Saying the $9 million lease agreement between Bayonne Medical Center and the Hudson County Improvement Authority (HCIA) will buy time for the hospital to restructure its finances, both the Hudson County Board of Freeholders and the Bayonne City Council voted to back up the deal with loan guarantees.
The City Council voted at its March 21 meeting to act as a backup in case BMC could not meet the $800,000 annual payments, and authorized the Bayonne Planning Board to look into setting up a redevelopment zone for the property currently occupied by the hospital and its garage.
Waiting on actions by the City Council as well as the state Local Finance Board, the freeholders voted on March 22 to act as a secondary backup to the deal.
Both the freeholders and the City Council said this was an effort to help save the hospital at a time when many hospitals around the state are facing similar serious problems.
Sale necessary, says BMC chief
In speaking before the City Council, Daniel Kane, acting chief executive officer at BMC, stated that the hospital said that without the sale, BMC would not be able to bolster its revenue stream in order to complete more comprehensive financial restructuring.
“Without this sale, the medical center will run out of money before the end of April,” he said.
Under an agreement forged earlier this month, the HCIA will purchase the BMC garage for $9 million in a lease/loan arrangement that BMC will pay back at about $800,000 over the next 25 years. The agreement, however, will not require payments to begin until 2009, giving the hospital an additional financial boost.
The sale will provide funding that will allow the hospital to continue.
Financial restructuring already underway
Kane said the hospital is working to improve various areas of operations for a more sustained financial restructuring that will address the issues of managed care and purchases of supplies.
Kane said he is working with the hospital’s medical staff and unions, and has brought on several key consultants including an information officer, finance officer and chief restructuring officer.
The high fee for the restructuring officer – $200,000 for the first six months then $55,000 a month after that – raised some concerns from the Freeholder Board.
“Since this is mandated by the state, the state should offer some kind of financial support,” said Freeholder Bill O’Dea, although Kane said none currently exists.
O’Dea urged the freeholders to lobby state officials to provide some kind of relief when positions like this are mandated.
“For what you’ll be paying for this position alone, you could keep open a service at the hospital,” O’Dea said.
In approving the HCIA deal with BMC, the state Local Finance Board added stipulations that included the expansion of the board of directors to include two new seats that would be filled through appointments made by the mayor of Bayonne.
While Kane said a union representative could not be a member of the board because of conflicts involving possible negotiations of salary, he said a committee process would include union members and would keep the union informed about the hospital’s financial situation and the steps being taken to solve its fiscal problems.
Red flags presaged fiscal crisis
Although some union members raised red flags about possible problems at the hospital more than two years ago, the dire situation became very obvious last August when the hospital announced the shutting down of maternity operations, and the Coalition to Save Bayonne Medical Center began to demand answers about the fiscal situation.
But the true financial picture was apparently unknown even to the hospital board of trustees until after the sudden resignation of CEO and President Richard Evans last November.
Hospital officials claim Evans painted “a rosy picture” of hospital finances when admissions showed sharp declines and the hospital faced an almost $23 million deficit by the end of 2007. Pressed by the Coalition to Save Bayonne Medical Center, BMC agreed to allow an independent review of the finances. That review’s recommendations have become a critical piece in the new restructuring plans.
While both the freeholders and the City Council admitted that the $9 million loan will not cure the problems at the hospital, they said it will buy time for hospital officials to come up with a long-term solution.
Kane said that several of the closings previously announced, such as the patient transitional care unit, might not occur. Talks are also underway to possibly bring in an outside firm to handle psychiatric treatment needs.
But Kane said the maternity ward may not be brought back on line, partly because the number of babies born cannot support the cost of keeping the ward open. BMC delivered slightly more than 70 babies in 2006. Kane said the hospital needed 900 to 1,000 a year to pay for the operations.