The affiliation between Lawrence + Memorial Healthcare and the Yale-New Haven Health System has been approved by the State of Connecticut’s Office of Health Care Access, officials announced Thursday evening.

“This is a defining moment in the history of healthcare in our community,” said Bruce D. Cummings, president and CEO of L+M Healthcare, the parent organization of Lawrence + Memorial Hospital, Westerly Hospital, L+M Medical Group and the Visiting Nurse Association of Southeastern Connecticut.

The decision is effective immediately, according to L+M spokesman Mike O'Farrell, who said the focus now is on establishing transition teams to "work through all this."

The transfer of ownership of L+M Medical Group, its physician organization, to Northeast Medical Group, Yale-New Haven's physician organization, also was approved. The two organizations will be merged over time.

L+M will continue to operate as an independently licensed hospital with its own separate medical staff, bylaws, rules, regulations and elected officers, according to the affiliation agreement.

It also will continue to have its own fiduciary board responsible for overseeing and managing L+M and Westerly hospitals.

Martha Marx, a New London city councilor and president of the Visiting Nurse Association of Southeastern Connecticut Local 5199, said keeping the L+M's local board intact was a "huge positive."

"It's clear that OHCA definitely tried to be responsive to the community's concerns," Marx said.

She indicated that it will take time to analyze the "complex" 35-page settlement. 

"We'll have to examine what the impact will be to cost, accessibility and quality of health care," she said.

The affiliation is expected to provide L+M with a greater ability to retain, develop and recruit physicians and greater financial stability as a result of being part of a larger hospital network.

No closures or reductions to current clinical services are expected, according to the affiliation agreement, and L+M Hospital's target patient population will remain the same.

Critics of the affiliation have expressed concern that it will result in reduced services, higher costs and loss of local control.

Thursday was the last day before the hospitals would have faced paying $250,000 to re-file with the Federal Trade Commission for regulatory approval.

"Our industry is changing daily," Cummings said in his statement. "Forming this affiliation — one which is built upon a history of successful clinical partnerships — is the step necessary to ensure our community continues to receive the highest quality of care it needs and deserves."

Cummings has framed the affiliation plan as an effort to head off financial difficulties that he feared could leave L+M unable to uphold the service it has been providing for more than a century.

He said payments from Medicaid patients — which make up an increasingly large proportion of the hospital's customers — don't adequately compensate hospitals for the cost of patient care.

The number of patients using Medicaid at the hospital has risen from 8 percent of patients more than a decade ago to 18 percent today, and 70 percent of patients at the hospital are on Medicaid, Medicare or Tricare, the government health care program for military personnel, Cummings said.

L+M Hospital transfers about 1,000 patients each year to Yale as a result of services the latter provides that are not available at smaller community hospitals.

An executive order by Gov. Dannel P. Malloy Wednesday afternoon cleared the way for a decision to be made on the affiliation.

The new order amended one issued by the governor in February, which stalled decisions on hospital mergers, acquisitions and affiliations until after Jan. 15, once a newly created task force had finished reviewing and recommending changes in the regulatory process.

The affiliation agreement includes "specific, important provisions that will help control baseline pricing levels, maintain transparency via an independent monitor, and respect the rights of workers," said Chris McClure, a spokesman with the governor's office.

The parties received regulatory approval from Rhode Island state agencies last week and the Federal Trade Commission last year.

L+M and Yale-New Haven submitted their application for the affiliation almost a year ago, and OHCA held two public hearings on it this summer.

Hospital union leaders, many New London city councilors and health care advocacy groups have been urging hospital regulators not to rush the decision.

New London Mayor Michael Passero, who was among those who urged decision makers to take their time, said Thursday, "I think it's going to be, on the whole, very positive for the city."

However, he said he remains concerned about collective bargaining rights and the future of those rights going forward.

Yale has agreed to recognize and honor all existing labor contracts within the L+M Healthcare system, according to a joint news release from Yale and L+M.

The affiliation plan was first confirmed by hospital officials in June 2015 after months of rumors that the two hospital systems would join.

The hospital's doctors were largely supportive of the affiliation proposal as a way to address L+M's financial struggles and allow it to continue to serve the region's patients.

The presidents of the three L+M unions had a more tepid reaction, releasing a joint statement to their members that said, "Because of the changing landscape in the health care industry we have been planning accordingly for this possibility, so that we will have a seat at the table in this process."

Harry Rodriguez, president of the health care workers' local, Stephanie Johnson, president of the licensed practical nurses and technologists' local, and Lisa D'Abrosca, president of the registered nurses' local, said in 2015 that they would continue "holding current and future leadership of our community hospital accountable to putting patients ahead of profits."

Day Staff Writer Martha Shanahan contributed to this report.

j.bergman@theday.com