At East Orange Hospital, Questions Abound, Answers Remain Elusive

Lilo H. Stainton | October 1, 2019 | Health Care
Financially troubled Essex County facility hasn’t filed for $7.5 million in taxpayer funds, seeks state permission to switch to not-for-profit model
East Orange General Hospital
East Orange General Hospital

Three months after New Jersey officials suddenly offered $7.5 million in taxpayer funds to help an economically struggling Essex County hospital expand its behavioral health program and become more financially viable, the facility — East Orange General Hospital — has yet to file the paperwork required to access any of its unique grant.

But EOGH leaders, who have been trying to sell the facility in recent months, have sought state permission to convert it from a for-profit to a not-for-profit model. According to paperwork filed with the state Department of Health in July, that is the only way to ensure the hospital doesn’t change hands or close its doors.

“The only available options to the proposed conversion include a transfer of ownership or the closure of the hospital. Closure was considered and determined to be an option of last resort in view of the volume of patient activity at EOGH and the potential impact on patient access to service area residents,” hospital officials wrote in their request to the DOH.

The conversion “will provide the best opportunity for the residents of the East Orange service area to maintain access to necessary health services in their community,” they said in the filing. The DOH has another month to decide on the hospital’s request.

The application — which NJ Spotlight obtained through the state’s open public records law — provides no detail on how exactly nonprofit status would be financially beneficial, but it notes the change would enable the hospital to better engage with community leaders, access funding currently off-limits and save on prescription drugs.

The paperwork also states the conversion would not include downsizing services or cutting programs and claims the hospital will retain “substantially all” of its current staff under the new plan. Prospect Medical Holdings, the Delaware-based for-profit firm that owns EOGH and 19 other hospitals in a half-dozen states, would continue to oversee daily operations of the Essex County acute care operation.

Hospital officials keeping mum

Officials at East Orange hospital declined to respond to repeated requests for comment on their plans to obtain and use the state funding, or their proposal to convert to a nonprofit business model.

According to the DOH however, the hospital’s grant application is also in the works. “East Orange is in the process of submitting their plan. They have been sent guidelines consistent with the statutory language and are working with the DOH grants team to submit appropriate information,” said Dawn Thomas, a department representative. But nothing had been submitted for state review as of Friday.

While most hospital funding is generally assigned through statewide, formula-based programs, on June 30 Gov. Phil Murphy signed the measure to allocate $7.5 million from the state budget to the special East Orange grant program, the terms of which are now being developed. (The budget would also allocate some $4.4 million in charity-care dollars for EOGH, as well as other funds.) The next day — July 1 — East Orange CEO Paige Dworak submitted the not-for-profit conversion request to DOH officials.

No answers from owners

Prospect Medical Holdings — which also declined to comment on the potential business-model change or the state grant — purchased the bankrupt East Orange hospital in 2016 and has made more than $26 million in capital improvements in the years since. EOGH now owes Prospect more than $60 million, although the parent company has said it will not collect in a way that threatens care.

But with significant competition — EOGH lists 10 other hospitals in its market area — and limited revenue, Prospect has struggled to balance the hospital’s books and is eager to sell it to another hospital system. The state conversion application lists more than a half-dozen hospital systems and other potential investors that Prospect spoke with recently about a potential sale.

In the past few years, the hospital has rarely filled more than half its 200 beds, nearly 40 of which are now devoted to psychiatric care. Between 2017 and 2018 alone, revenues declined by more than 10 percent, while total liabilities nearly doubled and losses grew more than five times, according to the application.

The potential loss of EOGH remains a concern for former acting and current state Sen. Gov. Richard Codey (D-Essex), who represents the area and has long been an advocate for mental health services. He pushed for the supplemental funding during the budget negotiations in June.  More than two-dozen hospitals in New Jersey have closed since 1992 — including several in Essex County — and at least eight, including EOGH, have declared bankruptcy.

Codey said that he asked DOH officials about the funding for EOGH in early September, after a hospital executive he was meeting with asked him for an update. The DOH assured him the process was in motion, he said Monday, and hospital officials have yet to come back to him with any concerns.

“They were in here Friday and it didn’t come up,” Codey said of the EOGH leaders, who were there to discuss other issues.  EOGH has also struggled to meet some quality metrics, with the Leapfrog Group, a national hospital watchdog, assigning the hospital an “F”  – the state’s only facility to get a failing grade — on its latest safety grade report, published last fall.

When lawmakers arranged for the funding in June, an EOGH communications representative  — who is no longer employed by the hospital — said the facility looked forward to expanding its mental health and addiction services to better meet the need in Essex County, which has some of the state’s highest rates of opioid addiction and overdose. The representative declined to comment on the potential for a sale or closure at that time.

According to the conversion request, EOGH is one of three hospital-based screening services for addiction and mental health needs in Essex County and these programs benefit some 3,500 people annually. Eliminating this offering would not only burden patients, but would create overcrowding at other facilities, officials suggest.

East Orange, which was founded more than a century ago, has established behavioral health services for adults and teens, including short-term inpatient and various outpatient programs; staff can treat serious mental illness, substance abuse and other issues, according to the hospital website.

“As an urban center, East Orange General Hospital has faced many challenges to maintaining fiscal solvency,” hospital officials wrote to the DOH. “This conversion to a not-for-profit corporation, with a community-based Board of Trustees, will engage local community leaders to work together with Prospect Medical Holdings as the manager to insure long-term stability and success. This will provide the best opportunity for the residents of the East Orange service area to maintain access to necessary health services in their community.”