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Activists Call for Greater Scrutiny of Proposed Hospital Sales, Closures

Among issues addressed, hospitals not signing up as in-network providers, so they can charge insurers higher fees.

Arnie Kimmel (left) senior vice president, Prime Healthcare Services of California with Ed Condit, CEO, St. Mary's Hospital
Arnie Kimmel (left) senior vice president, Prime Healthcare Services of California with Ed Condit, CEO, St. Mary's Hospital

Under a series of proposals made by activists yesterday, all parties involved in a sale of a nonprofit hospital to a for-profit operator would come under greater scrutiny.

The recommendations ranged from disallowing the sale of hospitals to owners facing investigations to increasing financial transparency. They were made at a joint hearing by the Senate Legislative Oversight and Health, Human Services and Senior Citizens Committees.

The hearing began with concerns that some for-profits are unfairly choosing not to contract with insurers to become in-network providers. This allows the hospitals to charge higher, out-of-network prices to the insurers.

“The out-of-network-issue, I think, ends up costing everyone more for healthcare,” said Joseph Scott, president and CEO of Liberty Health, the parent company of Jersey City Medical Center. The Jersey City facility announced last week that it plans to merge with Barnabas Health.

Scott noted that Bayonne Medical Center recently was revealed to have submitted the highest charges to Medicare of any hospital in the country. He added that Bayonne parent company CarePoint Health, formerly named Hudson Holdco, is owned by a privately held parent that doesn't have to file as much financial information as publicly traded for-profit companies.

“Where I think the most scrutiny needs to be, is around these individually owned investor hospitals, where we’re not sure where that money’s going,” said Scott. He added that he feels that it’s “frightening” that for-profits receive charity care funding from the state but don’t have to report how they spend the money. “We have to account for the money we receive, especially when it’s public monies.”

Ann Twomey, president of the Health Professionals and Allied Employees union, called for a series of steps to increase state oversight of hospital sales. These include disallowing the transfer of hospital licenses for owners under current federal or state investigations; conducting a health impact study and analysis of sales; expanding the state law governing the sale of for-profits so that it also applies to proposed hospital closings; and requiring that new hospital owners maintain current staff levels and insurance contracts after sales.

“We once thought that if we set strong enough standards and protections, we could maintain quality, services, and safe staffing and working conditions,” Twomey wrote in testimony she submitted to the committees. “But we now know that we need to strengthen our laws and strengthen our oversight.”

In addition, Renee Steinhagen, executive director of New Jersey Appleseed Public Interest Law Center, called for an overhaul of the hospital-sale law, the Community Health Assets Protection Act (CHAPA). She said the law should be changed to allow state officials to require that profits from the sale of hospital real estate be used for charitable purposes. She also recommended several other changes to the law, including requiring the state to appoint a monitor for new for-profit hospital owners.

Prime Healthcare Services of California, whose planned purchase of five hospitals in New Jersey has been criticized by some community and union groups, defended its track record in operating 23 other hospitals in five other states, including 14 in California.

The five hospitals include St. Mary’s in Passaic, Saint Michael’s in Newark, and Saint Clare’s in Denville.

Prime Senior Vice President Arnie Kimmel noted that Prime began buying hospitals in 2001 and has never closed or sold any of its facilities.

“It’s a perfect record,” in terms of maintaining the company’s commitments to keep hospitals open, he said.

Kimmel responded to criticism from California union official Travis Stein about numerous performance awards that the company has received. While Stein said the awards are tainted by Prime miscategorizing some patients in order to improve its ratings, Kimmel said that the awards are based on important measurements like low readmission rates. Stein is the research coordinator for the Service Employees International Union-United Healthcare Workers West.

Kimmel said Prime has maintained its status as an in-network provider with major insurers, except for a period in which it was out-of-network with Aetna.

Kimmel also defended the private ownership of his company, saying that private owners don’t face the same pressure that publicly traded companies do to meet quarterly financial goals.

Committee Chairmen Sen. Robert Gordon (D-Bergen and Passaic) and Sen. Joseph F. Vitale (D-Middlesex) both said that they were interested in working with community groups on legislation that would address the concerns about for-profits. Vitale thanked Kimmel for attending the hearing, but expressed disappointment that CarePoint officials declined to attend. He noted that hospital licenses are a “privilege,” not a right.

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