CT hospital mergers, purchases, need strict scrutiny

Article seen in CT Viewpoints, written by Tom Swn (CCAG)

It is hard to turn on your computer or to check out your evening news without hearing highly paid hospital executives saying that the sky is falling and arguing that they are on the side of consumers. In reviewing the recent filings with state regulators, it appears that this may just be an effort to create a distraction as they go about radically changing the health care landscape in Connecticut.

If unchecked it is likely to have a very harmful impact on cost and access.

Whether it be mergers into large hospital networks, purchases of hospitals by multi-billion dollar out-of-state corporations, buying of physician practices, or alliances with insurers to create Accountable Care Organizations, it is clear the Connecticut landscape is rapidly changing.

The last two years the legislature and the governor have enacted some important reforms to address these changes, but they are clearly not enough.

A report released this week by the Health Care Pricing Project found a strong correlation between hospital prices and the market power of hospitals. The findings in the report make a strong and convincing argument that additional protections are needed in Connecticut.

Yale New Haven Hospital’s proposed purchase of L&M Hospital in New London will give them a tremendous market share in much of southern Connecticut. In the L& M primary service area, Yale-New Haven already draws the second-largest volume of patients. After the takeover, Yale would have over 80 percent of all discharges in the New London area. Studies show that hospital mergers generally cause higher prices without an improvement in quality. In places like southern Connecticut, where there is already almost no competition, prices often rise more than 20 percent right off the bat.

Waterbury Hospital and the Eastern CT Health Network have already had their proposed sales to out-of-state for-profit companies fall through and are now eyeing being sold to the for-profit Prospect Medical Group, which is owned by a hedge fund. As the deal is being reviewed ECHN gave their executives a significant pay increase while reducing their level of charity care by an alarming amount.

Most recently Prospect stated that they had to get large tax breaks that are not available to for-profit companies to go forward – making the proposed deal look like more of a traditional Gordon Gecko style leveraged buy-out rather than something to help our community hospitals.

Meanwhile, Hartford Healthcare’s takeover of Windham Hospital is resulting in service cutbacks that pose very serious threats to community access to care. This not only threatens residents living in the service area, many of whom are covered by Medicare and Medicaid, but also will make it very difficult for family members to participate in their loved ones’ care due to transportation issues.

Inexplicably, OHCA has refused to adequately review the proposed cutbacks in services and their potential impact on low income patients and rural communities’ access to care.

Higher prices. Reduced services. No quality improvement. Bloated executive salaries. Less charity. Hedge fund profits. Clearly the old days of individual doctor’s practices and locally-controlled community hospitals are not the direction we are heading towards in Connecticut.

The legislature and Gov. Dannel Malloy took some very positive steps to protect consumers and our communities by passing SB 811 this past legislative session.
But Yale-New Haven, L+M and other hospitals have pushed their proposed deals in front of regulators before the new law takes full effect.

Here’s an example: the Yale-New Haven/L+M deal presents obvious concerns about possible price increases. SB 811 requires state regulators to conduct a full-blown cost and market analysis before taking any action. Even though the deal snuck in under the wire, we believe OHCA and the Attorney General should conduct the market analysis anyway – legally, nothing prevents them from doing so.

In particular, the state needs to take a look at what happened when Yale-New Haven took over the Hospital of St. Raphael to see if and by how much St. Rae’s prices went up after the deal.

All of these proposed deals should be reviewed with the strictest possible scrutiny, if regulators are to live up to the legislative intent of the past two years and to protect our care.

In addition, the legislature must take additional steps to protect access to quality care, limit the costs to consumers and prioritize healthy communities going forward in this changing landscape. We believe that we need to look at the oversight and proposed oversight mechanisms in Maryland, Vermont, and Oregon if we are to protect our health.

Tom Swan is the Executive Director of the Connecticut Citizen Action Group.

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