The city’s long-term goal ever since it rescued Hoboken University Medical Center from financial disaster in 2008 has been to find a private buyer to purchase the hospital for more than $52 million, the amount to which the city has underwritten the hospital’s operations by guaranteeing a municipal bond. After two meetings of a stakeholders group of approximately 30 members, it appears the city has investors ready.
“The long-term sustainability of the hospital is best achieved by moving forward with the plan to privatize the hospital – ending the city’s ownership and transitioning governance to a new non-governmental entity,” said Mayor Dawn Zimmer in a statement. “The transition process is now well underway.”
A positive response
“The response has been very positive,” said Toni Tomarazzo, Hoboken Municipal Hospital Authority Chairwoman. “We had well over 40 applications to participate.”
There were some cut downs because of contractual questions, but for the most part, “everyone who asked to participate was permitted to do so.”
“The long-term sustainability of the hospital is best achieved by moving forward with the plan to privatize the hospital – ending the city’s ownership and transitioning governance to a new non-governmental entity.” – Mayor Dawn Zimmer
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The stakeholders’ duties include reviewing the proposals without the names of the interested parties attached. Then the members will fill out individual surveys about the interested parties.
Some stakeholders even recommended the possibility of new services.
“A very large majority of participants wanted to see long term health care, like a nursing home or assisted living come to the city,” Tomarazzo said. “These were two things that were very interesting and new to us. Participants also said they wanted careful attention to outpatient services so that people can get those sorts of treatments here.”
Tomarazzo believes the turnout and the process thus far has gone “tremendously well.”
“Two weekends ago was one of the most beautiful weekends of the year and people were here with us for a three hour meeting,” Tomarazzo said.
In addition to the committee of stakeholders, the authority members have also formed their own committees.
One is the bond committee, which Tomarazzo called the “threshold committee.”
“They must decide, working with the appropriate professionals, what the best opportunities are for us,” Tomarazzo said. “We must understand all of our options with bonds.”
A second committee is the quality and service committee.
“The review is a two way street,” Tomarazzo said. “It’s not just the bidders looking at Hoboken, but Hoboken looking at the bidders.”
Part of the committee’s job will be to observe customer service ratings of potential purchasers, evaluate their management teams, and to “see if they’re going to be a good fit.”
The third committee is the RFP committee, which observes the request for proposals.
“We will be giving management presentations to people who have submitted proposals to the hospital,” Tamarzzo said. “It’s meant to show the strength of HUMC and our community.”
Another Hudson County hospital sale
Recently, it was reported that Meadowlands Hospital in Secaucus may sell for only $15 to $16 million. This doesn’t seem to concern Tamarazzo or the committee.
“That’s comparing apples to oranges,” Tamarazzo said. “That’s like saying you got $5,000 for your KIA, do you think I’ll get that for my Caddy [Cadillac].”
The authority reviewed bids on Oct. 27, and are confident that the sale price will be for a greater price than the $52 million bond, thus getting the city, which is making a slow financial recovery after years of escalating taxes and state financial supervision, out from under its obligation.
Tamarazzo said since the city took over the hospital, finances have improved. The hospital experienced a $21.7 million net loss in 2008, and a $16.3 million net loss in 2009. Tamarazzo said the hospital is expected to run a balanced budget, but could still suffer small net losses for 2010 because of “depreciation and interest.”
She said the losses should be “very, very insignificant compared to 2009.”
The improved financial statements come in part from a “very much appreciated roll back in wages from the staff and the union,” according to Tamarazzo. The employees essentially have taken a 10 percent wage reduction, which equates to approximately $6 million per year in savings for the hospital. More keys to the success of the hospital have come from stabilization money from the state and a series of incremental changes in revenue, including the addition of a new collection vehicle.
The next step will be the management meetings, which will be completed around Nov. 12. The Authority hopes to have the potential buyer list narrowed down by the first or second week of December.
“We feel this is a very transparent process,” Tamarazzo said. “We’re working through it as quickly as we can. We have been aided by the fact that many investors continue to believe that Hoboken is the ideal place to set up a business.”
Ray Smith can be reached at RSmith@hudsonreporter.com.