With four of Connecticut’s 28 nonprofit hospitals facing potential acquisitions by a for-profit chain, legislators are under siege from competing interests.
Hospital officials say the survival of some Connecticut hospitals depends on having the ability to convert to for-profits, something that requires a change in state law.
Union leaders want sweeping protections for workers in case hospitals change hands. Some union leaders and consumer advocates want an outright ban on hospitals becoming for-profit.
And so far, the proposals advancing through the legislature suggest the critics of for-profit health care have the upper hand.
The proposals aren’t likely to become law exactly as written. But they set the stage for what’s likely to be an intense debate about hospitals during a short, election-year legislative session, fueled by the discomfort among many legislators about the way the health care system is changing.
One bill developed by the co-chairwomen of the Public Health Committee would place a moratorium on the conversion of nonprofit hospitals to for-profits as of Oct. 1. It would also add new regulatory requirements for changes of ownership among nonprofit hospitals. A separate bill would require state approval for hospitals to discontinue reproductive services.
Another bill, which cleared the Labor and Public Employees Committee along party lines last week, would require hospitals that become for-profit to maintain the pay and benefits of all employees, recognize labor unions and collective bargaining agreements, and maintain staffing levels for at least three years after the conversion.
Asked about whether he would support a moratorium on conversions to for-profit hospitals, Gov. Dannel P. Malloy said he was “a little leery of a one-size solution fitting all.”
He had a similar response when asked about imposing limits on for-profit hospitals.
“I have a professed preference for not-for-profits,” Malloy said. “On the other hand, we have a situation in the state that we don’t have a lot of not-for-profits vying to take over other hospitals.”
Changes for hospitals, doctors, patients
The health care landscape is changing fast in Connecticut, and lawmakers are grappling with what to do about it.
After years of consolidation among the state’s nonprofit hospitals, a national for-profit hospital chain, Tenet Healthcare, is now in the process of acquiring four Connecticut hospitals in partnership with the Yale New Haven Health System. If the deals go through, Waterbury, Bristol, Manchester Memorial and Rockville General hospitals would become part of the first large-scale, for-profit hospital network in the state. (The Public Health Committee’s proposal would allow pending conversions to continue if the hospitals apply for state approval by Oct. 1. So far, only Waterbury Hospital has filed an application for its plan to form a joint venture with Tenet.)
But hospital sales are not the only changes on lawmakers’ mind.
Many have expressed concern about growing consolidation as hospitals buy up physician practices, a trend driven in part by doctors seeking help with the costly new demands of medical practice and in part by changes in payment models that encourage hospitals to align with community physicians. Some legislators worry about the pressures now placed on the small, independent medical practices that have long dominated Connecticut. And some have raised concerns that consolidation could reduce competition and lead to higher prices.
The rise in hospital ownership of medical practices has also led more patients to face new, sometimes hefty “facility fees” they didn’t expect when getting outpatient procedures performed at offices owned by hospitals. Legislators are likely to address it this session. A proposal advocated by Attorney General George Jepsen to require that patients receive notice about the fees passed the General Law Committee unanimously and has the support of hospitals.
Some hospitals have clashed fiercely with the unions representing their workers, including Waterbury Hospital, one of the four that could become for-profit as part of a deal with Tenet.
And as lawmakers contemplate slowing down or stopping hospitals’ move to become for-profit, some legislators are pushing to eliminate the facilities’ tax-exempt status. House Speaker J. Brendan Sharkey, D-Hamden, has proposed requiring nonprofit hospitals and colleges to pay property taxes. He noted that many hospitals are opening outpatient centers off their main campuses, removing property from local tax rolls.
It’s all happening as hospitals, among the largest employers in many communities, face the loss of hundreds of millions of dollars in state funding. Many lawmakers have expressed concern about the effect of the cuts on their local hospitals’ ability to operate. But the Malloy administration, which maintains that the hospitals will recoup the lost state dollars as more patients gain coverage under the federal health law, did not restore any funds to the hospitals in its budget proposal for the next fiscal year. Budget director Benjamin Barnes said hospitals appear to be in better financial shape than the state.
Law changes and for-profit conversions
State law doesn’t explicitly prohibit hospitals from operating as for-profits (and one, Sharon Hospital, does). But the legal structure that allows hospitals to hire doctors while avoiding problems with anti-kickback laws is only available to nonprofits. Hospital officials say that effectively prohibits new for-profit hospitals from employing physicians.
Malloy last year vetoed a bill that would have cleared up that hurdle for Waterbury and Bristol hospitals. Tenet has said it can proceed with its potential Connecticut acquisitions because of its partnership with Yale New Haven, which is remaining nonprofit. But a company official has said it’s not a long-term solution.
Malloy said Thursday that the existing regulatory process for changes in hospital ownership, and the law limiting physician employment to nonprofit hospitals, gives the state “a fair amount of control.”
“The two things together, I think, gives government a lot of leeway in trying to manage and help make the best decisions for the communities affected,” Malloy said.
But legislators are taking a broader look at the regulations on changes in hospital ownership. And so far, hospital officials aren’t pleased with the proposals.
The industry is facing new performance and financial pressures, hospital officials say, and they need flexibility to adapt, including the option of partnering with out-of-state, for-profit companies that can access capital to upgrade facilities or buy costly equipment.
The Public Health Committee’s proposal would “put walls around Connecticut,” said James D. Iacobellis, senior vice president for government and regulatory affairs at the Connecticut Hospital Association.
“Capital partners look at laws and the political landscapes across the country and across the world when making decisions on where to invest,” St. Mary’s Health System said in written testimony. “This legislation would have a chilling effect on the market. Prospective partners will go to states that have less restrictive processes.”
But critics of for-profit hospitals say the bills are on the right track in providing transparency, regulatory oversight and protections for workers.
They say the state should proceed cautiously, if at all, in allowing hospitals to be run by companies with shareholders. They worry that for-profit hospitals will be less likely to continue delivering money-losing services and point to scandals involving for-profit chains in other states.
“For-profit and health care has always been a very uneasy mix at best,” said Deborah Chernoff, spokeswoman for the New England Health Care Employees Union, District 1199, SEIU. “What is good for investors generally is not good for patients.”
Chernoff said she believes the sentiment in the legislature is to shape how conversions happen, not to end them.
“I don’t think anybody here thinks that we’re going to stop this from happening,” she said.
But, she added, it’s important for policymakers to be thoughtful about the way the health care market is changing, particularly since hospitals are the dominant employers in many cities.
Concerns about for-profits
Some legislators have also expressed discomfort with hospitals becoming for-profit and other changes in the health care landscape.
“We should not allow additional for-profit hospitals into our state until we have all of the information on all of the various entities that are bidding to make profits from the health care needs of our citizens,” Senate Majority Leader Martin Looney, D-New Haven, testified during a public hearing Wednesday.
He also raised concerns that doctors are being pressured to sell their practices to hospitals and suggested that physicians who wish to remain independent should be protected by state law.
Sen. Len Fasano, R-North Haven, has warned that the growth of large hospital networks that buy up physician practices could threaten the doctor-patient relationship.
Public Health Committee Co-Chairwoman Sen. Terry Gerratana, D-New Britain, has also raised concerns.
“If people complain now that the mom and pops are going out of business across the board because the big box stores are coming in, well folks, to me, it’s a similar situation. The big box stores are coming in,” she said. And, she added, patients won’t get the individual attention they get from small, community-centered practices.
As for for-profit hospitals, she said, “It does come down to that, who are we accountable to, are we accountable to shareholders and stockholders, or are we accountable to the practice of medicine?”
For-profit hospitals would probably say they could serve both, Gerratana added. But she said that’s not something Connecticut is used to.
“We are the land of steady habits and we are cautious,” she said.
Connecticut has 28 acute care hospitals and one children’s hospital, a large number for a state of this size, she noted.
“But that’s important because that’s what Connecticut wants, and Connecticut wants that individualized, that small community setting,” Gerratana said.
Turning a nonprofit hospital into a for-profit, she added, “That’s a big game changer. A lot of things change very rapidly, very quickly, including the services that are going to be delivered to our constituents.”
A matter of survival
But other lawmakers think that ensuring the survival of the state’s community hospitals requires having the option of partnering with a for-profit.
Rep. Whit Betts, R-Bristol, said community hospitals have been weakened financially in recent years, including from reductions in reimbursement from government programs and recently imposed state taxes. That’s made it hard for them to make the kind of facility upgrades they need to thrive. Joining a for-profit company that can access capital could help them overcome that, he said.
“What concerns me is if we create an atmosphere of not welcoming for-profit hospitals, you add that to the already strong perception that Connecticut is an anti-business climate, I think it’s going to hurt our citizens in terms of the type of medical care they can get in the future, and I don’t believe anybody wants that,” he said.
Betts said lawmakers have a responsibility to look out for hospital employees during conversions.
He expects that whatever becomes law will be somewhere between the Public Health Committee’s proposals and the narrowly tailored bill Malloy vetoed last year.
“It’s by far, in my mind, the single most important issue not only this session, but for the rest of the decade,” he said. “If we do not have community hospitals, I think it’s going to change the landscape significantly in Connecticut.”