The sale of the Hoboken University Medical Center continued to make headlines across the state last week when it was reported by The Star-Ledger that the former chief executive officer of the facility received a $600,000 severance package upon his resignation, just a few weeks before the hospital’s operator filed for bankruptcy.
The severance package was negotiated by the operator of the hospital, Hudson Healthcare Inc., in 2009, years before any word of a bankruptcy, said Mayor Dawn Zimmer last week. The bankruptcy means that the hospital will probably not pay its bills in full for hundreds of vendors and other creditors, including the Hoboken Parking Utility.
A special meeting of the council will address the hospital sale on Aug. 18.
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Second Ward Councilwoman Beth Mason blasted the hospital’s management over the $600,000 payout to the former CEO last week, calling for more transparency in the sale process.
The city of Hoboken is a major creditor in the bankruptcy of Hudson Healthcare Inc., and is owed $1.1 million. The Hoboken Parking Utility is owed approximately $900,000.
Zimmer has hired the powerful politically connected firm Okin, Hollander, and Deluca, LLP, of Fort Lee, on an emergency basis to represent the city and the Parking Utility in the bankruptcy case, hoping to recoup some of the $2 million owed, according to bankruptcy court documents. The administration is permitted to hire firms on an emergency basis for up to $17,000.
Zimmer said on Thursday that she will hold a special meeting of the council to address the hospital sale on Aug. 18.
The agenda will include a settlement between the hospital’s now bankrupt operators Hudson Healthcare Inc., the Hoboken Municipal Hospital Authority, the city, and the parking utility. Also on the agenda will be a contract for Okin, Hollander, and Deluca to represent the city in the bankruptcy hearings. Zimmer said the council will also go into executive session so she can brief them on the status of the hospital sale and the bankruptcy.
Sale issues
The city rescued the hospital from closure in 2008 by guaranteeing $52 million in bonds to underwrite its operations. But the hospital is still cash strapped, and the Hoboken Municipal Hospital Authority, a municipal board, has been working to sell the hospital to HUMC Holdco, a for-profit entity from Bayonne that also owns Bayonne Medical Center.
“I’d like to reiterate that this [sale] is the only way we’re going to save this hospital.” – Toni Tomarazzo
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However, because of the Aug. 1 bankruptcy filing, the hospital must also solve their financial issues before the sale can be completed.
Zimmer has said that the completion of the sale requires the hospital to resolve its outstanding vendor obligations, and creditors are demanding payment.
The bankruptcy caused the Hoboken Municipal Hospital Authority to change six aspects of the deal in a meeting on Wednesday night.
The HMHA entered executive session on Wednesday for two hours and then reconvened in front of a sparse crowd made up only of attorneys and reporters.
The commissioners spoke about the state’s Health Planning Board approval, and CEO Vincent Riccitelli said the authority is “moving forward and going in the right direction.”
“This is a very difficult time,” said HMHA Chairperson Toni Tomarazzo at the meeting. “I’d like to reiterate that this [sale] is the only way we’re going to save this hospital.”
Other companies, including a Connecticut-based buyer, “P3,” have said they still would like to buy the hospital, but the authority has said the hospital does not have the financial means to go into negotiations again.
“We’re moving through this process as quickly as we can with the hopes that we can close in a timely basis,” Tomarazzo said.
The authority voted to make six financial changes to the Asset Purchase Agreement between the authority and the potential buyers, but the main aspects of the deal remain the same. Examples of changes included addressing the allocation of state Charity Care funds and establishing a post-closing indemnification escrow of up to $500,000 for claims after the closing.
The proposed deal totals $91.7 million in considerations, including a $51.6 million payment in cash to extinguish the city’s bond guarantee. Under the proposed deal, $20.9 million will be spent on investments in the hospital, but they are not required in the agreement. Also, $19.2 million will be spent on “other deal considerations,” including accounts receivable payments and liabilities assumed as part of the transaction.
The Municipal Hospital Authority hopes the deal will be complete in September.
Ray Smith may be reached at RSmith@hudsonreporter.com