As population ages, CT’s chronic disease hospital sector set to double in size with new market entrants

Hartford Business Journal – Monday, November 25, 2024
By David Krechevsky

A recent land sale in Waterbury’s East End has set the stage for a noteworthy increase in the number of licensed, independent chronic disease hospitals actively operating in Connecticut.

That increase? From two to three. A fourth is also on the way.

According to the Office of Legislative Research, chronic disease hospitals are long-term care institutions with facilities, medical staff and all necessary personnel to diagnose, care for and treat a wide range of severe injuries and illnesses like a stroke, neurological disease, brain or spinal cord injury and amputations, among others.

While Connecticut has 26 acute-care hospitals, it currently has just two active, independent chronic disease hospitals — the 137-bed Gaylord Hospital in Wallingford and the 231-bed Hospital for Special Care (HFSC) in New Britain.

They will soon be joined by a new market entrant, Pennsylvania-based PAM Health, which will operate a 42-bed chronic disease hospital to be built on that recently sold 4.5-acre Waterbury parcel, at the corner of Reidville Drive and Harpers Ferry Road.

That new facility, along with another coming to Danbury — a 40-bed hospital being developed by Encompass Health that received state approval in April 2023 — will double the number of licensed chronic disease hospitals operating in the state.

That spike, according to a state health official, serves as a sign of things to come.

Not everyone, however, embraced the competition, at least initially.

Both Gaylord Hospital and HFSC raised opposition to PAM Health’s market entrance, arguing there would be an overlap in services.

Prospect backs out

In late October, Florida-based Catalyst Healthcare Real Estate paid $1.8 million for the Waterbury land.

Catalyst is the developer that will oversee construction of a 42-bed, 55,000-square-foot inpatient rehabilitation hospital for PAM Health. The company operates a network of more than 100 long-term acute care, physical medicine rehabilitation and behavioral health hospitals, as well as wound clinics and outpatient physical therapy sites in 16 states.

PAM Health in December 2021 filed an application — known as a certificate of need — with the state Office of Health Strategy seeking permission to open its first hospital in Connecticut, and only its second in New England (the other is in Massachusetts).

At the time, Waterbury Hospital, owned by California-based Prospect Medical Holdings, was a partner in the venture, which is projected to cost more than $33 million.

PAM Health’s proposed rehabilitation hospital received state approval on Aug. 9, 2023, but Waterbury Hospital backed out of the project this past January. Weeks later, PAM Health sought permission to move ahead on its own and received state approval in July.

Kristen Smith, senior executive vice president and chief operating officer for PAM Health, said Prospect Medical pulled Waterbury Hospital out of the project because of its financial situation.

“Given their situation with the Yale (New Haven Health) acquisition, that’s what delayed our project,” Smith said. She was referring to Yale New Haven Health’s delayed bid to acquire Prospect-owned Waterbury, Manchester Memorial and Rockville General hospitals, which has since become mired in a contentious court battle.

Catalyst subsequently received site plan approval in 2023 from the city of Waterbury to construct the facility, which will be located just off I-84.

Smith said PAM Health doesn’t need a partner to open the facility, which will be called the PAM Health Rehabilitation Hospital of Waterbury.

“There aren’t any issues because we don’t have a formal partnership,” she said. “The patients are still there, with or without a partner.”

Not all chronic disease hospitals are the same. They exist in subcategories.

PAM Health in Waterbury has been licensed to operate what’s known as an inpatient rehabilitation facility, or IRF. It will offer rehabilitative and therapeutic care for patients who have suffered a severe injury or illness — like a stroke, brain injury, neurological disease, cancer, trauma, etc. — and need to remain in the hospital for an extended period, generally two to three weeks.

IRF patients require at least three hours of physical, occupational or speech therapy for five consecutive days.

The state’s two existing chronic disease hospitals — Gaylord and HFSC — are considered long-term acute care hospitals (LTACHs), serving patients who need closely managed medical care over a longer period, typically lasting three to four weeks. This includes post-surgical patients, particularly those who require help to breathe.

Most post-acute care in the state is provided by nursing homes and home health agencies, which offer much less intensive services, while a tinier subset of patients gets discharged to IRFs or long-term acute care hospitals.

Even still, Connecticut’s changing demographics likely will increase the need for chronic disease care in the state, according to Office of Health Strategy Commissioner Deidre Gifford, who approved PAM Health’s market entrance.

Such facilities are needed more as the population ages, and Connecticut is getting grayer.

“Changes in population, and population health needs, may create a shift in the volume and type of services needed in the future,” Gifford said. “Nearly 26% of Connecticut’s population will be 60 and older by the year 2030, an increase of 30% from 2012.”

In its certificate of need application, PAM Health said the “primary users of inpatient rehabilitation services are over age 65.” It also said that the new hospital will serve 23 towns in western Connecticut, primarily in Litchfield and New Haven counties, and that over 20% of the population in this service area is elderly — a percentage that continues to grow.

Smith said PAM Health chose Connecticut “because there is such a high demand for rehab services.”

The new hospital will provide 150 full-time and 50 part-time jobs. That will include naming a medical director. The medical staff also could include physicians from local hospitals or medical practices who receive credentials to work in the facility, Smith said.

Construction is expected to take about 18 months, she said, adding that the project was set to begin this month or in early December.

‘Significant overlap’

While PAM Health’s Connecticut expansion was approved, it was not without opposition.

Both Gaylord Hospital and HFSC intervened in the case, claiming the new rehab hospital would be too close to their facilities, creating a “significant overlap” in the patients served.

Located on 400 acres in Wallingford, Gaylord is 13 miles from the PAM Health site in Waterbury. HFSC in New Britain, meanwhile, is about 18 miles from the site. (HFSC also has a satellite location at Mt. Sinai Rehabilitation Hospital in Hartford.)

Additionally, Gaylord claimed that PAM Health’s calculation of the number of inpatient rehabilitation facility beds needed in Connecticut was “overstated by between 43% and 328%.” It said the application was based on “broad assumptions” drawn from its experience in other states and on an “inappropriate extrapolation” of traditional Medicare data “without regard for the reality of post-acute care in Connecticut.”

Both intervening hospitals also claimed that while PAM Health is an inpatient rehabilitation facility and not an LTACH like Gaylord or HFSC, there is significant overlap that would draw patients away from them.

Smith, however, said there are differences between the two types of chronic disease hospitals.

“It’s really more when we get into … Medicare rules and regulations, our physician requirements and processes, from admission through discharge,” she said. “They’re very different on what we have to do on the inpatient rehab side.”

While the interventions failed to prevent PAM Health’s market entrance, Gifford, the OHS commissioner, said there is, in fact, some overlap.

She noted that in addition to the standalone chronic disease hospitals in the state, several traditional, acute-care hospitals — including Danbury, Hartford and Yale New Haven hospitals — also operate inpatient rehabilitation units.

“Overlap exists in the patients served by these facilities,” Gifford said, adding, “providers may disagree on the extent of that overlap.”

While they fought against the application, both Gaylord and HFSC provided statements via email offering their respect for the state’s decision.

Smith, meanwhile, said PAM Health is ready to be the state’s third chronic disease hospital.

“We’re excited to finally get into the market,” she said.

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