St. Michael's Medical Center in Newark, N.J., hopes its bankruptcy filing last week will ease the way for a sale to for-profit Prime Healthcare Services.
The Trinity Health-owned not-for-profit hospital entered into a deal with Ontario, Calif.-based Prime in 2013 and has been waiting for state approval. Critics of the deal, including insurers and some state political leaders, fear Prime's entry could raise rates and lead to service cutbacks.
The 147-bed hospital has sufficient funds to continue normal operations after its Chapter 11 filing, it said in a news release. It argues that its closure would mean less competition in Newark and lead to higher prices. St. Michael's CEO David Ricci said in a written statement that he's asking the state “to act expeditiously” so the hospital, under Prime's ownership, “can emerge as a financially viable, strong institution, maintain jobs and continue to ensure healthcare choice for those we serve.”
The two parties recently amended their agreement so that Prime sets the floor for all other competing bids. Prime has agreed to pay about $49.2 million, adjusted for certain balance sheet metrics, and to invest $25 million in capital improvements over the next five years.
In other New Jersey deals, Prime completed the acquisition last summer of St. Mary's Hospital in Passaic, and recently secured court approval for its acquisition of St. Clare's Health System in Denville from Catholic Health Initiatives.
The New Jersey Association of Health Plans has criticized for-profit operators that have severed contracts with insurers as part of their takeover of local hospitals, allowing them to bill higher out-of-network rates. It has said it's worried that Prime will pursue a similar strategy.
