Faced with serious financial problems, the Bayonne Medical Center voluntarily filed on April 16 to reorganize under Chapter 11 in the U.S. Bankruptcy Court in Newark.
This comes just after BMC was forced to abandon its plans to borrow $9 million from the Hudson County Improvement Authority because the state Division of Local Finance imposed fiscal requirements BMC could not meet on the loan.
A business that is unable to pay its debts or its creditors can file with the federal bankruptcy court for protection under two provisions – Chapter 7 or Chapter 11.
A Chapter 7 means the business intends to close and sell its assets to pay its debts. Under Chapter 11, however, the business is attempting to continue operations, and asks the court to supervise the restructuring. Under this chapter, the court can grant BMC complete or partial relief from its debts and other contracts so as to give the hospital a fresh start. As a consequence, the creditors could even end up owning the facility with the hopes that a turnaround will allow them to recoup what they are owed.
Hospital officials said they made this move to create a financially strong institution and to enable the hospital to continue operating on a normal basis.
“Our board of directors determined that this filing is necessary and represents the hospital’s best opportunity to continue to fulfill our mission of caring for the health care needs of the great Bayonne community,” said Acting President and Chief Executive Officer Daniel A. Kane at a press conference.
Earlier this year, an independent review of the hospital finances showed that its debt was significantly worse than anyone had previously thought.
Jim Lawler of JPL Healthcare Consulting conducted the independent analysis as part of a compromise with the workers union and members of the Coalition to Save Bayonne Medical Center – a group of residents fearful about the hospital’s problem.
Due to several factors, the hospital lost $6 million in 2006, adding to the more than $12 million in revenue shortfalls from previous years.
But the report said hospital administrators under reported the losses in 2006, saying the hospital was running less than $1 million in the red, when the mounting debt was more than $18 million without taking some preventive action. The report said BMC could be short as much as $23.6 million by the end of 2007.
Kane dodged questions about how much responsibility Robert Evans, the former president and CEO of BMC, had in the hospital’s problems and directed questions about possible criminal charges to the state Attorney General office.
He said hospitals in New Jersey and New York face financial challenges hospitals elsewhere in the county do not such as high rates of charity care, shrinking Medicaid and Medicare reimbursements, cost of supplies and other factors.
“All these things contribute to the problems here,” he said.
But he noted that the hospital has a new management team in place and that the hospital has received a $30 million line of credit that will allow it to meet current expenses unburdened by the need to pay back debt.
“We have a fine facility, and first class operations in a number of areas,” said Dr. John DeDouis. “What we need is the support of the public, for people to come here again.”
Donna Benjamin, president of the Health Professionals and Allied Employees (HPAE) union said the staff at the hospital has agreed to give up $3.5 million concession to help the hospital survive. But in return, the union expected “full financial transparency” and communication with the staff as to what is transpiring in the hospital.
Kane said the support of the staff was critical.
“Bayonne Medical Center has served the healthcare needs of Bayonne and surrounding communities since 1888,” he said. “We know that our physicians, staff and the greater Bayonne community will demonstrate their support for their hometown hospital, just as they have throughout the years. Their support is needed now more than ever before.”
Kane said the hospital had a talented medical staff dedicated to the hospital.
Kane, however, was realistic, saying the path to recovery was not going to be easy.
“Hudson County is over bedded, and we still face inadequate reimbursement policies,” he said.
In a separate interview, State Assemblyman Louis Manzo, who is expected to introduce legislation that would address some of reimbursement issues, said he had spoken to the office of Fred Jacobs, the state commissioner of health.
“They will monitor patient care that is up to standards that the department sets,” Manzo said. “The Healthcare Finance Authority will be monitoring the hospital board finance.”