Malloy sides with unions, vetoes bill key to Waterbury Hospital deal

Gov. Dannel P. Malloy vetoed a bill Thursday that was opposed by health care unions seeking leverage in the proposed acquisition of financially struggling Waterbury Hospital by a major national for-profit company, Vanguard Health Systems of Tennessee.

The veto of the bill, which would have given Vanguard the governance structure it says is necessary to operate in a state unfamiliar with for-profit hospitals, casts uncertainty over the acquisition strongly supported by Waterbury Mayor Neil O'Leary as a means to retain a major employer.

The measure was passed as an amendent on the last night of the legislative session after a dramatic confrontation outside the Senate chamber by hospital and Vanguard lobbyists and union officials, who complained that they were blindsided. At the time, the Malloy administration was supportive of the measure.

But Mark Ojakian, the governor's chief of staff, summoned Darlene Stromstad, president of the hospital, and her lobbyist, Craig LeRoy, to his Capitol office Wednesday to inform them that the administration now had too many questions about the bill and the acquisition.

"It is incumbent upon us to make sure what kinds of arrangements are going to exist with for-profit hospitals," Ojakian said Thursday in an interview. "What is the responsibility to the community? What is the responsibility to the workers? What is the responsibility it has to the state?"

Ojakian said a broader conversation was necessary. He also noted a new complication since the legislative session ended at midnight June 5: Vanguard itself is about to be acquired for $1.73 billion by a larger concern, Tenet Healthcare Corp.

"Since this is all new, I think we need to tread carefully as we move this forward," he said. "There is a lot of uncertainty."

Vanguard had no immediate comment on whether the veto would end its interest in Waterbury or a separate effort to buy Bristol Hospital. AFSCME, a union representing some of the workers in Waterbury, said Vanguard also was interested in buying hospitals in Manchester and Vernon.

"People have said to me, 'Well, you're going to blow it up.' You can go back and renegotiate the agreement, number one," Ojakian said. Another possibility, he said, was that a consensus could be reached on new legislation after the broader concerns were addressed.

Vanguard would take control of Waterbury Hospital by forming a joint venture with the hospital in which Vanguard would have an 80 percent stake.

Patrick McCabe, a lobbyist for Vanguard, declined to comment.

"We are very disappointed," said Matt Burgard, a spokesman for Waterbury Hospital.

An AFSCME affiliate locked in contract negotiations with the hospital applauded the veto.

“Our contract is up in September, and we’ve already been on the front lines fighting the ruthless practices and inhumane tactics of the for-profits,” said Barbara Simonetta, president of CT Health Care Associates/AFSCME, which represents 400 nurses at Waterbury Hospital. “Vanguard has been out for months to kill the nurses’ long-standing pensions, among other outrageous actions, as a precondition for merging with Waterbury Hospital."

Paul Filson, the political director of the Service Employees International Union and one of the labor officials to face off outside the Senate with lobbyists for Vanguard and Waterbury and Bristol hospitals, hedged when asked Thursday if SEIU sought a veto.

"We asked the governor to take a look at the bill and do what was right," Filson said. "I think he did that."

The bill would have created a governance structure for for-profit hospitals modeled after a law passed in 2009 allowing hospitals and health systems to take part in nonprofit "medical foundations” as a way to employ doctors. 

Without it, supporters of the 2009 law said, hospitals would have trouble acquiring physician practices because of federal laws, including an anti-kickback statute.  

The structure is key to a major change under way in Connecticut’s health care landscape as doctors in solo or small practices give up independent practice to join large provider networks run by hospital systems.

In his veto message, Malloy did not explicitly object to the proposed change sought by Vanguard, but said "further consideration was warranted."

The measure was written specifically for a for-profit health company closing a merger or acquisition deal by a date certain.

"As this bill carves out an exception to existing law for the benefit of specific for-profit entitites, further consideration is warranted to determine whether such exceptions are appropriate and, if so, whether existing law should be amended on a broader basis," Malloy wrote.

"Further consideration is also warranted to determine whether current law provides adequate safeguards to guard against any perceived or actual threat to the independence of medical decisions being made by providers employed by for-profit entities," he wrote.

The only for-profit in Connecticut is Sharon Hospital.

Ojakian said the administration has tried to help Waterbury Hospital, promising assistance with infrastructure improvements when it was considering a merger with St. Mary's Hospital.

"It's in nobody's interest if Waterbury Hospital fails. Then people are going to lose jobs," he said. "That continues to be our priority, to work with the hospital. I made that commitment yesterday to the president."

Malloy now has signed 297 bills and vetoed six.

Arielle Levin Becker contributed to this story.

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