Obtaining Service Guarantees

One of the biggest concerns in a hospital conversion is that the new owner will change the services provided by the hospital. Frequently, the buyer will talk about “economies of scale” and how it can make the delivery of health care “more efficient” by “improving coordination” and “minimizing duplicative services.” The buyer will claim that, after the conversion, services will be better coordinated with those offered at nearby facilities. Yet communities are often concerned that this “coordination” will bring significant reductions in services, requiring patients to travel farther to get their medical care. The community health impact study, if any, may show that there are looming gaps in service or inequities if the proposed deal goes through. Moreover, less profitable services may be cut, and there may be less access to care for indigent patients, such as those who obtain their care through Medicaid or other public health insurance programs.

In the Daniel Freeman Hospitals transaction, the community expressed great concern that the level of services would be reduced, that the amount of Medicaid delivered would decrease, and that one of the facilities would be closed. The California Attorney General imposed several conditions on the sale, requiring that for five years after the sale, the level of emergency room capacity and services be maintained. If Tenet, the buyer, intended to eliminate emergency room services, it would have to meet with the Attorney General to discuss the proposal. In addition, the Attorney General required Tenet to provide a minimum of 15,000 patient days for Medicaid patients at Memorial and expand the eligibility program. Finally, if Tenet closed the Marina Hospital facility, the Attorney General required Tenet to either establish an urgent care or ambulatory care facility within two miles of the hospital or provide free transportation to nearby clinics for Medicaid and Medicare patients. The Attorney General also required Tenet to conduct an outreach program to publicize the availability of these services in low-income areas surrounding the hospital.

What You Can Do:

• Find out if the buyer intends to reduce any health care services and ask for it to identify which services are slated to be cut.
• Conduct research on why particular services are important and should not be reduced or eliminated.
• Ask for conditions on the sale requiring certain services to be maintained in the future.
• Request alternatives if any services are reduced or eliminated.