Change is always difficult for many of us to deal with, but a major change in ownership of a community hospital hits us right where we live. People get nervous when a hospital changes hands. After all, in many cases our local hospitals are where we’re born and they’re where we go to die – to say nothing of everything in between.
The announcement last week that the ever-expanding Yale New Haven Health has signed an agreement to acquire three community hospitals and their related health systems in northern and western portions of the state has sent waves of concern over patients and public officials.
In a news release sent out on Thursday, the nonprofit Yale New Haven, which already runs seven hospital campuses in Connecticut and Rhode Island, said it had “signed an agreement” to acquire three Connecticut hospitals and related businesses from Prospect Medical Holdings, a private corporation.
The three facilities, Rockville General Hospital, Manchester Memorial Hospital, and Waterbury Hospital, will revert to nonprofit status if the deal is approved by the state Office of Health Care Access.
The sale price was not announced, though a YNHH spokesperson told the Republican-American newspaper the purchase price “will need to be negotiated.” Call me naive, but that strikes me as a pretty significant portion of the agreement to remain up in the air. It reminds of the baseball trade in which part of the deal is “a player to be named later.”
But I digress. Before it can close, the deal will need review and approval from state regulators, including the state Office of Health Strategy, which will consider whether to issue a certificate of need after holding a series of public hearings and evaluating the effect of the acquisition on patient care and the impact of the transaction on the affected communities.
On its face, this looks like a promising development. As the Courant has pointed out, a ProPublica investigation from 2020 found the Prospect system, which includes some 17 hospitals and more than 165 clinics and outpatient centers, “was riddled with poor and unsanitary conditions in its hospitals and lawsuits against [its] hospitals for fraudulent Medicare and Medicaid claims.” Not surprisingly, a private equity group, Leonard Green & Partners, owns a majority stake in Prospect.
By contrast, YNHH was rated four out of five stars by Medicare based on performance metrics, while Waterbury and Rockville hospitals rated only two stars and Manchester, three. One can only hope that a rising tide lifts all boats.
YNHH also has a far more productive history of negotiating with labor unions. Waterbury Mayor Neil O’Leary told the Republican-American that Prospect has “a tumultuous relationship” with organized labor at the hospital in his city and that he is hopeful that YNHH’s experience in collective bargaining will result in less acrimony and a more productive work environment.
When Prospect bought Waterbury in 2016, the hospital was on the verge of bankruptcy. Prospect deserves credit for saving it, but it goes without saying that satisfying investors is expensive and often some of their profits could be better spent on improving patient care.
To wit, ProPublica reported that in the decade after Leonard Green bought control of Prospect for $205 million, the private equity firm managed to extract $400 million in dividends and fees for itself and investors in its funds, “not from profits, but by loading up the company with debt.”
“The deal hasn’t worked out quite as well for Prospect’s patients, many of whom have low incomes,” ProPublica reported with more than a hint of cynicism.
There are some downsides to the acquisition that deserve mention. YNHH has not said what it intends to do about its labor force but it’s likely that some jobs will be eliminated. That almost always happens with consolidation, though YNHH said in its release that it’s “focused on preserving jobs in the local communities, supporting employee pensions, and assessing the future capital needs of these facilities.”
Then there is the matter of the effect these acquisitions will have on the state’s health care market. Larger organizations such as Prospect have greater buying power, but this acquisition means less competition for YNHH, which often results in fewer choices, as state Attorney General William Tong, told the CT Mirror:
“We are deeply concerned about the impact of hospital consolidation on patient care and our front-line medical workers,” said Tong, adding that his office would scrutinize the proposal. And there is cause for some concern. If the deal is approved, YNHH and Hartford HealthCare would own more than half of the state’s 27 hospitals.
Indeed, studies have shown that lack of competition in the health care industry can lead to higher prices and lower quality. The issue of competition came to the fore last month when St. Francis Hospital sued Hartford HealthCare for “anti-competitive conduct” in aggressively moving to acquire physician practices in the state – an action St. Francis claims “has caused serious harm to health care competition and consumers in the Hartford, Connecticut area.”
Then there is the matter of the reversion of the three hospitals to nonprofit status, thereby taking the properties off the tax rolls. Officials said last year Prospect paid the city of Waterbury roughly $4.6 million in property taxes. The Journal Inquirer reported that Prospect’s properties in Manchester are assessed at more than $56 million, the fourth highest in the town.
It’s doubtful the state payment in lieu of taxes (PILOT) program would make up the difference because it has been woefully underfunded for years. Just ask the city of New Haven, where Yale University’s campus sits.
My guess is those concerns, which state regulators will examine as part of the approval process, will be offset by YNHH’s nonprofit status and the fact that it is a company based not in California but right here in Connecticut.
Based on what I’ve seen so far, YNHH would have my vote.