The Star-Ledger

NJ Health Board Recommends For-Profit Company Buy Passaic Hospital

The Star-Ledger — Friday, February 21, 2014

By Susan K. Livio / The Star-Ledger

EWING — One of the largest for-profit hospital chains in the country moved another step closer toward entering New Jersey today by winning unanimous approval from the State Health Planning Board to buy the cash-starved St. Mary's Hospital in Passaic.

Prime Healthcare Services, a California-based chain that owns 25 hospitals in six states, still needs a final determination from Health Commissioner Mary O'Dowd, who has 120 days to decide. In addition, the state Attorney General's Office is required by law to vet the sale.

Prime has offered $30 million to buy the 264-bed facility, to be known as Prime St. Mary's Hospital, $5 million more since the sale was announced 13 months ago, Frank Velocci, the attorney for the hospital, said. The hospital required $5 million up front last year to cover pension costs, and Velocci said the money has been spent. In addition, he said the chain had donated $2 million to buy a telemetry system that tracks a patient's vital signs.

If approved, Prime would join a growing number of for-profit companies snapping up struggling community hospitals in North Jersey. In a contentious turf battle, St. Mary's selected Prime over CarePoint, another for-profit that owns three hospitals in Hudson County. Prime is also awaiting approval to buy Saint Michael's Medical Center in Newark and Saint Clare's Health System properties.

The board approved a long list of conditions suggested by the health department, including the curbing of a controversial practice — often used by for-profit hospitals — of terminating contracts with managed care companies and charging exorbitant "out of network" rates. The state Department of Banking and Insurance would have to approve any change Prime made to the hospital's "out-of-network cost sharing" plan, according to the recommendation.

The board also approved the creation of an independent advisory board chosen by the current owners and the health department. The panel will review Prime's charity care policies, supervise its "compliance with ethical and religious directives," and verify "its continued financial viability."

New Jersey Citizen Action and New Jersey Appleseed Public Interest Law Center, consumer advocacy groups who oppose the deal, said these protections wouldn't go far enough. They wanted the board to require an independent financial monitor to supervise the hospital, but the health department rejected that.

"In past instances where the department has appointed an independent health care monitor, the cost of the monitor substantially outweighed the benefits derived from the monitor," according to the health department's analysis of the sale. "A general monitor is typically not as effective as state oversight."

Two hospitals acquired by for-profit companies since 2008 — Bayonne Medical Center and Meadowlands Hospital Medical Center in Secaucus — are among the most expensive in the nation, in large part because they have relied on out-of-network billings, according to a recent study by National Nurses United, a union-affiliated research group.

The chain is also the subject of a long-running Justice Department investigation into Medicare billing, although there have been no accusations of wrongdoing.

India Hayes Larrier of Citizen Action urged O'Dowd to "impose conditions on the sale and put real oversight in place that will keep Prime accountable for the health and service to the community," and not just approve the deal to "keep the hospital open at any cost."

But St. Mary's employees and executives, who far outnumbered the opponents at today's hearing in Ewing, said the deal could not be closed fast enough.

The hospital's nurses and medical technicians "have seen their share of purchases and bankruptcies...They are scared, nervous and are holding their breath," Doug Placa, executive director for the union, JNESO. "By approving this transition, we now can come up for air."

Edward Condit, the hospital's chief executive, said he, too, was "a skeptic" when the for-profit made the offer, but his concerns dissipated long ago. "How they put the patient first is the same as any hospital — nonprofit and for-profit. Not every for-profit is the same."

Condit noted the opponents to the sale "are not from our community; I don't even know if they have ever stepped inside our hospital."

Prime promises to retain "substantially all" 1,200 employees and keep the facility operating as a hospital for at least five years.

Board member Poonam Alaigh, a former health commissioner, asked why Prime was not required to commit to St.Mary's for seven years, as has been past practice. John Calabria, the health department's Facility Licensing director, said five years was what Prime suggested.

Prime's President of operations, Luis Leon, assured the board the company commits to the hospitals it acquires.

"Prime has never closed or sold a hospital," he said.

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