In a move that healthcare advocates and a local nurses’ union say they find troubling and suspicious, the prospective buyer of Jersey City’s Christ Hospital has asked that the sale of the hospital be expedited so that the deal concludes by the end of this year.
In an Aug. 12 “letter of intent” addressed to Christ President and CEO Peter A. Kelly, a vice president representing Prime Healthcare Services lists several terms of the sale agreement between Christ Hospital and Prime, the California-based company negotiating to buy the facility.
Among the terms enumerated is the agreement that “the closing of this transaction would occur as soon as is commercially reasonable after all conditions to the closing…have been satisfied, but in no event later than Dec. 31, 2011.”
The following month, on Sept. 13, Kelly sent an 18-page letter to the Office of the New Jersey Attorney General requesting that the department approve Prime’s purchase of Christ Hospital by Dec. 31.
Before the sale of the hospital can be finalized it must be reviewed and approved by the New Jersey Attorney General, the New Jersey Department of Health and Senior Services, and the State Health Planning Board. By law there must also be public hearings on the proposed sale so that members of the community can voice their opinions as well.
This is not the first time that Prime has requested that a facility sale be put on the fast track.
The sale of Christ to Prime Healthcare would be the third transfer of a nonprofit medical facility to a for-profit company in Hudson County in just two years, something that worries critics. Meadowlands Hospital and Bayonne Medical Center have been sold to private owners, and the city of Hoboken is in the process of selling its hospital to the co-owners of Bayonne.
When Prime Healthcare’s track record in California is peeled back and examined, health advocates claim that what is needed is more scrutiny – and more time – if this sale is to be approved.
“We are deeply concerned that given the alternative of our hospital closing, this sale will be approved, even though the track record of the potential buyer raises serious questions,” Shelley Crowe, a registered nurse at Christ Hospital, said in testimony she gave last month at a Senate Health Committee hearing on for-profit hospitals.
Calif. Sen.: ‘investigate Prime’
Owned by Dr. Prem Reddy, Prime Healthcare currently owns 14 for-profit hospitals in southern California.
According to the company, all its hospitals were in severe financial distress or in bankruptcy when they were purchased. Under Prime’s management, these hospitals have turned around, according to the company, and are now recognized as among the best in the country.
But the advocacy group California Watch has investigated the company and has been critical of some of its business and medical practices.
In one investigative report released in July, California Watch alleged that Prime Healthcare admitted patients based on business strategy, not medical need. Specifically, the organization alleges that Prime was prone to admit out-of-network patients and keep them hospitalized at Prime facilities rather than transfer them to an in-network hospital.
Kaiser Permanente, one of the health insurers whose customers were allegedly subjected to this practice, has denounced this policy, according to California Watch.
Prime Healthcare has called California Watch’s reporting inaccurate and misleading.
But in August 2010 California State Sen. Elaine Alquist, chair of the Senate Health Committee, asked the California Dept. of Health to “investigate Prime and support other state and federal investigations of Prime’s practices.”
Specifically, Alquist asked the Dept. of Health to join an investigation by the California Justice Dept. and the U.S. Dept. of Health and Human Services into unusually high rates of septicemia (bacterial infection) at five hospitals owned by Prime Healthcare. According to Alquist, the national median for septicemia among Medicare patients is 4.1 percent. Five of Prime’s medical facilities appear to have a rate of 15.7 percent among Medicare patients.
California’s Attorney General also sued Prime Healthcare for closing a psychiatric center it had promised to keep open. The promise to keep the center open had been a condition of one of its hospital purchases. After the state sued, the company reopened the psychiatric facility.
Prime responds to criticisms
Prime Healthcare and Dr. Reddy have vigorously defended the company and its medical facilities.
In a statement issued after the septicemia investigation began, the company stated, “Prime Healthcare has met with California Department of Public Health (CDPH) staff to address the erroneous findings and CDPH has acknowledged that further discussions are warranted to address Prime Healthcare’s concerns. ‘Prime Healthcare is confident that CDPH’s initial findings will be reversed after CDPH has reviewed all of the facts and reviews the matters using correct standards’ said Mike Sarrao, Prime Healthcare’s general counsel.”
In another statement sent in response to questions asked by the Reporter, a company spokesman said, “Most hospitals can’t keep up with the increasing costs of providing care to patients coupled with lower reimbursement rates from insurance companies. When small, community-based hospitals are deep in the red and on the brink of closure, Prime Healthcare steps in and turns the hospitals into a profitable and quality functioning operation. We are very proud of what we have done so far in saving all these community-based facilities, and we’re proud we haven’t had to go through layoffs in the last two years.”
He further added that Thomson Reuters Research has “identified Prime Healthcare Services, Inc. as one of the Top 10 United States Health Systems based on clinical performance.”
Expedited timeline a sharp departure
Should the sale of Christ Hospital be approved by the end of the year, it would be a sharp departure from recent the history of local hospital sales in Hudson County. In general, sales of nonprofit hospitals receive more scrutiny from state agencies when they are being sold to for-profit entities – not less. The added scrutiny tends to lengthen the state review process.
Early last year, the nonprofit LibertyHealth System announced in January that it planned to sell Meadowlands Hospital Medical Center to MHA, a limited liability corporation. The sale of the facility wasn’t finalized until December 2010.
Similarly, the city of Hoboken announced in 2010 that it planned to sell Hoboken University Medical Center to HUMC Holdco, a for-profit company whose principals also own Bayonne Medical Center. While that deal is nearing completion, it has yet to be finalized.
In neither of the two letters requesting that the Christ sale be expedited is an explanation given for why the sale must be finalized by Dec. 31.
“We’re concerned about this particular bidder, their track record, and the impact of another for-profit hospital in Hudson County,” said Ann Twomey, president of the Health Professionals and Allied Employees, the union that represents 400 nurses and other professionals at Christ Hospital. “A full public process always benefits the outcome, and that takes time. And we understand the financial pressures the hospital is under. But if from the beginning they had involved the workforce, the community, and other [stakeholders], then the transition to a new owner wouldn’t have needed to be rushed. The issue of secrecy and transparency is critical here.”
Closer scrutiny in home state
But this apparently is not the first time that Prime Healthcare Services has requested that a facility sale be put on the fast track. According to California State Sen. Elaine Alquist, in November 2008 Prime received approval to purchase the Shasta Regional Medical Center after a two-week review.
Since then California officials have reviewed the company’s hospital purchases more closely. Last month Calif. Attorney General Kamala Harris denied Prime’s bid to purchase Victor Valley Community Hospital, stating the sale would “not be in the public interest.”
In a statement released after the attorney general’s decision Prime Healthcare said the company was “disappointed” by the ruling and found the decision “inexplicable.”
The California state legislature also passed a bill in September that closes a legal loophole that enabled Prime Healthcare to buy Alvarado Hospital in San Diego last year.
E-mail E. Assata Wright at firstname.lastname@example.org.