HUMC Holdco LLC, the group negotiating with the Hoboken Hospital Authority (HHA) for transfer of ownership of the Hoboken University Medical Center, may be new to the city. But behind the newly-established LLC are the part owners of Bayonne Medical Center, and some of their controversial policies made national headlines after the group’s takeover of the Bayonne facility in 2007.
Before they took over, Bayonne Medical Center was losing approximately $1.5 million monthly and nearing a collapse. The prospective owners took a hard line against health insurance companies and helped to put the medical center on the road to recovery, a stance that was written about in The Washington Post. But some customers were confused about the hospital’s new relationships with insurance companies.
“We want to make sure HUMC stays open as an acute health care center.” – Toni Tomarazzo, HHA Chairperson
At the time, executives said that the insurance companies were not offering rates that could sustain the hospital, and that new contracts were needed to cover the costs of the hospital and keep the facility out of bankruptcy.
A community-wide battle ensued. Insurance companies sent out information telling patients not to go to Bayonne Medical Center. However, hospital officials refuted the claims from insurance companies about a lack of coverage and continued to see patients.
It remains to be seen whether these hard line tactics will dominate the way business is done in Hoboken if the new potential owners – who were chosen from among eight entities vying for the HUMC ownership – reach an agreement. The strategy has worked from a fiscal perspective in Bayonne, as the hospital has since been able to turn profits. It is believed that Hoboken University Medical Center, if acquired by HUMC Holdco LLC, will become a for profit hospital, part of a growing trend nationwide.
In a statement, the prospective owners indicated their intention “to pursue and secure fair and reasonable contracts with most, if not all, third party payers following the receipt of all regulatory approvals prior to closing.”
Hoboken Hospital Authority Chairperson Toni Tomarazzo believes the start of negotiations is good for the city of Hoboken. The city has owned the hospital since 2007, after the City Council voted to guarantee a $52 million bond to keep the premises open. It had appeared to be headed toward closure under the ownership of Bon Secours Health System, Inc.
Some taxpayers did not like the idea of the city owning the hospital and putting their tax dollars at risk.
The hospital appears to have slowly recovered since the city took ownership, but Mayor Dawn Zimmer, who serves on the Hospital Authority, said the goal has always been to sell it to a private owner.
The hospital experienced a $21.7 million net loss in 2008 and a $16.3 million net loss in 2009. Tomarazzo has said the hospital is expected to run a balanced budget and break even, but small net losses are possible for 2010 because of “depreciation and interest.”
Hoboken has more full time employees than Bayonne Medical Center by a 977 to 682 margin, but had less expenditures in 2009, according to data from the New Jersey Hospital Association.
A survey put forth by the U.S. Department of Health and Human Services, updated in December 2010, showed that patients were generally happier at Hoboken University Medical Center than Bayonne Medical Center in almost every category surveyed. Sixty seven percent of patients surveyed from Hoboken University Medical Center stated they would “definitely recommend the hospital,” while only 37 percent responded similarly after an experience in Bayonne Medical Center.
Who should be involved in the discussions?
After a stakeholders’ committee of concerned citizens and interested parties sat down beginning in October, working with the Hospital Authority to assess the eight bids received, the Authority voted unanimously to begin negotiations with HUMC Holdco LLC.
Tomarazzo said the Authority has three goals for the hospital sale.
“First and foremost we want to make sure HUMC stays open as an acute health care center,” Tomarazzo said. “Second is that the $52 million bond guarantee will be alleviated, and third is to retain the jobs at the hospital.”
Tomarazzo said she believes the potential buyers have the capital “immediately available to satisfy the requirement of alleviating the $52 million bond when the deal is completed.”
The hospital cannot be sold until the $52 million bond has been legally extinguished, which is why Tomarazzo emphasized the point that immediate capital was available.
Can council see the bids?
The issue of the bond has birthed a whole other discussion among the City Council members. If the hospital fails while the city is still guaranteeing a $52 million bond, the financial burden would fall to the residents of the city of Hoboken, whose taxes underwrite the bond. It is for that reason that Councilman Michael Russo believes the City Council should be able to approve or deny the bid, and also gain access to see the other proposals.
Councilman Peter Cunningham, on the opposite political faction from Russo, said that because the board members are appointed by elected officials, the Hospital Authority is “acting in the best interest of our city.”
Hospital Authority Attorney Andrew Aronson said the next step is the negotiation, and responded to Russo’s thoughts on Wednesday.
“It’s not required to be done,” Aronson said, referencing Russo’s request that the City Council members be granted access to the proposals.
Tomarazzo said that the authority must continue to have the negotiations in private “in order to protect the hospital.” Tomarazzo fears that if negotiations fall through with HUMC Holdco LLC, a new prospective buyer would have the upper hand on the Hospital Authority if information from the failed talks is released.
Russo said he would be willing to sign a confidentiality agreement if necessary. Cunningham also said at the Jan. 5 council meeting that he would agree to view the other bids with an attorney present.
Virginia Treacy, a registered nurse and executive director of the union that represents the nurses at Hoboken University Medical Center, also spoke up at the authority meeting on Tuesday evening.
“It is very hard for us to determine if this is a good thing or a bad thing, because [the Authority] is not releasing information about the other bids,” Treacy said on Wednesday. “This is not supposed to be a secretive process when you’re talking about $52 million in taxpayer dollars. How is anyone supposed to know if this is a good thing without knowing the alternatives?”
Since the negotiations are ongoing, much of the information will not be released until after the deal takes place.
Tomarazzo said the potential buyer has a track record of good management.
“I want to know what their track record is,” Treacy said. “I’ve seen what’s happened at Bayonne Medical Center since they purchased it, and I’m very concerned.”
“People think unions are just interested in job preservation,” Treacy added. “But if the services are provided the jobs go hand in hand. If they provide the services, we’ll be fine.”
State must approve
After a contract is agreed upon, the current owners, the HHA, must file a certificate of need with the New Jersey Department of Health and Senior Services. The department will then take approximately 90 days to determine whether the new owners are fiscally stable enough to purchase and run the Hoboken hospital. The state will then hold meetings with the involved parties to discuss the sale and make their decision.
“We will seek guidance from the public as to how and what terms we should negotiate this [agreement] for,” Tomarazzo said. “We will continue to make this an open process.”
Ray Smith can be reached at RSmith@hudsonreporter.com.