Hospital Deal Needs Scrutiny

In recent years, for-profit hospital chains in America have been able to thrive, despite managed-care cost cutting, by aggressively forging contracts with insurers and other health providers. Independent or “stand alone” nonprofit hospitals, however, are having a harder time. They are unable to muster enough clout to negotiate lucrative partnerships and also have been hit hard by the federal government’s recent decision to spend more on outpatient care and less on inpatient services. Thus it should be no surprise that in the last three years the number of nonprofit hospitals selling themselves to for-profit companies has nearly quadrupled.

State Deputy Atty. Gen. James R. Schwartz is now reviewing one of the most controversial conversions: the pending sale of Queen of Angels, a 410-bed Catholic community hospital in Hollywood, to Tenet Healthcare, the nation’s second-largest hospital chain. Because nonprofit hospitals like Queen of Angels have enjoyed years of tax exemptions, California law says the attorney general can approve a nonprofit conversion only after ensuring that all profits from the deal will be used by a charitable trust to offer the kinds of community health services the nonprofit has historically provided.

Currently, the deal has at least one serious flaw: TheQueensCare foundation, which will oversee the charitable health care funded by sale proceeds, has not clearly defined what constitutes charitable care. What’s critical is that charity dollars are spent to provide services like indigent inpatient care, a traditional money loser. But slippery wording in the current deal could allow Tenet to include under “charitable care” any bill a patient does not pay in full. Schwartz should refine the definition of charitable care so that neither Tenet nor QueensCare can escape their legal obligation to help pay for it.Moreover, the current deal does not set minimum intensive-care unit or emergency room staffing levels. This is important, for if the staff levels are set too low, the hospital will be able to legally refuse to accept the 911-emergency cases handled by Queen today.

Opponents criticized the Tenet deal at a community hearing last Saturday, and Cardinal Roger Mahony also opposes it. He believes Tenet’s emphasis on profit is “incompatible with Queen of Angels” current emphasis on care for the poor.

Nevertheless, it’s important to remember that nonprofit hospitals can no more afford to hemorrage money than can for-profit hospitals. This is especially true of Queen of Angels, which lacks a deep-pocketed benefactor to bankroll future losses. Similarly, Tenet, which has failed to recognize the existing labor union at Queen of Angels, has every right to do so as a private company. In today’s intensely competitive health care environment, Tenet should be able to reserve for itself the flexibility needed to respond to ever-changing market demands.

But the deal as presently structured has too many loopholes, and until it can close them, the attorney general’s office should not give its approval.