Chad Wable, the President and CEO of Saint Mary’s Hospital, said the merger and site selection for a new hospital, “has gone from a complex deal, to a potentially mega-complex deal involving six parties. I am amazed at how aligned we are.”

                                       Column By John Murray  

   Waterbury is engaged in a cultural collision that might define the city for the next 100 years. Good versus evil? No, it’s not that dramatic. It’s health care versus economic development.

   Experts have scratched their heads for years wondering how a city the size of Waterbury could sustain two hospitals. The truth is, it couldn’t. For decades the city has witnessed a slow deterioration in the financial well being of Saint Mary’s Hospital, and Waterbury Hospital. They weren’t going to crash like airplanes tumbling out of the sky, it was more like a leak in an old wooden boat, slowly, almost imperceptibly, taking on water.

   Merger talks between the two hospitals in Waterbury were on-going for more than a decade, but the talks appeared to be defunct in March of 2011 when Saint Mary’s entered into a partnership with LHP Hospital Group, of Plano, Texas. Upon receiving state approval, LHP planned to invest $200 million in Saint Mary’s Hospital to wipe out debts and make capital improvements. Saint Mary’s would then become a for-profit hospital jointly owned with LHP, and would retain its entire staff.

   Waterbury Hospital set out to find its own capital partner and LHP was one of its top suitors. Talks between Waterbury Hospital and LHP intensified last summer, and morphed from courting, into a full-blown romance, when LHP promised to merge the two hospitals, and build a new $400 million state-of-the art, for-profit hospital.

   “The new hospital was the clincher,” Waterbury Hospital CEO Darlene Stromsted said. “We were thrilled.”

Darlene Stromsted, President and CEO of Waterbury Hospital.

   Remarkably, in the course of six months. LHP had bridged the gap between the two hospitals, and greater Waterbury was going to be the big winner with a brand new $400 million hospital. Former governor John Rowland told the Observer in September that the merger, “is the most significant Waterbury event of our times. This is huge, the two largest employers in Waterbury have now joined forces.”

   Rowland said the proposed merger, if it gained state approval, would increase the quality of life in the region. “We’re going to have the best technology and the best doctors,” he said, “now we have to make sure the new hospital is built in Waterbury.”

   Speculation about where the new hospital would be built began nano-seconds after the merger was formally announced. Knocking down Anaconda Brass and building the hospital on Freight Street was a rumor so hot that if you held it in your palms you’d get a third degree burn. The location was phenomenal, but the environmental issues were a nightmare. LHP wasn’t going to wait around two or three years for site clean-up, they wanted a new hospital up and running in four years. Freight Street was out.

   The new partners; LHP, Saint Mary’s Hospital, and Waterbury Hospital, formed a site selection committee and they began looking at potential properties in greater Waterbury.

   “We’ve looked at 17 different sites,” said Chad Wable, President and CEO of Saint Mary’s Hospital. “The site is of less importance to us than providing the very best health care in the region. Whether the new hospital is at a certain address within greater Waterbury, well, that’s not our top priority.”

   Darlene Stromsted agreed. “We are in the health care business,” she said. “We are not economic developers, but we do understand the position of interested parties weighing in on the site selection process.”

   Sitting at a conference table in her office at Waterbury Hospital, Stromsted said the most important variables in selecting the site is “great accessibility, and great visibility, at the most reasonable cost.”

   While no key player will go on the record to specifically talk about the three sites now being considered for the hospital, it’s not hard to weave the facts together. Two of the sites are in Waterbury, and one is right over the town line. Of the two sites in Waterbury, one is out east on Captain Neville Drive, and the other is where Saint Mary’s Hospital sits today.

   Stromsted said the partners are “very, very committed to Waterbury”, but are “very, very, very committed to the new hospital”. Note the one extra “very” the new hospital received.

   The easiest and most cost effective choice appears to be Captain Neville Drive. There are no environmental issues to contend with, and after the merger is approved by the state, shovels could be in the ground the next day. While that may be the quickest and most cost effective option, for city leaders, it’s a migraine headache – what do you do with two empty hospital buildings?

   Enter Neil O”Leary, Waterbury’s new mayor.

   O’Leary made economic development the #1 priority of his campaign, and after the election in November, he immediately engaged in the hospital site selection process.

   “I want the new hospital downtown,” O’Leary said. “It’s the economic development opportunity of a lifetime. LHP is the one putting up the $400 million, so we have to make it work for them.”

   Both Stromstead and Wable said the pressure to build the hospital downtown significantly intensified after O’Leary was elected. O’Leary has a tremendous relationship with Governor Dannel Malloy and reached out to the state for assistance in convincing LHP and the hospitals to build the new facility in downtown Waterbury.

Governor Dannel Malloy, left, stood on stage with Neil O’Leary, middle, on election night and vowed to help bring economic development to Waterbury. The efforts of O’Leary and Malloy have been critical in getting LHP and the two hospitals to consider building the new $400 million replacement hospital in downtown.

   Malloy and O’Leary have met with the decision makers, and are trying to cobble together incentives to make a downtown hospital palatable for LHP.

   “It is my obligation as mayor to advocate for the hospital to be built downtown,” O’Leary said. “This could be the game changer.”

   But why should LHP give a crap about economic development in downtown Waterbury?

   “They understand this is an opportunity to enhance the community,” O’Leary said. “They are trying to be good partners. There is a lot we can do for each other to make our journeys more pleasant.”

   And both Wable and Stromsted said it is important for them to be good neighbors, and they understand O’Leary’s passion about building the hospital downtown.

   “This is our community, too,” Stromsted said. “It is important for us to work with community leaders. This really is a once in a lifetime opportunity, and we want the investment to have the greatest possible impact.”

   The impact that O’Leary imagines is astounding. He envisions hiring professional urban planners to maximize the opportunity to tie the hospital into downtown, to the Green, to the Palace Theater, to UConn and to the mall.

   “How do we get connectivity?” O’Leary asked. “Do we need to change traffic patterns? Should Bank Street be turned into a pedestrian walkway with outdoor dining and an artist’s colony? We have a lot of energized people with great ideas in Waterbury, but we need direction and leadership, and it is my responsibility to do the right thing.”

   Stromsted said LHP and the hospitals did not ask for financial assistance with the new hospital, but as the pressure on site selection intensified, and the cost increased, they realized they would need help.

   “We met with the governor and the mayor together and asked for assistance,” Stromsted confirmed. “We also asked the state to identify one person to help shepherd us through the new process of getting approval. It’s been years since a new hospital was built in Connecticut, and we need clarity.”

   Wable said the partners have developed a great relationship with O’Leary, Malloy, and their respective staffs. “In a very short time we have significantly aligned our interests in what we are all trying to do,” Wable said. “This has gone from a complex deal, to a potentially mega-complex deal involving six parties. I am amazed at how aligned we are.”

Building the new hospital on the footprint of Saint Mary’s Hospital is the optimal choice for economic development impact.

   Does that mean the hospital is coming downtown? Not yet, there are still several important variables to be played out. The first is timing, and time is the enemy. LHP is investing $400 million and they are not going to cool their heels while local and state officials bumble through bureaucracy. If a downtown hospital is going to materialize, both O’Leary and Malloy have to shed their public sector skins and execute like private entrepreneurs.

   Second, and of no less importance, O’Leary and Malloy have to provide the financial incentive with tax breaks, road accessibility, etc… to make it attractive for LHP to build the new hospital in a congested urban environment.

   This is a situation tailor made for Waterbury’s new economic development director, Ron Pugliese, a well known figure in Hartford with nearly 20 years of lobbying experience. Waterbury has a short window of opportunity to pull this off, and I asked Pugliese if he thought a package could be put together to make the deal work.

   “I’m an optimist,” Pugliese said. “I always think a deal can come together.”

   Chad Wable said the partners are anxious to wrap up the details, and the final site selection will be made in the next few months. “We hope to be break ground by the end of 2012,” Wable said, “but we are still waiting for state approval on the merger.”

   The players in the game come from several different vantage points. LHP is a for-profit organization investing hundreds of millions of dollars, and they expect a return on their investment. The two hospitals are less concerned with profit or economic development, their mission statement is to provide quality health care. O’Leary and Malloy are focused on economic development and the greater good of Waterbury, and Connecticut.

   Remarkably, these three objectives may merge into a $400 million hospital in downtown Waterbury.

   “I do not foresee another opportunity for someone else to come in here and build a new hospital,” Stromsted said. “This is it. We have to do it right.”