Local officials seek state intervention in Hudson County hospital crisis

Four mayors joined the County Executive in asking for NJ Department of Health assistance

Bayonne Medical Center sits at the center of the crisis.
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Bayonne Medical Center sits at the center of the crisis.

Another chapter has been added to the never-ending tale of three Hudson County hospitals.

Hudson County Executive Tom DeGise has now asked New Jersey Department of Health Commissioner (NJDOH) Judy Persichilli for help in ending the ongoing saga.

CarePoint Health is dissolving and has been liquidating its assets, including Bayonne Medical Center (BMC), Hoboken University Medical Center (HUMC), and Christ Hospital.

Avery Eisenreich, owner of nursing home operator Alaris Health, purchased the land of BMC and HUMC in November of 2019. CarePoint has been searching for a hospital operator for the facilities ever since, eventually signing a formal sale agreement with BMC Hospital LLC to operate the hospital in Bayonne.

CarePoint has also signed a letter of intent with RWJBarnabas Health whereby RWJBH would acquire operations at both HUMC and Christ Hospital.

Four mayors, including Mayor James Davis of Bayonne, Mayor Ravi Bhalla of Hoboken, Mayor Steven Fulop of Jersey City, and Mayor Brian Stack of Union City, as well as Hudson County Improvement Authority (HCIA) CEO Norman Guerra, have also signed a letter calling for a state solution.

In response to the chaos

The officials have penned the letter to express their concern regarding the long term viability of the hospitals.

According to the letter: “This distress and concern has been heightened exponentially in the light of the worldwide pandemic where our county has been a part of the regional epicenter of the COVID-19 pandemic in the United States and the world.”

The plea to Persichilli comes in response to the events pertaining to the Hudson County hospitals from last week, when both CarePoint and Hudson Regional Hospital (HRH) made their respective announcements within hours of each other on Tuesday.

“And now, as implausible as it seems, the situation has devolved into further chaos and uncertainty,” the letter said. “Based upon press releases and our due diligence over the past 72 hours, the [property owner entities] have allegedly structured a deal to lease or sell certain assets with a new potential third party buyer/ operating entity Hudson Regional Hospital at the same time that [CarePoint] has allegedly finalized a deal with a new operator for Bayonne Hospital.”

As a result, CarePoint has filed a temporary restraining order against HRH, claiming it is in breach of contract regarding a confidentiality agreement between CarePoint and HRH. The New Jersey Superior Court ruled that HRH had not breached the confidentiality agreement with CarePoint.

Rumors of repurposing the hospital

“As you are aware, there is a long and tortured history between the property owner entities and the CarePoint operating entities,” according to the letter. “Furthermore, litigation brought by [CarePoint] against the property owner entities is replete with serious allegations of tortious conduct.”

The elected officials reference ongoing lawsuits by CarePoint against Eisenreich as well as Eisenreich’s subsequent counterclaim.

“Eisenreich’s admitted intent is to cause Bayonne Medical Center to close as an acute care hospital to enable him to “repurpose” it as a long-term care facility or nursing home similar to the facilities that Defendant Alaris Health (and Eisenreich) operates,” according to the lawsuit by CarePoint against Eisenreich.

The elected officials echo this claim, alleging in the letter that Eisenreich wants to “repurpose it as a long term care facility or nursing home,” also asserting that his new dealings with HRH threaten the potential closure of one or more of the hospitals.

Alleged overlap of ownership and management

The letter raised questions about an alleged overlap in ownership and corporate membership or shareholder interests between the operating companies and management companies providing management services

The letter alleges this overlap raises serious questions about “related party transactions” and a resulting “lack of transparency and accountability in their financial operations” cited in the State Commission on Investigation report on the matter from March 19 of 2019.

This references Eisenreich’s allegations in the ongoing litigation that the CarePoint owners have allegedly been operating “shell companies” and were allegedly “embezzling millions of dollars from the three hospitals.”

CarePoint’s owners are Vivek Garipalli, James Lawler, and Jeffrey Mandler, with Garipalli owning the majority interest in each hospital.

According to Eisenreich, the three owners are also allegedly managers and controlling members of limited liability corporations that operate and control the three hospitals, as well as the third parties that provide management services to the hospitals.

HRH said that the genesis of the hospital issue is the State Commission on Investigation report from 2019, mentioned in the letter. HRH echoed the report’s findings, aforementioned by Eisenreich in the ongoing litigation, which found that CarePoint distributed more than $150 million to its owners “while relying on public subsidies.”

“In the face of these reports, allegations, and correspondence, the residents and taxpayers of Hudson County, and our three cities in particular, grow increasingly anxious and weary that quality acute care medical services are at risk of evaporating at a time when such services are at a premium and the scientific community attempts to prepare us for the inevitable second wave of COVID-19,” the letter said.

A plea for help

The allegations on both sides have accumulated to the point that a state solution seems to be the elected official’s answer to the conundrum.

“The chaos and uncertainty must end,” the elected officials said in the letter. “We must act now to prevent these facilities from being cannibalized at a time when our cities need them the most and to assure that our communities will be properly served in the future.”

In the letter, the elected officials called for an “intense due diligence and feasibility analysis and possible exercise of eminent domain power to acquire the facilities to provide for stable, long term acute medical services.

The Hudson County Board of Freeholders adopted a resolution in May to allow the HCIA to start exercising their power of eminent domain.

The letter called for the use of regulations under the Healthcare Facilities Planning Act to compel CarePoint to “provide information that will be essential to our appraisal of the value of the facilities in an eminent domain proceeding and a feasibility analysis regarding a viable structure for continuing operations.”

Under the provisions of the Emergency Health Powers Act, the elected officials believe that the NJDOH has the necessary powers to aid them in seeking “financial solutions” to preserve the hospitals.

Last, the officials asked for a meeting to discuss how to “move forward together to protect our residents in the face of these daunting challenges.”

The hospital war continues

CarePoint reiterated its support for eminent domain proceedings.

“CarePoint wholeheartedly supports the eminent domain efforts of the County Executive, the Mayors of Bayonne, Jersey City, and Hoboken, and Senator Stack,” according to a spokesperson for CarePoint. “CarePoint will continue to provide all information necessary to the Hudson County Improvement Authority and the Department of Health, and stands with officials that the ultimate goal is to ensure the preservation of the hospitals and the services they provide to the communities.”

CarePoint said that its physicians, nurses, employees, and staff echo the concern that the current landowner continues to “hijack the process that will ensure the stability and future of these critical acute care hospitals.”

“The focus of our heroic physicians, nurses and employees should be on patient care and preparing for a second wave of the pandemic, not whether greedy landowners and real estate developers are threatening the future of the hospitals,” according to CarePoint.

HRH has issued a response to the letter, in support of the request for the NJDOH to “intervene to sort out the County’s interest in the competition to operate acute care facilities here.”

“Hudson Regional Hospital already is the property owner of Bayonne Medical Center and Hoboken University Medical Center as a result of its pending acquisition of those properties for $76 million and $144 million respectively and is the only hospital operator to submit and offer to buy all three CarePoint hospitals,” according to a spokesperson for HRH.

A proposed healthcare network

HRH said it is committed to creating a healthcare network in Hudson County through its plan to marry the hospital properties to the hospital operations under “stable financial ownership.”

“We came back into this conversation because we know that Hudson County cannot afford to float bonds to buy these hospital properties and then lease them to an unproven operator selected by the seller,” HRH continued.

According to HRH, its plan resolves most of the issues outlined in County Executive DeGise’s letter.

“We have long been confused by why it is so urgently important in the midst of a pandemic that CarePoint sell its Bayonne operations to BMC Hospital LLC, which has no experience operating an acute care facility, and commence expensive and frivolous litigation rather than accept an equal offer from Hudson Regional,” according to HRH.

HRH agreed that the County Executive and the four mayors are correct to express their concerns in their letter to the NJDOH and reiterated its readiness to operate the three hospitals.

“We are prepared to assume operations at a moment’s notice,” according to HRH.

HRH expects that DeGise’s letter will be referred to the attorney general of New Jersey. HRH said it is confident that he will come to legal conclusions in its favor.

Four points of contention

HRH believes the attorney general will agree that there are no legal grounds to prevent HRH from buying the Bayonne and Hoboken hospital properties. HRH also believes that the attorney general will rule that CarePoint cannot assign its lease and that a Certificate of Need cannot be issued to BMC Hospital Corp. because it does not control the Bayonne property.

HRH is also confident the attorney general will find that eminent domain cannot be used in this situation, when a licensed hospital operator is the property owner and is restricted to only operate hospitals on these sites as a condition of its deeds.

“We believe that the result of all this will be the conclusion that Hudson Regional Hospital, which has demonstrated high-performance in healthcare, in particular in its response to COVID-19, and that is committed to operating a network of Community Hospitals under its proven model, will prevail,” according to HRH.

For updates on this and other stories, check www.hudsonreporter.com and follow us on Twitter @hudson_reporter. Daniel Israel can be reached at disrael@hudsonreporter.com.