State lawmakers are considering a bill that would require hospital executives to disclose the “salary, severance, stock offering or any financial gain” of its officers, board members, and senior managers when a hospital changes hands.
The bill was proposed after a for-profit hospital chain sought to purchase several financially-strapped nonprofit hospitals.
Texas-based Tenet Healthcare Corp. tried to acquire five Connecticut hospitals — Waterbury Hospital, St. Mary’s in Waterbury, Bristol Hospital, Manchester Memorial, and Rockville General —but that deal fell through late last year. When Tenet informed the state of its decision to remove its bid, the company cited an “extensive list of proposed conditions” as the reason for the breakdown in talks.
According to a statement issued by Tenet: “The extensive list of proposed conditions to be imposed on the Waterbury Hospital transaction, which is only the first of four transactions for which we’ve made applications, has led us to conclude that the approach to regulatory oversight in Connecticut would not enable Tenet to operate the hospitals successfully for the benefit of all stakeholders.”
At the time, Frances Padilla, president of Universal Health Care Foundation of Connecticut, said that a hospital sale in Connecticut should be a transparent process.
“Tenet, or any company looking to buy a hospital, must follow rules and go through a process that is in the public eye,” she said in a release. “If we as a state abandon due process, it could lead to deals that do not benefit the public and could be potentially harmful.”
According to Sen. Terry Gerratana, D-New Britain, co-chairwoman of the legislature’s Public Health Committee, the purpose of the bill being considered is just that, “transparency.”
But several Republican members of the committee questioned the value and purpose of the bill. Among them was Sen. Rob Kane, R-Watertown, who asked why the state would require unpaid board members of a nonprofit hospital to disclose their compensation.
Rep. Jason Perillo, R-Shelton, argued that hospital executive pay, as well as what executives and board members might make from a potential sale, is often already publicly available information. He questioned what benefit a statewide requirement would have on public health.
“I’m concerned when we start requiring more and more information,” he said. “I could see where the release of information could have a negative impact on public health in Connecticut.”
Gerratana responded that much of the testimony heard by the committee during a public hearing this month supported increased transparency.
Among those who submitted testimony in favor of the measure was Deborah Chernoff, public policy director for the Service Employees International Union, District 1199, which counts 25,000 public health care workers as members.
“The citizens of Connecticut have both a right and a need to know that decisions regarding hospital sales, consolidations, or conversions are being made for the right reasons and for our mutual benefit,” she testified. “Public disclosure of the newly required information will promote public confidence that the needs of our communities and populace are put first and foremost.”
Connecticut Attorney General George Jepsen, who approved the Tenet deal and negotiated the terms, testified that requiring that executive compensation be made public is “sensible.”
“I am required by law to determine whether the nonprofit hospital failed to disclose any conflict of interest, including but not limited to, conflicts of interest pertaining to board members, officers, key employees, and experts of the hospital, the purchaser, or any other party to the transaction,” he said. “In light of these responsibilities, it is sensible to make clear that an initial application should include the information called for in the current proposal.”
On Monday, Perillo asked if the level of executive compensation could scuttle a potential deal or whether the attorney general could decide that “the executives make too much money.”
“What is the expectation the information will have on the process?” he asked. “What is the measure by which that determination can be made?”