Fletcher Allen Health Care says the state must approve a certificate of need that would allow the hospital to sell five outpatient hemodialysis clinics.
That is according to Spencer Knapp, senior vice president and general counsel for Fletcher Allen Health Care. At a public hearing Monday, Knapp cited Vermont’s Certificate of Need law, saying that the overwhelming support for the proposed sale in the record leaves the state no choice but to approve the deal.
The hearing was part of an application by Bio-Medical Applications of New Hampshire, Inc. to purchase the five clinics. The company is a subsidiary of Fresenius Medical Care North America. Fresenius is a for-profit corporation with approximately 1,800 clinics in North America. It is also the largest provider of dialysis products in North America.
“This is simply a change of ownership,” Knapp said. He cited the continuing drain on the hospital’s resources and importance of keeping this vital service as reasons why the sale is necessary and in the “public good.”
The hearing was part of the certificate of need process that started in February when Fresenius filed a letter of intent with the Department of Banking, Insurance, Securities and Health Care Administration. Fletcher Allen announced the proposed deal in November 2010. The medical provider cited its continuous financial losses on the service, $2 million in 2009, as the reason for selling the units.
Fresenius plans to purchase the five facilities for $26 million.
Knapp said a certificate of need, which is required under state law for capital expenditures on behalf of a health care facility for $1.5 million or more, should be granted because all of the material in the record before the agency supported the proposed sale. Furthermore, he said, two criteria embodied in the law that the state must consider—need and whether the project will serve the public good—were easily met.
Representatives for Fresenius, Fletcher Allen, and other hospitals praised the sale agreement.
“If there is a role for for-profits [in health care], dialysis is an area where this really makes sense,” said Paul Bengston, CEO of Northeastern Vermont Regional Hospital.
Fletcher Allen chose Fresenius of four dialysis providers that submitted proposals to purchase the clinics. One of these providers was a nonprofit that submitted a below market value bid for the facilities, according to Mike Noble, a spokesman for Fletcher Allen.
Dr. John Brumsted, interim president and CEO of Fletcher Allen Health Care, said the hospital determined the dialysis program could not go on without limiting access or reducing staffing. Brumsted said Fresenius consistently maintained high quality assurance standards. He and other hospital CEOs echoed the importance of having access to dialysis near their homes for people with end-stage renal disease. Dialysis is a process for removing waste and excess water from the blood of patients without functioning kidneys. Some patients require treatment, which takes a few hours, multiple times a week.
Critics of the sale have criticized the shift to a for-profit company because they say it could result in lower quality care.
Cindy Perron from the Vermont Workers’ Center, an organization that advocates for workers’ rights, expressed concerns that a for-profit corporation will provide worse care for patients. Because corporations have fiduciary duties to their shareholders, which generally translates into ensuring profits and financial solvency, the Workers’ Center and others have expressed concerns that the company will not be accountable to the public or provide quality of care as a non-profit would. The Workers’ Center requested interested party status in the proceeding, but the state denied their application.
“A company so beholden to its shareholders cannot be accountable to the community,” Perron said.
Dennis Debevec, who had received dialysis treatment at a clinic operated by Fresenius, said he was concerned about staffing ratios in the clinic.
“There’s a certain level of patient comfort that needs to be there,” Debevec said.
He said he is not sure Fresenius will offer satisfactory care. He said he was concerned how the company plans to make the facilities profitable when Fletcher Allen lost $2 million on it the year before it decided to sell the clinics.
The Vermont Federation of Nurses and Health Professionals, who had provided a critical letter to the state when it requested interested party status in the certificate of need application, offered more tempered comments at the public hearing. Mari Cordes, president of the local union, said it is working to ensure safe staff to patient ratios as well as ensuring that nurses have an incentive to continue their careers working for Fresenius.
Under the asset purchase agreement, Fresenius agrees to employ Fletcher Allen employees with direct patient care responsibilities. The union, however, is in the process of negotiating a new contract with Fresenius should the state approve the agreement.
Under the agreement, Fresenius will continue to operate the facilities in the same locations for 10 years.
The Department of Banking, Insurance, Securities and Health Care Administration has 120 days to make a decision on the application after the closing date, which was Oct. 7. The commissioner can extend this by another 30 days.
