Saint Michael's Medical Center fights to preserve acute care status

May 15, 2015

By JULIE MINDA

In the wake of a consultant's report recommending to the state of New Jersey that — among many other proposals — Saint Michael's Medical Center of Newark, N.J., transition from an acute care hospital to an ambulatory care facility, the hospital's leadership is urging the state not to implement that plan. The leaders said the state should instead approve the hospital's continuation as an acute facility under proposed ownership by Prime Healthcare Services of Ontario, Calif.

The 357-bed Saint Michael's signed an asset purchase agreement with the for-profit hospital management company in February 2013. When Catholic Health World went to press, the certificate of need for the purchase was awaiting approval by New Jersey's Department of Health and the deal awaited approval by the New Jersey attorney general.

In the meantime, the New Jersey Health Care Facilities Financing Authority — the state's bond issuing entity — commissioned Navigant Consulting to produce a study of the health care market in the greater Newark area. The resulting report issued on March 2 said the region's health care providers have excess capacity of inpatient beds; significant duplication of services; worsening financial challenges, despite receiving state subsidies; aging facilities; few off-campus outpatient services; and poor connectivity with post-acute care providers.

Navigant recommended in its report that Saint Michael's and East Orange General Hospital of East Orange, N.J., become ambulatory care facilities, and that select services be consolidated at Newark Beth Israel Medical Center. The consultant also proposed Newark Beth Israel and University Hospital of Newark be integrated and the University Hospital campus be expanded.

Navigant said in the report that ownership changes that Saint Michael's and East Orange currently are pursuing would not solve the region's health care delivery system problems. (East Orange signed an asset purchase agreement with Prospect Medical Holdings in February 2014.)

In April, Saint Michael's released a response to the report, concluding that the Navigant recommendations would create a monopoly in inpatient hospital services in the Newark area, potentially causing price increases amounting to as much as
$180 million annually. Additionally, the recommendations would cost at least 1,000 jobs, and expose New Jersey taxpayers to $50 million in additional obligations, according to the response.

"We believe that the Navigant recommendations are bad for Newark, bad for New Jersey and especially bad for health care consumers," said David A. Ricci, president and chief executive of Saint Michael's. "Monopolies harm the public and the Navigant recommendations, if enacted, would create a monopoly.

"We urge the state to approve the sale of Saint Michael's Medical Center to Prime Healthcare so it can maintain (the hospital's) current level of emergency, primary and specialty care," said Ricci.

Ricci added that the Prime deal provides a path to sustainability, with Prime promising to invest at least $25 million in Saint Michael's facilities, technology and staff. Prime also has agreed to maintain the hospital's current levels of charity care, he said.

"Prime has never closed or sold a hospital it acquired," Ricci said. It "has saved 23 acute care hospitals from closure; Prime will bring this experience to Saint Michael's."

About two years ago, Prime's purchase price for Saint Michael's was $50 million, and while that price has fluctuated over time, it now is around that number, Ricci said.

According to its proposed agreement, Prime will operate Saint Michael's "in a manner consistent with the Ethical and Religious Directives for Catholic Health Care Services," according to Ricci.

Ricci said, "We will continue to fight for Saint Michael's to preserve its acute care status, to protect jobs and to continue down our established path toward sustainability."

 

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