Troubled Jersey City Hospital Hopes for $35 Million Transfusion

Beth Fitzgerald | November 21, 2011 | Health Care
Merging with California healthcare company could revive Christ Hospital

Christ Hospital in Jersey City is the latest New Jersey hospital to seek a merger with a larger, financially stronger system, looking to survive the new normal for healthcare, in which government, employers, and health insurance companies are trying to clamp down on the double-digit growth in spending. These financial pressures are most critical for safety net hospitals like Christ, which each year rack up huge deficits caring for the poor and uninsured — hospitals that would be very deep in the red without millions of dollars in state aid.

Christ is asking state approval to be acquired by Prime Healthcare, a for-profit company that owns 14 California hospitals. The transfer must be approved by both the state attorney general and the commissioner of health. And while Christ chief executive officer Peter Kelly has asked for an expedited review so he might close the deal by December 31, he said the complexity of the merger means it’s unlikely to happen before next year.

Kelly said Prime plans to invest $35 million in Christ, money that would put the hospital on a sound financial footing and enable it to invest in the new equipment it sorely needs.

“Christ Hospital is losing money every day,” Kelly said. “We have reduced our losses substantially, but the sooner we transfer the ownership, the sooner Prime can invest the money we need for working capital and equipment– everything from a new CAT scanner to new patients beds and new waiting room chairs that we can’t afford right now. The idea is to take a financial burden off the state’s back.”

Christ has a staff of about 1,400, mostly nonunion. The 400 nurses are represented by the Health Professionals and Allied Employees union. Spokesperson Jeanne Otersen said HPAE isn’t opposed to the deal with Prime, but said “any change at Christ needs to protect the mission of the hospital, the services it provides, and the jobs.”

Opposing the sale to Prime is Joseph Scott, chief executive officer of Jersey City Medical Center, who instead wants a merger of JCMC and Christ. Scott noted that a study issued in July of the Hudson County hospital market, commissioned by the state and conducted by the Navigant consulting firm, found there are excess hospital beds in Hudson County and recommended consolidating services among the county’s hospitals. This countywide clinical integration, according to Navigant, would both improve quality by providing a critical mass of clinical expertise and reduce cost through efficiencies. Scott said he favors an open bidding process for Christ, which has instead chosen to negotiate exclusively with Prime. “I’m hoping the attorney general comes back and says ‘put it out for bid’ and then everyone gets a chance to put their best foot forward.”

Scott would retain a portion of Christ Hospital as an acute care hospital and convert the balance to a “medical mall” that offers a variety of services that could include doctors’ offices, mammograms and other imaging services, and a subacute nursing facility. Scott said JCMC would bid for Christ with partner Community Healthcare Associates, led by E. Stephen Kirby, a former chief executive officer of LibertyHealth, the parent of JCMC. In 2008 CHA redeveloped the former Barnert Hospital in Paterson into a medical mall and in October acquired the former William B. Kessler Memorial Hospital in Hammonton in order to develop a medical mall there.

Kelly doesn’t dispute the Navigant report’s conclusion that Hudson County hospitals need to combine services. But instead of having those conversations now, he wants to wait until Christ is financially stabilized by merging with Prime.

“If we can be acquired by Prime, and we are financially stable, then we can have much more meaningful discussion [about combining services] if we are speaking from a position of stability as opposed to instability,” Kelly said “After the acquisition goes through, there is nothing that would preclude us from advancing discussions with the other hospitals in Hudson County and the state to look at a meaningful way to reshape how healthcare is delivered. Because we will all have to address that.”

Kelly said his offer to discuss clinical partnerships with the other county hospitals is included in the certificate of need application requesting merger approval with Prime that Christ submitted to the attorney general and the state health commissioner. A spokesperson for the health department said the certificate won’t be made public until it is deemed complete by the state.

Kelly said the state requested nearly 50 additional pieces of information to supplement the application and “we just sent down three bound folders of information for the attorney general to review.” He said he’s concerned that critics of the deal “are trying to insinuate that this is being done behind closed doors. We’re not going through any back doors here—this whole process will be public.”

Concerns have been raised by news reports in California that several Prime hospitals have had unusually high levels of the infection septicemia and that Prime has engaged in questionable billing practices know as “upcoding” to increase reimbursements from health plans. Kelly said he personally reviewed the California health department documents relating to these issues and is satisfied the allegations are without merit.

Ward Sanders, president of the New Jersey Association of Health Plans, said he wants to make sure that if Prime acquires Christ, it is willing to negotiate managed care contracts with the state’s health insurance companies and not operate out-of-network, which Sanders said could raise healthcare costs and lead to higher expenses for health plans and their members, who include unions, employers, workers, and individuals.

Kelly said all these issues will be aired thoroughly at separate hearings by the attorney general and the state health department.

Scott said he is concerned that as a for-profit hospital, Prime will be less willing to provide charity care to uninsured patients. Prime “has to make sure their investors get paid, and I don’t want our hospital to become a dumping ground for all the charity care they don’t want to take care of,” he said.

According to Prime spokesperson Edward Barrera, Prime wrote off about $140 million in charity care in California last year. “We are an award-winning hospital, with nine of our hospitals recently cited for their quality by the Joint Commission,” the national hospital accrediting body, he said.

In October, deficit-plagued Hoboken University Medical Center, another Hudson County safety net hospital, was acquired by the for-profit company that owns Bayonne Hospital. The state-owned University Hospital, a Newark safety net hospital, is in discussions that could result in its merger into the not-for-profit healthcare system Barnabas Health, whose six hospital includes Newark Beth Israel Medical. University is the principal teaching hospital of University of Medicine and Dentistry of New Jersey; a task force appointed by Gov. Chris Christie is expected to issue a report in December that could recommend dismantling UMDNJ. The task force has already proposed shifting UMDNJ’s medical school in New Brunswick to Rutgers.

Hospital executives confirm that merger discussions are widespread throughout the state, and involve financially healthy standalone hospitals looking to join larger systems, so they will be able to compete in the wake of the 2010 Affordable Care Act. The ACA reduces Medicare reimbursement to New Jersey hospitals by a total of $4.5 billion over the decade beginning in 2011. The state’s share of Medicare reductions to the U.S. hospital sector were agreed to during the Congressional debate over the ACA, to help pay for the expansion of health coverage to an estimated 30 million uninsured American in 2014, which is the central goal of the ACA.

Both Jersey City Medical Center and Christ Hospital were among the bidders for Hoboken University Medical Center. But the Hoboken Municipal Hospital authority said it chose the Bayonne group because it offered the best hope of keeping Hoboken as a full-service acute-care hospital and saving the jobs of its more than 1,000 workers.

Kelly said that when he joined Christ in 2005 it was losing $3 million a month; he’s been able to reduce the losses to under $1 million a month. Without the $7 million in stabilization funds the state provides to safety net hospitals, Christ would lose about $10 million this year. But some question why, with such huge losses, Christ Hospital should continue to operate a free-standing, independent hospital.

According to Kelly, the city needs the services that Christ is able to provide as a full-service hospital. “We have 50,000 visits to our emergency room every year and we [admit] about 12,000 patients a year. We are in the middle of a medically underserved area in Jersey City. We service a substantial portion of Jersey City that is not served by other hospitals, as well as Union City and Secaucus.”