Daily Record

Health Commissioner Backs Sale Of St. Clare's To For-Profit Company

Daily Record — Tuesday, May 5, 2015

By Lorraine Ash

DENVILLE — The state health commissioner has approved the sale of St. Clare's Health System to California-based Prime Healthcare Services, a for-profit company.

In two May 4 letters to CEO Les Hirsch announcing the decision, state Health Commissioner Mary O'Dowd wrote that the new Prime St. Clare's has committed to keeping "substantially all" current employees.

For at least five years, O'Dowd wrote, the new owner has agreed to keep all inpatient clinical services and community health programs at the 306-bed St. Clare's Hospital-Denville and the 60-bed St. Clare's Hospital-Dover.

Currently, St. Clare's Health System employs 2,763 people, according to Stephanie Galloway, hospital spokeswoman. Yearly, it admits more than 15,000 patients and treats almost 73,000 in its emergency rooms.

O'Dowd's letter reflects a $74.7 million transfer of ownership for St. Clare's Hospital-Denville; St. Clare's Hospital-Boonton; St. Clare's Imaging Center at Parsippany; St. Clare's at Sussex Ambulatory Care Facility; the Visiting Nurse Association of St. Clare's; and two MRI facilities.

A separate $33.2 million acquisition price was listed for St. Clare's Hospital-Dover.

But the deal isn't sealed quite yet: Next, the Office of the Attorney General must approve St. Clare's CHAPA request, a process that ensures the sale complies with the Community Health Assets Protection Act and is in the public interest.

After that, a Superior Court judge must give the sale the final stamp of approval.

"Saint Clare's is pleased to be one step further with the approval of our Certificate of Need application," Hirsch said Tuesday night.

Franciscan Oaks, a continuing care retirement community on the Denville campus, is not included in the Prime Healthcare Services deal. That facility is seeking new ownership in a separate transaction.

Financial concerns

According to O'Dowd's letter, St. Clare's has received $14.3 million in stabilization grants from the state since 2009, and financial concerns played a key role in the deal.

In the period ending Dec. 31, the letter stated, Prime Healthcare Services had an excess of revenues over expenses of $177.4 million, representing a 7.4 percent profit margin, and $149.8 million in unrestricted cash, or 25 days' cash on hand. As of the same date, St. Clare's reported a negative 29.5 percent profit margin and two days' cash on hand.

"It is clear that the hospital's current financial status is so precarious," O'Dowd wrote, "that its closure, along with the resulting health care service and economic disruptions, is a real possibility."

At public hearings on the sale, doctors, staffers and residents mostly expressed overwhelming support for the sale to Prime Healthcare Services, though New Jersey Citizen Action, a watchdog group, raised concerns about Prime's record, particularly in respect to some instances involving federal confidentiality laws, Medicare billing practices and other issues.

At one meeting, the state health planning board was asked to consider recommending that the state Department of Health appoint a health care monitor. In her letter, O'Dowd wrote that the department thoroughly looked into all these matters but "identified no track record violations sufficiently serious to warrant denial of the application."

No monitor was appointed, she wrote, adding that the state Department of Health can work through existing mechanisms to oversee compliance.

St. Clare's Hospital, founded in 1953 by the Sisters of the Sorrowful Mother, is now owned by Catholic Health Initiatives.

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