How to Handle Sale of Newark Hospital Presents Dilemma for State Officials

Andrew Kitchenman | December 16, 2015 | Health Care
Saint Michael’s sale to Prime Healthcare receives unanimous support at public hearing, but others raise serious questions about proposal

Grades at Saint Michael's Medical Center in Newark improved significantly.
If the voices of Saint Michael’s Medical Center doctors and staff, patients, and local elected officials were all that mattered in deciding the hospital’s fate, the outcome would be clear.

State officials would approve the hospital’s sale to California-based for-profit chain Prime Healthcare, under terms similar to those for other sales that have allowed Prime to rapidly expand its footprint in the state.

But public-interest and consumer advocates are offering a critique of Prime that stands in stark contrast to the unanimous support the hospital sale received at a long-awaited public hearing last night.

These critics are urging the state to attach a series of conditions that they say will better secure the long-term future of Newark-area healthcare and give city residents the well-coordinated care that state officials have said they want to see in Newark and other cities.

Renee Steinhagen, executive director of New Jersey Appleseed Public Interest Law Center, said she will ask state officials to impose a series of conditions on the Saint Michael’s sale similar to those that California Attorney General Kamala Harris demanded earlier this year when Prime sought to buy the six-hospital Daughters of Charity chain.

Prime executives backed out of that purchase, saying that the conditions – which included calls to keep the hospitals open for 10 years and to maintain an extensive set of hospital services – were unprecedented.

The Saint Michael’s sale has remained bottled up in the state’s regulatory process for three years.

But the proposed sale got a series of boosts after the hospital filed for bankruptcy in August.

A bankruptcy court judge approved Prime’s acquisition of the hospital rather than a competing bid from another California for-profit chain, Prospect Medical Holdings.

Perhaps more importantly for completing the sale, state officials said that the hospital had completed its applications for a certificate of need and for approval under the Community Health Care Assets Protection Act (CHAPA). This formally starts a timeframe for the final decision on the sale.

Two public officials in particular will feel pressure to approve the sale: acting state Health Commissioner Cathleen Bennett, who will decide on the certificate of need, and acting Attorney General John J. Hoffman, who will decide, based on CHAPA, whether conversion of the nonprofit Saint Michael’s to for-profit status would benefit the public.

That was evident last night with the resounding show of support for Prime at a public hearing at New Jersey Institute of Technology’s campus near the hospital. Dozens of people spoke about what the hospital has meant for them, as patients and as employees.

Officials with the Department of Health and the Office of the Attorney General paved the way for the hearing by deeming the applications for state approval complete.

Prime has bought four other hospitals in the state – St. Mary’s Hospital in Passaic and St. Clare’s Health System in Boonton, Denville, and Dover. A foundation associated with Prime also recently announced its intention to buy Memorial Hospital of Salem County.

Prime officials have noted that they’ve never closed a hospital after buying it.

But critics like Steinhagen have questioned whether the hospital chain would maintain the services offered by former nonprofits. In addition, they’re concerned that Prime will cut less-profitable services, leading to nearby hospitals like state-owned University Hospital taking on more costs and weakening their finances.

They point to a state-commissioned report by Navigant Consulting that projected big losses at five Newark-area hospitals if they continue to compete instead of working together. The report recommended that Saint Michael’s, East Orange General Hospital, and Newark Beth Israel Medical Center be converted from full-service, acute-care hospitals to outpatient centers. Under these recommendations, University Hospital would be expanded and serve as Newark’s only acute-care hospital.

However, Saint Michael’s staff members have described Prime’s acquisition as the hospital’s best hope for the future.

Dr. Joaquin Correia, the hospital’s chief of cardiology, noted the facility’s long history of performing heart surgeries.

While critics of the proposed sale to Prime have focused on the need for better care coordination, supporters like Correia have emphasized the benefits of competition.

“We have to know what this battle is about – it’s about choice and access,” Correia said. “I think what they’re trying to do to healthcare in Newark is just, you know, unheard of. They want to put everyone in one big, giant pot and cook a batch of soup that can go wrong very quickly. We have to have choice, and choice drives excellence in medical care.”

Newark resident Hadren Simmons speaks in favor of the proposed sale of Saint Michael's Medical Center, saying the state should promote healthcare choices.
Newark resident Hadren Simmons repeated this theme, saying state government has promoted choice when it comes to schools, energy providers, and telephone service, adding that he doesn’t understand why the state isn’t promoting choice in healthcare.

Others focused on the quality of treatment they received at Saint Michael’s.

Patient John Agostini, a Nutley resident, credited hospital staff with saving his life by reviving him after his heart stopped repeatedly following a heart attack.

“I died four times,” Agostini said, adding that both doctors and nurses resuscitated him, prompting applause from the audience.

A series of local elected officials also praised the sale to Prime, with Newark Councilman Luis Quintana expressing concern that Saint Michael’s would join shuttered hospitals like Columbus and St. James and “become an eyesore,” if the state doesn’t approve the sale.

Councilwoman Mildred C. Crump cited “jobs, jobs, jobs” as reasons to support the sale.

“Newark cannot, nor can the county of Essex, afford to have another hospital closing,” she said.

File photo: Douglas Placa, executive director of hospital nurses union JNESO, speaks about the economic benefits Saint Michael's Medical Center brings to the Newark community.
Douglas Placa, executive director of hospital nurses union JNESO, added that the hospital and its workers spend money in the surrounding community.

Placa noted an estimate that the hospital’s annual economic impact on Newark totals $4.5 million.

“It’s a benefit, an important thing,” he added. “We’re going to continue to be loud and we’re not going away, and it’s important that the state knows that.”
But others who weren’t at the meeting remain skeptical of Prime.

In addition to the conditions required of Prime in California, Steinhagen would also like to see the state set the same conditions it imposed on Prospect Medical Holdings in its proposed purchase of East Orange General Hospital.

Those conditions include a commitment to working with other nearby hospitals and to reconsidering the number of inpatient beds at the hospital.

India Hayes Larrier, an organizer for New Jersey Citizen Action, said she agrees with Steinhagen. Hayes Larrier added that Prime’s stated commitments to keep Saint Michael’s open and maintain jobs there can’t be relied upon unless they’re mandated by the state.

Hayes Larrier added that while local residents have vocally supported the sale, that shouldn’t be the only factor that Bennett and Hoffman consider.

Hayes Larrier would specifically like to see the state require Prime to stay inside most health insurers’ networks, to keep the hospital open for 10 years, and to retain the hospital’s roughly 1,400 workers.

“I honestly think the community is being sold short,” if the state doesn’t impose these conditions, she said.

Prime spokesman Fred Ortega dismissed Steinhagen’s call for conditions similar to those required of the company in California. He contrasted her concerns with the praise at the public hearing, which he said was “overwhelming and humbling.” He added that Prime is “committed to preserving” Saint Michael’s and anticipates that state officials will treat the proposed sale “fairly.”

The public hearing in the Newark is the first of two hearings required as part of the certificate of need process. The second will be in front of the entire State Health Planning Board, which will then recommend to Bennett whether she should approve the sale.