For-profit hospitals buying not-for-profits in Massachusetts will be required to maintain existing levels of free care as part of the price they pay.
That's one outgrowth of the state's first two experiences with conversion of charitable healthcare institutions to investor ownership. Massachusetts officials are now using regulatory muscle to get hospitals to sign a free-care pledge.
They're also busy writing rules for future bouts that specifically spotlight free care, valuation of assets and public disclosure surrounding such sales. They said results of regulation and negotiation so far have been uneven and hampered by insufficient legal authority.
The state posted its first for-profit conversion when Columbia/HCA Healthcare Corp. purchased an 80% stake in Metro-West Medical Center in May after an 11-month trailblazing route through the attorney general's office and public health department.
And in September, OrNda HealthCorp bought St. Vincent Healthcare System and bought a 45% stake in Fallon Clinic. Both are units of Fallon Foundation in Worcester.
Up to now, the attorney general and public health commissioner have grabbed whatever leverage they could from existing laws.
Attorney General Scott Harshbarger, for example, has worked within his current authority over transfer of charitable assets to negotiate on behalf of communities affected by hospital sales.
But state Sen. Mark Montigny (D-New Bedford), co-chairman of a joint legislative committee on healthcare, said he will push for a law granting the attorney general more sweeping and pointed authority to review for-profit hospital conversions.
Meanwhile, state Public Health Commissioner David Mulligan said he will require for-profit companies to continue permanently the level of free care inherited from any not-for-profit hospital converted to for-profit.
A spokesman for Mulligan acknowledged, however, that the department has no regulatory authority to force such compliance. Instead, it will have to rely on "moral persuasion" reinforced by its status as licensing and inspection authority over hospitals.
In the absence of clear statutory directives, regulators have negotiated each case with differing public visibility and results.
The Columbia deal came with a publicly disclosed package of contractual agreements the size of a small phone book issued well in advance of the sale.
But the details were not as forthcoming for the St. Vincent conversion. Issues such as the value of that system's assets, especially St. Vincent Medical Center in Worcester, were hashed out in private between OrNda and the attorney general's office, and the results weren't disclosed until shortly before the sale in September.
Those results included a contribution to the community of just $4 million as a result of the sale while physicians at Fallon Clinic received more than $50 million in total compensation.
In addition, Harshbarger was able to get only a two-year commitment to maintain indigent care at current levels.
The MetroWest package described a promise "to operate at least one emergency room and to maintain existing MetroWest policies with respect to the provision of indigent care." It also committed Columbia to operating at least one 24-hour emergency department. MetroWest has hospital facilities in Framingham and Natick, which are about four miles apart.
Negotiations with the attorney general improved the final agreement to 24-hour emergency coverage at both campuses for at least three years. The free-care policy also was strengthened to require that any changes be put to a vote of the hospital board, whose members are split evenly between Columbia and the community.
The package included formulas for arriving at a purchase price; arrangements to contribute about $30 million to a charitable foundation; and details on sharing 20% of the proceeds of continuing operations with the foundation as a minority partner.