Time running short on for-profit hospital proposal. What then?

Time is running out for legislators to act on one of the most complex and controversial issues they’ve faced this session: whether to craft a new regulatory and statutory framework for nonprofit hospitals to convert to for-profits.

And with hospitals in Waterbury, Bristol, Manchester and Vernon poised to become for-profit, the possibility of no legislative action raises a question with no clear answer: What then?

Tenet Healthcare, the for-profit company poised to acquire the four hospitals, says it can complete the conversions without legislation. But Attorney General George Jepsen said it’s not certain that the company’s plans would pass legal scrutiny under current law.

Even though time is running short, legislators still could pass a measure on hospital conversions. Lawmakers have been working on a proposal, although there’s some doubt in the Capitol about them reaching an agreement that will pass both chambers before the session ends at midnight Wednesday.

This is the second year that hospital conversions have been an issue at the close of a legislative session, but in many ways, the politics and sense of urgency have reversed.

A measure that passed last year -- but was ultimately vetoed -- would have made it easier for for-profit hospitals to operate in Connecticut. The legislation under consideration this year would make it harder for hospitals to change ownership and become for-profit.

And last year, it was hospital lobbyists scrambling to get a law passed in the final hours of the session, to the consternation of union officials. At the time, a law change was seen as necessary for two hospital transactions to go through. This year, unions have been pushing throughout the session for added protections for workers and communities if hospitals become for-profit, while some on the hospital side have been less adamant that something must get done.

Tenet Senior Vice President Trip Pilgrim said that even without legislation this year, the company could move forward with its plans to acquire Waterbury, Bristol, Manchester Memorial and Rockville General hospitals.

State law currently restricts the ability of for-profit hospitals to operate in Connecticut, but doesn’t ban them outright. The restriction applies to something known as a medical foundation -- the legal structure that hospitals can use to employ doctors without running afoul of anti-kickback laws. State law makes that structure available only to nonprofits.

Even without a change, Pilgrim said, Tenet could still acquire hospitals in Connecticut and employ doctors because it has a partnership with the Yale New Haven Health System, a nonprofit. “We think it’s fully compliant with the existing statute,” he said.

But the legality of Tenet’s plans with the Yale New Haven system has not yet been evaluated by regulators, Jepsen wrote in a letter to legislative leaders last week. And no one should assume that the attorney general’s office would approve the plans, he wrote.

“[U]nresolved questions about the lawfulness of a medical foundation proposal … could be relevant to this office’s consideration of whether the nonprofit hospital exercised sufficient due diligence in entering into the transaction,” Jepsen wrote.

Jepsen said in an interview that he wasn’t weighing in on whether the arrangement would be legal or not -- he said it would be inappropriate to do so since his office must review hospital conversion proposals. But he said he wanted legislators to understand that “if they wanted to be sure that Tenet could go forward with their application” and hire physicians, there would need to be a change to state law.

Bristol Hospital President and CEO Kurt Barwis said Jepsen’s letter gave him pause. If the medical foundation law doesn’t change to accommodate for-profits and Tenet’s workaround is found not to be legal, Barwis said, “That’s a huge problem.”

The work required to seek approval for a change in ownership is lengthy and costly, so moving forward without assurances about the medical foundation model could be risky.

“I’m hoping and praying that we end up at a good place,” Barwis said.

While legislators from towns served by the four hospitals involved with Tenet have been concerned with making sure the hospital’s deals with Tenet can go through, other legislators have been advocating for more oversight on hospital conversions, a position being backed by unions, including those in a contentious dispute with Waterbury Hospital over givebacks.

Some legislators have pushed for more disclosure and regulatory oversight on changes in hospital ownership or for a moratorium on hospitals converting to for-profit.

But some key lawmakers have said they want to be cautious about taking action that could affect a fast-changing, complex industry in unforeseen ways.

Gov. Dannel P. Malloy has said that the state already has “some pretty handy levers” for addressing hospital conversions. “I’m a little leery of a one-size solution fitting all,” he said in March.

Last year, the debate on the issue was different.

At the time, Waterbury and Bristol hospitals were in the process of being acquired by Vanguard, a national for-profit hospital chain that was later bought by Tenet. The company did not yet have a partnership with the Yale New Haven system and officials believed that the medical foundation law needed to change to make those deals possible.

In the final hours of the session, legislators passed a narrowly crafted measure that would allow Waterbury and Bristol hospitals to have a medical foundation while operating for profit. Union officials said they were blindsided by the move, which was done by amending another bill. Malloy ultimately vetoed the measure.

Tensions over the issue rose so high on the final night of the session that hospital lobbyists and union officials got into a dramatic tangle outside the Senate chamber.

Will there be a similar rush to address the issue at the end of this session, too?

Stay tuned.

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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