March 10, 2014

Legislative overreach threatens hospital deals

Ask any business owner if they'd operate in an environment where government has strict control over who can be hired and fired, or how much employees must be paid, and you're sure to hear a chorus of "No's!"

Unfortunately, that's exactly the type of regulatory environment state lawmakers are considering for for-profit hospitals in Connecticut.

The legislature's Labor and Public Employees Committee recently held a public hearing on a bill that would put significant restrictions on for-profit hospitals that purchase nonprofit medical centers in Connecticut.

It would require acquiring hospitals, for example, to maintain staffing levels for at least three years after a deal was completed, and mandate that employee salaries and benefits remain intact.

If the bill ever became law, it would represent one of the most far-reaching, anti-business pieces of legislation passed by legislators in recent memory. Its negative impact would also be felt beyond just the healthcare industry.

It would send the message that state government simply has no restraint in how far it will go to dictate how companies can operate their business in Connecticut.

The bill is being pitched at a time when Dallas, Texas-based Tenet Healthcare Corp. is considering the purchase of several nonprofit Connecticut hospitals including Eastern Connecticut Health Network (ECHN), parent of Manchester Memorial and Rockville General hospitals.

Healthcare advocates have questioned whether for-profit hospitals will meet the needs of uninsured patients. They fear hospitals will put bottom lines ahead of care quality, reduce access to low-margin patients, and cut programs or staff.

We've said before those fears aren't totally unjustified. For-profit hospitals, although they are quite common in many other states, are a rare bird in Connecticut. Only one currently exists — Sharon Hospital in Litchfield County.

Therefore, it's understandable that lawmakers, hospital employees, and regulators have questions for Tenet executives and any other for-profit company that wants to buy a Connecticut hospital. Tenet should be transparent about its business plans and held accountable if it deviates from that blueprint.

Honest questions about how the deal will impact healthcare costs and access to care need to be answered, but enacting legislation that restricts a hospital from making layoffs or changing employee pay and benefits goes way too far.

The state's hospitals are facing intense financial pressures from healthcare reform, state budget cuts, the need to invest in health IT, and other issues. That's a huge reason why they are courting for-profit hospitals in the first place.

A for-profit corporate structure will bring economies of scale and provide access to much needed capital, making it easier for hospitals to meet demands of modern day medicine.

As the healthcare industry goes through rapid change hospitals need flexibility to adjust their business.

Patient service needs shift over time. It would be financially irresponsible to force hospitals to maintain staffing levels for a service or department that is seeing fewer patients. Within three years, hospitals can see significant swings in revenue and patient volume, especially as they are being asked to transform the way they deliver care.

Also, why should state government get in the way of contract negotiations that ought to be waged between hospitals and unions?

Connecticut already has a robust regulatory environment to oversee the healthcare industry. It doesn't make sense to create a legal landscape that forces one set of hospitals to play by different rules.

We encourage robust debate and fact gathering in the weeks and months ahead, but lawmakers would be unwise to create an environment that shuts out for-profit hospitals.

There may be a day when we desperately need them.

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