Saint Michael’s counters Navigant report with its own study

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Saint Michael’s Medical Center in Newark on Wednesday released its own study in response to one commissioned by the state that recommends three hospitals in the Newark area — including Saint Michael’s — should cease to operate as acute care hospitals and instead be converted into modern ambulatory centers to relieve an oversupply of…The Saint Michael’s study, however, argues that Navigant’s recommendation would lead to significantly greater market dominance in the region by Barnabas Health, potentially driving up medical costs in the greater Newark area.

The state-funded study by Navigant Consulting released last month looked at five hospitals in the Newark area. It recommended that only two remain full-service acute care hospitals: University Hospital in Newark and Clara Maass Medical Center in Belleville.

Navigant proposed that University Hospital — which is owned by the state of New Jersey — and Newark Beth Israel Medical Center enter into a public-private partnership where Newark Beth Israel provides outpatient care to complement the in-patient care provided by University.

Navigant also recommended that East Orange General Hospital be converted from a full-service hospital to an ambulatory care facility.

Barnabas Health owns both Newark Beth Israel and Clara Maass, as well as Saint Barnabas Medical Center in Livingston.

Saint Michael’s contended its analysis shows that Navigant’s recommendations would “create a monopoly in in-patient hospital services in the Newark area, potentially causing price increases amounting to as much as $180 million annually.”

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Saint Michael’s said 1,000 jobs would be lost if it ceases to operate as a full service hospital.

“We believe that the Navigant recommendations are bad for Newark, bad for New Jersey and especially bad for health care consumers,” said David A. Ricci, chief executive of Saint Michael’s. “Monopolies harm the public and the Navigant recommendations, if enacted, would create a monopoly.”

Barnabas Health spokeswoman Ellen Greene told NJBIZ, “The mission of Barnabas Health has always been to provide the highest level of quality health care and human services, with the greatest access, to the communities we serve. As health care delivery continues to transform in line with President Obama’s national vision of healthier communities, we look forward to continuing our mission of promoting wellness and caring for the sick because we believe that life is better healthy.”

California-based Prime Healthcare has offered to acquire Saint Michael’s; Prime acquired St. Mary’s Hospital in Passaic last August and is also seeking state approval to buy Saint Clare’s Health System in Denville.

During a conference call with reporters Wednesday, Ricci said Prime has agreed to pay $50 million for Saint Michael’s, which he said would go toward the medical center’s outstanding tax-exempt debt, now estimated at about $232 million. He said the $50 million from Prime leaves the state to assume about $180 million in bond debt. Ricci said that remaining bond debt would become the responsibility of the state, and ultimately the taxpayers; he explained that, as a for-profit, Prime cannot take over the tax-exempt bond debt of Saint Michael’s.

Ricci said that, without the $50 million from Prime, it is likely the state would be required to cover an even larger portion of Saint Michael’s debt.

Ricci said the Prime takeover has gotten support from community stakeholders, including the Newark City Council, the Belleville municipal council and the Essex County Board of Freeholders.

“As the community learns more and more about the challenges they face if the hospital closes or the Navigant report is followed,  they have raised their voices in great concern that someone  might dictate to them where they can go for care,” Ricci said.

The Saint Michael’s response cites economic research that shows consolidating health care facilities and eliminating competition substantially increases prices to consumers. The report argues that economic research also shows that higher quality results not from consolidation but from competition.

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Saint Michael’s called on New Jersey to “promptly approve the proposed acquisition of Saint Michael’s by Prime Healthcare.”

Saint Michael’s added that Prime plans to invest more than $25 million into Saint Michael’s facility.

Prime proposed acquiring Saint Michael’s about two years ago. The state Health Planning Board has not yet scheduled hearings on the proposal, awaiting the completion of the Navigant study. A spokesperson for the health department said hearings will be scheduled, but there is as yet no timetable for them.

“The Prime acquisition will allow Saint Michael’s to continue serving the people of the greater Newark area, and will preserve more than 1,400 jobs,” Ricci said. “After more than two years, it is time for the state to approve the acquisition, and let us move forward to improve health care in Newark.”

The Saint Michael’s response was authored by David Ettinger, an antitrust lawyer with the firm Honigman Miller Schwartz and Cohn who has worked in the health care field for more than 35 years.

Founded by the Franciscan Sisters of the Poor in 1867, Saint Michael’s is a 357-bed regional tertiary-care, teaching, and research medical center, and is a member of the Trinity Health system.

Prime Healthcare is a for-profit hospital system with 34 acute-care hospitals providing more than 35,000 jobs in 11 states.

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