Press Release July 12, 1999	Contact: Julio Mateo, Jr. or Laurie Sobel 415/431-6747 Consumers Union's West Coast Regional Office

 

SAN FRANCISCO, CA - The for-profit hospital chain Community Health Systems (CHS) terminated its proposed agreement to purchase nonprofit Victor Valley Community Hospital in Victorville, according to a letter released late last week by the office of Attorney General Bill Lockyer.

In the July 1 letter, CHS attributed its decision to a "current impasse with the California Attorney General over . . . indigent [or charity care]" and to pending legislation (AB 394, Kuehl) that would establish minimum nurse to patient ratios in acute care hospitals. CHS said it was "still interested in acquiring Victor Valley Community Hospital." In October 1998, CHS offered to buy Victor Valley Community Hospital (VVCH) for $87.7 million. In January 1999, CHS announced that it reduced its offer to $72.6 million.

"Consumers Union applauds the Attorney General's decision to hold the line on charity care," said Julio Mateo, Jr., staff attorney for Consumers Union's West Coast Regional Office.

"Under state law, the Attorney General has an obligation to determine if the sale of a nonprofit hospital would have an adverse impact on the availability or accessibility of health care services to the community affected, and he has the authority to impose conditions on the sale," Mateo said. "In this case, he determined that charity care and other services would be hurt by the proposed deal. Therefore, he properly conditioned approval of the sale on 'appropriate standards for charity care.'"

Specifically, the Attorney General proposed that CHS provide at least one percent of net revenue in charity care, adjusted for inflation and for as long as CHS owned the hospital.

Charity care is defined as the amount of care given to patients who are unable to pay, and for which the hospital has no expectation of payment from any third-party payer.

"CHS had agreed to similar charity care provisions in its acquisition of Watsonville Community Hospital less than a year ago," said Laurie Sobel, also a staff attorney with Consumers Union. "In the three most recent hospital conversions here in California, the for-profit suitor has agreed to tighter charity care guarantees than in previous transactions. California has set a paradigm for the provision of charity care in hospitals that convert to for-profit. CHS knew the rules of the game coming into this state, and now it wishes to change the rules and scapegoat the Attorney General."

"We have no objection to CHS coming back to the bargaining table, provided it does not lower its purchase offer as a trade-off to pay for charity care," said Mateo. "There is absolutely no reason why the Victorville community should be short-changed."

The Attorney General arrived at the one- percent figure by averaging three years of charity care provided by VVCH. Those years included years of extreme financial distress for the hospital.

"The Attorney General's position is eminently reasonable," Mateo said. "If CHS is not willing to stick to its offer and accept the Attorney General's charity care conditions, it should go elsewhere and VVCH should pursue its other options." Four other hospital systems made proposals for VVCH.

"The Attorney General has a duty to represent the poor and uninsured, and CHS cannot ignore this responsibility as a hospital," said Sobel. VVCH is located in San Bernardino County, 35 miles west of Barstow, where CHS manages another hospital. VVCH is the only hospital with a significant charity care program located in its primary and secondary service areas. Approximately 20% of San Bernardino County's population does not have health insurance, and 18% of the population under 18 years of age is below the poverty line.

Four years ago, Consumers Union, nonprofit publisher of Consumer Reports magazine, began a national effort known as the Community Health Assets Project. The project seeks to protect nonprofit charitable assets and to limit the potential adverse health impacts that may result from the switch to for-profit. Most recently, Consumers Union published a new report, titled "White Knights or Trojan Horses? A Policy and Legal Framework for Evaluating Hospital Consolidations in California." The report found a general decline in charity care in the absence of tight guarantees in the areas of charity care, emergency room services, and patient volume. To get a copy of the report, please call (415) 431-6747 or access our web site at (http://www.consumersunion.org/resources/publications.htm#wc).

Consumers Union, publisher of Consumer Reports, is an independent, nonprofit testing and information organization, serving only the consumer. We are a comprehensive source of unbiased advice about products and services, personal finance, health, nutrition, and other consumer concerns. Since 1936, our mission has been to test products, inform the public, and protect consumers.