The Star-Ledger

Saint Clare's Hospitals Prime For Takeover: California Chain Continues Its Buying Spree In N.J.

The Star-Ledger — Friday, May 3, 2013

By Dan Goldberg / The Star-Ledger

MORRIS COUNTY — Prime Healthcare, the multi-billion hospital chain that is making an aggressive play for the New Jersey healthcare market, has reached an agreement to purchase Saint Clare's Health System, according to spokesmen for the hospital and Prime Healthcare.

The deal, if blessed by the state, would give the California company ownership of one of western New Jersey's largest healthcare systems and access to tens of thousands of patients, but Prime's fast-paced expansion has some worried that New Jersey residents could suffer diminished care at the hands of a profit-motivated organization.

Prime has already agreed to buy Saint Mary's Hospital in Passaic and Saint Michael's Medical Center in Newark, and those deals are pending state approval.

"Prime Healthcare believes that the St. Mary's acquisition as well as the others will be approved and allow it to continue its mission of saving hospitals, saving jobs and saving lives," said company spokesman Edward Barrera.

But before New Jersey commits, state regulators want to be sure they understand their partner. The state's Department of Health has asked Prime dozens of questions about its business model, its messy legal battle with the Service Employees International Union in California, its plans for New Jersey and for the company to explain alleged misconduct that has sparked a U.S. Department of Justice investigation.

The state has also asked Prime to provide documents from the California Department of Health that show Prime Hospitals in that state do not exceed the average rate of septicemia, acute heart failure, malignant hypertension, automatic nerve disorder or encephalopathy. These are conditions that can be more profitable to treat.

Prime has repeatedly denied any wrongdoing, saying if rates are higher than average it is because their doctors are better at diagnosing those conditions. They simply catch what others miss.

Prime began expanding nearly three years ago, acquiring four hospitals in Texas, one in Nevada, two in Pennsylvania and two in Kansas. It already owns 14 in California and is attempting to buy one in Rhode Island.

"They're certainly on a shopping spree and they're not doing it at the Livingston Mall," said Phyllis Salowe Kaye, executive director of New Jersey Citizen Action, who opposes Prime's entry into New Jersey. "It concerns me when a hospital company that is being investigated by federal authorities ... is on this hunt to grab up hospitals. This is part of a bigger issue: who is going to own the hospitals in New Jersey?"

Salowe Kaye is one of several activists trying to galvanize opposition to the Prime deals. In a letter sent Wednesday to the state commissioner of health, and signed by union leaders, community activists and local politicians, the group called on the Department of Health to suspend Prime's application until the U.S. Department of Justice has completed its investigation.

"We make this request because of our ... belief that the outcome of these investigations could have a profound impact on whether or not these transactions would pass muster," the letter said. "We strongly believe that suspension of the license transfer application is necessary to ensure the future of St. Mary's Hospital and St. Michael's Medical Center as vibrant health care facilities that are working to solve the problems of delivering health care to New Jersey's low income, urban communities."

If the deal for St. Clare's goes through, Prime would control three hospitals in Morris County St. Clare's in Denville, Dover and Boonton. The deal would also include an outpatient facility in Sussex, an imaging center in Parsippany and a continuing care facility in Denville. St. Clare's employes nearly 3,000 people, admits more than 17,000 patients and treats nearly 73,00 people every year in its emergency rooms.

"The Saint Clare's Board and CHI decided to seek a new owner for Saint Clare's Health System to better meet the needs of the communities it serves in a changing health care environment," read a joint statement. "The Saint Clare's Board recognized that as health care reform continues to evolve, it is critical for health providers to be part of a broad network of coordinated health care organizations including health providers, payers and other related health entities."

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