As Jersey City’s Christ Hospital begins to emerge from bankruptcy, its future might be reflected in the recent past of two other Hudson County hospitals, Hoboken University Medical Center and Bayonne Medical Center. Now that the three facilities will share the same for-profit owner, Christ is likely to be remade in their image, transformed from a cash-strapped safety-net hospital into a lean, mean, and profitable medical facility. Exactly how the hospital gets from where it is to where it’s going, however, is the source of some concern.
A federal bankruptcy judge awarded Christ Hospital to one of two bidders on March 27, paving the way for that bidder, Hudson Hospital Holdco LLC, to buy the struggling medical facility. On the surface it appears residents, activists, and the nurses union got many of the commitments they wanted from the bankruptcy bidding process.
Christ Hospital will remain open and will continue to be an acute care facility in the community. Holdco has vowed to keep all of the current registered nurses on staff after the sale is completed, in addition to at least 90 percent of the hospital’s remaining employees. The nurses’ union has reached a tentative labor agreement with the company. Finally, Holdco is a locally-based entity that has less baggage than the hospital’s last known prospective buyer, Prime Healthcare Services.
Still, some observers warn that the devil will be in the details. Two months after the California-based for-profit Prime Healthcare Services backed out of a deal to buy Christ Hospital – to the relief of many residents and elected officials – sources last week said that Holdco has mimicked Prime’s business model and is likely to make many of the same changes as the West Cost company.
“Holdco is modeled on the Prime model, and that business model works best when you capture a market, capture the emergency rooms, and take the facilities out of network,” said Renée Steinhagen, executive director of New Jersey Appleseed Public Interest Law Center, which has lobbied the state to put certain restrictions on for-profits that buy non-profit hospitals. “That’s why Holdco wanted the three hospitals.”
There are currently six hospitals in Hudson County. Assuming Holdco’s bid to purchase Christ is approved by the state, the for-profit company will own three of these six facilities and only two non-profit hospitals will remain: Jersey City Medical Center and Palisades Medical Center in North Bergen. With Holdco holding a de facto monopoly on hospitals in Hudson County, these changes could have far-reaching implications for low-income and uninsured patients, in addition to people whose insurance plans have been cancelled by the county’s four for-profit facilities: Hoboken University Medical Center, Bayonne Medical Center, Meadowlands Hospital Medical Center in Secaucus, and now Christ Hospital.
Seven days in March
For seven days, Christ Hospital’s fate rested with U.S. Bankruptcy Court Judge Morris Stern, the Christ Board of Trustees, and a committee that represented the interests of the hospital’s creditors. Proposals from two bidders – Holdco and a combined offer from Community Healthcare Associates (CHA) and LibertyHealth System – were examined over these seven days.
Closed-door meetings were held during which the creditors’ committee and the board of trustees backed rival bids. The creditors’ committee favored the joint bid from CHA and LibertyHealth, though the support was not unanimous, while the trustees endorsed the bid from Holdco.
In an effort to break the deadlock, Judge Stern told CHA/LibertyHealth and Holdco to revise their bids. After meeting with the parties early last week, Stern awarded the hospital to Holdco on March 27, calling the company’s bid the “highest and best” proposal for the facility. According to one source at the bankruptcy proceedings the CHA/LibertyHealth System offer was about $500,000 less than Holdco’s.
According to two sources familiar with Holdco’s bid, the company has agreed to buy Christ Hospital for $43 million and has agreed to keep it an acute care facility for at least five years. (At a recent public forum, a representative for Holdco stated Christ would remain an acute care facility for at least seven years.)
Paul Bellan-Boyer, co-founder of Save Christ Hospital, a coalition of neighborhood associations, praised Stern and the bankruptcy bidding process.
“We are pleased that many of the things for which we advocated are reflected in this sale,” Bellan-Boyer said in a statement after the decision was announced. “We know that our advocacy, ability to mobilize people, and work with our elected officials made the bids much stronger. The sale now includes a lengthy commitment to operate as an acute care hospital. It promises the retention of 100 percent of nurses, 90 percent of all staff, and [an] assumption of accrued paid time off, significant protections for the people most responsible for Christ Hospital’s mission. Holdco also committed to reach agreements with all Medicaid HMOs, helping ensure coverage for many low-income patients.”
The nurses union was equally upbeat about the outcome last week.
“From the very beginning, the nurses were focused on saving the hospital, its services, and jobs. And I think we’ve done that,” Health Professionals and Allied Employees (HPAE) spokesperson Jeanne Otersen told the Reporter. “This is stage one of a process. Through the next stage, which is the regulatory process, we will continue to push for the kinds of accountability that Holdco has agreed to.”
HPAE represents 420 registered nurses and other workers at Christ Hospital. Prior to the bankruptcy negotiations before Judge Stern, HPAE had already reached tentative labor agreements with both bidders.
Holdco will still have to be approved by various state agencies, including the Dept. of Health and Senior Services and the office of the state Attorney General.
Prime & Holdco: Same insurance strategy?
Christ Hospital filed for bankruptcy in February after Prime Healthcare Services backed out of an agreement to buy the hospital for $15.7 million. A for-profit company that owns a chain of 14 hospitals in Southern California, Prime, some argue, has served as a template for Holdco. Steinhagen and others claim that Prime and Holdco run their hospitals similarly.
Referring to the two companies, LibertyHealth CEO Joseph Scott recently said, “Their strategy is to grow their bottom line by functioning as an out of network hospital.”
In January, Holdco cancelled contracts with two insurance companies, Aetna and United Healthcare, in order to negotiate higher reimbursement rates. If the parties don’t reach an agreement soon, patients covered by these companies will have to go elsewhere for treatment or face high out-of-network payments. Most recently, Empire Blue Cross announced that it, too, will be out of network with Hoboken University Medical Center this fall unless the stalemate is resolved through negotiations.
Last month a Holdco representative said the company would be able to negotiate from a position of market strength and get better reimbursement rates from insurance companies if it acquires Christ Hospital and owns three facilities in Hudson County. But at least two insurance providers noted last week that rate increases are not realistic given the economy.
“We have a dual responsibility to our customers,” said Aetna spokeswoman Susan G. Millerick. “The first is to provide them with access to comprehensive health benefits coverage that is both accessible and affordable. The second is to help contain rising health care costs which threaten their ability to continue providing coverage for their workers – particularly hospital costs, which are rising at rates that far exceed physician and other professional services. We take these responsibilities very seriously. On average, our customers’ revenues are not increasing at the rate some of our providers have previously demanded. We simply cannot agree to increases that substantially exceed the consumer price index.”
Attorney Thomas Rubino, whose Horizon Blue Cross Blue Shield continues to be an in-network provider at Holdco’s hospitals in Bayonne and Hoboken, agreed.
“Horizon negotiates with our network hospitals, on behalf of our members, in order to provide access to quality care at an affordable price,” Rubino stated. “We believe the new owners of Christ Hospital share the same concern for their patients, who cannot afford higher health care costs.”
Last summer, several health insurance companies – including Aetna, the Association for Health Plans-NJ, CIGNA, Oxford Health Plans of New Jersey Inc., and United Health Care – asked the New Jersey Department of Health and Senior Services to deny Holdco’s bid to buy Hoboken University Medical Center. Among their allegations was the claim that, according to 2009 figures from the New Jersey Hospital Association, the Holdco-owned Bayonne hospital charged significantly higher fees for services than other medical facilities in Hudson County and the rest of the state. For example, the median charge at hospitals across the state that year was $28,601 and $29,846 at other Hudson County hospitals. The median charge at Bayonne Medical Center in 2009 was $70,669.
Holdco officials have said the Hoboken and Bayonne hospitals are negotiating in good faith to reach new agreements with Empire, Aetna, and United.
State of emergency
Naturally, patients can be treated through the emergency room, and ER service is key to the business model of both Prime and Holdco, according to sources.
“The federal government requires hospitals to treat uninsured people in the emergency room for emergency care until they are stabilized. Then they can be discharged,” said Steinhagen. “New Jersey has a requirement beyond that. If you’re insured and you’re admitted to the emergency room for treatment, your insurance company has to cover the full cost of your treatment.”
Health care consultant Bill Carlos has speculated that severing ties with insurers could be a strategic move to increase reimbursements. In an article last year Carlos noted that New Jersey and California, where Prime is based, are the only two states in the country that require insurers to fully reimburse medical services offered in out-of-network emergency rooms.
One investigation of Prime Healthcare Services alleged that the company was prone to admit patients covered by out-of-network health insurer Kaiser Permanente through its emergency rooms. The company would later refuse to transfer these patients to in-network hospitals, according to the allegations.
Some observers warn that the devil will be in the details.
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Deterring charity care?
Located in the working class community of the Jersey City Heights, Christ Hospital serves a large uninsured and indigent population and currently loses about $800,000 a month, according to Christ CEO Peter Kelly. According to a September 2011 letter submitted to the state Attorney General from Christ’s lawyers, the “hospital’s total liabilities exceed approximately $123 million. In contrast, the hospital recorded its assets as of June 30, 2011 at approximately $38.7 million.”
The hospital’s bankruptcy filing in February listed its liabilities at $115 million.
Given this financial snapshot, some wonder how Holdco will pull Christ out of bankruptcy, while at the same time maintaining its legacy as a safety net hospital and generating a profit for its investors.
Officials at Palisades Medical Center and LibertyHealth System, which owns Jersey City Medical Center, have expressed concern that their hospitals will see a marked increase in uninsured charity care patients if Christ Hospital is sold to a for-profit company. Assuming Holdco receives state approval to buy Christ, Palisades Medical Center and Jersey City Medical Center will be Hudson County’s last two remaining nonprofit hospitals.
Holdco has promised to reach agreements with health maintenance organizations that provide health coverage to low-income people through the federal Medicaid program. Steinhagen, however, scoffed at this promise.
“The fact that they’ve agreed to that is meaningless,” she said. “You don’t have to deny someone service. There are many ways you can make sure they don’t show up. A Medicaid user can call for a clinic appointment and be told the next available appointment is in five months. So, what does the person do? They go elsewhere.”
The National Association of Urban Hospitals has seen evidence that some for-profit hospitals in New Jersey will also discourage low-income patients from seeking treatment by requiring them to fill out 15-page questionnaires each time they try to receive charity care. At present, there is no evidence this is being done at either Hoboken University Medical Center or Bayonne Medical Center.
Holdco officials, however, bristle at the suggestion the company’s hospitals have abandoned low-income patients.
In a recent letter to the editor, Bayonne Medical Center Board Chairman Daniel Kane claimed the hospital’s “documented charity care increased from $4.9 million in calendar year 2008 to $5.3 million in 2010. Among the steps that Bayonne Medical Center has taken to serve the medically disadvantaged is to assign a physician for follow-up care for uninsured patients in order to provide continuity of care, manage chronic medical conditions, and prevent complications and avoidable hospitalizations.”
Last week Holdco declined to answer seven specific questions from the Reporter regarding the company’s plans for Christ Hospital, including questions about insurance coverage.
More in store?
Other promises made to the bankruptcy court last week might be scaled back over time, if recent history is any indication of what Holdco has in store for Christ.
The company initially promised to continue its obstetrics/gynecology department at Bayonne Medical Center, and was given state approval to acquire the bankrupt hospital in 2008 in part based on this promise. The OB/GYN department was later closed.
(Prime Healthcare similarly shut down the psychiatric department at one of its hospitals before being ordered to reopen it by the California Attorney General.)
“They won’t immediately shut down services. It’s not going to happen tomorrow,” said Steinhagen. “They will deter people from receiving certain services. Then they can make the case to the state that those services aren’t needed. There’s a lot of money to be made in healthcare in certain segments of the market and on certain services. Nonprofits use those services to make money to support their other services that don’t make money. We’re seeing some for-profits using those services to make money for their investors and eliminating the services and sectors that don’t make money.”
Holdco has retained the nursing staffs at Bayonne and Hoboken – but work hours have been reduced, with wages being cut accordingly.
Bellan-Boyer acknowledged the Save Christ Hospital coalition will have to remain vigilant.
“Now that a buyer has been chosen we must build-in safeguards to ensure these commitments are met and get additional health care and asset protections through the state review process,” he said. “Save Christ Hospital…will seek continued involvement to see that community needs are represented in hospital services.”
HPAE’s Jeanne Otersen agreed, noting, “It’s still going to be up to the community and staff to work with the new owners to make sure that Christ Hospital and its mission are preserved. We intend to continue that advocacy.”
E-mail E. Assata Wright at awright@hudsonreporter.com.