DKH has been seeking a “white knight” capable of providing assistance that will eliminate the financial uncertainties that our local health system shares with most other health care institutions, including the very largest. Covenant Health, an out-of-state Catholic health system, has stepped into the breach, offering to “partner” with DKH to provide the resources DKH needs to “preserve and enhance services, protect jobs and invest in new technology.” An “Affiliation Agreement” has been signed with Covenant and an application filed with the State for issuance of a Certificate of Need (CON). If the CON is issued, DKH Corporators will be called on to vote the transaction up or down. The parties’ CON application and a dedicated DKH website purport to provide ample justifications for this transaction. Do they represent reality, or are they perhaps largely corporate “spin”?
ASSERTION – It’s a Partnership. The transaction described in the so-called Affiliation Agreement with Covenant (let’s call it the “Takeover”) is consistently portrayed to our community as an entirely benign “partnership” whereby Covenant selflessly provides resources enabling DKH to continue redefining itself and exemplifying excellence in healthcare delivery.
FACT – It’s an Acquisition. While we share this high estimation of DKH’s performance to date, it is disingenuous to portray the Takeover as anything other than what has been unambiguously admitted to the State – complete transfer to Covenant of the ownership and control of DKH. That hardly qualifies as a mere partnership.
ASSERTION – Local Representation Will Be Continued. We are assured that, as has long been the case, DKH will continue to be “guided” by a Board comprised of community leaders that are representative of our service area.
FACT – No Meaningful Local Control. Currently, DKH board members are elected by the corporators who volunteer to represent and protect the interests of the local community, and the board, in turn, hires the CEO. After the Takeover, all DKH board members will be hand-picked and removable solely by Covenant, as will DKH’s CEO. Covenant will be able to override any DKH board of directors’ decision. If Covenant’s fiduciary obligations to its many other health services providers call for action unfavorable to DKH’s service community, Covenant cannot be expected to forego taking such action just because DKH objects. Covenant’s control is so total that it is empowered to sell DKH to a third party (perhaps even to a for-profit business) if the transaction is approved by the Covenant-controlled DKH board of directors.
ASSERTION – Services Will Be Preserved and Enhanced. Supporters of the Takeover Deal pledge that DKH will maintain the full line of health care services currently provided to DKH’s patients.
FACT – Services Easily Cancelable. Besides the fact that no promises have been made (or are expected to be made until after completion of the Takeover) as to the level of financial and other support that must or even should be given to various services, whether individually or in the aggregate, the pledge also contains an explicit caveat that the pledge will not apply to services that are determined not to be “financially viable.” Since Covenant or its captive management at DKH will have complete control over what and how much support will be given to the maintenance of any particular health care service, it is easy to envision how Covenant will have substantial control over what and when particular services will be terminated as being not “financially viable”. To add further uncertainty as to what services may be cut, we are told that women's and children's services will be continued “consistent with the delivery of these services by Covenant's other hospitals”. The three Covenant hospitals have already limited such health care: St. Mary, Lewiston, ME, closed maternity and women’s health services, July 22, 2022; St Joseph, Nashua, NH, does not offer contraception or infertility treatment; St Joseph, Bangor, ME, offers no Ob/Gyn services except women’s health screening.
FACT – Clinical Performance Will Suffer. All three Covenant hospitals rank lower in universally recognized third-party measures of clinical excellence. Further, an often ignored but inevitable consequence of enforcement of Ethical and Religious Directives on acceptable health care is the effect it has on retention of physicians who universally are educated in and swore to uphold evidence-based medicine. DKH already has witnessed the flight of a rock star OB-GYN practitioner. How many other valuable medical professionals will follow?
FACT – The Assertion Blatantly Ignores Religious Banning of Many Health Care Services. Because Covenant is a Catholic institution, restrictions imposed by the directives of the U.S. Conference of Catholic Bishops will be enforced at DKH. Banned health care will include abortion, fertility treatments such as IVF, all birth control methods, including emergency contraception pills and sterilization (vasectomy and tubal ligation), some miscarriage management and ectopic pregnancy techniques, and end of life patient intentions that contradict the Bishops’ directives.
ASSERTION – Religious Banning of Healthcare Services Is not Important Because Those Services Generally Have not Been Provided by the Hospital in the Past.
FACT – Delivery of Services in Physicians’ Offices Would Be Significantly Curtailed. Health services that will be banned after the Takeover are being provided in abundance in the offices of the hospital’s affiliated physicians, including vasectomies (83% performed in physicians’ offices) and contraception medication and intervention, through Ob/Gyn, internal medicine or family practice physicians. Most women of reproductive age (65%) use contraception and 46% of all women 18 and older have an annual visit with an Ob/Gyn. After the Takeover, this will all be lost business. Further, emergency treatment of ectopic pregnancy, miscarriage, and sexual assault now generally provided in the hospital Emergency Room will be restricted causing risk to the health and life of women.
ASSERTION – Religious Banning of Healthcare Services Is not Important Because Those Services Will Be Available From Non-DKH Providers.
FACT – Referrals of Banned Health Care to Non-DKH Providers Will Be Critically Curtailed, Ultimately Jeopardizing DKH’s Patient Base. Once the Takeover has been completed, DKH referrals of religiously banned services to other providers will largely cease, with two significant consequences. To the extent that patients do not seek banned services elsewhere (whether due to finances including health insurance coverage problems, inadequate transportation, lack of information, work conflicts, etc.), patients will be greatly harmed, particularly those in low income or discriminated categories. On the other hand, to the extent that patients do find alternative sources for banned services, they are quite likely to shift their family’s other health care business from DKH as well. This is particularly likely concerning women patients turned away by DKH regarding reproductive health services who largely control health care decisions for themselves, their children and even spouses. In either case, DKH will be substantially harmed, since patients who receive care directly from DKH providers, or at least from other providers with the active assistance of their DKH providers, are clearly more likely to stay loyal to their established primary care or specialist physicians than patients seemingly unaccountably abandoned in their hour of need.
ASSERTION – Jobs Will Be Protected.
FACT – Jobs Will Be at Risk. 80% of DKH staff live in the region and support its economy with their wages. Covenant has advised the State that it will examine centralizing elsewhere human resources, information technology, finance, risk management, legal services, physician practice administration, philanthropy, medical interpreter services, quality management, patient financial services, provider credentialing, employee training, marketing, corporate communications, and commercial insurance contracting, essentially and substantially downsizing local employment. It will charge DKH $18 million for these off-site “benefits”.
Covenant’s promise of no aggregate loss of DKH jobs will apply only for 6 months, perhaps just enough time to figure out who to fire. DKH’s filings with OHS indicates that in the first year of the acquisition it will eliminate 50 jobs at DKH with jobs being outsourced to Tewksbury and Ohio with further position eliminations in the next two years. Although it projects that some new positions will be added as the result of “volume increases” it does not state its plan for accomplishing this.
FACT – Employee Benefits Will Be in Jeopardy. Covenant is required by the Affordable Care Act to offer insurance for birth control, sterilization, and emergency contraception but not for abortion, fertility treatments, or gender-affirming care.
ASSERTION – Covenant Will Provide for Investment in New Technology.
FACT – Funding of Capital Expenditures Not Clear. Covenant promises to cause 2% of DKH net revenues to be invested in unspecified capital improvements, but only during the first three years after completion of the Takeover. Further, this does not necessarily imply new cash infusions by Covenant as such investment could be funded instead by decreasing other DKH expenditures.
ASSERTION – Covenant Will Save DKH From Federal Regulatory Disaster by Providing the EPIC Electronic Health Records System (EHR).
FACT – Provision of EPIC Is Not Assured. Covenant does not promise to provide EPIC, but rather only to use “commercially reasonable efforts” and to “work in good faith” to do so. Covenant expects to provide DKH with EPIC software, but it will charge back the cost to DKH approximately $8 million per year to pay for this conversion.
EPIC’s premium price compared to other EHR products would likely be a significant long term drag on DKH financial results. This may cause Covenant to view various DKH services or even DKH as a whole as less than an ideal recipient of funding for operational needs, much less for capital improvements.
FACT – Other Regulatory-Compliant EHRs Are Available at a Mere Fraction of the Cost of EPIC. DKH will recover the cost of maintaining its current legacy medical records software system, $500,00-$1,000,000 per year. In addition, there are alternative providers of electronic health records (EHR) which meet all federal requirements. For example, a system has been identified that appears to be obtainable for a yearly cost perhaps as low as $1,000,000, which would be break even transaction when the legacy system is retired. DKH should not have to pay the price for one of the most expensive EHR solutions just because it is required to be compatible with Covenant’s existing EPIC-based system.
ASSERTION – Covenant Will Help Resolve DKH’s Pension Plan Deficit.
FACT – Pension Fund Help Is Capped, at Best. Covenant has not promised to contribute any funds to resolution of DKH’s outstanding $3+ million pension plan liability, relying on successful conclusion of negotiations instituted by DKH for federal assumption of most of this liability. However, Covenant does place a $1 million cap on any such contributions and insists on being able to walk away from the Takeover Deal if the pension plan liability is not settled, whether or not Covenant offers to make any such contribution.
ASSERTION – DKH Needs the Takeover Deal to Stay Afloat. Supporters of the Takeover Deal are suggesting that the choice is binary: accept the Takeover Deal now or go under in the near future.
FACT – Covenant Does Not Promise to Save DKH. Covenant does not demonstrate the financial, managerial or clinical capacity to “save” DKH. Perhaps reflecting its negative financial performance (posting operational losses during all but one of the last five fiscal years) Covenant has declined to undertake, even for the near term, to provide any guaranteed level of financial assistance much less in an amount sufficient to protect DKH from financial ruin. Quite the opposite, far from planning to financially benefit DKH, it would not be unreasonable to assume that Covenant, which owes a fiduciary financial duty to its existing network of health care institutions, expects to extract from its operation of DKH financial benefits sufficient to justify any attendant capital outlays and other assumptions of risk.
FACT – Rescue by a Benevolent White Knight Is Not the Answer. Looking for a “suitor” is largely unproductive. Unfortunate experience nationwide is that small hospitals acquired by larger systems tend not to gain economies or efficiencies so much as expensive additional overhead burdens. Research has shown that value typically is extracted from smaller hospitals while their overall costs remain steady or rise as administrative cost savings and benefits (including escalating executive compensation) flow up to the acquiring health care system. . Evidence in the applicant’s submission to OHS, is an annual “corporate overhead” charge-back to DKH of $7.2 million to pay for Covenant centralized functions of IT, Accounting, Payroll, Accounts Payable, Human Resources, Contracting, Supply Chain Management, Legal Services, Executive Leadership, Public Relations, Risk Management and “other functions” – DKH jobs and local contracts likely lost to NE CT.
FACT – Local Control of Hospitals Is Beneficial. Evidence shows that when hospitals are locally controlled, they improve access to and quality of care, health outcomes, and satisfaction with treatment, and can control costs. They actively address health needs in their communities and through collaboration with government, community organizations, and individuals, they can successfully manage fiscal challenges and solve problems.
FACT – There Are Alternative Fixes to DKH’s Financial Problems. There are viable options to keep DKH solvent, local, and independent. Although DKH has financial difficulties, its condition is similar to, and in fact better than, many other struggling CT hospitals, having proven marginally operationally profitable in recent years that were not overwhelmingly impacted by covid-19. Sufficient time and possibilities exist for long-term cures of DKH’s current financial woes that don’t require hollowing it out before it can be saved.
FACT – DKH’s Location Should Attract Government Support. DKH’s status as the only health care facility within reasonable traveling distance for much of its service community arguably has been and will continue to be a funding advantage. In essence, DKH may be viewed as almost a public utility, providing services that, if it were to go under, would need to be replicated by government to assure continuing access to essentially basic human services. This appears to have been born out recently in the naming this summer of DKH as the recipient of a $5 million state grant to help ameliorate the financial impact of covid-19. One can only speculate whether that grant would have been made by the State of Connecticut to a facility owned and operated by an out-of-state religiously affiliated health care institution. Other opportunities to vie for state and federal grants will surely present themselves provided we actively seek them out. Similarly, what a boon it would be if, through aggressive DKH lobbying initiatives, DKH’s $10 million per year contribution to the state hospital tax were to be significantly reduced.
FACT – DKH Already Possesses the Talent and Capabilities Required for Long Term Stability. Turning around DKH’s financial direction will take vision and effort at all levels of the DKH staff, not ham-handed business school style top-down management and quick externally supplied magical fixes. Clinical and other staff, hands-on managers, the board of directors and even corporators will need to work more closely and creatively together to accomplish this – we have the talent and will to accomplish our own salvation by rolling up our sleeves to achieve collaborative transformational success.