The Constitution State: <br>Is Bankruptcy Best <br>For Insolvent Hospitals?

Connecticut’s hospital problem has just bounced back into state government’s lap now that Tenet Healthcare Corp. has withdrawn its applications to purchase Waterbury Hospital and St. Mary’s Hospital in Waterbury, Bristol Hospital, Manchester Memorial Hospital, and Rockville General Hospital.The problem arises from several factors. State government, the biggest provider of medical insurance, continues to run deficits and has reduced subsidies to hospitals. The state’s population is aging and becoming poorer and more expensive to insure. And the new national medical insurance system has failed to achieve the promised savings.So the idea of Governor Malloy and the General Assembly was to facilitate selling the most insolvent nonprofit hospitals to for-profit corporations and let the new owners do the dirty work of economizing and take the blame for it — monopolizing, extracting concessions from labor, and raising prices. To start, the governor and legislature authorized for-profit hospitals to acquire doctor practices.But hospital unions and civic interests pushed back as they realized that savings from privatization would go far beyond mere purchasing efficiencies — that labor and medical services would be jeopardized. In response the state Office of Health Care Access and Attorney General George Jepsen, whose approvals are required for hospital acquisitions, conditioned Tenet’s acquisition of Waterbury Hospital on maintaining the status quo there for five years.Tenet recognized this as duplicity by state government. First state government purported to want to save money on medical care and to rescue the insolvent hospitals, but then state government made it impossible for the one bidder for the hospitals to achieve enough savings that would make them profitable. So last week Tenet withdrew its bid not just for the Waterbury hospitals but also for those in Bristol, Manchester, and Rockville.This leaves the hospitals, starting with Waterbury, on the verge of being unable to cover payroll and other vital expenses. There will be layoffs at the hospitals and new calls for state government to cover their losses. But then hospitals not getting extra aid from state government will complain, and fairly so, since the populations served by the five hospitals for which Tenet was bidding are not any more impoverished than those served by the other hospitals. The insolvent hospitals may just be less well managed. Besides, state government’s finances are as bad as the hospitals’ own.So the best option may be to let the insolvent hospitals go through bankruptcy reorganization, canceling their executive, labor, and other contracts and bestowing the remaining infrastructure on new community-based managements free of debt and able to start fresh. To keep the hospitals going as nonprofits, the new managements would have to make better choices than the old ones, but they would be out from under the old managements’ mistakes.For example, Eastern Connecticut Health Network, operator of the Manchester and Rockville hospitals, is notorious for its executive salaries and junkets and real estate expansions. Its trustees and community corporators failed to provide oversight and leadership and, having run the institutions down, blithely put them up for sale, though the hospitals are crucial parts of their communities.Of course it is questionable whether enough civic engagement remains in the communities served by the insolvent hospitals. Indeed, it’s a question whether enough civic engagement remains to operate the whole state itself, since only a little more than half the people who are registered to vote did so in the state election last month, a level of civic participation that falls to about 40 percent if eligible adults who have not even registered are counted.Maybe the state administration’s strenuous conditions and Tenet’s withdrawal are just negotiating tactics. Even so, the administration’s duplicity has failed to save the hospitals.Mr. Powell is managing editor of the Journal Inquirer in Manchester, Conn.

The Constitution State: <br>Is Bankruptcy Best <br>For Insolvent Hospitals?

The Constitution State: <br>Is Bankruptcy Best <br>For Insolvent Hospitals?

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