Hope For A Revival Of Tenet Hospital Deal [Courant]

January 5, 2015

Hartford Courant – By Dan Haar

For anyone who thinks it’s a shame the state drove out a hospital company that was willing to invest more than $400 million here, all might not be lost.

A top Tenet Healthcare executive, point man in the Dallas-based chain’s effort to take over five Connecticut hospitals, will return to the state late this week or early next week to have a talk with Senate leaders.

It’s not new negotiations, it’s just a conversation. But it’s something, and that’s better than nothing if it helps revive a deal that could make sense for Connecticut’s ailing collection of hospitals.

Tenet, a for-profit corporation, had deals to buy Waterbury, St. Mary’s, Bristol, Rockville General and Manchester Memorial hospitals, all currently not-for-profit. But on Dec. 11, after the state Office of Health Care Access issued unworkable conditions for the Waterbury merger, Tenet pulled its applications and exited the state.

Gov. Dannel P. Malloy, who neither blessed nor opposed the megamerger over the past three years when it was in the works, said he is still talking with people on both sides but can’t reopen direct negotiations with Tenet now that the chain of 80 hospitals has ended its formal quest.

But Sen. Len Fasano didn’t want to give up. The incoming senate GOP leader called Trip Pilgrim, Tenet’s senior vice president, several times in the days after Tenet said no to the state conditions.

Fasano invited Pilgrim to pay a visit to Hartford to talk with him and Sen. Martin Looney, who was the Senate majority leader and will now be the president-pro-tem.

No one — whether they favor the deal or oppose it — should be optimistic. “There’s a lot of bridges they’re going to have to cross,” Fasano said of Tenet in his hopes of reviving the deal.

The big issue is whether the state should force Tenet to maintain current staffing levels, job descriptions, prices and all services at the hospitals for five years — which is exactly what the health care office, part of the state Department of Public Health, proposed in a Dec. 2 draft decision for Waterbury Hospital, the first merger to come up for approval.

Here’s what has to happen: The state must now offer Tenet a package of conditions for all five takeovers, not one at a time. Just pulling back on the Waterbury conditions won’t do the trick, because Connecticut has proved itself to be an unpredictable environment for Tenet.

No one can say now whether that is even doable legally.

Ordering that a company not reduce staff or services for half a decade — seven years for critical services — would be a stretch in any industry, much less one that’s changing as fast as health care delivery under Obamacare.

The health care office’s proposal was a sop to the hospital unions, which fought the Tenet deal, reflecting confusion between public health and economic development.

Employment for the 55,000 employees of Connecticut’s 29 acute care hospitals does matter, and some protections make sense. Tenet needs to agree to some sort of restrictions.

But it’s not like the hospitals on their own are offering much stability to the unions. In 2014, the Connecticut Hospital Association said its members had announced 1,400 layoffs in the previous year, although some of those were, in effect, transfers to affiliated businesses.

More to the point, four of the five hospitals Tenet would have bought — all but St. Mary’s in Waterbury — are far below the state average on the most important measures of health. Rockville had a 29 percent occupancy rate for its available beds in fiscal 2013, and had enough cash on hand to cover just six days of operations compared with an average of 66 days for all of the state hospitals.

Waterbury Hospital had a total surplus of $16 million over the past four years, and while that sounds nice, it’s about one-third the size of a surplus the hospital would need in order to maintain a decent level of upgrades. And the corporation that includes the hospital and all of its affiliates lost almost $16 million from operations over those same four years.

“Restrictions such as those proposed would tie the hands of hospitals and impact their ability to manage their day-to-day business, at a time when hospitals need flexibility so they can continue to provide the best care to patients and communities,” Jennifer Jackson, CEO of the hospital association, wrote to the health care office after the draft decision.

Tenet would have infused $400 million over the first seven years at the hospitals, and would have created a system with Yale-New Haven Hospital as a part owner and clinical center of the Connecticut group. Lawmakers debated the deal for two years, apparently rejecting the conditions the unions wanted, and Malloy signed a bill allowing the takeovers this year.

I wondered at the time why the union leaders and their supporters in the legislature seemed so pleased with the outcome. Did they know the health care office would do the deed on their behalf? There’s no smoking gun. No one has accused Malloy of quietly pushing buttons with his bureaucracy, and in fact the Tenet deal would seem to help his efforts to shape up the hospitals.

What matters now is whether the state, given a second chance with a jilted lover, can make it happen — or even whether the state wants to make it happen.

“We may never get there,” Fasano said, adding, “Conversation never hurts anything.”

Whether for-profit hospitals are good, bad or indifferent to public health care delivery is one of the hottest debates out there. Everyone has studies and everyone slams the other guys’ studies.

For-profit chains such as Tenet have access to more money and can invest it, and they have an incentive to run these unwieldy ships more efficiently. But, yeah, they have to take money off the top and some say they have an incentive to cut corners.

Union leaders, including Sal Luciano, head of AFSCME Council 4, and Waterbury union chief Barbara Simonetta, are calling for more study.

Some of the hospitals say that’s already been done and the time to act is now. Waterbury Hospital could have layoffs any day now, its president told my colleague Matthew Sturdevant.

It would be nice if a large, benevolent, not-for-profit hospital system were to take over some of Connecticut’s weaker hospitals — and not make cuts, or even changes. That’s what some activists want. And it would be nice if Jeff Bezos called and begged me to run the Washington Post.

And so our old fling comes back to town, imperfect, certainly, and not making any promises — but in a certain light, not looking too bad.