Would-Be Buyer of East Orange General Hospital Offers Olive Branch

Andrew Kitchenman | October 26, 2015 | Health Care
Unlike combative tone taken by others, group expresses willingness to cooperate with other hospitals, state officials

Credit: Courtesy: East Orange General Hospital
East Orange General Hospital
The prospective buyer of East Orange General Hospital has expressed a willingness to cooperate with other Newark-area hospital operators, an apparent contrast with the longtime pursuer of Saint Michael’s Medical Center.

Executives with Prospect Medical Holdings, which has sought to buy the East Orange facility since early 2014, have said that they largely agree with a report by Chicago-based Navigant Consulting, which called for closer cooperation by the hospitals in or near Newark.

While disagreeing with a key recommendation – that East Orange General should no longer be as a full-fledged acute-care hospital – Prospect indicated a willingness to expand outpatient services and possibly reduce the number of inpatient beds to align with local demand.

The willingness to accept most of Navigant recommendations report sets Prospect apart from another California-based for-profit chain, Prime Health, which has been mired in an attempt to buy Saint Michael’s since 2012.

The approach by Prospect Medical Holdings also appears to be helping it close the East Orange deal more quickly. An Essex County Superior Court judge could decide to approve the East Orange sale soon, following a hearing scheduled for Wednesday.

And the fact that state officials cited the Navigant report in detailing why they support the sale of East Orange General to Prospect Medical Holdings could present another obstacle to Prime’s acquisition of Saint Michael’s, which it aims to complete through bankruptcy proceedings next month.

Acting Health Commissioner Cathleen Bennett weighed in on the proposed transfer of ownership from East Orange General Hospital’s current nonprofit board as part of her oversight responsibilities under state Certificate of Need rules.

“The applicant has stated its concurrence with most of the goals of the Navigant Report, with the exception of that report’s recommendation regarding the closure” of the hospital’s acute-care services, Bennett wrote in a letter in which she approved the ownership transfer with 27 conditions, including a commitment from Prospect to submit a plan within 12 months to reduce unnecessary and duplicated services and excess inpatient beds, to address the need for expanded ambulatory care, and for making capital improvements.

“Prospect acknowledged that it would work with the Department and other area providers to properly align bed need and capacity as suggested” by Navigant, Bennett wrote.

Acting Attorney General John J. Hoffman also supported the conditional sale to Prospect as part of a review mandated by state law designed to ensure that hospital conversions to for-profit status serve the public interest.

Renee Steinhagen, executive director of New Jersey Appleseed Public Interest Law Center, said she doesn’t object to the East Orange General sale. She has been a prominent critic of the growth of for-profit hospital ownership in the state.

Steinhagen pointed to the conditions included by Bennett and Hoffman. They include separating the charitable foundation that supports East Orange General from the hospital’s ownership. Prospect has committed to pay $10 million to the foundation to support community health.

The conditions set by Bennett and Hoffman ensure that the hospital’s charitable assets “are safeguarded and irrevocably dedicated for charitable health purposes, and that the transaction will not deteriorate quality and access to health services in the surrounding community,” Steinhagen wrote in a letter to Superior Court Judge Walter Koprowski, who will rule on the sale.

Prospect committed to continuing to offer the behavioral healthcare that is a key service at East Orange General. In addition, company executives told the state Department of Health that they believe they could cut costs through “a higher level of coordinated care and technology, including upgrading outdated equipment, in order to more effectively manage the delivery and quality of their healthcare services,” Bennett wrote.

[related]Saint Michael’s executives have criticized the Navigant report, which recommended closing East Orange General, Newark Beth Israel Medical Center, and Saint Michael’s as acute-care hospitals and converting them to outpatient centers. While the report called for closer collaboration in Newark healthcare, Saint Michael’s executives say that maintaining competition is the best way to ensure services continue and prices are kept down.

Saint Michael’s filed for bankruptcy in August, with hospital executives citing the effect of the state’s extended review of the proposed sale to Prime.

Some advocates, including Steinhagen, have encouraged the state to pursue control of Saint Michael’s and lease it to another operator. They see this as the best route for the state to recoup a share of the roughly $230 million in Saint Michael’s bonds that the state is on the hook for if the hospital closes or converts to for-profit status.

Prime has offered to pay $49 million toward the bonds. Hospital staff members and some community members have supported the sale to Prime, noting the company’s commitment to maintain jobs and services at the facility for at least five years.

Potential bids for Saint Michael’s are due November 3. If there’s more than one bid there will be an auction, scheduled for November 5. Regardless of what happens with the bankruptcy sale, Bennett and Hoffman could still weigh in on the transfer of Saint Michael’s ownership, just like they have in the case of East Orange General.

And if they give the Navigant report the same weight they gave it in reviewing the East Orange sale, it could present a problem for Prime.