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Court Upholds State’s OK of Hospital Reopening

Andrew Kitchenman | December 5, 2012

Three-judge panel rejects competitors’ attempt to block plans for branch of Hackensack University Medical Center.

Garrett
Hackensack University Health Network President and CEO Robert C. Garrett

Hackensack University Medical Center took another step on Tuesday toward ending a nearly five-year battle over its plans to reopen the former Pascack Valley Hospital in Westwood.

A three-judge state panel rejected two rivals’ appeal of state approval for Pascack Valley’s reopening.

The Appellate Division ruling rejected each of the arguments made by Englewood Hospital and Medical Center and the Valley Hospital, who sought to reverse state Health Commissioner Mary E. O’Dowd’s decision to approve a certificate of need for Pascack Valley. This certificate is required from the state before a hospital can open or close.

HUMC officials said the hospital, to be named Hackensack UMC at Pascack Valley, is on track to open in mid-2013. The 128-bed hospital is a for-profit partnership between the nonprofit HUMC and Texas-based hospital developer Legacy Hospital Partners Inc.

“Today’s decision reinforces the fact that the area residents need our services,” hospital CEO Chad Melton said in a statement. “With 70 percent of hospital construction complete, we are well on our way to the hospital opening, which is scheduled for June 2013.”

Officials with both Englewood and Valley expressed disappointment with the ruling.

Englewood Hospital and Medical Center lawyer James M. Hirschhorn said the hospital “is disappointed that the court failed to recognize the lack of need for a new acute care hospital in Bergen County and ignored the real economic impact that it will have on existing hospitals in an already well-served and shrinking market.”

Valley Hospital spokeswoman Megan Fraser said in a statement that hospital officials “remain strong in our belief – and the evidence continues to show – that our area does not need additional hospital beds. We also remain committed to providing the highest quality medical care and service to our community, including the thousands of Pascack Valley residents who have always chosen Valley for their healthcare services.”

It’s not clear whether the hospitals will appeal to the state Supreme Court. Officials with both hospitals said they are evaluating their options.

Pascack Valley Hospital closed in November 2007 after 48 years of operation. A few months later, HUMC bought its assets and submitted plans to reopen it, initially with Touro University College of Medicine as a partner and later with Texas-based LHP after Touro dropped out. That initiative ended in late 2009 when Pascack Valley Hospital’s license expired.

HUMC restarted the process in 2011. In its application, HUMC argued that Pascack Valley closed due to fiscal mismanagement, not lack of need. HUMC noted that it already is licensed for additional beds, but asserted that it would have to demolish facilities at Hackensack to make room for new beds. It preferred to add the beds in Westwood.

HUMC also argued that other hospitals aren’t easily accessible to Pascack Valley residents, that reopening the hospital is consistent with local needs, and that it would not have a negative impact on other local hospitals, partly because it would draw some patients from Hackensack rather than from the other hospitals.

In their appeal, Englewood and Valley attorneys argued that reopening Pascack Valley is unnecessary and would hurt their finances, particularly those of Englewood. Englewood officials argued that hospital occupancy rates are declining in the region despite an aging population, due to downward trends in hospital admissions and the length of hospital stays.

In addition, Valley officials argued that drive times from the Pascack Valley area to Englewood and Valley were within planning standards for hospitals.

Judges Jack Sabatino, Douglas M. Fasciale and Susan F. Maven rejected all of the arguments for reversing O’Dowd’s approval of the certificate of need.

“The market data generated since the closure of PVH, along with the many other analytic factors relied upon in the Commissioner's decision, provide reasonable support for her prudent exercise of regulatory judgment,” the panel wrote in its decision. “We will not question the wisdom of her policy-laden assessment.” Melton emphasized that reopening the hospital will lead to job creation, while Hackensack University Health Network President and CEO Robert C. Garrett also praised the decision.

“I am proud of the progress that has already been made at Hackensack UMC at Pascack Valley, and we look forward to providing world-class healthcare to the Westwood community next year,” Garrett said in a statement.

A 2008 state commission chaired by Princeton University healthcare economist Uwe Reinhardt found there was an oversupply of hospital beds in the northeastern corner of the state.

On Tuesday, Reinhardt expressed disappointment with how the state regulates hospitals. He said the state is wrong to require certificates of need, since it doesn’t regulate the prices hospitals charge.

Without a more tightly regulated system, Reinhardt said, the state should allow hospitals to open or close depending on whether they can receive private financing.

He said of a system in which the state controls whether hospitals can operate but doesn’t regulate prices: “The only technical word for that is stupid.”

“If you want to allow hospitals to price their services as they wish, then, I think, let competition rule,” Reinhardt said, arguing that the state must be prepared to allow any hospitals to succeed or fail.

“If Hackensack wants to open it again, if Hackensack is willing to bear the financial risk, fine, let them have it.”

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