Newark officials urge state to withdraw bid for bankrupt hospital

By Dan Ivers | NJ Advance Media for NJ.com
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on October 22, 2015

The Newark Municipal Council is urging the state to withdraw its bid to buy the bankrupt Saint Michael's Medical Center.

 

NEWARK – City officials are urging the state to drop its bid for bankrupt St. Michael's Medical Center.

The Municipal Council unanimously passed a resolution Wednesday calling for the state to stand down, with members saying they believed it placed the future of the hospital and its 1,400 employees in serious peril.

Attorneys for St. Michael's confirmed earlier this month that its largest creditor, the New Jersey Health Care Facilities Financing Authority, had expressed interest in buying the Central Ward facility, which entered Chapter 11 bankruptcy in August. Its competitors include Barnabas Health, the state's largest hospital chain, and Prospect Medical, which recently bought East Orange General Hospital.

Supporters of the hospital are fearful that an acquisition by the state or St. Barnabas would lead to its potential closure or transition into a same-day medical and surgical facility, in light of a state-funded report that found an excessive amount of hospital beds in the Newark area.

St. Michael's is hoping to complete a $49.1 million sale to California-based Prime Healthcare, which would turn it into a for-profit facility. Prime asked the state health department and Attorney General's office to approve the deal nearly three years ago, but it has yet to be approved.

Since the application was filed, Prime has been able to acquire several other healthcare centers in Passaic, Dover, Boonton and Sussex, further frustrating St. Michael's supporters.

Central Ward Councilwoman Gayle Chaneyfield Jenkins, who has been a vocal supporter of the sale to Prime, called the state's plans to bid a "shocking display of arrogance" and questioned whether it might present ethical questions.

"The state has refused for three years to act on a strong application from Prime Healthcare, preventing Prime Healthcare or any other bidder from purchasing the hospital and investing in it," she said.

"Now, with the state filing as a potential bidder at the 11th hour, it is charged with reviewing Prime's application. That is a clear conflict of interest."

St. Michael's owes $227 million in bond money it borrowed from the Health Care Facilities Financing Authority in 2008, when the chain Catholic Health East agreed to buy the hospital and shut down two other Newark hospitals, St. James and Columbus.

The hospital has been operating in the red for years, however, and said it was forced to file Chapter 11 to by freeze monthly payments of $1.8 million on the state-backed bonds.

U.S. Bankruptcy Court Judge Vincent F. Papalia, who is handling the hospital's case, has ruled that all bids must match or beat Prime's $49 million offer. They must also promise to keep the facility open for five years, invest at least $25 million into its operations, stay within its ethical and religious directives and maintain its current levels of charity care.

An auction is scheduled for Nov. 5, and Papalia is scheduled to name the winning bidder on Nov. 12.

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