The Basics: The last-minute for-profit hospital bill

It came down to the final hours, but legislators tackled one of the most complex, controversial issues of the session by passing a measure that makes it easier for nonprofit hospitals to convert to for-profits and adds state oversight to hospital sales and transactions involving physician practices.

basicsThe bill, the subject of intense lobbying by hospitals and unions representing health care workers, now heads to Gov. Dannel P. Malloy, whose administration was among several groups involved in crafting the measure.

If signed by the governor, the bill could clear the way for hospitals in Bristol, Manchester, Vernon and Waterbury to be acquired by Tenet Healthcare, a national for-profit company.

What does the bill do?

The bill makes changes in three areas:

  • It removes a barrier in existing law that makes it difficult for for-profit hospitals to operate in Connecticut;
  • It expands state oversight on the sale of nonprofit hospitals;
  • It gives the state significantly more oversight over transactions involving physician practices.

Current state law doesn’t ban for-profit hospitals outright, but the legal structure that allows hospitals to employ doctors while avoiding anti-kickback requirements -- known as a medical foundation -- is only available to nonprofits. Tenet developed a workaround that it believed would allow it to operate for-profit hospitals in the state, but it wasn’t certain to pass legal scrutiny.

The bill legislators passed Wednesday night changes state law to allow for-profits to establish medical foundations.

But it also gives the state more authority in determining whether to approve the sale of a nonprofit hospital.

For a sale to be approved, the public health commissioner would have to determine that the affected community “will be assured of continued access to high quality and affordable health care” -- after accounting for any proposed changes that affect hospital staffing. That’s in addition to criteria the commissioner already must use.

The hospital and purchaser would have to hold a public hearing in the town or city where the hospital is located.

And the public health commissioner and attorney general would be allowed to place “any conditions” on the approval of a hospital sale.

The bill also gives the state significant new authority over transactions involving physician practices.

Physician practices with eight or more full-time doctors would have to get state approval -- known as a certificate of need -- if they want to transfer ownership to a hospital or another organization, unless it’s another physician practice. Hospitals are already required to get a certificate of need to open facilities or terminate services, but physician practices generally haven’t been subject to the process.

The criteria for issuing a certificate of need would also be expanded to include consideration of whether the proposal would negatively impact the diversity of health care providers and patient choice in an area, and whether any consolidation that occurs would adversely affect health care costs or access to care.

The bill also includes several new reporting requirements.

  • Mergers or affiliations between physician practices that lead to a group with eight or more doctors, or between physicians and a hospital, would have to be reported to the attorney general;
  • Medical foundations would be required to detail their finances, services provided and significant changes made in annual reports to the state Office of Health Care Access;
  • Hospitals would have to report annually to the attorney general and Department of Public Health on the group practices they own or have an affiliation with;
  • Medical practices with 30 or more doctors that aren’t affiliated with hospitals would have to submit annual reports to the attorney general and health department;
  • The attorney general would get notice of pending mergers or acquisitions involving hospitals or other health care providers that involve assets large enough to require notifying the Federal Trade Commission or the U.S. Department of Justice as part of antitrust law.

In addition, when a patient is admitted to a hospital, the patient would be allowed to have the hospital staff notify his or her doctor.

What does the bill not do?

The bill does not impose a moratorium on nonprofit hospitals becoming for-profit, as an earlier proposal would have required. It also doesn’t include any requirements that hospitals maintain employment levels after converting to for-profit, a protection that unions had sought.

Who does it affect?

The bill has direct application to four hospitals and people who work and get care there: Bristol, Waterbury, Manchester Memorial and Rockville General hospitals. Those four hospitals are poised to be acquired by Tenet and become for-profit.

It also affects the Yale New Haven Health System, which has a partnership with Tenet in the deals.

The bill also affects doctors in private practice who are considering affiliating with a hospital or other doctors to form a practice of eight or more physicians.

What started it?

This bill grew out of the legislature’s attempt to address two separate but related issues.

One is the ability of nonprofit hospitals to convert to for-profit, prompted by the efforts by Tenet to acquire Connecticut hospitals.

The other issue legislators sought to address is consolidation in health care and the acquisition of physician practices by hospitals.

Many doctors have joined hospital systems or larger practices, seeing it as a way to help with the costs of things that are becoming common in medicine -- such as electronic medical systems and hiring care coordinators -- and avoid hassles like negotiating with insurance companies. Hospitals, meanwhile, are interested in acquiring physician practices because changes in the way health care is paid for are expected to reward those with strong connections with doctors in the community.

But many people, including some key lawmakers, have raised concerns about what consolidation could mean for doctors and patients. They worry that consolidation could raise health care prices and that doctors who wish to remain independent could be squeezed out by increasingly dominant hospital systems.

What's the debate?

The ability of hospitals to convert to for-profit has been a highly contentious issue. Some unions and community groups wanted lawmakers to ban hospitals from becoming for-profit or impose significant state oversight on the changes.

But hospital officials said the state’s existing regulatory process for changes in ownership is already robust and that expanding it could be problematic for an industry adjusting to major changes.

The final bill was a compromise: It didn’t include many of the restrictions unions sought but added to the state’s regulatory process.

Sen. Len Fasano, R-North Haven, who helped broker the deal, said the bill was a “big step forward,” but added that legislators would have to watch the health care field to ensure that workers and patients are treated fairly.

Rep. Sean Williams, R-Watertown, who also worked on the bill, said it will allow several struggling hospitals to be “rescued financially.”

But Rep. Claire Janowski, D-Vernon, voted against the bill, saying that although her local hospital was poised to become for-profit, she didn’t think becoming for-profit was the best course.

What else should I know?

The deal was the product of close to two weeks of negotiations between legislators from both parties, the governor’s office, hospital officials, Tenet and unions.

Union officials said the bill had some protections for workers and communities, although they said they hoped the matter would be revisited next year.

Tenet and Yale-New Haven Hospital had a more tepid response. In a statement released after the vote, they said they would have to do “some fairly extensive research to understand its implications.”

“If this bill becomes law there is clearly a chance that there will be some unintended consequences -- ones that could make it extremely difficult for us to partner with hospitals in Connecticut to provide quality patient care,” the statement said. “As we’ve said all along, we believe the current process for the conversion of nonprofit hospitals contains sufficient safeguards – ones with which we are happy and proud to comply.”

How they voted

The Senate approved the bill 35 to 1. Sen. Toni Boucher, R-Wilton, cast the only vote against the measure.

The House approved the bill 143 to 4. Democrat Claire Janowski of Vernon voted against the bill, as did Republicans Dan Carter of Bethel, Richard Smith of New Fairfield and Tim Ackert of Coventry.

About Arielle Levin Becker

Arielle Levin Becker was a finalist in 2009 for the prestigious Livingston Award for Young Journalists, a recipient of a Knight Science Journalism Fellowship and the third-place winner in 2013 for an in-depth piece on home caretakers from the National Association of Health Journalists. Arielle previously worked for The Hartford Courant, most recently as its health reporter. She also has covered education and municipal beats for The Courant and for the Home News Tribune of East Brunswick, N.J. She is a 2004 graduate of Yale University. E-mail her at alevinbecker@ctmirror.org.

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