N.Y. judge halts sale of specialty hospital
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December 13, 1999 12:00 AM

N.Y. judge halts sale of specialty hospital

Deanna Bellandi
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    A specialty not-for-profit hospital in New York City will return to court this week after a state Supreme Court judge dashed its hopes for a sale and an exit from the acute-care hospital business.

    On Dec. 3, Justice Bernard Fried denied a petition from 30-bed Manhattan Eye, Ear and Throat Hospital to effectively close by selling its campus for $41 million to New York's Memorial Sloan-Kettering Cancer Center, which plans to use it for a breast cancer center, and a real estate developer who plans to construct an apartment building.

    Under New York's not-for-profit corporation law, the hospital, also known as MEETH, needed the state Supreme Court's permission to be sold.

    New York Attorney General Eliot Spitzer had challenged the proposed sale.

    Spitzer, who filed court papers Sept. 30, claimed MEETH's board of directors breached its fiduciary responsibilities by not considering competing providers' offers that would have allowed the hospital to remain open and continue its 130-year tradition as a specialty facility.

    Fried said that while the proposed sale may have valued MEETH's real estate fairly, it didn't reflect MEETH's value as a hospital.

    "There has been no reasoned determination that MEETH cannot continue to operate an acute-care, specialty research and teaching hospital, as other medical institutions are proposing to do, and are willing to invest substantial sums to accomplish," the judge wrote in his decision.

    Under the proposal to sell and eventually close the hospital, MEETH planned to partner with 2,278-bed New York Presbyterian Hospital to open and run outpatient centers in underserved areas of New York City.

    The proposed agreement calls for New York Presbyterian to become the sole corporate member of MEETH's board and for sale proceeds to be used to finance the outpatient centers.

    Others challenging the proposed sale were MEETH's medical staff, two competing providers and an employee union.

    "The doctors are thrilled and elated that this will enable the institution to be preserved," said New York lawyer Scott Himes, who is representing the medical staff.

    Hospital officials, who still want to sell the hospital campus, plan to appeal the judge's ruling, said John Aerni, a New York lawyer representing the hospital.

    Linda Miller, president of Volunteer Trustees of Not-For-Profit Hospitals, said the judge's decision sends a strong message to the industry, namely "that boards have fiduciary duties, one of which is obedience to purpose. It needs to be a major part of the analysis before you try to close or change the purpose of the institution, and that includes selling it." Miller said.

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