The conversations over the sale of Hoboken University Medical Center are reaching fever pitch, with Mayor Dawn Zimmer saying the hospital will close if the current sale to HUMC Holdco, LLC is not approved by the state Department of Health. Public documents provided to The Reporter reveal that the new buyers do not plan to keep any existing insurance contracts, as they are negotiating with insurance companies for new rates.
The saga began in 2007 when the former owners of the hospital were having financial problems, and Hoboken’s City Council voted to guarantee $52 million worth of bonds so the city could take over the hospital and keep it open. Last year, Mayor Dawn Zimmer said it would be best to relieve the city of the financial burden and seek a private company to buy and run the hospital.
Hoboken hopes to transfer the hospital to new owners by July 31.
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Now, the state must issue the Certificate of Need to finalize the deal. Hospital Authority Chairwoman Toni Tomarazzo has said a goal for the transfer of ownership is the end of this month.
But before the Certificate of Need can be awarded, the state will hold a public hearing in Hoboken.
Some observers have been concerned because when Holdco took over Bayonne’s hospital, they canceled the hospital’s contracts with various insurance companies in order to negotiate better reimbursement rates. That caused some customers to have to pay out-of-network fees.
However, the new owners were able to turn a profit at the once failing facility.
Right now, the mayor is hoping for the sale of the hospital to be completed to the Bayonne group, but other residents and a nurses’ union want their concerns addressed first.
Under the terms of the contract, Holdco must keep the facility as a hospital for at least seven years.
What’s in the contract?
As the state Department of Health reviews the potential sale, they are seeking to find out what Holdco will do regarding the insurance companies.
According to documents between the applicant and the state Department of Health, the state has asked the potential owners to “identify all existing insurance plans” and to state if the company “desires to assume such contracts.”
The potential owners have responded, “HUMC Opco, LLC has no intentions of assuming any of the existing managed care agreements. Their reimbursement rates are below industry standards and are not adequate to sustain the operations at HUMC.”
The documents also indicate that the group is “currently in negotiations with all major insurers and the intention is to negotiate new contracts with rates and terms that are more favorable to HUMC to ensure its long-term viability.”
Even if insurance contracts are cut, Medicare and Medicaid would not be affected, said Tomarazzo.
Tomarazzo also indicated that city employees will still be covered at the hospital.
Holdco wrote to the state, “Negotiations are currently ongoing and we expect some to be completed prior to closing, but the majority of negotiations may not be completed until after a closing date due to the protracted process of insurance contract negotiations.”
In the conversations with the state, the new owners echoed their commitment made during a Hospital Authority meeting to keep at least 75 percent of the jobs in the hospital once they take over HUMC. They also wrote about the importance of keeping an acute care facility hospital in Hoboken.
As part of the $92 million deal with the city, the Hospital Authority has said the new owners will invest $20 million into new operations. However, according to the Asset Purchase Agreement, which is a document between the Authority and the purchaser, the investments aren’t required.
“Purchaser may make available, in Purchaser’s sole and absolute discretion (but without any obligation to do so) an amount of up to [$20,900,000] in the aggregate for working capital and capital expenditures for the Hospital,” according to the agreement, under the Capital Commitments section.
Public involvement
Virginia Treacy is the executive director of JNESO, the nurse’s union for workers at HUMC.
She said her union has made phone calls to the public insisting on more transparency.
“We are responsible for phone calls to community members but in no instance have we stated the hospital will close,” Treacy said. She was responding to the recent reports of “robo calls” to residents claiming the hospital will close.
“We have made it very clear that our objective is not to stop the deal but rather to have a public review of the deal,” Treacy said.
Usually, hospital sales undergo a review by the state Attorney General’s Office in addition to the state Health Department, but because the hospital is municipally owned, the attorney general’s review is not required.
“I agree with JNESO that we need to preserve access to HUMC for the citizens of Hoboken,” Zimmer said in a statement to The Reporter last week. “The only way that’s going to get done is by selling the hospital to the owners of Bayonne Medical Center. It is important that the public be provided with accurate information.”
Zimmer added that the anonymous calls by the union did not help provide accurate information.
Finances
The claim by Zimmer that the hospital will close if the sale to BMC does not go through has drawn a response from a potential bidder, Paradigm Physician Partners (P3), a Connecticut based health care company that wanted to buy the hospital and still hopes for the chance to do so.
P3 said that Zimmer’s comments last week in a letter to The Reporter about the hospital potentially closing if the sale fails are “inaccurate.” P3 echoed their own proposal, which they say includes no layoffs and $25 million in investments.
In any case, the hospital clearly has some financial issues that need fixing by whoever owns it.
The hospital experienced a $21.7 million net loss in 2008 and a $16.3 million net loss in 2009.
It has relied on state funding to stay open over the past few years, including receiving $7 million in stabilization funds this year. It also relies on some federal funds, but last week, a summary of the state budget revealed that $11 million in federal funds will be diverted away from the facility this year. According to the summary, this is because the hospital is no longer publicly owned. (However, that’s not yet the case.)
Steve Flemming, a consultant to the Hospital Authority from Price Waterhouse Cooper, said in April that the hospital “is in dire need of capital.”
Zimmer has said that the hospital can no longer survive as a stand-alone facility, adding that the funding the hospital relies on is drying up.
Although the Authority expects to have the Certificate of Need process completed soon, the process took almost a year when Meadowlands Hospital in Secaucus was sold to private owners in 2010.
However, the owners of Bayonne Medical Center are major supporters of Gov. Chris Christie’s initiatives and of the political action committee that supports the governor. Bayonne Medical Center donated $25,000 to Reform Jersey Now last year. Also on a donor list with a $25,000 donation to Reform Jersey Now is Spencer Baretz, a public relations spokesperson who has represented Bayonne Medical Center.
The heated conversation is likely to continue over the next few weeks as the applicants continue to go through the Certificate of Need process.
The public hearing for the sale has not yet been scheduled.
Ray Smith may be reached at RSmith@hudsonreporter.com