June 5, 2008 in City

Coalition questions bidder’s Empire plans

By The Spokesman-Review
 

Community Health Systems’ plan to purchase Empire Health Services leaves some questions unanswered and lacks a firm commitment from the buyer to the public’s interest, according to a review of the proposed sale by a coalition of concerned citizens.

The application lacks details about how the Tennessee-based for-profit corporation intends to improve finances at Empire Health’s two Spokane-area hospitals, Deaconess and Valley Medical Center, said Amy Freeman, a public interest attorney and member of the legal team put together by the Protect Our Hospitals Coalition.

Citing a reduction in the agreed purchase price for Empire Health – from $172 million in January to $156 million in April – Freeman asked whether the price will further erode by the time the Washington Department of Health approves or denies the deal in the fall.

Proceeds from the sale of the nonprofit Empire Health Services will go to a charitable foundation independent of the seller and the buyer, but the final purchase price is tied to “financial benchmarks” that must be met by Empire Health, which lost $7 million last year.

Freeman, a Columbia Legal Services attorney representing two coalition members, spoke to about 60 people gathered in the Spokane City Council’s chambers Wednesday night.

The presentation came in advance of public hearings on the sale June 25 and June 26 at the Spokane Convention Center and Mirabeau Park Hotel and Convention Center.

The sale would mark only the second time in the state that a nonprofit hospital system is sold to a for-profit company. Community Health Systems is the nation’s largest publicly traded, for-profit hospital system, with 110 hospitals in 28 states.

For the sale to be approved, CHS must show it has taken steps to safeguard the value of public assets and ensure that proceeds from the sale go toward charitable health purposes, Freeman said.

A major concern was whether CHS would turn around and sell the hospitals immediately after buying them.

An Empire official at Wednesday’s meeting said the buyer had committed to not selling for five years. Also, between five and 10 years after the sale, the charitable foundation would have first right of refusal.

Empire spokeswoman Christine Varela also said the coalition was making demands “not even required of the nonprofit” hospitals.

The coalition, formed in response to the proposed sale, aims to ensure the hospitals continue to provide essential services.

CHS, in its application, pledged to continue such services, unless there is “deterioration of financial performance” of the hospitals or the services become “unduly burdensome.”

Freeman suggested these clauses gave CHS loopholes it could use to drop unprofitable or low-margin services such as burn care, AIDS treatment, or health outreach programs.

“From a community perspective, it is not possible to simply get rid of essential services just because they are not making money,” Freeman said. Among those essential services is charity care for the uninsured in a community in which more than 10 percent of the population is uninsured.

CHS says it has committed to a charity care policy equal to or better than Empire’s current policy.

Freeman also said that in its application, CHS promises only to maintain levels of Medicare and Medicaid service required by the government for participation in the federal programs.

Other issues raised by either the Protect Our Hospitals Coalition or audience members, who were asked to submit questions in writing: Does the purchase price reflect the value of Inland Northwest Health Services, the nonprofit enterprise shared by Empire Health and Providence Health Care? And what is the risk of CHS busting unions or cutting wages of hospital workers?

Coalition organizers said those questions must be asked of the Department of Health and of the state attorney general’s office, which is expected to issue an opinion on the proposed sale in August.


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