For-Profit Hospital Care: Proceed With Caution

Hospitals represent many things to Americans, from hope during time of illness to philanthropic organizations assisting the uninsured to a major employer within many communities.

But hospitals have also become something else: big business. In Connecticut, we are accustomed to patient care provided by nonprofit, community-oriented hospitals. That is because in Connecticut, 28 of our 29 acute-care hospitals are not-for-profit. Every dollar they make goes back into their mission and their community.

However, Connecticut is quickly becoming an anomaly. Today, one in five American hospitals are owned by for-profit entities — an astonishing 50 percent increase from a decade ago.

Connecticut is reaching a crossroads in this tension between not-for-profit and for-profit hospitals. In recent years, four different for-profit hospital conversions were proposed to state regulators, and today, Vanguard Health Systems is proposing to buy two Connecticut hospitals in Bristol and Waterbury. Connecticut now has a target on its back for for-profit hospital operators.

To be clear, there can be benefits to for-profit conversion. Often, private companies bring access to capital. For instance, a now-dormant application to combine both Waterbury hospitals under one joint venture with LHP Healthcare, a privately held company based in Texas, would have come with a commitment by LHP to build a brand new, state-of-the-art hospital in Waterbury. In addition, larger for-profit operators can bring efficiencies. I saw this firsthand in Sharon, where local residents are very pleased with the financial stability and quality care brought to their small local hospital by a for-profit operator that took over in 2002.

Done right, for-profit hospital care can work. But often, for-profit hospital care isn't done right. First, to state the obvious, for-profit hospital companies' first obligation is to their investors.

For instance, if a behavioral health clinic doesn't make a profit, there will be a tension between a money-losing arm of the business and the needs of the community. Second, investors need to be paid back, with return, for the purchase of the hospital. This comes in either of two ways: The hospital ships a portion of its revenue out of state, or the hospital is sold to a new owner. In the first case, money leaves the community. In the second case, frequent hospital sales and constantly changing ownership create an unstable, uncertain environment for doctors and patients. Since Waterbury Hospital and Bristol Hospital signed an agreement to sell to Vanguard, Vanguard has been bought out by a different, bigger hospital company, Tenet.

But perhaps most concerning are the growing data suggesting that our country's spiraling health care costs are partially connected to the growing platform of for-profit medicine. Investors have been flooding into areas of health care previously reserved for nonprofit entities because they see an opportunity to squeeze more money out of public payers like Medicare and Medicaid.

And while studies are not totally conclusive, many show that costs at for-profit hospitals greatly exceed those at nonprofit hospitals. One highly influential article by New Yorker health care writer Atul Gawande demonstrated that one of the main reasons for the variation in health care costs between communities was the relative amount of for-profit care in each area.

Just as the question of for-profit hospital ownership is not black and white, neither is the answer for Connecticut. Thankfully our state has put in place a rigorous review process for any hospital that wants to convert to for-profit status. Both the state attorney general and the commissioner of public health need to sign off on any sales, and they can attach a broad range of conditions to deals, ranging from the guarantee that certain clinical services continue to be provided to the community or that the state share with investors in any profits made by the new operator.

One option could be that we allow for-profit conversions to take place, but with a very strict set of conditions to ensure that community benefits remain and that the state shares in profits.

In my opinion, Connecticut hospitals should remain not-for-profit. Not-for-profit hospitals have a proven track record of serving the best interests of their patients, not their bottom line. But if more for-profit conversions do move forward, our review process must ensure that here in Connecticut, patients remain our No. 1 priority — not profits.

Chris Murphy represents Connecticut in the U.S. Senate.

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