipping point, is anti-competitive and where government fits in when interfering in market forces, Steinberg said.

The trend, he said is “in some ways a natural outgrowth of what we’re doing in managed care.”

Stephen Singer can be reached at ssinger@courant.com.