For Christ Hospital President and CEO Peter Kelly, last week began with a letter to Jersey City Heights residents touting the benefits of the hospital’s pending sale to a California-based company that – he promised – would invest millions in the medical facility and save it from closure.
By the week’s end, the hospital’s prospective buyer had backed out of the deal, and the hospital’s board of directors had agreed to file for bankruptcy, if necessary.
Christ Hospital is currently one of only three hospitals in Hudson County that remain non-profit, and one of two hospitals remaining open in Jersey City. Three other hospitals in the county have been sold to private owners, which sometimes resulted in their not accepting as many insurance plans as before.
For residents and community activists who for months questioned the track record of the prospective buyer of Christ Hospital, last week’s turn of events was hailed as something of a victory.
Bids from Holdco and LibertyHealth/CHA dwarfed Prime’s $15.7 million offer.
But almost immediately, concerns were raised about Prime after it was learned that the company was the target of multiple investigations into its medical and business practices. This, coupled with the fact that Christ and Prime wanted the hospital sale to be expedited and completed by Dec. 31, 2011, led officials in New Jersey to closely scrutinize the deal. The added scrutiny may have proved too much for a company that tried to remain in the background while Kelly championed the deal to skeptics.
This past Wednesday, Feb. 1, Prime backed out, saying, “Out of respect for the wishes of those in the Hudson County community that Christ Hospital remains as a not-for-profit hospital, we respectfully withdraw our bid to purchase the hospital.”
The future of the hospital is now in limbo.
“It’s up to Christ’s Board of Trustees to save the hospital now,” said Ann Twomey, president of the Health Professionals and Allied Employees (HPAE), the union that represents 400 registered nurses at Christ Hospital. “They’re in a difficult position because they spent a lot of time on a problematic buyer. Many people predicted this sale would never go through.”
Other prospective buyers have made offers to purchase the facility, but whether Christ will consider them is unclear.
What killed the deal?
Early last week, when the deal to sell to Prime Healthcare Services was still alive, Peter Kelly wrote to residents in the Heights, asking them to “pledge [their] support for this sale” by signing an online petition on the hospital’s web site.
“We are confident that the sale of Christ Hospital to Prime is in the best interest of our residents,” Kelly wrote. “We share a common goal – to sustain our community hospital so that we can continue to serve each and every one of you.”
These letters were still arriving in mailboxes when the deal died days later. So what led Prime to back out?
Some observes said the answer may lie in questions asked by the state attorney general and the New Jersey Department of Health and Senior Services, two of the agencies charged with reviewing the details of hospital sales and transfers.
“Certain aspects of this sale were being scrutinized in a way that probably made Prime uncomfortable,” one health care industry executive speculated.
Jeanne Otersen, spokesperson for HPAE, agreed. “If you look at the questions that were being asked, especially by the attorney general, I think they’re very informative.”
Among the requests made by DHSS were “track record reports for all of the listed facilities owned by Prime Healthcare for the preceding 12 months.” DHSS staff specifically requested that these documents “come from the California state agencies responsible for licensing those facilities and indicate the degree of compliance with all state and federal requirements.”
Several California agencies either are or have investigated Prime Healthcare. Most recently the California Bureau of Investigation launched an inquiry into the company’s Medicare billing practices.
The DHSS also wanted to know “the number and percentage of patients [who] were admitted through the Emergency Department over the past two years, [and] the number and percentage who were out-of-network in terms of insurance status.” In addition, DHSS staff wanted to know how Prime’s in-network/out-of-network emergency room admissions compared to those of other California hospitals.
Prime was investigated for admitting large numbers of out-of-network patients to its emergency rooms as a way to boost company profits.
Last year, California Attorney General Kamala Harris denied Prime’s application to buy Victor Valley Community Hospital. Publicly, Harris stated the sale would “not be in the public interest.” New Jersey’s DHSS asked to see the full rationale she provided to Prime officials.
New Jersey’s attorney general also had questions about the sale. Specifically, the attorney general asked whether Kelly already had a contract with Prime to continue working for Christ after the sale was approved. Kelly has publically stated that he would remain at Christ after the sale was finalized, but insisted he did not yet have a contract with Prime. But the attorney general planned to make its approval contingent on seeing the details of any work offered to Kelly.
Oddly quiet about other offers
As questions about Prime’s track record continued to be raised by residents, public officials, and local newspapers, Prime CEO Lex Reddy remained completely silent and in the shadows. Requests for interviews were either ignored or were “answered” by referring the reporter to old press releases on the company web site.
With Reddy absent from the debate surrounding the sale, this left Kelly to shoulder the responsibility of defending the sale and Prime’s track record, a role Kelly readily accepted – at first. He was accessible for interviews. He appeared at a City Council meeting in October to ask the members not to pass a resolution opposing the sale. (The council ignored his plea and unanimously passed the resolution anyway.) He participated in a December community forum of the sale.
Eventually, though, Kelly withdrew from public discussions of the sale – particularly when seemingly better offers were put on the table.
In late December, Hudson Hospital Holdco LLC– which already owns Bayonne Medical Center and Hoboken University Medical Center – made a bid to buy Christ for $91.6 million. This offer also came with $10 million in emergency financing to help keep the hospital open to allow the Christ board an opportunity to explore purchase options from several prospective buyers.
Christ flatly rejected Holdco’s offer days after it was made.
LibertyHealth System, which owns Jersey City Medical Center, has made two offers to buy Christ, the most recent of which was a combined bid with Community Healthcare Associates (CHA) for $104.3 million.
These bids from Holdco and LibertyHealth/CHA dwarfed Prime’s $15.7 million offer. Still, Kelly remained committed to the Prime deal, leading some to speculate that the company had made him some very lucrative promises.
“You can’t have a financial gain from this kind of hospital conversion,” said one observer who believes Kelly may have navigated the agreement with Prime without much guidance from Christ’s Board of Trustees.
Last Wednesday the Christ Hospital board authorized a bankruptcy, should such a move be necessary to keep the facility open.
A statement issued on behalf of Christ’s board of trustees read, “At this meeting the Board of Trustees of Christ Hospital unanimously approved authorizing the filing Chapter 11 reorganization — if necessary — in order to maintain financial stability and to preserve its commitment to its patients. A reorganization would ensure that Christ Hospital continues to serve the community as an acute care facility here in Hudson County.”
Spokesmen for Hudson Holdco and LibertyHealth said their offers are still on the table.
“We made an excellent offer, which still stands,” said Holdco spokesman Spencer Baretz. “The ball is in their court.”
Mark Rabson, a spokesman for Jersey City Medical Center, said in a statement, “Our first concern is to [ensure] Christ Hospital continues to operate and provide uninterrupted service to the people of Jersey City and Hudson County. We stand ready to work closely with the leadership at Christ Hospital, the board of trustees, the medical staff, the Department of Health and Senior Services, and the community to facilitate the process.”
Both offers include up-front cash financing for the hospital that would provide money for operating expenses until the purchase is complete.
Christ spokesman Paul Hebert refused to answer whether Christ will entertain either of these offers. Three attempts to contact Kelly for a response to Prime’s decision were not answered.
“The board has a fiduciary responsibility to get the best deal for the hospital and keep within its mission,” said Otersen. “That means they have to move quickly. They have to be smart. They have to be transparent. Everybody has to keep the pressure on the board to do this differently from here on.”
E-mail E. Assata Wright at firstname.lastname@example.org.