Primed for Hope

Thanks to all at Prawfsblawg for the opportunity to guest blog here this month.

Prompted by Prime Healthcare Services's end of the year and under the wire closure of its acquisition of  Landmark Medical Center in Woonsocket, Rhode Island,  I thought I might begin with a few observations on the changing nature of hospital ownership in the United States. There could not be a more telling example of what is happening in hospital conversions (the transformation from not-for-profit to for-profit or investor-owned facilites) than in considering the acquisition activities of Prime, an investor-owned Ontario, California-based chain of 25 hospitals. 

Prime's nationwide expansion strategy is interesting because its distinctive business model may soon arrive at a distressed community hospital near you.

Prime buys genuinely  distressed hospitals. No, I don't mean merely struggling hospitals but distressed hospitals. A distressed hospital is a facility so financially troubled its board of directors or governing authority has determined it must either be closed or sold.

I have written elsewhere about the  economic and social implications of hospital closure but what you need to understand today is that hospitals rarely fold quietly. Whether it is wise in all circumstances to prolong the life of an acute care hospital is seldom considered at the community level.  The overwhelming presumption is that all hospitals are health-promoting, job-creating, community welfare-enhancing institutions. And Prime acknowledges this with its corporate tag-line: "Saving Hospitals, Saving Jobs, and Saving Lives."

Prime's multi-state acquisition strategy has finally brought it to southern New England where Rhode Island, Massachusetts, and Connecticut have some of the lowest rates of investor-owned hospitals in the nation.  Prime's 2001 origins in California and eventual expansion to Nevada, Texas, Kansas (which I have discussed here: http://delong.typepad.com/annmariemarciarille/2013/04/prime-healthcare-comes-to-kansas-city-kansas.html), and Pennsylvania  have always been interesting but the arrival of the Prime business model in Rhode Island can tell us somethings both about the evolution of Prime's business model as well as the perilous state of community hospitals in many places.

Woonsocket Rhode Island is an old mill city in the Providence metropolitan area, still heavily French-Canadian and quite low income.  The Washington Post has noted that Woonsocket's economy is so dependent on the food stamps (or SNAP) income of approximately forty percent of its population, that it  might be said to have the modern version of a  boom or bust economy.  And it has been mostly bust for Landmark Medical Center for some years -- more than $10 million in debt and overseen by a court-appointed special master since 2008.  An earlier attempted sale to a Boston-based for-profit chain fell through in the face of failed negotiations with Blue Cross and Blue Shield of Rhode Island.

Rhode Island has an acute care hospital bed market you can actually  get your mind around. As I understand it, there are thirteen not-for-profit acute care facilities in Rhode Island, six of them stand alone community hospitals. And stand alone community hospitals, once the bulwarks of acute care in low income communities like Woonsocket, are the dinosaurs of the hospital world. Large (with 214 beds in its Woonsocket unit alone) unionized  facilities tied to a non-diverse  lower rate payor mix like Medicaid are the most vulnerable in a contracting market for acute care hospital services.

And there's the rub: is it better  to let the facility close or better to embrace Rhode Island's first for-profit hospital operated by a chain dodged dogged by  billing practices investigations? (Which you may read about here: http://californiawatch.org/dailyreport/prime-hospital-chain-acknowledges-it-faces-2-federal-investigations-18801). 

So hesitant  or so eager were both Rhode Island's Attorney General and its Department of Health Director to decide the issue under Rhode Island's hospital conversion statute (which you may read about here: http://www.health.ri.gov/publications/laws/HospitalConversionActSummary.pdf or consult here: http://webserver.rilin.state.ri.us/Statutes/title23/23-17.14/index.htm) that the deal was finally approved with a remarkable set of conditions attached  including capital investment requirements, service expansion requirements, a committment to three years guaranteed continued operation and more.

Why would Prime accede? Landmark's turnaround story would be quite a feather in Prime's cap. Community hospital conversion to for-profit turnaround is Prime's business model after all, whatever you make of the not inconsiderable controversy surrounding its operations. The value of establishing a for-profit hospital beachhead in Rhode Island may be difficult to overestimate.

All of this coming soon to a community near you.