It’s puzzling. Yale-New Haven Health System recently announced 72 layoffs and eliminated 155 positions among their managers, but they scored large profits last year and they have enough money to buy three more Connecticut hospitals. If approved by the state, the acquisitions will make Yale the largest health system in the state. We should all care because health system consolidation is the main driver of rising healthcare costs in our state, squeezing out other spending priorities for families, businesses, and government. But Connecticut has a chance to mitigate the damage.
The latest numbers show that Yale-New Haven Hospital lost $15 million last year in operating costs, but across all the hospital’s businesses and investments they netted $642 million in total gains. That’s more than any other Connecticut hospital and well above its 2019 profit margin. Yale-New Haven Health System, which includes Yale-New Haven, Bridgeport, Greenwich, Westerly, and Lawrence & Memorial hospitals as well as physician practices with over 1,000 clinicians, also showed a decent profit last year. The system also received $188 million in state and federal COVID grants to cushion any losses from the pandemic, twice as much as Hartford Healthcare, Connecticut’s next highest recipient.
So it’s hard to understand why Yale’s health system needs to lay off 72 workers and eliminate 155 positions. Healthcare is big and very lucrative business, comprising 16% of our state’s economy. Hospitals employ 58,900 workers in our state and the Connecticut Department of Labor expects hospital employment to rise 2.8% by 2030. The future is bright for huge health systems like Yale-New Haven.
There is considerable evidence that consolidation of healthcare providers into huge health systems raises prices while making no difference in the quality of care. As large health systems get larger in Connecticut, they can use their monopoly power in local communities to demand higher prices. Connecticut’s healthcare markets are among the most consolidated in the country. Among Connecticut’s 27 hospitals, 22 are owned by a large health system. If the state approves Yale’s application, it will have eight hospitals on ten campuses. Consolidation also stresses hospital workers and lowers access to care. Mergers in Connecticut’s northwest and northeast corners have resulted in closing critical services including birthing centers and intensive care units.
But there are two sides to this consolidation. While making Yale’s system bigger is very likely to raise prices and healthcare costs for all Connecticut consumers, the alternative may be worse. The three hospitals slated for purchase, Waterbury, Rockville, and Manchester hospitals, are currently owned by Prospect Medical Holdings, a private equity company with a history of loading hospitals with debt and extracting dividends for the partners while starving the hospitals for resources and routine maintenance.
While Yale’s hospital is a non-profit, it’s been dogged by scandals over the years. Most recently, a scheme to shift healthcare for low-income New Haven area residents from neighborhoods to a distant site and run the money through the city’s two community health centers to generate higher Medicaid reimbursements while charging high prices to low-income patients. Despite community opposition, the state Office of Health Strategy approved the move. It’s hard to pick a favorite between two bad options.
But that’s exactly what the state Office of Health Care Strategy (OHS) will have to do. OHS runs Connecticut’s Certificate of Need (CON) process, designed to ensure that mergers and changes to services in our healthcare system are in the public’s best interests. Unfortunately, it isn’t working. From July 2016 through last August, of 74 CON decisions, OHS approved all but three. Conditions placed on mergers and service changes are rarely enforced and only after public political pressure. OHS has the tools in legislation to limit mergers, and to set and enforce meaningful conditions that protect competition and access to care, but they don’t appear to be willing to use them.
A task force is currently meeting to consider changes to the CON process. It’s unclear if CON can or should be salvaged; other states have done away with it and prices didn’t change. A recent comparison of state laws found that Connecticut’s CON laws are among the best in the country but OHS isn’t using the tools available to protect our markets. In 2016 another legislative taskforce recommended protecting and strengthening market competition in CON decisions, but nothing changed.
If policymakers decide to give CON another chance, they should make it more transparent, not be afraid to set conditions that will protect competition and limit price increases, require truly independent monitoring, and set meaningful penalties that are triggered automatically when violations of conditions are verified.
Right now, only public political pressure has been able to get OHS to act in the public’s interest. So, let’s lean into that. Engage the public and elected officials in the CON process. Along with OHS, the Attorney General’s Office should be actively involved in deciding if a merger will harm competition or consumer choice. Relevant legislative committees should have to approve conditions and evaluations to ensure we are protected.
Currently, in an obvious conflict of interest, the applying health systems get to choose their own monitors to determine if they are complying with conditions. In Rhode Island, the Attorney General has a significant role in CON decisions and their office chooses the monitors, while the applicant must pay for the evaluation.
A strong Certificate of Need process is critically important to controlling healthcare costs and ensuring access to critical care. But Connecticut’s weak process is not working, giving only a false veneer of protection. Either fix it or do away with it.