Public Health Committee

JOINT FAVORABLE REPORT

Bill No.:

SB-460

Title:

AN ACT CONCERNING HOSPITAL CONVERSIONS AND OTHER MATTERS AFFECTING HOSPITALS.

Vote Date:

3/25/2014

Vote Action:

Joint Favorable Substitute

PH Date:

3/19/2014

File No.:

SPONSORS OF BILL:

Public Health Committee

REASONS FOR BILL:

The bill bans the sale or transfer of assets from a non-profit hospital to a for-profit entity unless an application has been filed with the Department of Public Health and the Attorney General by October 1, 2014.

It changes the requirements for purchases and conversions in which an application is filed prior to October 1, 2014. The bill also requires a Certificate of Need for hospitals seeking to terminate inpatient or outpatient reproductive services; increases reporting requirements for for-profit hospitals; authorizes bonding to fund grants for nonprofit hospitals' capital improvements; and requires the Department of Public health and the Department of Social Services commissioners to review hospital regulations to determine whether any should be amended or repealed, to ensure that profitability does not outweigh patient health safety.

RESPONSE FROM ADMINISTRATION/AGENCY:

George C. Jepsen, Attorney General: The bill revises the regulatory process for approving sales of nonprofit hospitals to for-profit entities. The current laws governing the hospital conversion process have not been amended for more than a decade and do not address the changing landscape of healthcare systems.

The current language in the bill does not address whether a for-profit hospital should be permitted to employ physicians and engage in the corporate practice of medicine. Some for-profits hospitals have indicated that they will not do business in this State at all if they cannot employ physicians, as nonprofit hospitals currently do, and thus vertically integrate through the acquisition of group medical practices.

I urge the legislature to give careful consideration to this issue as part of its current deliberations over the hospital conversion process; otherwise, it may render many other key aspects of the bill an academic exercise since for-profits may decide not to pursue acquisitions in Connecticut without a law permitting the corporate practice of medicine.

Commissioner Jewel Mullen, MD, MPH, MPH, Department of Public Health (DPH): The Department of Public Health provided information for Senate Bill 460 by outlining some of the Department's specific concerns:

Section 2: defines “affected community” as a municipality where a hospital is physically located or a municipality whose inhabitants are regularly served by the hospital. The phrase [“a municipality whose inhabitants are regularly served by the hospital”] is unclear and needs clarification. (e.g. hospital's primary service area).

Section 10, (a): defines the expedited review process for distressed hospitals that propose a transaction including only non-profit to non-profit entities. The Commissioner of DPH is to consider six criteria in determining if a hospital is distressed and therefore, would qualify for expedited review. If the intent is the consideration of all six criteria, the Office of Health Care Access (OHCA) is concerned that these criteria may not allow any hospitals to qualify as distressed, even the most financially troubled.

Section 10, (h): regarding submission of annual financial filings by the new hospital after the transaction. By existing statute, OHCA receives a large amount of financial information from all hospitals. OHCA requests that this post-transaction requirement be eliminated or revised in light of the possible redundancy.

Section 14: [“hospital or other facility”] in the following language: [“termination of inpatient or outpatient reproductive services offered by a hospital or other facility or institution operated in the state”.] does not align with the existing definition of “Health Care Facility” found in Sec. 19a-630 of the Connecticut General Statutes. The bill's language may require the regulation of service providers (e.g., abortion clinics) not currently under OHCA's jurisdiction. Though the DPH licenses clinics, including abortion clinics, they are not subject to CON. Therefore, OHCA request that the words ““Health Care Facility as defined in 19a-630”] be substituted for [“hospital or other facility.”] In addition, [“reproductive services”] is not currently defined in OHCA statutes/regulations thereby making it unclear as to what “reproductive services” means.

The implementation of the bill would require the allocation of significant additional resources to the Department of Public Health that are not currently included in the enacted budget or in the Governor's recommended budget adjustments.

Victoria Veltri, State Healthcare Advocate, Office of the Healthcare Advocate: The notices required by parties engaged in the conversion of a non-profit hospital to a for-profit model are appropriate and reasonable. S.B. 460 advances the principles of transparency in the proposed transactions, and enables the review of the transactions by the Attorney General and the Commissioner of the Department of Public health and weigh the potential impact of the public interest in affected communities.

Senator Martin Looney, Majority Leader: I would like to express my support of S.B. 460. A decade ago, the General Assembly passed Public Act 03-73 which created the new process for hospital conversion. As a result, we now see a number of hospitals begin the conversion process, and others creating joint medical foundations that will allow them to skirt the Connecticut statute that prohibits a for-profit hospital corporation from employing physicians.

The bill would slow this movement down. It will prohibit any additional for-profit hospital conversions to file after October 2014. Additional for-profit hospitals should not be allowed in our state until we have all of the information on all of the various entities that are bidding to make profits from the healthcare needs or our citizens.

Representative Jeffrey Berger: As the delivery of healthcare continues to change, it is important the legislature have a role. I have the same concerns and want to ensure that Waterbury Hospital continues to provide affordable, quality care and good jobs with existing retirement security agreements to maintain excellent staffing.

I am committed to continuing the community based model that is the history of Waterbury Hospital, and what we do now is critical to the future model of nonprofit hospitals to for-profit hospitals.

Teresa C. Younger, Executive Director, Permanent Commission on the Statue of Women (PCSW): The bill enhances the certificate of need (CON) process and allows an opportunity to fully analyze a hospital's plan to eliminate patients services including inpatient or outpatient reproductive services. The provision is of significant importance because women's health services are often the first targeted for elimination.

PCSW has used the CON three times to work toward a resolution when women's health services were threatened by a proposed change in hospital practices. Enhancing oversight to the State would ensure that adequate health services are provided in all communities, and the process is transparent and accessible to the public.

NATURE AND SOURCES OF SUPPORT:

Joanne Chapin , RN, President, New Milford Hospital RNs, AFT Local 5101, AFL-CIO; AFT Connecticut represents 29,000 professional workers across the state including 7,000 healthcare workers.

I understand that with the dramatic changes within the healthcare industry, mergers or conversion in Connecticut will occur. It is important, however, to protect the communities and the members of these communities who are employed by these hospitals.

At this time within our current statute there is little the state can do to protect the patients, communities and workers interests. SB 460 strengthens current statutes by expanding the ability of the Attorney General to investigate community impact and to demand transparency.

I have had experience with a nonprofit that merged with smaller nonprofit hospital because services were moved off site or closed. The lack of transparency in the network's plans has left the community and staff vulnerable.

Universal Health Care Foundation of Connecticut: If we are serious about transforming our health system to focus more on the patient, improving health outcomes, and spending dollars wisely on health care, we must take the time to evaluate the impact of allowing for-profit hospitals into our state.

The Universal Health Care Foundation would prefer to have the state put a moratorium on hospital conversions than try to just regulate the approval process. We first need to allow the major initiatives in health reform to work a little more. With the exception of the Sharon Hospital conversion, we have no real experience with for-profit hospitals. We cannot afford to experiment with the health and well-being of our communities in order to please the appetite of shareholders and board members who may have no connection or allegiance to local municipalities, staff and patients associated with a nonprofit hospital that has converted to for-profit control.

Connecticut Women's Education and Legal Fund (CWEALF):

CWEALF is a statewide nonprofit organization dedicated to empowering women, girls and their families to achieve equal opportunities in their personal and professional lives. We provide information, referral and support to women seeking guidance about questions involving family law, employment discrimination, education, and civil rights.

We support the provision of the bill that require hospitals and other facilities to apply for a certificate of need before terminating the inpatient or outpatient reproductive services that they offer. There is a significant risk that reproductive health care could be eliminated at hospitals purchased by large companies that purchase several health care facilities and choose to use religious directives for all newly-acquired facilities.

Judy Singer, Public Affairs Chair, Greater Hartford Section National Council Of Jewish Women (NCJW): The language included in the bill which protects women's access to full reproductive services from being eliminated or curtailed upon the whim of any for-profit company that purchases a hospital or health care facility or facilities in the state.

Charles Bell, Program Director, Consumers Union: Consumers Union is a nonprofit publisher of Consumer Reports, based in Yonkers, NY. The organization has been involved in state and national work to monitor conversions of nonprofit health plans and hospitals to for-profit companies.

A nonprofit conversion to a for-profit operation is a legal, policy and community decision about how to organize and structure health care services in a community, state or region. Therefore, full disclosure, transparency and community participation is essential similar to other decisions that affect quality, affordability and accessibility of health care services.

Consumers Union has seen the effects of health care restructuring transactions and conversions that moved too rapidly, sometimes under the radar of regulators and legislators. We have seen many nonprofits in other states converted by corporate insiders, who have privatized and pocketed the charitable assets owned by the health plans and hospitals. In other cases, health care services have been withdrawn and discontinued.

Melodie Peters, President, AFT Connecticut: Provided suggestions for substitute language for the bill.

NOTE: There are an additional 12 similar statements-of-support available online

NATURE AND SOURCES OF OPPOSITION:

Trip Pilgrim, Senior Vice President, Tenet Healthcare: Tenet is one of the largest for-profit hospital groups with 77 hospitals nationwide and approximately 200 outpatient centers.

The current non-profit model is simply no longer viable. As the healthcare industry is changing due to the Affordable Care Act, hospitals have to adapt. The attractive solution for some hospitals is entering into strategic partnerships with for-profit institutions.

We understand the concerns that people have with converting state hospital's to for-profits and fully support safeguards and regulations to be in place to protect hospital employees and the communities they serve. The current conversion process strikes the right balance. It protects patients, workers and the communities, and also allows the flexibility to respond to changes that occur in the health care industry.

For-profit hospitals share the same mission as nonprofit hospitals to provide quality health care and to provide economic resources to the communities they serve. A for-profit hospital has to pay income, property and sales taxes. This also will help to generate millions of dollars for Connecticut.

Dennis McConville, Senior Vice President, Eastern Connecticut Health Network (ECHN): ECHN opposes Senate Bill 460. After two years of careful analyses and with the interests of our patients and our employees the ECHN's Board decided to pursue a joint venture of Tenet Healthcare Corporation and Yale New Haven System to become a for-profit company.

As a result of the Affordable Care Act, declining payments for patient services, hospital taxes and federal sequestration leave us challenged to reduce expenses. Given our current economic path, a partnership is the best way we can continue to deliver quality care at the lowest possible cost and preserve and add jobs.

Senate Bill 460 would impose extensive and unnecessary requirements on applicants in a regulatory process that already contains sufficient protections for the residents of Connecticut. The current hospital conversion process has been proven effective and as well as regulatory oversight by the Attorney General and the Department of Public Health to ensure the integrity of the process and the fiduciary responsibilities are carried out.

St. Vincent's Health Services: Senate Bill 460 increases regulatory requirements and reduces the ability that hospitals have to be flexible during this rapidly changing health care environment.

We have hospital conversion laws in place, as well as a Certificate of Need process. Hospitals are subject to these requirements and have complied and agree that our current system exists to preserve patient access, safety, and quality of care. While some hospitals may decide to convert to a for-profit status, others will form close affiliations, allowing access to necessary capital, efficiencies in purchasing and other cost reduction opportunities, including reduction in duplicated services.

Kurt Barwis, President and CEO, Bristol Hospital and Health Care Group, Inc: The bill significantly increases the regulatory requirements to the Certificate of Need and hospital conversion process and creates an overly burdensome regulatory environment.

The bill as written will prevent hospitals and health care systems from forming strategic partnerships that will allow them to adapt and expand in the rapidly changing health care system.

Darlene Stromstad, President and CEO, Waterbury Hospital: Provided testimony highlight the financial challenges they have experience as a result of the Medicaid. Budget cuts, Medicare reimbursement reductions and the financial impact of the health care reform.

In 2012, the Waterbury Hospital Board of Directors signed a letter of intent to engage in a Joint Venture with Tenet Healthcare. The vision for a cooperative health network would allow us to provide the best care for our patients in the right place at the right time. A Certificate of Need/Conversion application was completed in May 203.

The key issue is whether Connecticut is a favorable place for for-profit healthcare and for the creation of networks of healthcare for our communities. SB 460 makes extensive changes to the Certificate of Need and conversion process which we are not needed. The existing statutes provide the level of detail and analysis to ensure the right decisions are made.

As the only hospital in the state with a pending conversion (CON) for a joint venture with for-profit healthcare system, we ask that you give careful consideration to the consequences of the proposed bill.

NOTE: There are an additional 11 similar statements-of-oposition available online

Reported by: Virginia L. Monteiro

April 14, 2014