Eastern Connecticut Health Network, Manchester, broke off its deal to acquire Johnson Memorial Corp., Stafford Springs, Conn., citing an additional $6 million infrastructure investment, financial discoveries during due diligence and the ongoing challenge of obtaining accurate information from Johnson Memorial, which filed for Chapter 11 bankruptcy in early November. While ECHN has not ruled out an acquisition, it has determined that the current arrangement is no longer appropriate due to various significant issues, the system said in a news release announcing its decision to pull out.
Peter Betts, interim president and chief executive officer for Johnson Memorial, which owns 92-bed Johnson Memorial Hospital, said he was disappointed and surprised to learn of ECHNs exit. Betts said Johnson Memorials prospective partner was aware of needed capital investments when entering the deal, but the cost of long-planned repairs to a waste treatment plant rose to $6 million in a recent estimate. However, Betts said he will seek federal economic stimulus funding for the project. Betts acknowledged prior financial records are in poor shape, but have improved during turnaround efforts and Johnson Memorial has eliminated a $14 million loss during the prior eight months.