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Senate panel gives Steward nod

April 6, 2012

PROVIDENCE – The Senate Health and Human Services Committee has scrapped a proposal to amend the 15-year-old Hospital Conversions Act and substituted language proposed by Steward Health Care that will facilitate its purchase of the troubled Landmark Medical Center.
The new version of the bill would eliminate the provision that a for-profit hospital corporation like Steward is prohibited from applying to buy a second hospital for at least three years after it acquires one.
It also reduces from 180 days to 120 the review process conducted by the state Department of Health and the attorney general by which the application for a for-profit company to purchase a non-profit hospital may be accepted or rejected. In addition, initial application requirements have been streamlined to save time and paperwork.
The measure, proposed by Woonsocket Sen. Roger Picard, also establishes an “expedited” health department review process for a distressed non-profit hospital that is licensed by the state.
Marie Ganim, the Senate Policy Director, outlined a list of conditions that “may” be considered by the director of the Department of Health in the approving the acquisition of a hospital by a for-profit corporation.
Some who testified before the committee Wednesday said that list does not go far enough. For one thing, they wanted the language that says the health director “may” consider those conditions changed to say he or she “shall” consider them.
Nicholas Tsiongas, a doctor and a former state legislator, said that one word makes those protections “thin gruel for those that recognize what some of the activities of for-profit hospitals in the past have been.”
He pointed out that, while a financial contribution to state health planning is on the list, there is no amount specified for that contribution and there should be.
“If the last gubernatorial administration was committed to health care planning, we wouldn’t be here today,” Tsiongas said.
He said the state should have a blueprint for “how many hospitals do we have, how many should we have, where should they be, what is the distribution of services between hospitals?”
By getting rid of the rule that requires the three-year waiting period before a for-profit hospital can acquire a second institution, Tsiongas said, “we should be ready for a for-profit hospital network in Rhode Island that will result unavoidably for the taxpayers in this state and for the small businesses in this state in a much higher cost.
He said fewer hospital networks would have greater bargaining power with insurers, and that would lead to higher rates for customers. Tsiongas also noted that investor-owned networks have an obligation to the firms that put up the money for mergers.
That would put them in a position, he said, where they promise to improve planning, respect current union contracts, pay state taxes, not make demands on insurers more than non-profits and pay dividends to investors. “I think that’s a really hard nut to crack.”
Robert Goldberg, a Pawtucket attorney who is a lobbyist for Steward, suggested even more amendments that he said would “level the playing field” between for-profit and non-profit hospitals.
“We want to make this work,” Goldberg said, “we want to move forward.”
Among the amendments Goldberg suggested is the ability to get courts to review decisions made as the process moves along, rather than only being able to challenge a denial. He noted that the proposed merger of Lifespan and Care New England hospital networks was stopped when the application was deemed incomplete and that could not be challenged in court.
“The only true difference between a for-profit and non-profit,” Goldberg asserted, “is that the for-profit pays taxes and the not-for-profit doesn’t.” He added that the Hospital Conversion Act is “heavily skewed” toward non-profits.
That was challenged by Sen. Joshua Miller, who told Goldberg, “I think one of the other major difference is an obligation to stockholders either inside or outside of Rhode Island to compensate them for their investment.”
Goldberg retorted that the “first obligation” is to “run a cost-conscious, efficient business that delivers a good product. If a for-profit is not delivering an effective, good product, it’s not going to be around very long. Perhaps part of the problem with the skyrocketing cost of health care is not enough cost consciousness by the not-for-profits. Maybe part of the problem is the lack of meaningful competition in the state right now that allows you to be free not to worry about cost.”
He said rather than increasing costs, the operation of a for-profit hospital could produce the opposite effect – reduced costs.”

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