Not-for-profit Trinity Health will acquire St. Mary's Health System in Waterbury, Conn., adding to the formation of a new market for the system in New England.
The deal with St. Mary's, which was signed Friday, expands the 86-hospital system's geographic reach, joining the one-hospital Sisters of Providence health system in Springfield, Mass., and the December 2014 acquisition of St. Francis Care, a two-hospital system in Hartford, Conn.
The St. Francis deal is expected to be finalized in October, and the St. Mary's acquisition is still pending Vatican and state approval.
Unlike many health systems that have looked for partners or buyers, none of the systems involved in this deal are in poor financial health, said St. Francis CEO Christopher Dadlez, who will become president and CEO of Trinity's new region. Rather, these systems are looking to get rid of redundancies, gain clinical knowledge and attain economies of scale.
“We're coming together for strategic purposes,” Dadlez said. “This is really the new world.”
Both St. Mary's and St. Francis have been looking for a buyer for some time, leaders said. Livonia, Mich.-based Trinity is one of several Catholic megasystems, along with Ascension and Providence Health & Services, that have gone through significant M&A activity as the healthcare landscape has changed.
“We have been (searching) to find the right strategic partner for several years, and our board has worked really hard through what we call our principles of affiliation," said St. Mary's CEO Chad Wable.
He added those principles involve strengthening Catholic healthcare, improving the community and enlisting resources to deal with future market issues.
Wable said Trinity's faith-based background was important to St. Mary's. For-profit Tenet Healthcare Corp. had previously planned to acquire the 168-bed hospital but that deal and three others in the state fell through because the company wasn't comfortable with conditions imposed by the state's regulators, who haven't been particularly open to for-profit healthcare.
Rick O'Connell, Trinity's East Group executive vice president, said “it's been a pleasure working with the State of Connecticut" on past deals and he expects to close the St. Mary's acquisition with regulatory approval within the next six to nine months.
"This agreement represents a strong affiliation and the creation of a regional health system that will serve the people of Connecticut well, while preserving the legacy of Catholic, not-for-profit healthcare in Waterbury," O'Connell said.
Though leaders say it's too early to discuss specific improvements, Trinity says it expects to implement programs related to clinical excellence, population health, retail healthcare and IT. Getting a grip on the management of the region's population was also a major priority.
“It's really about taking better care of our population here,” Wable said. “We're not going to be able to do it alone in as sophisticated a manner as we can without partners like St. Francis Care and Trinity Health and they're going to help us to move more rapidly towards that.”
Trinity reported $13. 6 billion in revenue in fiscal 2014, with a $119.6 million operating surplus. The system's operating margin was 0.9%.