New Owner Eager to Take Over Struggling South Jersey Hospital

Lilo H. Stainton | May 2, 2018 | Health Care
Powerful local politicians keep close watch; not all services that previously had been eliminated would be restored

Memorial Hospital of Salem County
South Jersey leaders are cautiously optimistic about the plans of a healthcare facility group to revitalize a long-struggling Salem County hospital, an operation that healthcare advocates and public officials agree is a crucial asset in a rural corner of the state.

Community Healthcare Associates LLC, an Essex-County based company, filed paperwork yesterday seeking state approval of an agreement it has reached with Community Health Systems, an unrelated company based in Tennessee that operates Memorial Hospital of Salem County, a for-profit, 126-bed facility in Mannington Township.

CHA has overhauled four community hospitals since it was founded a decade ago, creating “medical arts” complexes with multiple services, but not acute-care facilities. It has offered to pay the current owners $1 million for Memorial Hospital and return any cash on hand in hospital accounts, estimated at $3 million. But, in this case, its plan calls for it to protect the acute-care functions at the Salem County facility and operate this core as a nonprofit, while bringing in a mix of other providers, some of which may be for-profit businesses.

The proposed deal involves just a fraction upfront of the $15 million purchase price discussed three years ago — when California-based Prime Healthcare Foundation was interested in acquiring the facility — and likely reflects the economic and other challenges facing community hospitals during a time of evolving care, with a growing emphasis on prevention and out-patient treatment.

Founded in 1919 as a nonprofit community hospital, Memorial has reduced its size and the scope of services — eliminating maternity care and other programs — and has downsized its workforce. This situation has attracted close attention from a range of local and state leaders, including Senate President Steve Sweeney and Assemblyman John Burzichelli, two powerful Democrats who represent the region.

Hospital ‘continues to struggle’

“The circumstance is precarious at best,” Burzichelli said recently. “The hospital in its present state continues to struggle.”

While similar pressures have impacted facilities across New Jersey, Memorial is unique in that it could potentially get help from a community foundation — with more than $60 million in assets — that was created when the hospital was the first acute-care facility in New Jersey to be sold to a for-profit operator, in 2002. (That process was the result of a law, the Community Health Care Assets Protection Act, CHAPA, designed to protect public health during such hospital transfers; the vast number of these deals have involved bankrupt or near-bankrupt facilities, however, leaving few if any assets to be set aside.)

Sweeney and Burzichelli would like to see the funds from this group, the Salem Health and Wellness Foundation, support the hospital, something that can only happen if it operates as a nonprofit. Legislation they championed (S2247/A3615) to help protect these assets and ensure they are available for a nonprofit operator in the future sped through the Senate and Assembly in recent months and now awaits Gov. Phil Murphy’s signature.

Under scrutiny

“The County cannot bear losing this hospital,” Sweeney said last summer, while advocating for Inspira Health Network, a Camden County-based healthcare system that has also explored purchasing Memorial Hospital. The lawmakers have pledged to monitor the potential purchase closely as the state Department of Health reviews the deal in the coming months.

CHA founder and managing partner Bill Colgan, who served on Murphy’s healthcare transition team, outlined for NJ Spotlight the purchase agreement his company has signed with the current ownership of Memorial. He said CHA expects to spend another $20 million in physical upgrades, equipment purchases and other capital costs, with hopes that the Salem County facility will be financially stable in three years.

If approved by the state, Colgan said CHA plans to return the acute-care portion of the facility to nonprofit status, making it possible for it to tap into foundation funding. The company has met with the Wellness Foundation, as well as Sweeney and Burzichelli, and leaders of the Health Professionals and Allied Employees, a healthcare union that represents 120 nurses at Memorial but no detailed agreement has been reached with the foundation, he noted.

“Any organization that would depend on (the foundation’s) financing is making a huge mistake,” Colgan added. Officials at Memorial Hospital did not respond to a request for comment.

Pledge of ‘significant investment’

Colgan said CHA is now evaluating the 225,000-square-foot Salem County facility and its equipment and has pledged to make a “significant investment” to provide quality patient care. “Our focus is really going to be rebuilding medical staff and regaining confidence of the community,” he added, noting they also aim to protect the current jobs.

CHA plans to retain the emergency department, Colgan said — an essential function for the community, given the limited options in the region — and will seek to rebuild or add other services, some of which will be run by for-profit contractors. This hybrid model could mean the return of angioplasty services at some point, he said, or the creation of a behavioral health unit, since Memorial received state approval to add 26 beds for in-patient psychiatric services as part of former Gov. Chris Christie’s effort to expand access to treatment options.

“We will right-size the hospital,” Colgan said, noting CHA’s focus on scaling services to meet the ongoing transition from inpatient to outpatient care.

That does not mean restoring all the services that have been eliminated in recent years, Colgan warned. For example, CHA has no plans to run a birthing center again — because of quality concerns, not economic calculations, he stressed. With a handful of hospitals already competing for a limited number of births, Colgan said CHA fears it would not be able to attract enough volume to ensure proper patient outcomes.

“We don’t want to mislead anyone,” said Colgan. “We will not run any health services that pose a health risk to anyone.”

‘Medical malls’

Protecting the region’s essential healthcare services, including obstetrics, is the goal for leaders like Burzichelli and Sweeney, whose district is based in adjacent Gloucester County. They worry about the impact of potential reductions at Inspira Medical Center in Elmer, on the other side of the county, and how more residents are now traveling to hospitals operated by the Christiana Care Health System, across the river in Delaware.

Burzichelli also raised concerns about CHA’s approach, which has involved the creation of what he termed “medical malls,” or office complexes that house multiple providers. But Colgan stressed that, while the company does pursue new models, the leaders all have a solid background in hospital operations. “We’re not real estate guys, we’re healthcare guys,” he said repeatedly.

Leaders at the Salem Health and Wellness Foundation, who have at times clashed with Burzichelli and Sweeney over the foundation’s role as a steward for public health assets, are encouraged by the plans CHA has outlined. The foundation has granted $15 million since it began to help Salem County communities purchase defibrillators, expand nutrition programs, and build walking paths, among other efforts. But if the hospital were under a nonprofit structure, the law would allow the foundation to play a more direct role in its work.

Keep jobs in the community

Brenda Goins, the foundation’s executive director, said the group is now working with CHA and the current hospital leadership to support the facility’s future. “We want to see the hospital strong. We want to see it stay as an acute care hospital. We want to keep the jobs in the community,” Goins said last week.

Officials at HPAE, which represents 13,000 healthcare professionals nationwide, have similar aims to protect care, but are wary of CHA’s hybrid business model. The union has engaged in lengthy legal battles with the owners of other for-profit facilities, including the former Meadowlands Hospital Medical Center, which was sold to another for-profit owner in December and renamed Hudson Regional Hospital.

“Salem County deserves to have a voice in how their hospital can meet the health care needs of the community, not the business interests of the owner,” said HPAE president Ann Twomey. “As CHA proposes to take over Memorial Hospital of Salem County the nurses will engage State regulators and the new owners to advocate for strong conditions to maintain current healthcare services, protect patient care and the rights of employees at the hospital.”

Other CHA facilities in New Jersey include:

  • Barnert Medical Arts Complex, in Paterson, a 265-bed, 100-year-old operation that declared bankruptcy in 2007 and was obtained by CHA the following year. The facility now includes doctors’ offices, behavioral health services, a women’s health practice, a lab and outpatient surgery.
  • Greenville Medical Arts Complex, in Jersey City, a former satellite facility for Jersey City Medical Center that closed in 2013. CHA renovated the building and now leases space back to JCMC to operate behavioral healthcare, social services and other programs on a nonprofit basis.
  • William B. Kessler Medical Arts Complex, in Hammonton (Atlantic County), which CHA purchased in 2011 and has turned into a hub for addiction care, with an outpatient surgery and sleep clinic. The 100-bed hospital was closed in 2009 and became a satellite emergency department for AtlantiCare, the region’s main healthcare provider, until it went bankrupt a few years later.
  • Muhlenberg Medical Arts Complex, in Plainfield (Union County), which CHA said it scheduled to reopen soon. The 140-year-old facility once held 355 beds and employed more than 1,000 people — the community’s largest source of jobs — but closed in 2008. JFK Medical Center had run a satellite emergency department there until CHA took over last year and began what the company said is a $56 million renovation that will result in 600 permanent healthcare jobs.