Change to hospital regulation again looms – but direction unclear

Windham Hospital

File photo

Windham Hospital

Health care is changing in Connecticut: Once-independent hospitals are joining larger health systems. Physicians are joining hospitals or larger practices. And some observers worry about what that means for people’s access to care, particularly after recent cuts to services at one Eastern Connecticut hospital.

Amid all that, a key legislator says the time is ripe for lawmakers to revisit the way the state regulates major changes in health care. But it’s not yet clear what shape that will take – or whether any changes would leave the state with more regulation or less.

“I would be surprised if there was nothing done on certificates of need this year,” Rep. Matt Ritter, co-chair of the Public Health Committee, said, referring to the approval process required before hospitals can change ownership, acquire certain major equipment, open certain types of facilities, or terminate inpatient or outpatient services.

Ritter said the committee probably will come up with a product after public hearings, including one today on a proposal that would add regulation, a response to cuts to the critical-care unit at Windham Hospital last year.

The uncertainty reflects sharply differing views on the role of state regulation and its use – or lack thereof – in recent situations.

While some see state oversight as a key check against changes they view as problematic – such as rising prices and elimination or reduction of services – others see the certificate-of-need process as a barrier that can impede hospitals’ ability to adapt to changing circumstances and that can limit competition by making it harder to offer new services. A premise behind certificate-of-need regulations is that too much health care capacity can lead to higher costs – a view at odds with the idea that competition can keep prices down.

“There’s no question you’re getting some people saying we need to really look at that certificate of need and strengthen it, and other people saying maybe we’re allowing the CON process to be abused in some cases to slow down and make it cumbersome for other hospitals to make changes,” Ritter, D-Hartford, said. “It is competing demands.”

When hospitals seek to reduce services

The proposal that grew out of the changes at Windham Hospital would require hospitals to obtain state approval before reducing direct care staff hours by more than 50 percent in obstetric, maternity, pediatric, emergency or critical care units.

Windham’s parent company, Hartford HealthCare, last year converted the financially struggling hospital’s 12-bed critical care unit into a four-bed progressive care unit. Critics of the change – including local groups, doctors, unions and legislators – asked the state regulator, the Office of Health Care Access, to intervene, but the office determined that the hospital would not need state approval for the change.

Rep. Susan Johnson

Rep. Susan Johnson

Rep. Susan Johnson, D-Willimantic, said the bill reflects a concern that health systems could ratchet down the services they offer at a particular hospital to the point where patient volume and demand drops, and then could seek to eliminate the service. That could allow them to send patients to other hospitals in the same system that receive higher payment rates, she said.

But others say state regulations are already too restrictive, and that it makes little sense to add more at a time when hospitals are trying to adapt to both changes in how care is paid for and delivered, and recent increases in state taxes and reductions in certain Medicaid payment rates.

Reducing certain services “is a harsh reality of what the hospitals have to do to continue to provide services,” said Rep. Prasad Srinivasan, the top Republican House member on the Public Health Committee, citing recent state budgets that have relied on taxes on hospitals and cuts to payment rates.

“It is extremely unfortunate, but you can’t have it both ways,” Srinivasan, of Glastonbury, said. “You start cutting left, right and center and then expect the hospitals to continue to provide what they were doing, that is not fair.”

Concerns about the use of certificate-of-need rules
This is a picture of Rep. Prasad Srinivasan (left) and Rep. Matt Ritter, who worked to revise the bill.

Mark Pazniokas / CTMirror.org

Rep. Prasad Srinivasan, left, and Rep. Matt Ritter

While some have cited the controversy over Windham Hospital as a basis for potential changes, others, including Srinivasan, have pointed to another case: the pending proposal by Middlesex Hospital to replace one of its two linear accelerators – used to provide radiation therapy for cancer – and put the new one in the hospital’s Westbrook clinic, rather than in Middletown, where the current two are located.

The change, which requires a certificate of need, drew opposition from Yale-New Haven Hospital, which operates a linear accelerate 13 miles from Middlesex’s Westbrook facility. Middlesex officials have said denying the proposal could lessen competition and attributed Yale-New Haven’s opposition to competitive concerns – something Yale officials dispute. The Office of Health Care Access issued a preliminary decision rejecting Middlesex’s plan, although it has not yet taken final action.

Srinivasan, a physician, said he’s never supported the certificate-of-need process or the premise behind restricting whether health care providers can acquire certain medical equipment.

“If they have the capacity and the capability to provide whatever is needed, then let them do so,” he said. “The public access is definitely going to be only better.”

The Connecticut State Medical Society and Connecticut Chapter of the American College of Surgeons have called for the certificate-of-need process to be eliminated, saying in written testimony that CONs “in every shape and form are counterproductive to the delivery of high-quality health care.”

Senate President Pro Tem Martin M. Looney, D-New Haven, submitted testimony supporting the proposal requiring a certificate of need for service reductions, but also urged the committee to consider a streamlined process for equipment acquisitions and to ensure that competitors aren’t automatically allowed to intervene in certificate-of-need cases.

“The current system allows larger entities to engage in anticompetitive practices as intervenors acting against a struggling smaller entity; this should be strongly discouraged,” Looney wrote.

Hospital officials, meanwhile, have warned that the combination of tightened regulations and reduced state funding could have dire consequences.

“The simultaneous interaction of regulation and fiscal harm that’s being done to health care, it has the potential to destroy the health care delivery system in Connecticut,” Dr. Rocco Orlando, Hartford HealthCare’s chief medical officer, said in an interview last fall. “I understand some of our legislators, I understand some folks in our community, they become concerned about the mix of services that are being delivered. We’re doing our utmost to preserve the core services, and if this pendulum doesn’t stop swinging in the wrong direction, we’re not even going to be able to provide the cornerstone services that we’re seeking to preserve.”

Sen. Terry Gerratana

Keith M. Phaneuf / CTMirror.org

Sen. Terry Gerratana

Public Health Committee Co-Chair Sen. Terry Gerratana said she sought to draft the bill on reductions in hospital services narrowly, to require additional state oversight only in cases involving specialty and critical care services.

“Because that’s significant in a community,” Gerratana, D-New Britain, said, adding that she thought it was important to include a definition of the size of the reduction that would require approval.

Others sought a broader bill, she said, that would have required approval for any reduction in services.

Johnson is among those who would like to see the regulation go further, including allowing the Office of Health Care Access to hold hearings on potential 25 percent reductions in services.

Asked about hospitals’ argument that they need flexibility to adapt to challenges, Johnson questioned how hospitals used their resources.

“I think that they forget how much we do provide for them,” she said, citing the fact that nonprofit hospitals don’t pay property taxes and the state provides money to their towns and cities to offset some of the lost tax revenue. She also pointed to six- and seven-figure hospital executive salaries. (Johnson has introduced a bill that would require nonprofit hospitals to limit administrators’ salaries and bonuses to $500,000 per year and require hospitals that exceed that amount to pay property taxes.)

Chris McClure, a spokesman for Gov. Dannel P. Malloy, said the administration is open to changing the certificate-of-need process. “The details on how that’s done matter,” he said. “What’s unequivocally clear, however, is that we all must ensure that hospitals are prioritizing and maintaining access to high-quality and cost-effective patient care.”

Backlash to previous changes

In the past, changes to the certificate-of-need regulations have reflected both efforts to scale back regulations and responses to specific actions taken by hospitals.

In 2010, lawmakers passed a series of changes to the process expected to reduce the number of applications by half. Among the changes was no longer requiring a certificate of need before hospitals could terminate inpatient or outpatient services – something a state health department spokesman said no other state required at the time.

That change drew little public attention when it was passed as part of a budget bill. But later that year, Rockville General Hospital closed its birthing center without having to seek state approval, sparking local controversy,

The next year, legislators restored the requirement that hospitals seek approval before terminating services.

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