Editor’s Note: The FTC may have plans in store that differ from the outcome set forth in the following article.
New Haven Register
The universe of hospital care is fast evolving in Connecticut, with a giant for-profit system poised to take over a number of small community hospitals, while Yale-New Haven Health Systems is set to provide some clinical services beyond its current footprint.
Yale-New Haven Health System is also in a position, on an interim basis, to remove a roadblock to the switch to for-profit status for these smaller hospitals, while maintaining its own nonprofit standing, according to an official from Tenet Healthcare Corp. The merger with a for-profit system with deep pockets is viewed by the struggling hospitals in Waterbury, Bristol and eastern Connecticut as a godsend that will allow them to keep up with technological changes and make the capital investments they currently can’t afford,
Health care advocates however, are wary that the changes are happening too fast and need more public input.
As the mergers were being planned, the initial for-profit partner for those Connecticut hospitals — Vanguard Health Systems of Tennessee — was itself bought by Tenet Healthcare Corp of Texas, a $16 billion behemoth, which makes the new company the second-largest in the country behind HCA Holdings.
A bill that would have provided a governance structure to allow for-profit hospitals to operate here by being able to hire physicians was introduced as an amendment to another bill, without a public hearing, and adopted on the last night of the legislative session in May.
It subsequently was vetoed by Gov. Dannel P. Malloy, who agreed with union concerns that there needed to be a larger conversation about the operation of for-profit hospitals, but an arrangement with Yale-New Haven may change that until another bill can be debated in the next legislative session.
Federal law prohibits the corporate practice of medicine, which means hospitals cannot directly employ physicians.
Connecticut in 2009 adopted a statute on the creation of medical foundations that would allow hospitals and certain other health care entities to employ physicians and other providers through these foundations.
Vincent Petrini, senior vice president of public affairs for Yale-New Haven Health System, said declining revenues from the state and federal government, in addition to sequestration and new rules on bundled payments tied to patient outcomes, have driven hospitals to seek partners to achieve efficiencies.
The Yale system already includes Greenwich, St. Raphael’s and Bridgeport hospitals, in addition to Yale-NewHavenHospital. Petrini said it serves patients throughout the state and beyond, but it is not in a position to invest in other hospitals outside this immediate area.
He said this is why it is partnering with Tenet and the Eastern Connecticut Health Network to provide clinical support — mainly speciality care — when Tenet’s partnership with that network receives state approvals.
Petrini said Yale personnel won’t be taking the place of medical personnel there, but rather will be supplementing them. He said the arrangement will not have an effect on Yale’s personnel or change its mission in Greater New Haven and FairfieldCounty.
The Eastern Connecticut Health Network includes Rockville and ManchesterMemorialHospitals, and a number of outpatient facilities there.
Trip Pilgrim, senior vice president and chief development officer of Tenet, said when a smaller hospital merges with Tenet it will have access to equity markets to allow investments that it now cannot afford.
Pilgrim said as a stock entity it has never paid a dividend, but creates value “through growth … we don’t drain money out of the community.”
Pilgrim said it is moving away from fee-for-service payments and toward providing quality outcomes, as sought by the federal government and large employers. He said more and more payments will be tied to these outcomes and cost effective measures.
“That flips the incentives pretty radically for an organization like Yale-New Haven, which, historically, its incentive was to bring all patients to New Haven and treat them all here,” he said. The incentive now is to get those patients into the appropriate cost setting at the lowest cost, he said.
“Rockville, Manchester and Bristol will always be the lower cost setting than Yale-New Haven because they don’t have the burdens of research and teaching,” Pilgrim said.
Petrini said those patients in Eastern Connecticut it serves with its speciality care can now be followed back at the community hospital, while Tenet provides the physical investments it might need.
The merger that is the furthest along with Tenet and state approvals is WaterburyHospital, followed by BristolHospital, but both are stalled because the state law governing medical foundations was not amended to allow for-profits to also take advantage of them.
Pilgrim, in a discussion at the New Haven Register, said they have been talking with the attorney general’s office on an interim arrangement that would allow the Yale-New Haven Hospital System to create another medical foundation which Tenet could join as a way for it to be able to hire physicians.
He said this would apply to the Waterbury and Bristol hospitals and eventually Rockville and Manchester hospitals, while Tenet awaits a legislative fix.
The American Federation of Teachers, which represents nurses at ECHN, has been working with Vanguard and now Tenet as it looks toward a for-profit conversion there.
“Our union leaders stepped forward early on to be part of the discussions leading up to the proposed takeover of ECHN and their community hospitals in Manchester and Rockville. We made our concerns very clear from the beginning: access to quality care for the whole community and the impact of any loss of bedside caregivers to patients and the local economy. To date, the network has listened to the needs of the community by maintaining a collaborative partnership with local stakeholders,” said AFT CT President Melodie Peters.
AFT unions represent nearly 10,000 nurses, LPNs, lab techs and health care and support staff in Connecticut acute care hospitals, while the Service Employees International Union represents them at other facilities. Peters is a licensed practical nurse and a former state senator from the 20th District in Waterford.
She was concerned that a mechanism be put in place in the state to ensure that the for-profit companies “fulfill their obligations to the communities they serve. What we cannot afford is to allow a new system that blindly permits for-profit companies to put their bottom line ahead of patient care and community access,” Peters said.
Pilgrim said one of the things the attorney general is looking at is consideration of the charitable assets that these nonprofit hospitals own and that Tenet pay fair value for them. He feels that wrapping up the deal with Waterbury will take three more months.
The AFT would like the state to look at the governance mechanism in Rhode Island that stresses quality of care and correct staffing levels.
“I want a full discussion,” said Ellen Andrews of the Connecticut Health Policy Project. “These are not private companies (the hospitals.) They are public trusts.”
Kevin J. Counihan, chief executive officer of Access Health CT, which runs the insurance exchange in Connecicut set up under the Affordable Care Act, in a recent seminar at YaleUniversity, expressed his concern that all these mergers will result in higher costs tied to less competition.
Andrews wants to make sure that the quality of care and breadth of services, particularly on mental health access, will be protected under a for-profit system.
Pilgrim said whether a hospital is nonprofit or for-profit, it still has to meet the same standards. He said Vanguard and Tenet hospitals have better scores than half the hospitals in Connecticut on the Centers for Medicare and Medicaid website.
He said if there is no interim solution on the hiring of physicians, “no deals can go through. It’s a fundamental access issue.”