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DECEMBER 23, 1998   2:18 PM
CONTACT: Consumers Union
Julio Mateo, Jr. and Diana Bianco
(415) 431-6747
Consumers Union Denounces Attorney General Lungren's Approval Of Columbia/Alexian Brothers Deal
SAN FRANCISCO - December 23 - Consumers Union criticized California Attorney General Dan Lungren for jeopardizing health care in San Jose when he gave the green light to the sale of nonprofit Alexian Brothers Hospitals to for-profit hospital chain Columbia/HCA. Lungren announced a settlement today with Alexian and Columbia, permitting the sale to occur if the courts approve. Consumers Union, along with community groups, will explore legal options to modify or set aside this settlement.

For months, community groups, elected officials, and religious, union and community leaders have criticized the proposed deal for its negative impact on hospital concentration, charity care, and the quality, accessibility and affordability of health care in San Jose. In recent letters, elected officials and community representatives requested that the Attorney General not approve the deal until the public's concerns were met. Specifically, groups asked that Columbia agree to provide the same level of charity care Alexian Brothers has provided, in perpetuity; that the Attorney General conduct an independent valuation of the charitable assets and a health impact statement; and that all antitrust issues are resolved in a manner satisfactory to the community that has supported and depended on Alexian Brothers Hospital for many years. Groups also asked that the terms of any settlement the Attorney General negotiated with Columbia/HCA and Alexian be made public, and the community have an opportunity to review and comment on the settlement before any final action.

"The community's opposition to the proposed deal was loud and clear," said Julio Mateo, Jr., staff attorney with Consumers Union's West Coast Regional Office. "Today's settlement falls far short of meeting San Jose's health care needs."

In his announcement, Lungren stated that Alexian will donate $4 million to the O'Connor Hospital to be used to provide health care to poor residents currently served by Alexian Hospital. In addition, Columbia will make $15 million in capital improvements to Alexian Hospital over the next five years, including $3 million to expand the emergency department; will maintain the emergency department for at least five years; and will provide $2 million in charity care to the poor residents served by Alexian for each of the next five years.

Consumer groups believe the Attorney General should have required more of both Columbia/HCA and Alexian Brothers, especially regarding the provision of charity care and the preservation of charitable assets.

"The health care needs of the people of San Jose will not evaporate in five years," said Diana Bianco, staff attorney with Consumers Union. "In the last three hospital deals approved by Lungren, for-profit hospitals in California pledged to carry on a charity care commitment forever. Columbia should not be held to a lower standard. The San Jose community doesn't deserve less protection than other communities."

"The settlement allocates funds to services without an independent valuation of the assets involved in this sale," Mateo said. "And it guarantees some services for limited time periods without the benefit of a health impact statement to identify the real services that are put at risk due to this sale. Because the Attorney General didn't do his job, we don't know if care for the poor will be increased or decreased."

"Columbia has offered to pay for the costs of enforcing today's settlement. Columbia should offer to pay for the costs of an independent valuation and a health impact statement before this deal is approved by any court," Mateo said.

Consumers Union questioned the details of the $4 million commitment to O'Connor Hospital.

"Why O'Connor, and how exactly will that money be used?" Bianco questioned. "What is the mechanism to insure that the community is involved in decisions about how that money is spent? The funds must not be a windfall for O'Connor, but must be used for services above and beyond its current services. It must serve the same residents now served by Alexian Brothers."

To address antitrust concerns raised by the deal, Columbia will hold prices stable, adjusted for inflation, at Alexian Hospital for just two years.

"While it is laudable that the Attorney General's office attempted to resolve this issue, we don't know if this method will solve the clear problems posed by the fact that Columbia will control 53% of the hospital beds in San Jose and 100% in East San Jose," Bianco said. "If there are no new health care alternatives in two years and concentration remains the same, the price freeze must be extended, or the transaction unwound."

Consumers Union had also requested that Lungren refrain from allowing the sale, pending the outcome of an investigation regarding the inflated sales price of a hospital facility in Illinois that is part of the simultaneous "swap" between Columbia and Alexian. Alexian Brothers is paying Columbia/HCA $285 million for one Illinois facility that Columbia purchased in 1992 for approximately $20 million. This translates into a $265 million - or 1280% -- profit for Columbia/HCA in six years. Consumers Union asked Lungren to withhold any decision until the Illinois Attorney General investigates theses figures and determines whether Alexian Brothers board members may have violated their fiduciary duties by spending nonprofit dollars in this way.

"We believe the Attorney General should not have given his approval to this deal with so many outstanding issues, and with no independent valuation and health impact statement," Mateo said. "Lungren put the cart before the horse in this sale, and San Jose residents could suffer because of it."




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