Christ Hos­pi­tal re­jects high bid, takes Prime’s of­fer

Modern Healthcare - - EDITORIAL MODERN HEALTHCARE - Paul Barr

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.

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