The future of Bristol Hospital is as part of a large network, CEO Kurt Barwis believes. The small community hospital is in talks to be acquired by Tenet Healthcare, a national for-profit hospital chain partnered with the Yale New Haven Health System, a move that Barwis says would help Bristol Hospital adapt to the rapidly changing demands of health care.
But that vision of the hospital’s future relies in part on the legislature: With the strong encouragement of organized labor, legislators will make expanding the regulatory oversight needed for changes in hospital ownership a top priority this year.
All but one of Connecticut’s hospitals are nonprofit, and Tenet’s potential entrance into the market — the company has deals in the works with Bristol, Waterbury Hospital, and the parent company of Manchester Memorial and Rockville General hospitals — has sparked intense interest and scrutiny from lawmakers.
It’s a debate that pits unions’ concerns against warnings from some in health care that the survival of hospitals could be at stake.
And critics of for-profit hospitals have leverage: a provision of state law that effectively prohibits for-profit hospitals from hiring doctors, a key part of running a health care system.
House Speaker J. Brendan Sharkey, D-Hamden, said the legislative session that begins next week will include a broad look at hospital governance, a push prompted by rapid changes in Connecticut’s hospital landscape and concerns that national chains don’t invest in local communities the way nonprofit hospitals do.
Democrats, who control the House and Senate, have agreed to try to modify and expand the approval process for hospital ownership changes, known as the certificate of need process, Sharkey said.
“This is one of those things I don’t think we can afford to wait a year,” he said.
Sharkey recalled a conversation several years ago with the CEO of a major Connecticut hospital, who predicted that in five years or so, the state would be dominated by two or three hospital groups “who will swallow up all the other hospitals in the state.” It’s a view shared by many in the industry.
“The message was Connecticut hospitals need to be ahead of that curve by being aggressive in how they proliferate in Connecticut,” Sharkey said. “And he was absolutely right. It’s starting to come true right now.”
More transparency or stymieing change?
The push toward consolidation and for-profit chains has some people worried. Critics have warned that for-profits won’t have the same commitment to communities that nonprofit hospitals have and have said care quality could suffer — charges that hospital leaders refute.
Paul Filson, state political director for SEIU, a union that represents health care workers, said organized labor wants a broader review of hospital consolidations, whether they involve nonprofits or a takeover by a for-profit company.
“The most important thing in our view, of course, is worker protection. That includes a protection of staffing levels, a protection of benefits, a protection on wage scales and a certain amount of job security that comes with any kind of conversion,” Filson said.
The unions also want to see greater transparency on finances and plans for scope of services.
“What kinds of things are going to be moved around?” Filson said. “Our folks want to know.”
In looking to expand the certificate of need process, Democrats would be targeting one form of approval needed for hospital ownership changes. But James D. Iacobellis, senior vice president for government and regulatory affairs at the Connecticut Hospital Association, noted that hospitals must also get certificates of need to buy certain medical equipment or move facilities.
“Whenever we touch the certificate of need process, it impacts everything,” he said Thursday during a legislative breakfast at Bristol Hospital. “The certificate of need process is important, and we need to make sure that it moves more efficiently, that we don’t gum it up in a way that really stops and prevents some of this dramatic health care changes from being applied throughout the state.”
Barwis said he hopes whatever legislation emerges won’t cause an imbalance between for-profit and nonprofit hospitals. If it does, he said, “I think that’s something that may cause an organization like Tenet to take a big pause and not invest their dollars in this state.”
“They’re going to put in billions of dollars into the state when they do this, and those funds are going to go to work, creating jobs and be an economic engine for the regions that they actually make those investments in,” he said.
Why hospitals want to go bigger
At a recent visit with the local Lions Club, Barwis said, he got many questions about the potential Tenet sale, among them, “Why can’t Bristol just stay the way it is?”
The hospital has backup plans in case the talks with Tenet fall through. The hospital could refinance its debt and explore ways to borrow money to execute its strategic capital plan, Barwis said.
But he’s clear: Even if the hospital is doing well now, remaining on its own is not the way to go given the way health care is changing.
The way insurers and programs like Medicare pay for care is changing, and the emerging models are expected to require hospitals to be financially accountable for patients’ health beyond the acute care delivered in the hospital. It will require having closer relationships with doctors in the community and other care providers, like nursing homes and home health agencies.
That takes resources, Barwis noted. And taking on the financial risk for patients’ health efficiently and effectively requires being part of a broader system with a wide population base, he said.
Hospitals are also facing reduced funding from the state and federal governments, making economies of scale more important. If something costs Bristol a dollar, Yale-New Haven Hospital could buy it for 90 cents, and the much larger Tenet might be able to get it for 50 cents, said Vin Petrini, senior vice president for public affairs for the Yale New Haven Health System.
For-profit hospitals have the advantage of being able to access capital more easily than nonprofits. For Bristol Hospital, that could mean the money to convert semiprivate patient rooms to private rooms. That could help raise patient satisfaction scores, which affect a portion of hospitals’ Medicare funding.
“Having a for-profit partner that can make those kinds of investments is really important to us,” Barwis said.
What would becoming part of a larger system mean for the care that gets delivered? Barwis said community hospitals like Bristol have lower cost structures than facilities like Yale-New Haven Hospital, a teaching institution with round-the-clock trauma specialists. In a larger system, Barwis said, the “basic bread-and-butter stuff” will likely be pushed to the community hospitals where they can be done at lower cost, while hospitals like Yale-New Haven will handle the more complex procedures.
Tenet Senior Vice President Trip Pilgrim said it’s important to ask what will happen to certain hospitals if the deals don’t go through.
“This is not unique to Connecticut,” he said. “I don’t think long term, the independent, freestanding sole-ownership community hospital is a sustainable model.”
The legal leverage
To date, much of the focus on for-profit hospitals in Connecticut has centered on Waterbury, where the unions representing health care workers have been locked in a fight with the hospital over givebacks.
Legislators passed a bill last year that would have helped pave the way for Waterbury and Bristol hospitals to become for-profit. But Gov. Dannel P. Malloy vetoed it, a move seen as a victory for the Waterbury Hospital unions.
The bill itself dealt with a provision of state law that allows hospitals to employ doctors through entities referred to as “medical foundations.”
State policy has long prohibited corporations from employing doctors directly, a reflection of concerns that physicians not have to answer to businesspeople. But increasingly, doctors have sought to be employed, rather than owning small practices. Hospitals worried that the models for supporting independent practices would run afoul of federal anti-kickback laws.
In 2009, state legislators passed a bill giving hospitals a way around that: forming medical foundations to employ doctors. The law prohibited medical foundations from operating for profit.
Pilgrim said the law effectively prohibits for-profit entities from employing physicians. But Tenet could still move forward with its Connecticut hospital deals without a law change because the company has a partnership with Yale, a nonprofit system, and any hospitals it acquires could hire doctors through Yale.
“But we feel that’s a kind of short-term or interim solution, that ultimately there needs to be a legislative fix to that statute,” Pilgrim said.
Melodie Peters, the president of AFT-Connecticut, which represents nearly 10,000 nurses and other health care workers, including employees at Manchester Memorial and Rockville General, told legislators last year that labor is not trying to ban for-profit hospitals.
“We recognize that the health care industry is quickly changing,” Peters said. “As community hospitals pursue partnerships with for-profit entities, we must recognize that we cannot stop this from happening.”
But Peters said the hospitals must be open with employees and the communities about their plans. An example of that approach, she said, already exists in Connecticut.
Unlike Waterbury Hospital, she said, the managers of Manchester and Rockville engaged the unions early in the process, allowing a frank dialogue that “ensured that the fundamental needs and and interests of each party were clarified and communicated at the earliest stages of the purchasing process.”