2002 No Action
2001 No Action
2000 No Action
1998 No Action
1995 No Action
July 7, 1997 TO THE HONORABLE, THE HOUSE OF REPRESENTATIVES:
In accordance with the provisions of § 43-1-4 of the General Laws, I am transmitting herewith, with my disapproval, 97-H 6668, Substitute B, as Amended, "An Act Relating to Health and Safety - Hospital Conversions Act."
This Act provides new review procedures for the acquisitions of hospitals, imposes new restrictions on the ownership of hospitals by non-profit corporations, and establishes new approval requirements for hospitals seeking to eliminate or reduce certain services. Specifically, the Act sets forth comprehensive review criteria and procedures to be followed by the Attorney General and the Department of Health in reviewing applications to approve a so-called "conversion" of a non-profit hospital through acquisition by a for-profit corporation Under the Act, net proceeds from the sale must be transferred to a charitable foundation. Any for-profit corporation which receives approval for conversion of a non-profit hospital is prohibited under the Act from applying for conversion of a second hospital for a period of three years after the initial conversion is finalized.
The Act also contains new requirements and restrictions applicable to all hospitals. Prior to eliminating or significantly reducing an emergency department or primary care services which serve uninsured or underinsured individuals, a hospital must receive approval from the Department of Health. Each hospital also must meet charity care requirements as determined by the Department of Health. The Act also includes review criteria and procedures for acquisition of a non-profit hospital by a non-profit corporation.
Rhode Island has long enjoyed a tradition of high quality, affordable, community-based hospital services which have been accessible to all in need. In the face of a rapidly changing health care marketplace, our goal should be to foster and guarantee continued high quality and access to care from our hospitals, regardless of ownership.
At my initiation and at the initiation of others in the General Assembly, legislation was enacted last year requiring all hospitals being sold or transferred to meet requirements of charity care, open access, and quality of care. This year, legislation was introduced at my request to require that all terms of hospital sales be made public, that public hearings be held, and that all hospitals provide care to indigent individuals. The Hospital Conversions Act addresses these concerns and improves on them by providing comprehensive procedures for review of hospital sales. While I believe that the Attorney General and the Health Department presently have sufficient statutory authority to review hospital sales, the Act properly clarifies and expands such authority In order to guarantee open and effective regulatory oversight.
The most problematic provision of 97-H 6668 is the requirement that any for-profit corporation which receives approval to acquire a non-profit hospital must wait for a period of three years after the first conversion is finalized before applying to purchase any additional hospitals. Given that the application process could take as long as a year or more, this provision effectively bars any non-profit corporation from owning a second hospital in Rhode Island for perhaps four years or even longer. Given the new dynamics of the hospital industry in which economic demands have led to the rapid consolidation of hospitals into multi-hospital networks, this three-year limitation places a severe restriction on the entry of non-profit corporations into the hospital industry. Indeed, this limitation may prove to be enough of a disincentive to a for-profit hospital corporation to abandon any consideration of operating in Rhode Island.
The three-year limitation contained in the Hospital Conversions Act is bad public policy for several reasons. First and foremost, this limitation will significantly reduce opportunities available to Rhode Island hospitals which desire or need to partner with larger organizations in order to obtain capital, better purchasing power, and professional and technical expertise. The ability of a community hospital to find an appropriate partner has become critical in an industry in which independent community hospitals most likely will not survive. Indeed, most of our local hospitals are now units within statewide "health care systems," and are seeking affiliations with hospitals in neighboring states. Given that the three-year limitation in the Act is a substantial disincentive for for-profit corporations to enter Rhode Island, there is a distinct likelihood that, as a result of this Act, one or more of the few remaining independent hospitals in Rhode Island will be unable to find a suitable partner needed to continue operation and may be forced to close or significantly reduce services, which would mean the loss of jobs and diminished access to care.
We have high quality, relatively low cost and accessible hospital care in Rhode Island due in large part to the efforts of community-based trustees at individual hospitals which have been entrusted to make wise decisions consistent with the missions of these institutions. By limiting the choices available to these trustees, the restrictions on non-profit hospitals in the Act are contrary to the public trust placed in these individuals to determine what is best for the institutions for which they are responsible- Given the enormous challenges facing hospitals today in a dynamic health care marketplace, this is absolutely the worst time to tie the hands of hospital trustees.
Moreover, there are very few states which have restrictions on non-profit hospitals different from those applicable to non-profits, and there appear to be no states with numerical limitations on hospital ownership by non-profits as contained in the Act. In fact, there is no sound basis for distinguishing between for-profit and non-profit hospitals in terms of quality of care and access. There are good and bad hospitals among both non-profits and non-profits. We must rely on our regulatory oversight of all hospitals to guarantee the high quality and access Rhode Islanders deserve and expect.
The three year limitation contained in the Act likely will serve to place Rhode Island at a competitive disadvantage in the rapidly changing health care market, to the detriment of consumers of health services. Given the barriers to entry contained in the Act, dynamic for-profit corporations may choose to locate in nearby Massachusetts or Connecticut, attracting patients and revenue out of Rhode Island. At the same time, one hospital system in Rhode Island will soon have over fifty percent of total net hospital patient revenues in the State and will likely continue to dominate the marketplace.
The other unacceptable provision in the Act calls for a hospital to receive approval from the Department of Health to close or significantly reduce emergency or primary care services. This so-called "reverse Certificate of Need" requirement is an unnecessary and burdensome provision. It appears that no other state has a requirement of this kind. Moreover, this new procedure is contrary to the trend here and elsewhere to remove Certificate of Need requirements pertaining to health care facilities. Only last year, legislation was enacted in Rhode Island to considerably reduce the role of our current CON program in the approval of facility expansions. In addition, strict charity care requirements, which the Health Department has been developing through regulation, should work to ensure that hospitals maintain their overall commitment to underserved populations. Moreover, if a hospital's request to withdraw services is denied, a hospital may have no choice but to close operations entirely, which ironically does not appear to need approval of any kind. This "reverse CON" procedure is simply unwise given the enormous demands placed on hospitals today to reconfigure services to effectively compete and survive.
If this Act were to become law, I fully expect the General Assembly would soon be required to make modifications in its provisions because the legislation represents such bad public policy.
For the foregoing reasons, I disapprove of this legislation and respectfully urge your support of this veto.