Legislators call for oversight of BMC real estate transaction

State Assemblyman Chiaravalloti and state Senator Vitale urge the DOH to take action

Bayonne Medical Center remains at the center of the crisis. Photo by Daniel Israel.
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Bayonne Medical Center remains at the center of the crisis. Photo by Daniel Israel.

State officials have penned a letter to the New Jersey Department of Health (DOH) regarding the oversight of hospital real estate transactions.

State Assemblyman Nicholas Chiaravalloti and state Sen. Joseph Vitale wrote the letter to DOH Commissioner Judith Persichilli because they “are perplexed by the Department’s decision to waive the [certificate of need] requirement for the sale of the real-property where Bayonne Medical Center sits.”

A certificate of need (CN) is a regulatory process that governs the construction, relocation, or renovation of certain healthcare facilities. Chiaravalloti and Vitale want to discuss the matter with Commissioner Persichilli as soon as possible.

The crisis drags on

CarePoint Health is dissolving and has been liquidating its assets, including Bayonne Medical Center, Hoboken University Medical Center, and Christ Hospital in Jersey City.

Avery Eisenreich, owner of nursing home operator Alaris Health, purchased the land of BMC and 70 percent of the land of Hoboken University Medical Center in November of 2019.

CarePoint has been searching for an operator for the facilities ever since, eventually signing a formal sale agreement with BMC Hospital LLC to operate Bayonne Medical Center. BMC Hospital LLC’s leadership is composed of investors from the surgery-center chain Surgicore.

CarePoint has also signed a letter of intent with RWJBarnabas Health whereby that company would acquire operations at both Hoboken University Medical Center and Christ Hospital.

Meanwhile, Hudson Regional Hospital in Secaucus has closed on the purchase of the real estate of BMC for $76 million and is in contract with Eisenreich to acquire Hoboken University Medical Center for $144 million.

When the sales close between Eisenreich and Hudson Regional Hospital, HRH intends to operate the hospitals, not BMC Hospital LLC. This has sparked a war between the two entities over who will operate the hospitals.

In August, Bayonne Mayor James Davis wrote to Gov. Murphy, reiterating his support for BMC Hospital LLC, voicing his frustration with the DOH’s process regarding applications to operate Bayonne Medical Center, and asking the governor for his direct intervention. Davis previously wrote to the NJ Department of Health, along with other local officials including Chiaravalloti, pleading for state intervention, to no avail.

Now, state officials are once again asking the state to intervene.

Calling for increased oversight

“Over the past 10 years, we have observed a proliferation of “sale-lease-back” arrangements, as well as direct purchases of for-profit hospital real estate,” Chiaravalloti and Vitale said. “This has resulted in a pattern that can reasonably be described as resembling ‘the wild west.’ One has to look no further than the current situation at multiple hospital locations in Hudson County to see the result of the lack of department oversight.”

Chiaravalloti and Vitale stipulated that the DOH has the power to fully vet hospital real estate transactions by providing oversight and requiring a review process. They urged the DOH to do so in the case of Bayonne Medical Center.

“In the absence of diligent review at the outset of these purchases, the state is leaving the land hospitals sit on in the hands of obscure ownership structures, that in many instances obfuscate any future efforts to regulate them. All we know about them are the LLC names they use and the legal gamesmanship they so often play on the state to block oversight efforts.”

Chiravallotti and Vitale said that whether or not the DOH has historically used its oversight powers is irrelevant.

“The state has not historically encountered what we see unfolding in relation to Bayonne Medical Center,” they said. “The reality is that the decision not to exercise the department’s power exposes the New Jersey health care system to vulnerability. We are asking the department to reverse this inaction and exercise its full powers.”

HRH clarifies ownership; welcomes transparency

In a statement in response to the letter, a spokesperson for Hudson Regional Hospital (HRH) said that there is “no confusion as to the ownership of the Bayonne Medical Center property or the role of the state in oversight of hospital properties.”

HRH purchased Bayonne Medical Center in August and said the validity of its purchase has been repeatedly affirmed by Hudson County Superior Court Judge Jeffrey Jablonski. HRH and BMC Hospital LLC have been embroiled in a lawsuit for “obstructing an agreement” between BMC Hospital LLC and CarePoint where BMC Hospital LLC would take over operations.

“The interest in transparency being expressed by public officials is something we welcome,” a spokesperson for HRH said. “We have consistently invited officials to meet with us to hear our intentions and perspective on these matters and in fact several of these meetings have been held.”

HRH said that it supplies regular updates and financial reports to the Department of Health that are available to the public. According to HRH, the purchase of the Bayonne Medical Center property should be regarded as stabilizing healthcare in Hudson County.

“In the event that CarePoint were to unexpectedly exit its operation, we stand ready to step in more capably than any other acute care provider,” a spokesperson for HRH said, noting that the CEO of HRH, Dr. Nizar Kifaieh, was previously a CarePoint executive who was interim-CEO of Bayonne Medical Center.

“Further, we want to assure the community that Bayonne Medical Center’s future is more assured than at any time in its recent history.”

BMC Hospital LLC echoes calls for oversight

Meanwhile, BMC Hospital LLC also welcomed calls for increased transparency.

“Senator Vitale and Assemblyman Chiaravalloti are absolutely correct in saying that the Department of Health should exercise oversight when buyers seek to purchase land upon which hospitals are located,” President of BMC Hospital LLC Wayne Hatami said in a statement.

By not doing so, any person or group is able to purchase hospital land without proper vetting from DOH, even if that person or group has bad intentions or been accused of wrongdoing.”

Hatami echoed Chiaravalloti, attacking the DOH’s decision to wave the certificate of need requirement.

Hatami continued: “Unfortunately, the department has so far declined to exercise these responsibilities in the case of Bayonne Hospital, leaving tens of thousands of patients uncertain about their future health care. BMC Hospital LLC is the only entity with the qualifications and financial resources to operate Bayonne Hospital and the only group willing to participate in a full certificate of need process.”

Eminent domain proceedings ongoing

HRH alleged that BMC Hospital LLC’s plan to acquire Bayonne Medical Center requires that the property be purchased through eminent domain and that the county will lease the land to BMC Hospital LLC at a reduced rate.

“In particular, when we learned that the BMC LLC bid to operate Bayonne Medical Center was reliant on public subsidies in the form of eminent domain and discounted rent, we advised that there was no need for taxpayers to bear this expense when we were interested in purchasing the facility without government funding,” according to a spokesperson for HRH.

“Subsequently, we purchased the property and it remains in operation through CarePoint Health, our tenant. We are available to meet with any and all authorities and elected officials to pursue further conversation on this and any other pertinent healthcare matter.”

In May, the Hudson County Board of Commissioners approved three resolutions invoking eminent domain on the three CarePoint Health hospitals.

The Hudson County Improvement Authority (HCIA) has notified the property owners and operators of the three hospitals that an inspection of each facility will be conducted by the authority’s real estate appraisal experts, according to HCIA spokesperson Caitlin Mota.

As lawsuits drag on, the hospital crisis in Hudson County appears far from over.

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