STATE OF CONNECTICUT DEPARTMENT OF PUBLIC HEALTH Dannel P. Malloy Governor Raul Pino, M.D., M.P.H. Nancy Wyman Commissioner Lt Governor Of?ce of Health Care Access Agreed Settlement Applicants: Lawrence Memorial Corporation 365 Montauk Avenue New London, CT 06320 Yale New Haven Health Services Corporation 789 Howard Avenue New Haven, CT 06519 Docket Number: 15-32033-CON Project Title: Transfer of ownership of Lawrence Memorial Corporation to Yale New Haven Health Services Corporation Project Description: Lawrence Memorial Corporation and Yale New Haven Health Services Corporation herein collectively referred to as the (?Applicants?) seek authorization to transfer ownership of and its subsidiaries to with no associated capital expenditure. Procedural History: The Applicants published notice of their intent to ?le a Certi?cate of Need application in the New Haven Register and The Day (New London) on July 27, 28 and 29, 2015. On October 7, 2015, the Of?ce of Health Care Access received the CON application from the Applicants for the above?referenced project. On December 16, 2015, Commissioner Jewel Mullen designated Attorney Kevin T. Hansted as the hearing of?cer in this matter. The application was deemed complete on May 10, 2016. On June 17, 2016, OHCA received a petition from a coalition of organizations led by New England Health Care Employees Union, District 1199 SEIU (?District 1199?) requesting intervenor status with full rights of cross? examination. The Hearing Of?cer granted the petition of District 1199 (?Intervenor?) on June 24, 2016. On June 22, 2016, the Applicants were noti?ed of the date, time, and place of the public hearing. On June 24, 2016, a notice to the public announcing the hearing was published in The Day. Thereafter, pursuant to Connecticut General Statutes (?Conn Gen. Stat?) 19a?639a a public hearing regarding the CON application was initially held on July 11, 2016 and . . - .A- . -- Phone: (860) 418-7001 0 Fax: (860) 418?7053 410 Capitol Avenue, Hartford, Connecticut 06134?0308 Connecticut Department of Public Health Af?rmative Action/Equal Opportunity Empioyer Corporation and. Yale New Haven Health Services Corporation Page 2 of 35 Docket Number: continued on July 26, 2016. The hearing was conducted in accordance with the provisions of the Uniform Administrative Procedure Act (Chapter 54 of the Conn. Gen. Stat.) and Conn. Gen. Stat. 19a?639a and the Hearing Of?cer heard testimony from witnesses for the Applicant and the Intervenors. The public hearing record was closed on September 7, 2016. In rendering the decision, Deputy Commissioner Addo considered the entire record in this matter. L+lVl Corporation and Yale New Haven Health Services Corporation Page 3 of 35 Docket Number: Findings of Fact and Conclusions of Law 1. is a non?stock, tax?exempt corporation that is the sole member of subsidiaries operating acute care hospitals and community?based services located throughout southeastern Connecticut and southwestern Rhode Islandthe parent company of Lawrence Memorial Hospital its principal asset in Connecticut, and various other subsidiaries and affiliated entities (see legal chart of corporate structure, below). Lawrence Memorial Corporation di?bla Heaithcare LMW Healthcare ?si?cg?c?g Lawrence VNA of Southeastern Inc. dfbi'a I dim UM M?edical Memorial Southeastern CT Health Hospitai Group Hospital, Inc. CT, Inc. Partners, nc. The ?u?v?esterivr . . Associated Hospital LMW Finis'c'ans? Specialists of Foundation Southeastern, CT Lawrence Memorial Foundation, Inc. Westerly Hospita! Healthcare, (P) Entities that provide for-pro?t services Exacute care community hospital located in New London, Connecticut. It is licensed for 280 general hospital beds (plus 28 bassinets) and provides a full range of inpatient, outpatient and ancillary services to residents of southeastern ConnecticutConnecticut non?stock, tax?exempt corporation that was organized in 1983 to provide support services to Yale New Haven Health System a network of affiliated health care providers, the foremost being Yale-New Haven Hospital Ex. A, p. 22 Corporation and Yale New Haven Health Services Corporation Page 4 of35 Docket Number: 5. In addition to YNHH, is the parent company of Greenwich and Bridgeport Hospitals, along with various other subsidiaries and af?liated entities (see legal chart of corporate structure, below). Yale-New Haven Health Services CorporatiOn Yale-New Haven Northeast Medical Group, Inc. Greenwich Health Care Services, Inc. Bridgeport YNHH-MSO, Inc. Hospital Hospital, Inc. 10. ll. North Shore LIJ and Yale-New Haven Health Medical Air Transport The New Clinical Development Corporation Total Health Connecticut, LLC Ex. A, p. 591 The and boards approved execution of the Af?liation Agreement and agreed to seek regulatory approval on July 9, 2015 and July 10, 2015, respectively. Ex. A, p. 29 The Applicants request authorization to transfer ownership of and its subsidiaries to such that shall become the sole corporate member Hart?Scott?Rodino ?ling1 was submitted to the Federal Trade Commission on August 7, 2015 and on September 8, 2015, the FTC informed and that it would allow the waiting period to expire without further investigation. Ex. A, p. 29 Following the transfer of ownership, will continue to operate as an independently licensed hospital, with its own separate medical staff, bylaws, rules, regulations and elected of?cers. Ex. A, p. 21 will continue to remain a separate entity with its own board responsible for overseeing and managing and Westerly Hospital, subject to certain reserved rights of with respect to fundamental strategic, ?nancial and governance matters. Ex. A, p. 26 The Board will continue as a ?duciary board and be responsible for the oversight and management of patient care, safety, licensure, accreditation, medical staff credentialing, election and removal of of?cers and approval of actions not otherwise reserved to and/0r A appointee will serve on the Board as a result of the The Hart-Scott Rodino Act requires that information about large mergers and acquisitions be submitted to the Federal Trade Commission and the Department of ustice prior to their occurrence. The parties may not close their deal prior to the waiting period outlined in the HSR Act without government approval. Source: ?otation-program Corporation and Yale New Haven Health Services Corporation Docket Number: 15 -3 203 Page 5 0f35 proposal, however the Board?s scope of responsibility and authority will be largely unchanged. Ex. A, p. 26 12. The following chart depicts the organizational structure following the proposed transaction: Yaie~New Haven Health Services Corporation I .d rt Greenwich Lawrence Memorla' Northeast a e~ ew aven rl gepo Corporation . Hospital, Inc. Hospital Health Care dm Medical YNHi-Hvtso. Inc. Servrces, Inc. UM Healthcare Group. Inc. - - North Shore LIJ and ?Beards?: ?g?iai Yale?New Haven Total Health Heaith Medical Air Connecticut, LLC orporatlon Transport Ex. A, p. 594 13. The proposal is expected to provide and the community it serves the following bene?ts: 0 enhanced access to health care services through clinical integration and collaboration with physicians; - strengthened ability to retain, develop, and recruit physicians; - access to capital needed to re?invest in and the communities it serves, including advanced diagnostic capabilities and state?of-the-art facilities and technologies; 0 access to population health infrastructure and expertise; and greater ?nancial stability resulting from being part of a large health system. Ex. A, p. 25 14. YNHH offers specialized tertiary and quaternary services not available at smaller community hospitals. As a result, transfers approximately 1,000 patients each year to YNHH, via the Access Line transfer service. These patients have historically been referred back to the community to receive follow-up care following discharge. Ex. A, p. 26 Corporation and Yale New Haven Health Services Corporation Docket Number: Page 6 of35 15. primary service area consists of ?ve towns in southeastern Connecticut; nearly half of discharged inpatients reside in Groton or New London (see table below): TABLE 1 PRIMARY SERVICE FY 2015 Town Discharges Groton 3,797 27.0% New London 2,929 20.8% Waterford 1,715 12.2% East Lyme 1,293 9.2% Ledyard 828 5.9% PSA Total 10,562 75.1% All other 3,498 24.9% Total 14,060 100.0% *Primary service area based on top of patient discharges by town Source: CT DPH Office of Health Care Access, Acute Care Hospital Discharge Database 16. As determined in its most recent Community Health Needs Assessment service area has a higher proportion of middle aged and older adults than Connecticut and the nation overall. The Applicants estimate that service area residents in the 65+ age cohort will increase 12.5% from 2015 to 2020. Ex. A, pp. 27, 32 17. 2012 CHNA highlights the likelihood of a higher incidence of heart disease, cancer and certain lung diseases due to the service area demographics. Other key health issues identified are as follows: a higher cancer incidence than state and national levels for all cancers, in particular, breast, colorectal and lung; 0 higher cancer mortality than state and national levels for all cancers, particularly in breast, and lung cancer; high Chlamydia rates, EX. A, pp. 32?33 obesity levels higher than the state average; increasing diabetes incidence; and high alcohol consumption as compared to national benchmarks. 18. is currently conducting the 2016 CHNA planning process in collaboration with over 30 partner organizations to help determine apprOpriate strategies and benchmarks, including the use Of Healthy People 2020 benchmarks. Testimony of Laurel Holmes, Director of Community Partnerships and Population Health, Exhibit PP, p. 166 19. The Applicants plan to provide similar levels of funding for community benefits and community building following approval of the proposed transaction. Testimony of Ms. President and Chief Executive Officer of Ex. PP, p. 169 Corporation and Yale New Haven Health Services Corporation Page 7 of 35 Docket Number: 20. The proposal is expected to provide and the community it serves the following bene?ts: 0 enhanced access to health care services through clinical integration and collaboration with physicians; strengthened ability to retain, develop and recruit physicians; decreased clinical variation for through standardized protocols as a result of adopting Epic, Lawson and other IT platforms used by access to population health expertise and infrastructure; development of additional clinical programs identi?ed as needed in the service area; I access to capital on more favorable terms once becomes a member of the Obligated Group2; needed to re?invest in and the communities it serves, including advanced diagnostic capabilities and state-of-the-art facilities and technologies; a supply chain-related cost savings as a result of volume discounts and ef?ciencies - economies of scale relating to IT, ?nance, insurance, equipment, supplies and other administrative services; 0 more ef?cient clinical and business practices resulting from the proposed merger of Physician Association, Inc. into Northeast Medical Group, Inc; 0 management expertise and efficiencies; and 0 greater financial stability resulting from being part of a large health system. EX. A, pp. 25, 37 21. Overall patient volume (discharges and patient days) has declined at over the past several years (see table below): TABLE 2 HISTORICAL AND CURRENT DISCHARGES Actual Volume Service (Last 3 Completed FYs) FY 2012 FY 2013? FY 2014? FY 2015* Medical/Surgical 10,319 10,139 9,525 9,609 Maternity (OBIGYN) 1,786 1,704 1,811 1,827 866 822 812 819 Rehabilitation 331 334 310 309 Pediatric 89 98 41 40 Newborn/Neonates 1 ,546 1 ,562 1 ,652 1 .666 Total 14,937 14,659 14,151 14,270 2015 annualized using 6 months of actual volume ?Inpatient demand declined due to the following factors: more stringent requirements for inpatient status CMS two~midnight rule), advances in technology and non?surgical options shifting care to the outpatient setting and iikely delays in seeking care due to high deductible health plans or lack of coverage. FY 2015 2 An obligated group aliows organizations to combine multiple business lines or assets to create a singte entity that becomes jointly and severally liable for the organization?s debt. An obligated group may be stronger financialiy than the sum of its individual members and generally leads to improved credit ratings, lower borrowing costs and enhanced capacity for future borrowing. Source: Corporation and Yale New Haven Health Services Corporation Page 8 of 35 Docket Number: 15?3 2033-CON volume is projected to increase and may be the result of Westerly?s maternity service closure andior program development initiatives in cardiac, oncology and surgical services at TABLE 3 HISTORICAL AND CURRENT PATIENT DAYS Actual Volume Service (Last 3 Completed FY 2012 FY 2013 FY 2014 FY 2015* Medical/Surgical 48,738 46,352 44,415 43,675 Maternity (OBIGYN) 4,890 4,264 4,804 5,108 6,433 6,367 6,679 7,101 Rehabilitation 4,721 4,536 4,494 4,730 Pediatric 238 213 129 134 Newborn/Neonates 5,537 5,581 5,811 6,183 Total 70,556 67,314 66,332 66,931 2015 is annualized using 10 months of actual volume ?inpatient demand declined due to the following factors: more stringent requirements for inpatient status CMS two?midnight rule), advances in technology and non~surgica options shitting care to the outpatient setting and likely delays in seeking care due to high deductible health plans or lack of coverage. FY 2015 volume is projected to increase and may be the result of Westeriy?s maternity service closure andfor program development initiatives in cardiac, oncology and surgical services at Ex. A, pp. 52?53 22. Inpatient discharges are projected to increase as a result of new clinical program development3 and the addition of more specialty care to eastern Connecticut and westerly Rhode Island. TABLE 4 PROJECTED DISCHARGES BY SERVICE Projected Volume Service FY 2016 FY 2017 FY 2018 FY 2019 MedicaUSurgical 9,649 I 9,633 9,607 9,608 Maternity (OBIGYN) 1,836 1,833 1,829 1,827 839 847 852 856 Rehabilitation 1310 310 310 310 Pediatric 61 77 93 108 NewbornlNeonates 1,696 1,712 1,727 1,741 Total 14,391 14,412 14,418 14,450 3 Potential new programs include: musculoskeletal, neurosurgery/spine, cardiovascular, general surgery, maternity and children?s services. Corporation and Yale New Haven Health Services Corporation Docket Number: TABLE 5 PROJECTED PATIENT DAYS BY SERVICE Projected Volume Service FY 2016 FY 2017 FY 2018 FY 2019 MedicallSurgical 42,852 42,150 41,489 41,512 Maternity (OBIGYN) 5,059 4,975 4,900 4,895 7,146 7,104 7,059 7,094 Rehabilitation 4,653 4,583 4,524 4,526 Pediatric 200 247 293 343 Newborn/Neonates 6,142 6,081 6,037 6,078 Total 66,052 65,140 84,302 84,448 EX. A, pp. 41, 53-54 Page 9 of 35 23. Following adoption of the proposal, target patient population will remain the same. There are no planned closures or reductions to any clinical services currently offered. Further, the Applicants are planning service enhancements and expansions to minimize the need for area residents to travel outside the service area for specialty care. Ex. A, pp. 32, 34 24. Clinical needs in the service area will be prioritized through a comprehensive strategic planning process undertaken by and Priority projects to be considered during the ?rst three years following approval of the proposal include: behavioral health; emergency/urgent care; heart and vascular services; medicine services; oncology; pediatrics; primary care; surgery/ ambulatory surgery; and women?s health. Exhibit E, p. 627; Late File 1, submitted August 2, 2016 Corporation and Yale New Haven Health Services Corporation Page 10 of 35 Docket Number: 25. Medicaid?covered patients account for 21.3% of discharges. The Applicants do not anticipate any signi?cant changes in payer mix as a result of the proposal. TABLE 6 MH CURRENT PROJECTED PAYER MIX Current Projected FY 2015 FY 2016 FY 2017 FY 2018 FY 20191 Payer Discharges Discharges Discharges Discharges Discharges Medicare" 5,603 39.3% 5,650 39.3% 5,658 39.3% 5,661 39.3% 5,673 39.3% Medicaid* 3,037 21.3% 3,062 21.3% 3,067 21.3% 3,068 21.3% 3,075 21.3% CHAMPUS 8 TriCare 1,771 12.4% 1,785 12.4% 1,788 12.4% 1,789 12.4% 1,793 12.4% Total Government 10,411 73.0% 10,498 73.0% 10,514 73.0% 10,518 73% 10,542 73% Commercial nsurers* 3,698 25.9% 3,729 25.9% 3,734 25.9% 3,736 25.9% 3,744 25.9% Uninsured 87 0.6% 88 0.6% 88 0.6% 88 0.6% 88 0.6% Workers Compensation 75 0.5% 76 0.5% 76 0.5% 76 0.5% 76 0.5% Total Non- Government 3,860 27.0% 3,892 27.0% 3,898 27.0% 3,900 27.0% 3,908 27.0% Totai Payer Mix 14,271 100% 14,391 100% 14,412 100% 14,418 100% 14,450 100% *Includes managed care activity 1 FY 2019 projections are imputed from FY 2015 percentages Ex. A, pp. 47, 856 26. Following approval of the proposal, will adopt ?nancial assistance (charity and free care) policies617 27. There are no planned changes to charge-master or to its existing payer contracts as a result of the proposal. plans to honor the terms of all existing agreements for their duration. Ex. A, pp. 57?58; Testimony of Mr. Tandler, Executive Director Finance, YN HHS, EX. PP, p. 136. 28. has assured price neutrality for for the remainder of the contract terms. The ?nancial terms and reimbursement rates for each provider are unique and based on individual provider?s cost structure. Once the contracts expire, they will be renegotiated and the new terms will be based on own individual cost structure and service area. Ex. E, p. 867; Testimony of Ms. President and Chief Executive Of?cer of EX. PP, pp. 145?146 29. The existing debt and pension obligations of will remain unchanged as a result of this proposal. Ex. A, p. 57 30. will become a member of the Obligated Group (current members include: Yale New-Haven Hospital, Bridgeport Hospital, Bridgeport Hospital Foundation, Northeast Medical Group, and Yale New?Haven Care Continuum), which enables Corporation and Yale New Haven Health Services Corporation Page 11 of35 Docket Number: 1. 5-32033-CON 31. 32. 33. 34. 35. participants to gain access to more favorable borrowing rates than otherwise would be available on their own. Ex. 8. p. 640 has experienced a loss from operations in each of the past four ?scal years (see table below): TABLET INCOMEHLOSS) FROM OPERATIONS FY 2013 FY 2014 FY 2016 FY 2016 YTD Operating Loss ($7,417,664) ($18,685,472) ($10,296,604) ($14,035,190) Source: Audited Financial Statements submitted to Late ?le #3 As of May 2016, the bond rating for its CHEFA Series bonds was downgraded by Standard and Poor?s to from an rating given three years earlier. 8861? indicated, however, that there is upward rating potential if integration with provides immediate improvement to ?nancial performance and balance sheet stability. Pre?led testimony of Bruce D. Cummings, President CEO of p. 888 As of August 2016, Fitch Ratings downgraded State of Connecticut Health and Educational Facilities Authority revenue bonds, Series (2011), issued on behalf. of from A (stable) to (negative) due to the ?continued trend of weakening pro?tability stemming from softer volumes, shift to outpatient utilization, less favorable reimbursement and escalating Connecticut provider tax burden.? Exhibit SS, Fitch Ratings Report has agreed to commit as much as $300 million in resources in eastern Connecticut and western Rhode Island over the next ?ve years to enhance clinical and operational capabilities and services. Ex. A, p. 39 The funding sources of capital commitment will be: 0 operating cash ?ows from 0 operating cash flows from and a cash reserves from EX. E, p. 624 Corporation and Yale New Haven Health Services Corporation Page 12 of35 Docket Number: 36. 37. 38. 40. The table below provides a preliminary capital investment plan. At least of the total will be allocated for the following capital infrastructure projects at TABLE 8 PRELIMINARY CAPITAL INVESTMENT PLAN FOR (IN THOUSANDS) Five Year Description Total Capital infrastructure to maintain and improve the equipment and facilities at $163,000 Full implementation of EPIC and other clinical systems upgrades 34,000 Rebranding initiatives at 2,000 Clinical program development and related capital expenditures 15,000 Avoidance of population health infrastructure costs at 10,000 Unspeci?ed; to be allocated after a more detailed assessment 76,000 Total estimated capital expenditures $300,000 Ex. E, p. 625?626 The most recent credit ratings for are as follows: 0 Moody?s: Aa3/ Stable Outlook 0 A+/Positive Outlook 0 Fitch: Stable Outlook Ex. E, p. 641 The Applicants have stated that multiple options are available to fund the capital commitment in the event of a operating loss, including the use of cash on hand or an debt offering. Ex. EL, pp. 624-625 . The $3 00 million is a commitment over the next ?ve years to enhance services, infrastructure and operations at A portion of the money will come from operational improvements at however will be a hard investment made by A signi?cant amount of this investment will be used for new information technology and population health infrastructure, as well as physician recruitment. In addition, the proposal will help expand the clinical areas determined to be under?supported in the and Westerly communities, including primary care, surgery, behavioral health, women/children's services and emergency critical care services. Testimony of Ms. President and Chief Executive Of?cer Ex. PP, pp. 45?46 commitment to is dependent upon the performance of community need, strategic plan and mutually agreed upon business plans that achieve a positive return on investment. will provide based on the strategic plan and an additional for speci?c clinical and operational initiatives (years two through ?ve of the af?liation). Ex. E, p.624 Corporation and Yale New Haven Health Services Corporation Page 13 of35 Docket Number: 15-32033-CON 41. The commitment will be used for the following capital expenditures at EPIC installation and other IT investments; rebranding and communication; population health infrastructure; clinical programs and services for eastern Connecticut and western Rhode Island; funding for new physicians; and other miscellaneous expenditures including staff augmentation and clinical support. Ex. E, p. 626?628 42. plans to use the remaining capital commitment balance in southeastern Connecticut for the following services: expansion of primary care network including ambulatory surgery; access to pediatric specialty services; development of a musculoskeletal center; expansion of maternal fetal medicine and obstetric capabilities; enhancement of Smilow Cancer Hospital oncology services; expansion of bariatric and/or laparoscopic surgical programs; expansion of neuromuscular and stroke programs; development of a multidisciplinary vascular program and enhancement of cardiac services; enhancement of endocrinology/thyroid services; development of population health and risk contracting capabilities; continued access to SkyHealth; expanded emergency services; and physical plant and infrastructure renovations. Ex. A, Af?liation Agreement p. 99 8a; 100 43. With the exception of an initial FY 2016 1055, the Applicants project incremental gains at from FY 2017 through FY 2019. These projected gains are largely due to anticipated operating expense reductions resulting from ownership. TABLE 9 PROJECTED INCREMENTAL REVENUES AND EXPENSES (in thousands) FY 2016 FY 2017 FY 2018 FY 2019 Revenue from Operations ($13,647) ($24,943) ($19,073) ($14,036) Total Operating Expenses ($13,575) ($32,219) ($31,337) ($29,548) Gain?Loss) from Operations $7,276 $12,265 $15,512 Ex. p. 857 Corporation and Yale New Haven Health Services Corporation Page 14 of 35 Docket Number: 44. Similarly, an overall loss is projected at in FY 2016. However, operating gains of and are projected in FY 2017, FY 2018 and FY 2019, respectively, if the proposal is approved. PROJECTED REVENUES WITH CON (in thousands) FY 2016 FY 2017 FY 2018 FY 2019 Total Operating Revenue $455,074 $446,783 $455,808 $461,104 Total Operating Expenses $463,843 $432,214 $436,748 $444,229 Gain!(Loss) from Operations ($8,769) $14,569 $19,060 $18,875 Ex. E, p. 857 45. projected incremental cost savings are summarized. in the table below: TABLE 11 PROJECTED INCREMENTAL OPERATING EXPENSE REDUCTIONS (in thousands) FY 2016 FY 2017 FY 2018 FY 2019 Total Reductions* $13,575 $32,219 $31 ,337 $29,458 *Operating expense reductions are attributable to the following: salaries and wages, fringe bene?ts, physician fees, supplies and drugs, malpractice insurance, lease expense and miscellaneous operating expenses. Ex. E, p. 857 46. acquisitions of Bridgeport and Greenwich Hospitals have resulted in improved ?nancial performance and cost savings for both hospitals. Additional system savings were realized with the integration of the former Hospital of St. Raphael into Yale New Haven Hospital. 0 The affiliation of Bridgeport and Greenwich Hospitals, along with the merger of the Hospital of St. Raphael into has resulted in supply chain cost savings and capital avoidance of since FY 2010. These savings were the result of the standardization of supply and pharmaceutical purchases, the integration of service contracts, volume discounts and rebates and ef?cient utilization of information technology and medical equipment within the system. In 2011, the consolidation of property insurance policies under a single contract with generated annual reoccurring savings of $147,000; $84,000 is attributable to cost reductions at Bridgeport and Greenwich Hospitals. I The integration of the Hospital of St. Raphael into has yielded cost savings of as of November 30, 2015 in the areas of supply chain management, insurance, back of?ce functions and the standardization of clinical practices. Ex. E. pp. 869-870 Corporation and Yale New Haven Health Services Corporation Page 15 of35 Docket Number: 47. 48. 49. 50. 51. 52. 53. 54. 55. 56. 57. The ?nancial performance of both Bridgeport and Greenwich Hospitals has improved since affiliating with In FY 2015, Bridgeport and Greenwich Hospitals reported operational gains of and respectively. Ex. E. p. 874 and Audited Financial Statements submitted to OHCA. A Department of Public Health survey conducted on July 13, 2016 found that was not in substantial compliance with certain Conditions of Participation required by the Centers for Medicare Medicaid Services As a result, deemed status4 was removed by CMS. Subsequently, submitted a Corrective Action Plan to DPH on July 29, 2016. Late file #5 OHCA is currently in the process of establishing its policies and standards as regulations. Therefore, OHCA has not made any ?ndings as to this proposal?s relationship to any regulations not yet adopted by OHCA. (Conn. Gen. Stat. This CON application is consistent with the Statewide Health Care Facilities and Service Plan. (Conn. Gen. Stat. The Applicants have established that there is a clear public need for the proposal. (Conn. Gen. Stat. The Applicants have demonstrated that the proposal is ?nancially feasible. (Conn. Gen. Stat. The Applicants have satisfactorily demonstrated that the proposal will maintain quality, accessibility and cost effectiveness of health care delivery in the region. (Conn. Gen. Stat.? 19a- 63 The Applicants have shown that there would be no change in the provision of health care services to the relevant populations and payer mix, including access to services by Medicaid recipients and indigent persons. (Conn. Gen. Stat. The Applicants have satisfactorily identi?ed the population to be affected by this proposal. (Conn. Gen. Stat. The Applicants? historical provision of treatment in the service area supports this proposal. (Conn. Gen. Stat. The Applicants have satisfactorily demonstrated that this proposal would not result in an unnecessary duplication of existing services in the area. (Conn. Gen. Stat. 4 Sections 1865 of the Social Security Act and CMS regulations state that a provider or supplier accredited by a CMS?approved Medicare accreditation program will be ?deemed? to meet all of the Medicare Conditions of Participation for hospitals. In accordance with Section 1864 of that Act, State Survey Agencies may conduct, at direction, surveys of deemed status providers in response to a substantial allegation of noncompliance or when CMS determines a full survey is required after a substantial allegation survey identi?es substantial noncompliance. Corporation and Yale New Haven Health Services Corporation Page 16 of 35 Docket Number: 15?3 58. The Applicants have demonstrated that there will be no reduction in access to services by Medicaid recipients or indigent persons. (Conn. Gen. Stat. 59. The Applicants have demonstrated that the proposal will not negatively impact the diversity of health care providers and patient choice in the region. (Conn. Gen. Stat. 60. The Applicants have satisfactorily demonstrated that the proposal will not result in any consolidation that would affect health care costs or access to care. (Conn. Gen. Stat. 19a- 639(a)(12)) Corporation and Yale New Haven Health Services Corporation Page 17 of 35 Docket Number: 1 Discussion CON applications are decided on a case by case basis and do not lend themselves to general applicability due to the uniqueness of the facts in each case. In rendering its decision, OHCA considers the factors set forth in l9a?639(a) of the Statutes. The Applicants bear the burden of proof in this matter by a preponderance of the evidence. Jones v. Connecticut Medical Examining Board, 309 Conn. 727 (2013). is a non?stock, tax?exempt corporation that is the sole member of subsidiaries operating acute care hospitals and community-based services throughout southeastern Connecticut and southwestern Rhode Island. is the parent company of an acute care community hospital located in New London, Connecticut. is licensed for 280 general hospital beds (plus 28 bassinets) and provides a full range of inpatient, outpatient and ancillary services to residents of southeastern Connecticut. is a Connecticut non-stock, tax-exempt corporation established in 1983 to provide support services to the Yale New Haven Health System a network of af?liated health care providers, the foremost being Yale?New Haven Hospital is also the parent company of Greenwich and Bridgeport Hospitals. FF4-FF5 Community hospitals like are increasingly seeking to integrate with larger health systems to gain resources and the expertise necessary to meet the demands of health care reform. As a result of some recent ?nancial challenges and the long standing collaborative relationship between and the respective boards agreed to execute an Af?liation Agreement and seek regulatory approval to unite the two health systems. Accordingly, the Applicants submitted a Hart-Scott?Rodino ?ling to the FTC on August 7, 2015 and were informed on September 8, 2015 that the waiting period would be allowed to expire without further investigation. FF8 Following this noti?cation, the Applicants submitted their proposal to OHCA, requesting authorization to transfer ownership of and its subsidiaries to C, such that shall become the sole corporate member of Following the transfer of ownership, will continue to operate as an independently licensed hospital, with its own separate medical staff, bylaws, rules, regulations and elected of?cers. FF9 The Board will include a appointee, however, the scope of responsibility and authority will largely be unchanged. The Board will continue to be responsible for the oversight and management of patient care, safety, licensure, accreditation, medical staff credentialing, election and removal of of?cers and approval of actions not otherwise reserved to and/ or There are no planned closures or reductions to any clinical services currently offered at as a result of the proposal. The Applicants are currently planning service enhancements and expansions to help minimize the need for residents to travel outside the service area for specialty care. FF23 Further, the proposal will expand under-supported clinical areas in the and Westerly communities, including primary care, surgery, behavioral health, women] children's services and emergency critical care services. FF39. The Applicants expect that clinical variation will decrease through the use of standardized protocols resulting from the adoption of Epic, Corporation and Yale New Haven Health Services Corporation Page 18 of. 35 Docket Number: Lawson and other IT platforms used by thus improving the experience and quality of patient care. FF20 The Hospital will continue to serve Medicaid patients and the indigent. Medicaid is the primary payer for approximately one out of ?ve patients served by The Applicants do not anticipate any signi?cant changes in payer mix over the next three years. FF25 Following approval of the proposal, will adopt charity and free care ?nancial assistance policies. FF26 There are no planned changes to charge-master or to its existing payer contracts as a result of the proposal. plans to honor the terms of all existing agreements for their duration. Once existing contracts expire, they will be renegotiated with new terms based on own individual cost structure and service area demographics. FF2 7-FF28 As a core component of the proposal, has agreed to a commit up to in resources over a ?ve?year period to enhance clinical and operational capabilities in eastern Connecticut and western Rhode Island. FF34 A signi?cant amount of this investment will be used for new information technology and population health infrastructure, as well as physician recruitment and the development of new clinical programs. FF39 Through the infusion of capital, will be better positioned to develop state-of?the?art facilities, technologies and diagnostic capabilities. In addition, will bene?t from ef?ciencies resulting from economies of scale relating to IT, ?nance, insurance, equipment, supplies and other administrative services and will be able to reduce costs through supply chain- related savings as a result of volume discounts. FF20 is currently experiencing some ?nancial challenges, posting operational losses in each of the past four ?scal years (FYs 2013?2016). FF3I In addition, recently had its Series bond rating downgraded by both Standard and Poor?s and Fitch Ratings to (investment lower medium grade) and (negative), respectively. Fitch stated the downgrading was due to the ?continued trend of weakening pro?tability stemming from softer volumes, shift to outpatient utilization, less favorable reimbursement and the escalating Connecticut provider tax burden.? Approval of the proposal should help mitigate future operational losses at and help stabilize its future credit ratings. With the exception of an initial FY 2016 loss, the Applicants project incremental operating gains at from FY 2017 through FY 2019. FF44 These projected gains are largely due to the anticipated ability of to reduce Operating expenses as a result of ownership. Operating expenses are projected to decrease in FYs 2016-2019 by and respectively. These cost savings are attributable to salaries and wages, fringe bene?ts, physician fees, supplies and drugs, malpractice insurance, lease expense and miscellaneous operating expense reductions. FF44 As a result of the potential for improved operational and ?nancial performance, cost savings and capital improvements, the Applicants have demonstrated the proposal to be ?nancially feasible and that the overall ?nancial strength of the state?s health care system will be improved. Corporation and Yale New Haven Health Services Corporation Page 19 of 35 Docket Number: 15 -3 future ?nancial viability and its patient population?s access to community health services can best be achieved by maintaining and building upon its existing relationship with Integration with will afford the opportunity to expand services, including its primary care network and ambulatory surgery offerings and to develop new local access points for vascular and musculoskeletal treatment. FF42 The proposal will help provide needed capital and resources to improve ?nancial strength and preserve as an important source for health care in the local community. Thus, the Applicants have demonstrated a clear public need for the proposal. The ownership change resulting from the proposal will improve the community?s health by delivering high quality, cost effective, coordinated care across a broad continuum. Therefore, the Applicants have demonstrated that the proposal is consistent with the Statewide Health Care Facilities and Services Plan. Corporation and Yale New Haven Health Services Corporation Page 20 of35 Docket Number: 15-32033-CON Order Based upon the foregoing Findings of Fact and Discussion, the Applicants? request for the transfer of ownership of Corporation to Yale New Haven Health Services Corporation, is hereby Approved under Conn. Gen. Stat. 19a?639(a) subject to the enumerated conditions (the ?Conditions?) set forth below. Unless expressly provided otherwise, all Conditions of this Order shall, to the extent applicable, be binding on the Applicants, their affiliates, successors and assigns, regardless of whether Corporation remains the parent company and sole shareholder of OHCA and any successor agency shall have the right to enforce the Conditions by all means and remedies available to it under law and equity, including but not limited to, the right to impose and collect a civil penalty under Conn. Gen. Stat. l9a?653 against any person or health care facility or institution that fails to file required data or information within the prescribed time periods set forth in this Order. All references to days in these Conditions shall mean calendar days. 1. Within twenty (20) days following the Closing Date of the transfer of ownership authorized by this Order, shall submit schedules to OHCA setting forth inpatient bed allocation and the location and hours of operation for all outpatient services, by department, as of the Decision Date and publish this same information on the applicable website of OHCA is imposing this Condition to ensure continued access to health care services for the patient population. Legal and Factual Basis: Conn. Gen. Stat. FF21-22. Within twenty (20) days following the Closing Date of the transfer of ownership authorized by this Order, shall notify OHCA 0f the Closing, in writing, and shall supply final execution copies of all agreements related to same, including but not limited to: a. the Af?liation Agreement, including any and all schedules and exhibits; and b. Bylaws or similar governance documents for as well as for may redact from the Affiliation Agreement any information that is exempt from disclosure under Conn. Gen. Stat. 1?210. If redacts materials in accordance with the previous sentence, it shall provide a list to OHCA, which identi?es in general terms the nature of the redacted material and Why it is claimed to be exempt for public record purposes. OHCA is imposing this Condition to verify that the proposal will improve quality, accessibility and cost effectiveness of health care delivery in the region. Legal and Factual Basis: Cor/m. Gen. Stat". I 961?639(5 FF 6, 9 Following the completion of 2016 Community Health Needs Assessment (CHNA), shall participate with and the key community stakeholders and health organizations, in conducting future CHNAs and shall provide a copy of the 2016 CHNA and its Implementation Strategy to OHCA within thirty (30) days of completion. and the participants shall utilize Healthy Connecticut State Health Improvement Plan data and priorities as the starting point for the new CHNA (available at health planning/sha? Corporation and Yale New Haven Health Services Corporation Page 21 of 35 Docket Number: 15-32033-CON ship/hct2020/hct2020 state 111th impv 325l4pdt), as well as any applicable community health improvement plan issued by any local health department in the Service Area.5 The Implementation Strategy shall also adopt the evidence-based interventions identi?ed in the Centers for Disease Control 6/18 initiative (available at to the extent the health priorities identi?ed in the CHNA correlate to the health conditions identi?ed by the CDC and provide information on how any patient outcomes related to the Implementation Strategy will be measured and reported to the community. In the event that has already substantially completed its 2016 Implementation Strategy at the time of the signing of this Order, it may submit the information requested in the 6/18 initiative as an addendum Within six (6) months of the Closing Date. The CHN A and the Implementation Strategy shall be published on the website of Until such time as the CHNA and Implementation Strategy are submitted to OHCA, shall continue to support and implement current CHNA. OHCA is imposing this Condition to ensure continued access to health care services for the patient population. Legal and Factual Basis: Slat. FF 3,16. 18 4. Within one hundred and eighty (180) days following the Closing Date, shall submit a plan demonstrating how health care services will be provided by for the ?rst three years following the Transfer Agreement, including any consolidation, reduction, or elimination of existing services or introduction of new services (the ?Services Plan?). The Services Plan will be provided in a format mutually agreed upon by OHCA and OHCA is imposing this Condition to ensure continued access to health care services for the patient population. Legal and Factual Basis: Conn. Stal. (6) FF 23 5. Until such time as the Services Plan is submitted, shall provide OHCA with notice of any reallocation of inpatient beds and relocation of outpatient services for speci?c to those services that existed at as of the Decision Date. Such notice shall be provided within ten (10) days of any such reallocation or relocation and published on the website pages of OHCA is imposing this Condition to ensure continued access to health care services for the patient population. Legal and Facraal Basis: Slat. 1951-6396596), (6) FF 23 6. Within one hundred and eighty (180) days following the Closing Date, the Applicants shall file with OHCA the total price per ?unit of service? for each of the top 25 most frequent MS-DRGS (inpatient) and top 25 most frequent CPT codes (outpatient) for services. The ?rst ?ling shall be for the period September 1, 2015-August 30, 2016. The Applicants shall provide the same information for three (3) full ?scal years thereafter, within sixty (60) days following the end of a ?scal year. OHCA shall provide the format for the ?ling. OHCA is imposing this condition to ensure that the proposed transfer of ownership does not adversely affect health care costs. Legal and Factual Basis: Slat. 5 Other tools and resources which the Applicants are encouraged to consider include County Health Rankings and CDC Community Health Improvement Navigator in order to assist with the Study process in terms of an understanding of social, behavioral, and environmental conditions that affect health, identifying priorities, and the use of evidence-based interventions. Corporation and Yale New Haven Health Services Corporation Page 22 of 35 Docket Number: 7. Within one hundred and eighty (180) days following the Closing Date and thereafter until the capital commitment is satis?ed, shall submit to OHCA a report on the capital investments (?Capital Investment Report?) it has made in and its affiliates from the Commitment Amount. The Capital Investment Report shall include the following in a format to be agreed upon: a. A list of the capital expenditures that have been made in the prior one hundred and eighty (180) days with descriptions of each associated project; and b. An explanation of why each expenditure was made and a timeframe for the roll out of the associated capital project (including estimated beginning, ending and startup/operation dates); and c. The funding source of the capital investment indicating whether it was drawn from operating revenue, capital contributions from or another source and, if ?mding was drawn from another source, indicating the source. For purposes of this Order, semi-annual periods are October 1?March 31 and April 1 September 30. The required information is due no later than two (2) months after the end of each semi-annual period. Due dates are May 31St and November 30th, beginning November 30, 2016. The reports shall be signed by or Chief Financial Officer. OHCA is imposing this Condition to ensure continued access to health care services for the patient population and to verify the continued ?nancial feasibility of the project. Legal and Factual Basis: Star. dc FF78, 35,36, 38?42 Corporation and Yale New Haven Health Services Corporation Docket Number: Page 23 of 35 8. For three (3) years following the Closing Date, shall submit to OHCA a ?nancial measurement report. This report shall be submitted on a semi?annual basis and show current month and year-to-date data and comparable prior year period data for and The required information is due no later than two (2) months after the end of each semi-annual period. Due dates are May 31St and November beginning November 30, 2016. The following financial measurements/indicators should be addressed in the report: Financial Measuremen?lndicators A. Operating Performance 1. Operating Margin . Non-Operating Margin . Total Margin . Liquidity . Current Ratio . Days Cash on Hand . Days in Net Accounts Receivables . Average Payment Period . Leverage and Capital Structure . Long?term Debt to Equity . Long-term Debt to Capitalization . Unrestricted Cash to Debt . Times interest Earned Ratio . Debt Service Coverage Ratio . Equity Financing Ratio . Additional Statistics . Income from Operations . Revenue Over/(Under) Expense . Cash from Operations . Cash and Cash Equivalents . Net Working Capital . Free Cash Flow (and the elements used in the calcuiation) . Unrestricted Net Assets/Retained Earnings Corporation and Yaie New Haven Health Services Corporation Page 24 of 35 Docket Number: 10. ll. 8. Bad Debt as of Gross Revenue 9. Credit Ratings FITCH or Moody's) OHCA is imposing this Condition to ensure continued access to health care services for the patient population and to verify the continued ?nancial feasibility of the project. Legaz andFacrual Basis: Stat. FF 31?45 Following the Closing Date, will adopt ?nancial assistance (charity and free care) policies or adopt other policies that are at least as generous and benevolent to the community as current policies, consistent with state and federal law. These policies shall be posted on the website pages of and as additionally required by applicable law. OHCA is imposing this Condition to ensure continued access to health care services for the patient population. Legal and Factual Basis: Stat. 19a- 639(a)(5), (6) a FF 26 For three (3) years following the Closing Date, shall provide written notice to OHCA of any modi?cation, amendment or revision to the charity care, indigent care and community volunteer services policies of within thirty (30) days of such change. The notice of these changes shall be accompanied by copies of any revised policies and the notice and revised policies shall be posted on the website of simultaneously with their submission to OI-ICA. OHCA is imposing this Condition to ensure continued access to health care services for the patient population. LegaZ and Factual Basis: Stat. 19a- 613(5), (6) a FF 26 The Applicants shall maintain community bene?t programs and community building activities for for three (3) years after the Closing Date consistent with most recent Schedule of IRS Form 990 or shall provide such other community bene?t programs and community building activities that are at least as generous and benevolent to the community as current programs, and the Applicants shall apply no less than a 1% increase per year for the next three (3) years toward the community building activities in terms of dollars spent. In determining participation and investment in both community bene?ts and community building activities, the Applicants shall address the health needs identi?ed by the applicable CHNA in effect at the time and the population health management objectives, including social determinants of health, contained in the related Implementation Strategy. a. On an annual basis, shall identify the amounts and uses related to community benefits and community building and shall discuss how such investments and support are being applied toward the health needs identi?ed in the CHNA and population health management objectives. Such reporting shall be filed within thirty (30) days of the anniversary date of the Closing for three years and shall be posted on website. OHCA is imposing this Condition to ensure continued access to health care services for the patient population. LegaZ and Factual Basis: Stat. FF19-20. Corporation and Yale New Haven Health Services Corporation Docket Number: 12. 13. I4. 15. Page 25 of35 The Applicants shall work toward making culturally and linguistically appropriate services available and integrated throughout operations. Speci?cally, the Applicants shall ensure that shall take reasonable steps to provide meaningful access to each individual with limited English pro?ciency eligible to be served or likely to be encountered in its health programs and activities, in accordance with the implementing regulations of Section 1557 of the Patient Protection and Affordable Care Act. Additionally, the Applicants shall provide at appropriate insurance navigator services for patients and, where appropriate, English as a second language and cultural competency training for employees. In complying with this Condition, the Applicants shall ensure that shall be guided by the National Standards for Culturally and Linguistically Appropriate Services in Health and Health Care published by the US. Department of Health and Human Services? Of?ce of Minority Health. For three (3) years following the Closing Date, shall submit a written report on its activities directed at meeting this Condition. Such reporting shall be ?led within thirty (30) days of the anniversary date of the Closing and shall be posted on website. OHCA is imposing this Condition so as to ensure continued access to health care services for the patient population. Legal and Factual Basis; Star. FF 13? 16 The Applicants shall abide by all requirements of licensure that may be imposed by the Facility Licensing and Investigations Section of the Department of Public Health in any Pie-Licensing Consent Order or similar agreement that L18 may enter with these parties. OHCA is imposing this Condition to ensure that quality health care services are provided to the patient population. Legal and Factual Basis: Star. 19a?490, Wat-493, FF 48 For three (3) years following the Closing Date, the Applicants shall allow for one (1) community representative to serve as voting members of Board of Directors with rights and obligations consistent with other voting members under Board of Director Bylaws. The Applicants shall select the community representative in a manner that ensures the appointment of an unbiased individual who will fairly represent the interests of the communities served by OHCA is imposing this Condition to ensure continued access to health care services for the patient population. Legal and Factual Basis: Star. l) a FF 20-11 Within sixty (60) days after the Closing Date, shall contract with an Independent Monitor who has experience in hospital administration and regulation. The Independent Monitor shall be retained at the sole expense of Representatives of OHCA and FLIS will approve the Independent Monitor?s appointment. The Independent Monitor shall be engaged for a minimum period of two (2) years following the Closing, which may be extended for another year at and/or discretion. The Independent Monitor will be responsible for monitoring the Applicants? compliance with the Conditions set forth in this Order. The Applicants shall provide the Independent Monitor with appropriate access to and its applicable records in order to enable the Independent Monitor to ful?ll its functions hereunder. OHCA is imposing this Condition to ensure continued access to health care services for the patient Corporation and Yale New Haven Health Services Corporation Docket Number: 15-32033-CON 16. 17. Page 26 0f35 population and to verify and monitor compliance with the Conditions set forth herein. Legal andFactual Basis: Conn. Gen. Stat, FF 48 The Independent Monitor will report to both OHCA and FLIS. The Independent Monitor shall conduct on?site visits of on no less than a semi?annual basis to assess adherence to Consent Order. The Independent Monitor shall furnish a written report of his or her assessment to OHCA and L18 within thirty (30) days of the completion of each on-site review. will have the opportunity to review and provide written responses to the report. As OHCA deems necessary, the Independent Monitor shall meet with OHCA and FLIS personnel to discuss the written report and will perform additional periodic reviews. OHCA is imposing this Condition to ensure continued access to health care services for the patient population and to verify and monitor compliance with the Conditions set forth herein. Legal and Factual Basis: Conn. Gen. Star. (4M5), FF 48 For three (3) years following the Closing Date, the Applicants shall hold a meeting of the Board and Board (?Joint Board Meetings?) at least twice annually. Such Joint Board Meetings shall be followed by a meeting to which the public is invited in advance and at which the public is informed of activities and afforded an opportunity to ask questions and make comments. OHCA is imposing this Condition to ensure continued access to health care services for the patient population. Legal and Factual Basis: Stat. (7), FF 1041 Additional Conditions Agreed to by and Given the importance of this af?liation to Eastern Connecticut, both and have voluntarily agreed to the following additional conditions for the purpose of representing its ongoing commitment to the provision of high quality affordable health care services in Eastern Connecticut. To the extent that any of these conditions are duplicative or vary from other conditions imposed herein, and agree to consult with OHCA as needed for the purpose of ensuring that and fulfill the spirit and intent of the entire order. The following are ways in which and shall demonstrate these commitments for a period of not less than five years (except as otherwise noted) following the Closing of the affiliation of with 18. 19. shall continue to maintain emergency room services, inpatient general medicine services, cardiology services (including emergency and elective PCI), inpatient obstetrics/ gynecology services, inpatient behavioral health services, critical care unit services, and oncology services, which such services shall assure patient affordability and adhere to standards of care, quality, and accessibility and re?ect local community need. and shall develop a strategic plan to focus on the retention and enhancement of healthcare services in the primary service area, i.e. towns served by which assures patient affordability and is consistent with appropriate standards of care, quality, and accessibility. Such plan shall seek to minimize travel for patients Corporation and Yale New Haven Health Services Corporation Docket Number: 20. 21. Page 27 of 35 requiring clinical services that can be provided appropriately at service sites, and to support the return of patients back to and its medical staff for care should patients be referred to other affiliated facilities for specialized care not available locally. The strategic plan shall include but not be limited to the following components: a. shall enhance access to primary care physician services in the Eastern Connecticut region by recruiting and retaining eight additional primary care providers and other providers required to respond to local community need, in accordance with the community needs assessment in paragraph 31 herein and shall accommodate improvements to delivery models including value based care during such period. shall demonstrate annual progress toward achieving these goals. b. and shall abide by the resource commitments for clinical service programming as set forth in the Affiliation Agreement. and shall maintain the current and Lawrence Memorial Medical Group (LMMG) commercial health plan contracts in effect as of the Date of Closing for a period following the Date of Closing to December 31, 2017. Rates or scheduled increases in such previously negotiated rates that are in effect on the Date of Closing shall be maintained for a period ending December 31, 2017. Any commercial health plan contracts that expire prior to December 31, 2017 shall be extended to December 31, 2017 and any contracts Without expiration dates shall be continued under their current previously negotiated terms for a period from the Date of Closing to December 31, 2017. No increase in negotiated rate schedules shall be negotiated during the periods set forth in this paragraph. Upon the expiration of any such commercial health plan contracts after such period, and shall negotiate new rates based on post?Closing cost structure, taking into account any cost or price reductions, i.e. efficiencies, achieved as a result of the af?liation and in addition as set forth in paragraph 25 herein. shall not impose a single System-wide rate and shall, for and LMMG, maintain a negotiated rate structure re?ective of the market conditions applicable generally to hospitals and medical foundations in Eastern Connecticut. For a period of five years from the Date of Closing in the case of and twenty? eight months from the Date of Closing in the case of LMMG, any annual increase in the total price per unit of service (as de?ned below) for and LMMG shall be subject to a cap determined through the process set forth below. It is the intent of the parties that such cap shall serve as a cap for the purpose of assuring patient affordability for services delivered by and LMMG. With respect to the proposed merger of LMMG and Northeast Medical Group (NEMG): Corporation and Yale New Haven Health Services Corporation Page 28 of 35 Docket Number: 1.5?3 2033-CON a. LMMG and NEMG will integrate as of the Closing Date, and when NEMG is able to abide by the commitment set forth in paragraph 20 above, i.e. physicians providing services through NEMG to patients, that were not providing services as of the Date of Closing, shall charge prices for services (site speci?c charges) based upon LMMG commercial health plan contracts and total price per unit of service, LMMG and NEMG shall implement the statutory merger contemplated in the Certi?cate of Need Application. . Physicians who are hired, recruited or contracted by a af?liate to provide professional services (other than in a licensed hospital department) in the primary service area (which may from time to time change), currently the communities of East Lyme, Groton, Ledyard, Lyme, Montville, New London, North Stonington, Old Lyme, Preston, Salem, Stonington and Waterford, and in the following specialties shall be billed at the LMMG commercial health plan negotiated rates subject to the provisions of paragraph 20: family medicine; general medicine; internal medicine; obstetrics and gynecology; endocrinology; and Current LMMG physicians providing services in the primary service area as of the Date of Closing in any specialties shall be subject to the provisions of paragraph 20. 22. Within ninety days of the Date of Closing, shall initiate a cost and market impact review which shall comply with Connecticut General Statute Section l9a?639f, which such analysis shall include and shall be utilized to establish the baseline cost structure set forth below: a. Establishing a baseline cost structure and total price per unit of service (the ?baseline and establishing a cap on annual increases in total price per unit of service (as de?ned below) for and LMMG (the ?annual CMIR update?). shall retain an independent consultant, subject to approval, to conduct the baseline CMIR and the annual CMIR update and shall pay all costs associated with the cost and market review. To the extent that all data is not available to comply with the provisions of section l9a?639f the baseline CMIR shall be adjusted to re?ect such information when it becomes available. In conducting the baseline CMIR and annual CMIR update, the cost and market impact review shall analyze the factors relative to and LMMG in accordance with subsection of section 19a?639f of the general statutes and the Eastern Connecticut market more specifically: and size and market share within their primary and secondary service areas; and prices for units of service, including its relative price compared to other providers for the same services in Eastern Connecticut; (0) and LMMG cost and cost trends in comparison to total healthcare expenditures statewide; the availability and accessibility of services similar to those provided by and LMMG in their primary and secondary service areas; the role of and LMMG in serving at-risk, underserved and government payer populations, including those with behavioral, substance use disorder and mental health conditions, within their primary Corporation and Yale New Haven Health Services Corporation Page 29 of 35 Docket Number: 15-32033-CON and secondary service areas; the role of and LMMG in providing low margin or negative margin services within their primary and secondary service areas; general market conditions for hospitals and medical foundations in the state and in Eastern Connecticut in particular; and and other conditions that the independent consultant determines to be relevant to ensuring that and LMMG prices do not exceed the market price for similar services in Eastern Connecticut. In recognition that the baseline CMIR pursuant to Connecticut General Statute Section 19a-63 9f shall be conducted after the Date of Closing, in the event that the baseline CMIR ?nds a likelihood of materially increased prices as a result of the af?liation with notwithstanding these conditions, the Commissioner of Public Health (Commissioner) and shall meet and confer for the purposes of determining further conditions as necessary to correct such condition and to create a performance improvement plan to address the conditions. The Commissioner shall determine whether is in compliance with such performance improvement plan. Prior to the end of each ?scal year, the independent consultant shall conduct the annual CMIR update and use the results of such annual CMIR update to establish a cap on any increase in the price per unit of service for the upcoming fiscal year. Nothing herein shall prohibit the independent consultant from considering and recommending any recommendations of the Certi?cate of Need Task Force on cost containment measures or a cap on annual cost or price increases. The independent consultant shall report to and take direction from the . Commissioner. The independent consultant in establishing the cap shall take into consideration the cost reductions re?ective of the ef?ciencies resulting from the af?liation and the annual cost of living of the primary service area or the Eastern Connecticut area. The independent consultant shall provide the baseline CMIR and the annual CMIR update to OHCA Within thirty days of completion. OHCA shall keep con?dential all nonpublic information and documents obtained as part of the baseline CMIR and the annual CMIR update and shall not disclose the information or documents to any person without the consent of and unless required to do by law. The con?dential information and documents shall not be public records and shall be exempt from disclosure under Connecticut General Statute Section 1-210. 23. For purposes of determining the price per unit of service: a. A ?unit of service? for inpatient hospital services shall be a case categorized by an diagnosis code or a Diagnosis?Related Group (DRG) code and identi?ed by the Connecticut Department of Insurance pursuant to PA. 15-146 Section 2 as among the ?fty most frequently occurring acute care hospital inpatient primary diagnoses, the ?fty most frequently provided acute care hospital inpatient Corporation and Yale New Haven Health Services Corporation Docket Number: 24. 25. 26. 27. 28. Page 30 01?35 principal procedures, and the twenty-?ve most frequent inpatient surgical procedures. b. A ?unit of service? for outpatient hospital services shall be a procedure or service categorized by a Current Procedural Terminology (CPT) or Healthcare Common Procedure Coding (HCPC) code and identi?ed by the Connecticut Department of Insurance pursuant to PA. 15-146 Section 2 as among the ?fty most frequently provided outpatient procedures, the twenty-?ve most frequent outpatient surgical procedures and the twenty-?ve most frequent imaging procedures performed in the state. c. A ?unit of service? for physician services shall be a work Relative Value Unit d. The baseline to be established as of the Date of Closing for total price per unit of service for physician services and inpatient and outpatient hospital services is inclusive of all administrative overhead, other ancillary fees including, but not limited to facility fees and the total price per unit shall re?ect the total price of such service. c. All administrative costs for overhead, ancillary fees, facility fees or any other fees which are re?ected in the total price per unit shall be determined by the independent consultant to be within any annual cap established. and shall not convert any physician of?ces (including those that will be merged into NEMG) to hospital-based status. shall attain cost savings as a result of the af?liation with as described in the CON application. As described in the Affiliation Agreement, is committed to maintaining local governance at The Board of Directors shall continue as a ?duciary board composed of a majority of members who reside in the communities served by with the only change in composition being the addition of the President/CEO of (or his or her designee) serving as an eX-of?cio member. Each director of the Board of Directors shall have an equal vote. The Board shall be empowered and supported to oversee local performance and to create and sustain connections with the community. Subject to certain reserved powers for the Board of Directors will have the right to approve any major new programs and clinical services, or the discontinuation or consolidation of any such programs. shall continue to recognize all collective bargaining units currently organized at an af?liate, and honor the collective bargaining agreements currently in place. Employees of any af?liate shall not be required to reapply for their positions as a result of the af?liation. To the extent that any employees leave their employment at Corporation and Yale New Haven Health Services Corporation Docket Number: 29. 30. 31. 32. Page 31. of 35 service sites within ninety days following the Closing Date and obtain employment with a af?liate, such employees? seniority shall be preserved eligibility for bene?ts consistent with total years of service). shall maintain its current wage and salary structures for its non-bargaining or non? represented employees based on hospitals ofsimilar scope, size and market conditions in Connecticut. and shall use their best efforts to achieve ef?ciencies through the management of vacancies and attrition and to minimize the elimination of individuals? jobs. and have agreed to maintain at least the same level of community bene?t consistent with most recent Schedule of IRS Form 990 and its Community Health Needs Assessment (CHNA). and agree to conduct an updated Community Health Needs Assessment by no later than December 31, 2016, and provide services in accordance with implementation plan adopted as part of the updated CHNA process and provide OHCA with its updated CHNA within thirty days of its approval. Every six months (the ?six month reports?) until December 1, 2018 and each year thereafter (each an ?annual report?), shall submit notarized reports to OHCA for the periods of January to June (due July 31?) and July through December (due January 3151) certifying the achievement of each and every commitment described herein, including without limiting the foregoing the following speci?c detail: a. Af?rmation of the continuation of all services as described herein. b. A narrative description of the achievement of the strategic plan components to retain and enhance healthcare services in the communities served by including with respect to physician recruitment and resource commitments for clinical service programming, whether the commitments described in the Af?liation Agreement were achieved, as well as the purposes, dates and amounts for which expenditures were made. c. Af?rmation that and LMMG commercial health plan contracts in place as of the Date of Closing are/were maintained through the remainder of their terms, and that any new contracts are consistent with the commitments of paragraphs (20), (21) and (22) above. Af?rmation that no physician of?ce has been converted to hOSpital-based status. Corporation and Yale New Haven Health Services Corporation Page 32 of35 Docket Number: e. Af?rmation that has adopted the Financial Assistance Program Policies currently in effect as of the date hereof, and that such Policies, if amended, provide assistance to patients that is at least as generous as the Financial Assistance Program Policies currently in effect as of the date hereof. A detailed and comprehensive document showing a five-year plan (the ?plan?) to generate and achieve ef?ciencies for resulting from non-clinical shared services opportunities, integration with and adoption of information technology systems and platforms, supply chain management services, integration of clinical and business practices across LMMG and NEMG, reduced cost of capital, and participation in population health initiatives. Subsequent to submission of the plan in its six month report, shall include the following additional information in its annual report. i. Narrative updates on the progress of implementation of the plan. These updates shall include the status of integration activities and adoption by and of non-clinical shared services opportunities; ii. A report identifying and cost saving totals since the Closing Date for the following Operating Expense Categories: Salaries and Wages, Fringe Benefits, Contractual Labor Fees, Medical Supplies and Pharmaceutical Costs, Depreciation and Amortization, Bad Debts, Interest Expense, Malpractice Expense, Utilities, Business Expenses and Other Operating Expenses. The categories shall be consistent with the major operating expense categories (Categories and K) that are in use at the time of reporting in the OHCA Hospital Reporting System Report 175 or successor report. shall also file a narrative describing the specifics of the cost savings for each of these major expense categories; A completed Balance Sheet, Statement of Operations, Statement of Cash Flow for and LMMG (or of NEMG in the event of an NEMG-LMMG merger). For the format shall be consistent with that which is in use at the time of reporting in HRS Report 100 and Report 150 or successor reports; and iv. For a completed Hospital Operating Expenses by Expense Category and Department report. The format shall be consistent with that which is in use at the time of reporting in HRS Report 175 or successor report. Af?rmation of the labor and employment commitments described herein, including but not limited to service sites continued honoring of collective bargaining agreements in place as of the date hereof. Corporation and Yale New Haven Health Services Corporation Page 33 of 35 Docket Number: h. A narrative description of community bene?t commitments described herein, including without limitation the amounts spent and a description of such spending to support and invest in the communities that serves. 33. In addition to the above, and make the following commitment for a period of ?ve years post-Closing: a. and shall appoint an independent monitor at their own cost (selected by and and approved by OHCA) to serve as a post-transfer compliance monitor. b. Such monitor shall, at a minimum meet with representatives of the community at six months after the Date of Closing and annually and shall report to OHCA in accordance with Section l9a?639(e) of the general statutes and speci?cally address: compliance with the Certi?cate of Need Order; and (ii) the level of community bene?ts and uncompensated care provided by during the prior period. c. shall provide the monitor with reasonable access to its public ?lings and facilities and all other ?nancial information necessary for the purposes of carrying out the monitor's duties. shall hold a public forum in New London at six months after the Date of Closing and not less than annually thereafter during the monitoring period to provide for public review and comment on the monitor?s reports and ?ndings. e. If the Independent Monitor determines that and are substantially out of compliance with the conditions to the CON, the monitor shall notify and in writing regarding the de?ciency. Within two weeks of such notice, the monitor shall convene a meeting with representatives from and for the purpose of determining compliance and any appropriate corrective action plan. If and fail to implement a plan of correction satisfactory to the monitor within thirty days of such meeting, the monitor shall report such substantial noncompliance and its impact on health care costs and accessibility to OHCA. OHCA shall determine whether such non-compliance has had a material negative impact and what remedy is reasonably necessary to bring and into compliance and shall have the right to enforce these conditions by all means and remedies available to it under law and equity, including but not limited to Conn. Gen. Stat. l9a?642 and the right to impose and collect a civil penalty under Conn. Gen. Stat. l9a?653. In addition, in the event OHCA determines and are in material non-compliance, OHCA may order and to provide Corporation and Yale New Haven Health Services Corporation Page 34 of 35 Docket Number: additional community bene?ts as necessary to mitigate the impact of such non? compliance. Corporation and Yale New Haven Health Services Corporation Docket Number: 15-3 All of the foregoing constitutes the ?nal order of the Of?ce of Health Care Access in this matter. Date Signed by (Print name) ?latlo Date Signed by mafia? gogS'i'l/oqt By Order of the Department of Public Health Of?ce of Health Care Access k/t?i' "i Li Yyorme T. Addo, MBA Deputy Commissioner Duly Authorized Agent for Lawrence Memorial Corporation (Title) Jam. gas Duly Authorized Agent for Yale New Haven Health Services Corporation pro:th a: 6'30 (Print name) (Title) {?f?vi a mi Yak: New i?awan ?-I?a?th Services {Ha-I?poratiarr. {?'cmkm Lumbar-r: ?11 U'ftim 'feraggai?g ??1723 final order of the Of?ca of Heaith {Tiaizfc-a?arcess in. this ma?a: By Graig: oftm E3 61% rtmmi: of 3? 1113} i s: {Dim-a Cart": Acce?g jl?a-ate TEX ?aiij M'Bsk {12?qu I 4811359 1i. gn?d by {Him mama) 13:51:61 Bully Anti-unified. Agemz for Yale New Haw-?en Heaith Services {.70rp0ra'iim'1 ?igm-?i . (Prim nan-3.6.5 {Ti?tl E3)