The Star-Ledger

N.J. Bankruptcy Judge Approves $62M St. Michael's Hospital Sale

The Star-Ledger — Thursday, November 12, 2015

By Susan K. Livio | NJ Advance Media for NJ.com

TRENTON — A bankruptcy judge Thursday approved a for-profit hospital chain's $62.2 million bid to buy Saint Michael's Medical Center in Newark, although the hospital's future remains in the hands of the Christie administration.

Prime Healthcare Services of Ontario, Calif. announced plans to acquire the 148-year-old three years ago, but the state Attorney General's Office and the Department of Health have not yet completed their review of the application to determine if is in the public's best interest.

Frustrated by the long wait, Saint Michael's executives filed for bankruptcy in August to protect the cash-starved hospital from having to make its monthly $1.8 million payment to the New Jersey Healthcare Facilities Financing Authority. The hospital owes the state $228 million in bonds.

"It's been a long road and, today, we are another step closer to securing a vibrant future for our medical center, the community we serve, and our dedicated physicians and staff," said David A. Ricci, the hospital's president and CEO. "We hope the state will approve the sale promptly and look forward to continuing our legacy under Prime's leadership."

Prime has promised to spent $50 million on capital improvements to maintain the facility as a hospital for a minimum of five years, and to hire "substantially all" its employees.

"Thank you to Judge (Vincent) Papalia for his decision, and we are so grateful to the Saint Michael's Board for supporting the best interests of the community and valuing Prime Healthcare's commitment to saving Saint Michael's Medical Center," said Luis Leon, president of Operations for Prime Healthcare.

A health care consultant hired by the Authority released a report earlier this year saying there were too many hospital beds in the city, but outpatient services were in demand. Navigant Consulting of Chicago recommended Saint Michael's and East Orange General Hospital be turned into outpatient care centers.

After the report was released, Newark city officials, religious leaders and residents who banded together to save the hospital and its 1,400 jobs by signing petitions and holding rallies.

"This $50 million investment to upgrade and modernize Saint Michael's is a game changer for Newark's economy," said Central Ward Councilwoman Gayle Chaneyfield Jenkins, one of the hospital's loudest defenders. "Prime's investment will create jobs in the Central Ward and modernize our hospital. We need Prime to make this investment and we need it now, not later."

Some consumer health care advocates said they did not agree Prime was the best choice to save the beleaguered hospital.

Representatives for the Campaign to Protect Community Health Care, led by NJ Citizen Action and the NJ Appleseed Public Interest Law Center, wished the St. Michael's board of directors had picked Prospect Healthcare Holdings, another for-profit national chain. Prospect, which is buying East Orange General Hospital, has expressed interest in collaborating with other Newark hospitals.

"Prospect Medical Holdings has offered — and, indeed is still willing — to work with the community and partner with University Hospital, Newark Beth Israel, and other healthcare organizations to work together to improve the health of all Newarkers and solidify the institution of University Hospital, which has been a sacred promise from the state to the people of Newark," according to the campaign's statement.

Although Prime commits to invest in the facility, "they've also made clear in their plans that they will emphasize the high-priced and high-profit services, that Newark arguably has too much of, like cardiac surgery and bariatric surgery" instead of services in short supply, "primary care, community-based care, outpatient care, behavioral health, substance abuse, and mental health services."

If the sale is approved, this would be Prime's third acquisition of Catholic hospitals. Prime also acquired St. Mary's Hospital in Passaic and St. Clare's three hospitals in Morris County.

The shift away from inpatient care and to outpatient services, accelerated by the Affordable Care Act, has hurt the smaller community hospitals. It has also sparked a flurry of mergers and acquisitions among the larger hospital chains in the state.

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