It's back to bankruptcy court for United Healthcare System, but not before a stop in appeals court.
The troubled Newark, N.J., hospital, which has been at the center of a skirmish for its certificate of need and licenses, is stuck in judicial purgatory.
Late last month, a federal judge in Newark overturned a U.S. Bankruptcy Court decision on United's fate and sent the case back to that court.
Now the federal court ruling is being appealed by Newark-based Cathedral Healthcare System. Cathedral, along with University of Medicine and Dentistry of New Jersey, contested the state's decision to transfer United's licenses to Livingston, N.J.-based Saint Barnabas Health Care System. The state's action enables Newark Beth Israel Medical Center, which is part of the Saint Barnabas network, to call itself "Children's Hospital of New Jersey."
The legal squabble has yet to derail Saint Barnabas' efforts to build a children's hospital at Newark Beth Israel. The hospital is renovating space and staffing up a new pediatric cardiac surgery program, said Barry Ostrowsky, Saint Barnabas' executive vice president and general counsel. But if a court were to find that the state was wrong in granting Saint Barnabas the applicable licenses, "that would clearly disrupt our plans," he said.
Ruling on the matter late last month, U.S. District Court Judge Nicholas H. Politan said the bankruptcy court "exceeded its power" by ordering United to petition state health Commissioner Len Fishman to reconsider his handling of United's licenses. In February, the commissioner voided the licenses and granted new ones to Saint Barnabas as part of the system's agreement to take over the troubled hospital's operations for $13 million.
U.S. Bankruptcy Court Judge William F. Tuohey ruled last month that the termination of United's licenses "defeated" the court's ability to obtain a fair price for United's "goodwill." He asked that the CON and licenses be reinstated to allow the court to consider higher bids.
During bankruptcy court proceedings last month, Newark-based University of Medicine and Dentistry of New Jersey and Cathedral upped the ante for United by submitting a new bid of $18 million.
But in a 26-page opinion dated March 27, Politan faulted Touhey for focusing "overwhelmingly" on the monetary aspects of the case while failing to weigh the fiduciary duty of United's trustees to maintain the legacy of the children's hospital operated by United.
Politan found that United exercised sound judgment in deciding to sell its assets before filing Chapter 11 bankruptcy. Furthermore, he concluded that United's board of trustees acted in good faith by deciding to sell to Saint Barnabas.