Campaign Targets Hospital Takeovers by For-Profit Companies

Andrew Kitchenman | March 13, 2013 | Health Care
Unions, healthcare advocates call for closer state scrutiny of sales of nonprofit community hospitals

St. Mary's Hospital in Passaic.
The trend of New Jersey hospitals converting to for-profit status is under attack from labor unions and healthcare-access advocates, who are urging the state to step up scrutiny of hospital sales.

Several labor and advocacy groups announced a campaign yesterday calling on the state to increase and enforce its regulation of hospital conversions with an eye on Prime Healthcare’s proposed purchases of St. Mary’s Hospital in Passaic and Saint Michael’s Medical Center in Newark.

The announcement marks the start of the latest battle in the years-long expansion of for-profit healthcare operations in the state. Opponents of the trend argue that a primary focus on profits harms the ability to deliver less-profitable services, and weakens the financial position of nonprofit operators, while for-profit advocates counter that they can operate hospitals more efficiently and are a victim of a smear campaign by labor unions.

A telephone conference call announcing the campaign included a man who has been battling the Prime Healthcare chain in its home state of California.

Anthony Wright, executive director of the California-based nonprofit Health Access, accused Prime – which has 10 facilities in that state — of overcharging the Medicare and Medicaid programs. He also said the company has intentionally chosen not to contract with insurers in order to receive higher out-of-network fees.

“These are costs that impact both on relationships with insurers and the cost of the health insurance that we pay in premiums,” Wright said. He also pointed to a case where Prime was audited for questionable business expenses, including the depreciation of a Bentley luxury car and a helicopter.

“This is not just isolated examples of bad behavior, this is a business model of trying to abuse the trust and goodwill that the healthcare system relies on,” Wright said, saying the company focuses on profits rather than patients.

The allegations were denied by Prime spokesman Edward Barrera, who cited independent reviews of the company that found it provided high-quality care.

Barrera said the company’s Medicare billing has been reviewed by state and accreditation bodies, which found no evidence supporting the overbilling allegations. He said the allegations stem from a campaign by a California healthcare union. The company has sued the union, alleging antitrust violations.

“Health Access seems to have allied itself with the California unions, because these are the same discredited allegations,” Barrera said.

He said Wright’s reference to the questionable depreciation was based on claims that occurred more than three years ago. He said state denials of hospital depreciation expenses are routine and that the financial benefit to hospitals of depreciation claims is tiny compared to overall company revenue.

Sen. Joseph F. Vitale, D-Middlesex, who joined the conference call, expressed skepticism about Prime. He wants to see the state’s Community Health Care Assets Protection Act enforced more broadly to protect communities served by nonprofits. The state law requires that nonprofit hospital sales undergo a rigorous regulatory review.

The most recent legislative sparring over the issue occurred last year, when Gov. Chris Christie conditionally vetoed a bill that would have tied state charity care payments to a requirement that hospitals make more information publicly available about their finances, governing boards and vendors.

Christie called for a six-month study of the issue, but an aide to bill sponsor Sen. Loretta Weinberg (D-Bergen) said yesterday that Weinberg plans to attempt an override of Christie’s veto.

Ann Twomey, president of the Health Professionals and Allied Employees union, represents workers at four hospitals that have been converted to for-profit status. Despite having three different owners, Twomey said they have largely followed a similar pattern of reducing staff and replacing full-time positions with workers who are paid by the day.

This “means a reduction in patient care, there is no question about it,” Twomey said. She alleged that for-profit operators might be undermining the financial sustainability of their hospitals.

Barrera said Prime is different from the other for-profit operators whose bids for St. Mary’s and Saint Michael’s were rejected.

Campaign supporters expressed concern that for-profits would end hospitals’ role as teaching facilities, as well as the possibility of hospital boards that have mismanaged their facilities being in a position to determine which company will purchase their hospitals.

The groups supporting the campaign plan to go door-to-door making their case and plan to hold community hearings in Newark and Passaic on the potential sales to Prime, according to Phyllis Salowe-Kaye, executive director of the nonprofit watchdog group New Jersey Citizen Action.

Paul Bellan-Boyer, an activist with the Jersey City group Save Christ Hospital, asserted that Prime backed out of buying Christ Hospital due to community mobilization against it.

Bellan-Boyer said the campaign opposes selling hospitals to companies that would reduce or eliminate contracts, services, quality, staffing and affordability.