Is it possible to make an adequate profit, produce a good product and treat your employees fairly all at the same time? Not really — at least in the field of healthcare anyway, according to nervous special interest groups lobbying the Capitol.
Is the market economy, as President Obama seems to feel, a zero-sum game? As an unaffiliated voter, I’ve long thought if it’s true that conservatives hate the idea that someone somewhere is having too much fun, then it’s equally true that progressives hate the idea that someone somewhere is making too much money.
I hope that sort of mentality isn’t at the root of the opposition to legislation that would increase state oversight of hospital conversions from nonprofit to for-profit. To wit, some consumer and labor groups want an outright ban on for-profit hospitals in Connecticut.
At the center of the debate is the nonprofit Waterbury Hospital which, according to its CEO, has lost money in 9 of its last 10 years. Waterbury has an investor-owned national suitor, Tenet Healthcare, which seeks to acquire it and three other hospitals in the state.
Progressives find themselves in a bind here. On the one hand, they’re under pressure from labor unions to resist these conversions because of a perception that for-profit hospital owners will be decidedly less friendly to the demands of organized labor. And consumer advocates are alarmed at the possibility that investor-owned hospitals will eliminate less profitable but essential procedures.
On the other hand, the conversion of nonprofits to for-profits will move real estate and business assets back onto the tax rolls. The conversion of St. Francis Hospital in Hartford, for example, could generate an estimated $11.3 million in annual tax revenues for the cash-strapped Capital City.
Doesn’t it make a lot more sense to allow hospitals to become for-profit and pay taxes than it does to force them to remain nonprofit and then force them to pay taxes anyway, as Democratic House Speaker Brendan Sharkey has suggested.
And the simple fact is that small hospitals across the nation are distressed because of low Medicaid and Medicare reimbursements, shorter hospital stays, and more patients seeking outpatient care at specialty clinics. Combine those factors with the poor economy of scale that plagues your average small hospital and you have a nationwide disaster in the making. And in Connecticut the situation has been exacerbated by hundreds of millions in state and federal reimbursement cuts.
My local healthcare hub, Sharon Hospital, is currently the only for-profit critical-care hospital in the state. Sharon’s conversion was completed in 2002 after an extensive review process featuring the same cries of protest we hear now. Under nonprofit ownership and management, Sharon Hospital was crumbling and near bankruptcy when the Tennessee-based Essent Healthcare offered to buy it. The hospital had lost $16 million in the six years leading up to the sale.
The pre-Essent money wasting in Sharon was legendary. One longtime employee told me the heat in the building would often malfunction in the winter, causing patient-room temperatures to shoot up to the mid 80s, which in turn triggered the air conditioning units to blast cold air. There were similar problems at the tiny mismanaged nonprofit North Adams Regional Hospital in Berkshire County, Mass. That bankrupt facility was abruptly shuttered at the end of March.
Since investor-owned companies have far greater access to capital, Essent was able to invest $40 million in new facilities and procedures, retire the previous owner’s $11.4 million debt, expand services, turn a 5 percent profit, and pay $1.4 million annually in taxes to the town of Sharon. And its corporate parent, which owns several other hospitals, has far more purchasing power than a small stand-alone facility. Heck, Sharon’s conversion even made a believer out of state Rep. Roberta Willis, the staunchly progressive Democrat who represents me in Hartford.
Don’t get me wrong. Sharon still has many of the same problems other hospitals are experiencing. But at least it’s open — and it most certainly wouldn’t be today if the state Office of Healthcare Access had denied Sharon’s conversion.
If the state makes it even more difficult to convert to for-profit, we likely will see more closures of small- to medium-sized hospitals across Connecticut. Those who live in the sticks should prepare for the worst.