Christ Hospital rejects high bid, takes Prime’s offer
Christ Hospital rejects $92 million to take lower bid, and other news
An already controversial situation in which a for-profit hospital chain agreed to buy a not-for-profit hospital in Jersey City, N.J., got even more interesting with aggressive interest shown by a second for-profit company.
The owners of Bayonne (N.J.) Medical Center and Hoboken (N.J.) University Medical Center revealed last week that it had made an unsolicited and nonbinding offer to buy 381bed Christ Hospital, Jersey City, for $91.6 million, looking to outbid an agreement made during the summer for Prime Healthcare Services, Ontario, Calif., to pay $15 million upfront and another $20 million over five years for the struggling Episcopal Church-affiliated hospital. A letter from the new bidding group, which proposed to make the deal through a company called Hudson Hospital Holdco, also said it would be willing to lend the hospital $10 million to give it time to consider the offer.
Officials for Christ Hospital said they were sticking with Prime’s lower bid the day Hudson Hospital’s offer went public, Dec. 27. “Having received several offers over the past year, Christ Hospital is moving forward with the asset purchase agreement by Prime Healthcare—which we believe is in the best interests of the hospital and the community we serve,” according to a statement from Christ.
Christ Hospital officials declined to comment further, but in a letter posted on its website, Christ Hospital President and CEO Peter Kelly said the hospital would close if it does not sell to Prime. “Those who would cavalierly oppose this transfer of ownership, without benefit of … relevant data, must understand the consequences of their opposition,” Kelly wrote. “This sale will preserve the existence of an essential acute-care facility for years to come and continue to improve the quality of care provided to our patients.”
Prime declined to comment and referred questions back to Christ Hospital. The new bidders declined to comment beyond a statement sent with a copy of its letter to the Christ board.
The sale of Christ Hospital to Prime, which requires approval from the state Department of Health and Senior Services and the state attorney general, has generated a lot of discussion and scrutiny in the state, in part because New Jersey’s experience with for-profit hospitals is somewhat limited, said Kerry Mckean Kelly, a spokeswoman for the New Jersey Hospital Association. New Jersey had essentially locked for-profits out of the state until 1993 and did not see its first for-profit hospital until 2002, Kelly said. Currently, six out of 73 hospitals are for-profits, she said.
Despite a seemingly large difference between the two bids for Christ, there are circumstances where a lower bid is accepted by a selling hospital. A not-for-profit hospital looking for a new owner may accept a lower bid for reasons related to its desire to maintain its relationship to the community, said Mukesh Gangwal, managing director in the Chicago office of Huron Consulting Group. He is not directly familiar with the Christ situation.
Not-for-profit hospital officials want the hospital to avoid undergoing a jarring transition to a for-profit owner, and may choose owners they expect to be a better fit over those bidding the most, Gangwal said. Also for the community’s sake, they may pick a lower bid if that buyer is financially stronger and more likely to succeed, he said.
Both Prime and the new bidders have been active potential buyers. Prime, which counts 15 hospitals in its chain, recently entered negotiations to buy two Hawaii hospitals, but no deal was struck. Prime also purchased minority stakes in 88-bed Harlingen (Texas) Medical Center and HMC Realty from MedCath Corp., Charlotte, N.C., last year. The new bidders on Christ Hospital in November purchased Hoboken Medical Center through a separate holding company, HUMC Holdco.
Christ Hospital, meanwhile, is struggling, based on its latest available tax filings. The organization’s Internal Revenue Service Form 990 for 2009 shows that the hospital lost $18.3 million on total revenue of $144 million that year. Liabilities exceeded assets by $65 million in the same period.
Christ Hospital officials say the facility would close without sale to Prime.