The city is on the verge of selling Hoboken University Medical Center (HUMC) to a group that has common ownership with Bayonne Medical Center.
The Hoboken Municipal Hospital Authority voted unanimously on Wednesday evening to execute an asset purchase agreement with HUMC Holdco, the group from Bayonne, ending more than four months of exclusive negotiations.
HMHA Chairperson Toni Tomarazzo said the authority hopes to close the sale by July 31. But first, the authority will hold public meetings and must acquire a certificate of need from the state.
No state Attorney General review will be done to ensure the sale was done in a correct manner because the seller is a municipality.
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Who is HUMC Holdco?
The owners of Bayonne Medical Center have employed controversial tactics in Bayonne, cancelling in-network insurance contracts, thus making trips to the hospital expensive for patients, forcing them to pay “out of network” costs. A type of community warfare broke out in Bayonne in 2007, with insurance companies telling their subscribers to go to other hospitals.
In a statement in January, the potential owners said they would work to secure “fair and reasonable contracts with most, if not all, third-party payers following the receipt of all regulatory approvals and prior to closing” in Hoboken.
HUMC Holdco released another statement on Thursday saying that they are “committed to keeping HUMC as a full service acute care community hospital” and that they “recognize the hospital’s critical role in Hoboken.”
A clause in the proposed contract indicates that the hospital must remain as such for at least seven years. During the negotiation process, a real estate advertisement surfaced which showed the Hoboken hospital property advertised as part of a sale-leaseback agreement. The move was meant to explore options in terms of financing improvements to the hospital, according to a statement from HUMC Holdco at the time. Also during the negotiation process, the land of Bayonne Medical Center was quietly sold to a real estate investment trust based in Birmingham, Ala.
However, in a presentation on Wednesday, it was indicated that the potential new owners are looking to invest approximately $20 million in the hospital, including the possibility of establishing a nursing home facility.
The proposed transaction totals $91.7 million in deal considerations, including a $51.6 million cash payment to extinguish the city’s bond guarantee. In addition to the $20.9 million for investments in the hospital, $19.2 million will be spent on “other deal considerations” including accounts receivable payments and liabilities assumed as part of the transaction.
Tomarazzo said that even if insurance contracts were to be cut, Hoboken city employees, including those from the police department, fire department, City Hall, and Board of Education, will be serviced. Tomarazzo said the Housing Authority employees will also enter the agreement to be covered in the hospital after the eventual transfer of ownership.
Tomarazzo said the potential new owners will also accept Medicaid and Medicare, no matter what the situation is with the other insurance contracts.
“We will continue to have open meetings during the course of our review process,” Tomarazzo said.
The public meetings for the certificate of need process have not yet been scheduled, but there will be no official Attorney General review of the sale under the Community Health Care Assets Protection Act (CHAPAH). The state Attorney General’s office usually conducts a CHAPAH review for hospital sales, as it ensures the sale was done in a correct manner. However, Zulima Farber, who works with the Hospital Authority as special counsel, said the Attorney General’s office indicated that since the hospital is municipally owned, a CHAPAH hearing is not required. Farber is a former Attorney General.
Potential sale ‘a milestone’ for the city
Zimmer, who sits on the authority, calls the potential sale “a milestone.”
The hospital has relied on state funding to stay open, including recently receiving $7 million in stabilization funds.
“This hospital cannot survive without funding from the state every year and that money is drying up,” Zimmer said.
Steve Flemming, a consultant to the authority from Price Waterhouse Cooper, said the hospital “is in dire need of capital.”
The hospital experienced a $21.7 million net loss in 2008 and a $16.3 million net loss in 2009. The 2010 audit has not yet been completed.
HUMC CEO Spiros Hatiras said he believes the proposal from HUMC Holdco was “the leading bid.” Hatiras said he is unsure if he would be brought on as the CEO under the new owners, but indicated that he would be interested in continuing his tenure.
Other hospital execs speak out
The ‘Bayonne model’ has had an effect on neighboring hospitals, as those whose insurance is not accepted in Bayonne often go to a neighboring facility. In February, Mark Rabson, a spokesperson for Jersey City Medical Center, said that during the past two years, JCMC picked up 75 different physicians from the Bayonne community.
Tom Gregorio, the president and CEO of Secaucus-based Meadowlands hospital, attended the meeting on Wednesday.
Gregorio stated that the occupancy of Bayonne Medical Center has been low, and costs are comparatively high.
BMC has run a profitable model since the takeover in 2007.
Gregorio said he was “disappointed” that there would not be a CHAPAH review.
Geoff Teed, a bidder and owner of a Connecticut based health care company, P3, also attended the meeting, and he believes his bid met the specifications, and wondered why the authority only negotiated exclusively with one bidder.
Teed said at the end of the meeting that his “bid is still on the table” and will continue to pursue ownership of the hospital.
New owners will hire 75 percent of current employees
The potential new owners also stated they would hire at least 75 percent of the current hospital staff.
“They have committed to additional services like assisted living, and a nursing home; a place where more employees are needed, not less,” Tomarazzo said.
Virginia Treacy, the executive director of JNESO, the nurse’s union, said she doesn’t have enough information to make a determination about the impact of the sale on her union.
“We have a lot of concerns,” Treacy said in a phone interview on Thursday. “I don’t think there’s significant information for us to know yet [if the sale is a positive].”
She continued: “Services to the community means good jobs for us and good jobs for us means services to the community.”
An employee and resident, Rebecca Ramirez, said she was concerned with the “openness of the process.”
“I’ve tried to attend some of these meetings and it’s very disheartening,” Ramirez said. “I come after work and it’s like, ‘thanks for coming, now step out’.” She also asked why the public couldn’t see the other bid proposals.
“We couldn’t negotiate with one or two or three in public,” Farber said. “It’s impossible to reach a deal. Negotiations, by necessity, had to be done behind closed doors.”
There were members of the public who thanked the authority for their work on the deal, including Forde Prigot, who was happy to hear the city’s bond guarantee would be extinguished.
The owners of Bayonne Medical Center are large supporters of the political action committee “Reform Jersey Now,” which supports Gov. Christopher Christie’s initiatives.
Before the deal is complete, public hearings will be held, and the proposal requires a stamp of approval from the state in the form of a certificate of need.
Ray Smith may be reached at RSmith@hudsonreporter.com