Use of Monitors in Administrative Proceedings

Hospital Conversions

Many states have laws in place to protect the public’s interest when a not-for-profit hospital is sold to a for-profit entity. The state’s Attorney General or Department of Health may impose conditions on the new entity, in some cases to prevent it from simply “flipping” the hospital and extracting the dollar value of the goodwill that was invested by the state when it was not-for-profit.

Hospitals started by charitable or religious organizations may have been acquired or approached by for-profit entities who might be interested in acquiring them. States are concerned that they simply don’t want these health care institutions snapped up, so the states want to make sure that the interests of the public are really protected.

There are multiple interests the public has when a not-for-profit entity is bought by a for-profit entity, including confirming that:

• the for-profit entity will exist as a health care provider for a reasonable period of time going forward,
• the for-profit entity is a good neighbor,
• the for-profit entity pays taxes and
• if there were charities in place, those charities continue.

Variety of Conditions

When such a conversion occurs, the purchaser may agree to a wide variety of conditions, such as maintaining certain services, making capital improvements, expanding in certain areas, meeting certain public health standards (for immunizations, treatment standards, coordination of care) and addressing certain public health priorities, such as opioid overdose risks.

An independent integrity monitor may engage in some or all of the following: review of money to be sure it is spent according to conditions; review of policies, procedures, contracts and training materials; review of assignment of assets (e.g., donations that were earmarked for a purpose that is no longer possible); visits to the hospital to see if certain programs are functioning and to see if services are being offered as agreed-upon; interviews with staff to see how medical requirements are being met; and review of charts to see whether processes are being followed.

In short, there are wide variety of conditions that will be in place or that the state or regulators will want visibility into, and a monitor can provide that visibility.

A monitor can also consider other factors that may seem to be less related to health care, but could impact the conversion.

Other Factors

There might be an agreement for capital improvements; for example, there might be total dollar amounts to be invested – dollar amounts per year or dollar amounts over a span of time. It could all depend on what the long-term plans are for the acquirer.

As an acquirer typically does not make a lot of capital improvements in the first year, a regulator would need a monitor in place for some period of time to make sure the investments are eventually made and the money spent is actually going toward capital improvements. There could also be ancillary agreements, such as participation in and sponsoring of community activities or education – all of which need to be monitored.

A monitor can drill down into whether the health care provider put out advertisements about these matters and see if the public and the person or persons involved actually attended them.

Charitable Assets

Another area reviewed by an independent monitor is charitable assets; a donor may have made a bequest to a hospital for a specific purpose. If the specific purpose is no longer available – for instance, if it was for a hospital wing that is getting closed down and not being used for the kind of care it was intended for – these assets might be reassigned.

Granting of Licenses

A second area exists with the granting of licenses or certificates of need and the conditions a state may impose. This could be for a new hospital, a renewal or some other health care facility where the state really wants to have some continued oversight. While it is not substantively different than the acquisition realm, it is more quantitatively different. There may be a smaller set of conditions that have been agreed upon. An example might be a certificate of need associated with the purchase of a large piece of equipment, which might change the dynamics around a facility.

An independent integrity monitor extends the capability of the state agencies and regulators as it allows them to confirm that the entities are meeting the conditions.

And best yet, the costs of the independent health care monitor are borne by the acquiring entity.

A monitor can review the paper trail indicating that the agreed-upon processes are in place and can help to keep a health care provider’s compliance program on a schedule so that it does not slip too far down the list of the acquiring company’s priorities.

Please join me next week when we conclude our series on monitors in health care and consider how independent integrity assessment and monitoring can be used to limit adverse consequences.

In case you missed the earlier installments of this ongoing series, please see the links below.

Everything You Always Wanted to Know About Monitors But Were Afraid to Ask

Part 1, Part 2, Part 3, Part 4 and Part 5

Potential Issues in Corporate Monitorships

Part 1, Part 2, Part 3, Part 4 and Part 5

Suspension and Debarment in Monitoring

Part 1, Part 2, Part 3, Part 4 and Part 5

Monitoring in the Health Care Sector

Part 1, Part 2, Part 3