Committee Hears Pros & Cons of For-Profit vs. Nonprofit Hospitals
Tempers flared at the end of the this year’s legislative session over a bill that would have made it easier for a private, for-profit hospital company to purchase physician practices from a nonprofit hospital that it planned to take over.
It’s an area where the state has little experience. The only for-profit hospital in Connecticut is Sharon Hospital.
Lawmakers, Gov. Dannel P. Malloy, and union officials have been wary of unknowns when it comes to for-profit hospitals and what they mean for the residents of Connecticut. The legislature’s Labor and Public Employees Committee heard Tuesday from both hospital executives and union officials about the pros and cons of converting from a nonprofit to a for-profit model.
Waterbury Hospital was the first to start courting for-profit suitors like Vanguard Health Systems, a Tennessee-based for-profit hospital operator that was recently acquired by another Texas-based for-profit company called Tenet HealthCare Corporation.
Tenet has been in negotiations with Waterbury Hospital and has been courted by Bristol Hospital, and Eastern Connecticut Health Network.
But the question lawmakers will have to answer is: Would a for-profit risk quality care in order to achieve savings for shareholders?
The answer to that may come down to who you believe: the hospital executives or the labor unions.
“In a few years or less, Connecticut’s nonprofit hospital landscape could be radically changed, with for-profit chains dominating and gobbling up hospitals and private doctor practices everywhere,” Barbara Simonetta, president of Connecticut Health Care Associates, an AFSCME affiliate, told the committee Tuesday.
She said Tenet wants to take away the nurses’ pensions. “They tell nurses constantly if they don’t give up their pension, it’s their fault when the hospital closes in two years,” Simonetta said.
She cited a long list of complaints, fines, and legal settlements over the past decade from some of the 15 other states were Tenet operates hospitals. The company paid more than $1 billion to settle fraud, overbilling, and kickback allegations over that time period. It also paid about $641 million to settle hundreds of civil lawsuits.
Trip Pilgrim, senior vice president of development for the Tenet Healthcare Corporation, said nearly all of the settlements were made prior to the installation of the current management team.
“It is a very, very different company than it was 10 to 12 years ago,” Pilgrim said.
He said the hospitals in the state looking to be acquired by Tenet have done their due diligence on the company and feel comfortable enough to move forward with a deal.
Sen. Cathy Osten, co-chairwoman of the committee, asked why a for-profit company like Tenet will do a better job with the hospitals than a nonprofit.
“Scale,” according to Pilgrim. He said Tenet is successful because it is able to leverage its purchasing power. He said it’s “tough to make it as a standalone” nonprofit.
Osten said one of her biggest concerns is the benefits employees have today and what benefits they will have in the future.
The state of Connecticut, according to Pilgrim, has lost 1,400 hospital jobs over the past 12 months. He said that some of the hospitals his company has acquired have actually increased employee pay, which in turn increased the quality of care. He said the quality of care is important because it helps hospitals retain good doctors.
Darlene Stromstad, president and CEO of Waterbury Hospital, said the proposed merger with Tenet is the best option for her community.
“Quite frankly, we continue to limp along until that point when we can’t,” Stromstad said. “I can’t change the economy of Waterbury. I can’t change the state reimbursement. We all have to live within our means.”
She said hospitals do go bankrupt and Waterbury Hospital was losing money “really rapidly.” She said they tried to buy themselves some time to “right the ship and to be able to find a partner.”
She saidstate budget cuts may be coming next year and she is unsure where she would be able to cut her budget because there’s “not a lot of fluff left in our organization.” She said Waterbury Hospital would benefit from economies of scale.
Rep. Peter Tercyak, the other co-chair of the committee, asked if economies of scale would really save that much money.
She said just a small amount of savings would allow the hospital to reinvest in new equipment. Buying something like a CAT-scan machine would cost a lot less through Tenet, which operates 77 other facilities throughout the United States.