Foes Of Sale Of St. Mary's Hospital In Passaic, St. Michael's Medical Center In Newark Seek Delay

The Record ( — Thursday, April 11, 2013

The Record

A coalition of labor unions and consumer advocates has asked the state to hold off its consideration of the sale of two New Jersey hospitals — including St. Mary's in Passaic — to Prime Healthcare Services until federal investigations of the for-profit California chain are completed.

The same groups mounted a successful campaign last year against Prime's purchase of Christ Hospital in Jersey City, which ultimately was purchased at bankruptcy by a Prime competitor, Hudson Holdco. Now the opponents are asking that St. Mary's and St. Michael's Medical Center in Newark be "free to explore other alternatives" while the federal investigations are under way.

They are taking a cue from the Rhode Island attorney general, who last week suspended review of Prime's purchase of a bankrupt hospital there. Officials there said they were swamped by a 1,400-page submission by Prime after an initial round of questions on the deal, but still didn't have the answers they needed. They gave Prime more time.

In response to the coalition's call, a Prime spokesman said, "This is just another pathetic attempt by misinformed critics and [the Service Employees International Union], all of which would rather St. Mary's and St. Michael's close than become top-ranked hospitals. ... To suggest that there is a reason for any such suspension in New Jersey is absurd, and is against the best interests" of both hospitals, said Fred Ortega, Prime's director of government relations.

The escalating opposition to Prime's expansion plans in New Jersey is a sign of the intense interest in the changing ownership of the state's hospitals from non-profit, charitable organizations to for-profit, investor-owned companies. Even money-losing urban hospitals such as St. Mary's and St. Michael's, which have been shored up by state subsidies for years, are seen as potentially profitable targets — and powerful lobbyists, politicians, health-care companies and unions are involved in the battle over their futures.

Each purchase is subject to review by the New Jersey Attorney General's Office and Department of Health, and requires public hearings and final approval by a judge. The review of the St. Mary's application is not complete; state officials have asked for additional information. Prime's application to buy St. Michael's was submitted last week.

Prime previously disclosed — in Rhode Island — that records at some of its California hospitals had been subpoenaed in 2012 for a U.S. Department of Justice investigation. Authorities appeared to be looking into a pattern of Medicare billings that showed a larger than normal number of cases of septicemia and malnutrition, which are reimbursed at higher rates than simpler cases. In addition, Prime disclosed that the civil rights office of the Department of Heath and Human Services was looking into Prime executives' disclosure of private patient information.

"Without knowing the outcome of the investigation, we can't be sure that Prime Healthcare could meet its obligation to invest in these hospitals and communities," said Timothy Foley of the Committee of Interns and Residents, which represents physicians-in-training at St. Michael's. The committee is a branch of the Service Employees International Union, which has long fought Prime management at its California hospitals. Other members of the New Jersey coalition are the Health Professionals and Allied Employees union, New Jersey Citizen Action and New Jersey Appleseed public-interest law group.

Prime has committed to spend $25 million on improvements at each hospital over five years, but the coalition warned that a financial settlement of any potential Medicare charges might jeopardize its ability to fulfill that commitment.

A spokesman for the attorney general declined to comment Wednesday.

Vanessa Warner, a spokeswoman for St. Mary's, said Prime was chosen as the buyer after a lengthy review. "We are confident that Prime will save St. Mary's and help us become one of the best hospitals in the state," she said.

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