New London — The pending affiliation of Lawrence + Memorial Hospital with Yale-New Haven Hospital met a major setback on Thursday, when Gov. Dannel P. Malloy announced an executive order to review and overhaul the state regulatory and review process for the health care industry.

The order will create a task force to recommend “comprehensive reform” of the way the state evaluates and decides on proposals for the establishment, closing, transfer, acquisition and expansion of hospitals and medical service providers, known as the Certificate of Need process.

It is under the authority of the state Department of Public Health’s Office of Healthcare Access and the Department of Social Services.

In a statement, L+M spokesman Mike O’Farrell said the executive order is “injurious to our organization, the people we serve and the people we employ. Jobs are at stake. Access to care is at stake. The long-term viability of our organization is at stake.”

The executive order means that the earliest the review process for L+M and Yale-New Haven could resume would be January of 2017.

L+M announced plans to affiliate with the larger Yale-New Haven network in June, and both hospitals filed paperwork with state regulators this past fall.

The review process has begun, O’Farrell said, with hospital officials fulfilling several requests for additional information from regulators.

When the acquisition plans were first announced, both hospitals were hoping for a decision by the end of 2016.

He said the affiliation was made necessary by actions that the Malloy administration took that undermined L+M’s finances.

“The governor and his policies have created the very conditions that are fueling the need for community hospitals to become part of larger regional or national systems,” O'Farrell said. “Today’s actions are an ill-advised and unnecessary step because OHCA has the tools it needs to effectively evaluate CON applications — including the financial conditions and representations of the parties involved, as well as the ability (and commitment of the transacting parties) to maintain or expand access to locally available services.”

This year alone, he said, the state tax on hospitals is costing L+M $18 million.

That action, along with federal health care reform and cuts to Medicaid and Medicare reimbursements, is making affiliation necessary for smaller hospitals like L+M, he said.

The Connecticut Hospital Association said it had “grave concerns about a blanket moratorium on acquisitions and conversions, including those already in process.”

AFT Connecticut, the union that represents health care workers at several hospitals including L+M, praised the executive order as giving the pause needed before more changes are allowed in the state’s health care system.

“The governor’s executive order has created much-needed space for a thorough assessment of rapid changes to vital healthcare services in Connecticut,” AFT President Jan Hochadel said in a statement. “One of the lessons learned from the recent gutting of services at Windham Hospital is that current patient and community protections are not always sufficient.”

Hochadel was referring to a reduction in services at Windham Hospital after its affiliation with the Hartford HealthCare network.

The William W. Backus Hospital in Norwich also became part of the Hartford HealthCare network in 2014.

“Just today we learned that Hartford HealthCare — already one of the state’s largest health systems — was attempting to expand yet again,” Hochadel said. “And Yale-New Haven Health Systems’ current take-over efforts in New London are creating more questions than answers. The proposed task force is an opportunity to take an honest look at whether these and other consolidations are actually serving the needs of patients, caregivers and communities.”

In the announcement, Gov. Malloy said the task force review is needed “to ensure that consumers in Connecticut continue to receive equitable access to health care that encourages transparency and competition, proves accessible and affordable health care delivery, contributes to economic development and promotes community benefits.”

He said that in light of continuing changes in the health care industry, it is critical that state laws foster the health of all hospitals, “and that the deck is not stacked in favor of fewer than a handful that dominate the marketplace.”

“We need balance,” Malloy said. “Fewer health care systems mean fewer choices for consumers, and that can dramatically affect both the quality of care and costs. It’s time we take a holistic look at the acquisition process.”

Lt. Gov. Nancy Wyman will serve as chairwoman of the task force. Members will include commissioners of the state departments of public health and social services, a representative of a hospital serving a city with a population over 80,000 and another representing a hospital in a city of less than 80,000 residents; a member of a physician group, a nursing home representative, labor representatives, a health economist and consumer advocate, among others.

Editor's note: This version corrects the year William W. Backus Hospital in Norwich became part of the Hartford HealthCare network.

j.benson@theday.com

Twitter: @BensonJudy