As Execs Trade Blows, Hospitals Get The Black Eye

Reputations put at risk as for-profit operators fight

NJBIZ — Monday, April 1, 2013

By Melinda Caliendo

While a quickly growing number of New Jersey hospitals have for-profit partners or operators, historically, the industry has been nonprofit, and the public's notion that owners are more concerned about bottom lines than health care delivery has been a hard one for these companies to conquer.

In some cases, they're not doing themselves any favors, either. A good example is the legal tussle between executives at Prime Healthcare, of California, and Hudson Holdco LLC over a handful of North Jersey hospitals.

Prime's entry into New Jersey comes as it fends off very public allegations of Medicare fraud through billing practices in California. Critics and opponents say those accusations are reason to keep it out; in a complaint, Prime alleges Hudson Holdco, also a for-profit operator, has threatened to build opposition among lawmakers and unions as Prime moves forward on deals to purchase St. Mary's Hospital, in Passaic, and St. Michael's Medical Center, in Newark. In Jersey City, Christ Hospital was sold to Holdco after Prime walked away from the table over opposition to its record in California; Holdco, which operates three New Jersey hospitals, has expressed interest in both St. Mary's and St Michael's.

Such fighting might not raise eyebrows when it takes place between corporations, but when the battleground is a hospital, the for-profit ownership becomes the story rather than the financial conditions that necessitated the sale.

"Hospital licenses are a privilege and a contract with the public. They are not a private contract among investors and Wall Street," said state Sen. Joe Vitale (D-Woodbridge). "Consumers and the rest of us who pay the bills demand accountability."

David Ricci, president and CEO of St. Michael's, said for-profit operators have been "on a roller coaster" in trying to win public acceptance.

When it came to Prime's bid for St. Michael's, the hospital's board of trustees and ownership group "asked very pointedly" about its alleged conduct, said Ricci, who's confident in the charity care, religious directives and infusion of capital to which Prime agreed.

But that hasn't satisfied other stakeholders. A new coalition formed by NJ Appleseed, NJ Citizen Action, Save Christ Hospital and the Health Professionals and Allied Employees union — some of the same groups that protested Prime's attempt to purchase Christ Hospital — wants more transparency on for-profit hospital deals.

"There are a number of groups around the state that have felt the impact of what happens when particularly a for-profit hospital comes in to buy up a distressed community hospital," said Paul Bellan-Boyer, a member of Save Christ Hospital. "There are a number of concerns about the effect that that has on community health care in each of those communities ... and on the state as a whole."

Concerns raised by the coalition include whether community hospitals are being sold to for-profit entities at a fair value, as well as dropping insurance contracts and how much revenue goes back to investors rather than being invested in the hospital itself.

Insurers, unions and stakeholders criticized Hudson Holdco's takeovers of Bayonne Medical Center, Hoboken University Medical Center and Christ Hospital as the group dropped and subsequently renegotiated insurance contracts. The ownership group of Meadowlands Hospital Medical Center, MHA, also faced scrutiny for the quick financial turnaround of the hospital — critics say the ownership group paid investors before establishing financial security.

"If you look at the way different states have handled this, New Jersey is relatively poor in the quality of information that's available to the public and to policymakers for evaluating a hospital transaction," Bellan-Boyer said.

Elsewhere, a partnership between nonprofit Hackensack University Medical Center and for-profit LHP Hospital Group has resulted in a successful takeover of Mountainside Hospital, in Montclair, and the planned reopening of Pascack Valley Hospital as a for-profit hospital.

The reopening of Pascack Valley, in particular, was not an easy process. The move was hotly contested by neighboring Englewood Hospital and Medical Center and Valley Hospital, and had a Senate advocate in Loretta Weinberg (D-Teaneck).

In a 2008 letter to Gov. Jon Corzine, Weinberg called the reopening of the Westwood hospital as a for-profit "irrational health policy." The very public battle featured a number of legal challenges from Englewood and Valley, to no avail; the hospital is to reopen in the summer.

Bellan-Boyer said the coalition is not against for-profit hospital ownership. Rather, it is against the type of business practices that "we do not think helps the community health care environment or the sustainability of these institutions."

Ricci said critics of Prime's deal with St. Michael's were concerned about the commitment to keep the hospital as an acute-care provider for five years, but both he and the board rejected the need for a longer commitment.

"Who knows what health care is going to look like in five years?" Ricci said. "Look at how much health care has changed in the last five years."

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