Senate Minority Leader Len Fasano speaks fondly of the days when his dad was a primary care doctor in independent practice, running his patients’ lab tests and performing mammograms in his office to make sure they got done.
“I think that era is going to be a memory in 10 years, and I don’t think there’s anything we can do to stop it at this point, unfortunately,” the North Haven Republican said, noting that most young doctors prefer to work for larger physician groups or hospitals.
But Fasano, like many lawmakers, has concerns about the way the state’s health care landscape is changing. Fasano worries about what he sees as pressures on doctors to give up independent practice to join larger organizations. He’s concerned about the growth of big, powerful hospital networks – particularly the Yale New Haven Health System, which he sometimes refers to as “Jaws,” circling around independent doctors and hospitals. He worries that big systems will gain too much market share, leading to less competition and choice for patients and higher prices.
Other lawmakers worry about the survival of small community hospitals, particularly as they face cuts in state funding.
Some are wary of the idea of out-of-state, for-profit companies buying Connecticut’s nonprofit hospitals. Others see for-profit purchasers as a needed option for small hospitals looking for partners and capital, and worry the state’s regulatory climate will scare them off.
The result is a flurry of proposed legislation that, together, reflect the challenge of adapting to a fast-changing industry – one that is both a top employer in many communities and a big driver of the health care costs that are straining state, local and business budgets.
There are bills to require each hospital to negotiate insurance payment rates separately, even if they share a parent company; eliminate the tax-exempt status of nonprofit hospitals’ satellite facilities; and create a commission to monitor health care costs and mergers. There’s a proposal aimed at making the state more palatable to for-profit hospital operators, and one that would make potential for-profit purchasers disclose more information when seeking approval.
“It’s all a very volatile situation right now, it seems,” said Senate President Pro Tem Martin M. Looney, D-New Haven. “One of our concerns is that you have larger numbers of significant marketplace changes happening all at once that a regulatory framework is struggling to keep pace with.”
Hospital officials say the changes lawmakers are responding to reflect their attempts to adapt to reduced state and federal funding, and to position themselves for major changes in care delivery and payment models, spurred by the federal health law. And they say some of the proposals would undermine their ability to do so.
Some bills appear to be “attempts to really hold back the clock,” said Dr. Rocco Orlando, senior vice president and chief medical officer at Hartford HealthCare, the parent company of Hartford, Windham and Backus hospitals, MidState Medical Center and The Hospital of Central Connecticut.
“We’re concerned that some of the proposed legislation is actually really moving against what we see as emerging national trends, and trends that are really coming from Washington,” he said.
What’s behind the changes
The push by hospitals to join larger organizations and to acquire or affiliate with physician practices has accelerated in recent years, propelled by declining Medicare reimbursement rates, the need to buy costly electronic records systems and other equipment, the desire for better leverage when negotiating with private insurers, and changes to the payment models used by government and private insurers.
“Acquiring physician practices and consolidation of hospitals, that’s a must,” said Peter Karl, CEO of Eastern Connecticut Health Network, which includes Manchester Memorial and Rockville General hospitals. “And the reason why hospitals and health systems need to do it is really for scale purposes. We need to get our costs down, and that’s why we’re all trying to merge with each other.”
As an example, Yale New Haven Health System spokesman Vin Petrini said the savings achieved when Yale-New Haven Hospital bought The Hospital of St. Raphael in 2012 amounted to about $300 million, helping to offset reductions in Medicare and Medicaid payments.
Being part of a larger organization is also expected to be important in adapting to new payment models. While health care now exists largely on a fee-for-service basis – a separate payment for each visit, test or procedure – future models are expected to tie compensation to providers’ ability to manage patients’ health. That requires better coordination between hospitals, community physicians, nursing homes, home health agencies and other providers. And health care providers are expected to take on some of the financial risk for patients’ outcomes, which Orlando said makes it important to have a large pool of patients to spread out the risk.
Demands on medical practices have increased too, including the need to purchase expensive electronic records systems. And independent physicians have no negotiating power with insurers, said Ken Ferrucci, senior vice president of government affairs at the Connecticut State Medical Society.
“They’re at a disadvantage. So many physicians, they’re the ones throwing their hands up, saying ‘I can’t compete anymore,’ and going to hospitals and health care systems and asking them to purchase them and take them into their system,” Ferrucci said.
Fasano said he’s talked to independent doctors who have felt pressured to join Yale’s system.
Petrini said most of the time, the system isn’t approaching doctors. “The vast majority of these practices come to us,” he said.
Bristol Hospital President and CEO Kurt Barwis said legislators are right to be concerned about large health care systems gaining too much market share.
Barwis thinks there’s will still be a role for community hospitals, noting that they can perform routine procedures at lower cost than larger hospitals that perform more specialized procedures.
But he said that state funding cuts make it harder to get by. Gov. Dannel P. Malloy’s proposed budget would eliminate a $15.1 million annual pool of money for low-cost hospitals and cut Medicaid payment rates for health care providers. And Malloy has proposed eliminating the tax exemption nonprofit hospitals receive for facilities outside their main campuses.
“I think that the concerns are not unfounded concerns, but they also have to consider how they nurture and support community hospitals that are not the big players,” Barwis said.
In Massachusetts, where changes to payment models are further along, only 11 of the state’s 90 hospitals remain independent, community hospitals, said Lynn Nicholas, president and CEO of the Massachusetts Hospital Association.
“I think the legislature in Connecticut has their head in the sand if they believe that they can maintain independent community hospitals going into the future that will be successful in what is an ever-increasingly complex environment, where non-fee-for-service medicine is going to require different strategies, different resources, and independent hospitals won’t in the long run have the ability to do that,” she said.
Concerns about price
But some Connecticut officials say there’s too much change happening too fast – and without enough oversight or recognition of the potential implications.
“I think we’ve been a little hands-off on it for a while, and now we have to get in the game,” state Healthcare Advocate Victoria Veltri said. “I think it got away from us, and it happened so fast. We’re looking at trying to fix a problem that the horse has already left the barn.”
Hospitals say consolidation and practice acquisition can lead to reduced costs and better care, but Veltri said there needs to be more transparency to determine if that’s the case. “In fact, I don’t think we’re seeing that yet,” she said.
Critics say consolidation might save money for hospitals, but can also raise prices for care. Patients who receive care at hospital-owned facilities can face higher charges, and larger health systems can gain leverage with insurers.
If talks break down and a big hospital system leaves an insurer’s network, thousands of patients might find themselves without access to many facilities. Veltri cited last year’s dispute between Hartford HealthCare and Anthem Blue Cross and Blue Shield, the state’s largest insurer.
“If those two had not resolved their contract dispute, you would’ve had over 100,000 people without a close hospital that was in-network,” she said.
Trying to affect the playing field
Looney and Fasano, the two Senate leaders, have teamed up to propose a series of bills they say are aimed at increasing transparency in health care costs and leveling the playing field for doctors and hospitals that wish to remain independent.
They include bills that would:
- Allow health care providers who work together to provide and coordinate care for a group of patients to negotiate contracts with insurers together without violating antitrust laws. The idea is to allow independent medical practices to participate in new payment models without having to join larger organizations.
- Block health systems from negotiating insurance payment rates for all of their facilities together. Instead, hospitals in the same market would have to negotiate separately, even if they’re owned by the same parent company.
- Ban certain facility fees – which can be charged to patients who receive care at outpatient facilities owned by hospitals – and cap other facility fees at $100 and require insurers to cover them as medical expenses.
- Create an independent agency to monitor health care cost, delivery and payment trends, and review proposed mergers and acquisitions for their impact on the market
- Hold for-profit and nonprofit purchasers of hospitals to the same standards in seeking approval, and require that the public health commissioner, when considering imposing any conditions on the transactions, consider the potential negative impact of the failure of the proposed sale to proceed. Fasano said this could help make the state more appealing to out-of-state, for-profit health systems that could partner with Connecticut hospitals, adding competition to the market.
- Encourage the compatibility of electronic medical record systems across the state so providers can access their patients’ information when needed. Hospitals would be required to subsidize independent doctors’ purchase of electronic medical records systems.
Hospital officials call some of the proposals contradictory, and said that requiring hospital chains to negotiate separately for each facility would fly in the face of the new payment models.
The contradictions of hospital regulation
In discussions on health care, Public Health Committee Co-Chairman Rep. Matt Ritter said, there’s one thing everyone agrees on: “There’s no putting the genie back in the bottle,” he said. Mergers and consolidations are going to happen. The question, he added, is what are reasonable policies for them?
To Ritter, mergers are the product of basic economics. And in 20 years, he said, the same services probably won’t be offered at every hospital.
But the Hartford Democrat said it’s important to recognize that health care isn’t just a business – and to also recognize when the consequences of not allowing flexibility could mean a hospital closing.
Ritter said a suitable approach might be for lawmakers to figure out what services to prioritize, rather than fighting to preserve every service at every location. He gave an example: If he knew his local hospital were losing its maternity ward, it would eat at him. But if changes in the market meant that he’d have to travel 20 miles for an outpatient rehab facility, Ritter said he’s not sure he’d lose any sleep.
In the past, lawmakers have been quick to reverse regulatory course after an unpopular outcome.
In 2010, legislators removed the requirement that hospitals seek state approval to terminate most inpatient and outpatient services, an effort to make the approval process more responsive to changes in health care.
But soon after, Rockville General Hospital closed its birthing center without applying for state approval, sparking local anger.
The next year, lawmakers restored the requirement that hospitals seek approval.
This year’s hospital debates will take place in the context of the collapse of plans by the national for-profit chain Tenet Healthcare to purchase five Connecticut hospitals. To facilitate the deal, legislators last year changed a state law that restricted for-profit hospital operations. But Tenet pulled out after the state Office of Health Care Access proposed conditions for purchasing Waterbury Hospital that included strict controls over staffing, services and pricing.
Some, including Fasano, say that produced the impression that Connecticut is unfriendly to for-profit hospitals, making it harder to attract out-of-state systems that could compete with Yale and Hartford.
But others remain wary of for-profits and say there’s still a need for more transparency if they try to buy a Connecticut hospital.
Public Health Committee Co-Chairwoman Sen. Terry Gerratana, D-New Britain, developed a bill that would increase the information prospective for-profit purchasers would have to submit, including information on expected staffing levels and services that would be substantially reduced or eliminated. Purchasers would also have to pay for an independent monitor.
“Good quality health care is good quality health care, and the people in those communities shouldn’t get anything less,” she said after the Tenet deal collapsed. “I didn’t feel really that with the different conditions that they were so onerous that we have to go in and make it easier for people to come in and provide less quality, in my opinion.”
Mark Bergman, Malloy’s communications director, said the governor and his staff are monitoring the proposals. He said the governor “believes any legislation that is passed must protect patients, the quality of care at hospitals, and workers employed at those facilities.”