With court ruling, Saint Michael’s sale is back in state’s hands

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The pressure is back on the state to handle the sale of Saint Michael’s Medical Center in Newark after a bankruptcy judge approved California-based Prime Healthcare Services as the new owners.An application for the sale is in front of the Department of Health and has not been deemed complete yet, the department said Thursday, following the news of the court decision.

The Attorney General’s Office also has its process, which has been continuing throughout the bankruptcy proceeding, and will continue now, according to spokesman Leland Moore.

Prime has been working on a sale with Saint Michael’s for at least three years — a plan that lay dormant with the state during that time — and was selected as the winning bidder Monday by Saint Michael’s.

The only other bidder was Prospect Medical Holdings, also based in California, which is working on the final steps of purchasing East Orange General Hospital. That hospital filed for Chapter 11 bankruptcy Wednesday.

Saint Michael’s similarly filed for bankruptcy in August, a move that attempted to force the state’s hand in having to move forward in the sale process.

The Save Saint Michael’s Coalition has been vocal in its support of Prime, along with Newark’s Central Ward Councilwoman Gayle Chaneyfield Jenkins — who called for the state to back off when it appeared to be interested in a bid for the medical center.

“I am calling on the state agencies to expedite their approvals of this sale,” said Chaneyfield Jenkins after the sale was approved in court. “We have waited long enough — too long, in fact — for the state to approve the sale to Prime.”

To some extent, the process is back at square one, awaiting approval from the Department of Health and the state Attorney General’s Office.

“Now that the bankruptcy judge has signed off on the sale, it’s time for the state to stop playing games and approve the sale now,” said the Rev. Ronald Slaughter, the senior pastor of Saint James AME Church and a co-chair of the coalition. “There is no more justification for the state to continue to delay the sale of this hospital.”

Previous delays caused the hospital to suffer financially, which is why it sought Chapter 11 reorganization, according to CEO and President David Ricci.

But the financial loss is an exaggeration, since the hospital had already been dragging financially for the past several years, said Renee Steinhagen, executive director of New Jersey Appleseed Public Interest Law Center.

Some of New Jersey’s most densely populated areas are seeing a rise in for-profit health care entities, and industry leaders anticipate more to come.

“The responsibility is to care for the people in the community,” said Dennis Kelly, former CEO of CarePoint Health — the for-profit health system in Hudson County.

“It’s a challenging environment because of the payer structure. But there is so much similar between for-profits and nonprofits,” he said.

The major differences lie purely, as the names suggest, in the finances. Access to capital is more expensive for for-profits because they have to pay taxes on both net income and property tax. But outside of that, there are similar costs, Kelly said.

Prime basically has to figure out what the needs are of the Newark community and how it will have access to care, he said, adding that was the method of success for CarePoint.

Prime’s winning bid of $62 million was more than $10 million above the stalking horse bid, and its additional capital investment doubled from $25 million in August to $50 million during the final bid — an amount to be used for improvements over the next five years.

“This $50 million investment to upgrade and modernize Saint Michael’s is a game changer for Newark’s economy,” Chaneyfield Jenkins said. “The state needs to recognize how important Prime’s investment is to our city. Prime’s investment will create jobs in the Central Ward and modernize our hospital. We need Prime to make this investment and we need it now, not later.

“Right now, I know that Saint Michael’s has had difficulty recruiting staff as well as doctors because of all the uncertainty surrounding its future. Once this sale is approved by the state, Saint Michael’s can start hiring permanent employees, many of whom will be from Newark.”

“Prime Healthcare looks forward to expanding its presence in New Jersey and partnering with the dedicated physicians, nurses and employees,” said Prem Reddy, chairman, CEO and president of Prime Healthcare Services and Foundation.