After years of financial troubles, top UConn Health center officials will now be analyzing a series of financial options that call for forming partnerships to attract more patients beyond its relatively small hospital in Farmington.
Seeking to improve the health center’s financial future, Gov. Ned Lamont hired a respected health care consulting firm that spent nearly six months in seeking the best solutions for the center’s future.
The health care consulting and investment banking company, known as Cain Brothers, released a detailed, 104-page report Friday that said that UConn needs to generate more money from patient care in order to compete in the health care world of the future.
John Dempsey Hospital, outpatient offices in places like Simsbury, and the related faculty physician group have “generated cash flow losses averaging $140 million annually over the past four years before any state transfers,” the report said. “Recent accounting changes beginning in 2024, however, will result in materially reduced fringe benefit expenses for UConn Health because those costs are being absorbed by the state.”
The report added, “UConn Health will still generate a loss after this accounting shift. UConn Health’s patient care enterprise is subscale, unprofitable and unable to financially support the academic mission nor fund recruiting or research for the medical school. Financial support from the state has been necessary to fund both the academic mission as well as losses from the patient care enterprise.”
Compared to other medical centers nationwide, UConn is hindered by a small operation, the report said. UConn has 234 staffed beds, compared to more than 1,000 beds at major hospitals across the country.
“UConn Health is 20% of the size, in terms of revenue, of the average of select public university academic health systems,” the report said. “UConn Health has no leverage in the marketplace. It lacks scale to support fixed costs — IT, revenue cycle, supply chain, etc.”
The university’s medical school is rated by U.S. News and World Report magazine as 53rd in research and 70th by the Blue Ridge Institute for Medical Research, which the report described as “middle of the pack nationally.”
The Cain Brothers report offered a series of options, rather than making one specific recommendation that should be followed. As a result, Lamont and top UConn officials will not be tied to a specific outcome and will now begin collaborative efforts to study the health center’s future.
Those options include combining with another hospital in a joint operating agreement or public-private partnership; leasing space in John Dempsey Hospital to generate money; and creating a partnership in back-office operations to increase scale and purchasing power. Another option is breaking UConn off from the university, creating a 501 (c) (3) nonprofit organization, and then allowing UConn to acquire other hospitals.
The report was released only two days after UConn announced that it has hired a new leader, Dr. Andy Agwunobi, to guide the health center, including the hospital and the university’s medical and dental schools, into the future.
Lamont said that Agwunobi had already read the report before the public announcement of his appointment last week and was prepared to study the issue further.
“It’s on Andy’s desk,” Lamont said when asked by The Courant. “That’s why he’s here. He knows this hospital well. It’s operationally working the best it’s ever been. Now he’s thinking strategically, where we ought to be. … Scale, partnerships, how can we make UConn Health be all that it can be? How do we continue to raise the bar? Given the size of the hospital we are right now, it’s doing very well. It’s a lot better today than 10 years ago.”
Concerning Agwunobi, Lamont said, “If we have to do any partnerships along the way, he’s the guy to do it. He’s been in five other hospital systems. He knows what he’s doing.”
The report does not call for any drastic realignments.
“Andy has read it,” Lamont said. “We asked him about that when he came in. We just wanted to make sure that he was thinking strategically, and he is. … Cain is very well regarded, strong regionally. They’ve done some work previously for UConn Health. They had some history, so they could hit the ground running.”
Union leaders from the State Employees Bargaining Agent Coalition said the report was done “by the corporate-oriented Cain Brothers, a division of KeyBanc Capital Markets, an out-of-state investment banking firm with a vested interest in hospital consolidations.”
Bill Garrity, president of the University Health Professionals union and former emergency room nurse at Dempsey hospital, said, “The clinical, research and academic professionals at UConn Health deliver a vital and unique public good. … Expanding this public good is in everyone’s interest.”
One of the multiple options mentioned by Cain was merging with another health operation that would “shift SEBAC employees to private sector union and benefit structure.”
In the fast-moving medical world, Connecticut once had 27 independent hospitals and now has only six. The two biggest systems, Hartford Healthcare and Yale New Haven, control about two-thirds of the market, officials said.
The report noted that UConn has 449 students in the medical school, 204 dental school students, and 378 in the graduate school that focuses on issues including biomedical science, clinical research and public health.
Regarding finances, Agwunobi said, “The results at UConn Health are amazing whether you talk about tripling net patient revenue or reducing costs by hundreds of millions of dollars. … There are always opportunities to strengthen our finances. … We’re doing a lot better now than we were seven years ago. So it’s a trajectory.”
Concerns raised
House Republican leader Vincent Candelora of North Branford, who was briefed on the issue during the legislative session, said the 104-page report did not break any new ground and instead highlighted the same financial problems that have existed for years.
“We’re spending money to find out what we already know,” Candelora said in an interview. “One of my takeaways from the study was that UConn Health has always said that they take such a large Medicaid population that that’s one of the reasons why they go into the red. But when you look at the report, their Medicaid population is probably below average than many of our hospitals.”
Candelora added, “Bottom line, we need to have that conversation about the fringe benefits and the unaffordable state benefits that not only take down our hospital but is certainly adding quite a bit to the bottom line for our college institutions. There was nothing in the report aside from the Medicaid issue that really surprised me. I think Connecticut continues to spend money on consultants to delay the difficult decisions. Meanwhile, the taxpayers are picking up the tab. … They don’t have a Medicaid problem. They have an expenditure problem. UConn Health uniquely has the financial problem with the fringe benefits that no other institution has, but they have the deep pockets of taxpayers to continue to dig into.”
Behind the scenes
While all the top officials were united last week in announcing the UConn Health’s new leader, Lamont had received strong pushback from the top leaders of the UConn administration, who said that hiring a consultant was not necessary.
Behind the scenes, UConn President Radenka Maric and other top officials had been trying to block the request for proposals sought by Lamont, which was first reported by Hartford Courant columnist Kevin Rennie. Rennie obtained a two-page letter that was written by Maric and three of the university’s highest-ranking officials: board of trustees chairman Daniel Toscano, health center board chairman Sanford Cloud, and medical school dean Bruce T. Liang, who also served as interim CEO at the health center. All these officials appeared together at the celebratory announcement of the new CEO
“We question the need to issue a broad RFP or RFI, particularly because, as you know, we fear this will cause significant damage to UConn Health, including its schools, its reputation, and most importantly, retention and recruitment of the best and brightest faculty, staff and students, many of whom build their lives and careers in Connecticut,” the letter said.
The four leaders also said they were concerned about the future of the UConn medical and dental schools that are based in Farmington.
“We are extremely concerned that if any responses include selling the clinical enterprise, the two schools’ accreditation — and therefore their ability to continue to operate — could be in serious jeopardy,” according to the letter.
During years of previous debates about the future of the health center, Connecticut lawmakers have repeatedly noted that Harvard Medical School does not own its own hospital and students instead learn at hospitals around Boston.
But Lamont prevailed, and Cain Brothers began doing their work in December.
The financial problems at the health center have been a long-running issue with the legislature, dating back at least to 2000 and have continued for the terms of the past four governors. The health center sought millions in additional funding as lawmakers said for years that the fringe benefits for state employees at the state-subsidized hospital in Farmington have traditionally been far beyond those at similar hospitals. At Lamont’s direction, the state will continue funding the legacy costs of pensions and retiree health care.
Financial oversight
Legislators have questioned the level of financial oversight at the health center, citing a case in which UConn continued to pay an 84-year-old medical school professor, Dr. Pierluigi Bigazzi, after he was dead.
Bigazzi was paid for at least five months with 11 biweekly paychecks until his body was discovered by police on Feb. 5, 2018. He was believed to have been killed in his Burlington home at some point around August 2017 and wrapped in black plastic garbage bags with duct tape in the basement. His 70-year-old wife, Linda, was charged with murder and tampering with physical evidence. She pleaded guilty in the case under the Alford Doctrine and could receive 13 years in prison when she is sentenced on June 28.
“You would hope people would recognize that somebody is not showing up at the office,” former Senate Republican leader Kevin Kelly previously said of the case.
Later, UConn recovered about $50,000 in wages that had gone electronically to Bigazzi’s joint bank account that he shared with his wife. The total was reduced by the amount of vacation time that had not been taken by Bigazzi, who was earning about $200,000 per year at the time of his death. He had been working from home on rewriting part of the medical school’s curriculum, and he did not answer telephone calls and more than a dozen emails as UConn officials tried to contact him.
Patrick Raycraft / Hartford Courant
Linda L. Kosuda-Bigazzi, now 76, appears in court in 2018 after being charged with killing her husband, University of Connecticut medical school professor Dr. Pierluigi Bigazzi. She could receive 13 years in prison when sentenced on June 28. (Courant file photo)
Long history
The health center has a long history of seeking partnerships that never worked out.
In March 2007, five major hospitals teamed up and went public to protest UConn’s plan to build a $500 million hospital in Farmington as behind-the-scenes feuding over the proposed new hospital spilled into public view.
UConn said at the time that its then-30-year-old hospital in Farmington was too small and seriously outdated, making it increasingly difficult to attract top faculty for its adjacent medical and dental schools. Competing hospitals countered that a larger hospital in Farmington would siphon off suburban patients with good insurance plans, leaving them with a disproportionate number of poor patients and more severe financial problems.
Those particular plans were dropped, and some officials said that Hartford Hospital, St. Francis Hospital and Medical Center, Bristol Hospital, Middlesex Hospital, and The Hospital of Central Connecticut should work with UConn to determine the number of new beds that were needed in the region.
In 2009, officials talked about a merger between Hartford Hospital and the health center that would create a two-campus “university hospital” in Farmington and Hartford.
That idea fell apart, and the next governor, Dannel P. Malloy, called in 2011 for a bold new plan that was more than double the size of a plan discussed under Gov. M. Jodi Rell. The legislature approved an $864 million multifaceted project to expand the medical and dental schools and generate an estimated 3,000 new construction jobs at the Farmington campus. The proposal called for adding 100 students to the medical school, 48 students to the dental school and about 50 medical researchers overall, as well as a new hospital tower and parking garages.
The proposal said the health center, which had been bailed out four times since 2000 under two governors, would break even by 2018.
The tower was eventually built in Farmington under Malloy’s direction. But UConn’s financial problems have continued.
In 2017, the health center hired Cain Brothers after the state legislature required the UConn board to explore public-private partnerships. That led to a report that was sent to the legislature in 2018, but no major structural changes were made.
In December 2023, the state hired Cain Brothers once again for the latest report under Lamont. That report will help serve as a baseline to determine UConn Health’s future.
Mark Mirko/The Hartford Courant
State comptroller Sean Scanlon has been studying the financial situation at the UConn Health center at the direction of Gov. Ned Lamont. Here, they stand together at the intersection of Capitol Avenue and Broad Street after Lamont signed legislation when Scanlon was still a state legislator. (Courant file photo).
State comptroller Sean Scanlon, who has gained a reputation for tackling long-running, intractable public policy problems, has been looking at the health care situation for the past year at Lamont’s direction and will continue in that role.
“The next step is we’ve got a new leader, and a great leader, and he is now going to be looking at this report alongside myself, the governor, the employees, and the board at UConn to evaluate what the best plan for the future of UConn is — to continue the important work that they do in our community, but to see if we can do that in a way that is more financially sustainable,” Scanlon told the Courant in an interview. “Now, we’ve got to get everyone around a table whether it’s labor, the doctors, the management there. We’re going to work through this together. Andy is going to be the leader of that process, but I’m proud to continue being involved in that, and I’m excited for what the future holds.”
Christopher Keating can be reached at ckeating@courant.com
UConn Health is in financial trouble. It also has 44 employees who earn at least $500,000 a year, four of them $1M+