NEWS
Hospitals debate re-opening of PVH as for-profit entity
As the Certificate of Need hearing for the re-opening of a full service, acute-care hospital at the former site of Pascack Valley Hospital (PVH) nears, Valley Hospital in Ridgewood and Englewood Hospital Medical Center (EHMC) are raising questions about whether the prospective new facility is in the best interest of not just the Pascack Valley, but the larger healthcare system of Northern New Jersey. Valley and EHMC recently launched a Web site stating their concerns and have been circulating a petition opposing the hospital’s re-opening in anticipation of the hearing, expected sometime in late-November or December. HUMC and local municipalities have been circulating their own petitions, claiming the area’s need for a full-service hospital and garnering signatures from residents concerned about ready and available access to healthcare services. According to Westwood Mayor John Birkner, more than 14,500 residents had signed the petition as of 7 p.m. last night, Tuesday, Oct. 21. When PVH filed for bankruptcy and eventually shut its doors in November of 2007, many residents of the Pascack Valley wondered what would become of the 20-acre site and waited anxiously for a hospital to re-open. To the relief of many in the area, the property was ultimately sold for $45 million in a bankruptcy auction last February, in a joint bid of $45 million by HUMC and Touro University College of Medicine. Since the auction, HUMC has gained an investor, Legacy Hospital Partners, which plans on injecting millions of dollars of capital into the opening of the new facility – HUMC North at Pascack Valley – and has lost its original partner, Touro, which backed out of the agreement to share the facility, citing the need for a more spacious location for its rapidly growing institution. Bob Garrett, executive vice president and chief operating officer of HUMC, said that in the 20 days since the emergency room at HUMC North has been open, the hospital has seen 576 patients and feedback from the patients, ambulance squads, and physicians “has been absolutely terrific.” He said that while the hospital is still unsure of the final plans for the building that was to originally house Touro, it will probably be used for outpatient services such as cardiac rehabilitation and a sleep center that were at the former PVH. Since the closing of PVH, Valley and EHMC say they have welcomed physicians and nurses from the former hospital and have made efforts to meet all of the medical needs of the community it once served. “Even a year before the hospital closed, we modified our application procedures to ease the hiring of staff from PVH, because it was clear to us that the hospital was not going to be able to survive,” stated Mike Pietrowicz, vice president of planning and program development at EHMC. In the months following the closure, Pietrowicz estimated EHMC accommodated 15 to 20 percent more patients and hired more than 250 physicians, nurses, and technicians, including many former employees of PVH. To successfully cope with the new influx of patients, EHMC also expanded operating room services, opened two additional nursing units, extended its Mobile Intensive Care Units, and worked with local volunteer ambulance corps to help manage issues that arose immediately after the closure of PVH. Megan Fraser, director of marketing and communications at Valley Hospital said Valley incorporated similar efforts to ensure patients coming from Pascack Valley were well cared for. “After PVH closed we immediately reached out to the Pascack Valley physicians and put in place ways for them to admit their patients to our hospital,” she said. “It is important to understand that we have a long history of caring for patients from the Pascack Valley who choose to come to Valley and we feel privileged to care for that community.” While some local borough officials have painted Valley and EHMC’s bid for the property and consequent petition against the opening of HUMC North as blatant hypocrisy, the two hospitals claim there were vast differences between their plans for the site and the proposed HUMC North. “Because of business issues, we decided to stop the bidding at the $45 million mark,” said Pietrowicz. “But our plans were for emergency and urgent care at the site, outpatient services, like radiology, a breast center, cardiac rehab, and a lab, to make that property vibrant, active, and accessible to the community. And we still support that.” Garrett disagrees that the community’s needs have been satisfied in the months since PVH’s closure. “That is something we’ve been hearing from the community, ambulance squads, and physicians. The former physicians [of PVH] are absolutely hearing it from their patients, loud and clear: an ER alone won’t do the trick.” He said the reopening of a full-service hospital would not only enhance the community’s access to healthcare, but would benefit it financially as well. “From a health care perspective, having a full service hospital in that community is very important to those residents in Bergen County and New York in Rockland County. With the Bergen County road system being what it is, it could take upwards of an hour or more to get to some of those other hospitals, especially during rush hour,” Garrett said. “Also, there will be over one thousand jobs created, plus construction jobs temporarily created during the renovation phase. In addition, think of the local businesses, shops and restaurants who were depending on PVH as a major employer in the area, they will all benefit from the re-opening.” Valley and EHMC cite two reports issued recently as proof that even without a full-service hospital at the PVH site, the needs of the community are being met. The New Jersey Commission on Rationalizing Health Care Resources, or the Reinhardt Commission, requested by Gov. Jon Corzine, issued a report which examined the state’s hospitals and found there was an oversupply of beds, “most pronounced in the Hackensack, Ridgewood, and Paterson… market areas.” Similarly, the Lewin Report, a study commissioned by EHMC and Valley concluded that the hospitals “have absorbed PVH volume without reaching capacity” and that “reopening a facility where PVH stood offers no immediate benefit to the citizens of Bergen County, and runs counter to every report and indicator suggesting the need to consolidate services in the State of New Jersey.” According to EHMC and Valley, this surplus of beds will weaken the area’s entire healthcare system and drive up costs, because Margiotta said, “Simply put, when you build a hospital, you have to hire nurses, technicians, and maintenance people, even if no one shows up at the door. There is no way to avoid these fixed costs. An oversupply of beds causes hospitals to be inherently inefficient. If an underutilized, full-service hospital is opened in the community, costs will go up and quality will go down.” Garrett argues that the Reinhardt Report is flawed because since the publication of the study, three major hospitals, including PVH, have closed. “We will add 128 beds,” he said. “Seven hundred beds have closed. If you do the math, what we are doing is well within the premise of the report. With the 128 [beds] being restored, we are still within that number.” He added that while the former PVH was licensed for 290 beds, HUMC North will be restoring less than half that number. Asked why he thinks HUMC will thrive where PVH did not, Garrett responded, “PVH did close, but I think with the reputation of Hackensack and the management expertise of Hackensack and Legacy, the new hospital will be successful.” As for the Lewin Report, Garrett argued that any report commissioned by an interested party is inherently flawed. “Anyone can hire a consultant and come up with a certain conclusion.” One of EHMC and Valley’s primary concerns is HUMC’s partnership with Legacy Hospital Partners, a private equity firm established in January of this year, based in Plano, Texas and sponsored by an affiliate of private equity firm CCMP, Capital Advisors, LLC and Canada Pension Plan Investment Board. “When Hackensack submitted their Certificate of Need application to the state, it wasn’t Hackensack’s application, it was Hackensack and Legacy,” explained Pietrowicz. “They were looking to create a brand new, for-profit entity to manage, own and run the campus.” EHMC and Valley contend that although Legacy is relatively young, its founders, chairman James Shelton and chief executive officer Daniel Moen, former executives of for-profit hospital operators, Triad Hospitals, Inc., and Columbia HCA, have a history of putting profits ahead of patient needs. “I kind of describe it as a Trojan horse,” said Pietrowicz, “This is not Hackensack. This is a for-profit company that is looking to make an investment, get a return on that investment, drive those dollars out of the community to Texas and ultimately out of the country.” According to a compendium of articles gathered by EHMC, before Triad was bought out in 2007 by Community Health Systems, it had a reputation of pursuing policies that avoided uninsured patients by purchasing hospitals located in wealthy neighborhoods. Legacy has a stated goal of partnering with non-profit hospitals through joint-venture deals in order to make local hospitals strong and profitable, a strategy previously employed by Triad. In a Jan. 28 article titled “PE Firms Launch New Hospital Platform,” in the Mergers & Acquisitions Report, Kelly Holman reported that “Moen and his team are seeking to make Legacy a $3.5-billion-in-revenue-per-year business in five years with 20 or more acquisitions.” But Triad’s history, Valley and EHMC claim, is littered with broken promises and in some cases has had negative consequences for the communities its hospitals served. “In these former companies,” Pietrowicz said, “there were promises made to the communities. There are several examples across the country that show these gentlemen went before the towns and said we’re interested in either building or buying or resurrecting your hospital, it will generate tax revenues. We need your approval to get things done like zoning, or whatever it might be, but then at the 11th hour coming back, with a division they have in their company that’s an expert on how to do this, and saying, ‘We need tax abatements because we can’t make this hospital work unless we’re not taxed.’” Valley and EHMC also raised what they fear are possible conflicts of interest regarding Legacy and some of its board members. Several are sitting not-for-profit hospital CEOs, which EHMC claims causes conflict between their mission to provide not-for-profit healthcare and their interest as board members to deliver profits for Legacy. Uwe Reinhardt of the Reinhardt report is also a member, and although he recused himself from the decision to buy PVH, Maria Margiotta, director of marketing and communications at EHMC wrote in an e-mail, “Be that as it may, he is still one of the original authors [of the report]… and now he is on the board of a healthcare company that is doing exactly what his report said not to do.” According to Moen, CEO of Legacy, HUMC North will be under the control of a group of trustees made up of medical professionals and people who are familiar with the needs of the greater Pascack Valley community. “Legacy will be managing the day to day operations with the hospital being responsible to the local board of trustees,” he said, specifying that the board will be composed of 12 people who are “all local leaders – six physicians and six non-physicians.” The hospital’s CEO would report to the board of trustees. Additionally, said Moen, HUMC North will have a “joint venture board of directors,” made up of five members appointed by Legacy and five appointed by HUMC. This board would be responsible for making “strategic decisions.” However, “95 percent of decisions will be made by the trustees,” he said. Moen takes exception to the assertions that opening HUMC North will hurt health care in the region, reiterating the argument that numerous hospitals have closed since the Reinhardt Commission’s report was published, in his opinion rendering its findings moot. “The people that are opposed to this are the competing hospitals,” he stated. On the other hand, he said, “There’s 14 municipalities in that market in which the mayors have stated their support for it. The opposition is coming from two hospitals that don’t want competition.” He added that HUMC North would provide the community with access and services that are not currently available, like all private rooms. “It will be a new facility, for all intents and purposes, when it reopens.” But, he said, “The issue is access. We’ll provide more access there. The main competitor won’t need to divert or expand by hundreds of thousands of dollars.” In his opinion, it is preferable to “build a new hospital, rather than expand one that’s already full,” referring to other area hospitals that may plan expansions in the future. Also, in response to whether operating as a for-profit entity will have any bearing on quality of service, Moen stated, “It [HUMC North] should look and feel and act just like Hackensack [South Campus].” While Valley and Englewood hospitals have argued that losing patients to HUMC North would hurt them financially and could eventually lead to more expensive healthcare, Moen said the price of medical care should not change since “payers, such as Medicare and Medicaid, pretty much establish the rates.” He pointed out that although Legacy is a relatively new company, having formed earlier this year, the management team at Legacy has years of experience under its belt. Legacy has not opened any hospitals yet, but Moen said the company is currently “in the process of closing a number of deals in the first quarter of the coming year, including this one.” He went on to say, “As a management team we have done more joint ventures than all the hospital companies in the country combined. While we are new, we are not practicing.” Moen also responded to concerns about whether Westwood taxpayers would be at risk of bailing out HUMC North in the future if Legacy is unable to turn enough of a profit to pay its municipal taxes: “Pascack Valley was operating for the last 50 years; it never paid taxes.” As a for-profit hospital, HUMC North will presumably pay both sales and property taxes. “Taxpayers can take comfort that it will be one of the largest taxpayers in town,” said Moen. “Rather than a for-profit, it’s more accurate to call us a taxpaying company versus a non-taxpaying company.” Garrett said that while Legacy will be involved in the day to day management, the governance of the new joint venture hospital will be split 50/50 and HUMC has reserve powers so no major decisions will be made without its approval. “It will be our name, our reputation, and our quality of care, so we will make sure that the quality of care is exactly the same as what it is on the main campus. The two hospitals (HUMC and HUMC North) will be clinically integrated so all of the clinical protocols that govern HUMC, including nurse-to-patient ratios and response time to emergencies, will all be the same as Hackensack.” He added that financial decisions will be made by both entities. “In today’s day and age, access to capital is very important. Legacy has access to capital and expertise in running small hospitals. We did a lot of due diligence [on the company]. Legacy is someone whose main focus is quality and has been demonstrated from other institutions they’ve run.” At the heart of EHMC and Valley’s argument lies what the hospitals claim is a fundamental difference between their facilities and the one HUMC and Legacy hope to open in Westwood: they are both not-for-profit entities, and HUMC North will not be. “We are owned by the community, we are governed by the community,” Pietrowicz said. “If you are lucky enough in this state – and over 50 percent of the hospitals in this state lose money year after year after year – if you’re lucky enough to make that small little margin at the end of your year, those dollars get reinvested back into your campuses or your communities in new equipment, you hire staff, you do health fairs and health screenings. It is a reinvestment in our owners, which is the community. When you’re a for-profit, like any other business, you make your investment to make money, and to make your investors or shareholders happy by the returns you get.” According to EHMC and Valley, it is not altruism that is driving Legacy and HUMC to reopen a hospital in Pascack Valley, but the profit motive, and that can have dire consequences for healthcare decisions. “There have been several hospital closures in the state, where those communities are up in arms too, but there is no for-profit company coming into those communities,” Pietrowicz argued. He mentioned recent hospital closures around the state in Paterson, Plainfield, Newark, Jersey City and Passaic and said, “There’s no hospital in Plainfield, but there’s nothing coming in to meet that need. Why is that? Why is Bergen County, where any resident, no matter where they live is within 10 miles of a hospital, why is it that a for-profit company’s not going into these other areas? To me, the motives are clear. The area where PVH was is an area where they believe they can make money.” He added, “A for-profit’s goal is to drive services and make money, that means a reduction in services. You are only going to offer services where you have a revenue base. For this to happen in this economic climate in this country, on the heels of these reports, is hard to understand.” Although EHMC and Valley acknowledge that the closing of PVH has been beneficial to their bottom line, they deny that is the reason for their opposition. “This is not an issue of us making money or not,” Pietrowicz said, “this is an issue that will ensure for Bergen County and for all of our hospitals that we can continue to invest in our communities.” Contrary to this, Garrett said, “There is very little difference between a not-for-profit and a for-profit hospital. The same charity requirements exist and they are governed by the same laws. The biggest difference is the for-profit hospital will pay taxes to the community.” He said the dollar amount that hospitals are reimbursed is based on a formula made up of many factors, including admissions, the demographics of a particular area, and the location of the facility. “Suffice it to say, many hospitals, including Hackensack, are not totally reimbursed,” Garrett said. “Hackensack has the biggest gap between charity care provided and what we get reimbursed back. We provide the most charity care of any hospital in Bergen County.” Usually when a hospital changes hands, a Community Health Care Assets Protection Act, or CHAPA review, is completed to ensure that the care the community was receiving from the previous institution is upheld. Pietrowicz said that he believes a review was not done because HUMC’s original plan was to open a medical school with Touro and “to use the property for something else. It was never their stated intent to use the property as a hospital, and that’s in letters to attorneys. So, the Attorney General’s office said, ‘The hospital’s closed, there is no reason to apply the CHAPA rule.’” However, Pietrowicz said, because of Hackensack’s partnership with Legacy, EHMC has asked the Attorney General to revisit the matter. “We believe that this is the best example of why CHAPA was passed. Maybe contingencies need to be set up to protect the community.” Garrett said while he is unsure of why a CHAPA review has yet to take place, he believes one will be ordered. It is currently being considered by the Attorney General’s Office. With the Certificate of Need hearing expected to take place in late November or December, residents can expect municipalities and hospitals to continue gathering signatures for their petitions and for ongoing debates about the merits of the potential reopening of a full-service hospital. Karen F. Mrnarevic contributed information to this article. For a related story on legislators’ reactions to the potential hospital reopening, visit www.pvcommunitylife.com. Megan Burrow's e-mail address is burrow@northjersey.com.
Filling the gap
Commissioned reports
Who is Legacy?
For-profits vs. not-for-profits
CHAPA
This article originally appeared in Pascack Valley Community Life. Original Article is located here