As phones ring across Hoboken urging residents to call legislators in Hudson County to question the pending sale of Hoboken University Medical Center, Mayor Dawn Zimmer’s response has been to hold community meetings, a practice that has become a staple of her administration.
Hoboken University Medical Center, a municipally-owned hospital run by the Hoboken Municipal Hospital Authority, will likely soon be sold to a private company that also owns Bayonne Medical Center. The target date for the sale is July 31.
‘If this sale doesn't go through...the hospital will close.’ – Mayor Dawn Zimmer
When the hospital was on the verge of failing in 2007, the city took ownership of the facility. They guaranteed $52 million in bonds to underwrite its operations and established the autonomous Hoboken Municipal Hospital Authority.
Zimmer, who became mayor in 2009 and is a member of the authority, has said a major goal of her administration is to sell the hospital to a private buyer and end the city’s underwriting. But the buyer would have to keep it as a hospital.
Last year, the authority reviewed eight bids for the hospital and voted unanimously to negotiate exclusively with HUMC Holdco, LLC in early January. A $91.7 million deal was approved in late April.
Over the past few weeks, phone calls from what sources say is a union representing hospital workers have been made to Hoboken residents. The callers have reportedly been telling residents that the hospital will soon shut down and the building will be developed into residences.
One resident said he received a call saying there will be “a major curtailment of services” once the new owners take over. Other people say they received calls urging more transparency in the deal.
The sale process has been criticized for a lack of transparency, but the authority indicated that they needed to keep negotiations private in case the deal with the Bayonne group falls through.
Sources say the callers have been directing residents to contact the offices of State Sen. Brian Stack (D – Union City), Assemblyman Ruben J. Ramos (D – Hoboken), and Mayor Zimmer. One assistant for a legislator said their office has received approximately 200 emails from residents, and the office is constantly receiving voicemails.
“The calls are nonsense,” Philip Schaengold, the Chief Transition Officer for HUMC Holdco, LLC, told a recent meeting of seniors in the Fox Hill Gardens senior building uptown. “This hospital is going to remain your institution and a place where people from all over come for service.”
Schaengold, a Washington, D.C. based medical professional, will help coordinate the sale and smooth the transition process.
At least seven years
As part of the sale, the hospital must remain an acute care facility for at least seven years.
Zimmer is holding a series of community meetings over the next few weeks about the sale to quell the rumors from the “robocalls” as the date for the final approval approaches.
Before a sale is finalized, the state will hold a public hearing in Hoboken. The date for the public hearing has yet to be announced.
One concern from residents is that once HUMC Holdco, LLC takes over, they will cut in-network insurance contracts, like they did when they took over Bayonne Medical Center. Without insurance contracts to set negotiated rates, patients would be required to sometimes pay higher out-of-network rates for being treated.
However, Medicare and Medicaid would not be affected, no matter what the outcome of the negotiations between the potential buyers and the insurance companies, Schaengold said.
Hospital Authority Chairwoman Toni Tomarazzo has said that Hoboken city employees, including those from the Police Department, Fire Department, Hoboken Housing Authority, City Hall, and the Board of Education will be served at the hospital as well.
But what about the non-public sector residents?
While some sources believe the same model as Bayonne will be followed, Schaengold and Zimmer said that the potential owners will have more leverage with the health care companies to acquire contracts once the Bayonne group owns two area hospitals.
“If you’re one hospital by yourself, the managed care companies will not give you a good deal,” Zimmer said at the Tuesday meeting.
Schaengold added that the goal is “to keep as many of the contracts in place as possible.” However, that doesn’t mean the parties won’t play hardball in the negotiation process.
“Our position is [the health care companies] have taken advantage of Hoboken for years,” Schaengold said. “Now it’s time to pay fair contracts.”
In addition, the Newark-based Public Interest Law Center New Jersey Appleseed started an online petition last week calling for a halt of the sale to HUMC Holdco.
“Based on the track record of Bayonne Medical Center including termination of nearly all insurance contracts, dramatic increases in the cost of in-patient care, and some of the lowest quality of care scores in the county, we believe that the process undertaken by the Authority has not provided the Hoboken community and stakeholders with the best option available,” according to the petition.
Zimmer said on Thursday that the sale is vital to the survival of the hospital.
“Hoboken University Medical Center is bleeding money and if this sale to HUMC Holdco (Bayonne) does not go through, the hospital will close,” Zimmer said. “We will lose our hospital and the vital services it provides our community, and the taxpayers will be obligated for a $52 million bond guarantee. For this reason, the sale to [HUMC Holdco] is crucial to saving our hospital and protecting our taxpayers.”
What’s the deal?
The proposed transaction totals $91.7 million in deal considerations, including a $51.6 million cash payment to extinguish the city’s bond guarantee.
The new owners have also pledged to make a $20.9 million investment in the hospital, and $19.2 million will be spent on “other deal considerations,” including accounts receivable and liabilities assumed as part of the transaction.
The city has relied on state funds to help with the hospital’s expenses over the past two years, receiving $7 million in 2010 and $4 million in 2011. The hospital lost $21.7 million in 2008 and $16.3 million in 2009.
“They’re going to make millions and millions in investments,” Zimmer said.
Currently, the applicants are trying to acquire the “certificate of need” from the Department of Health, which involves a lot of communication between the state and the applicant, according to Schaengold.
In order to acquire a certificate of need, the potential buyer fills out an application, and then the state comes back with questions. After the questions have been answered, the state will hold a public hearing in Hoboken, and then the state will make their decision to either award or not award a certificate of need to the buyer, essentially completing the transaction.
In most cases, the Attorney General reviews the sale under the Community Health Care Assets Protection Act (CHAPA).
Zulima Farber, a former attorney general, works with the hospital as special counsel, and said in April that the state Attorney General’s Office said a CHAPA review is not required, since the hospital is municipally-owned.
As of last Tuesday, Holdco was in their second round of questioning with the state for the certificate of need process, and the public hearing has yet to be scheduled.
Ray Smith may be reached at RSmith@hudsonreporter.com