In a surprising move, the Massachusetts Senate Ways and Means Committee is giving the municipal market a say over the disposition of deteriorating hospitals with outstanding bonds.
In the course of fashioning the state's most siginificant health-care legislation in years, the influential committee late Wednesday approved a bill that would appoint two new members to the "conversion board" -- one of whom is the executive director of Massachusetts Health and Education Financing Authority.
The conversion board is charged with overseeing the restructuring of failing hospitals, and the participation by the authority's executive director -- currently Edward M. Murphy -- would give the tax-exempt market a voice over the fate of bond-issuing hospitals going through the conversion process.
The legislation already has passed the state House of Representatives and has only to survive a conference committee composed of lawmakers from both assemblies to become law.
"The Senate, in proposing this, is understanding the hospital industry in its entirety," said Juliette Fay, spokeswoman for the hospital authority. "Having a voice is a substantial change from what it has been. Getting involved in the early stages of a hospital's problems at the conversion-board level gives us time to address the problems."
Mr. Murphy estimated that the hospital legislation, currently named Senate Bill number 1760, could result in six to eight of the state's bond-issuing hospitals being "squeezed out" of existence. He declined to specify which hospitals would be affected, but he did say Lowell, Mass., where a number of antiquated facilities are located closely together, could see three hospitals close.
The latest version of the bill says the conversion board will "have the authority to assit any closing or converting hospital ... to ensure an orderly transition, including, but not limited to, ensuring that the hospital's obligations for any bonds issued and for other short- and long-term debt are met."
The original legislation, filed by Gov. William Weld's office, sought to save patients money on insurance premiums by injecting competition between hospitals. The objective was to make facilities compete for patients' insurance dollars.
Late yesterday, discussion on the Senate floor was heated, according to legislative sources, but the competitive spirit of the bill appeared to be intact. None of the 50 or so amendments being proposed appeared to tinker with the bill's goal of lowering patients' insurance premiums, according to Joan Fallon, spokeswoman for Sen. Patricia L. McGovern, D-Lawrence.
"I think the deregulated system will probably survive," Ms. Fallon said. "It may come off the floor with some changes, but the House and Senate bills are similar in many ways" and are thus unlikely to be changed substantively.
If so, and no real changes are made by the conferees in the next several days, Massachusetts will get the most dramatic revision of its hospital laws in recent history. Gov. Weld's original proposal has survived and is expected to inject competition into the state's medical establishment.
Ms. Fay of the health financing authority said the legislation appears to have very few political detractors and thus should move "very quickly" through the final stages of becoming law. "If the language stays the same," she said, "any hospital that bumps up against difficult times [will have] its outstanding debt factores in."
Berkshire Medical Center in Pittsfield, Mass., is currently one of the shakiest hospitals in the state, and sources for the past several weeks have been saying the facility's bonds are in jeopardy. Passage of the competitive legislation could send it over the brink, said one public finance banker who asked not to be identified.
Municipal Bond Investors Assurance Corp. in 1989 insured $45 million of tax-exempts from Berkshire Medical. Hospital officials last month circulated requests for proposals throughout Wall Street, asking for help in restructuring Berkshire Medical's finances.
One of the biggest issues on the Senate floor yesterday was a funding source for Medicaid reimbursements to 2,200 nursing homes. The state House of Representatives had proposed a 50% tax increase on cigarettes -- to 39 centrs from 26 cents per pack -- but the Senate Ways and Means Committee deleted the provision.
