The New Jersey State Health Planning Board has rejected the recommendation of the New Jersey Department of Health staff and delayed the approval of CarePoint Health’s planned sale of an additional 39.1 percent share of its ownership of the operations of Bayonne Medical Center to BMC Hospital, LLC.
This, combined with the existing 9.9 percent of operations ownership that BMC Hospital, LLC already had transferred to it from CarePoint, aimed to bring its total ownership of operations of Bayonne Medical Center up to 49 percent for a total of $4 million.
CarePoint has decided to exit the market, and has been selling its assets including Bayonne Medical Center. In 2019, it sold the property including the building and grounds to Avery Eisenreich, owner of the nursing home operator Alaris Health.
While CarePoint searched for entity to purchase the operations, Hudson Regional Hospital eventually purchased it from Eisenreich for $76 million in 2020. At the same time, CarePoint had announced they had signed an agreement to sell the operations to BMC Hospital, LLC, founded by the investors behind surgery center chain Surgicore.
However, when closing on the sale of the property, Hudson Regional Hospital announced its intentions to operate the hospital, sparking an intense battle over the operations of Bayonne Medical Center that ensued throughout much of 2020 and 2021. Since the start of 2022, there hasn’t been much movement, but now things are picking back up.
NJDOH recommendation rejected
BMC Hospital, LLC previously filed a Certificate of Need in November of 2020 to operate the facility and the NJDOH held a public hearing on the potential transfer in December of 2021 The transaction had been recommended for approval by the DOH, which had referred the matter to the board for review at its April 7 meeting.
But after the application was advanced by the Department, it was learned that CarePoint had unilaterally started the process of divesting itself of a controlling interest in Bayonne Medical Center by transferring those shares to an unfunded not-for-profit entity.
“As we argued to the Board, the transfer of CarePoint’s controlling shares in the hospital to a not-for-profit raises numerous regulatory and legal issues, in particular because CarePoint’s plan to step aside from its role as controlling shareholder leaves the continued source of funding to operate the hospital unclear, and the proposed minority shareholder, BMC Hospital, LLC has not been forthcoming with regard to its intended source of capital, if any,” said Thomas Abbate, counsel for Hudson Regional Hospital.
“These series of transfers being pushed through in isolated parts just do not add up to a whole. We expressed to the Board the concern that if CarePoint is permitted to cede its controlling interest and leaves behind an inexperienced minority shareholder and a newly-formed non-profit with no operational record or financial endowment, the consequences to the health care system are potentially grave. Hudson Regional has advised the Department of Health that it has serious concerns that the current ownership’s plan does not leave an adequate transition plan in place that is necessary to ensure Bayonne Medical Center’s future. We look forward to our arguments being vindicated in further proceedings before the Board.”
Application stayed until June
Because the commencement of the non-profit conversion materially changed CarePoint’s ownership structure and source of operating funds, and is the subject of a newly-filed certificate of need application that has not been deemed complete, the board rejected the DOH’s recommendation. The board sent BMC Hospital, LLC’s application back to the drawing board until at least its June meeting.
Hudson Regional Hospital, which owns the Bayonne Medical Center property, has pending litigation against CarePoint as a result of numerous defaults under its lease of the property, and has consistently objected to the proposed transfers on the grounds that it is not in the best interests of Hudson County residents.
“This is another instance of CarePoint attempting to engage in financial engineering at the expense of the health care system, and the Board rightly refused to go along with this plan,” said spokesman for Hudson Regional Hospital, Ron Simoncini. “If CarePoint is permitted to surrender its interests in Bayonne Medical Center to a newly-formed, cash-starved entity controlled by local politicians and their cronies, the potential for mischief is limitless. In the absence of a clear plan for financing of the needed capital and operational needs of the hospital, and without putting forth a skilled successor hospital operator with a track record of success, it is the taxpayers who would be left holding the bag if the current plan fails.”
Simoncini continued: “Clearly, CarePoint’s refusal to await proper regulatory approvals shows that its ownership is desperate to get out, and every step they make must be finely scrutinized or the community could bear the consequences. We have long-held that the purpose of transferring to a not-for-profit was to escape liabilities while enabling CarePoint to pull out management fees as the hospital continued to lose money. CarePoint said it was selling a minority position to BMC, but its real intention was to sell out the community.”
BMC Hospital, LLC looking ahead
In response to the ruling, a spokesman for BMC Hospital, LLC said the decision by the board was unrelated to CarePoint’s divestment: “We appreciate the work of Department staff and the members of the State Health Planning Board and the need to conduct appropriate diligence on this application. While we believe the limited ownership transfer application that was before the board this week has nothing to do with CarePoint’s ongoing efforts to move towards a non-profit structure, we fully expect to receive the boards ultimate approval in June.”
While BMC Hospital, LLC is optimistic about the June meeting of the State Health Planning Board, CarePoint Health did not immediately respond to requests for comment.
For updates on this and other stories, check www.hudsonreporter.com and follow us on Twitter @hudson_reporter. Daniel Israel can be reached at firstname.lastname@example.org.