The Hoboken Municipal Hospital Authority is still in negotiations to sell Hoboken University Medical Center to a private firm that is a part owner of Bayonne Medical Center (BMC), but interested parties and City Council members still have unanswered questions.
Two bits of related news this week raised some eyebrows. The Bayonne Medical Center building and land were quietly sold to a real estate investment trust called Medical Properties Trust, based in Birmingham, Ala., with the public and hospital staff only becoming aware when media outlets read a vague release from the trust. BMC will continue to operate as a hospital.
“Even if the hospital operates at close to a balanced budget, it cannot be self sufficient going forward.” – Toni Tomarazzo
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Hoboken’s hospital was bought by the city in 2008 after the facility faced closure due to financial problems. But taxpayers were concerned that their tax dollars were going to support a hospital that could lose money. The City Council guaranteed a $52 million bond to support the facility.
After Mayor Dawn Zimmer took office last year, she said she wanted the hospital to be sold to private owners, as long as it would be kept as a hospital. So the Municipal Hospital Authority began taking bids. HUMC Holdco, LLC, a company formed by the co-owners of Bayonne Medical Center to buy Hoboken’s hospital, was selected out of eight bidders to negotiate early this year.
Last week, Hoboken Hospital Authority Chairwoman Toni Tomarazzo said that the negotiating period is still underway, and that the sale of the BMC land does not affect the current negotiations.
One bidder speaks out
However, the potential buyer has implemented controversial tactics in Bayonne, mainly canceling contracts with insurance providers in 2007. When a hospital has a contract with an insurance provider, the two agree on set costs for certain services. The cancelation was an effort to renegotiate fees for services provided to patients. However, the prices of services rose because patient’s insurance claims were now considered out of network by insurance companies.
BMC’s hardball tactics with insurers helped make the hospital more profitable, when in the past it had had severe financial problems.
Now, some are asking if BMC would employ the same tactics in HUMC.
Who else gave a bid for the hospital?
One bidder reached out to The Reporter last week, sharing concerns about the transparency in the process of the potential sale. The bidder, whose proposal has not been completely rejected but did not earn the rights to negotiate exclusively with the Authority, worries that if the trend of canceling insurance contracts spreads to Hoboken, it would have a “very costly side effect on a vulnerable population.”
Tomarazzo said last week that HUMC will still see underinsured patients, adding that “Medicare and Medicaid patients are not affected” by a cancelation of contracts.
Council members have asked if they would be able to see the other bids, since the guarantee of the $52 million bond is on the backs of the council’s constituents, the taxpayers of Hoboken.
Council President Beth Mason said she has been advised by the city’s legal department that the sale is within the rights of the Authority. The Authority’s attorney Andrew Aronson confirmed in a January interview that it’s not required for the council see the bids after Councilman Michael Russo inquired about that in January at a public meeting.
“There are non-disclosure agreements in place,” Tomarazzo said last week. “You could start having potential bidders bidding against each other.”
Not about money
Tomarazzo continued: “This isn’t simply who writes the biggest check. It’s about whose vision for the future best meets the goals of the Authority.”
The three goals set forth by the Authority for selling the hospital are: To eliminate the city’s guarantee of the $52 million bond; ensure long term viability of acute based care, and retain jobs, according to Tomarazzo.
Tomarazzo said she would be open to releasing the details of the other bids to the council when a contract is eventually agreed upon. When asked if that might be too late for the council to make any changes, Tomarazzo said the council would be able to see “if the Authority made the best selection or not.”
One bidder went public on Thursday saying they are “prepared to acquire” HUMC for $77 million.
Paradigm Physician Partners, LLC (P3), a Fairfield, Conn.-based company, issued a statement saying if they bought the hospital, “There will be no HUMC patients turned away, thereby maintaining regional stability between and among nearby Christ Hospital and Jersey City Medical Center.”
Mark Rabson, a spokesperson for JCMC, said he did not wish to comment on how other hospitals run their business, but said JCMC has gotten more business in part because of the insurance changes at Bayonne.
“During the last two years we picked up 75 different physicians from the Bayonne community because we accept insurance and for the quality of our services,” Rabson said on Thursday.
P3 is trying to keep their horse in the race, even if the Authority has now only let one competitor on the track.
“We’re still at the table because we believe we have the best financial and clinical plan for the city of Hoboken, HUMC, and the community and patients HUMC serves,” said Geoff Teed, P3’s president and founder.
“Unlike the pure profit-driven bid currently under review by HMHA, we see no reason to forsake HUMC’s 501(C)3 not-for-profit status,” Teed said in the release. “There will be no service interruption and we will accept all major insurance carriers.”
Concerns expressed
In the contract for the sale of BMC in 2007, it was established that the property would be required to remain as a hospital for seven years. When asked last week if the property in Hoboken will remain as a hospital “long-term,” Tomarazzo said the Authority would “absolutely make sure it stays as a hospital. One of [the] three goals is to ensure its long term stability.”
When asked to define “long term,” Tomarazzo could not provide a specific timeframe.
Despite all of the concerns about possibly going “out of network,” HUMC Holdco, LLC, has said they intend to sit down and negotiate contracts with insurance companies.
Question from nurses
Virginia Treacy, the executive director of JNESO, a union for HUMC nurses, said there are still some unanswered questions.
“The positive part of this is that they reached out to meet with us,” Treacy said. “The negative is that they’re inquiring about our pension plan, asking how much it would cost the new entity to withdraw from the pension plan.”
A concern for the union is the maintenance of services, because if services are cut at HUMC, Treacy believes jobs will decrease.
Financial problems
Tomarazzo said the deal is “by no means a foregone conclusion” but did say both sides have “a tremendous amount of common ground.”
The audit of the hospital’s 2010 finances is still underway, according to Tomarazzo, but she added that “the hospital, in 2010, will have performed much better than it had in 2008 and 2009.” The hospital experienced a $21.7 million net loss in 2008 and a $16.3 million net loss in 2009.
But this doesn’t mean HUMC is profitable.
“Even if the hospital operates at close to a balanced budget, it cannot be self sufficient going forward,” she said.
Thus, the new owners will have to make some kind of changes.
One source close to the situation asked if there will be a public hearing administered by the state Attorney General before the sale can be completed by the state, which is normally the protocol.
Tomarazzo said she is still waiting to hear back from the Attorney General.
The owners of Bayonne Medical Center recently surfaced in the news as large donors to a political action committee, “Reform Jersey Now,” which supports Gov. Christopher Christie’s initiatives. In order for the sale to go through, the deal requires a stamp of approval from the state in the form of a certificate of need.
The 60-day negotiation period ends in early March, at which time another announcement can be expected about the potential sale.
Ray Smith may be reached at RSmith@hudsonreporter.com