By Katie Kerwin McCrimmon
Colorado Attorney General John Suthers plans to rule within about two weeks on the Colorado Health Foundation’s proposed $1.45 billion sale of its share of HealthOne hospitals to Tennessee-based HCA.
At hearings this week, Suthers and Deputy Attorney General Geoff Blue heard conflicting testimony about how best to protect community interests and ensure health care for the poor in Colorado where HealthOne now runs seven large hospitals, 13 surgery centers and 50 medical imaging and specialty centers. HealthOne is currently co-owned by the nonprofit Health Foundation and for-profit HCA. HCA operates 164 hospitals and has 180,000 employees across the country.
Supporters of the deal flooded a standing –room-only hearing Monday night at Rose Medical Center, one of the HealthOne hospitals. Many of those who spoke represented other large Colorado foundations or organizations that have received funding from the Colorado Health Foundation.. They praised the foundation’s work, which centers on three strategies to make Colorado the healthiest state in the nation: promoting wellness and fighting obesity, increasing access to care, and promoting innovations that improve the quality of health care.
Several speakers testified that it’s wise for the foundation to diversify its assets and sell the hospitals for a good price now while also eliminating an inherent conflict of interest. The foundation’s goals increasingly center on keeping people out of hospitals. Shedding their financial interest in the hospital chain would allow foundation executives to pursue that mission without concerns about fluctuating hospital profits or hospital consolidation that may be coming under national health reform.
“They will be 100 percent in the health business and not in the hospital business,” said Lisa Brown, CEO of the Northwest Colorado Visiting Nurse Association, which provides health services to nearly 30,000 people from newborns to seniors in Routt Moffat and Jackson counties.
Brown’s agency has received extensive support from the health foundation and she said she drove all the way from Steamboat Springs to testify because the health foundation’s work is so critical to rural communities. She said her association is struggling with an aging, underemployed population and needs powerful, stable partners like the health foundation.
Other proponents of the sale said it’s financially imprudent to have such a large investment in one business sector: hospitals.
Robert Kauffman, an attorney at Brownstein Hyatt Farber Schreck who served on the HealthOne board from 2002 to 2010, said the board carefully considered two questions before accepting HCA’s offer. First, was it wise to keep over half of its assets in one company, and second, would the leaders of HCA and HealthOne live up to commitments to educate future doctors and provide care to all people in the community?
“The answer to both questions was very clear,” Kaufmann said. “Under no scenario should the foundation keep all of its assets in one company.”
Furthermore, he said that HCA and HealthOne’s commitment to charity care is unparalleled across the country and unwavering.
But some opponents pointed out that the Health Foundation has enjoyed stunning returns from the hospitals over the years, while others urged Suthers to require increased charity care since Colorado’s Medicaid population is expected to grow dramatically in coming years.
Dede de Percin is executive director of the Colorado Consumer Health Initiative, a consumer group that represents about 50 groups across the state. She said the group is not opposing the deal, but wants to ensure that commitments to charity care and coverage for Medicaid patients will increase over time.
An independent analyst whom Suthers hired found that the $1.45 billion purchase price was fair, but some critics wanted to see the financial statements on which the price was based. Others said it’s unwise to sell.
“I understand why HCA is interested,” said Dr. Richard Parker, a Denver surgeon, but he warned that once the for-profit company takes over, hospitals could close. That’s what happened with Mercy, a former hospital in east Denver that shut its doors only three years after a for-profit entity purchased it.
“When is enough enough? When is big enough enough?…If this (sale) goes forward, we can’t go back,” Parker said. “I have great respect for HCA. No question about their commitments. But, having watched this joint venture succeed, why are we so quick to run away from it?”
Other opponents pointed out that the foundation has enjoyed a remarkable infusion of cash from hospital profits. Today, the foundation reports that its assets total more than $1 billion.
“If this entity in 1995 had taken its $17 million and invested (those profits in the stock market) it would have only (generated) $50 million,” said Jay Horowitz, a Denver attorney who spoke on his own behalf and is not involved in the transaction. “Non-diversification has paid off more than 20-fold.”
Horowitz said that all of the speakers who praised the work of the foundation were missing the key issue. In additional to their excellent work today, he believes that the people of Colorado expect the mission to include the original intent. When the foundation was created through the partial sale of nonprofit hospitals back in 1995, the people of Colorado expected an ongoing commitment to protect community interests.
“And here we are now and we have this big outside force. They’re not Coloradans. They’re not living and working here. They don’t have a long tradition here. The Colorado Health Foundation should be continuing what it set out to do,” Horowitz said.
Leading that point of view was former board member, Dick Anderson, who helped negotiate the original deal with HCA’s predecessor back in 1995. Anderson and nine former board members urged the attorney general not to approve the deal. They said that the foundation has served as a moral compass, preventing mass layoffs and hospital closures, and ensuring the long-term viability of expensive residency programs that train future doctors.
Anne Warhover, president and CEO of the health foundation, sought to reassure Suthers and Blue that the transaction is indeed in the public interest.
“This is the right decision at the right time,” Warhover said. “It’s clear that our state’s health needs have changed. Today acute care is only one piece in a complete health system. Today we know more about preventive measures.”
Warhover said studies show that only 10 percent of health outcomes are determined by health care. Environmental factors, income, behavior and genetic makeup have far greater impacts on health outcomes, she said. That means that the foundation wants to spend more resources promoting wellness so people need less health care.
She said covenants in the proposed sale would ensure that the HealthOne hospitals will continue to care for Medicare and Medicaid patients and will provide the same levels of indigent care for at least five years.
“This transaction is good news for the people of Colorado,” Warhover said.
Ed Kahn, an attorney who specializes on health issues for the Colorado Center on Law and Policy, testified that after analyzing the proposed sale, the center supported the deal, but he encouraged Suthers and Blue to modify it. Click here to see Kahn’s full analysis in Solutions. Opinion: Five ways the HealthOne hospital deal should be adjusted to protect the public.
Kahn believes it’s wise for the foundation to divest itself of the hospital interests, but he said there’s no reason that HCA should be able to require a non-compete clause and the health foundation should be able to fund endeavors in the future that might bring about dramatic reductions in hospital costs.
Kahn said HCA should be required to contribute at least $10 million per year plus additional funds adjusted for inflation to support the graduate residency programs, and he said that HCA should promise that it won’t close any of the HealthOne hospitals for at least 10 years.
Furthermore, he called on Suthers to require that the community board overseeing the HealthOne businesses have a majority of members who represent consumers. The current structure would mandate 50/50 representation with HCA choosing the chair.
Finally, Kahn urged the attorney general to make available all the financial materials that his consultants used to determine that the $1.45 billion sale price is fair. That way, members of the public could evaluate the price on their own if they wished.
“Ten years of financial statements from HealthONE should be made public so that any individual who wishes to investigate the fairness of the purchase price can do so,” Kahn said.
The attorney general is also accepting comments via e-mail at email@example.com